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markets .” Blackstone increased its investment pace starting in the fourth quarter of 2023 , which coincided with the peak of 10-year treasury yields . Since then , Blackstone has deployed $ 123 billion , which doubles the prior-year comparable period . “ We ’ ve been planting the seeds of future value at what we believe is a favorable time in terms of future harvesting ,” Schwarzman said .
THE GRAY ZONE Jon Gray , the heir apparent to Schwarzman and social media face of Blackstone , is one part savant and one part wizard when it comes to investing . Rarely wrong , he makes big bets that tend to pay off . The arsenal of dry powder doesn ’ t hurt , but , more often than not , Blackstone makes the right choices , prescient decisions that pay off for it and its partners .
“ Over the past several quarters , we ’ ve been advancing along the path we outlined for investors , and as we emerge from the high cost of capital environment , we are pleased to see our business progressing on this path , especially the strong investment performance with broad-based acceleration across the firm ,” Gray said .
The path , for now , doesn ’ t appear to include too much in the way of hospitality . While Gray told analysts that it expects to be a net buyer — and that there are many more buyers now to contend with chasing deals — recently , it ’ s been a seller within the hotel market , the Motel 6 deal just
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one example . Earlier this year , Blackstone agreed to sell the Arizona Biltmore , the iconic luxury hotel in Phoenix originally designed by Frank Lloyd Wright , to Henderson Park , a Londonbased international private equity real estate company , for $ 705 million or $ 1 million per key . Blackstone acquired the hotel , which transitioned from Hilton ’ s Waldorf Astoria Hotels and Resorts to the LXR Hotels & Resorts portfolio , in 2018 for $ 403 million from Singaporean sovereign wealth fund GIC Pvt . Ltd . The deal closed in early May .
Also in May , Blackstone said it would be selling the Turtle Bay Resort on the North Shore of Oahu for $ 725 million to Host Hotels & Resorts . The hotel subsequently rebranded as The Ritz-Carlton O ’ ahu , Turtle Bay . “ This transaction is an excellent outcome for our investors and a testament to Blackstone ’ s ability , including through the pandemic , to transform iconic , luxury hospitality assets ,” said Rob Harper , head of Blackstone Real Estate Asset Management Americas .
“ The team executed an ambitious business plan , investing significant capital to reposition the resort for longterm success while also adding high-quality jobs on the North Shore .” Blackstone acquired the resort in 2018 for $ 332 million .
One recent Blackstone sale is a bit baffling given all the encomiums heaped of late upon the extended-stay hotel segment . In September ,
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Blackstone sold the Residence Inn Seattle East / Redmond to Clearview Hotel Capital for $ 34 million , 30 % less than what it bought the hotel for 10 years ago .
Is Blackstone shying away from hospitality in general ? “ That ’ s what it appears ,” said Michael Belisario , director , senior research analyst , at Baird Equity Research . “ Blackstone ’ s recent real estate bets have been focused on sectors with more favorable secular demand drivers and multi-year tailwinds ( e . g ., AI and data centers ). Hotel and travelrelated investments do not have the same longer-term growth outlook that they did several years ago when you could invest in the post-pandemic travel recovery and ‘ revenge spending ’ thesis .”
Blackstone is still invested in the hospitality industry , including a controlling interest of Great Wolf Resorts and UK ’ s Village Hotels . In May , Blackstone Mortgage Trust originated financing for the 88-room Rosewood Bermuda , which is owned by Gencom .
COMMERCIAL REAL ESTATE CONVICTION Blackstone ’ s accuracy in its hospitality investment pullback may still be undetermined , but it does not mean Gray ’ s confidence in commercial real estate has waned . “ The recovery is underway in commercial real estate and in January we made the call that values in the sector were bottoming ,” Gray said . In the first nine months of 2024 , Blackstone invested or
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committed $ 22 billion in real estate , nearly two and a half times the same period last year . “ The combination of lower base rates , lower borrowing spreads and lower new supply makes the direction quite positive for our real estate business ,” he said .
And though an election year can oftentimes have a profound impact on investment activity , Gray isn ’ t convinced that it ’ s affecting it one way or the other . “ I haven ’ t seen people pulling back from buying ; it ’ s probably delayed a few sales processes , and that should be a good sign for deal activity in terms of relative pickup and activity ,” he said . “ We ’ ve now seen borrowing spreads and borrowing costs come down a ton . You ’ re going to see a pickup in activity . You have all the conditions for more transaction activity .”
Blackstone ’ s other main focus has been its private-credit platform . It manages the largest third-party , private-credit business in the world , with $ 432 billion across corporate and real estate credit . “ Our farm-to-table approach , which brings investors directly to borrowers , results in a strong value proposition for clients in the insurance channel ,” Gray said .
“ Now ” is not part of the Blackstone ethos . “ Next ” is more precise . And for the time being , things appear to be sanguine across markets , if you believe Gray . “ We ’ re in the middle of a broad-based recovery in real estate ,” he said . “ We ’ re trying to capture as much as possible .”
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64 hotelsmag . com Oct / Nov 2024 |