Blackstone's $68 billion flagship property fund, the Blackstone Real Estate Income Trust (Breit), has shifted its strategy from being a major buyer to a significant seller of property. From the beginning of 2021 to the third quarter of last year, Breit acquired approximately $60 billion worth of various properties, including hotels, warehouses, and self-storage facilities. However, since the autumn of last year, Breit has refrained from making large purchases and has instead sold over $10 billion in assets to realize gains on successful investments and increase liquidity.
The sales have been at 4% above the properties' book values, generating about $2.5 billion in investment gains. These funds have allowed Breit to return more than $8 billion to investors since November of last year when the fund limited withdrawals due to a surge in redemption requests. The recent asset sales, such as the disposal of a 49% stake in two Las Vegas casinos for $2.8 billion, have provided liquidity to manage the high redemption requests.
Blackstone is now focusing on raising cash for a "once in a generation" opportunity to build data centers to meet the increasing computing demand from the artificial intelligence (AI) boom. The company has committed to spending over $8 billion on new data centers for large-scale technology companies, capitalizing on the rising data needs from the surge in AI investment. The investment push stems from Blackstone's ownership of QTS Realty Trust, a real estate trust specialized in data centers, which Blackstone acquired for over $10 billion in mid-2021.
Large technology companies like Microsoft, Google, Meta (formerly Facebook), and Amazon are projected to invest around $1 trillion in the coming years to construct the digital infrastructure needed to accommodate the soaring computing demand from AI technologies.
Blackstone has already invested more than $1 billion in purchasing land for new data centers in five states across the US. The company is also partnering with local utilities to handle the energy requirements of the properties it plans to build. The data centers that Blackstone is preparing to construct can cost over $1 billion per property due to their size and complexity.
The investment in QTS has been divided among different Blackstone funds, with Breit being one of them. Since Blackstone's acquisition of QTS, its leased space has tripled, and with the new investment, it is expected to double in size. QTS's valuation has reached about $20 billion, double the amount Blackstone initially paid for it. Some top Blackstone officials believe that the QTS investment could become the company's most profitable real estate investment.
Breit believes that large technology companies' ongoing AI competition will be a significant driver of future growth in data centers, leading to strong demand in the industry. Investment Disclaimer:
For informational purposes only. Not financial advice. Invest at your own risk. Consult a professional advisor for personalized guidance. Past performance is not indicative of future results.
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