High interest rates impact property valuations and inflows, affecting Blackstone's Q2 earnings
Blackstone Inc.’s second-quarter results were affected by its real estate arm, as high interest rates reduced property valuations and investor inflows, reports BNN Bloomberg.
Blackstone, the largest owner of commercial real estate globally, slowed its real estate exits while managing market fluctuations. Despite gains in credit and private equity, fee-related earnings fell three percent to US$1.11bn, the New York-based firm stated on Thursday.
Distributable earnings, which represent profits available to shareholders, increased three percent from the previous year to $1.25bn, or 96 cents per share, missing analysts’ average estimate by 2 cents, according to Bloomberg.
In late May, Blackstone faced increased redemption requests after Starwood Capital Group’s real estate investment trust limited investor withdrawals. Blackstone’s $57bn REIT avoided restricting outflows for two months, even though requests reached levels that would have permitted it.
In June, BREIT saw a 50 percent decrease in redemption requests compared to May.
President Jon Gray noted that the real estate market is improving, except for office spaces. “The clouds in real estate are starting to clear,” he said, highlighting the impact of declining borrowing costs and a strong market for commercial mortgage-backed securities.
Gray also mentioned that moderating inflation might enable the Federal Reserve to cut interest rates, and the upcoming US election is unlikely to disrupt dealmaking.
Blackstone shares have increased by three percent this year, trailing the S&P 500’s 17 percent rise.
As the world’s largest alternative-asset manager, Blackstone oversees $1.08tn in assets, including buyouts, lending, and hedge fund strategies.
During the second quarter, its private equity arm saw new inflows from its first fund targeting wealthy individuals, leading to a one percent growth in fee-related earnings and a 16 percent rise in distributable earnings.
The credit arm achieved the most significant gains, with fee earnings up 29 percent and distributable earnings surging 51 percent due to higher inflows and successful exits.
This demonstrates that large firms can depend on their credit arms for stability, even as higher rates impact other core businesses. Blackstone aims to more than double its credit assets to $1tn within a decade.
In the second quarter, Blackstone invested $33.7bn in new ventures, marking a 73 percent increase from the previous year, and committed an additional $19.1bn to deals.
