In Conversation with BlackRock and Blackstone: Samir Amichi Video Transcript

Hello. I’m Dirk Holz, Director of Product Management, Head of Private Capital Services at RBC Investor & Treasury Services.

Thank you, everyone, for joining. On behalf of RBC Investor & Treasury Services, I’m pleased to welcome Samir Amichi from Blackstone for a discussion around the real estate investment market.

Samir leads the European real estate acquisition business away from Blackstone, a company managing more than US$341 billion assets under management within the global fund range.

Before we start, I would like to thank you, Samir, for taking the time to participate in this virtual discussion considering to the current COVID-19 situation. Welcome, Samir.

2020 was a very challenging year for all of us. I would like to ask you to share with us how 2020 has impacted your strategy and long-term views on the real estate investment market.

Well, as you may know, we tend to have a thematic approach to real estate investing that’s really focused on the longer-term trends.

Now that being said, COVID-19 and the recessionary environment that we find ourselves in today, have of course driven us to reevaluate our major areas of conviction and our associated investment strategies. But generally speaking, our views today as to where we have conviction or where we are cautious, are not that different to the beginning of the year.

What we’re seeing on the ground is really a significant dichotomy, both geographically and across sectors. Geographically, those countries that, like Germany, benefit from a deep domestic investment market and are, at least at this point in time, faring better, are still seeing robust liquidity. The rest, somewhat less so.

By sector, the contrast is perhaps starker. You have retail and lodging, which despite the recent stock market rebound, are struggling with limited liquidity and really challenging top-line performance this year.

And at the other end of the spectrum, what we see is residential, which has proven extremely stable through COVID and is now perceived as the primary bond proxy in the real estate space. And then you have of course logistics, which is benefitting from a real surge in e-commerce penetration.

As Blackstone was incredibly successful over the past few years in capital raising from institutional investors, how do you see the private and retail market as a potential new chain for capital raising?

You’re right, of course, that historically our main sources of capital have been institutional investors, in particular public and private pension funds. But what we have seen in the US for example, is that particularly in the current low interest rate environment, there’s meaningful demand from real estate investors for institutionally managed real estate products that benefit from our expertise and our global platform.

Specifically, as regards our long-dated strategies and permanent capital vehicles. And this is an area where we see growth potential over time.

As Blackstone has been very successful over the last years with their real estate investment strategies, which real estate types are in the centre of the Blackstone strategy?

Well we tend to be thematic investors. And as such, we focus our efforts and our capital deployment on sectors and strategies where we have the strongest conviction. And in Europe that would be, number one, logistics, our highest conviction area globally, where across our various strategies and portfolio companies, for instance Logicor and Mileway, our two main logistics platforms, we control today a portfolio of nearly $40 billion in gross asset value.

Number two, residential. Across the UK and all the major European markets, in particular for Blackstone property partners Europe, our permanent capital vehicle. And this is really driven by supply-demand imbalances and strong investor demand.

And number three, office in what we call knowledge centres or innovation cities. These are cities that attract a disproportionate share of young, educated talent and funding for research and technology, such that as a result they benefit from meaningful demographic and economic outperformance. In Europe, these would include London, Berlin, Amsterdam, Stockholm, Munich, or Milan.

Despite the current recessionary environment, which is likely to dampen the demand from corporates for new space in the short term, in the ongoing COVID pandemic, which is leading to a rethink of how office space is utilized and optimized, these markets have proven resilient in terms of both occupier and investor demand.

Now these three asset classes that I just listed account for around 80% of our existing holdings and the majority of our pipeline.

Samir, Blackstone is known for successfully launching mega funds. How do you see the competition between specialized boutique funds and the market-leading mega funds?

Well first and foremost, we’re grateful for the trust that our investors have placed in us over the years, allowing us to raise meaningful discretionary funds. That trust is at least in part, of course, driven by performance. And maybe just to give you a sense, we have generated around 2 15% average IRR since 1991 for our investors.

Now in that context, we are of the view that larger funds are a proven and successful business model. That’s of course not to say that there isn’t a place for specialized funds, as there has been for years.

Digitalization, disruptive technology, AI are just a few buzzwords we are hearing consistently in the investment market. How do you expect technology will disrupt and transform the real estate investment market?

When we think about technology, we think about it both in terms of how it can help us improve our investment and our management decisions, but also how it affects how people use real estate.

On the former, technology can be and is hugely beneficial to better inform us as investors. And on the latter, our experience is that it tends to accelerate the rate of change. Whether that be e-commerce, which is radically changing the way we consume goods, or AI, which is expected to have a meaningful impact long term on the global employment market, or life sciences, which this year perhaps more than any other, are showing the sort of impact that sector can have on the global economy.

And these trends are all impacting the real estate space. This is something that we can see firsthand with the rise of logistics, compared to the decline of certain bricks-and-mortar retail, the outperformance, think residential, or office, of cities capable of attracting young, educated talent, or the rise to prominence and the performance of US life science office companies, such as BioMed or Alexandria.

A lot of the research that we conduct in-house when we devise our strategies is based on what sort of impact technological change will have. It’s really a cornerstone to our investing strategy.

Many thanks, Samir, for your open and insightful views. I really enjoyed our discussion, and I’m looking forward to reconnecting and continuing our discussion in the post-COVID-19 area.