Seated in the New York State Capitolâs Red Room, Gov. Andrew Cuomo introduced the team that would restart the stateâs economy. He knew them well.
âIn some ways itâs like putting the band back together,â Cuomo said in late March, introducing Bill Mulrow, a senior executive at the Blackstone Group, and Steve Cohen, executive vice president at Ron Perelmanâs holding company MacAndrews & Forbes.
âBut itâs also the most competent group of professionals you could put together, and Iâve worked with these people for 30 years,â the governor added.
Mulrow has built a long career on Wall Street and in politics and has served as a senior advisor to both Cuomo and his father, Mario Cuomo.
He played a key role in both governorsâ campaigns for re-election over a span of 30 years.
And Mulrow remained a top aide to Andrew Cuomo, who is known to keep a tight grip on his inner circle, until the investment banker and public servant was given a shot at returning to the private sector.
Mulrow, who had previously worked at Blackstone, rejoined the investment firm as a senior advisory director in 2017, while serving as chairman of Cuomoâs re-election campaign.
âGroups like Blackstone need government contact â theyâre dead without the government working with them,â said one political insider. âWhen Bill Mulrow says, âIâm going to work for one of the biggest asset managers in the world,â Cuomo thinks, whatâs in it for me? The answer is campaign donations and access to some of the wealthiest people in the world.â
Now Mulrow has returned to Cuomoâs side to oversee the âhow, when and whereâ of reopening New York, Albany insiders say.
Blackstoneâs Jonathan Gray was also included in a 116-person council to advise on the stateâs economic recovery, but a source on the council said his involvement has been limited.
Meanwhile, Blackstoneâs political ties donât stop at state government.
The companyâs chair and CEO, Stephen Schwarzman, is one of Donald Trumpâs top donors and remains one of his closest confidants, according to several sources, and the publicly traded investment firm has two seats on the presidentâs council to restart the U.S. economy.
As Blackstone executives advise governments on the best road to recovery from the crisis, the company is assuring investors that itâs well-equipped to profit during a downturn.
With $152 billion in dry powder at its disposal, the investment giant is primed to scoop up assets at a discount as waves of distress wash over hotels, malls and other asset classes, even as its competitors intensify their own efforts.
Blackstoneâs top brass argue that the firmâs past performance and its size will ensure it prevails.
âFor nearly 30 years, through a wide range of economic cycles, we have been high-conviction, thematic investors,â Kathleen McCarthy, Blackstoneâs global co-head of real estate, told The Real Deal in May.
âWe will continue to invest in scale where we see compelling opportunities across asset classes and geographies.â
The biggest fish
Blackstone, the worldâs largest commercial landlord, holds roughly 10 percent of private equityâs $1.5 trillion in global dry powder, according to research firm Preqin.
As of its most recent earnings report, the company had $538 billion in total managed assets around the world â including billions from pensions funds, hedge funds, banks and other institutional investors.
And Blackstoneâs investment strategy during a public health and economic crisis could alter the way real estate is bought, sold and developed, and determine what direction the U.S. economy will head in.
âPeople look to Blackstone as an indicator of where the market is going because they have some of the most successful and influential minds working for them,â said Brian G. Schwagerl, a clinical assistant professor at NYUâs Schack Institute of Real Estate.
âWhen there is a movement with an 800-pound gorilla, the 60-pound chimp is looking to see where they are going,â he added.
The 35-year-old firmâs past successes have been fueled by Schwarzmanâs warrior-like approach to seizing opportunities after crises and devising new ways to invest in real estate.
âI want war â not a series of skirmishes,â Schwarzman told the Wall Street Journal in 2007. âI always think about what will kill off the other bidder.â
In the early â90s, Schwarzman tapped Gray, then a recent Wharton School graduate and now the companyâs president, to buy up properties taken over by the U.S. government, according to the Journal.
Almost two decades later, Blackstone saw the housing market fall apart during the 2008 financial crisis and spent about $10 billion buying and renovating single-family homes in metro areas and turning them into rentals.
Now Blackstone is hungry for new opportunities. The company has invested $11 billion in public equities and liquid debt since the onset of the pandemic, is looking to provide rescue financing to companies in distress and is âwell-positioned to do more,â Gray said on Blackstoneâs most recent earnings call.
And while the investment giant reported net income loss of $2.6 billion in the first quarter, Blackstone highlighted the $27 billion in new capital it raised in the same period.
