CRE returns down: Blackstone’s Jonathan Gray

Private equity firm’s real estate head cites “more mature” market, CMBS slowdown

Mar.March 07, 2016 09:30 AM

UPDATED: March 8, 4:25 p.m.: Jonathan Gray, the Blackstone Group’s head of real estate, recently joined the chorus of investors and analysts highlighting headwinds in commercial property market.

While the national multifamily market remains strong, global volatility is slowing down financing through commercial mortgage-backed securities (CMBS) and reducing rates of return on commercial real estate in general, Gray said at the University of Texas Investment Management Company in Austin on Friday.

“Rates of return are definitely coming down,” he said, according to Bloomberg, because the property cycle is “much more mature.”

Persistently-low oil prices and economic volatility in China, Russia and Latin America have led to a slowdown in the creation of commercial mortgage-backed securities, as The Real Deal recently reported.

“It’s very difficult” to do securitizations today, Gray said, according to Bloomberg.

Blackstone’s massive rental portfolio is doing fine as well, Gray said. The company’s Invitation Homes unit, which owns 50,000 single-family rental homes in the U.S., has seen 97 percent occupancy and rent gains of 5 percent per year.

The Real Deal profiled Jonathan Gray and Blackstone’s real estate business in depth back in August. [Bloomberg] Ariel Stulberg

Clarification: A prior version of this version of this article characterized Gray as being “bearish” on commercial property. 

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