Since its founding in 1985, Blackstone has grown to become one of the world’s largest and most influential real estate investors and that dominance is only increasing.
In March, the company launched a new global flagship fund targeting $30.3 billion – 50% larger than its predecessor and, it claims, the largest private equity real estate fund ever raised. It will launch in autumn. First closers will get a four-month fee holiday.
Already it has closed $24.4 billion, and the remaining capacity has already been fully allocated. What’s more if you add on its opportunistic real estate funds in Europe and Asia, it has $50 billion in total with only around 12% invested today.
As chief operating officer Jon Gray said on Blackstone’s Q2 earnings call: “This is a very advantageous position given the current environment.”
Can Blackstone defy the odds?
Stock markets have had a rough ride so far in 2022. The S&P 500 had its worst first-half performance since 1970 with investors spooked by rising interest rates and inflation.
Against this backdrop, Blackstone has performed remarkably well. Distributable earnings in the second quarter nearly doubled year-over-year to $2 billion, representing one of the two best quarters in the company’s history. But it still swung to a second-quarter loss of $ 29.4 million thanks to fall in value of its private equity portfolio.
"We come away with greater confidence that Blackstone is best positioned to navigate this backdrop, capitalize on dislocation, and propel earnings power," analysts at Morgan Stanley said in a note to investors.
Despite all this market upheaval Blackstone raised $88 billion in inflows and Stephen Schwarzman is confident that the company can defy the odds.
“Our fundraising cycle and the deployment of our dry powder should significantly expand the firm's earnings power and fee-related earnings over time. How can Blackstone generate these extraordinary results, while most other money managers are suffering? We believe that it is the power of our brand, and our superior performance, which have enabled us to build unique relationships with our clients over decades,” he said on the same Q2 earnings call.
“We've also benefited from the remarkable trends started over 30 years ago of increasing allocations to alternative managers, as investors seek higher, sustainable returns, including retail investors, which represent a vast and largely untapped market. Limited partners across customer channels rely on us, to produce differentiated outcomes, compared to what they can achieve in traditional asset classes.”
Hospitality investments
Blackstone has exposure to the travel and leisure industry across its private equity and real estate investments and has historically done pretty well out of the sector. Its $26-billion acquisition of Hilton at the beginning of the global financial crisis in 2007 eventually netted it a $14 billion profit by the time it had fully cycled out in 2018.
More recently it bought UK-based holiday park operator Bourne Leisure and teamed up with Starwood Capital to buy Extended Stay America.
The firm remains bullish on the sector. Earlier this month via its Hotel Investment Partners subsidiary it bought another Mediterranean hotel.
Blackstone's 10 most recent hotel deals
| Asset | Date | Location | Size |
|---|---|---|---|
| Mett Hotel | July 2022 | Estepona, Spain | 253 units |
| Me Milan Il Duca | January 2022 | Milan, Italy | 132 units |
| Cala Blu Premium Resort | December 2021 | Sardinia, Italy | 199 units |
| Agrustos Beach Villas | December 2021 | Sardinia, Italy | 150 units |
| Costanza Charme Club | December 2021 | Sicily, Italy | 187 units |
| Valtur Magic Pollina Cefalu | December 2021 | Sicily, Italy | 341 units |
| Marmorata Sea View Resort | December 2021 | Sardinia, Italy | 597 units |
| Brucoli Premium Resort | December 2021 | Sicily, Italy | 448 units |
| Hotel Sentido Elounda Blu | July 2021 | Crete, Greece | 170 units |
| The Lake Spa Resort Hotel | January 2020 | Algarve, Portugal | 192 units |
Source: MSCI RCA