Blackstone’s Tim Johnson On Deploying $22B Last Year — And What’s Ahead

As the clock struck midnight on New Year’s Eve, chances are that many in commercial real estate were pondering what might lay ahead in 2025 as they clinked champagne glasses or warmed up their vocal cords for “Auld Lang Syne.” After all, if the past five years taught us anything, it’s to expect the unexpected. 

Still, throughout the recent period of dislocation and uncertainty, some have set an example of what market leaders look like. These leaders are the ones who don’t sit on the sidelines but rather step up to the smorgasbord of opportunities that arise in unique moments like these to do what they do best: invest, lend and defy gravity by artfully choosing the savvy spots where the basis is low, and the only way, eventually, is up. 

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Blackstone (BX) is one such firm, and Tim Johnson, global head of Blackstone Real Estate Debt Strategies (BREDS), is one such leader. Johnson joined the firm in 2011 — a hairy period in its own right — and these past few years he and his team have worked on some of the biggest and most talked-about transactions in the debt space, from gargantuan deals, to, ahem, “signature” loan portfolio buys.

In December, a time when few lenders were comfortable taking down significantly sized loans, BREDS provided a $740 million refinance for Bal Harbour Shops, retiring the luxury retail property’s previous debt and funding its expansion. Leaning into the firm’s global infrastructure, with a wealth of data at their fingertips, the team put out a whopping $22 billion in capital in 2024. 

Johnson sat down with Commercial Observer in late December to discuss Blackstone’s year and why his 2025 pipeline is already stacking up nicely. 

This interview has been edited for length and clarity. 

Commercial Observer: Here we sit in December. Looking back, what were the key highlights and challenges of 2024? 

Tim Johnson: We had an unbelievably productive year in what— looking backward — was a fantastic investment environment. We developed conviction that real estate values had bottomed early in the year and that liquidity was going to return to the market, and we fortunately had capital to deploy into that type of an environment. 

What we did a great job of throughout the year was finding ways to deploy capital through a bunch of different avenues. We invested in securities, which is a great place to find good relative value risk-adjusted returns when there’s volatility, and early in the year we bought some high-profile loan portfolios from folks that wanted to sell for one reason or another. We were also making new loans at scale, and that business came off the sidelines materially throughout the year as more borrowers requested financings of larger deals. 

In total, we put out $22 billion of capital on a growth basis throughout the year, and that was across all of those avenues [loan originations, loan purchases and trading volume]. We’re super proud of being able to do that, because, when we look back, I think those investments will be some of the best that we’ve made in this cycle.

How does that $22 billion figure compare to the previous year? 

On a loan origination basis, it’s about three times higher. So a much bigger year in terms of activity. Part of the difference was, in 2023, we had money and capacity, but there just weren’t as many people borrowing, whereas, in 2024, more of those borrowers came off the sidelines as there was more stability and people had coalesced around valuations being a little bit more transparent. That resulted in overall increased transaction volume. 

 

How is client sentiment going into 2025?

General sentiment has certainly improved overall, and buyers are generally more inclined to try to put capital out today. The increased liquidity of the debt markets makes it easier for people to underwrite buying and selling real estate because, whether it’s 60, 70 or 75 percent of the capital structure, debt is the biggest piece. When people start to have more comfort there and there’s demand, you can get a competitive dynamic amongst lenders, and it takes one of the risks of equity investing off the table. 

Twelve months ago, borrowers really didn’t know what the debt was going to look like if you bought an asset, because there was so little debt availability. Today, there’s a much stronger picture. The market is going to continue to contend with rates that are staying higher than people want them to be and — based on what we’ve seen recently from the Federal Reserve and the strength of the underlying economy — it’s reasonable to presume that there’s not a dramatic decrease in rates coming anytime soon. So while that’s still a headwind, the tailwinds are also pretty strong, and the capital markets are very open. That leads me to believe that we’re going to have a pretty strong start to 2025. 

That’s not to say that everything in every portfolio has been marked to the right level, but the market knows what transaction levels are for most things now. You know where you can sell an asset — not perfectly, but within a range. You know where you can borrow money, again, within a range. There are data points, there’s transparency, and the stage is set for an increase in activity. 

