Blackstone question

Nousernamehere's picture
Rank: Gorilla | 561

Not sure if this is a stupid question but is Blackstone considered an "owner/operator"?

I was recently reading an article in The Real Deal with the largest NYC property owners and Blackstone was listed in the top 5 alongside the likes of obvious ones like SL Green, Tishman, Vornado, Brookfield, RXR, etc who are considered owners/operators/landlords. I've always just associated BX as a large PE fund manager with massive investments across RE.

So is BX actually considered a landlord at least in NYC?

Comments (16)

Jul 7, 2019

Yes. Blackstone is considered a landlord in most major markets globally, because it owns assets in most major assets globally.

If Brookfield comes under your like of top 5 major landlords Blackstone should definitely be there too.

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Jul 7, 2019

I think what he means is that Brookfield and the others have Property Management arms that operate the property themselves. Honestly can't speak for Blackstone but I always assumed they used 3rd parties. I'm sure others on this forum have more insight on that.

Jul 7, 2019

Maybe it is just me but if you own the property, you own it and you are the landlord. Property management arms boost your operating leverage, sure, but I don't see them as a pre requisite for being an owner.

I probably spend too much time looking at REITs so I'm missing the question/point. I'm also European and there seems a lot more a lot more focus on terminology etc in North America.

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Jul 8, 2019

When a property is purchased, the usual structure is 55-70% loan-to-cost with the remaining 45-30% of needed equity split between two partners - a majority LP investor and a minority GP investor. The GP equity partner is the owner/operator which is responsible for day-to-day management of the property. This may include solely asset management of third party leasing/property management/etc... or fully vertically integrated leasing/property management. The LP partner capitalizes the majority of the equity, 80% to 95%, and incentivizes the GP partner to successfully manage the property by allowing GP to be distributed a CF split in excess of there equity share after achieving a certain level of performance, typically an IRR lookback, the "promote".

Blackstone is an LP investor - I do not believe they operate in any capacity. They passively capitalize deals and monitor/asset manage from a high level without making day-to-day decisions.

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Jul 8, 2019

The above comment is incorrect. Blackstone just 3rd parties out management, they are an owner, not operator (i.e. they're almost fully vertically integrated except for management/leasing. They have accounting, reporting, etc.)

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Jul 8, 2019

This...

Blackstone is the GP, because they don't have LP's in their deals. They hire thirdparty managers to manage the properties, but they are the GP. They AM their own deals, and they are the ones signing guarantees with lenders.

Jul 9, 2019

They have various buckets of money. When they capitalize a development deal they are strictly LP - the developer is the GP. To my knowledge, Blackstone has no capacity outside asset management/accounting which plenty of LP shops handle... Blackstone doesn't manage development and attend construction meetings...

Jul 9, 2019

When did I say they operate in any capacity?

Jul 8, 2019

Read about Equity Office for some insight.

Jul 8, 2019

When you have a company with $150B+ AUM it's safe to assume they do a bit of everything. If you want to get technical you can start breaking down which of BX's big ole fund buckets count for what in this debate. Does LINK Industrial count? The Blackstone Mortgage Trust? One is an industrial owner-operator the other is a subordinated lender organized as a REIT. Point is, I'm sure they have some funds where they are hands on in the operations and I'm sure they have some funds that are all about throwing a layer of debt/equity on a deal and never looking back once it gets walked down the aisle.

Long story short, with once you break 100 B's you are everything and nothing, and everyone else can suck it.

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Jul 9, 2019

This, 100%. I know for a fact they do deals as an LP where they have a GP as well. Look at their Burbank office deal with Worthe for instance.

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Jul 8, 2019

someone correct me if i'm wrong but you can legally be 'the operator' without self-managing. if you buy a big office building and you control it but you 3rd-party out the day-to-day mgmt, i would still say you're an office operator. maybe i'm wrong to say that though.

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Jul 9, 2019

The "operator" is the defined manager in the venture/partnership/development agreement docs. The operator makes day-to-day decisions regarding the property, even if it is solely asset management. They are responsible for managing the GC, leasing agents, property manager, etc... whether or not they are in-house or third party.

Jul 10, 2019
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