Jonathan Gray on Real Estate: Invest For Kids Chicago 2016 ~ market folly

Thursday, October 27, 2016

Jonathan Gray on Real Estate: Invest For Kids Chicago 2016

We're posting up notes from the Invest For Kids 2016 investment conference.  Next up is Jonathan Gray, head of real estate at Blackstone who talked about real estate.

Jonathan Gray's Presentation at Invest For Kids Chicago 2016

•    16% net return to Blackstone

•    Our edge is scale and conviction

•    We seek an opportunity to buy it, fix it, sell it

•    Timing on Hilton and EOP deals in 2007 was poor, but still made 3x our investors’ money because we had the right structure and we didn’t panic; both were good assets and while levered they had reserves and no covenants; key was not being forced to sell; and had 2/3 of EOP assets not been sold 90 days after closing to delever, we wouldn’t be sitting here

•    Airbnb has reduced hotels’ pricing power, but most are leisure travels; business travels often still want hotels

•    Record occupancy across hotel industry

•    Good opportunity in logistics but a real challenge for retail, especially “generic consumer supply” retail

•    We’re looking to own in areas that are exciting and driven by technology/innovation: Bay Area, Seattle, New York

•    Risks today: sharp jump in rates due to wage inflation; political crisis leading to economic crisis in Europe; China deceleration gets worse

o    All are risks but none are base case

•    Sam Zell says I’m too optimistic but I think we’re likely to continue slow growth; housing recovery has legs; banks are in good shape; realistic but trying to find opportunity in slow growth world

•    Powerful urbanization trend in Chicago – people want to come here and live in the city, with companies like McDonald’s and Conagra following them

Be sure to check out the rest of the presentations from Invest For Kids 2016.

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