Blackstone Changes Tack In China And Japan

Sydney Morning Herald

Saturday June 28, 2008

Carolyn Cummins

BLACKSTONE Group, manager of the world's biggest buyout fund, plans to invest in property companies in China and Japan struggling to obtain financing as the firm seeks to benefit from rising borrowing costs.

"We are happy to partner with companies to help walking through recapitalisation and hopefully to inject some equity," Alan Miyasaki, managing director of Blackstone Group Japan, said in an interview.

Rising borrowing costs and slowing growth in property prices are threatening the 31 per cent average annual return over the past 16 years of Blackstone's real estate funds. Investments in buildings may fall this year as financing has evaporated after the collapse of the subprime market saddled banks with almost $US400 billion of credit losses and write-downs.

The fund is changing its strategy to invest in property companies where it will inject new capital and help them turn around their businesses, instead of selling assets quickly. In March Blackstone sold buildings held by Equity Office Properties Trust just two weeks after buying the biggest US office landlord.

Asian companies including Daiwa House Industry, Japan's biggest home builder, and DLF Ltd, India's biggest developer, have pulled the plug on planned share sales for real estate investment trusts as credit markets seized up worldwide. Blackstone, based in New York, might buy a portfolio of real estate trusts that failed to go public, Mr Miyasaki said.

Meanwhile, gains in property prices have slowed in Japan and China, the world's second- and fourth-largest economies, because of government regulations and lack of financing, according to DTZ Group.

Japan's land price growth is slowing because of tighter credit globally and a slump in apartment sales in suburban areas, according to a survey by the Ministry of Land, Infrastructure, Transport and Tourism.

Government measures in China to curb property prices have slowed sales, resulting in smaller property companies sitting on vacant lots that they now cannot develop because of a funding shortage.

© 2008 Sydney Morning Herald

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