- Blackstone invested $34B in Q2, the most it has spent quarterly in two years, anticipating lower interest rates by EOY.
- The global firm committed to spending an additional $19B on warehouses, rental housing, and data centers.
- AI infrastructure is a key focus, with significant investments planned in data centers and cloud computing.
According to Costar, Blackstone (BX), the world’s largest commercial property owner, is ramping up its investments in preparation for interest rate cuts later this year.
Real Estate Buffet
The world’s largest asset manager reported investing $34B in 2Q24, the most it has spent in the past two years.
Blackstone has also committed to investing an additional $19B on warehouses, rental housing, and data centers, which make up around 75% of its global equity portfolio.
Major deals in Q2 included taking Apartment Income REIT and Tricon Residential private, as well as acquiring the Tropical Smoothie Cafe chain.
Financial Performance
Despite improvements in real estate investment performance, Blackstone’s overall real estate segment still trails its private equity, credit, insurance, and other business arms.
The firm reported a 3% decline in fee-related earnings to $1.11B last quarter, while net income fell to $444.4M from $601.3M. However, distributable earnings rose 3% to $1.25B, as total assets under management jumped 7% to $1.076T.
Cyclical Trends
CEO Stephen Schwarzman emphasized that real estate has always been cyclical. Upcoming rate cuts, combined with dwindling new construction for most real estate types, create favorable investment opportunities.
The cost and availability of capital have also improved, with 10-year Treasury yields dropping 0.8% since October. The commercial mortgage-backed securities market, previously closed, has also seen positive changes.
Sector by Sector
AI-related infrastructure will be a key focus for Blackstone. The firm is planning to invest in more data centers to position itself as a global leader in AI infrastructure. Blackstone’s data center developer QTS has expanded its leasing capacity sevenfold since being taken private by Blackstone in 2021.
In May, Blackstone also agreed to provide $7.5B in financing for cloud computing provider CoreWeave, the single largest debt financing in the firm’s history. The move aligns with Blackstone’s long-term strategy to capitalize on growing data center and AI infrastructure demand.
Meanwhile, the office sector remains less attractive as it continues to struggle with high vacancy rates and availability.
