Jonathan Pollack
Global Head at Blackstone Real Estate Credit
Describe the past 12 months in one word, then expand on your choice.
Rates (obviously). The world has changed, or, maybe more accurately, it has changed back. No one can say with certainty where the 10-year Treasury will be when this goes to print, but the moves this year have changed everyone’s perspective on how to manage through this rate cycle. Real decisions now have to be made — refi, reduce, repay, sell, etc. Every one of those decisions requires capital, which will make this a really interesting time to lend and invest.
What are/aren’t you lending on today, and what’s changed in your loan terms?
As we like to say, not all real estate is created equal. We always start with the quality of the property and the market — that will never change, but the outcomes certainly do. To give an obvious example, there are core industrial markets today that have higher rents than some strong, core office markets. That would have been unimaginable just 10 years ago. At the same time, there are some office buildings that are outperforming their market because they offer quality and amenities that are hard to find.
Regarding loan terms, it comes down to the situation — when we are comfortable with our basis, we always aim to be flexible, which has been a big differentiator for us over the years.
Name two markets you’re gravitating toward today, and tell us why.
Even relatively short loans or investments last for years, so we are always focused on long-term trends when establishing our investment thesis. When you look at the world in 10-year chunks, you see major changes in the ways we live and work that wind up creating bifurcation across commercial real estate, with significant strength in some areas and significant weakness in others, so having that long-term view is so important.
An obvious case today is data centers, which are experiencing an explosion in demand from AI. That is creating a major tailwind, but the sector was already well positioned from the growth in data collection, as nearly every object in our lives has gone online. Another is student housing, which is benefiting from the long-term trend of globalization of higher education.
Has certain lenders’ retrenchment been beneficial to your pipeline? Discuss.
We are one of the largest managers of insurance capital, so over the past several years we have established a meaningful presence in parts of the debt world you wouldn’t normally associate with us — investment-grade CMBS, high-quality residential mortgages, and five- to 10-year, fixed-rate commercial mortgages. We have definitely seen a change in the competitive dynamic since the regional bank pullback earlier this year, and that is working to the benefit of our insurance clients. Insurance capital is a natural home for the same borrowers and products that may have gone to banks, and in many cases we have been able to partner with banks to create helpful solutions.
What’s your approach when it comes to loan extension requests?
We want to be great partners to our borrowers beginning on day one and continuing all the way through the life of the deal. Partnership is a two-way street, and great real estate is worth protecting. When you have well-capitalized borrowers who are willing and able to contribute more capital, both parties can bring something to the table.
Will rate stability calm market volatility, or is that wishful thinking?
There’s nothing investors like less than uncertainty. While a higher-rate environment introduces certain challenges for borrowers, the market can benefit from more stability.
If you had five minutes with Jerome Powell what would you say?
I think he’s hearing plenty of opinions, and the reality is that they have a complicated picture to manage. He’s been pretty clear about his objectives, and, if there’s one overused phrase you should listen to it’s “Don’t fight the Fed.” We are fortunate to sit in a large firm that is able to spot trends in our broader portfolio. Blackstone made an early call on inflation, in part because we saw signs of it in businesses we manage. We see significant progress being made, and I take him at his word when he says they will stay the course until they are confident they have won. We do believe they are getting pretty close.
Lightning Round:
Multifamily or Industrial?
That’s like asking if I prefer Taylor Swift or Beyoncé. I love them both, depending on the cap rate.
Taylor Swift or Beyoncé?
That’s like asking if I prefer multifamily or industrial. I love them both, depending on the occasion.
What would be the title of your Lifetime biopic?
I looked at the list of Lifetime biopics to get some inspiration for this, and my main conclusion was they would never pick me for a biopic.
Ride or dies’ only (relationship borrowers) or taking on new borrowers?
I’m an extrovert — the more friends, or borrowers, the better. But let’s be honest, there’s no substitute for the relationships you have for a lifetime.
Vacay time: Mountains or beach?
Mountains for sure. Sticking with the pop music theme, as Miley says, it’s the climb.
Complete this sentence: If I weren’t a lender I’d be a…
When my mom was frustrated with my high school study habits, she would tell me I was going to grow up to run the most successful dive bar on a beach somewhere. That doesn’t sound so bad, so let’s go with that.
