Blackstone Reports Income From Real Estate Sales Down 96% In Q2
Not even Blackstone is immune from the tumult in the commercial real estate sector, with its second-quarter distributable earnings falling by 40% as its realizations from real estate sales plummeted by 96% compared to a year earlier, according to the company's earnings call Thursday.
With two major sales in the quarter, an $800M hospitality trade in Texas and the $3.1B sale of an industrial portfolio to Prologis, the private equity giant netted just $50M in the second quarter from real estate sales, down from $1.2B in Q2 2022.
In better news for Blackstone, the firm also announced it reached $1T in assets under management, making it the first private equity firm to do so.
A good chunk of the company's AUM is real estate, with $333B of investor capital under management and a global real estate portfolio valued at $585B.
With sectors like office struggling, Blackstone has shifted its focus in property markets to other asset types that are experiencing more growth.
“We are seeing sustained strength in our key sectors in terms of cash flow growth,” Chief Financial Officer Michael Chae said on the call. “Half of our owned real estate is in logistics, student housing and data centers, which have experienced double-digit year-over-year growth in market rents.”
Blackstone closed on a $30B real estate fund earlier this year, with an eye toward these alternative property types amid the continued drop in value for office assets.
“I would say that there continues to be pretty significant bifurcation in commercial real estate,” Chief Operating Officer Jon Gray said during the call, adding that less than 2% of Blackstone's portfolio is in office assets. “Certain sectors face real underlying fundamental headwinds; that would be notably the office space. We have a ways to go in terms of what will be, I think, continued challenges going forward. And there will be more foreclosures and more markdowns coming in portfolios.”
The sorry state of the office market — and the impact of interest rates on real estate — caused investors to demand withdrawals from Blackstone's nontraded REIT at such a strong clip that the firm limited withdrawals. Blackstone Real Estate Income Trust has capped withdrawals since November but said in June its repurchase request total was the smallest it has been all year.
