Blackstone, Brookfield Say Now's The Time To Make Deals As Treasury Policy Changes Loom

Federal Reserve Chairman Jerome Powell

Perhaps the two biggest giants in global commercial real estate are in "let's make a deal" mode.

Brookfield Asset Management CEO Bruce Flatt and Blackstone Group President Jon Gray both said that their companies have been motivated to sell assets in the past few months. After over a year of historically low interest rates and cash hoarding by major companies, the global market is at a liquidity peak, the two agreed at a virtual conference hosted and reported by Bloomberg.

Both companies and their various affiliates have also been active on the buyer side, and Brookfield indicated in August that it is targeting $25B in property sales to fund other activities. But with deals like Blackstone's most profitable sale ever (a Las Vegas casino in which the sale price was triple what Blackstone paid) closing in late September, the companies' recent behavior backs up their leaders' words.

The current environment may not last much longer with the Federal Reserve indicating that just a little more recovery from the U.S. economy will spur changes to the agency's bond-buying policy and short-term interest rate, which has remained near zero since last year, CNBC reports. As soon as interest rates rise, debt to fund transactions will become more expensive.

To the extent that Brookfield and Blackstone are buying, the two have been focused on acquiring companies more than individual properties. Blackstone paid a premium to acquire data center operator QTS for $10B in June, and it has also bought companies in the affordable housing and single-family rental sectors this year.

For large capital outlays, businesses with the potential for internal growth represent a better strategy than fixed-income investments, which provide "nowhere to hide," Gray said at the Bloomberg conference. Still, neither Gray nor Flatt came out and said the current market overall is peaking.

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