In a recent transaction Blackstone purchased almost 1,000 units in New York for $700M. That's a seven with eight zeros. Or, $700,000,000 in long hand. Rough math places this deal at $700,000 per unit. Who does that?
According to The Real Deal, Blackstone, that's who.
This is not their first rodeo. In 2007 Blackstone purchased Equity Office for $39 billion dollars (that's NINE zeros). As of 2015 their expectations were to tripled their money on this deal.
Here's my thinking on the matter. These representative buyers (Blackstone) are consummate professionals. From the very beginning I presume they outlined a plan of action and implementation strategy and executed on this action plan towards a preconceived targeted exit. Adjustments were made along the way to take advantage of market dynamics.
In my experience, too many non-professionals believe they can accomplish the same results as the experts without having the same training, background, experience, backing and know-how as these full time professionals. Note to egomaniacs: no one can reasonably expect to get off the sofa and deliver results playing in the NFL or park their four-cylinder van and jump in a race car. It's just too far a stretch.
Albeit high-profile, these purchases by Blackstone were not vanity purchases- they are in these deals to make money. It's a good example to follow. Check your ego at the door and scrub the deal, bring equity, financial wherewithal, professional management and a high quality due diligence process.
My comments are not to dissuade people from trying for a home run purchase, more so to request contemplation and consideration of the risk profile of the investment as compared to that of the investors.
Increasing the realism and recognizing the chasm between the professional class with significant equity and everyone else brings to light an added layer of conservatism that can go far in protecting your capital and assist in guiding your investment decisions. A vanity purchase seldom turns out well.
Mr. Wilhoit is the author of three books: How To Read A Rent Roll: A Guide to Understanding Rental Income and Multifamily Insight Vol 1 & 2 – How to Acquire Wealth Through Buying the Right Multifamily Assets in the Right Markets. Multifamily Insight Vol 2 — just out!
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About This Blog: Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. See multifamilyinsight.com
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