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Interview

Blackstone leans into warehouse, life science properties

Jae-kil Cho in New York Oct 14, 2020 (Gmt+09:00)

The Blackstone Group, which four years ago held the world’s largest hotel portfolio, has shed most of its hotel investments over the past few years, switching into warehouses and life science properties, said its Chief Executive and Co-Founder Stephen Schwarzman.

Logistics centers and life science real estate, including medical labs and healthcare-related facilities, are among the few sectors performing stronger in the prolonged pandemic era. This is in stark contrast to hotels and retail stores hit hard by travel restrictions and a surge in online shopping accelerated by social distancing.
Blackstone's CEO and Co-Founder Stephen Schwarzman in 2015 (KED Photo DB)
“Investments in warehouses used in the online shopping supply chain have boomed and have been remarkable investments, with rents going up and almost zero vacancies,” Schwarzman told The Korea Economic Daily in a recent video conference interview. “That is where Blackstone has put one third of its money.”

The US private equity group is now one of the two largest owners of real estate warehouses in the world.

It is also bolstering its life science-related portfolio, already faring well. Tennessee Consolidated Retirement System (TCRS) has committed $150 million to Blackstone’s US life science-related property fund, according to a media report earlier this month. No further details about the fund were disclosed. 

“We have office buildings that specialize in life sciences and laboratories for testing drugs. That area, as you might imagine, has also been exceptionally strong,” he said.

Schwarzman said that the investment giant's real estate investments were doing quite well, which is "not an accident," but because it "avoided" the sectors that have performed badly.
   
“Four years ago, we were the largest owner of hotels in the world. A vast majority of those have been sold,” the CEO noted.

Regarding office buildings, the CEO said the segment is somewhere between the warehouse/life science properties and retail properties in terms of investment performance.

Despite retail properties struggling in most part of the world, the retail malls in which Blackstone has invested in South Korea, China and India, have been doing “extremely well,” he said, without elaborating further.

At its New York headquarters, Blackstone recently re-opened its offices and made it voluntary for people to return physically to work.

“But we asked our best professionals as a priority to return ... I think around 50%,” Schwarzman said.

Courtesy of Blackstone


When asked about any impact of trade tensions between the US and China on its Chinese investment, he said Blackstone will not reduce its exposure to the world's No.2 economy, which constitutes around 40% of the global economy together with the US. 

“I think there's little doubt that China will be the best-performing large country in the world in terms of economic growth. We think China will remain an interesting place to invest ... The two countries (the US and China) will have to find a way of living together on a more harmonious basis than they're currently doing."

He expects the US economy will fare better after the November presidential election given the prospect of coronavirus vaccine commercilization.

"No matter who is elected president, by the time that president takes office there is a high likelihood there will be a successful vaccine that will start going into production," Schwarzman said.

On the US stock markets, which have powered ahead led by technology stocks, he said the rally may reflect their strong business fundamentals.

“So it’s really just a question of what’s the right price. People tend to get over-excited when they see something that's doing extremely well. And then eventually, those overvaluations adjust but they still remain high by historic standards, just not as high as the level of enthusiasm."

Write to Jae-kil Cho in New York at road@hankyung.com

Yeonhee Kim edited this article.

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