Blackstone Profits Jump As It Bets Big on Data Centers

Blackstone called the bottom of the commercial real estate market earlier this year.

Now, Jon Gray and the rest of the company’s top brass say they have put $22 billion into real estate this year, nearly twice what it invested during the same period last year.

The investment giant reported strong quarterly earnings Thursday. Net income totaled $780.8 million, or $1.02 a share, up from $552 million a year earlier. As a result, Blackstone’s stock shot up over 6 percent to $170.28, an all-time high.

Its real estate segment’s inflows fell to $5.8 billion from $9.1 billion in the previous year. But the firm deployed nearly $1 billion more capital into real estate in the third quarter — $3.6 billion in total.

Blackstone thinks the Federal Reserve’s decision to lower interest rates will drive more real estate deals, both for itself and others.

“We expect lower base rates will be supportive of transaction activity and deployment,” said Gray in Blackstone’s third-quarter earnings call.

Blackstone is the world’s largest commercial property owner and its earnings are closely watched as a barometer of the broader market. In recent years, the firm has made a lucrative bet on logistics.

Blackstone has now adopted a similar game plan with data centers. The push is driven by developments in AI and the resulting need for computing power. Chairman and CEO Stephen Schwarzman has equated AI to “what occurred in 1880 when Thomas Edison patented the electric light bulb.”

Blackstone recently acquired AirTrunk, the largest data center operator in the Asia-Pacific region, in a $24 billion deal. The firm called data centers the “single largest driver of appreciation in our infrastructure real estate businesses and for the firm overall in the third quarter.”

Outside of data centers, Schwartzman said real estate is in the middle of a broad-based recovery. The firm even said it will consider opportunities to buy higher quality office buildings. Its investments in logistics and rental apartments will benefit from a projected fall in construction starts and availability of apartments and warehouses.

Schwartzman cited other positive signs in the market. He said Blackstone has seen “two to three times the number of buyers showing up to buy things like apartments and logistics.”

“As we work through the cycle and values recover, you’ll see a pickup in sales, and you can feel that happening now,” said Schwarzman.