Blackstone sells second commercial mortgage bond to fund buyout

BLACKSTONE is selling US$1.05 billion of commercial mortgage bonds to help pay for a deal it struck in April to acquire AIR Communities, an apartment landlord.

The debt consists of six tranches of securities, with ratings ranging from AAA to BB-, according to sources familiar with the matter. An interest-only loan backing the commercial mortgage-backed securities (CMBS) bonds will carry a floating rate, the sources said.

The bonds add to an earlier US$2.95 billion of CMBS that Blackstone sold in July which were also backed by AIR Communities properties.

A representative for Blackstone declined to comment.

Blackstone struck a deal in April to buy Apartment Income Reit, known as AIR Communities, for US$10 billion. It said at the time that it would invest more than US$400 million to maintain and bolster the company’s portfolio of apartment buildings.

Issuance of CMBS has been torrid recently, with overall sales this year to Monday (Sep 9) of US$69.7 billion. Spreads on the debt are wider today than they were at the start of the year, but are still below levels from much of last year when concerns over the credit quality of commercial real estate were widespread. BLOOMBERG