Blackstone’s $92bn (€85.6bn) real estate business will continue to grow and gain a “disproportionate” share of a widespread push into alternative assets, according to its global head of real estate.
Speaking at the INREV annual conference in Barcelona, Jon Gray also said the private equity giant would benefit from investors’ increasing preference to work with fewer investment managers.
Gray was interviewed on stage by Johan van der Ende, former PGGM CIO and INREV chairman.
Asked what would happen to Blackstone’s real estate business in the next five years, Gray said: “Blackstone will be a large institution. It has been growing rapidly. I think it will continue to do so.”
Gray has presided over Blackstone’s move into the real estate sector since he was hired by the New York company in 1992.
He said questions about the risks associated with Blackstone’s size had always been raised – “that’s the question we have been getting consistently for a decade”.
“The way you counteract that is by making sure the business stays as connected and integrated as possible,” Gray said, pointing to the importance of weekly regular conference calls between partners and global investment committee meetings.
Gray said Blackstone’s size and global resources enabled it to carry out the recent multi-billion-dollar real estate deal with GE Capital.
“We were very uniquely positioned to move quickly – in three and a half weeks from the first meeting, they laid out the deal to us,” he said.
Blackstone, Gray said, had been able “attract so much capital” in recent years principally because it has delivered consistently strong returns, in real estate and other asset classes.
If that performance were to slip, then the capital would naturally migrate elsewhere, he said.
Gray told delegates he was “probably more positive than the consensus” on the global economy and real estate markets.
He said an improving US economy, low energy costs, low interest rates and a more stable, albeit slower, Chinese growth all boded well for real estate markets where most assets could be bought below replacement cost.
He highlighted Brazil as potential “contrarian” real estate investment opportunity.
“The currency is down 50%. Cap rates moved up 300 basis points,” he said. “The economy has some serious challenges, and it’s hard to say when things are going to get better there.
“[But] it reminds me of India a few years ago, when no one really believed India would turn a corner.”
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