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Blackstone's Pre-Pandemic Portfolio Pivots Spared It From The Worst Of The Recession's Effects

Kendall Square (left side of the river) is Greater Boston’s tightest life sciences market.

The coronavirus pandemic has affected at least one real estate company much like it has affected individuals: The rich have gotten richer.

Blackstone Group, the private equity giant that owns an estimated $341B worth of real estate worldwide, avoided a much worse fate than it could have if its portfolio had the same areas of relative exposure as it did 10 or even five years ago, The Wall Street Journal reports. Retail properties, which accounted for 19% of Blackstone's real estate portfolio in terms of equity value in 2015, make up 5% now.

If retail's pandemic-driven devastation was merely an acceleration of trends that were already being widely observed, hotels were blindsided by lockdowns and travel restrictions. In 2010, nearly half of Blackstone's real estate value was in the hospitality sector, including all of hotel empire Hilton, WSJ reports. By 2015, that number was down to 23%, and today it stands at a mere 7%, with no remaining stake in Hilton.

Unsurprisingly, the sector in which Blackstone has increased its investment the most is industrial real estate, specifically logistics. In the past three years, industrial assets increased from 9% to 36% of Blackstone's equity value, WSJ reports. The demand for online delivery has at times overwhelmed the world's shipping infrastructure, but that has only underscored the value of the buildings on which it depends.

Blackstone's heavy investment into life sciences buildings also looks even more prescient than it did when one of its temporary funds purchased BioMed Realty Trust in 2016 for over $6B. This past fall, Blackstone moved it into a new, open-ended investment fund at a valuation of $14.6B and in December purchased a $3.5B portfolio focused in the Kendall Square neighborhood of Cambridge, Massachusetts, from a Brookfield Asset Management fund.

Office real estate hasn't been hit quite as hard as retail or hospitality, but the prospect of remote work becoming a permanent fixture has led to wariness in the market. Even though Blackstone decreased its exposure to office from 19% of its total asset value in 2015 to 5% now, it has retained and gained space focused on the entertainment industry, which is currently locked in something of an arms race between streaming giants.

Though its exposure to struggling industries has lessened considerably, riskier sectors remain a part of Blackstone's portfolio worth billions. The company recently ceded control of a mall in Ireland once valued at $1.1B to its lender, and a portfolio of malls in the U.K. it co-owns with the Abu Dhabi Investment Council entered administration in October.