It’s a ‘Favorable’ Time To Spend Capital, CEO Schwarzman Says
Blackstone, the world’s largest commercial property owner, sees opportunities to spend capital and “plant seeds of future value” despite uncertainty about when the Federal Reserve may cut interest rates.
The private equity giant, with more than $1 trillion in assets under management, on Thursday said its real estate business posted positive investment performance in the first quarter after a decline in the fourth quarter and the past 12 months.
Breaking down its real estate segment, Blackstone’s riskier opportunistic investment performance inched up 0.3% after a 5.6% drop in the past 12 months while its more stable income-producing investments rose 1.2% following a 1.5% drop over that time. The gains would have been even higher without the impact of translated overseas results against a stronger dollar, Chief Financial Officer Michael Chae said Thursday on an earnings call with Wall Street analysts.
Outside of real estate, Blackstone’s private equity, credit and insurance, and other segments all posted positive performance returns.
The real estate results also contributed to Blackstone’s distributable earnings, or profit available to shareholders and a key performance metric. It inched up 1% to $1.27 billion following a 15% decline in the past 12 months. Net income attributable to Blackstone jumped about 10 times to $847.4 million from $85.8 million a year earlier in part as its fee-related performance revenue doubled.
We see an “improving external environment,” Stephen Schwarzman, Blackstone’s chairman and CEO, said on the earnings call, adding 2023 marked a “cyclical bottom” even as “changing market conditions take time” to translate into performance.
We see “positive momentum … [to] plant seeds of future value. It’s a favorable time for deployment.”
Among its key investment areas, Schwarzman pointed to digital infrastructure, logistics, and energy transition.
“Digital infrastructure is one of [Blackstone’s] highest conviction themes,” he said. “Just as we recognized the rise of e-commerce with warehouse [investments], we anticipate the paradigm shift [in infrastructure demand].”
Focus on Data Centers
In fact, Blackstone owns $50 billion of data centers globally including facilities under construction with another $50 billion in prospective future development pipeline, he said. Driven by demand for content creation, cloud services adoption, and now the growing use of artificial intelligence, he said Blackstone’s data center lease capacity has grown sixfold in less than three years.
Blackstone is also spending a lot of time on power and energy needs tied to AI and growing data center demand, said Jonathan Gray, Blackstone’s president and chief operating officer.
We “focus on the whole ecosystem of AI,” he said, adding Blackstone also is investing in AI-related businesses.
Blackstone in 2021 bought data center provider QTS for $10 billion. It also has a partnership with Digital Realty to develop $7 billion of data centers.
The growing data center demand coming from AI is real, Digital Realty Chief Executive Andrew Power told CoStar News on Wednesday, adding its data centers count among customers tech giants such as Google and Microsoft.
As Blackstone has increased investments in lending, including high-yield real estate debt, to capitalize on the seized-up financing facing the market in the wake of the Federal Reserve’s string of rate hikes since early 2022, Schwarzman said Blackstone sees opportunities to lend in areas including infrastructure and energy transition.
https://www.costar.com/article/1461414147/blackstone-earnings-rise-as-investment-giant-projects-commercial-real-estate-recovery
