By Manya Saini
(Reuters) -Blackstone beat estimates for fourth-quarter profit on Thursday, driven by a pickup in dealmaking, while executives at the world’s largest alternative asset manager signaled that the troubled commercial real estate sector was stabilizing.
A revival in CRE, which had suffered a sharp decline due to high interest rates and low post-pandemic office occupancy, will be a boon for financial firms that had been grappling with exposure to the distressed industry, from asset managers to banks.
“We remain firm believers that a sustained commercial real estate recovery is underway,” Blackstone’s President Jonathan Gray said in a call with analysts.
Lower interest rates, Donald Trump’s victory in the U.S. presidential election and easing economic uncertainty have powered a global resurgence in deals, with North America leading the activity in recent months.
Blackstone’s fee-related earnings jumped 76% to a quarterly record of $1.84 billion.
“Earnings growth accelerated sharply, while the key drivers of our business – inflows, investment activity and realizations – all reached their highest levels in two-and-a-half years,” CEO Steve Schwarzman said. “As we move forward in 2025, the firm is exhibiting significant momentum.”
Blackstone’s distributable earnings surged 56% to $2.2 billion, or $1.69 per share, in the three months ended Dec. 31. Analysts had expected $1.46 apiece, according to data compiled by LSEG.
But the company’s shares reversed premarket gains to trade lower as investors weighed AI-driven data center demand against concerns sparked by Chinese startup DeepSeek.
BRIGHT OUTLOOK FOR BUYOUTS, IPOs
Leveraged finance activity is expected to rebound this year as borrowing costs decline, enabling private equity firms to finance deals cheaply and complete more acquisitions.
Some of the world’s largest buyout firms, including Blackstone, have begun pursuing large leveraged acquisitions as the financing outlook improves.
Blackstone said fourth-quarter inflows were $57.5 billion, bringing full-year inflows to $171.5 billion. It deployed $41.6 billion in capital in the quarter.
“Blackstone seems to be signaling bullishness in real estate as deployments of $4.7 billion in opportunistic real estate by far exceeded the inflows of $1.5 billion,” Oppenheimer analyst Chris Kotowski said.
Lower rates are also expected to boost corporate earnings and real-estate valuations, enhancing exit opportunities and deal flow across broader markets.
Executives at Blackstone said the pipeline of companies looking to do initial public offerings is now double of where it was a year ago, adding that large, profitable companies can go public.
The IPO market remained subdued for nearly three years as capital markets volatility, high interest rates and a broad risk-off sentiment weighed on investor demand.
In November, Blackstone agreed to buy sandwich chain Jersey Mike’s Subs in a $8 billion deal. In the same month, it also struck a $4 billion deal to take Retail Opportunity Investments private.
Last month, the company said it will buy a high-end office building in central Tokyo for $2.6 billion, the biggest ever real-estate outlay by a foreign investor in Japan.
(Reporting by Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri)
