Just after the closing bell yesterday, the investment czar Steve Schwarzman typed up a memo to his loyal foot soldiers at the Blackstone Group celebrating a milestone.

"Earlier today, Blackstone's stock price crossed the $100/share milestone for the first time," Schwarzman said in a memo seen by Insider. 

"While we are long-term investors who don't overly focus on day-to-day market fluctuations, I think it's worth pausing for a moment to reflect on how far we've come as a firm," he wrote.

Blackstone, like its private-equity peers the Carlyle Group, Apollo Global Management, and KKR, has been a publicly traded company for years. But it has faced a challenge in making its business easier to understand and own.

In the memo, Schwarzman said: "We're seeing the public markets start to recognize the specialness of our business."

In recent weeks, Blackstone agreed to acquire Home Partners of America, which buys and rents single-family homes, in a $6 billion deal and was part of a consortium of investors that bought a majority stake in Medline Industries. It also bought the tech publisher IDG for $1.3 billion. 

All told, the firm now has $649 billion in assets under management. And its market value — which Schwarzman pointed to in his memo — stands at $120 billion.

Schwarzman, who called the firm's stock price a "symbol of how the world views us," also praised Blackstone Chief Operating Officer and President Jon Gray, whom Insider profiled earlier this year, and Gray's predecessor, Tony James. 

Read the full memo below:

Earlier today, Blackstone's stock price crossed the $100/share milestone for the first time. While we are long-term investors who don't overly focus on day-to-day market fluctuations, I think it's worth pausing for a moment to reflect on how far we've come as a firm.

My late partner, Pete Peterson, and I started Blackstone in 1985 with $400,000 in total capital. Today, Blackstone's market value is $120 billion. What a journey and what a remarkable outcome!

We went public in June 2007, within several weeks of the credit crunch, which led to the onset of the Global Financial Crisis in September 2008 — triggered by the bankruptcy of Lehman Brothers, where Pete and I had worked before starting Blackstone. 

We priced our IPO at $31/share. At the bottom of the Global Financial Crisis, the average price of a financial stock declined an unbelievable 85%. Blackstone outperformed the average stock by declining 90% to $3.55. Those were dark moments for the country and for our business. However, I never doubted for a minute that we would recover — our investments were sound, our people were excellent, and we had the confidence of our limited partners.

The rest of this story, of course, has a much happier ending. Over the last decade, we've grown earnings at more than double the rate of the S&P 500 and have established ourselves as one of the leading public companies in the world — we are now the 73rd largest public company in the United States.

Over the past several years, we've also been on a journey to make our stock easier to understand and own, and we're seeing the public markets start to recognize the specialness of our business. Since announcing our corporate conversion approximately two years ago, the stock has delivered a total return for our shareholders of over 200%.

None of this could have been accomplished without the inspired and remarkable leadership of Jon Gray and his predecessor as President of the firm, Tony James. Each of them has had the energy, imagination, and judgment to lead us in the right direction at the right time. They have helped create the extraordinary culture and outcomes we have now learned to expect. We are exceptionally fortunate to have had each of them in the critical role as Chief Operating Officer of the firm.

It is hard to express my personal astonishment and pride in what Blackstone has become. A $100 stock price is just a symbol of how the world views us. I know that the best is yet to come — we will continue to recruit and train some of the best people in finance, expand globally and into new products to support our investors' needs, and, as always, be relentlessly focused on delivering outstanding results for our clients — and we will do all this consistent with the best principles of ESG.

All of you have made this happen and will continue to make it happen in the future. It is truly a privilege to share this great adventure with you.

Congratulations on $100/share — what a tremendous milestone!

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It's been quite the month for Blackstone.

The private-equity behemoth is part of a consortium of investors that bought Medline for about $34 billion, its share price ticked over $100 for the first time, and it's doubling down on residential real estate with a $6 billion Home Partners of America buy.

It's a bet on scorching demand for housing continuing, and also a defensive move as inflation worries start to seep into investors' minds. The average price of a home topped $350,000 for the first time inn May, according to the National Association of Realtors, logging the largest-ever increase in prices since the NAR began tracking data.

