Blackstone Betting Big On Global Logistics And Life Sciences
The world's largest real estate manager and investment behemoth Blackstone Group is pushing aggressively into real estate sectors it believes will thrive in a rising-interest-rate environment. That includes U.S. and Spanish housing, Indian office buildings, global logistics and life science office buildings.
"Our largest current holdings reflect grow-oriented sectors that are more insulated from rising rates," Blackstone President and Chief Operating Officer Jonathan Gray said during a conference call Thursday.
The investor's non-traded REIT, Blackstone REIT, is nearly 50% in logistics, Gray said, compared with about 8% for public REITs overall.
"We're clearly heading into a rising rate environment, as we see global economic strength," Gray said. "As investors, that means you need to buy things that will grow faster. In a real estate context, cap rates are likely to go up, so you want to own things in which you see higher earnings growth.
"We see that in Spain, where there's a shortage of housing and a cyclical recovery. We [also] see that in global logistics, where there's a movement from land-based retail to online retail. We've been the major player in the world [in the logistics sector], having bought 500M SF in the last seven or eight years."
Blackstone also sees growth opportunities in the life science office market, Gray said.
"More exposed is owning a 20-year leased office building that looks and feels like a long-duration bond. You want to buy things that have growth associated with them, and that's what we've done with our real estate portfolio."
Blackstone is also expanding its infrastructure investments. "In infrastructure, we have assembled a world-class team, and they are pursuing a robust pipeline," Gray said.
The private equity giant's infrastructure fund will soon be supplemented by an anchor commitment of as much as $20B from Saudi Arabia’s Public Investment Fund.
In its Q1 earnings report, Blackstone said that the value of its opportunistic real estate funds increased 3.5% during the quarter, primarily driven by valuation gains. Its core-plus funds increased 3.5% in value during the quarter.
Blackstone was aggressively active in making real estate investments during the first quarter, with $6.7B invested or committed, and fully half of that total was outside North America.
Investments during the quarter included $1.3B for the purchase of a majority stake in the Banco Popular Spanish real estate portfolio, along with a commitment to acquire the Canadian Pure Industrial REIT that will close in Q2.
Blackstone's total assets under management in the real estate sector were up 17% year-over-year during Q1 to a total of $119.6B. Global core-plus assets under management were up 87% year over year to $29.7B, four years after Blackstone launched the business.
Overall, Blackstone reported Thursday that its assets under management jumped 22% to a record $449.6B.