Blackstone Sets its Sights on Australian Real Estate

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Wednesday, October 30th, 2013
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Global private equity giant Blackstone says it favours investment in Australian real estate due to the country’s economic resilience.

Stephen Schwarzman, co-founder of New York-based Blackstone, said during a visit to Sydney that the resilience of the Australian economy and its ability to weather adverse conditions in the global marketplace has made the country a highly alluring investment destination.

“We are very focused on Australia,” he said. “Where else in the world can you invest in where they don’t have recessions?”

Schwarzman praised the management of Australian economy, which he said was “set up in a very intelligent way, with the pension system funded, which is pretty unusual in a developed world economy.”

He also pointed to Australia’s geographic location in the Asia-Pacific, close to rapidly expanding markets, as another factor in its economic favour.

While Schwarzman indicated that Blackstone is interested in lifting its exposure to the Australian economy via investments in both real estate and equity, he observed that “property is easier to buy than companies.”

Blackstone recently found itself the underbidder in a pair of major private equity sales in Australia, losing out to rival firm TPG in its efforts to acquire stakes in the Ingham chicken group earlier this year and hospital group Healthscope in 2010.

Stephen Schwarzman

Stephen Schwarzman, Blackstone co-founder

Blackstone has nonetheless rapidly expanded its local property investments since establishing an office in Sydney in 2010, with its Australian real estate portfolio currently worth around $2.5 billion.

These assets include the Spencer Street DFO outlet in Melbourne and Gold Fields House in Sydney’s Circular Quay, as well as a several major shopping centres.

Schwarzman, whose personal wealth is estimated by Forbes magazine to be around $6.5 billion, was formerly the head of mergers and acquisitions with Wall Street investment Lehman Brothers before setting up Blackstone in 1985 with Pete Peterson, a fellow Lehman veteran as well as former US secretary of commerce.

The firm has since become one of the world’s largest private equity investment firms, as well as one of its largest international investors in real estate.

Blackstone is far from the only major institutional investor to cast a covetous eye upon the Australian property market.

The first half of 2013 saw a flood of interest from Canadian pension funds looking to snap up Australian infrastructure and property assets as safe haven investments given the economic resilience so lauded by Schwarzman. This dramatic rise in interest has made Australia the third largest global destination for Canada’s direct investment abroad, excluding tax havens.

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