Blackstone's Homegrown Dealmaker Finally Makes It to the Top
(Bloomberg) -- Jon Gray has spent his entire career inside Blackstone Group LP. Now, at 48, he’s been handed a shot at the top.
Signaling a generational shift in one of Wall Street’s signature businesses, Gray has been tapped as the designated heir to Steve Schwarzman and Tony James, the pair who built Blackstone into a dominant force in private equity.
Gray will assume the role as president and chief operating officer while James, a dealmaking legend who came to the firm in 2002 after a career on Wall Street and was named president in 2006, will become executive vice chairman. The duo will report to Chief Executive Officer Schwarzman, Blackstone said Tuesday.
“Part of doing a really successful succession is taking your time in knowing who the right person is and making sure they’re trained,” Schwarzman said in a phone interview. “Jon is trained up.”
The long-anticipated promotion represents the final piece in a broader, generational shift among some of Wall Street’s most powerful and prominent dealmakers. Blackstone peers including Carlyle Group LP, KKR & Co. and Apollo Global Management LLC have announced promotions in recent months with an eye toward future leadership.
Blackstone’s marathon to win the president role has shaken out a dealmaker modest in public but whose track record is commanding of one’s attention. Under Gray, Blackstone’s real estate business became the largest owner of property globally, accounting for half of the firm’s pretax profit last year.
Gray joined Blackstone as an analyst out of college in 1992. After stints in the firm’s private equity and merger advisory groups, he signed on to help with Blackstone’s then-nascent real estate effort, led by John Schreiber.
Gray and Chad Pike were put in charge of the business in 2005. The Midwesterners -- Schreiber and Gray were both Chicago natives, and Pike was from Toledo, Ohio -- ingrained the group with a vibe distinct from the rest of hustle-and-bustle Blackstone at its headquarters on Park Avenue.
The duo shifted away from buying individual buildings and toward acquiring whole companies, an approach that gave them greater flexibility with assets and compelled bigger bets.
That’s when a buyout of Equity Office Properties Trust came across Gray’s desk. The $39 billion deal for the nation’s largest owner of office properties was the biggest Blackstone had ever pulled off, spotlighting the young co-head and the thriving business he was building around him.
Gray’s streak continued. He led the firm’s 2007 deal for hotel operator Hilton Worldwide Holdings Inc., which after a global financial crisis and U.S. recession has generated about $14 billion in partly realized profit -- a record in private equity.
He has “amazing courage of being able to always go where they’re not,” said fellow real estate investor Tom Barrack, the billionaire executive chairman of Colony NorthStar Inc. “To go public to private, to go bulk to individual, to be able to have a balance sheet, to be able to bridge large transactions and then co-invest.”
Gray’s success -- his stake in Blackstone made him a billionaire -- didn’t lessen his attention to detail. Laurence Tosi, Blackstone’s chief financial officer from 2008 to 2015, came to expect a phone call from Gray at about 6:30 p.m. on the Monday before a Thursday earnings announcement.
“Jon would mark up every earnings release and would go line by line through everything about real estate and the rest of the firm,” Tosi said in a phone interview. “He would be able to catch a number wrong out of thousands. And he was almost always right.”
Gray will continue to chair the real estate investment committee but said he looks forward to his expanded role. While he sees “big white spaces” in areas such as insurance, infrastructure, retail clients and use of data, he said he envisions Blackstone’s playbook continuing much as it is today.
“This is really a story of continuity,” Gray said in a phone interview. “There’s no need for any sort of sharp turns.”
If success in private equity’s early days was as much about calculated bravado as it was about financial acuity, the modern buyout executive has to master a slightly different equation. Gone are the days of hostile takeovers, pure financial engineering or deals for the sake of a price tag. People need to actually like you.
Gray, who people say is both endearing and a master of its effect on people, has come to wear the balance seamlessly.
“He’s one of the toughest-minded business people you’ll meet,” Tosi said. “But he’s always honest, direct and interested in what you have to say. If he disagrees he stays quiet and stares harder -- he never interrupts.”
For all his boldness, a casualness about Gray puts people at ease. He’s an avid Chicago Cubs fan. In an industry filled with Rolex and Patek Philippe watches, he’s known to wear a G-Shock. When Blackstone bought the Cosmopolitan of Las Vegas hotel and casino for $1.7 billion in 2014 and Gray applied for a casino license, he listed his 6-year-old minivan as his primary vehicle, a person with knowledge of the matter said.
He treasures family dinners and, when his four daughters are home, has been known to leave work for the meal and resume calls at 11 p.m.
Schwarzman’s multimillion-dollar, celebrity-studded birthdays have long made headlines. Gray, who celebrates his birthday just 10 days earlier than his boss, prefers the event to pass with little fanfare.
Blackstone “is bigger than Jon Gray, it’s bigger than Steve Schwarzman,” said Barrack. “I think that Jon’s goal will be to leave it a little bit better than he found it.”
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