Top officials at BlackRock say the big investment management firm continues explore major investments in distressed assets--such as its recent purchase of $15 billion in mortgage securities from UBS--but the company is becoming more selective in recent weeks about where to place its bets, CNBC has learned.
People with knowledge of BlackRock's activities say members of the firm's real estate group were initially interested in possibly making a bid for the distressed real estate assets of Macklowe Properties, which included several major pieces of Manhattan real estate including the GM building.
But BlackRock's risk committee declined to review a proposal for the sale of the properties, which was later snapped up by a group led by Boston Properties and Goldman Sachs for $1.5 billion.
A spokeswoman for BlackRock declined to comment.
The move comes as BlackRock prepares for its annual shareholders meeting today in New York, and its annual board meeting on June 2, which CNBC has learned is taking place in Abu Dabi.
The site of the annual meeting next week is significant, people close to the company say. It reflects the business philosophy of Backrock and its CEO Lauarence Fink in navigating the asset-management firm during the credit crisis.
Fink, these people say, expects further turbulence in the US real estate market, as well as the market for debt backed by real estate loans. But he sees great opportunities in the Middle East, and has been spending much of his time wooing major investors there, people with knowledge of the company say.
“Larry thinks the Middle East is the place to be,” said one person close to the company.
BlackRock specializes in managing large pools of fix-income securities for wealthy individuals and large institutional investors.
In 2006 Merrill Lynch bought a chunk of BlackRock and farmed out management of its mutual funds to the firm.
The credit crunch, which forced big banks to hold billions of dollars in distressed debt and other depressed assets they couldn't sell in the market, made BlackRock a key player in the field of vulture investing, where investors snap up severely battered down assets such as bonds and real estate on the cheap and sell them later when the market improves at a healthy profit.
BlackRock's investment in the UBS portfolio is an example of such an investment.
Both the shareholder meeting and the annual meeting are closed to the press.
But people close to the company say Fink and board members will discuss their outlook that the credit crisis is coming to an end.
One great sign that the credit crunch is waning, they say, is that “the price discovery process” has begun, meaning firms like BlackRock, as well as Ochs-Ziff Management and Pimco are setting price on distressed bonds, albeit by bidding on them at very low levels.
While people at BlackRock believe the worse of the credit crunch is over, and that they will likely find other distressed-debt deals similar to the UBS purchase, Fink is only cautiously optimistic about the immediate future, something he will likely tell shareholders this week and board members next week in Abu Dabi.
Fink believes big banks may still have to write down additional bad assets and prices of everything from CDOs to distressed real estate may still have further to fall.
One of those banks maybe BlackRock’s partner, Merrill Lynch, which owns a 49% stake in the money management firm.
Merrill has written down tens of billions of dollars in bad debt in recent months, and speculation is swirling that to generate cash because of possible additional writedowns, the firm may sell its BlackRock stake.
But people close to both BlackRock and Merrill say Merrill chief executive John Thain has recently suggested that he has no plans to do so, and a more likely scenario would be for Thain to unload Merrill’s stake in Bloomberg LP.
These people also say that Thain is secretive and rarely telegraphs his intentions so anything is possible.