Blackstone is now ‘the largest owner of real estate in the world’

Sears tower
The Willis Tower, once the tallest building in the US, is now owned by the biggest real estate investor in the US — Blackstone Group. Antony Wood, CTBUH

Blackstone has grown its size nearly four-fold since its 2007 IPO.

But the biggest private equity firm on Wall Street has seen even greater growth in its real estate division, which has expanded from a $US17.7 billion business when Steve Schwarzman took his company public to one that today manages nearly $US100 billion worth of property.

Steve Schwarzman is America’s landlord, now, and he’s not afraid to acknowledge it.

“We’re now, we believe, the largest owner of real estate in the world,” he told Business Insider in an interview at his company’s Park Avenue headquarters in midtown Manhattan.

“We have a performance record that is… pretty much in a league of our own, we’ve compounded [returns of] around 18% after fees. We’ve had almost no losses of any type.”

‘League of our own’

Stephen A. Schwarzman, Chairman and Chief Executive Officer of The Blackstone Group, looks on during an interview with Maria Bartiromo, on her Fox Business Network show;

Thomson Reuters
Schwarzman, Chairman and CEO of The Blackstone Group, looks on during an interview with Bartiromo, on her Fox Business Network show; “Opening Bell with Maria Bartiromo” in New York

Time and again, Blackstone has taken on real estate deals — even in down markets — and turned them into winners. Since 2009, according to Blackstone’s website, the firm has put more than $US50 billion to use and earlier this year closed a real estate fund worth nearly $US16 billion. That fund is separate to the firm’s private equity investing.

After undertaking one of the biggest private equity deals ever, a buyout of Sam Zell’s Equity Office Properties, Blackstone has today sold off most of the assets from the $US36 billion deal. It is also in the process of exiting Hilton Worldwide Holdings, the high-end hotel chain Blackstone bought in 2007 at the height of the real estate bubble and salvaged during the financial crisis.

It wasn’t always this way.

“We started [Blackstone] in 1985,” Schwarzman pointed out speaking with Business Insider. “We made our first real estate investment in 1992; we raised our first fund in 1993. That was eight years after the firm started. Eight years is an endless amount of time when you start a business from nothing.”

More recent transactions include its $US6 billion buy of Strategic Hotels, Blackstone’s investment in the building formerly known as the Sears Tower and a $US3 billion deal to buy property funds from CalPERS, the largest US pension.

As Blackstone continues its push to expand — with goals to double the size of its assets under management — expect the property business to be a cornerstone of Schwarzman’s legacy.

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