Can someone tell me more about the pros and cons of doing RE acquisitions at BX (BREP) vs doing BREDS (Bx RE Debt Solutions)? Are there different exit opps, does one have more transferrable skills than the other, etc? Also if anyone knows how the interview technicals differ that would be helpful.
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Comments (19)
Personally I'm a big fan of BROOP or BROPA over BREDS or BREP
This may be a bit of an unpopular opinion, but I also think BAPO and BIPA are solid groups as well
Its just a decision between doing re debt or equity, choose whatever u prefer. Also just fyi if u actually have an interview and dont wanna get dinged in a heartbeat u should refer to Breds as blackstone real estate debt strategies and not solutions.
This. People make this so much more complicated than it needs to be.
I've heard a few of our partners discussing BX lately... The conversations are usually underscored by confusion about their ability to pay the sized premiums that are being paid.
I'm not one to count people's money, but ... with BX's cost of debt so low, the returns could make sense if you're delivering a 6% dividend and calling it a day; however, the cost basis per unit and the going-in cap rates are so aggressive it is hard to see how you can back into any type of attractive IRR in 2-5 years.
This is all relative to non-core/core+ product, in non-core markets; ie there is risk in all the deals I see.
Does anyone have any insight into how they look at deals?
I know RE seems like a no brainer looking backward, but if anything in the economy or RE fundamentals changes, the exits become very unattractive.
Interested to hear other's thoughts.
BREIT raised a gazillion dollars and has to deploy it no matter what. Imo - their multi family and logistics portfolios will do just fine given the sector tailwinds
Have no idea on earth how they will exit, or who they will exit to
So that in and of itself means they will not do just fine... if your hurdle rate is above 15%, which I'd imagine it is... like i said, if the objective is to deliver a coupon and call it a day, that is different, but to generate returns at the investor's level of even 15%, i dont see how its possible if 1 or 2 variables go wrong (whereas ALL variables have been going super well the last few years)
They're obviously aware of the overblown premiums they're paying, but for them it's just a game of scale and strength at that point. Now, with the current insane cap rate compression across MF, Industrial, Data Centers, etc, they're actually able to get a refi or recap at an insanely high value/low cap basis and get a massive cash out when taking on the new debt, usually less than 1-2 years after purchase. 2020 and 2021 for them was golden undet this MO, they hit returns north of 4x of the usual 6%. Debt plays perhaps the biggest role in this strategy, and as long as lenders are willing to finance BX's deals at the below 3-4% cap rate level, refis and recaps are insanely attractive vis a vis exits.
Will BREDS do the refi? Lol
Yes yes, everyone did. You would actually have to have bought like a dummy in order to have done even ok or bad... the question is moving forward, at the valuations from an intrinsic value perspective, how can you project achieving IRRs above 10 - 15% ? From the sound of it, those are not the target returns
BREIT, the "core" product that they're buying a lot of these assets with market a mid-high single digit return to their investors. Historically it's been low teens, but that's not what they go out with on the marketing trail
what are your thoughts on how how rising fed funds rate will effect BREDS' investment strategy/current investments?
Interested as well^^
Their rates will go up with the broader market just like everyone else. Not sure it would effect their strategy.
Anyone know the rough comp/carry differential between the two groups at the more senior levels? Talking about Sr Assoc, Principal, MD
During bear markets (for RE), carry at a debt fund will be higher. During bull markets, carry at an equity fund will be higher
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