Blackstone purchases real estate assets directly related to film and television production.
The investment comes at a time when the industry is almost completely devastated.
But Blackstone seems to be bullish on the field and wants to expand his investments outside the USA.
The global investment giant Blackstone Group Inc. (NYSE: BX) believes that owning facilities where television and film productions take place is a worthwhile investment, even at a time when production has been halted due to the COVID 19 pandemic, the Wall Street Journal reported.
Hundreds of millions of dollars wagered
Blackstone’s real estate investment team is collecting land and facilities that are vital to content distributors such as Netflix and Walt Disney, the WSJ reported. Most notably, Blackstone has closed a deal to purchase a 49% interest in a film studio site and five nearby office buildings in the content production capital of Hollywood, California. The remaining 51% remains with Hudson Pacific Properties Inc (NYSE: HPP), and the two are planning to expand a joint portfolio in New York, Vancouver and London.
Blackstone’s involvement in the media and entertainment sector does not end there. The company owns several office buildings whose tenants include some of the biggest names in the industry.
As expected, an investment of several hundred million dollars in an industry that has almost doubled in size is a multi-year issue. Nadeem Meghji, Head of Real Estate at Blackstone, told the WSJ that the company is focusing on “sectors with a strong tailwind” and content creation is a perfect example of this.
“We think this is really a long-term trend,” he said. “We are thematic investors.”
Blackstone could also diversify his real estate exposure. The company happens to be one of the largest real estate owners in the world and in recent years has focused on distribution centers for online trading. In fact, assets tied to logistics represented only 2% of its global real estate portfolio at the beginning of the last decade, but rose to one-third at the beginning of the new decade, according to the WSJ.
In contrast, Blackstone’s exposure to retail real estate and hotels accounted for 50% of its global portfolio in 2010. By the beginning of the new decade, it had shrunk to less than 15%.
Challenges and opportunities
Regardless of Blackstone’s investment motives, the move to own production facilities for video content creation is a new step. Many experts agree that owning these assets is not an easy task, especially considering that production time varies dramatically. Blackstone could rent its equipment for a film for a long period of time, but the next customer would need the equipment for a few weeks.
But Blackstone has a factor that works in his favor: Supply and demand. The space available for film studios in Los Angeles is quite small compared to the demand. So the studios have to fight each other to get the land.