Blackstone eyes return to hotel business as real estate fuels strong Q2

Firm recorded $1.3B in net income for the quarter, up from $568M a year ago

New York /
Jul.July 22, 2021 12:24 PM
Blackstone eyes return to hotel business as real estate fuels strong Q2
Blackstone president Jonathan Gray (Blackstone and iStock)

Blackstone backed out of hotels in the nick of time.

“It wasn’t because we anticipated the pandemic,” said president Jonathan Gray on the firm’s Q2 earnings call Thursday. Rather, the investment giant saw greater promise in the rental housing, life sciences and industrial buildings it picked up in the past year — investments that helped it nearly double its distributable earnings year-over-year.

Now, the firm is betting on recovery, with plans to pull hospitality, which currently comprises about 7 percent of its real estate portfolio, back into the mix.

“I think that number will go up,” Gray said. “We do think people will return to travel — individual and leisure travel first and over time corporate and group travel, so it’s a sector we like.”

That plan is already being put into action. In March, Blackstone struck a $6 billion deal to acquire the economy hotel fleet Extended Stay America as part of a joint venture with Starwood Capital.

Overall, real estate investments proved to be the workhorse behind Blackstone’s jump in second-quarter profits

Net income for the quarter more than doubled, from $568 million a year ago to $1.3 billion this year. On a year-to-date basis, cash returned to shareholders grew by 105 percent compared to the same period last year, with real estate accounting for nearly half of total returns. Revenue also more than doubled year over year, hitting $5.3 billion in the second quarter, compared to $2.5 billion in the same period last year.

“The largest single-engine of perpetual capital and fee-related earnings for the firm is our real estate core+ business,” Gray said.

The firm’s core-plus strategy targets long-term investments in the residential, office and life sciences space, encompassing Blackstone’s private real estate investment trust BREIT.

Over the past year, BREIT has added west coast warehouses, Silicon Valley offices and mobile-homes in Florida for a combined $1.8 billion. Those types of investments helped drive a record $5.8 billion in BREIT inflows in the second quarter. As of July 1, the firm has recorded another $2.6 billion from BREIT not included in the second-quarter report.

Logistics real estate, at 40 percent of the firm’s portfolio, drove second-quarter gains, alongside suburban multifamily, life sciences offices and U.S. hospitality, said chief financial officer Michael Chae.

The firm is the biggest private lab landlord in the country, Private Equity News reported, with over 16 million square feet of space, demand for which exploded during the pandemic.

Blackstone has also made a big splash in the growing market for single-family rentals, committing
$6 billion in June to acquire Home Partners of America.

This month, the firm purchased $5.1 billion in affordable housing through a deal with AIG.






    Related Articles

    arrow_forward_ios
    808 S. Broadway and Steve Needleman of Anjac Fashion Buildings (Google Maps, Getty)
    Downtown LA’s largest, priciest rentals set for Fashion District
    Downtown LA’s largest, priciest rentals set for Fashion District
    LTC Properties CEO Wendy Simpson (Getty)
    Senior housing mortgage REIT puts $46M into Q3 deals
    Senior housing mortgage REIT puts $46M into Q3 deals
    PS Business Parks CEO Mac Chandler and new CFO Adeel Khan (PS Business Parks, LinkedIn via Khan)
    PS Business Parks taps former Rexford exec as CFO
    PS Business Parks taps former Rexford exec as CFO
    Councilmember Joe Busciano and Council President Nury Martinez (Getty, Busciano)
    LA delays vote on strict vaccine requirement for indoor spaces
    LA delays vote on strict vaccine requirement for indoor spaces
    SoLa Impact founder and CEO Martin Muoto, whose firm plans an apartment complex in Park Mesa Heights (Google Maps, SoLa Impact)
    SoLa Impact plans 195-unit rental complex in Park Mesa Heights
    SoLa Impact plans 195-unit rental complex in Park Mesa Heights
    LA County Board of Supervisors. From left to right: Holly J. Mitchell, Janice Hahn, Sheila Kuehl, Kathryn Barger and Hilda L. Solis (Getty, Board of Supervisors)
    LA County commercial landlords can’t evict tenants just yet
    LA County commercial landlords can’t evict tenants just yet
    CAA president Richard Lovett and ICM chairman Chris Silbermann with 2000 Avenue of the Stars and Constellation Place at 10250 Constellation Blvd (Getty, Viracon, Gensler)
    Talent agency megamerger leaves Century City office leases in doubt
    Talent agency megamerger leaves Century City office leases in doubt
    USPS nears lease for 100K sf distribution center in City of Industry
    USPS nears lease for 100K sf distribution center in City of Industry
    USPS nears lease for 100K sf distribution center in City of Industry
    arrow_forward_ios

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

    Loading...