Blackstone’s flagship $68bn property fund is now one of the largest sellers of real estate in the world. It has raised liquidity to meet redemptions, and invested billions of dollars into data centres for the artificial intelligence boom.
According to an analysis of Blackstone’s filings, between the first quarter of 2021 and the third quarter last year, Breit (Blackstone Real Estate Income Trust) acquired approximately $60bn in property. This included hotels, warehouses, and self-storage units. Four publicly listed real estate trusts were taken private as part of the wave of deals.
Breit has not made any large purchases since last autumn, instead selling more than $10bn of assets to realise gains from successful investments and increase liquidity.
These sales, which were 4 percent above the value of the properties Breit held on its balance sheet, generated about $2.5 billion in investment gains. These sales have allowed Breit to return over $8bn in investment gains to investors since last November, when it limited withdrawals due to a surge of investor requests.
Breit, for example, sold a 49 percent stake in two Las Vegas casino’s for $2.8bn. This created the liquidity needed to meet the influx of redemption requests.
Blackstone stated in a press release that Breit had “significant financial flexibility” with its immediate liquidity of $10bn. Investors sought to redeem $3.8bn last month from Breit. This was a 30% decline from January.
Blackstone has been selling properties in recent months. The $800mn sale in Texas of a resort and the $2.2bn sale earlier this month of a self-storage portfolio are part of its efforts to raise cash for a project it considers a “once in generation” chance to build properties that can handle the rising computing demand due to , a boom of artificial intelligence.
According to two sources with knowledge of the matter, Blackstone has agreed to spend over $8bn on building new data centres for a number of large-scale technology companies.
Blackstone, a company that owns QTS Realty Trust (a real estate trust focusing on data centres), which it purchased for over $10bn at the beginning of 2021, is driving this investment.
Blackstone’s $1tn assets group has given priority to properties that can handle the rising data demands from an increase in AI investments.
According to Dell’Oro Group, large technology companies such as Microsoft, Google Meta, and Amazon will have to invest around $1tn over the next few years to build a digital infrastructure that can handle the rising computing demand of artificial intelligence technologies.
According to sources with knowledge of the situation, Blackstone spent over $1bn on land in the last few years in order to build new data centers in five states in the US. Blackstone has contracted with large local utilities to provide the energy needed to power the new properties that it plans to build.
Sources said that the data centres Blackstone plans to build could cost up to $1bn each, given the complexity and size of the projects.
The group invested in QTS through three funds: Breit’s property fund, which targets wealthy investors; a fund similar to that for large institutions; and its infrastructure fund.
Blackstone has increased its investment in QTS and is now preparing to double the size of its business with this new investment. QTS has been valued at about $20bn according to sources with knowledge of the situation, which is double what Blackstone paid.
Blackstone’s top officials think the investment could be its most profitable real estate investment.
Breit told its investors recently that “large technology companies are undergoing an AI arms race, which we believe is a once in a generation engine for growth in future data centres. This is driving enormous demand on the ground.”