MIPIM 2007: Chad Pike, European chief of private equity giant Blackstone, today predicted that more investors would follow the private equity model of buying alternative real estate assets.
At a MIPIM seminar entitled ‘Alternative Investments today, Mainstream tomorrow?’, Pike told delegates that he feared the alternative property sector Blackstone first ventured into a decade ago was becoming a little crowded.
‘We have bought E50bn (£34.1m) of assets in non-traditional asset classes and were one of the first to put a value on a businesses income stream and its real estate,’ said Pike.
He told investors he was now looking at new operating businesses to stay ahead of the vast flows of global capital into alternative property assets such as pubs, nursing homes and hospitals. Blackstone has sold its final stake in UK nursing home group Southern Cross and offloaded its residential holdings in Germany within the last week.
"We now own 2000 student housing beds in London targeting the foreign exchange student market and are buying hospitals, clinics and rehabilitation centres," Pike added. "We are the second biggest hospital owner in France; the world's largest hotel landowner. At one point we were the biggest pub landlord in the UK. We have also expanded into amusement and theme parks and are the second largest owner of amusement parks after Walt Disney."
He said the four elements which were key to Blackstone's strategy included the importance of the brand of the operating business, the management structure of the operating businesses; and the ability to spend vast capital sums to bring the value of the property " to bear as most of the money is made at the property level not the corporate level".
Pike said Blackstone had no fear of liquidity or exit routes, pointing to Blackstone's purchase of Equity Office Properties. "We had to go up in price but less than two weeks after completing the deal we have already sold 22bn US dollars of the portfolio as we discovered a degree of liquidity in the deal that we had not realised was there when we first bid."
He said that the company was not interested in buying into the UK healthcare or pub sectors, which he described as over-valued, nor was Blackstone looking at investment in the infrastructure sector as it was more interested in the shorter-term play.