Blackstone Finds Investment Environment Ideal, Exec Says

Blackstone is deploying capital because it sees the current environment as ideal, according to Kathleen McCarthy, its global co-head of real estate, speaking this week on CNBC.

“We feel like there’s a bottoming happening,” she said. “We’ve said there’s no V-shape recovery. It’s not going to be a straight line up from here.”

She said when looking at some of the key pillars of how a recovery comes into place, they are strong.

For example, the cost of capital is coming down with spreads coming in, and there’s more liquidity in markets, “and perhaps most importantly, for the long-term, we are seeing a sharp decline in new supply.”

McCarthy said new starts for example, in logistics and rental housing where a lot of our capital is focused, are down 30% to 75%, depending on the market.

“We think that sets up for long-term performance on the back of good supply demand.”

Last year, Blackstone raised a record $30 billion for its global real estate opportunistic fund and has $65 billion in dry powder for real estate.

“This is the kind of environment when we do some of our best work,” McCarthy said. “We can combine this capital with the expertise and experience of our team.”

She said in the past couple of months, Blackstone took private Tricon Residential, which focused on high-quality residential development and management in North America.

McCarthy said data centers is one of the highest conviction themes the company is most excited about.

It announced a $7 billion joint venture with Digital Realty, where across Europe and the US, McCarthy said Blackstone plans to build data centers, given explosive demand for that kind of digital infrastructure from some of the biggest technology users in the world.

She said Blackstone continues to see strong performance in warehouses and rental housing, data centers, and hospitality.

“We are always trying to buy high-quality real estate and good locations and then make it better or make the company that owns and operates the real estate better,” McCarthy said.

“Sustainability is a big part of that and that’s in part because that’s where the most attractive tenants want to be. They want to be in real estate that is high-quality, that is a place where people want to come to work and to create and collaborate.

“We continue to see news and evidence and more people are coming back to the office. You can look at turnstile data as evidence. Blackstone has long believed that we do our best work physically, together in the office. We were early openers in July 2020 and we’re in five days a week now and that’s because we are feeling that we owe our customers our best work and we do that work together.”