Blackstone to buy about $870m in commercial real estate loans

Blackstone has agreed to acquire up to US$869 million in commercial real estate loans from a unit of First Internet Bancorp.

The loans, called single-tenant lease financing, are being purchased for about 95% of their unpaid balance.

Blackstone will make the deal through its real estate debt strategies unit, while First Internet Bank will continue servicing the loans.

These loans are provided to investors whose properties are leased to long-term retail tenants, such as drugstores and convenience stores.

Banks have increased their focus on risk management after the 2023 regional bank crisis, and transactions like this can help strengthen capital positions.

With the sale, First Internet expects to remove about US$550 million in deposit balances from its books and improve its tangible common equity ratio. The deal is expected to close on September 18.

Blackstone has previously acquired commercial property loans from other institutions, including a US$2 billion purchase from Atlantic Union Bank.

🔗 Source: Bloomberg

🧠 Food for thought

Implications, context, and why it matters.

Blackstone capitalizes on banking sector pressures with aggressive loan acquisition strategy

This $869 million deal represents Blackstone’s latest move in a massive buying spree that has totaled $22 billion in commercial real estate loan portfolios over the past 24 months2.
The firm has consistently purchased these loans at significant discounts, 95% of unpaid balance in this deal, and 90-93% of par value in the $2 billion Atlantic Union Bank acquisition earlier this year3.
Blackstone’s strategy takes advantage of banks’ urgent need to strengthen balance sheets following the regional banking crisis in early 2023, which made risk management a higher priority for lenders1.
The timing demonstrates how alternative asset managers can exploit market dislocations, acquiring performing assets from financially sound but capital-constrained institutions.

Banks increasingly use loan sales as strategic capital management tools

First Internet’s transaction specifically targets improving its tangible common equity ratio by moving $550 million in deposit balances off its balance sheet2.
This follows a clear trend where banks like Atlantic Union have used loan sales proceeds to pay down high-cost deposits and enhance their securities portfolios4.
The trend reflects how banks with stricter capital requirements than non-bank institutions are proactively managing their balance sheets rather than waiting for regulatory pressure1.
These transactions allow banks to reduce exposure to lower-coupon, fixed-rate loans while maintaining customer relationships through continued loan servicing arrangements5.