Blackstone now owns more than $100B in real estate

Fund manager’s CRE earnings recovered slightly in Q1

Source: The Blackstone Group
Source: The Blackstone Group

The Blackstone Group’s real estate division passed the $100 billion mark in assets under management in the first quarter, while its earnings recovered slightly from a dip at the end of 2015.

The fund manager earned $457.2 million in fees from its real estate funds in the first quarter, down 50 percent from its record quarter a year ago but up from the $366.1 million earned in the fourth quarter of 2015.

At the same time, its assets under management grew from $92.7 billion a year ago to a record $101.7 billion – with fee earning assets growing from $50.8 to $67.3 billion. In other words: Blackstone’s real estate division is earning significantly less in fees today than it did a year ago on a smaller asset pile.

The real estate division’s dry powder – or money committed from investors that hasn’t been spent yet – stood at a staggering $31.2 billion at the end of the first quarter – up from $23.5 billion at the end of 2015.

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Blackstone’s real estate head Jonathan Gray recently argued that the U.S. real estate market cycle is entering a more mature phase – which tends to limit opportunities for high-yield investors like Blackstone. The firm’s president Tony James echoed that comment in a media call Thursday morning. “In real estate I think the U.S. has gotten a bit pricier, although there’s still value to be had, but Europe is booming for us,” he said.

The Blackstone Group, a public company, earns the vast majority of its income from management fees charged on the private investment funds it runs. These fees are calculated partly as a share of assets under management, and partly based on the funds’ performance – meaning they are an indirect indicator of how profitable Blackstone’ real estate holdings are.

With $101.1 billion in assets under management, real estate is Blackstone’s largest division ahead of private equity ($95.5 billion), credit ($78.7 billion) and hedge funds ($68.5 billion).

The entire company now manages $343.7 billion in assets – up from $310.5 billion a year ago. Its total quarterly income fell by 63 percent year-over-year, from $2.51 billion to $929.4 million.

Blackstone has, according to Real Capital Analytics, accounted for $10.63 billion worth of real estate acquisitions in Manhattan over the past five years, making it the market’s most active investor. Last year, the fund manager dished out $5.3 billion for Stuyvesant Town-Peter Cooper Village in partnership with Ivanhoe Cambridge.