Blackstone has made another major move in the commercial real estate debt market, acquiring $2 billion in loans from Atlantic Union Bankshares. The transaction, announced Thursday, is the latest in Blackstone’s aggressive campaign to snap up discounted property debt as regional banks struggle to adapt to higher interest rates and shifting real estate dynamics.
The loans in question, which are performing and backed by apartment buildings and neighborhood retail centers, were originally made by Sandy Spring Bank. Atlantic Union acquired Sandy Spring in April, creating the largest regional banking franchise in the lower Mid-Atlantic.
The loans, however, were issued before the Federal Reserve began raising rates in 2022, and their market value has since declined. Blackstone purchased the portfolio at a discount of about 7% to its face value.
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For Atlantic Union, the sale is a strategic step following its merger. By marking the loans to market as part of the acquisition, the bank avoided booking a loss on the sale. The proceeds will allow Atlantic Union to reduce costly deposits and invest in higher-yielding securities, freeing up capacity for new lending and supporting its post-merger growth strategy.
Blackstone’s purchase is part of a broader trend that has seen the firm acquire more than $20 billion in commercial property loans over the past two years. The company’s Real Estate Debt Strategies unit, which manages $76 billion in assets, has been capitalizing on opportunities created by banks’ urgent need to reduce exposure to commercial real estate. As regional and community banks face mounting pressure from regulators and investors to shore up their balance sheets, many are increasingly willing to sell portfolios of loans at discounts, even if those loans are still performing.
Smaller banks, which collectively hold the majority of commercial real estate loans in the U.S., are particularly exposed. Their reluctance to sell at a loss has, until recently, slowed the flow of deals and limited their ability to make new loans to local developers.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
