After betting big on e-commerce growth with several industrial portfolio acquisitions, New York-based real estate investment manager Blackstone is adding live entertainment as its next investment conviction.
“We’re a big fan around live entertainment because even though many things are moving online, people still need physical activities, things they want to do,” Blackstone president and chief operating officer Jon Gray said on the firm’s third quarter earnings call.
Blackstone has already started executing on the live entertainment focus, announcing a deal to take over the iconic Vegas strip Bellagio hotel last week. Using capital from the firm’s non-traded real estate investment trust, BREIT, Blackstone paid $4.2 billion to acquire the hotel and lease it back to an MGM Resorts subsidiary. MGM Resorts will keep a 5 percent stake in the asset, which BREIT acquired through a 95:5 percent joint venture with MGM Resorts, continuing to operate the property on a day-to-day basis, according to a press release. The MGM Resorts subsidiary will pay $245 million in annual rent, according to media reports.
The live entertainment theme is a “cousin” of the bets that Blackstone has already made on the positive impact of e-commerce on industrial real estate, according to Michael Knott, Green Street Advisors managing director and head of US company and sector research.
“[The idea is to] invest in brands and real estate that cater to the experiential needs of an ‘Instagram lifestyle’ which cannot be easily disrupted by rapid technological adoption,” he told PERE.
These e-commerce-resistant and experience-focused investments can include unique Hawaii resorts, iconic Vegas casinos with long-term lease security and branded family-centric parks like Legoland, he explained.
Blackstone has also started deploying its latest global opportunistic fund, Blackstone Real Estate Partners IX. Four months into the fund’s investment period, BREP IX is 20 percent committed, Gray said on the earnings call.
Meanwhile, fundraising for opportunistic European real estate fund BREP Europe VI has been largely completed, according to Gray. BREP Europe VI, which had a fundraising target of €10 billion, is the largest European fund in the market, according to PERE data. The European fund kicked off its investment period with the take-private of the C$6.2 billion ($4.69 billion; €4.24 billion) Dream Global Real Estate Investment Trust announced in September, he added.
On a previous earnings call, Blackstone set a goal to raise $67 billion across its four flagship funds, which included its European real estate fund, global real estate fund, corporate private equity fund and private equity secondaries fund. The firm has now raised $65 billion, or 97 percent, of the expected $67 billion and expects to hit the target with a few retail closings over the coming months, according to chief financial officer Michael Chae.