Reality check time: Blackstone says to expect lower property returns

Low interest rates and volatile markets are to blame
May 16, 2017 09:55AM

Chris Heady and Lee Kok Sun

Time to come back down to Earth: The “great run” of the past five years is coming to an end, the Blackstone Group warned investors on Tuesday.

Chris Heady, Asia Pacific chairman and head of Asian real estate for Blackstone, told investors at a forum in Singapore that they should “calibrate” their expectations for property returns, Bloomberg reported.

“They’re probably going to be lower over the next five years,” Heady said.

With low interest rates and volatile stock and bond markets, investors have struggled to bring in high returns.

GIC, Singapore’s sovereign fund, which was at the same forum as Blackstone, hasn’t met its projected allocations when it comes to real estate. About 7 percent of the fund’s portfolio is real estate, rather than the estimated 9 to 13 percent. Lee Kok Sun, GIC’s managing director, told investors on Tuesday that the fund has sold off some of its real estate as values increased, but that’s made it more difficult to raise the allocation percentage. He likened it to “running faster and faster” on a treadmill.

GIC purchased a 95 percent stake in 60 Wall Street in January. Blackstone had $102 billion worth of real estate in the first quarter of 2017 after shedding $6.7 billion in assets, including a 25 percent stake in Hilton Worldwide Holdings. [Bloomberg] — Kathryn Brenzel