Daily Management Review

Blackstone is the Biggest Landlord in the World


Blackstone Group's capitalization grew by almost 4-fold since the IPO in 2007.

Yet, the largest private investing firm from Wall Street has shown even more impressive growth in its real estate division, with assets increased from $ 17.7 billion to $ 100 billion for 8 years.

Blackstone’s Head Stephen Schwarzman, in fact, is the largest landlord of America, and is not afraid to admit it.

- At the moment we are the largest owners of real estate in the world. We invested in real estate in 1992 for the first time, and set up our first fund next, 1993, year," - he told to reporters.

Blackstone Group continues to expand with aim to double the asset size. It can even be expected that the property will be the "cornerstone" of Schwartzman’s empire.

Earlier this year, Blackstone Group acquired Willis Tower - the second tallest building in the country, formerly known as Sears Tower. The deal amounted to $ 1.3 billion, a record for acquisition of commercial real estate outside New York.

The pace, with which the company has been buying property in the last few years, decreased by 70%. The company was spending $ 100 million a week – this is a colossal sum.

Total cost of purchased items for the period from 2012 looks even more impressive. This sum is $ 8 billion, that is 43 thousand buildings in 14 cities, mainly in Seattle, Atlanta, Miami, Orlando and Tampa.

Who knew that someone from Wall Street could become the largest owner of residential real estate.

What is the reason for the decline of activity? The answer to this question is quite logical: property prices soared very high, so further purchases of the company, apparently, are considered inappropriate.

Blackstone was not the only investment company that conducted similar transactions. It was a full-scale investment idea, which was used by many others.

Yet, the main wave of buying by institutional investors have come to naught. In the last couple of years wealth management companies, hedge funds, investment trusts and other investors bought more than 200 thousand homes in excess of $ 20 billion. This happened after the prices fell by about 35-40% compared to their peaks in 2006.

Some agencies, protecting the consumers rights, then even accused investors of creating excessive growth in property prices in some cities.

Yet, such accusations are not uncommon. Besides, they rarely affect decisions of investors, especially in this quite beneficial and remunerative situation. Apart from exchange rate differences, which sometimes reached 35%, investors also hold annuities.

Remind that sales on the secondary real estate market in the US decreased by 4.8% in annual terms in August 2015. This is the first decline in the past 4 months.

According to the National Association of Realtors (NAR), in August 2015, the secondary real estate market has sold 5.31 million homes, which is 4.8% lower than in August 2014.

The NAR reported an increase in prices for secondary housing as one of the factors that led to a decrease in sales. On average, housing prices (including all types of houses) on the secondary real estate market in the US amounted to $ 228.7 th., in August. This is 4.7% higher than in August 2014 ($ 218.4 th.).

The decline occurred for the first time since April this year, when sales in the secondary market decreased by 3.3% year on year.

source: businessinsider.com