Blackstone Has More Than Doubled Its Real Estate Spending. Next Year It Could Start Selling

The world’s largest commercial real estate owner has been on a buying spree after calling bottom in the property markets earlier this year. 

Blackstone President Jonathan Gray said on the firm's earnings call Thursday morning that the company spent or committed $22B toward real estate acquisitions through the first nine months of the year, more than double the outlays for the same period in 2023. It has already committed 40% of its flagship $30B real estate fund, Gray said.

An analyst asked when the company might shift toward selling some of its $325B of real estate assets under management.

“The balance this year has been very heavy toward the investing relative to the harvesting,” Blackstone CEO Stephen Schwarzman responded. “I think that will start to balance out, still probably more investing earlier on as we work through the year. I would then expect to see more realizations.”

He added that the firm will continue buying properties and companies that own data centers, industrial real estate and rental housing, and it could even look to dip back into office ownership after executives have touted its low exposure in recent years.

“I think we will find interesting places to deploy capital, and it's possible in office on a selective basis that you could find some interesting things, particularly higher-quality buildings, and even retail around the grocery-anchored space as opposed to the enclosed mall,” Schwarzman said. “So I think we're in the middle of a broad-based recovery in real estate.”

Blackstone beat expectations for its third-quarter performance. Its distributable earnings, a closely watched gauge of profit for the world's largest alternative asset manager, hit almost $1.3B, roughly 10% above analyst projections, Bloomberg reported.

Blackstone increased its assets under management from $1.08T in Q2 to $1.11T in Q3, and its credit unit overtook real estate as the segment of the business with the most assets under management, with $354.7B. It recategorized some of its CRE debt holdings from real estate to credit, according to Bloomberg.

The company is also in the planning stages of taking some of its largest holdings public, as Wall Street has enjoyed a record rally this year. 

“We are preparing to take some portfolio companies public,” Gray told the Financial Times. “I would say the discussions have gone from theoretical to practical, and we are talking about things like timing. When you have this strong of an equity market, it’s almost like a magnet pulling companies out of the private market.”

Gray said he believed the recent rally with technology stocks signaled that investors were hungry again for initial public offerings.

Blackstone has executed some major portfolio sales in the past year, including the budget motel chain Motel 6 to Oravel Stays for $525M last month and its 450-room Turtle Bay Resort hotel in Hawaii for $725M in May. The company was also considering selling London-based events group Clarion Events for upward of $2.6B, Reuters reported.

The most scrutinized fund in Blackstone's real estate portfolio has been Blackstone Real Estate Income Trust, a semiliquid vehicle from which investors have withdrawn $15B over the past few years.

Schwarzman said BREIT's repurchase requests — when an investor asks the fund to buy out its shares — are down 90% from their peak.

“BREIT is clearly moving toward positive net flows based on current trends,” Schwarzman said.