What’s BREDS busy leaning into today? 

Our core strength has always been in doing large-scale financings where there’s a little less liquidity, or people are less able to speak for the entire transaction. Coming out of a period like we’ve just come out of, it tends to be the case that the participants in the large loan market are the commercial mortgage-backed securities (CMBS) market, banks and people like us. 

The CMBS market in the U.S. is pretty strong, and is a good, active tool. But there’s always a bunch of things that don’t fit into the CMBS market because of, say, cash flow, or if the property is in transition. 

Banks are definitely moving in the right direction in terms of activity, but they’re still not interested in taking down a big loan, and then owning the risk and syndicating it out. They have more of an agented business model today. 

Then you have nonbanks like us, but not that many nonbanks can do $500 million to $700 million loans, because you need a pretty large capital base to do that. We can be a really good solution there, so that’s where we focus our attention. We’ve done a lot of large loans in the U.S. and in Europe over the past year, and I think that will continue to be a focal point. We also do a lot in longer-duration, private, investment-grade lending for insurance companies and the like, which is a strategy that we’ll continue to focus on. 

How about asset types? 

We like the asset classes that we like as a firm overall: multifamily and all types of housing, data centers, logistics. Office is coming back into our focus because of the pockets of very strong fundamentals I mentioned before. You have valuations that have clearly adjusted, and there’s deals happening at a reset basis, where we can lend money and make outsized returns for what we think are really attractive risks. 

How long does this window last, in terms of finding savvy opportunities to either lend or invest in office?

I think it’s going to play out over a long period of time, as it’s happening at different phases. We’ve seen massive recovery in the financing for office. If you look at what’s happened with Rockefeller Center’s [$3.5 billion loan] securitization — the bond pricing was very, very strong, and demand was very, very strong. That indicates that the recovery in high-quality office is well underway, and certain styles of office are going to be just fine. We all know that there’s a lot of  shades of gray throughout the office sector and liquidity is going to return over time to different lower-quality assets, but there’s still not a bid from either equity or debt players for the lower-quality assets.  

You also haven’t seen a lot of the lender-forced situations come to play yet, because you need a bit of stability and a bit of recovery for that to start. This wasn’t a very levered environment coming into it, and so there was generally an ability to not sell, and lenders were smart enough to say, “I’m not going to sell something into a totally illiquid market.” But it eventually needs to get dealt with, and will take years for that to play out.

As you mentioned, you’re doing a lot of lending and investing in Europe. Are there any indicators that you’re taking from certain markets and applying them elsewhere?

Yes. One of the things I love about our business, and my job, is I get to see the relative value across all the different things we do. We’re a broad-based platform and we’re positioned to be able to look at the relative value of various things we do — buying bonds, making loans, buying loans — on a geographic basis. In Europe, on the loan origination side, there’s better relative value on large loans generally, and that’s because there isn’t a reliable CMBS market in Europe. It’s open from time to time, but the scale of it is a handful of billions of dollars versus $100 billion in terms of activity, and, if you need to borrow a good chunk of money, it’s not often the best option in Europe. So there’s a little bit of a better competitive dynamic, which results in better loan pricing on larger things. 

We can see this in real time as we’ll make a loan on a portfolio of logistics in Europe at a spread premium to the exact same deal in the U.S. You can compare the two, and decide to put more of your money into making those loan originations in Europe. 

The U.S. and Europe are in very different economic situations today, of course, in terms of the underlying fundamentals. We’re growing a lot in the United States, with a very strong recovery, whereas in Europe you have more economic headwinds, but you also have rates coming down a little faster, which provides a little bit of a tailwind. So, the two aren’t apples to apples. The beauty of our market in the United States is it’s big and it’s very, very liquid in comparison to everything else around the world, and you have these mechanisms that give you information very quickly, like the bond market or the equity markets, which are highly liquid and sophisticated and tell you things both good and bad really, really quickly. 

