At the NYU International Hospitality Industry Investment Conference last week, Jonathan Gray, global head of real estate at Blackstone, discussed everything from the current economic environment and hot markets to the firm’s investment strategies and recent $1.73 billion acquisition of The Cosmopolitan of Las Vegas. Here are seven pieces of advice for investors Gray shared during the onstage interview.
In an economic downturn, hold tightly to the assets you own. “If you own great assets or great businesses and you hold on to them, then ultimately there’s a recovering value because the economy starts to grow, travel starts to pick up in lodging, debt markets recover, and hard assets go back to the cost to build.”
Buy debt at a discount on existing properties. “If you believe value is going to recover, then move quickly to capture the advantage—go and buy hard assets at a discount.”
Be willing to take risks. “It’s in those moments of greatest uncertainty when you have the greatest opportunities.”
Go against the grain. “Even though consensus is one way, because the analytics show there is still underlying demand, and there is very limited new supply, then have the confidence to do it. You don’t generate outside returns with consensus.”
Don’t give up hope on emerging markets. “Emerging markets may grow more slowly, they may have challenges, but there’s still going to be higher growth in those places than there has been historically.”
Focus on net cash flow. “I would look at the bottom line these assets produce, the margins, and the capex costs. One of the things we’ve underestimated as hotel owners and investors is how much capex over time, particularly in the full-service space, you need to spend. You look at the net capital an asset produces.”
Be mindful of the capital you invest, and how durable the demand profile is. “Losing investments you agonize over. You really beat yourself up and say, ‘I don’t want to make the same mistake again.’”