How Blackstone became the world’s biggest landlord

Firm’s focus shifted from traditional private equity to real estate over past decade

National /
Feb.February 18, 2020 12:30 PM
Clockwise from the top left: Bellagio Las Vegas, Blackstone's Jon Gray, Embassy Office Parks in Bangalore, Blackstone's Ken Caplan, Stuyvesant Town, and  Blackstone's Kathleen McCarthy (Credit: Blackstone, Embassy Office Parks, Wikipedia)

Clockwise from the top left: Bellagio Las Vegas, Blackstone’s Jon Gray, Embassy Office Parks in Bangalore, Blackstone’s Ken Caplan, Stuyvesant Town, and  Blackstone’s Kathleen McCarthy (Credit: Blackstone, Embassy Office Parks, Wikipedia)

Until about a decade ago, Blackstone Group derived most of its profits from traditional private equity. But following a dramatic expansion into real estate driven by CEO-in-waiting Jonathan Gray, massive property deals are now the company’s calling card.

With an estimated real estate portfolio of $325 billion, Blackstone is now the world’s largest real estate company, according to Fortune.

Of that total, $163 billion comes from Blackstone’s own real estate equity capital — which has multiplied eightfold since the company went public in 2007 — while the rest is financed with debt.

As rising property values and a slowing economy have made it harder to find high-yielding deals, Blackstone is increasingly investing in unglamourous assets such as warehouses and rental properties in the world’s “knowledge centers” — rapidly gentrifying cities like New York, London, Berlin and Stockholm.

Blackstone’s real estate investments are classified into two basic types — riskier “opportunistic” funds with average annual returns of around 15 percent, and more conservative “Core+” funds with returns around 10 percent.

The firm’s relationships with large institutional investors have given it a significant advantage when pursuing massive deals. Last year, it closed on a record $20.5 billion opportunistic fund known as Blackstone Real Estate Partners IX (BREP IX), which co-invested in the firm’s $18 billion industrial portfolio acquisition from GLP last June.

“If a $20 million office building is for sale, you might have 20 bidders,” Blackstone’s head of Americas acquisitions Tyler Henritze told Fortune. “When it’s a $20 billion deal, the competition is a lot more limited.” [Fortune] — Kevin Sun


Related Articles

arrow_forward_ios
From left: Nadeem Meghji, head of real estate, Blackstone; Bill Bayless, CEO, American Campus Communities (Blackstone, American Campus Communities, iStock)
Blackstone expands student housing stake in $13B deal
Blackstone expands student housing stake in $13B deal
Watch: Why Wall Street loves this controversial path to homeownership
Watch: Why Wall Street loves this controversial path to homeownership
Watch: Why Wall Street loves this controversial path to homeownership
Blackstone CEO Stephen Schwarzman and President Jonathan Gray (Getty)
Blackstone reports “the most remarkable results in our history”
Blackstone reports “the most remarkable results in our history”
Watch: Here are the key drivers of the industrial real estate boom
Watch: Here are the key drivers of the industrial real estate boom
Watch: Here are the key drivers of the industrial real estate boom
$1B in Rent Reduction Available to Select Blackstone Tenants (Blackstone)
Blackstone to spend $1B in affordable single-family rental expansion
Blackstone to spend $1B in affordable single-family rental expansion
Blackstone chairman Stephen Schwarzman and Bluerock CEO Ramin Kamfar (Getty, Bluerock)
Blackstone buying multifamily REIT Bluerock for $3.6B
Blackstone buying multifamily REIT Bluerock for $3.6B
425 Park Avenue and L&L Holding Company CEO David Levinson (Alan Schindler, Levinson via Getty)
L&L secures nearly $1B financing package to complete 425 Park Ave
L&L secures nearly $1B financing package to complete 425 Park Ave
Stephen Schwarzman, CEO of Blackstone Group
Why Blackstone bet $6B on Home Partners of America
Why Blackstone bet $6B on Home Partners of America
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...