We’re seeing a recovery in the United States, and the capital markets starting to open up. What we know through experience is it usually starts here, then works its way outward. That emboldens us to be a little more aggressive in Europe because we know it’s going to follow suit. 

Has the data center craze caught on in Europe, in terms of lenders being very eager to finance these deals? 

It certainly has, and we’ve been active in Europe and Asia. We bought a company called AirTrunk [an Asia-Pacific data center platform] on the equity side of our business, which is the largest data center developer in Asia. So, it’s a global phenomenon. The constraints in places like Europe tend to be that power is harder to come by and more constrained. So the scalability of it is different from that standpoint, but it’s definitely a major trend around the globe and a truly global theme for us. 

Data centers are interesting in that they’re a niche, hybrid product between real estate and infrastructure, and not every lender can handle that size of loan. How competitive is the data center lending side overall?

There’s good amounts of capital for data centers because the fundamentals are strong and they appeal to a wide group of people, both on the equity and debt side. You have infrastructure investors, real estate investors, private equity investors, and on the credit side — like you said — it’s potentially real estate, potentially infrastructure, so the loans can fit in a lot of different places. Once your data center is built, there’s a very robust asset-backed finance market, or CMBS market to finance those deals. The areas where we will play is where our data center expertise can be particularly useful, so that might be pre-securing a tenant or a land deal. 

We’re working on a large-scale transaction right now that isn’t to a hyperscaler. It’s a really smart strategy that we like a lot, but it involves a different underwriting. Underwriting a 100 percent-leased building to XYZ investment-grade company is one thing, but underwriting a data center to 150 different tenants where they’re constantly rolling over and you have to understand the business model better, is a very different thing. We find that’s a little bit better suited to our capabilities, given what we understand about these things on the construction side. 

It’s something we spend a lot of time on because, to your point, the scale of that capital is really big. Those deals can easily be $3 billion. Data center construction loans are definitely easier than other styles of construction loans for lenders to make, but it’s difficult for any lender to make a $2 billion construction loan. So when it gets to a scale like that, I think we’re in a spot where we can offer a one-stop solution that’s pretty unique. There are angles where our scale is the advantage and the deal otherwise is relatively straightforward. And then there are other angles where our capabilities as a large data center owner are a big advantage. 

In March, you bought a $1 billion loan portfolio from Deutsche Pfandbriefbank. Why was that a good fit for Blackstone? 

That was the perfect style of deal for us. We had a relationship with the financial institution,  one where we had built up a lot of trust over a long period of time. It was a large-scale deal, $1 billion and involving a variety of assets in the U.K. and the U.S. If you look at the Venn diagram of somebody who can, like, provide $1 billion of capital, and who can look at things that are in the U.S. and the U.K., across the risk spectrum, that’s us. 

Some assets were highly stabilized in core loans, some were a little bit more transitional or a little bit higher leverage, and not that many people can do that. Also, buying performing loans is a business that not as many people are in. A lot of people want to buy nonperforming loans, there’s deep capital there. Buying performing loans is a credit strategy, but you have to be set up a little differently to do it, because buying loans is different than making loans. It requires you to act more like an equity investor, because you have to do all of your work and bid firm and be willing to, frankly, spend a lot of time and energy and lose money — and that’s just not something that everybody’s built for. 

We were trying to make a good return for us, but also make something that works for them so that they can deliver the outcome they need to deliver for their shareholders. That’s a critical part of that business model: the trust we’ve built with these institutions as a financial solutions provider. They know us as people who will pay market prices for things, and, if you need to get something done fast at scale and you want to get a good, fair price for it, that’s what we’re known for, and that was the situation where things evolved for that institution. They wanted to transact relatively swiftly, and having that certainty of an outcome was really important. 

Blackstone is a massive organization. Can you move pretty nimbly in that type of scenario, where time is of the essence? 

Yes. Our secret sauce is being able to move quickly. We’re maniacal about our investment committee process being efficient so that we can provide that certainty to people, and having direct lines to get to decision-makers for all of our teams is super important. It’s a hallmark of our business — making sure that we’re able to capitalize on things quickly. The Signature Bank portfolio was a great example of that, as a massive-scale transaction in a short period of time with a limited amount of data. Being able to get that done was proof of that.

