Blackstone’s Ultimate Real Estate Play: Your Head

ROUND ROCK, TEXAS – Blackstone founder, Stephen Schwarzman, recently made headlines after he reaped the biggest dividend haul in the history of Wall Street, when his 19% stake in the private equity firm netted him $941.6 million in share bonuses. In addition, the 75-year old billionaire collected $160 million in straight profits as well as cutting himself a $350 million-dollar paycheck for services as the CEO of the company he started decades ago, bringing his total compensation for 2021 closer to $1.5 billion.

Asset management companies proliferated in the wake of the 2008 financial crisis, and Blackstone has emerged as the largest of them all, with nearly $1 Trillion under management, currently. Real Estate – particularly industrial real estate –, is one of Blackstone’s main investment vehicles, presently owning more industrial real estate than any other private entity on earth, besides its main competitor, Prologis. Up until last year, Blackstone was only second to the U.S. federal government in commercial property ownership as well, but cashed out when the rental properties it snapped up for bargain basement prices during the pandemic rose 40% last year.

Flush with cash, Blackstone is now poised to make deeper inroads into the logistical real estate market and position itself as the tech industry’s landlord. Already controlling several hundred million square feet of industrial storage space in Asia, Schwarzman’s firm has set its sights on expanding its also sizable industrial real estate holdings in the U.S., as it seeks to “leverage the data from all of Blackstone’s other businesses”, which run the gamut of digital services, and are tied directly to the e-commerce boom resulting from the lockdown protocols and the growing momentum for remote work, and the tele-medicine business in which it is also heavily invested.

In line with the broader geopolitical shifts and the reshuffling of the semiconductor industry, Blackstone’s industrial logistics arm, Link Logistics, is planning to build a $38 million 631,100-square-foot industrial business park in Round Rock, Texas, a suburb of Austin. The project will look to take advantage of the multiple billion-dollar semiconductor manufacturing plants, that have chosen the Greater Austin area as their preferred location.

Samsung, which has had a semiconductor facility in Austin since 1997, just received a tax-incentive package to bring a new $17 billion, 6 million-square-foot semiconductor plant to Taylor city, just outside the Texas capital. Micron Technology Inc., another semiconductor manufacturing leader, is also in the process of selecting the precise location for its $40 billion plant – both in Austin. 

Mind The Demagoguery  

Texas and other Sunbelt states are quickly becoming the linchpin of a restructured economic landscape as the fourth industrial revolution takes hold, and the various cogs of the digital infrastructure pipeline are being redistributed. As the noose of our cybernetic rope gets tighter, the politicians who are in the pocket of so many of these large multinationals will rely on populism and nationalistic rhetoric to assure citizens that the 3.8 million square-foot fulfilment facility Amazon is building at 2000 East Pecan Street, Austin TX, is a boon for them. 

Little mention, if any, will be made of the fact that Amazon is involved in nine of the ten largest industrial projects currently underway across the United States, or that Blackstone shelled out $18.7 billion in 2019 to become Jeff Bezos’ landlord, along with other private equity behemoths like KKR, which are also gobbling up logistical real estate to complement their related investments in e-commerce, and to hold the levers of the emerging data economy.

Stephen Schwarzman’s banner year reflects the absolute bankruptcy of the prevailing economic paradigm as far as the masses of people are concerned. Forced into the precariousness of gig work and low-wage service jobs, regular people can only vent their frustrations on Twitter and other social media platforms, while the likes of Blackstone’s CEO amass fortunes that the robber barons of the late 19th century could only dream of.

The burgeoning digital economy depends on the dispossession of billions of people, who will have no choice but to enter into the increasingly dystopian work environments of the new millennium. Gaslit by unscrupulous hucksters into participating in seemingly endless web 3.0 scams, like cryptocurrency and NFTs and the metaverse, normal, hardworking people are increasingly herded into the cybernetic ecosystems, which Blackstone and company are in the process of erecting.

The New Real Estate Frontier 

Nadeem Meghji, head of Blackstone’s real estate operations in the United States and Latin America, claims to have had an epiphany while looking down on L.A.’s Sunset Boulevard from the rooftop of Netflix’s creative headquarters. Staring down at the hustle and bustle, Meghji hit upon the realization that the building he was peering from was “critical infrastructure for making the online entertainment“, which had propelled the streaming platform to the top of the entertainment industry.

Talking about the private equity firm’s approach to real estate in the last few years, Meghji’s co-head of real estate, Kathleen McCarthy, identified the pandemic as the single greatest factor that “accelerated the trends already underway before the crisis” – a market signal the company had already heeded when it began to acquire properties in what it calls its “highest-conviction themes”, namely “logistics, suburban apartments, life sciences, and film studios.”

In the summer of 2020, Blackstone acquired 49% of the L.A. entertainment production complex where Netflix and other studios are located, and followed that up with significant acquisitions in that space, including music catalogues. Managing reality is a growth business in the age of social media and on-demand entertainment, which Blackstone is not about to let slip by the wayside. “We act as concierges for the movie and streaming studios,” Meghji says. “We arrange for the lighting, sound, trailers, and most other equipment, as well as for the stage managers and catering. It’s not just about being an owner.”

Dovetailing with the firm’s entry into the content creation business since 2017, its more recent foray into tele-medicine via the launch of the world’s biggest on-demand “mental health” mobile app, signals Blackstone’s intent to move beyond mere real estate in the physical world, and make a play to own the real estate between our ears, as well.