27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
On Tuesday, Reuters reported that U.S. alternative asset manager Blackstone Group LP (NYSE: BX) is seeking to publicly list Fidere Patrimonio, a Spanish real estate investment trust (REIT) owned by Blackstone.
Fidere is a real estate investment trust owned by private equity group Blackstone, which controls 2,688 rent-controlled properties in Madrid and Barcelona with an estimated value of €212 million.
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Blackstone shares has been the top performing large U.S. private equity firm during the past year.
Tale Of The Tape: BX Strong Performance
The inflow of funds to Blackstone from its pension fund and sovereign wealth limited partners is essentially its lifeblood. The firm reported having raised an eye-popping $30 billion for its global funds during Q1 2015 alone.
The last thing that Blackstone needs is for limited partners or potential counterparties in Europe to become skittish because of adverse publicity.
The Problem: Eviction Headline Risk
"City and regional governments sold thousands of rent-controlled flats – subsidized to make them affordable to lower- income families – to private investors during Spain's economic crisis, causing huge controversy. Thousands of Spain's poor now depend for their homes on the generosity of private equity," according to Reuters.
Fidere Patrimonio shares will list on Spain's alternative stock market MAB next week in order "to provide potential liquidity and transparency, according to the bourse.
"But documents filed by Fidere to the bourse spoke of a reputational risk as rent-controlled housing changes to private from public management," Reuters reported.
"The documents also said tenants will be required to show they are solvent by presenting their most recent wage statements and providing proof that rents are no higher than 40 percent of their income, as well as not being on any creditor blacklist."
The Reuters article also pointed out, "The announcement of the listing by Blackstone comes only days after Madrid city council changed hands. Under leftist Mayoress Manuela Carmena, it has vowed to reverse the tide of housing evictions during the economic crisis."
A search query of the Blackstone public facing website resulted in zero hits for Fidere Patrimonio.
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Blackstone – Blackfish 'Black Eye'
The fact of the matter is that Blackstone has so many investments and portfolio companies that it is inevitable from time to time that the firm would be subject to negative reports and headlines.
Adverse publicity from the documentary film "Blackfish" aired by CNN in 2013 regarding the treatment of Orca killer whales at former Blackstone operating company SeaWorld Entertainment Inc (NYSE: SEAS) was certainly a PR nightmare.
The SeaWorld IPO sponsored by Blackstone priced at $27 per share, and SEAS shares are currently trading $19.16 per share.
Credit Suisse – Negative Publicity Fades Slowly
Business Insider reported analyst comments by Credit Suisse last week, "After lengthy negative publicity around SeaWorld driven by Blackfish (and slow response from former management), we believe brand sentiment is bottoming. Our survey work suggests that while negative, online consumer sentiment appears to be stabilizing."
Blackstone could be attempting to avoid the fallout from a similar situation – the eviction of families that do not meet the criteria to stay in what was formerly public housing, now owned by Fidere Patrimonio.
European Real Estate Opportunity
Blackstone executives have remarked recently that at this point in the real estate cycle there are far more opportunities in Europe to invest than the U.S. These executives included Chairman and CEO Steve Schwarzman who expressed his sentiments during a May interview:
In Europe, "there's again almost nothing being built… and Europe looks like it might have a little bump here, in terms of growth in the 1 to 1.75 percent area, from being negative, previously…because of the ECB buying bonds and quantitative easing."
Investor Takeaway
The Blackstone real estate mantra is "Buy It, Fix It, Sell It."
However, an evolving political situation in Spain may have changed the calculus regarding future prospects for this Spanish real estate investment.
Protecting the firm's valuable brand, as well as its reputation in Europe, appears to be at least a partial motivation for this exit.
Image Credit: Public Domain27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.