According to Bloomberg, New York-based The Blackstone Group (BX) may buy-out Australian real estate firm Valad Property Group, valued at approximately $240 million (A$220 million).
Valad is heavily burdened with debt after the company struggled to pay off debt as the value of its assets plummeted through the financial crisis. In 2007, Valad purchased properties worth more than $2.2 billion (A$2 billion).
Though Valad sold off some of these properties to raise new equity for repayment of loans, the company is still suffering to cut down debt, which led to $55.3 million (A$50.7 million) net loss as of six months ended December 2010.
The deal is likely to mature as Blackstone is aggressively deploying capital in real estate with the price improvement following the recession. The deal followed Blackstone’s agreement of purchasing Centro Properties Group’s (CNP) U.S. shopping centers worth $9.4 billion in March 2011.
Blackstone has increased its profit from real estate funds through acquisitions and posted finest quarterly results since 2007. The company’s first-quarter 2011 economic net income (ENI) of 51 cents per share outpaced the Zacks Consensus Estimate of 41 cents. It also surpassed the prior-year quarter’s ENI of 32 cents.
ENI came in at $568.1 million for the reported quarter compared with $360.4 million in the year-ago quarter. The increase was primarily driven by improved performance in all the segments.
The better-than-expected results were mostly aided by strong revenue growth, improved equity markets and lower operating expenses.
Blackstone has planned to lift its next real estate fund with a target of about $10 billion till the second half of 2011. The company has major real estate business of the big private-equity firms, with $33.2 billion under management at the end of 2010.
Our Take
Though there are concerns related to the sluggish economic recovery, Blackstone will continue to benefit from the growing need for risk management and alternative investment solutions within the financial industry. Moreover, such acquisitions will augment real estate funds of the company in the forthcoming quarters producing quality results.
Currently, Blackstone retains a Zacks #3 Rank, which translates into a short-term Hold rating. However, Blackstone’s closest competitor – Calamos Asset Management Inc. (CLMS) retains a Zacks #2 Rank (a short-term Buy rating).
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