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 04:30 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
19191 South Vermont Avenue (Credit: CBRE)

Blackstone sells Torrance office complex for $56M

Blackstone sells Torrance office complex for $56M
900 Corporate Pointe

Blackstone provides $110M loan on Culver City office buy

Blackstone provides $110M loan on Culver City office buy
Bob Iger, Reed Hastings and (clockwise from top left) Sunset Las Palmas, Sunset Bronson and Sunset Gower Studios (Getty, Google Maps)

Here’s what Netflix, Disney and CBS pay at their Hollywood digs

Here’s what Netflix, Disney and CBS pay at their Hollywood digs
Photo illustration of Hudson Pacific Properties CEO Victor Coleman and Blackstone Group President Jonathan Gray (Coleman by Rich Polk/Getty; Gray by Drew Angerer/Getty; Top Gun by Paramount Pictures/Sunset Boulevard/Corbis/Getty)

Inside Hudson Pacific and Blackstone’s field of streams

Inside Hudson Pacific and Blackstone’s field of streams
Hudson Pacific Properties CEO Victor Coleman (Illustration of Victor Coleman by The Real Deal; iStock; Coleman via Hudson Pacific)

Hudson Pacific is effusive about Blackstone deal, defensive about office space

Hudson Pacific is effusive about Blackstone deal, defensive about office space
An illustration of Jon Gray and Victor Coleman

Blackstone nears $1.4B deal with HPP to build out production studios

Blackstone nears $1.4B deal with HPP to build out production studios
Blackstone-owned Homewood Suites by SF airport (Credit: Hilton and iStock)

Blackstone sues over scotched $265M hotel deal

Blackstone sues over scotched $265M hotel deal
The building at 8201 Woodley Avenue and Blackstone CEO Stephen Schwarzman (Credit: Google Maps)

Blackstone pays $83M for pair of industrial properties in Van Nuys

Blackstone pays $83M for pair of industrial properties in Van Nuys
arrow_forward_ios

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

Loading...