Blackstone's Real Estate Revenue Halved In 2023 Despite Expanded Portfolio

The world’s largest commercial real estate manager increased its property assets in 2023 in spite of a bruising year for the industry, but the revenue it earned from those assets shrank dramatically. Still, the fourth quarter saw the picture brighten for the company and the sector. 

In results that covered Q4 and full-year 2023, Blackstone said that its real estate assets under management rose from $326B at the end of 2022 to $336B at the end of 2023. But, the revenue it earned from its real estate business dropped 50% in 2023 compared to 2022, falling from $6.8B to $3.4B. 

As was the case across its business lines, that was because of significantly lower performance fees earned.

Q4 saw an improving picture, however, with real estate revenue 1% higher than the equivalent period in 2022 at $812M. 

The value of the firm’s opportunistic funds declined 3.8% in Q4 and 6.3% for the year, while core-plus funds declined 4.6% in the quarter and 4.3% for the year.

Blackstone saw $19.9B of inflows in the final quarter of the year, half of which came from the company entering into a fee-paying joint venture with the FDIC to acquire the Signature Bank commercial senior mortgage loan portfolio, resulting in $10.5B.

Real estate fund inflows in the quarter also included $3.8B in separately managed accounts from insurance companies in its real estate debt business, $1B in its seventh European opportunistic fund, $813M of capital raised in BREIT and $230M in the fifth real estate debt strategies fund, which commenced its investment period in December.

BREIT took a 0.5% loss in 2023, its worst returns ever.

Blackstone sold $4.6B of assets in Q4, $1B more than during the same period last year. That included BREIT’s partial sale of The Bellagio Las Vegas for $933M and the final share sale of Embassy REIT for $848M from its opportunity fund business.

In terms of outlook, Blackstone President Jon Gray told Bloomberg that 2024 should be an easier year for financial firms because interest rates are likely to fall rather than rise in major economies, but cautioned that rates might not drop as much as markets are anticipating.

He added that redemption requests for the BREIT nontraded REIT were down 80% from a peak last January and if the trend continues, the vehicle should be able to lift the gate on redemptions before the end of the quarter.