Blackstone Exec fears ‘torrent of economic activity’
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Law360 (May 5, 2021, 7:24 p.m. EDT) – As the latest COVID-19 stimulus recedes in the rearview mirror and some experts warn of an economic downturn, Blackstone chairman Jonathan Gray fears the opposite and is worried about inflation, according to remarks at a DLA Piper virtual real estate conference on Wednesday.
Gray, who is also chief operating officer of Blackstone Group, said while recent signs of rising wages are positive, a massive spike in spending as travel options open up could hurt the economy. The comments were delivered at DLA Piper LLP’s annual World Real Estate Summit, which it held virtually for the first time this year.
“I’m worried about overheating,” Gray said in his remarks Wednesday. “With the arrival of vaccines, the barrage of the pandemic will disappear. On the other side of that, huge savings have been made.”
“There is cabin fever.… A torrent of economic activity is coming,” he added.
There are already signs of inflation, Gray said. Commodity prices have increased, as have energy prices. And Gray noted that used car prices have gone up 25% and house prices by more than 15%.
“I’m less concerned about things slowing down too quickly and more about them heating up too quickly,” Gray said.
DLA Piper Tuesday evening released a report ahead of Wednesday’s conference that included a broad discussion across a variety of asset classes and markets, more than a year after the start of the pandemic.
Blackstone has continued to be active on the real estate front during the pandemic, having invested heavily in the logistics sector and more recently banking on a rebound in the hotel sector.
“I think people are going to hit the road again,” Gray said.
The company, however, also sees potential in the office market, especially in areas where there are lots of tech companies and lots of highly skilled workers, Gray said. Blackstone also continues to see opportunities in biotech as well as multi-family, he added.
And Blackstone’s continued real estate activity has meant many significant legal fees paid to the large law firms that private equity stores enlist for its transactions.
“Today the legal fees – and DLA Piper can appreciate it – are more important than some of the early deals,” Gray said, adding that the first real estate deal he worked on in Blackstone decades ago , was a $ 6 million transaction. “I was not surprised that we weathered the storm. We had long term capital reserves.”
Of course, one of the many questions that remain for the commercial real estate industry is how quickly the workforce will return to physical offices and the number of employees who will ultimately return there.
Gray said Blackstone has hired more than 700 employees since the start of the pandemic, and many have yet to work in a physical office. He said Blackstone had a “bias” to have employees together and in person, and that he expected most to return to the office.
“We believe we’re a lot better together. As a business, we don’t have the secret formula for Coca-Cola,” Gray said. “When it is safe to do so … [and] as we receive a vaccine, a large majority [of Blackstone’s employees] Will be back.”
Gray’s remarks on Wednesday came as part of a question-and-answer session hosted by David Rubenstein, co-founder of private equity boutique The Carlyle Group.
At one point during the conversation, Rubenstein noted earlier rumors that Donald Trump regarded Gray as Secretary of the Treasury.
“Biden could call you,” Rubenstein said. “Are you interested?”
It seems not.
“I’m attached to Blackstone. I have the most amazing job and love what I do. I plan to be here as long as possible,” said Gray. “Like Ted Williams, you hit a home run and you’re off.… I’m going to keep playing ball.
– Edited by Peter Rozovsky.
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