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By Michael Barkman ’20 & Tricia Craig ’19
The 2018 Real Estate Symposium kicked off with a Keynote conversation featuring Kathleen McCarthy, Senior Managing Director and Global Co-Head of Blackstone Real Estate, and Sonny Kalsi, Founder and Partner of GreenOak. The discussion covered a wide range of issues from the current state of the real estate market to McCarthy’s personal path to becoming Co-Head of Blackstone Real Estate and much more.
On Blackstone’s outlook for the real estate market, McCarthy said that economic growth continues to provide reasons for optimism despite the length of the current expansionary period. Kalsi added that a slowdown may be coming, though it is not yet showing in economic indicators and that he thinks it may never hit the technical definition of a recession.
McCarthy explained that Blackstone is currently very focused on the logistics sector across several countries and increasingly in dense urban areas. The recent acquisition of a Canadian Industrial REIT was based on the belief that e-commerce growth in Canada will rise, similar to what has happened already in the US and Australia. McCarthy also pointed to rental housing as a thematic focus as demand outweighs current supply, especially outside of Class A properties. Another area of interest for Blackstone is “Innovation Cities,” typically urban areas where there is a concentration of talent.
McCarthy and Kalsi talked about how their investors seem to be cautiously optimistic about the real estate markets. CIOs continue to feel pressure to invest more in private and illiquid markets to defend against low interest rates and there has not yet been any pullback in allocations. Foreign investment, from Australia, Asia, and elsewhere continues to rise. McCarthy also discussed how Blackstone is working to provide institutional real estate investment management to retail investors through its non-traded REIT; as companies move away from defined pension plans and 401(k)s become more popular, employees have less access to private real estate investments. Blackstone wants to continue to provide this exposure to individual retail investors.
McCarthy discussed Blackstone’s growth in Core Plus investments. Despite traditionally being more focused on value-add and opportunistic investing, there was a strong interest from Blackstone’s investor base for a Core Plus strategy that would allow the firm to deploy more capital and take advantage of its breadth and expertise in real estate investing. The Core Plus strategy is primarily focused on urban areas where Blackstone sees rents below market, which provide for income growth over time thanks to a longer-term hold strategy.
As Kathleen McCarthy and Ken Caplan step into the Co-Head of Real Estate role this year, McCarthy is focused on maintaining the strong company culture and the company’s core values which have enabled its success so far throughout the company’s significant growth.
Towards the end of the discussion, Kalsi asked McCarthy to talk about her path to becoming the Co-Head of Blackstone Real Estate. As a high school student, McCarthy wanted to work in some international capacity and was interested in diplomacy and business. Upon graduating with a liberal arts degree from Yale University, McCarthy worked in the M&A division of Goldman Sachs and eventually moved to the Real Estate Principal Investment area where she was involved in acquiring and managing investments on behalf of the Whitehall family of funds. For young professionals in the audience, McCarthy emphasized that support and flexibility from colleagues and family has been crucial to her success. She recommended to all to practice finding time for outside priorities, as it remains difficult throughout your career.
McCarthy also mentioned her commitment to philanthropy at Blackstone and how that helps her find even more purpose in her role. She discussed Blackstone’s commitment to affordable housing in New York as shown in the Stuyvesant Town deal, as well as to entrepreneurs. McCarthy reminded the audience that Blackstone was founded by an entrepreneur and continues to drive a diverse set of entrepreneurs towards a common goal. In tying the final discussions together, McCarthy recommended that audience members seek out companies whose values and philanthropies align with one’s own.
Tricia Craig is a California native and second-year student focusing on real estate investment. She graduated from the University of Southern California with a degree in Business Administration and a minor in French. After graduating, she worked at with CAST Management Consultants, specializing in operational efficiency for financial services clients. Tricia also worked in hotel operations while in college and is the Co-President of the Hospitality and Travel Association. Last summer, Tricia interned with Allianz Real Estate of America working on their debt and equity platforms. This year, Tricia is interning with citizenM hotels as a Development and Investment Associate.
Michael Barkman is an MBA student in the Class of 2020 with a concentration in Real Estate. Michael serves as the AVP of Alumni & Mentorship on the Board of the CBS Real Estate Association. Prior to Columbia, he worked in investment banking in the M&A group of Mizuho Securities USA, advising on cross-border mergers and acquisitions. Michael graduated from the University of Denver in 2014 with a BS in Business and Economics.