"Whether it's apartments, storage facilities for warehouse distribution, or single-family homes, private-equity is getting into this as an inflation hedge," Nicholas Tsafos, a partner with accounting firm EisnerAmper, told Insider.

Home Partners, which owns more than 17,000 homes in the US, rents out these properties, but tenants have an opportunity to someday buy the home.

In the single-family rental arena, private-equity firms can hike rents, while also holding onto profitable, tangible assets.

"Because interest rates are low, and with the potential for a pick-up in inflation, private-equity also feels the need to be long on hard assets," Tsafos said. "In real estate, you buy it today and then flip it for a higher price."

Jon Gray, Blackstone's president and COO, alluded to it during the firm's earnings call in April when he said multi-family apartments that come with the ability to reset rents were key for Blackstone.

The firm bought many houses at remarkable discounts after the housing market crashed in 2007. It accumulated a number of single-family homes through a former portfolio company Invitation Homes. Blackstone sold its final block of shares in the company in 2019.

The private-equity shop also favors logistics spaces, such as warehousing, life sciences offices, and media and studio businesses with offices, according to a June 22 research note from UBS.

In October, Blackstone made a handsome investment when it sold life sciences real-estate company BioMed Realty for $14.6 billion, after acquiring it for about $8 billion in January 2016.

And it's not just Blackstone. Fellow private-equity investor KKR is investing in My Community Homes, a platform that buys and manages single-family rental properties, according to Bloomberg.

KKR will invest in My Community Homes through its real-estate and private-credit vehicles.

A spokesperson for KKR was not immediately available to comment.

The Carlyle Group said in May that it provided up to $300 million to Four Springs Capital Trust, a private REIT that acquires and manages single-tenant properties with long-term net leases.

Four Springs will use the money to build its portfolio, which encompasses 122 properties across 29 states, Carlyle said in a press release.

The move on real estate comes while private investment firms sit on more than $1 trillion in cash. Borrowing costs, too, remain subdued as the Fed keeps interest rates at all-time lows.

Given the sheer amount of dry powder available, coupled with accommodative credit markets, private-equity is keen to conduct a surfeit of acquisitions, and isn't shy about injecting large sums of equity into prospective investments.

Medline, for example, is expected to raise roughly $17 billion from the debt markets, while the private investors are providing a similar amount in equity.

"Big leveraged buyouts are back in vogue," said Christopher Zook, chairman and CIO of alternative investment manager CAZ Investments. "Whether it's KKR or Blackstone, they have large capital to put to work. So they've got to do a ton of deals."

Disclaimer: KKR holds a majority stake in Insider's parent company, Axel Springer.

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The race among private-equity firms to show investors they are serious about sustainability has been heating up.

Blackstone, the world's largest alternative asset manager, is considering adding three executives to its corporate ESG team, Christine Anderson, Blackstone's head of external relations, told Insider. The firm has been snapping up talent for its fast-growing ESG team this year, announcing the hire of five new ESG execs in early May.

The search for talent comes as investors ramp up the pressure for private equity firms to double down on ESG and impact investing efforts.

Blackstone made a major move toward bolstering its ESG initiatives when it asked all the CEOs of its portfolio companies to regularly report on sustainability measures in a letter, Reuters reported in May.

The initiative was also one of Anderson's first, as she took on oversight of ESG at the firm after KKR poached Blackstone's former global ESG head, Alison Fenton-Willock, in early May.

Anderson, said that when she joined the firm 12 years ago, she would informally meet with other employees who were interested in the budding field of "corporate social responsibility," which culminated in the firm's first sustainability initiative.

When president and chief operating officer Jon Gray took over in 2018, the firm honed in on a "renewed focus" on ESG issues, aiming to add further structure to its previous efforts. 

The firm did not issue standardized reporting rules to all its portfolio companies when it widened the ESG reporting requirement to include them in May. 

"We certainly gave them a little bit of guidance on the things that we care about, like diversity and sustainability, but we gave them a lot of leeway to do it the way they wanted to do it."

However, companies in Blackstone's real-estate division have been reporting sustainability metrics against The Global ESG Benchmark for Real Assets framework to their boards since 2019, she said. 

