Blackstone left the hotels at the very last moment.
“It wasn’t because we were expecting a pandemic,” company president Jonathan Gray said Thursday during a company call. Rather, the private equity giant saw great promise in the home rents, life sciences and industrial buildings it acquired last year – investments that helped it nearly double its distributable profits from last year.
The company is now banking on recovery with plans to bring back the hospitality business, which currently accounts for about 7 percent of its real estate portfolio.
“I think this number will increase,” said Gray. “We really think people will return to travel – primarily individual and leisure travel, and eventually corporate and group travel, so we love that.”
This plan is already being implemented. In March, Blackstone struck 6 billion dollars acquisition of the Extended Stay America economy hotel fleet as part of a joint venture with Starwood Capital.
Overall, real estate investment was the main driver behind Blackstone’s earnings growth in the second quarter.
Net income for the quarter more than doubled from $ 568 million a year ago to $ 1.3 billion this year. On an annualized basis, cash returned to shareholders was up 105 percent over the same period last year, with real estate accounting for nearly half of total revenues. Revenue also more than doubled from a year ago, to $ 5.3 billion in the second quarter, up from $ 2.5 billion in the same period last year.
“The largest source of permanent capital and royalty income is our core real estate business,” Gray said.
Core-Plus’s strategy is focused on long-term investments in residential, office and life sciences, including the Blackstone BREIT Private Equity Trust.
Over the past year, BREIT has added the west coast warehouses, Silicon Valley offices as well as mobile homes in Florida for a total of $ 1.8 billion. These types of investments helped attract a record $ 5.8 billion BREIT inflow in the second quarter. As of July 1, the company received an additional $ 2.6 billion from BREIT not included in the second quarter report.
Logistics real estate, which accounts for 40% of the company’s portfolio, made a profit in the second quarter, along with suburban tenements, life sciences offices and U.S. hospitality, according to CFO Michael Chae.
Blackstone also made a big splash in the burgeoning single-family rental market by committing to
$ 6 billion in June to acquire America’s home partners.
The firm acquired $ 5.1 billion in affordable housing this month through to deal with with AIG.