Key Takeaways
- • Blackstone's opportunistic real estate segment, which includes distressed assets and turnaround projects, was the only business line to post a loss in Q3, with performance down 3.2 percent, according to the company's financial statements.
- • President Jon Gray attributed the drag to higher interest rates, which led Blackstone to increase valuation cap rates across its holdings, depreciating opportunistic real estate funds, particularly slower-growing U.S. multifamily and some European assets.
- • Net income rose just about 3 percent year over year to $1.27 billion in Q3, a sharp slowdown from the 27 percent growth seen over the first half of 2026; year-to-date net income reached $4.89 billion, up 20 percent.
- • Blackstone's core-plus real estate group gained 1.6 percent, while infrastructure was the strongest segment at up 6.4 percent.
- • Leadership turnover in real estate continued as Nadeem Meghji stepped down after 20 years, with David Levine and Giovanni Cutaia named new co-heads, while the stock trades near $110, down about 30 percent over the past year.
Summary
Blackstone's opportunistic real estate segment, which invests in distressed assets and turnaround projects, was the only part of the private equity giant's business to suffer a loss in the third quarter, with performance down 3.2 percent, according to the company's financial statements. President Jon Gray said the cause was higher interest rates. "In the third quarter we increased valuation cap rates across our holdings in response to the increase in base rates, which led to depreciation in our opportunistic real estate funds," he said on the company's third-quarter earnings call. Gray added that the impact was particularly felt in slower-growing assets, including U.S. multifamily and some European properties.
An example of the distress cited was a $1.3 billion CMBS loan Blackstone took out on a portfolio of 6,671 Sunbelt multifamily units, which recently moved into special servicing. The loan had been watchlisted in December 2024 after property inspections uncovered deferred maintenance ahead of its maturity. Blackstone has been selling some of the properties and received a three-month forbearance to sell the remainder.
Gray said real estate fundamentals remain strong and expects performance in the group to improve, pointing to a decline in new multifamily supply from buildings that began construction roughly three years ago. Leasing in Blackstone's warehouse portfolio, the largest component of its real estate holdings, rose 45 percent. Core-plus real estate, which covers fully stabilized, high-performing properties, gained 1.6 percent, while infrastructure was the strongest segment at up 6.4 percent.
Firm-wide, net income rose about 3 percent year over year to $1.27 billion in the quarter, a marked cooling after earlier 2026 growth. Year-to-date net income stands at $4.89 billion, up 20 percent from the same period in 2025. Blackstone's shares are down about 30 percent over the past year, trading just below $110.
Leadership in the real estate group has also changed. Nadeem Meghji, head of the global real estate group, decided in September to step down after 20 years, less than a year after Kathleen McCarthy left as co-head in November. David Levine, head of the Americas real estate business, and Giovanni Cutaia, president of the real estate business, were appointed as the new co-heads. Much of the call focused on AI, where Blackstone plans to invest across chips, compute and data centers backed by high-credit companies; its data centers are leased under long-term contracts to investment-grade hyperscalers. CEO Stephen Schwarzman acknowledged AI risks but called the opportunity a once-in-a-lifetime one, saying, "Seldom in my career have I seen such a supply-constrained market of this scale."
An example of the distress cited was a $1.3 billion CMBS loan Blackstone took out on a portfolio of 6,671 Sunbelt multifamily units, which recently moved into special servicing. The loan had been watchlisted in December 2024 after property inspections uncovered deferred maintenance ahead of its maturity. Blackstone has been selling some of the properties and received a three-month forbearance to sell the remainder.
Gray said real estate fundamentals remain strong and expects performance in the group to improve, pointing to a decline in new multifamily supply from buildings that began construction roughly three years ago. Leasing in Blackstone's warehouse portfolio, the largest component of its real estate holdings, rose 45 percent. Core-plus real estate, which covers fully stabilized, high-performing properties, gained 1.6 percent, while infrastructure was the strongest segment at up 6.4 percent.
Firm-wide, net income rose about 3 percent year over year to $1.27 billion in the quarter, a marked cooling after earlier 2026 growth. Year-to-date net income stands at $4.89 billion, up 20 percent from the same period in 2025. Blackstone's shares are down about 30 percent over the past year, trading just below $110.
Leadership in the real estate group has also changed. Nadeem Meghji, head of the global real estate group, decided in September to step down after 20 years, less than a year after Kathleen McCarthy left as co-head in November. David Levine, head of the Americas real estate business, and Giovanni Cutaia, president of the real estate business, were appointed as the new co-heads. Much of the call focused on AI, where Blackstone plans to invest across chips, compute and data centers backed by high-credit companies; its data centers are leased under long-term contracts to investment-grade hyperscalers. CEO Stephen Schwarzman acknowledged AI risks but called the opportunity a once-in-a-lifetime one, saying, "Seldom in my career have I seen such a supply-constrained market of this scale."
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