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Blackstone Net Income Soars 1117% Amid Mixed Property Performance

Blackstone has caught much attention for its Q4 earnings with net income up year-over-year by 1117%, or by almost $1.22 billion. That was across its entire collection of enterprises, investments, and asset classes. And for the entire year? Nearly a 1225% increase.

And yet, in Q4, opportunistic real estate investment performance was -5.1% and core plus, -0.8%. For all of 2024, opportunistic was -3.7%; core plus was almost flat at 0.1%.

It may seem out of place, but it’s not. There are multiple dynamics in Blackstone’s CRE activities and comments, and they suggest both a bottoming in real estate values and how CURE private debt is a strong investment.

For a year, Blackstone President Jon Gray has said that CRE markets are reaching their bottom. During the company’s earnings call last week, he said the following: “One year ago, we said that real estate values were bottoming, but that the recovery would take time and was unlikely to be ‘V-shaped.’ That’s exactly what happened. We remain firm believers that a sustained commercial real estate recovery is underway.”

This mirrors what GlobeSt.com has reported from various sources over some time. In November 2024, MetLife mentioned a “positive rebound” for CRE. Last August, Moody’s said that the office market might be nearing bottom. However, again, reaching bottom is an often time-consuming process and doesn’t suddenly happen with the flip of a switch. Markets are improving and it takes time for them to reach a true bottom.

“Debt markets have vastly improved, as borrowing spreads tightened by approximately 50% from the [2023 rise], and CMBS issuance was up nearly threefold in 2024,” Gray added during the call. At the same time, new construction starts are down dramatically for virtually all types of real estate, including by two-thirds from 2022 levels in U.S. logistics and apartments, our largest sectors. Meanwhile, demand is resilient, with the potential for acceleration in the context of a stronger U.S. economy. Given our conviction, we deployed $25 billion in real estate in 2024, up nearly 70% year over year, and we expect to continue to deploy at scale.”

Gray noted that real estate is a cyclical asset class “that has been through a cyclical downturn.” Eventually, things come around again.

While the 2024 whole-year and Q4 results were largely negative, they are a great improvement over 2023. Opportunistic investments in Q4 then were -3.8% and core plus was -4.6%. For the full year, opportunistic was -6.3%; core plus was -4.3%.

“Our real estate credit high-yield drawdown funds appreciated 4.4% in Q4 and 18% for the year, underpinned by resilient credit performance in its real estate loan portfolio,” said chief financial officer Michael Chae. He added that Blackstone’s improved results were “against a backdrop where the market for large-scale realizations was very challenged for much of the year and the significant underlying earnings power of our real estate business has yet to reemerge.”

And so, the two lessons are that the bottoming process is currently going on and that, for now, investment in CRE debt is probably the way to more immediate profits.

In response to a GlobeSt.com inquiry, Blackstone directed us to Gray’s comments.

Reprinted with permission from the Monday, 03 February 2025 07:21:15 EST online edition of GlobeSt © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.