âThe first year after the shock is pretty slow, then things start to pick up,â Gray said on the earnings call. âWe have so much capital â thatâs a great competitive advantage. We donât need financing to get things done.â
Colossal fundraising
The firmâs real estate bets â including record purchases like Stuyvesant Town-Peter Cooper Village â have been largely fueled by money from public pension funds, which face immense pressure to pay for workersâ retirements through investment returns.

Blackstoneâs Stephen Schwarzman with Donald Trump in 2017
The state of New Jersey first committed more than $1.8 billion to Blackstone in 2011, and Blackstone has since raised many billions more, including roughly $10 billion in commitments from seven of the top public pension funds in New York and California.
That figure includes a recent $400 million commitment from New Yorkâs Common Retirement Fund â the nationâs third largest â after the coronavirus had already rattled markets.
Blackstoneâs strong fundraising capabilities have put the company in a position to outbid most competitors as it gets ready to deploy its war chest under Grayâs watch.
Schwarzmanâs comparison of doing deals to going to war stands in stark contrast to Grayâs cool-headed temperament.
In a recent interview with CNBC, Gray said the firmâs strategy during the pandemic is to invest in businesses that are âcyclically depressed, not secularly challenged.â
For Blackstone, and its many stakeholders, that largely means one thing: investing in warehouse space. The firmâs largest focus in recent years has been acquiring industrial properties at a rapid pace.
In June 2019, Blackstone agreed to pay just under $19 billion for a 179 million-square-foot warehouse portfolio from the Singaporean holding company GLP â one the largest U.S. industrial deals ever.
Within weeks, the investment giant was already negotiating the sale of some of those assets to the logistics and industrial property REIT Prologis.
And before yearâs end, Blackstone went into contract to acquire Colony Capitalâs 60 million-square-foot national warehouse portfolio for $5.9 billion.
McCarthy told TRD that warehouse and logistics space now represents more than one-third of Blackstoneâs global portfolio, âand is more critical than ever given the growing e-commerce demand in response to the Covid pandemic.â
In all the rooms
While Blackstoneâs sheer size gives it a formidable edge, it also has the ear of policymakers.
Blackstone made that clear during a wave of rent reforms around the U.S., when it spent millions to defeat a 2018 ballot measure in California that would have advanced rent control.
Now Blackstone can play a key role in shaping the political and economic response to Covid-19 through positions its executives have on boards tasked with guiding the recovery process at both the federal and state levels.
Even as Trump and Cuomo publicly spar over the use of federal aid and where to place blame for the alarming spread of the virus, both agree on who to consult in a crisis.
The two leaders â both from Queens and both with long-standing ties to New York City real estate â have announced councils consisting of prominent business leaders tasked with restarting the economy since the pandemic hit. Gray, who Trump considered for Treasury secretary in 2016, sits on each council.
Though Gray is just one of several real estate executives Trump tapped for his council on reopening the economy, with the presidentâs inclusion of Schwarzman, Blackstone is the only real estate firm with two seats at the table â and some say it has too much influence over policy it can benefit from.
âThis is the nature of growing oligarchy, [with] people and corporations that are so powerful they actually are more influential than the government is,â said Stephen Lerner, a labor and community organizer and fellow at Georgetown University.
âItâs a few individuals who have so much power, they donât have to play by the same rules as everyone else â thatâs Blackstone.â
In addition to the firmâs advisory roles, Blackstone disclosed in lobbying filings that it spent $560,000 on issues related to the Coronavirus Aid, Relief and Economic Security Act â the $2 trillion package that provided direct assistance to individuals and âforgivable loansâ to small businesses.
Also included in the final version of the bill was a payday for real estate companies in the form of a provision that allows firms to use losses from depreciation to offset future tax liabilities
. The Joint Committee on Taxation estimated the provision would cost $160 billion over the next 10 years.
One lawmaker, Rep. Lloyd Doggett from Texas, called the tax breaks âan inside hit jobâ and decried the benefit to âreal estate speculatorsâ at the expense of taxpayers.
âBlackstone did not engage in any lobbying for the CARES Act loan programs or this real estate tax provision,â a spokesperson for the investment firm said. âThe filings were for general monitoring and analyzing of legislation across Blackstoneâs business units.â
Politics has shifted dramatically since the Great Recession, in which Blackstone performed spectacularly well.
The companyâs success cemented its reputation as a cycle-tested fund manager, but also fueled anti-capitalist sentiment.
 A re-energized left has laid the blame for much of the housing affordability crisis and rising inequality at Blackstoneâs feet.