Blackstone's portfolio companies can report on ESG in a variety of forms, from verbal discussions with board members to Powerpoint presentations.

Portfolio companies log these metrics quarterly as part of their broader reporting process, Anderson said. Blackstone also administers an annual ESG survey for them to identify "some of the less quantitative items" like anti-discrimination policies.

Further standardization of the metrics companies use to assess their ESG efforts, however, would be helpful in ensuring accountability, Anderson said. Some of Blackstone's portfolio companies are in the early stages of the reporting process and are still assessing what ESG factors are material to their business.

"Not all of these companies have had the luxury -- they've been in a growth phase, and haven't had the time to really address [ESG]."

Anderson said that Blackstone is encouraging these companies to make ESG a priority. The private-equity firm's view of some topics within ESG, like its emissions program, require a more "granular" approach -- the firm offers mechanical guides, seminars, and help from outside consultants and vendors, Anderson said.

It's also considering further ramping up the support of portfolio companies by hiring ESG coverage leaders within its different business units, she added.

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Blackstone has agreed to acquire a majority stake in the Certified Collectibles Group in a transaction valuing the company at more than $500 million, the private equity firm said Thursday. 

Jay-Z's Roc Nation will be an investor in the transaction, as well as Michael Rubin, founder and executive chairman of Fanatics, NBA player Andre Iguodala, Daryl Morey, President of Basketball Operations for the Philadelphia 76ers, and others.

The Certified Collectibles Group (CCG) offers authentication services for various collectibles items including comic books, banknotes, magazines, concert posters, stamps, trading cards, sports cards and estate items.

CCG estimates it has certified more than 62 million of these collectibles, with a combined fair market value approaching $50 billion.

Specifically, Blackstone's funds managed by its Tactical Operations business will be acquiring a majority stake in the collectibles company. Meanwhile, CCG founder Mark Salzberg and CCG CEO Steven R. Eichenbaum will retain a "significant minority stake," the company said. 

Blackstone seeks to develop CCG's digital presence, add employees, and branch CCG's geographic reach. 

Shares of Blackstone were up 0.3% Friday. 

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Noah Breakstone is used to fielding offers from homebuilders.

His real-estate investment company, BTI Partners, based in Fort Lauderdale, owns enough land in Florida to build about 20,000 houses.

But in recent months, Breakstone has witnessed firsthand how Wall Street's growing interest in the American home has begun to revamp the normally sleepy business of developing houses across the country.

His firm has received a flurry of interest from a growing number of investors in search of land for homes to build and then rent — a departure in a homebuilding industry that has for decades focused on producing for-sale housing.

"We probably receive five to eight calls a week from investors who need to buy land for build-to-rent homes," Breakstone told Insider. "There's a lot of money chasing deals in that area."

Over the past decade, major institutional buyers, including investment firms, public companies, and pensions, have been steadily acquiring single-family homes across the country to rent out at a profit. That's created a headache for everyday homebuyers by intensifying competition in what is already one of the hottest residential markets on record.

In addition to purchasing existing homes, these corporate investors are now crowding to buy and build new houses to rent that might otherwise help alleviate a shortage of for-sale dwellings nationwide and make homeownership more accessible and less costly for buyers.

A report by the National Association of Realtors found that the US had a deficit of 5.5 million residential units, including about 2 million single-family homes. That gap has been a major factor in dramatic price spikes in the housing market. The NAR recently reported that the median home price rose by a record 23.6% in May over the previous year.

"Build-to-rent investors are essentially competing against homebuyers," Breakstone said. "It's putting pressure on the for-sale market."

The future of rentals looks bright, so investors are taking action

Institutional investors have traditionally allocated money to more established real-estate investment assets, like office towers, hotels, and retail spaces. The pandemic clouded the fortunes of those property types as people worked from home, travel and tourism dwindled, and shopping moved online. The value of residential houses, on the other hand, has skyrocketed over the past year as Americans hunkered down at home and gained an appreciation for the added space and suburban surroundings of single-family properties.

