Evening Brief – 04.18.24
$200B in the Holster
Blackstone, which now has $1.06 trillion in assets under management, now has $200 billion in “dry powder”, and with inflows of $143 billion over the last three months the asset manager is looking for some big opportunities.
Private equity has the greatest amount of capital, with $80 billion in dry powder, while real estate has approximately $64 billion available.
“Blackstone reported strong first-quarter results, highlighted by accelerating momentum in private credit and private wealth businesses,” said Blackstone Chairman and CEO Stephen Schwarzman in his first quarter earnings call.
“Compelling Time to Invest in CRE”
The $339 billion real estate portfolio witnessed over $8 billion in inflows as data centers proved to be a lucrative investment. The performance for the quarter was somewhat favorable, but it remained negative annually.
The gains come as Blackstone Real Estate prepares to take the AIR Communities residential REIT private in a $10 billion transaction, its largest-ever apartment portfolio acquisition.
BREIT received $807 million in inflows while selling its remaining stake in Phoenix Tower International, a global wireless communications infrastructure firm that at the end of March received a strategic investment from BlackRock and Grain Management.
“The key differential has been in the growth and cashflows in our portfolios where we chose to invest, Blackstone President & COO Jon Gray told CNBC. “We have very little, almost no office exposure, no regional malls. We own within BREIT the fastest growing data center business, we believe in the world, in QTS. We [also] own a very large, fast-growing student housing business and big exposure to logistics.”
“What’s happening on the ground today looks encouraging. We’ve seen the cost of capital for real estate come down, the commercial mortgage-backed securities market had a five-fold increase in issuance, so debt capital is much more available, and more importantly – long-term – new supply has come down,” added Gray. “It’s a compelling time to invest in commercial real estate and you need to do that before the all-clear sign.”
Credit Continues to Amaze
The credit segment continues to perform exceptionally well for the asset manager, as the $329 billion credit and insurance portfolio received inflows of more than $17 billion. The firm’s global direct lending strategy received the greatest share of capital raised, totaling $7.3 billion.
The $12 billion in capital deployed during the quarter went to U.S. direct lending and asset-backed strategies, notably in February when Blackstone purchased about $1.1 billion in outstanding credit card receivables connected to certain Barclays-branded U.S. credit card accounts.
“Credit, both for corporate and real estate for us, is now over $400 billion. We’ve crossed over $200 billion we manage for insurance companies, so we’re seeing a lot of momentum,” noted Gray.
The largest real estate inflows during the quarter were $2.5 billion to BREDS Insurance SMAs, which continue to make major strides into the insurance industry.
“A lot of what we’re doing, particularly for insurance companies and some pension funds, is [investing in] investment-grade private credit,” explained Gray.
Private credit returned 12.6% over the last 12 months, while liquid credit strategies were up 11.8% over the same period.
“We are well positioned to navigate today’s dynamic market landscape, with a portfolio concentrated in compelling sectors and nearly $200 billion of dry powder available to invest,” added Schwarzman.