REPE Fund Profile Series - Part One: The Blackstone Group

This is a new series of posts that will take an in-depth look at the top real estate private equity (REPE) firms. In each post, we will briefly summarize each fund’s history, as well as getting into the details of their funds, and we will outline a few of their key real estate equity investments in recent years. By the end of each post, you will have a solid base of knowledge to help you prepare for your upcoming real estate private equity interview.

We will be creating fund profiles for the top 50 REPE firms (in order of their prominence). So up first, we have: The Blackstone Group.

Key things you should know about The Blackstone Group

Originally founded in 1985 as a M&A advisory firm by Peter Peterson and Stephen Schwarzman, the Blackstone Group is one of the largest private equity firms in the world. The firm has a global team of over 3,100 employees dispersed between their 25 international offices including London, Singapore, Sydney, and Copenhagen. Within its real estate business unit, there are currently 106 senior executives - the majority of these executives based in the New York office.

As of June 2021, the firm had $684B worth of total assets under management, with $208B of this allocated to its real estate division. In terms of investments, Blackstone’s real estate portfolio is currently valued at $411B.

Blackstone's Main Areas of Concentration

As part of Blackstone’s real estate equity investment process, the firm has organized its investment activities into three core strategies they refer to as ‘Opportunistic’, ‘Core+’, and ‘Debt’. We explain each of these in further detail below.

Opportunistic

This part of the business looks for opportunities where the team can acquire and improve under performing, yet well-located, assets before selling them off at a profit. Blackstone’s buyout of Equity Office Properties (EOP) in 2007 is a clear example of this strategy.

Core+

This part of the business works on optimizing long-term assets to maximize their full potential—with a specialist unit (Blackstone Real Estate Income Trust, Inc. (BREIT)) that targets the aforementioned in the top 50 U.S. markets. The types of assets this team focuses on include retail, logistics, residential developments, and office space. A recent example of this strategy in play may be found in Blackstone’s recently completed acquisition of QTS Realty Trust, a data center provider.

Debt

This part of the business centers on financing solutions for commercial real estate projects. The debt portion of Blackstone’s real estate business is made up of the Blackstone Mortgage Trust company which has a $19.2B loan portfolio. 

Blackstone’s Signature Deals

The best way to understand how a firm carries out their investment strategy is to examine their past performance, including challenges and successes. So, to get you started, here are a few more of Blackstone’s signature deals you should become familiar with:

• Southern Cross Healthcare: In 2004, Blackstone acquired Southern Cross Healthcare, a UK private residential care company, for GBP £162M. The firm then further increased the company’s portfolio by acquiring Nursing Home Properties for GBP £564M and then the Ashbourne Group for GBP £85M, before taking it public in 2006. In 2007, Blackstone sold its remaining shares in the company resulting in a total exit profit of GBP £1.1B.
• Invitation Homes: Between 2012 and 2017, Blackstone acquired over 80,000 single family homes through the creation of Invitation Homes, eventually taking the company public in 2017, and then exiting with a share profit of $1.7B in 2019.
• Center Parcs: In 2015, Brookfield Property Partners acquired Center Parcs, a UK holiday village company, for GBP £2.4B after Blackstone’s initial investment of GBP £205M and further $100M+ investment in facilities improvements.
• Hilton Hotels: In 2018, Blackstone sold its 15.8 million shares in Hilton, thus exiting after 11 Years with a $14B total profit.
• La Quinta: In 2018, Blackstone agreed to sell La Quinta to Wyndham Hotels & Resorts for $2B.

Any other Interesting Facts?

Like any other large investment firm, Blackstone is not without its own controversies.

After the impact of the 2008 financial crisis, the UK-based Southern Cross Healthcare company later collapsed in 2011, resulting in the potential loss of homes for 31,000 vulnerable residents across 750 care homes. Blackstone took the brunt of the blame for its role in the eventual collapse, primarily due to the firm’s choice of investment strategy. 

Similarly, there were a number of controversies which arose from the social impact of the Invitation Homes project. Blackstone addressed these controversies directly before selling all its remaining shares in 2019.

Over to you...

We hope this Blackstone REPE fund profile has helped you broaden your industry knowledge in preparation for your upcoming real estate private equity interview. Now that you’re up to speed, do you have your interview strategy in place, both in terms of the technical and behavioral aspects? Without the right strategy to sell yourself  at the interview stage, you’re risking your dream job. 

Let us help you set yourself up for interview success: take a look at what we can offer you at Leveraged Breakdowns.

 

---

About the Author: 

Melody Sadé Abeni is a London-based writer who specialises in commercial real estate content. As a generalist member of the Leveraged Breakdowns team, she crafts detailed posts geared towards those curious about the real estate private equity life. 

In her former professional life, Melody supported senior corporate executives as a global mobility consultant and did her time in both management consulting and specialist asset management firms.