Major banks and investments firms such as JPMorgan Chase and Goldman Sachs and pensions such as CalSTRS have taken notice.

"These groups have been looking to asset classes that offer the chance to reap higher returns, and single-family rentals check off a lot of those boxes," said Rick Palacios, the director of research at the real-estate consulting firm John Burns.

If interest rates rise as they are expected to over the coming years, more Americans could be forced to rent rather than buy because of rising mortgage costs. Already, increasing home prices and feverish competition for properties have pushed some prospective buyers to rent instead of own.

Single-family-rental, or SFR, investors see those shifts as an opportunity to grow their hold on the market. Institutional owners control about 55% of the nation's rental apartments but only about 0.2% of single-family rentals. Their money is now pouring into the sector at a record rate.

Investors — including SFR buyers — purchased a record $77 billion worth of homes during the fourth quarter of 2020 and the first quarter of 2021, the brokerage firm Redfin found. In the first quarter, one in seven home purchases in America was made by an investor.

"With SFR, there's so much room to run," said Darren Schulz, a fund manager with the North Dakota State Investment Board, a pension fund that recently committed $200 million to an investment fund managed by Invesco that plans to acquire single-family rental housing.

Buying enough single-family homes to absorb the billions of dollars queuing to invest in the sector is not as straightforward as acquiring a giant Manhattan office skyscraper or a large portfolio of apartment buildings.

Invitation Homes, a $20 billion public company founded by Blackstone that has become the nation's largest owner of single-family homes for rent, has taken almost a decade to amass a portfolio of roughly 80,000 homes. It purchased the bulk of those properties one by one on the open market.

To grow more quickly, some investors have turned to corporate acquisitions. Blackstone, for instance, recently announced that it would purchase the SFR company Home Partners of America, which owns 17,000 houses, for $6 billion. KKR agreed to invest in an SFR company it recently created called My Community Homes.

But in a nascent sector, such acquisition opportunities are few and far between.

Big-name firms are pouring billions into build-to-rent homes

New homes are generally built in contiguous tracts, and investors can buy or build them more efficiently by the dozens, generally at wholesale prices. The homes have roofs, appliances, and other components of the same type and vintage, making maintenance and replacement more orderly, predictable, and similar to apartment buildings, an asset that many institutional players have experience — and comfort — investing in.

Much of the money flowing into the SFR business this year has focused on the new-build market, with major new investments almost monthly:

• In March, a group led by Allianz Real Estate and Centerbridge Partners announced it would invest $1.25 billion to raise single-family homes in partnership with the builder Lennar Corporation.
• In April, Quinn Residences received $600 million from Conversant Capital to build 8,000 homes across the Southeast.
• Pacific Coast Capital Partners and the California State Teachers' Retirement System, the $300 billion pension fund known as CalSTRS, have said they will buy and build up to $1 billion worth of rental homes.
• In May, Tricon Residential, which owns 25,000 SFR homes, said it had raised $450 million in a joint venture with Pacific Life Insurance and another partner to buy 5,000 newly built homes. Tricon said in 2019 that it had entered into a $450 million joint venture with the Arizona State Retirement System, a $40 billion pension fund, to build for-rent housing.
• In June, Goldman Sachs provided a $300 million credit line to the real-estate investment firm Fundrise to help fund $500 million worth of build-to-rent homes.

"You're seeing more announcements for build-to-rent vehicles," said Jonathan Ellenzweig, the chief investment officer for Tricon.

Though Tricon, one of the largest SFR owners, has focused its acquisition pipeline on purchasing existing homes in the US and Canada, it sees buying and building new homes as an important avenue to augment its portfolio.

"We realized we weren't buying enough new homes, so this venture allowed us to be more acquisitive in that space and grow our scale," Ellenzweig said, referring to the recent partnership with Pacific Life.

Firms build new houses to help steer clear of controversy

Since the financial crisis sent the nation's housing market into tumult a decade ago, major institutional buyers have amassed over 300,000 houses, estimates suggest. That's a fraction of the more than 80 million single-family homes in America and just 2% of the number of homes investors are renting out.

