Monday, November 12, 2007

Blackstone Soft Shoes Real Estate

Blackstone (BX) just released results and alas it is sad to say that the results are not stellar. They have lamented the fact that credit markets are tight and many mega deals are extremely difficult if in fact not impossible. Predictable comment and good to hear. But read this comment relating to real estate.

"During the periods presented, weakness in the sub-prime residential lending area spread to general commercial real estate lending. Although there was no evidence that these credit problems have significantly affected the underlying operating fundamentals of the investment portfolio, valuation multiples have declined modestly."

Excuse me. Lets connect a few of the dots. Sub-prime residential problems problems relate to silly underwriting practices. Many of those loans just should not have been made. Blackstone is now saying some of their commercial real estate deals are of the same ilk.

They then dish out the oxymoronic comment that credit problems are not having an operating effect but the assets are now worth less than before. Well if its worth less something is going wrong. If you are connecting dots to sub prime how can you expect everyone to say "Its OK"

The investor is being prepared for bad news. The future press release may now read "As Previously Disclosed". Investors need to watch how blips show up on the radar. There seem to be a few new incoming items of interest.