- David Levine and Giovanni Cutaia now run Blackstone real estate after Nadeem Meghji announced his exit, with the unit’s profit tracking at half its 2022 peak and a $30 billion fundraise delayed.
- Third-quarter distributable earnings fell 10%, assets sit $30 billion below their peak, and the flagship BREP IX fund has returned 3% annualized since 2019.
- Data center demand and AI-driven leasing offer relief, but rate-hobbled deal markets mean the new leaders must deploy capital before they can raise the next fund.
Blackstone has handed its real estate business to a new pair of leaders at a tough moment, according to a Bloomberg feature published Nov. 8.
David Levine and Giovanni Cutaia take over a unit whose profit is tracking at half its 2022 peak.
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A Shock Leadership Change
Nadeem Meghji became sole head in January and announced in September that he would leave by year-end, less than 10 months after co-head Kathleen McCarthy departed. Bloomberg reported that Jon Gray tried and failed to talk him out of it, citing colleagues.
A firm statement said Meghji plans to take time with his young family. People familiar with his thinking told Bloomberg he eventually wants to start his own venture.
The Numbers Behind the Slide
Blackstone’s latest results showed real estate distributable earnings down 10% from a year earlier and assets $30B below their peak. Opportunistic strategies lost 3.2% over the quarter, and private equity has overtaken real estate as the firm’s most profitable business.
The flagship BREP IX fund, which began investing in 2019, has returned 3% annualized net, according to Bloomberg. KKR’s comparable fund has returned 3.3%, Carlyle’s 1% and Brookfield’s 3%.
The Fundraising Clock
The unit manages about $309B, including nearly $47B of uninvested capital. The tenth flagship fund must deploy at least 70% of its $30B before Blackstone can pitch a successor, Bloomberg reported.
Levine and Cutaia see openings in warehouses, hotels and grocery-anchored retail, which have benefited from thin new development. They also see data center financing as a source of large deals.
AI Gives Some Relief
Gray said a June sale of three fully leased Northern Virginia data centers lifted real estate returns to a four-year high in the second quarter. Nearly 15% of Blackstone’s big warehouses are now used by hyperscalers for equipment storage, and second-quarter leasing volume rose 30% year over year, per Bloomberg.
AI tenants are also helping office and life science holdings, and Blackstone recently leased a 25-story San Francisco tower to Anthropic. We saw the same pivot when BREIT put $7B of sale proceeds into data centers, according to AltsWire.
Why It Matters
Levine said in an interview with Bloomberg that the firm will stay disciplined and will not rush if transactions are slow. Cutaia said capital markets still face rate volatility, though fundamentals are improving.
Property values have fallen since the Fed began hiking in early 2022, and many would-be sellers are waiting, so lower prices have not yet produced bargains. Blackstone is also running a secondary process for Blackstone Property Partners and has cut management fees for some investors who stayed.
What’s Next
The midterms could test Blackstone’s AI conviction. Gray told Bloomberg TV the firm has high confidence in long-term contracts with hyperscalers, but Democrats won in part on voter worries about AI, and Sen. Elizabeth Warren is expected to chair the Senate Banking Committee. We covered how Democratic wins threaten the data center boom, with about half of proposed additions facing more scrutiny.
