The Blackstone Group’s real estate business continued to grow in the fourth quarter of 2016, but the company’s president Tony James cautioned that investment opportunities could be harder to come by as the market matures. “The one area that’s a little softer I’d say is real estate in the U.S.,” he said on an earnings call with journalists Thursday morning.
“I think the opportunities today are scattered and tend to be around some larger multi-property assets,” he said, adding that there is no “big theme that has been really cheap in the U.S.”
The fund manager ended the year with $102 billion in real estate assets under management – up 9 percent over 2015 – making real estate its largest business line ahead of private equity. The real estate funds’ dry powder, or money committed from investors waiting to be spent, fell slightly to $32.1 billion, down from $33.2 billion in the third quarter. Economic income (which accounts for both realized and unrealized profits) from real estate investments rose to $395.4 million in the quarter, up from $162.1 million a year ago.
Echoing prior statements by Blackstone’s real estate head Jonathan Gray, James said he is not too worried about rising interest rates because they tend to coincide with economic growth. “The spreads of cap rates over base rates are near all-time highs so we have a lot of cushion” to absorb interest rate hikes, he said.
Blackstone, long one of the most active investors in New York City real estate, has recently taken to buying large multifamily complexes. After dishing out $5.3 billion for Stuyvesant Town-Peter Cooper Village in partnership with Canadian pension fund Ivanhoe Cambridge in 2015, the firm last month bought Kips Bay Court for $620 million.
On Monday, news broke that Blackstone is preparing a new, $5 billion-plus Asian real estate fund. James didn’t delve into detail, but said that Blackstone is “still seeing a lot of good opportunities in Asia real estate.” He also said that the firm is considering investing in infrastructure, a field it is currently not active in.