Blackstone Exceeds $1 Trillion in Assets Despite Real Estate Headwinds

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Blackstone (BX) announced Thursday that it became the first alternative manager to push past the $1 trillion mark in assets under management, but dislocation in the commercial real estate debt markets weighed heavily on the property giant’s second-quarter performance. 

The company reported a 39 percent decline in distributable earnings attributed largely to slowing commercial real estate sales activity in a rising interest rate environment. Michael Chae, chief financial officer at Blackstone, noted on Thursday’s earnings call that the second-quarter numbers were largely in line with the first quarter and stressed that real estate net realizations achieved record levels in the year-ago period in far different market conditions.

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“Our model, focused on long-term committed capital, keeps us from being forced sellers when markets are less favorable,” Chae said in the earnings call. “During these periods as we’ve seen in past cycles, the portion of our earnings related to realizations is interrupted, but ultimately re-emerges as markets heal.”

Achieving the $1 trillion assets under management threshold has been driven largely by the sharp growth of the firm’s Blackstone Real Estate Income Trust (BREIT), which has seen as 12 percent annualized return since the non-listed REIT’s inception six years ago. BREIT recorded its strongest month since August 2022 with a 0.96 percent return in June, just months after incurring massive redemption requests in late 2022. 

Jonathan Gray, president and chief operating officer at Blackstone, said June marked the lowest month for BREIT redemption requests, down nearly 30 percent from its January 2023 peak.  BREIT’s portfolio is now 80 percent concentrated in rental housing, industrial properties and data centers in Sun Belt markets with no exposure to commodity offices and malls.

“Longer term, we remain confident in the reacceleration of growth in this channel, given our portfolio positioning and exceptional performance,” Gray said. 

On the property sales front, the second quarter was highlighted by Blackstone’s $800 million sale of the JW Marriott San Antonio Hill Country Resort & Spa to Nashville-based Ryman Hospitality Properties in early June to net a $275 million profit. It also announced an agreement in late June for Prologis to acquire nearly 14 million square feet of industrial properties from “opportunistic real estate funds affiliated with Blackstone” for $3.1 billion in an all-cash deal. 

Andrew Coen can be reached at acoen@commercialobserver.com