Real Estate
Much of Blackstone’s dominance reflects the growth of its real estate group, the firm’s largest with $81 billion in assets at year-end. The unit spotlighted its clout when it teamed with Wells Fargo & Co. to buy office buildings and other properties from GE. It was the biggest real estate purchase for Blackstone since its $26 billion takeover of Hilton Worldwide Holdings Inc. in 2007. The hotel company, which went public in 2013, is up 16 percent this year, elevating Blackstone’s gain in the deal to about $14.8 billion, the most ever in private equity.
After sales this year of warehouse owner IndCor Properties Inc., mall operator Kimstone and other holdings, Blackstone real estate chief Jon Gray -- widely viewed as Schwarzman’s eventual successor -- is gathering more investor capital. His newest fund, for which he’s gathered $14.5 billion so far, will be the largest real estate pool ever.
He’s putting money to work quickly. Last week, in addition to the GE pact, the group struck a deal to buy shopping-center owner Excel Trust Inc. for about $2 billion. In March it agreed to buy Chicago’s Willis Tower, the second-tallest building in the U.S., for $1.3 billion.
Commercial Property
Blackstone’s role as the biggest private equity investor in the real estate industry may hurt the company in the event of a slowdown. Commercial-property prices have climbed about 7 percent past the prior boom’s peak, according to Moody’s Investors Service. The U.S. Federal Reserve may raise its benchmark interest rate later this year, which could hurt real estate along with other investment assets.
The private equity unit, with $73 billion in assets at year’s end, is benefiting from performance fees earned from a $21.7 billion buyout pool it raised from 2005 to 2007. The fund, which struggled when the financial crisis dragged down holdings, crossed a return threshold in last year’s second quarter that’s allowing Blackstone to collect performance fees at an accelerated rate.
The group’s sales included shares of pharmaceutical company Catalent Inc., U.K.-based theme park operator Merlin Entertainments Plc and Pinnacle Foods Inc. That unit, too, is raising more money from investors, seeking at least $16 billion for its seventh buyout fund.
For Schwarzman, a billionaire who’s the largest shareholder in Blackstone, there’s another way to measure just how good a year he’s having: His personal net worth has climbed by $1.6 billion since the start of this year, to $12.5 billion, according to the Bloomberg Billionaires Index.