Blackstone, the world’s biggest private equity firm with $361 billion under management, has $102 billion in real estate assets. The New York-based manager has around 80 people focused on property in Asia and runs an opportunistic, pan-Asia real estate fund that closed at $5 billion in December 2014.
Chris Heady is Asia-Pacific chairman and Asia head of real estate. He joined Blackstone in 2000 and has since 2007 helped expand the property group in Asia, including establishing teams in Greater China, India, Singapore, Japan and Australia. Heady was previously with Morgan Stanley in London and New York, working in real estate private equity.
The full Q&A feature appeared in the December/January issue of AsianInvestor magazine. The second part of it will be published in the coming days and will focus on how Blackstone invests in property in Asia Pacific.
Q What is your typical deal size in Asia?
A We are at the larger end of the size spectrum in Asia compared to other real estate funds. Deal sizes of $200-300 million in equity would be typical. But we have done smaller transactions of around $30-50 million and deals of $400 million-plus.
Q Some limited partners (LPs) worry that having a bigger fund leads to greater pressure to deploy assets and therefore pay a premium for the larger deals. Have they raised this with you?
A Asia’s a very big place and we invest all over the region. We’ve found that as we get larger in terms of transaction size, we end up being able to use our scale to get better pricing on the underlying assets we’re purchasing.
Q Can I get a feel for the make-up of your client base?
A Historically, going back more than a decade, Blackstone’s investor base, like the industry as a whole, was predominantly large institutional investors in the United States. But we’re increasingly seeing more Asian investors – sovereign funds, insurance companies and high-net-worth clients investing via private banks. That is likely to continue, because of the attraction of alternatives, and in many cases investors are under-allocated to alternatives.
Q More asset owners in Asia are building in-house teams for alternatives and looking to do direct investments. How are you dealing with that greater competition?
A Following the 2008 financial crisis, many of the bigger institutional investors around the world, including in Asia, strategically decided to allocate more capital directly. But does that mean a lot more competition? From the real estate perspective, not necessarily.
That’s because at the same time that as you have a number of groups investing more directly, you also have a number of investors who were active in the past that have left the real estate market. Ten years ago in Asia many of the US investment banks were very actively investing. Today they are much less active as a result of the financial crisis and regulatory changes.
Q Are you seeing more LPs looking for co-investment type deals and is Blackstone doing more of such transactions?
A Smaller asset managers have probably taken the approach they can work with their biggest investors on co-investment opportunities. But our primary objective [is] to focus on the fund we’ve raised and generate the best returns for it.
Q There’s been quite a lot of movement of personnel in Asia recently, particularly among the bigger general partners (GPs). What’s the main driver of that?
A Our team’s been very stable, but if I were to conjecture [generally], the real estate private equity industry is earlier in its development in Asia than in Europe or the US. As part of that, individuals at various firms may feel there are times it makes sense to venture off on their own.
Q How do you seek to ensure Blackstone hires in Asia are well integrated into the firm’s culture?
A We run a very globally integrated business. Although we’re investing in Asia, we have one investment committee that runs all our real estate funds. All of our people when they are hired spend time in offices around the world. We think that helps them take a more global perspective when investing.