Author Topic: Blackstone Vs Brookfield - Let's Stir The Pot (An Allow Me To Bash Brookfield)  (Read 1530 times)

BG2008

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Blackstone bought warehouses while Brookfield bought malls - Blackstone 1 Brookfield 0

Others? 


Gregmal

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Blackstone is like Visa, "everywhere you want to be". BAM is like Discover, pretty darn useful in certain areas, but sometimes sleezy and not exactly in the right places all the time.

BG2008

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Blackstone is like Visa, "everywhere you want to be". BAM is like Discover, pretty darn useful in certain areas, but sometimes sleezy and not exactly in the right places all the time.

Can you expand on this analogy a bit?

Gregmal

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Blackstone seems to go to where the puck will eventually be. They've also seemed to do a pretty good job managing their reputation. In the PE world, IMO, BX is in a league of its own. Visa and MasterCard style.

Brookfield is no doubt impressive in its own right, but much like Discover, again IMO, it has its limitations, does a poor job managing its reputation(or doesnt care) and probably extends itself at times, in terms of taking on unnecessary risks.

BG2008

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https://www.theverge.com/2020/6/26/21297400/microsoft-retail-stores-closing-cities-open

More bad news for malls.  I thought that Microsoft opening stores was potentially a saving grace for malls as it highlights the value of experiencing MSFT products in person

Xerxes

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Blackstone seems to go to where the puck will eventually be. They've also seemed to do a pretty good job managing their reputation. In the PE world, IMO, BX is in a league of its own. Visa and MasterCard style.

Brookfield is no doubt impressive in its own right, but much like Discover, again IMO, it has its limitations, does a poor job managing its reputation(or doesnt care) and probably extends itself at times, in terms of taking on unnecessary risks.

Isn't the underline a function how things are perceive in a given snapshot in the timeline. The bet that BX made on industrial warehouse seems to be right on the money now, but if we go back to the genesis of that bet, which was probably a decade ago in a much smaller magnitude would have had folks scratching their heads. The obvious bet 15 years ago was to be long office building & malls.

Meaning that the malls that BAM is making a bet today, could be perceived differently another 10-15 years from now. After all they are in business of re-purposing them and as long as BAM has enough imagination to see the real estate can be far more than just a mall or can be completely different, than I think we can call that a contrarian bet in the making, which you can participate by using a 10-feet pole, through BAM itself as oppose to BYP.

Gregmal

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Blackstone seems to go to where the puck will eventually be. They've also seemed to do a pretty good job managing their reputation. In the PE world, IMO, BX is in a league of its own. Visa and MasterCard style.

Brookfield is no doubt impressive in its own right, but much like Discover, again IMO, it has its limitations, does a poor job managing its reputation(or doesnt care) and probably extends itself at times, in terms of taking on unnecessary risks.

Isn't the underline a function how things are perceive in a given snapshot in the timeline. The bet that BX made on industrial warehouse seems to be right on the money now, but if we go back to the genesis of that bet, which was probably a decade ago in a much smaller magnitude would have had folks scratching their heads. The obvious bet 15 years ago was to be long office building & malls.

Meaning that the malls that BAM is making a bet today, could be perceived differently another 10-15 years from now. After all they are in business of re-purposing them and as long as BAM has enough imagination to see the real estate can be far more than just a mall or can be completely different, than I think we can call that a contrarian bet in the making, which you can participate by using a 10-feet pole, through BAM itself as oppose to BYP.

I dont disagree necessarily. I think one of the most misunderstood aspects of the mall hate is that well placed dirt is well placed dirt. Todays mall doesnt have to be tomorrows. Worst case scenario it costs maybe $15M to demolish a mall and start from scratch. Then you can be whatever you want to be, even a warehouse. Malls in tier 1 cities, especially right off major highways will do just fine IMO. The future will obviously look different, but look at what the inside of a major casino looks like. Shopping, entertainment, rooms/housing, and often office space. Simon and BAM are already doing this.

racemize

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I believe BAM was in warehousing/logistics first and sold it to BX or others.  2018 investor day transcript:

Quote
Maybe to help highlight that in a little more--it's always helpful to have real examples. About five years ago, we looked at industrial logistics warehouses, felt that it was a great place to put capital to work, and so we set up a dissembling a global logistics business through the acquisition of three companies in Europe and the United States. We then spent the next five years building the management team, resetting the focus of the business, selling out of markets that we thought were slower growth, and redeploying capital into higher growth markets. We increased rent by 16% over that period of time. We delivered over 20 million square feet of new development, and then over that same period of time, industrial went from being out of favor, to being probably the most highly sought-after real estate sector today.

And there is a consequence, the evaluation of this portfolio increased dramatically. We took advantage of that last year and sold our European platform for about five times what we paid for it originally. And by the end of this year, we'll also have disposed of the U.S. portion of the business as well with a similar result. So, in just five short years, we invested about $300 million into this business, and it will return close to a little over $1 billion to us, which can be redeployed into our other investment activities.

Five years is a relatively short time frame, sometimes it moves even quicker, so a couple of years ago, we looked at self-storage and decided this was an attractive sector for us to invest in. Similar to industrial, we assembled a 7 million square foot portfolio through a series of very small acquisitions and grew the portfolio to about 200 assets. Highly sought-after sector in high demand but highly fragmented ownership. And so, institutional investors have a lot of interest in investing in self-storage. There are relatively few portfolios out there for them to invest in scale. And so, what we did was we created this portfolio of 200 assets. We took the hundred assets that were in the markets that we felt offered the least upside. These were in the midwest and southeast, and actually sold them for roughly double what we paid for them as we were assembling this portfolio.

And, so today what we own is the remaining 100 assets in the higher growth markets, with zero capital invested in it. And so, obviously thatís going to generate a substantial amount of capital for us over the next couple of years as we continue to build that business up. And so, this is simple, it's repeatable, we often get asked about where we are in the real estate investment cycle. It doesn't matter in a lot of ways when these are the types of plans that you're undertaking. You need to know where you are. You adjust your strategy accordingly, but it doesn't mean that you stop investing when we're able to do these types of things.
« Last Edit: June 27, 2020, 05:04:25 AM by racemize »

Spekulatius

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I dont disagree necessarily. I think one of the most misunderstood aspects of the mall hate is that well placed dirt is well placed dirt. Todays mall doesnt have to be tomorrows. Worst case scenario it costs maybe $15M to demolish a mall and start from scratch. Then you can be whatever you want to be, even a warehouse. Malls in tier 1 cities, especially right off major highways will do just fine IMO. The future will obviously look different, but look at what the inside of a major casino looks like. Shopping, entertainment, rooms/housing, and often office space. Simon and BAM are already doing this.

Sure yo can covert mall space into offices, but offices have problems already. Using them as logistics hubs would work too, but that would be a lesser use and imply much lower rents.  I think the eine closed malls are going to have a tough time, outdoors/ open air super centers are going to have a much better performance both short term and longer term.

I could see a monster mall like the Roosevelt mall in LI becoming a tear down eventually.
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ValueMaven

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This is a great topic actually.  Personally I've allocated to BAM vs. BX - as BAM is cheaper IMHO, and better hands-on operators.  Way better credit (oaktree), infrastructure and renewable businesses vs BX.  Yes, they are over-allocated to retail and office....that is a sore spot for sure.  BAM insider ownership = $10B, while BX is sub-$1B.  In fact: Jon Gray (co-president) only owns $75M w/of stock.