With a real estate portfolio valued at north of $600 billion, Blackstone knows a thing or two about the built environment. What the company says and thinks makes a difference and shifts markets.
Per the company's latest set of results net income was $1.2 billion for the quarter and $4.1 billion year-to-date. The company has more than $1.2 trillion in assets under management up 12 per cent year-over-year, with $54.2 billion of inflows in the quarter. It reported total dry powder of $188.1 billion available for future investments.
On the subject of the real estate market cycle chief operating officer Jon Gray had the following to say [HI take in bold]:
Well, we've been pretty consistent. We said at the beginning of '24, we thought real estate was bottoming. We said it would be a slow non-V shaped recovery. That has certainly been the case. It's hard to say exactly when things turn, but a number of the tumblers are falling into place for real estate. First off, we've seen cost of capital come down pretty meaningfully. The 10-year back down here at 4 per cent. Spreads have come down quite a bit. That is very helpful for the sector. The CMBS market, volumes they are picking up. I think they're up about 25 per cent year-to-date. We're also seeing this very constructive decline in new supply, which you heard about in our prepared remarks, which starts to set a foundation for cash flow growth as you look out over time. I would tell you, qualitatively, we are seeing some good signs in the sense that in the last couple of weeks, we announced 2 large transactions, big office building here in New York City, and then that we were selling and then we sold some logistics in the U.K. to a public company. These sort of transactions were very hard to get done 12 months ago. And I would note that during one of a recent transaction we've been involved in, I got multiple calls from buyers asking if they could be positioned to win. And I joked internally that was the first time in 3.5 years, that has happened. So I think we're at a point here, the combination of a capital markets recovery and a sharp downturn in construction sets the groundwork for getting closer to that inflection point. And I think when you see that, obviously, it will be very helpful to our business given the exposure we have. And that's why you see us trying to deploy capital at scale to capture this before people start to feel more comfortable. I will also say the sentiment amongst global investors. I was in Europe, in Asia in the last couple of weeks; is definitely moving to a better spot. But in general, investors want to see a little more positive performance, and that will make a difference.
Real estate is significant part of the Blackstone picture and the company invests across the asset class spectrum. One area that has gained a lot of attention in recent months is data centres with a suggestion that AI hype could be inflating a bubble.
Asked about this very subject on a recent call, chief operating officer Jon Gray had a considered response:
Well, I think the key thing for us in our data center business is how we do the business. The vast majority of our investing and the vast majority of return comes from building, developing, leasing these data centers. We do it now in the U.S. We do it in Asia. We do it in Europe. We have leading platforms around the globe. And the key to what we do from a risk standpoint is we make sure we have an investment-grade counterparty. Today, I would say, in general, the largest companies in the world with roughly $1 trillion to $4 trillion market cap, and we get lease terms of 15 to 20 years. And that's when you start to deploy capital at real scale. And to us, that seems like a very prudent way to do this. The returns come from the differential between the cost of doing those projects and then what their worth is stabilized assets. So when you have a high investment-grade company and a long-term leased asset, that is quite valuable.