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Investment giant Blackstone Inc., which just reported a relatively lackluster quarter due to commercial property market turbulence, is considering partnerships with regional banks, which have had their own issues lately as depositors have sought other places to put their money.
“As regional banks experienced outflows of deposits, we are seeing real-time opportunities to partner with them at scale, utilizing our insurance capital in areas like auto finance, home improvement lending and equipment finance,” Blackstone President Jonathan Gray said during the company's first-quarter 2023 earnings call this week.
Gray didn't specify which regional banks Blackstone might partner with, merely that the company is “in a number of discussions.”
“We really think it's a golden moment for private credit,” Gray said. Blackstone is one of the largest nonbank lenders operating in the U.S. capital market.
Gray also noted that the pullback in capital markets is further constraining the new supply pipeline for most types of real estate, which is likely to intensify since regional banks provide “a meaningful portion of U.S. construction lending.”
Overall, a tighter pipeline is good for existing assets, he said.
“This is quite positive for real estate over time,” Gray said. “Aside from the supply-demand dynamics, the single most important driver for real estate valuations is the level of the 10-year Treasury.
“While rising rates have been a significant headwind for real estate valuations recently, we've seen a reversal with the 10-year yield down 65 basis points from its high last year.”
Blackstone turned in a mixed first quarter. Its opportunistic and core real estate funds saw drops of 0.4% and 1.6% over Q1 2022, respectively, while its corporate private equity and private credit funds gained 2.8% and 3.4%, respectively.
Blackstone ended Q1 with $991.3B in total assets under management, up 8% compared with a year ago. The investor now has a target of reaching $1T in assets under management by the end of this year.
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