Real Estate: Blackstone Eyes a New Approach to Real Estate Investment

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Real estate investors at Blackstone Group are getting into show business.

As one of the world’s leading investment management firms, Blackstone is looking to expand its portfolio in the real estate sector.  Specifically, the company is keeping a close eye on production sites and warehouses used by companies like Netflix and Disney for production.  One of Blackstone’s major moves toward this direction includes acquiring 49 percent of three film studios — some of which are owned by Netflix — in Los Angeles.  This deal was joint with Hudson Pacific Properties which owns the other half of the properties.  This adds up to $1.65 billion.  

Blackstone Expresses Hope in a Promising Industry

According to Blackstone’s leader in real estate for the Americas, Nadeem Meghji, “We’re thematic investors and focus on sectors with strong tailwinds, and content creation is a prime example.”  Clearly, Blackstone is looking to diversify its portfolio in an untapped market.  Before 2010, real estate only accounted for 15 percent of Blackstone’s portfolio.  The content production portion of the booming real estate sector could be even more profitable for the firm.  The niche nature of this industry can allow for quick revenue growth.

The Effects of Low Supply

According to John Tornson — principal at Avison Young — demand for these investments will rise as supply continues to be very limited.  Most of these production studies are based in highly developed areas like New York City and Los Angeles.  Investing in them now can provide benefits in the long run when the real estate appreciates.  This trend remains true in other states that companies are expanding in.  For instance, Netflix recently moved a studio to Albuquerque, New Mexico.  Blackstone expects this to be a potentially profitable area.  

As companies like Netflix continue to dominate film and content production, firms like Blackstone will be very happy.  The nature of Netflix’s high entry costs and low maintenance costs will promote expansion.  As a result, investment firms will have more options to choose from. 

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