Blackstone's Property Arm Gets Two Heads With Gray Moving Up
(Bloomberg) -- There are two new sheriffs in town at the helm of one of the world’s largest property investors.
Blackstone Group LP named Ken Caplan and Kathleen McCarthy to lead the private equity giant’s real estate business as Jon Gray takes on the role of president and chief operating officer. The real estate business Gray built, after joining Blackstone straight out of college, is the firm’s largest by assets and accounted for about half of its pretax profit last year.
The new chiefs will lead an operation that spans the globe and touches all corners of the real estate world, from New York skyscrapers and Hawaiian resorts to warehouses and rental housing. Caplan, who has been with Blackstone for 21 years, was previously the global chief investment officer. McCarthy, who joined the firm in 2010, focused on investors, capital raising and business development in her role as chief operating officer of Blackstone’s real estate group.
“The logic behind what we’re doing here is that these are my two key partners running the business today,” Gray said in an interview. “They are the natural heirs to the business.”
Caplan, who began his tenure at Blackstone in the U.S. real estate acquisitions group, was a key player in two of the firm’s marquee deals, the $39 billion purchase of Equity Office Properties in 2007 and the takeover that same year of hotel operator Hilton Worldwide Holdings Inc. Caplan moved to London in 2009 and took over the firm’s European division in 2011.
McCarthy, who becomes the first woman to run an investing business at Blackstone, came to the firm following a decade at Goldman Sachs Group Inc., where she worked on its real estate investments. At Blackstone, she started as a client liaison and eventually came to oversee the real estate group’s day-to-day operations.
It’s difficult to define the scope of Blackstone’s sprawling real estate holdings. In the U.S., notable coups since the financial crisis have included the $5.3 billion acquisition of Stuyvesant Town-Peter Cooper Village, Manhattan’s biggest apartment complex, and the launch of a nontraded real estate investment trust that targets individual investors. Outside the U.S., the firm is active in Spanish residential properties and office buildings in India. Logistics is an area of focus as the rise of e-commerce spurs demand for warehouses.
“The tie that binds all of this across all of the different types of capital we manage and the different investors we serve is that we are high-conviction thematic investors,” McCarthy said. “That’s how we invest at any moment in the cycle.”
Gray is handing over the reins at a pivotal time for real estate. Price gains in major U.S. cities have plateaued following years of record-shattering growth. At the same time, interest rates are climbing as central banks wean markets off a decade of low-cost debt.
The changing environment is a challenge Blackstone is uniquely positioned to navigate, according to Caplan.
“We’re not changing our approach to investing,” Caplan said. “Because of our size and position, we can do things here at Blackstone that others can’t.”
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