Blackstone Inc. President Jon Gray believes that real estate prices have reached a bottom, presenting an excellent opportunity for swift action to acquire assets at discounted rates. In an interview with Bloomberg Television’s Francine Lacqua at the Bank of America Global Investor Summit conference in Rome, Gray expressed his optimism about the current market conditions.
Despite widespread negative sentiment surrounding real estate, Gray noted that the decline in value has already occurred, indicating a potential bottoming period conducive to investment. He emphasized the importance of seizing opportunities during this phase. Gray highlighted that competition for purchasing discounted assets has been limited thus far. He anticipates a growing demand for new capital as financial institutions grapple with losses from loans originated during periods of lower borrowing costs.
Gray foresees a wave of buying opportunities emerging, particularly as some banks and insurance funds may need to sell assets at discounted prices. However, he reassured that the scale of such transactions won’t reach the severity witnessed during the financial crisis. Gray expects numerous headlines reporting market transactions conducted under different economic conditions but stressed that the cost of capital is decreasing, spreads are narrowing, and new construction activities are declining significantly.
Blackstone has already been actively involved in financing multibillion-dollar real estate deals, with potential for more opportunities akin to the $17 billion portfolio sale of Signature Bank debt. In November, Blackstone bid for a portfolio of commercial-property loans from the Federal Deposit Insurance Corp.’s sale of Signature Bank debt following the collapse of the lender seized by regulators in March of the previous year.
“As investors, sometimes, one of the risks is that you miss it by being overly cautious and I think now is probably a good time before rates come down,” Gray said. Blackstone has grown into a powerhouse that touches all aspects of the economy, lending to businesses and financing infrastructure projects. Its assets hit $1 trillion in July 2023, making it the world’s largest publicly traded alternative asset manager.
Its shares surged 83% last year, including reinvested dividends, beating its biggest peers as well as the S&P 500, which returned about 25%. Blackstone became a member of the stock gauge in 2023. Blackstone’s shares have gained 8.3% this year.
The firm’s $60 billion real estate trust for wealthy individuals, the Blackstone Real Estate Income Trust, allowed investors to draw cash in full in February. It marked the first time in a month that the fund fulfilled all redemption requests since November 2022. The milestone is a sign that investor pressure for cash back has eased.
“As the real estate market bottoms, as rates start to come down and the Fed at some point starts to cut, as well as the lack of new supply — that should be more constructive for commercial real estate and we think that will be a positive for BREIT,” Gray said.
The environment for fundraising is getting better compared to about six months ago, though it’s a bit slower on the institutional side, he said. Investors are more enthused about private credit, or secondaries, and insurance clients are increasingly realizing the benefits, he added.