Will Blackstone build or buy a nontraded REIT business?

The firm could create its own REIT sponsor and wholesaler or take a run at an established one like NorthStar Asset Management Group Inc.

Feb 9, 2016 @ 1:10 pm

By Bruce Kelly

With private equity giant The Blackstone Group potentially pushing its way into the nontraded real estate investment trust business, the question for many on Wall Street is whether Blackstone will make an acquisition of a current REIT sponsor and wholesaler or create its own.

Blackstone has tapped two senior wealth management executives to lead its new effort. They include Brendan Boyle, senior managing director, private wealth management distribution, and Joe Lohrer, managing director, private wealth management distribution.

Selling nontraded REITs would help get Blackstone in front of mainstream retail investors. Right now, it sells its private equity deals to institutions and the wealthiest clients at wirehouses.

According to one industry executive, who asked not to be named, Blackstone “traditionally builds its own” businesses when exploring new ventures.

That runs counter to a research note from Monday, in which an analyst from FBR & Co., Daniel Altscher, raised the possibility that Blackstone look no further than New York-based NorthStar Asset Management Group Inc. for a potential takeover target.

A nontraded REIT manager and wholesaler, NorthStar's board last month said it had hired Goldman Sachs & Co. as its financial adviser to help the company “in exploring possible strategic alternatives to maximize shareholder value.” With the ticker symbol NSAM, NorthStar's stock price has been struggling. On Tuesday morning, it was trading at $9.67 per share, a drop of 55% in the past year.

That prompted Mr. Altscher to wonder whether Blackstone might take a run at NSAM.

“With NorthStar Asset Management recently announcing that it was exploring strategic options, some on the Street, including us, highlighted that Blackstone could be a possible interested buyer in NSAM given its interest in entering the space,” wrote Mr. Altscher.

(More: Blackstone considering getting into nontraded REIT market)

“Certainly, this recent article suggests that Blackstone is diving deeper into the space, which could further the view that rolling up NSAM could provide instant scale, products, relationships and distribution, in addition to any potential greenfield effort Blackstone pursues,” he wrote. “Of course, it is entirely possible that Blackstone ignores NSAM altogether and goes at the effort alone.”

Another source who asked not to be named said Blackstone “was not pursuing” NSAM.

A spokesman for NSAM, Joe Calabrese, did not return a phone call to comment. Blackstone spokeswoman Paula Chirhart, said the company declined to comment about NSAM.

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