First, it just sounded really unpleasant. Five hundred mostly fair-weather friends (nobody has 500 real friends, and the Schwarzman guest list seemed to lean heavily toward the fake and the famous; or at least, that’s who got mentioned in the papers) standing around in fancy clothes in an armory listening to Rod Stewart. Not. Fun.
Second, it’s really tempting to declare after the party and the almost-record-setting $39 billion buyout last week of property giant Equity Office by Schwarzman’s Blackstone Group that Schwarzman is headed for a fall. Private equity in general is headed for some sort of a downturn soon; these things go in cycles and this up cycle has gone on just about long enough. Firms will go under, investors will lose money.
Fear is driving Gray, the 37-year-old co-head of Blackstone’s real estate team. Gray is so scared his deal will meet a fate similar to Kravis’s RJR Nabisco deal, which saw its profits eroded by debt costs, that he found a buyer for eight of Equity Office’s Manhattan skyscrapers before Blackstone even owned them. Now he’s scrambling to sell buildings in cities with the highest rents and lowest vacancy rates–even properties Blackstone would rather have kept.
Somehow, I think everything’s going to turn out okay for these guys.