The Blackstone Group’s real estate operations, which has about $10 billion in dry powder, has come out of the global financial meltdown “fully intact and stronger than ever”, said the firm’s chief Steve Schwarzman during an earnings call Thursday.
In a mark of turning fortunes, Blackstone’s sixth global opportunity real estate fund, which was raised in 2008 “at the top of the market”, was valued at 85 cents on the dollar and “likely will be in excess of a dollar by year-end if current trends continue”, Schwarzman said. The $10.9 billion Blackstone Real Estate Partners VI was being carried at about 46 cents just last year, he said.
Recovery in the real estate portfolio has to do with a recovery in the broader markets, especially in hospitality and an increased demand for “high-quality office assets … in select markets where we happen to be highly concentrated”, Schwarzman said.
The firm also had been able to improve portfolio operations and restructure debt, he said. Overall, Blackstone had “reduced, refinanced or extended over $52 billion of portfolio company debt since the beginning of 2009”, Schwarzman said.
Revenue from Blackstone’s real estate operations soared in the second quarter, climbing to $208.5 million, compared with losses of $18.9 million in the second quarter of 2009. Revenues increases were driven by improved operating performance and projected cash flows across real estate, the firm said in a statement.
Blackstone’s net return for real estate in the second quarter was 17 percent, compared to negative 20 percent in the second quarter of 2009.
The firm spent $643.8 million of limited partner capital in the second quarter, up from $231.5 million in the same period last year.