Blackstone Outlines Plans For Real Estate Investment In Turbulent Market
On the heels of Blackstone’s Wednesday announcement that the University of California system would invest an additional $500M in Blackstone Real Estate Income Trust on top of the $4B it committed to earlier this month, Blackstone pulled back the curtain on its plans for the coming year.
Life sciences, real estate debt and green energy funds are expected to lead Blackstone’s capital raising efforts in 2023, executives shared on a fourth-quarter earnings call.
“We had a $150B target that we've been talking about now for more than a year,” Blackstone President and Chief Operating Officer Jon Gray said on the call. The company has raised about $100B so far.
Blackstone is considering a fifth debt fund, “which will be a meaningful chunk” of that $50B gap, Gray said. The firm also plans to raise both credit and equity for green energy and launch the next “vintage” of its life sciences business.
The call also provided a snapshot of what kind of real estate Blackstone had its money in as 2022 came to a close.
Concerned about rising interest rates and inflation, it concentrated more than 80% of its real estate portfolio in logistics, life sciences offices, rental housing, hotels and data centers — sectors with strong cash flow growth. Forty percent of its real estate portfolio is logistics. The rise of logistics has come alongside a significant pullback from office.
“We've written down the equity value of traditional U.S. office assets dramatically since 2018,” Gray said. “And fortunately, such assets represent only 2% of our global real estate portfolio versus approximately 50% 15 years ago.”
Blackstone CEO Stephen Schwarzman defended BREIT's performance throughout the call, referring to media coverage of the fact that redemption requests reached a level that triggered a cap on withdrawals.
“I've been in finance for over 50 years and I'm frankly quite surprised by the intense external focus on the flows for BREIT at a time of cyclical lows in stock and bond markets,” Schwarzman said.
“For those of us that build and create businesses, what's going on is highly predictable. It should be expected that flows from high net worth individuals would decline to nearly all types of new investments in this environment,” he said.
Executives said they did think, from an investor perspective, the massive investment from the UC system “was really important in terms of psychological confidence,” Gray said, but that only time would tell whether the $4.5B commitment would calm investor requests to take out their money.
CORRECTION, JAN. 27, 1:30 P.M. PT: A previous version of this story inaccurately connected Blackstone's nontraded REIT and the firm's fifth debt fund. The story has been updated.