In some hot markets such as Atlanta, Phoenix, and Dallas, big SFR investors and other corporate interlocutors have contributed to a tight housing market that has made it harder for everyday Americans to purchase homes.

Investors, especially pensions, which are sensitive to assets that could have negative societal, economic, and environmental consequences, are increasingly aware of the controversy. Some view the build-to-rent segment of the SFR business as less fraught. Building homes, after all, adds much-needed housing inventory, even if it doesn't bolster the number of for-sale homes.

The New Mexico State Investment Council, a sovereign wealth fund with nearly $30 billion in assets under its management, recently put $100 million into a fund managed by the private-equity firm Carlyle that seeks to invest, in part, in single-family rental housing.

But Paul Chapman, a director at the fund who oversees its real-estate investments, said it was more focused on the build-to-rent segment of the SFR business going forward.

"If an investment firm came to me and said their strategy was to buy homes here and there and put together a portfolio that way, that's not as interesting to me," Chapman said. "But my ears would perk up if they said they were doing a build-to-rent strategy. If we're going to continue to invest in this space, that's where we're most interested."

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Single-family homes have become the hot real-estate play of the pandemic, with major Wall Street firms, corporate investors, and institutions like pension funds pouring billions of dollars into buying suburban houses across the country and renting them out for healthy profits.

As Americans migrated away from cities during the depths of the crisis and gained an appreciation for the added space and suburban surroundings of single-family properties, those homes' value has skyrocketed. The National Association of Realtors recently reported that the median home price rose by a record 23.6% in May — the most recent month with data available — over the previous year.

The brokerage firm Redfin found that investors purchased a record $77 billion worth of homes during the fourth quarter of 2020 and the first quarter of 2021. In the first quarter, one in seven home purchases in America were made by investors. They're looking away from office towers, hotels, retail spaces, and other more traditional real-estate offerings to focus on the single-family-rental, or SFR, business.

More recently, big investors have begun to buy or build new homes to repurpose as rentals, eating into new supply at a moment when the nation has a deficit of millions of for-sale houses.

There's an outrage cycle around the industry: A tweet on June 8 from an anonymous right-wing commentator about Wall Street firms buying up thousands of homes — to rent out to the same population they're outbidding — stoked anger among the growing number of Americans who have been shut out of the housing market. Many critics feel the presence of investors in local markets leads to increased competition for single-family properties when inventory is already at historic lows.

Major players in the SFR business own a little over 300,000 houses, according to estimates, or only about 0.2% of the single-family-home rental market. They see that tiny share as an opportunity. Institutional owners control about 55% of the nation's rental apartments, which are often stacked in multifamily buildings — a potential guidepost for the kind of market share that big investors see as possible in the single-family market.

The major players' rapid expansion into SFR is underway. Here are the biggest names buying up American homes right now. 

Blackstone

A decade ago, Jon Gray, now Blackstone's president and chief operating officer, encouraged executives at the firm to take advantage of the financial crisis and buy up homes through Invitation Homes, a company it launched to handle get into the SFR business.

Blackstone brought Invitation Homes public in 2017 and sold off its shares by 2019. The investment firm continues to be active in the SFR business. In August, it announced that it led an investment group that had purchased a $300 million equity stake in Tricon Residential, an SFR company in Toronto that owns 25,000 homes in Canada and the US, through a private real-estate investment trust it manages, Blackstone Real Estate Income Trust, or BREIT.

Last month, BREIT paid $6 billion for Home Partners of America, an SFR company that owns 17,000 homes in the US, tuning Blackstone again into a major holder of SFR units.

BREIT's biggest shareholders are a collection of investment firms including MAI Capital Management and Silvercrest Asset Management, wealthy individuals, and Blackstone itself.

Invitation Homes

Founded by the alternative-asset giant Blackstone in 2012, Invitation Homes grew by acquiring thousands of homes across the country one by one, including many that had fallen into distress during the financial crisis.

The company went public in 2017, and Blackstone has since sold off all its shares. It now has a market cap of over $22 billion and owns about 80,000 homes, making it the largest SFR company in the country. It has outlined plans to undertake a record expansion in 2021, aiming to spend over $1 billion on home purchases and sell off fewer homes in its portfolio than in recent years.

