Blackstone Group, billed because the world’s largest various asset supervisor and business property proprietor, posted a second-quarter loss because the values of its personal fairness and opportunistic actual property portfolios declined after sharp beneficial properties a 12 months earlier.

However the New York-based agency mentioned its efficiency nonetheless far outpaced the broader market, and its actual property portfolio, concentrated in residential rental and logistics properties, can be an essential benefit that can assist it climate excessive inflation and different financial considerations. Capital elevating for brand spanking new investments remained sturdy.

Whole property beneath administration rose 38% to $940.eight billion as fundraising of $88.Three billion final quarter made the second-largest influx Blackstone has seen “within the midst of market chaos,” Blackstone Chairman, CEO and co-founder Stephen Schwarzman mentioned on a convention name. About $49 billion of the cash it raised got here from its actual property enterprise, together with $24.four billion it raised in its 10th world opportunistic fund.

The corporate’s place within the business actual property trade means its efficiency could be thought-about a market snapshot amid rising rates of interest, inflation that has hit a 40-year excessive, and shifts in residential property demand. In every week the place mortgage functions have been reported to have hit a 22-year low, traders and analysts are on the lookout for indicators of modifications in shopper sentiment that may have an effect on multifamily and different business actual property, in addition to prospects for corporations.

In a single signal of the financial shift enjoying out in company America, Blackstone mentioned its second-quarter lack of $29.four million in contrast with revenue of $1.31 billion a 12 months earlier. That got here as the worth of its company personal fairness fund, together with investments in companies such because the Bumble relationship web site and Ancestry digital household historical past service, dropped 6.7% after a 10.1% bounce a 12 months earlier.

The worth of its opportunistic actual property portfolio, which invests in “undermanaged, well-located” properties worldwide, dipped 1% after a 35% improve a 12 months earlier. And the worth of its core plus actual property investments rose 2.3% following a 25.5% bounce in 2021. These property embrace logistics, residential, workplace, life sciences and retail properties positioned in world gateway cities.

Whereas the worth of its actual property portfolios declined or noticed slower progress, Blackstone mentioned its efficiency on numerous fronts nonetheless sharply outpaced that of its friends and broader actual property and different market indexes.

With the extra cash, Blackstone’s whole actual property property beneath administration elevated 54% to $320 billion, outpacing its personal fairness, hedge fund and different companies.

“These outcomes are beautiful versus losses most traders are experiencing,” Schwarzman mentioned. “We had anticipated increased pursuits price and extra pervasive inflation for a while and positioned our portfolio to mirror that. We’re seeing a transparent good thing about that foresight in the present day. Trying ahead, market situations will stay difficult.”

Jonathan Grey, Blackstone’s president and chief working officer, mentioned its bets on “onerous property with short-term period with pricing energy” will proceed to repay and assist the agency navigate market uncertainty. These embrace its residential rental actual property and logistics property investments, which make up the vast majority of its actual property portfolio.

He mentioned elevated on-line buying is offering a lift to the logistics area, whereas provide chain considerations and corporations transferring away from “simply in time” stock administration — or making items when orders are available versus stocking them — translate to extra demand for warehouses.

For each residential and industrial property sorts, “the backdrop is extraordinarily constructive” with “document low vacancies,” he mentioned.

Whereas Grey expects the excessive residential rental price progress “in some unspecified time in the future will come down,” he mentioned the decline in new development and residential begins, coupled with elevated mortgage charges and development prices, bodes effectively for the rental market.

“Individuals nonetheless have to dwell someplace,” he mentioned. There’s “much less new provide. Now we have an enormous infrastructure scarcity. That pushes folks to the rental market.”

In the meantime, whereas increased rates of interest and borrowing prices have led to actual property funding trusts together with SL Inexperienced Realty — Manhattan’s largest workplace landlord — and Vornado Realty Belief to shift how they plan to pay down or refinance debt, Grey mentioned as a lender Blackstone’s floating-rate debt enterprise will profit. The agency’s fixed-income actual property debt enterprise is closely oriented towards floating-rate debt, in accordance with Grey. Each time the Federal Reserve raises charges, the returns are “sturdy” for that enterprise, he mentioned.

Amongst a few of Blackstone’s notable actual property transactions final quarter, it offered the Cosmopolitan luxurious lodge and on line casino in Las Vegas, which it mentioned was its actual property enterprise’s most worthwhile single-asset sale. The agency additionally recapitalized Mileway, a pan-European last-mile logistics firm, in what it described as “the largest-ever personal actual property transaction globally.”

Blackstone additionally accomplished the $7.6 billion buy of PS Enterprise Parks, the proprietor of 27 million sq. toes of business properties consisting primarily of business area that appeals to small and midsize corporations.