Missed payments: Blackstone and Schwarzman’s Golden Rule
Not losing money is a bit trickier to pull off in a global pandemic
Big landlords are having trouble with their mortgages
When Stephen Schwarzman published his autobiography last year, we learnt that a secret of the Blackstone founder’s success was his ability to follow one weirdly obvious rule.
“Don’t. Lose. Money,” he wrote in What It Takes, spelling out the maxim for the rest of us. “People often smile [when they hear that],” he added. “I never understand the smirks, because it is just that simple.”
Perhaps Schwarzman, pictured below, would allow that his rule is a bit trickier to follow in a global pandemic. Or maybe one of his underlings didn’t get the memo.
But either way, Blackstone has skipped a payment on a $274m hotel loan, DD’s Mark Vandevelde and Eric Platt reported last week, joining the ranks of leading real estate investors that have fallen behind on debt during the coronavirus crisis.
The debt is secured on four hotels in Chicago, Philadelphia, Boston and San Francisco, which the US private equity group acquired in 2016. Blackstone called the deal “a very small investment”, which already had problems before Covid-19 shut much of the hospitality sector down.
Schwarzman’s group isn’t alone in struggling with some of its portfolio companies’ debts. Colony Capital, the real estate investment group founded by Tom Barrack, said in May that its portfolio companies had defaulted on $3.2bn of debt secured by properties that include nursing homes and hotels. The Canadian asset manager Brookfield has also skipped payments on its shopping mall mortgages.
But not everyone is licking their wounds. The US Treasury department on Wednesday agreed a $700m bailout of trucking company YRC Worldwide. Among the haulier’s creditors is Apollo Global Management, which had been active in lobbying the Trump administration to intervene in the capital markets during the Covid-19 crisis.