Blackstone and TPG have agreed to make hundreds of millions of dollars of unscheduled repayments on loans funding their real estate investment trusts, in exchange for promises that their lenders will not take punitive action as the property market sours.
The private equity firms moved to renegotiate terms with their banks and other lenders as they brace themselves for a fall in property prices in the upheaval caused by the coronavirus pandemic.
The Reits — which are managed by the private equity firms and listed on the stock market — make money by borrowing from banks and lending the cash at higher interest rates to hotel operators, apartment block developers and other owners of commercial property.
But with many offices remaining empty, and those businesses that can reopen having to adjust to social distancing rules, the consequences are rippling through the real estate sector, creating uncertainty about the prospects for buildings regarded as trophy assets only a few months ago.
Blackstone Mortgage Trust has made unplanned repayments of $200m and pledged an extra $414m of collateral to its banks, according to a regulatory filing last week. TPG’s Real Estate Finance Trust handed over $160m.
In exchange, the Reits secured commitments