Blackstone buys $1B mortgage portfolio from German bank

A Blackstone real estate debt office bought a $1 billion loan portfolio from a German bank that has felt the effects of commercial distress in the United States. 

Blackstone Real Estate Debt Strategies, or BREDS, acquired 11 senior mortgages from Deutsche Pfandbriefbank “secured against performing multifamily, office and hospitality assets across the U.K. and U.S.,” the investment firm said in a press release.  

Some of the portfolio’s largest loans included in the all-cash deal involve The Mills Building, an office property at 1700 Pennsylvania Avenue in Washington, D.C. and 325 Main Street in Cambridge, Massachusetts.

Deutsche Pfandbriefbank is a Germany-based bank specializing in real estate finance that originated the portfolio. The firm was at the center of concerns distress in the U.S. commercial markets was affecting European lenders, suffering record-low shares earlier this year, Bloomberg previously reported. 

“The second quarter 2024 should remain challenging,” the lender said, adding it expects “further valuation corrections for US office properties, but lower than 2023.” 

A pfandbrief is a type of European bond collateralized by income-producing properties similar to mortgage-backed securities in the U.S., according to Investopedia. They carry investment-grade credit ratings because the underlying mortgages can be rotated out if they are paid off or in default. 

The deal comes months after BREDS in a joint venture with Blackstone Real Estate Income Trust, Rialto Capital and Canadian Pension Plan Investment Board teamed with the Federal Deposit Insurance Corporation to buy a 20 percent stake in a $17 billion portfolio from failed Signature Bank. 

The portfolio consists of more than 2,600 first mortgages on retail, multifamily and office properties mostly located in the New York metro market, according to Blackstone.

— Joel Russell