Jonathan Gray's One Regret
If there was one asset Blackstone regrets letting go, it was Manhattan's Worldwide Plaza, laments global head of real estate Jonathan Gray. (One night, you'll find him outside the building with a boombox over his head.)
The firm was so focused on selling assets after its $39B buyout of Equity Office Properties, which had owned the building, "that we let it get away," he told Newmark Grubb Knight Frank prez Jimmy Kuhn during a one-on-one Wednesday at NYU Schack Institute's 46th annual capital markets conference in Manhattan. Macklowe Properties bought as part of a portfolio, then its value fell again sharply. Blackstone's methodology, after all, is "buy it, fix it, sell it." Like its $9B rescue of Centro Properties two years ago; redubbed Brixmor Property Group, the retail giant underwent an IPO this week that raised $825M on its trading debut. Now we're just waiting for Hilton.
Jimmy and Jonathan before their sit down. Blackstone's other investment philosophy is not to make short-term moves and deliver poor returns, Jonathan says. (We used to buy only Baltic Ave in Monopoly before meeting Jonathan.) One area of focus: snapping up foreclosed, single-family homes and renting them--since prices have fallen as much as 50%, you can buy at a discount to replacement cost, and a lack of supply would support growth, he says. Blackstone believes it can take that national platform, Invitation Homes, public over time. Its $1B purchase of Duke Realty's suburban office portfolio has been a boon too, as no one is developing in those markets, allowing for steady improvement.