Private equity giant Blackstone Group
James, speaking at a Barclays Capital conference that was webcast, said he thinks the market is near the bottom in terms of values. Blackstone has $12 billion of capital to invest in real estate, according to a slide accompanying his talk.
You'll see us start to ratchet up the activity level in real estate, hopefully we've got three new deals that will be announced in the next week or so, James said.
James noted that Blackstone sold $60 billion of real estate assets between late 2005 and 2007, and has been waiting patiently on the sidelines since autumn of 2007, when the credit markets started to unravel.
In a slide on Blackstone's website to accompany the talk, Blackstone said it is seeing attractive opportunities for real estate in discounted debt and properties from distressed sellers. Blackstone on Tuesday announced a proposed deal to buy a number of Sunwest senior living properties.
Blackstone has $28 billion of capital to invest across its funds -- slightly less than the $29 billion it said it had in August.
In broader comments, James said that while he expects a few quarters of stronger earnings, and the world is bottoming out, the economy is still weak.
I think we'll have a couple of decent quarters as you get inventory rebuilding ... that will translate to a couple of quarters of very strong earnings, but longer term we think the recovery will be grudging and slow.
The stock and bond markets have been very strong and have got ahead of themselves said James. This means we're cautious right now in terms of our investing. It is very dangerous to be exuberant early in our business, he said.
I think we're in for a W sort of shape (recovery) and a much lower glide path out of this, James said.
James sees particular opportunities in credit investing. Blackstone's credit asset manager, GSO Capital, has about $20 billion of assets under management.
James sees a massive wave of corporate defaults -- somewhere between $500 billion to $1 trillion -- which he said would be four to eight times the last peak. In addition, there's a refinancing bulge looming that hits in 2012 and 2015.
The refinancing requirements alone for the U.S. absorb almost 100 percent of a normalized healthy leveraged financing market, he said. So that leaves nothing left for normal corporate financings and nothing left for new deals, he said.
That means that the provision of credit will be quite profitable for some time now, he said.
James said in Blackstone's current private equity fund there are no defaults and no bankruptcies.
Blackstone, which has about $13 billion capital to spend in private equity, has invested about 75 percent of the funds in its fifth buyout fund, Blackstone Capital Partners V and is fundraising for its sixth fund. Its fifth buyout fund includes investments such as Hilton Hotels, chipmaker Freescale and Biomet.
James noted that leveraged lending for new deals remains difficult, so deals Blackstone is doing typically have a lot of equity, are medium sized and tend to be less than $3 billion market capitalizations.
He will look at exiting investments if there is the opportunity for long-term value, noting that the equity markets are wide open. Private equity firms have been starting to put portfolio companies forward for IPO, such as Kohlberg Kravis Roberts & Co's Dollar General.
James predicted that 2010 will continue Blackstone's run of double-digit asset management growth, based on what the company has in hand today.
Blackstone in August reported higher quarterly earnings.
James expects Blackstone will pay the full $1.20 distribution to public shareholders this year.
(reporting by Megan Davies and Michael Erman; editing by Gunna Dickson, Bernard Orr)