Real estate business

Billionaire Jon Gray, architect of Blackstone’s $ 115 billion real estate firm, named chairman

When private equity giant Blackstone Group went public in 2007, less than a quarter of its $ 79 billion in assets under management were related to real estate. Shortly after listing, the worst real estate recession in at least a generation hit and it found itself at the epicenter of a severe financial crisis. The uproar turned out to be an opportunity for Blackstone’s head of real estate business, billionaire Jonathan Gray.

The unit weathered the crisis as other businesses faltered. Gray’s founding agreements such as the Equity Office Properties buyouts and

successful, a contrast to the competitor’s problems with Caesars and Archstone. Subsequently, Gray helped create Invitation Homes and Logicor, and oversaw mega-deals like GE’s real estate portfolio, Willis Tower in Chicago, and Peter Cooper Stuyvesant Town in Manhattan. For the performance, Blackstone was richly rewarded. Gray’s real estate business now has $ 115 billion in assets under management, more than six times more than before the crisis. Last year alone, the division sold $ 24.5 billion in real estate and made $ 20 billion in new investments. Some $ 24 billion in cash flowed into the unit, which generated half of Blackstone’s overall revenue.

The great success of Blackstone’s real estate foray has meant Wall Street believes Gray, who spent 26 years in the business after being hired at the University of Pennsylvania, will one day take the reins. That speculation escalated on Tuesday when Blackstone appointed Gray as president and chief operating officer, handing him over to the day-to-day management of the $ 434 billion asset-investing giant.

Gray will replace longtime president Tony James, who will become executive vice president and will continue in a full-time position. The move is part of a careful succession to Blackstone. “Jon’s appointment as president and chief operating officer lays the foundation for the next generation of senior executives and positions the company well for future leadership,” said Stephen Schwarzman, co-founder and CEO of Blackstone. “I have learned over the past 26 years. that Jon Gray has great judgment, tremendous energy and a unique personal charisma which has earned him enormous respect within the global financial community, ”he added.

James, also a billionaire, added: “One of my most important responsibilities is succession, and I am fortunate to have a spectacular leader and investor like Jon Gray who I can give the reins to.”

Gray was hired by Blackstone in 1992 as an analyst in their private equity and M&A practice, but quickly turned to real estate when the deal was formed in the early 1990s. really started to gain attention on Wall Street during the LBO boom of the mid-2000s when, as co-head of the unit, he oversaw the joint takeover of Trizec and the LBOs of Equity Office Properties and Hilton.

With Equity Office Properties, Gray’s team quickly sold portfolios of non-core assets, putting the business in good financial shape before the downturn. He eventually brought in a profit of several multiples of Blackstone’s cost. At Hilton, Blackstone and Gray went through a number of gut checks in which the company doubled down and convinced sponsors to follow suit. In the end, this resulted in a profit of over $ 10 billion.

After the crisis, Gray’s unit oversaw the creation of Invitation Homes, the nation’s largest single-family home rental company, which now has a market capitalization of over $ 11 billion. He also consolidated logistics and warehouse assets, making Logicor the largest logistics and distribution company in Europe. Last year, the company sold Logicor for $ 14 billion in its biggest ever real estate sale.

Other major recent deals include the $ 18 billion acquisition of GE real estate assets and the purchase of Stuyvesant Town / Peter Cooper Village, an 80-acre property with 11,200 units in Manhattan. In that deal, Gray threaded the needle of New York City’s tense politics and the scar tissue of Stuy Town’s bankruptcy following an LBO in 2007. It also gave weight to a new platform for business. basic investment that has a longer duration.

Now Gray, worth $ 2.6 billion according to Forbes’ real-time net worth ranking, is shedding his real estate transaction fabric after building an industry heavyweight. He will oversee Blackstone’s operations, which encompass private equity, credit investing and hedge funds, reporting directly to CEO Schwarzman. Ken Caplan and Kathleen McCarthy will take on Gray’s role as co-heads of Blackstone’s real estate operations.

“Despite our tremendous success to date, I am very excited about the opportunity to continue to innovate for our investors and shareholders,” said Gray.

Meanwhile, James will take on more responsibilities at the board level as Executive Vice President. Said Schwarzman, “Tony James had a bigger impact on Blackstone than anyone in the history of the firm … He put in place the internal processes that are the foundation for the institutionalization of our firm.”

Among Gray’s major philanthropic endeavors is his alma mater UPenn, where he has donated $ 30 million to support cancer research.

On Wall Street, succession planning has been a major story for the past 18 months.

With the Blackstone reshuffle, there have been changes at the top of most of the major financial institutions. A month ago, JPMorgan appointed two Co-Chairs and Co-COOs, refining its succession plans for CEO Jamie Dimon’s resignation. Just over a year ago, Goldman Sachs, led by Lloyd Blankfein, appointed investment banker David Solomon and CFO Harvey Schwartz as co-chairs, solidifying his succession plans.

In private equity, companies like KKR, Carlyle, Apollo Global and Ares have all announced or set the stage for a second generation of leaders. Now, Blackstone, the biggest player in the industry, is also presenting its succession plans.

To learn more about Blackstone:

See our 2016 Schwazman cover story titled “The Master”

See also Schwarzman’s comments for Forbes 100th Anniversary issue

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