August 1, 2021

Blackstone, a Wall Street giant storming the cities

Did you like BlackRock? You will love Blackstone. This Wall Street fund, the world’s leading “alternative investor”, buys buildings in cities around the world at low prices, in order to extract millions of dollars in profits to the detriment of tenants. But in Barcelona, ​​Berlin and many other cities large and small, elected officials and residents come into resistance. Focus on a financial giant little known to the general public, as part of our publication “Cities against multinationals”.

A few months ago, in the midst of a debate on pension reform, French opinion got acquainted with BlackRock, this giant Wall Street fund which manages nearly $ 7 trillion in the financial markets, and which seems to have the ear attentive to most political leaders … including in France.

This February 27, the Observatory of multinationals will publish “Cities against multinationals”, an overview of the hidden struggle that is waged in Europe and elsewhere between elected officials, inhabitants and urban movements on the one hand, and multinationals and giants of the finances on the other hand, from the re-municipalization of water to the regulation of Uber and Airbnb.

In this post, we get to know another Wall Street heavyweight, just as little known to the general public and just as powerful as BlackRock: Blackstone. Despite the similarity in name, the two funds have no formal connection (although Blackstone helped launch BlackRock more than thirty years ago, before their paths separated in 1994).

Blackstone is nothing less than the world leader in “alternative investments” (in other words, everything that is not stocks, bonds or cash: real estate, precious metals, financial derivatives, private equity, venture capital. , etc.) with $ 545 billion managed in 2019. The fund was created and remains headed by Stephen A. Schwarzman, a former banker of Lehman Brothers, very close to Donald Trump since he financed his campaign and chaired his “Strategic advice” until its dissolution. (Stephen Schwarzman is also a Francophile; he notably received the tie of Commander of the Legion of Honor in 2017 after having personally financed the renovation of the gardens of the Château de Chambord, and obtained the right to use the presidential hunts in a personal capacity. )

Massive investments in real estate after the 2008 crisis

In many ways, the global financial crisis will have been a boon to Blackstone. The fund has occupied the space left free by the big banks, now under the supervision of regulators, in “risky” markets and financial products. Its assets under management have increased fivefold since 2008, and its investments in real estate by eight. Blackstone notably bought back thousands of homes foreclosed after loan defaults in the United States at a low price. He currently owns $ 325 billion in real estate worldwide. Blackstone has also developed its activities in amusement parks, of which it is one of the world leaders with Disney, as well as in warehouses (part of which is rented from Amazon).

The recipe followed in the United States has also been applied to major European cities, where Blackstone has carved out a reputation as a veritable “vulture fund” among housing activists and politicians from Barcelona to Copenhagen. The basic strategy remains the same: acquire property at low prices while taking advantage of a context of crisis or falling property prices, renovate them or wait for prices to rise, and resell them at full price by pocketing a generous added value. While forcing the inhabitants of these buildings either to pay exorbitant rents and repair costs, or to pack their bags. Another variant, applied in Sweden, consists of acquiring social housing and “securing” the rents to be collected on the financial markets to finance riskier operations.

From Barcelona to the United Nations, resistance is growing

It is in Spain that Blackstone’s activities have attracted the most attention – but also aroused the most resistance, as recounted in an article in our publication “Cities against Multinationals” on the victorious struggle of a collective of inhabitants. of the popular Raval district against the financial giant. It is very present in the city and throughout the country, where it has swept dozens of buildings following the collapse of the real estate bubble. (By the way, businessmen linked to Blackstone also helped fund Manuel Valls’ municipal campaign in Barcelona.)

Blackstone also owns some 1,250 housing units in Berlin, where citizen groups are campaigning for a “remunicipalisation” of social housing privatized in the 1990s (as another article in “Cities against multinationals” will relate). In Copenhagen, where Blackstone wanted to buy hundreds of homes in the Frederiksberg district, the fund had to give up in the face of residents’ frustration. The same resistance in Italy and in other countries as well.

Blackstone’s real estate activities have been the subject of vitriolic criticism from the United Nations rapporteur for the right to housing, Leilani Farha. The Canadian lawyer denounces the increased “financialization” of housing since the global financial crisis, real estate having become a new “class of financial assets” on which giants like Blackstone are speculating. These new players are looking for very significant returns on investments, pushing up rents and charges paid by tenants, and not hesitating to resort to an aggressive policy of evictions to get rid of the refractory. “Landlords have become faceless multinationals, annihilating tenants’ right to security and fueling the global housing crisis”, summarizes Leilani Farha.

Other investments to watch

Blackstone is also present in France and in particular in Paris, even if the large investment funds have so far remained less present in residential real estate than in other countries. A few years ago, however, Blackstone was targeted by a group of residents of the 3rd arrondissement of the capital and activists for the right to housing for its prestigious operation, “Coeur Marais” (since sold to the Italian insurer Generali) . The fund also owns 34,000 square meters of office space in the new “Chapelle International” district under construction in the 18th arrondissement.

Blackstone is obviously not just real estate. The fund has just raised several billion dollars with the support of Saudi Arabia to invest in infrastructure and “public-private partnerships”, especially in Europe. It could thus be one of the beneficiaries of the scheduled privatizations of Aéroports de Paris and GRTgaz (read our article), as well as of La Française des Jeux (which is already present in the casino and gambling sector).

As an “alternative” investor absent from the stock markets, Blackstone is also much less subject to transparency obligations in terms of greenhouse gases and climate, and to pressure from investors engaged in these issues, than from banks or funds like … BlackRock. Blackstone and other similar financial players like Apollo are thus becoming major funders of the development of fossil fuels in the United States. All the more reason for cities, increasingly affected and mobilized in the face of the climate emergency, to stop doing business with it.

Olivier Petitjean

Read also: #RavalVsBlackstone: how a collective of Barcelona residents pushed back a Wall Street giant

-A presentation event for our publication “Cities against multinationals” takes place in Paris on Thursday February 27 at 6.30 pm. More details here

Photo : Alexis Lamster CC BY via flickr