The Signature loan portfolio was my next question! How are you feeling about that acquisition, one year on? 

We made the call that real estate values were bottoming around one year ago and we’ve actively invested before the all-clear sign. The acquisition of this mortgage portfolio at an attractive basis was an early example of that conviction. Since then, we’ve seen three straight quarters of real estate market values increasing. This is an exciting investment that we think will allow us to leverage the full breadth of the Blackstone real estate platform to deliver strong returns for our investors.

We’ve seen a lot of investors add real estate credit to their portfolios for the first time these past few years. What have you seen in that regard? 

The attractiveness from an investor standpoint today is about as high as it’s going to get. This is a great time for real estate, credit investing. It just is. Interest rates are high and valuations have reset, which means your entry point is better today. As the lender, you’re lending at a lower basis in the asset, credit standards are tighter because you’re coming out of a cycle where there’s been stress, and, so, naturally, the market’s a little bit more conservative, and spreads are wide on a relative basis compared to other styles of credit. 

If you’re an asset allocator, you look at the world and you say, “I can invest in credit overall.” You look at corporate credit and see spreads are at their tightest levels since COVID, or you look at real estate credit and see spreads are still, you know, 30 to 50 percent wider than where they were at their tightest. 

You’re approaching your 14th year at Blackstone. What are you most proud of? 

It’s hard to pick one moment, but a few things come to mind. For example, some of the large deals that really brought our entire team together over the history of our business. The Signature loan portfolio was one of those deals. It was the type of thing you needed every single person to contribute to, which is super fun. 

It’s also been very rewarding to go through a challenging period and see how the business and team has performed. We just had a nice town hall this morning, and business performance has been exceptional, but working with the team in the trenches and seeing how everybody comes at challenging problems with creativity and integrity, and all that other stuff that I think is really special about our business, is definitely what makes me the proudest about working here. 

What did you want to be as a kid? 

I wanted to be a teacher. I took an internship at Lehman Brothers [in 2002], mainly because it was in New York, and that’s where my eventual wife was living. So, I took it to be close to her. I wish I could say there was some really thoughtful, dramatic story, but I just kind of fell into real estate. I quickly loved the industry and found it to be so unique and my internship grew into a career. Looking back, I can’t see things having evolved differently, but at the time I had no idea that this would be where I would end up today.

How would you compare the early years at Blackstone, coming out of the Global Financial Crisis, versus the recent market bumps?

There are definitely some things that rhyme with that moment in time. 

Was your rhyming deliberate? 

No. [Laughs.] The leverage was lower this time around. In the GFC, you had maybe 20 percent equity in deals, and when values went down 30 percent, the whole system blew up. In the recent period, more often than not, you had 35 or 40 percent equity. Office values went down a lot, but other sectors didn’t go down that much. So you had more of an overlevered capital structure situation, but the value was still in the equity and the lender was still relatively safe. 

There was volatility in the public securities market during the GFC, which presented some opportunities to buy things cheap, which we did, and you saw the banks start to reduce their real estate portfolios and become the center of attention, not in a good way. You saw loan sale activity really pick up, and then eventually saw the thawing of the transaction market and lending activities start to pick back up. 

You’ve seen all of that this time around, but there’s been some pretty critical differences that have made this a very different environment. Specifically, a very different rate picture and different leverage picture coming into this period, which has resulted in less of a V-shaped recovery, and a longer recovery.

How is your 2025 pipeline shaping up? 

It’s looking very strong. I think the themes we’ve been talking about, with transaction activity picking up and more borrowers coming to the market buying and selling real estate, has really resulted in probably our busiest pipeline since 2022 at this point, and on a global basis. I’m pretty excited about 2025 from an activity standpoint. Liquidity is returning, and a lot of people need to borrow money. 

A lot of the deals that need to get dealt with are going to be complicated as there are a lot of overlevered capital structures that need to be worked through, and that’s going to provide a lot of fun stuff to sift through. We’ve got a lot of dry powder, and I think it’s going to be a very fruitful 2025.

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.