The stock market may be flirting with a correction, but Blackstone says its fourth-quarter results, driven by real estate returns, show the firm is stronger than ever.
“Today Blackstone reported the most remarkable results in our history on virtually every metric,” said CEO and co-founder Stephen Schwarzman.
The firm nearly doubled its net income to $2.9 billion from $1.8 billion in the fourth quarter of 2020. Earnings hit $1.92 per share, up from $1.07 in the year-ago period.
The firm’s real estate investment trust BREIT and its Core+ business accounted for the lion’s share of those gains.
Blackstone nearly doubled its real estate assets under management to $279.5 billion in the quarter, from $187.2 billion in the previous year. By comparison, private equity, the firm’s next biggest segment, grew by just under one-third.
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The firm reported that its opportunistic real estate ventures appreciated by 12 percent and its Core+ segment by 7.2 percent.
Blackstone president Jonathan Gray said the firm achieved those gains by homing in on faster-growing areas of the economy.
“Nowhere is that more apparent than in real estate, which led the firm’s returns in the fourth quarter,” said Gray. “In my 30-year career, I’ve never seen real estate fundamentals in the sectors where we are focused as strong as they are today.”
The firm said its equity portfolio is concentrated in “the best areas” — logistics, rental housing and life sciences, all of which have seen growing demand drive up prices throughout the pandemic.
Vacant logistics spaces are nearly impossible to find as the rise of e-commerce has propelled a run on warehouses.
Late in the fall, Blackstone bet $2.8 billion on a 17.4 million square foot portfolio with properties spread across the U.S. and Europe. BREIT picked up the U.S. buildings and Blackstone’s long-term investment business Core+, acquired the European portfolio.
Blackstone has also made an aggressive push into rentals, focusing recently on acquisitions of multifamily REITs, affordable housing and rental buildings.
One of the biggest deals last quarter was Blackstone’s $3.6 billion agreement to buy multifamily REIT Bluerock. The acquisition will add 30 garden-style Sun Belt properties to
Blackstone’s holdings.
Early-year transactions are evidence of more growth to come in 2022. Just this week, Blackstone said it would acquire Resource REIT’s 12,000-unit multifamily portfolio for $3.7 billion. And the week prior, the firm said it would pick up $1 billion worth of affordable single-family rentals, which will add 4,000 homes to Blackstone’s portfolio over the next two years.
Inflation worries and anticipated interest-rate hikes have delivered a blow to share prices: The S&P 500 has dipped about 8 percent in the past month and Blackstone’s shares by more than 10 percent.
But the firm’s executives underscored that Blackstone’s real estate portfolio — 80 percent of which is logistics and rental housing — is insulated from those market pressures.
Leases in those sectors are generally shorter and rents are growing precipitously — at two-to-three times the rate of inflation. Those factors would allow Blackstone to “reprice as we move through the inflationary period,” Schwarzman said.
Gray added that logistics and rental properties are “the kind of hard assets you want to own in a rising rate environment,” Gray said.
Blackstone’s president noted that supply chain issues have posed a challenge for development, which allows firms to common higher rents for existing assets.
The firm hinted that the “extraordinary performance” of 2021 would be hard to duplicate this year, and that rising rates on the value of assets could create “some headwinds,” as Gray put it.
“But overall we feel very confident about the BREIT portfolio and continuing to deliver for shareholders in the kind of environment we face today,” he said.