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Blackstone’s Real Estate Bonanza

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It’s widely known that Blackstone had a powerful real-estate arm. Its $39.2 billion purchase of Equity Office Properties broke records and made headlines for weeks. The firm manages six general real estate funds and two internationally focused real estate funds, and has somewhere in the neighborhood of $20 billion of assets under management for its real estate deals.
But it wasn’t until the most recent filing by Blackstone that we learned how lucrative its real estate business has been in recent months. The firm’s real estate business garnered pre-tax income of $762 million in the first three months of this year alone, according to the prospectus filed with the Securities and Exchange Commission on Monday. That puts it well on pace to soundly beat the $902.7 million of income from real estate last year.
Blackstone doesn’t disclose the details of this huge increase in income but we suspect a good deal of it comes from flipping EOP properties. At the time the deal was announced, there was lots of tut-tutting from those who simply could not believe the gods of finance would not punish the hubris of Blackstone for daring to take on such a huge deal. Isn’t that the lesson of all of Greek tragedy?
Blackstone’s Jon Gray, who orchestrated the EOP buyout, looks to be following the path of a writer from another era who told us: fortune favors the bold.