So in April, when progressive standard-bearer Rep. Alexandria Ocasio-Cortez and former presidential candidate Sen. Elizabeth Warren proposed a halt to mergers and acquisitions during the coronavirus crisis, Blackstone was ready to respond.
Later that month, Gray penned a fiery op-ed in the Financial Times, urging the government to ignore âcries that private equity, real estate funds and private lenders are vultures swooping in to profit from economic suffering.â
But the calls to rein in private equity have not diminished, as current unemployment levels rival those seen during the Great Depression.
âThe people who work in these businesses â shops and stores â they are the ones who get left behind,â said New York City-based Morris DeFeo, chair of law firm Herrick Feinsteinâs corporate department.
âThe truth is that we donât live in a single country. Itâs divided, substantially, and no more so than when it comes to money.â
âThere are people who are well-intentioned who want to see that kind of division collapse,â DeFeo added.
âThere are legitimate arguments for how to fix it, but you donât fix it by eliminating mergers and acquisitions.â
Capital to the rescue
But Blackstone is not the only firm considering opportunistic strategies, and as its competitors promote their own funds, the private equity giant will have to distinguish itself.
Nearly all the large private equity firms investing in real estate and commercial real estate funds have launched distressed or opportunistic funds.
Brookfield Asset Management announced in May that it will invest $5 billion in struggling retailers.
And Pacific Investment Management, a subsidiary of European financial-services giant Allianz, plans to raise at least $3 billion for a new distressed-assets fund.
And this crisis is different from past crises.
When the housing market collapsed in the last cycle, homes went into foreclosure and securities backing residential mortgages imploded.
The ensuing liquidity crisis allowed private equity to come in as a white knight and provide rescue capital.
But since the pandemic hit the U.S. in mid-March, the Federal Reserve has acted promptly to provide liquidity to the market.
Among other efforts, the Fed has been lowering interest rates to near zero and buying hundreds of billions of dollars of mortgage-backed securities â limiting distress opportunities in some markets.
As a result, there have been no major bank failures, and banks have yet to unload heavily discounted real estate assets to private equity firms.
âThis is not a financial crisis. This is a health crisis,â Christopher Ailman, chief investment officer of CalSTRS, the countryâs second-largest pension fund, said in a recent interview on CNBC.
âThe Fed and Congress will soften the financial blow,â he added. âThere will be investment opportunities in certain industries, but not the strong returns people saw in 2009 or 2010.â
Leaving nothing to chance
One place where Blackstone could see an immediate opportunity is in buying up loans from commercial mortgage lenders eager to sell some of their loans to increase liquidity and keep margin calls at bay.
In April, Blackstone was reportedly in negotiations to buy $1 billion or more of commercial real estate loans from the private equity firm TPG Capitalâs struggling mortgage REIT, according to Bloomberg, citing sources with knowledge of the matter.
In May, TPG Real Estate Finance Trust told its investors that it had sold off its debt, but did not disclose the buyer.
âIn the near term, Blackstone can buy what should be good-money loans at a discount from shops that need liquidity, and take the upside when those loans eventually pay off at par,â said Michael Beckman, a managing director at New York-based Townhouse Partners, a real estate due diligence firm.
âAs deals transfer to special servicing, there will be tremendous opportunity for distressed investors in the loan sale marketplace,â he added.
But as Blackstone hunts for new distressed opportunities, the firm is not immune to industry challenges.
And though the investment giant often touts the strength of its warehouse portfolio, it has exposure to nearly every sector of real estate.
Some of its less-touted holdings include hotels â which accounted for almost as much revenue for Blackstoneâs REIT as its industrial portfolio.
Hotels brought in $441.8 million, or 26 percent of total real estate revenue, last year.
And in an April letter to shareholders, Blackstone reported that its REIT owns 72,000 multifamily apartments.
The latest SEC filing from Blackstoneâs REIT notes that âdelays in collecting accounts receivable from tenants could adversely affect our cash flows and financial condition.â
Every real estate firm will have to clear hurdles, but Blackstone is bolstered by a nearly endless supply of money and its fundraising capabilities.
During Blackstoneâs latest earnings call, Schwarzman pointed to the companyâs $6 billion equity investment in Hilton in 2007, when the investment was marked down to 31 cents on the dollar during the financial crisis.
It then recovered to 10 times its marked-down value.
But to triumph in a crisis marked by singular volatility, the firm isnât leaving anything to chance.
âTo effectively navigate a crisis of this magnitude, an investment firm needs two essential qualities: staying power to ride out the storm and firepower to take advantage of opportunities,â Gray told investors on the earnings call.
âFortunately, Blackstone has both,â he said.