Blackstone Group, the world’s largest commercial landlord, announced a decline in earnings from its real estate business for the first quarter of 2023, marking a 58 percent drop compared to the same period in 2022, according to the firm’s recently announced earnings filing and a report by Mingtiandi. The decrease in income from asset sales and disposals was a result of a market slowdown, with net realizations down by 98 percent, from $567 million down to around $10 million, due to rising interest rates and market uncertainty, causing a decline in investor demand for real estate assets. As a result, the company’s assets under management and management fee income from the sector slid to $535 million in the first three months of the year, down from $1.3 billion twelve months ago.
Blackstone disposed of $4.4 billion in real estate assets during the first quarter of 2023, compared to $9.5 billion in exits during the same period in 2022. The company’s capital fresh deployments in the real estate sector also declined, from $7.5 billion in the first quarter of 2022 to $2 billion in the first three months of this year.
Despite the challenges, the company’s total real estate assets under management grew by 11 percent to $331.8 billion in the first quarter of 2023, from $298.2 billion in the same period of 2022. Major inflows for the company’s investment vehicles included $5.5 billion in capital raised for its BREIT real estate investment trust and $2.1 billion for its fifth real estate debt fund.
Blackstone recently announced that it had achieved a final close of $30.4 billion on its Blackstone Real Estate Partners X fund earlier this month, making it the largest closed-end investment strategy to date. The company raised $1.6 billion in the first quarter alone towards this fund.
Blackstone’s leadership remains confident in the company’s ability to outpace the market and shift into the highest-yielding segments of the real estate industry. Logistics now constitute 40 percent of Blackstone’s real estate portfolio, up from zero in 2007, with market rents for warehouse space generally growing at double-digit rates. Despite the downturn, the company is ready to take advantage of potential opportunities, with a sizable amount of investment dollars available to capitalize on dislocations. “Our latest fundraising cycle has positioned us very well for the current environment,” Chief Operating Officer Jonathan Gray said during the analyst call. “We have nearly $200 billion in dry powder to take advantage of dislocations.”
However, the company’s leadership is not yet predicting a return to buying and selling in the property market until more confidence and stability in the markets ensues. That, Gray concluded, will take a little more time in the making.