New York, October 20, 2022: Blackstone (NYSE:BX) reported its third quarter 2022 results.
Stephen A. Schwarzman, Chairman, and Chief Executive Officer, said, “We delivered excellent results again in the third quarter. We protected client capital during a period of extreme market turbulence as we have through many challenging cycles in our history. Our clients entrusted us with $45 billion of inflows in the third quarter and $183 billion year to date, and we grew total assets under management 30% year over year to a record $951 billion. The Blackstone brand has never been stronger.”
Blackstone 3Q22 Earnings Soundbites
- The fact that we raised $45B in 3Q, $183B in the first 9 months, which is 60% higher than our previous best in an environment when equities were -25% and bonds -15% is pretty remarkable.
- In CRE, approx. 80% of our portfolio is in sectors where rents are growing above the rate of inflation, including logistics, rental housing, life science office and hotels.
- In the context of rising interest rates, we've materially increased cap rate assumptions across the portfolio. Notwithstanding this impact, our real estate strategies have still seen strong appreciation YTD as cash flow growth and dividends have more than offset the impact of wider cap rates.
- Investors are more capital-constrained. I think it will be tougher for many groups to raise capital. But I would say, overall, when you talk to our customers, you don't hear a lot saying they want to reduce their allocation to alternatives.
- We're in a much better spot as a global economy than 2008. We don't have the same kind of overleverage in housing, CRE, or banking institutions. So that makes you feel better, but there's no question, there is a slowing coming here.
- Hard assets are interesting in an environment like this because the replacement cost goes up significantly. Labor, the cost to build and the cost of capital goes up significantly. The yield on cost that you need to build a new project goes up.-I was talking to a major apartment developer who has 15K units U/C today. He said he's cutting his budget to 4K units, a 75% decline in new construction. So what you see happening is a reduction in new supply, which is obviously helpful in the long term.
- If you're in rental housing or logistics, where we're still seeing in the U.S. 30% increases in rents, in Europe, nearly 20% increases in rents. Even if the cap rates go up, you can still see value appreciation, albeit at a lower rate.
- Until you get I think a little more certainty out there, until people become more confident about inflation starting to head down, that rates have hit their peak levels, I think you'll see a slower level of transaction activity.
- The public real estate market is pretty small. 7-8% of the US CRE market. It trades with a lot of volatility. In fact, since 2010, it's gone up or down in a 60-day period by more than 10% 50 times, which hasn't happened once over that period in the private market.