Two Things Define You
Blackstone's Real Estate Secret, Happiness in America, So many Aliens
To learn how to allocate our own investments, we studiously pay attention to those who have lots more than we do at stake. They have more reasons to get it right, spend more time, money, and thought on what’s about to happen, and when they move often cause things to happen. With that in mind, I’ve been paying attention to Blackstone real estate holdings recently.
In case you don’t know, Blackstone is the largest alt investment fund on earth, managing $1T. It was founded in 1985 as a mergers and acquisitions firm by Peter G. Peterson and Stephen A. Schwarzman, who had previously worked together at Lehman Brothers, and now owns a stake in almost every business you can imagine, either through public market allocations (trading), or Private Equity outright ownership.
And it owns real estate, lots of real estate. From the start of 2021 through the third quarter of 2022, the fund acquired roughly $60 billion in property, according to the Financial Times. Almost none of that was in office space, by the way. They see the writing on the wall, the world is never going back to the office to get work done. The smartest people I know are saying that we need 91% less office space than is currently on the market.
The problem with owning all of this real estate, of course, is that it’s hard to manage and especially hard to manage to cash flow returns right now, as we’ve discussed before. Investors want liquidity through cash flow distributions or redemptions of shares held, both of which create a challenge for the one managing the funds. When the investors want their money back, you’d better have it for them.
To solve this challenge, Blackstone recently sold some marquis properties, including Mandalay Bay and the MGM Grand in Las Vegas, the JW Marriott Hill Country Resort and Spa in San Antonio, and the sale of its entire storage portfolio to Public Storage. In total, the firm has sold roughly $10 billion in assets since the fall of last year, creating about $2.5 billion in investment gains. This should create plenty of liquidity to keep investors happy, pay its own partners very handsomely (remember the average carry is 20%), and allow Blackstone to put those funds into its future-facing vision of real estate.
On the top of the list are data centers. As AI goes mainstream and becomes embedded and invisible to the consumer, the amount of data generation, processing, and storage will explode again. When I was 12 years old, Vartan Gregorian told me that the amount of data that an average person in the middle ages consumed during a lifetime could fit on the front page of the New York Times. Today, we create that amount of date every 1.7 seconds.
Blackstone recognizes this and spent $10b to buy QTS Realty Trust, a data-center REIT and plans to fund it with an additional $8b to build new data centers on spec for tech companies. In a letter to shareholders, Blackstone said “Large technology companies are in the midst of an AI arms race which we believe will be a once-in-a-generation engine for future growth in data centers and is driving tremendous demand on the ground.” These converging trends — repositioning of real estate assets and the boom of AI — will give birth to a $1 trillion data center market in a few short years, but your broker won’t know that until his masters tell him to push data center stocks.
“Work will work when nothing else works.”
—Shay Carl
Most of us don’t even know it, but since 1972 the General Social Survey has asked a representative sample of US adults “Are you very happy, pretty happy, or not too happy?”
Today, overall the population is reasonably happy even after a mild recent decline owing to the pandemic and political nonsense rampant in the world. Some interesting observations from the study though:
Being married is the most important differentiator with a 30-percentage point happy-unhappy gap over the unmarried.
Income is important. The rich are always much happier than the poor, for obvious reasons.
In the past decade, the gap between white and black reported happiness scores have narrowed substantially.
For years, geography, gender and age differences have been relatively unimportant. Now, for the first time, we are seeing old-age unhappiness may be emerging.
Conservatives are distinctly happier than liberals.
So to be happy in the US in 2023, be married, white, rich, young and conservative. This has pretty much been my prescription for a long time anyway. Being that there are some of these that we cannot solve for, the biggest indicator of happiness in life is a rich and fulfilling social life. Friends, engagement, harmony and pleasant conversation is the prescription we can all aspire to manifest a little more strenuously.
“People who have failed before have the same amount of success as people who have never tried at all.”
—Jason Fried
For some reason, this past week the US Congress decided to hold hearings about the presence of UFOs in the world. Many think it’s a way to prepare the world for a big announcement, others think it’s fun and games. Ten years ago I would’ve said “Of course UFOs exist,” but when I hear the government say they do? I’ll wait for more evidence.
Speaking of evidence, did you know that in 1803 several flying saucers washed up on the shores of Japan during the Edo period? The stories were recorded, pictures were sketched including alien script on the sides of the pods. Believe what you will but I found it a fascinating read in my new favorite time-wasting website: The Public Domain Review.