November 13, 2012 / 11:50 PM / 5 years ago

Blackstone eyes property sales over next two years

NEW YORK, Nov 13 (Reuters) - Blackstone Group LP will likely take Hilton Hotels public in the next two years and sell other properties as it looks to cash out of some of its U.S. commercial real estate, a senior Blackstone executive said on Tuesday.

Given Hilton’s size, taking the company public would make the most sense, said Jonathan Gray, Blackstone’s Global Head of Real Estate, at the Bloomberg Commercial Real Estate Conference. Hilton has 630,000 rooms worldwide.

“We’re just sort of getting to the point where we feel like the assets are going to get appropriately valued,” Gray said. “My guess is over the next year or two.”

Blackstone’s office holdings include more than 100 buildings. Gray said the private equity company may sell those properties as their occupancies reach in the low to mid 90 percent from the 80 to 81 percent they hit during the recession.

Likely buyers would be publicly traded real estate investment trusts that can tap the unsecured bond market at a very low cost of capital of about three percent, he said.

Other buyers may include sovereign wealth funds. However, rules that subject foreign buyers to U.S. capital gains taxes may present a hurdle for them.

“We think the pace of realization for us will pick up in 2013 and 2014 in our real estate portfolio,” Gray said, adding that any sale or IPO would be subject to market conditions.

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