The company's shares have surged by 40% in 2021, and its market cap is now $22.6 billion.

BlackRock

BlackRock was thrust into the center of the controversy surrounding the SFR industry when J.D. Vance, a US Senate candidate from Ohio and the author of "Hillbilly Elegy,"implicated the firm in the corporate takeover of American homes.

While that message ricocheted across social media, the truth is more complicated. BlackRock, an investment firm that manages $9 trillion for a host of clients, including institutional investors, held an ownership stake in Home Partners of America in 2014, along with the private-equity firm KKR, before selling the company to Blackstone last month.

As of March, BlackRock held about $1.5 billion worth of Invitation Homes stock, making it the second-largest shareholder, behind only Vanguard. Other major holders include Cohen & Steers, Principal Financial Group, and State Street Corporation.

But BlackRock is invested in Invitation Homes not as part of a specific stock-buying investment strategy but as a byproduct of exchanged-traded funds it operates that are pegged to indexes that include Invitation Homes shares, a spokesman said.

Goldman Sachs and JPMorgan

Two of Wall Street's biggest players have pushed into the SFR business.

Last month, Goldman Sachs extended a $300 million loan to Fundrise, a crowdfunded real-estate investment platform, which plans to use the facility to invest in newly built single-family homes.

Last year, JPMorgan Chase announced that it would team up with American Homes 4 Rent — the country's second-largest SFR company, with over 50,000 homes — in a $625 million venture to build 2,500 homes. The investment is being made by JPMorgan Asset Management, an arm of the bank that invests institutional money, and will be overseen by Mike Kelly, the division's head of real estate in the Americas.

Tricon Residential

Tricon Residential, a $2.4 billion firm based in Toronto with a portfolio of 25,000 homes in the US and Canada, has taken a multipronged approach to growth, buying properties one by one on the open market, purchasing newly built houses, and building homes from the ground up.

On Monday, July 19, Tricon announced that it had entered into a joint venture with a public pension plan called the Teacher Retirement System of Texas, the insurance firm Pacific Life, and an unnamed investor that together will invest up to $1.55 billion in single-family home purchases. Tricon stated that the venture plans to spend $5 billion, using financing, to buy more than 18,000 houses.

In May, the firm entered into a $450 million joint venture with the insurance firm Pacific Life to buy 5,000 newly built homes. The company had launched another $450 million joint venture in 2019 with the Arizona State Retirement System, a $40 billion pension fund, to build homes from scratch.

SFR companies and investors in the sector have increasingly focused on buying and building new homes that investors can erect efficiently by the dozens and that have roofs, appliances, and other components of the same type and vintage, making maintenance and replacement more orderly and predictable.

"It creates a more homogenous product," Jonathan Ellenzweig, the chief investment officer for Tricon, said of the so-called build-to-rent segment of the market, adding that the segment had become more attractive to institutional investors.

Mynd, a property-technology company

Mynd got its start developing property-management software to help SFR investors oversee a collection of homes that may be scattered widely and have varying maintenance needs.

In June, the company, which has raised over $40 million in funding, announced a partnership with the money manager Invesco that will aim to spend $5 billion on acquiring 20,000 single-family homes across the country.

Doug Brien, a former NFL placekicker who founded Mynd in Oakland, California, in 2016, said it planned to begin its buying spree on behalf of Invesco in September and was ramping up its operations to take on the huge task of purchasing so many homes.

"We're at 450 people now, and we need to hire 50 more to support this buying operation," Brien told Insider.

Pension funds and sovereign wealth funds

The North Dakota State Investment Board recently committed $200 million to Invesco's Value Added Fund VI, which plans to allocate funds to SFR. "There's so much room to run," Darren Schulz, a manager with the board, told Insider of SFR's growth potential.

The Pennsylvania Public School Employees' Retirement System said earlier this year that it would commit $200 million to the private-equity firm Carlyle's ninth US real-estate fund, which will invest in SFR and other property assets.

The New Mexico State Investment Council, a $30 billion sovereign wealth fund, put $100 million into that same Carlyle fund. Paul Chapman, a director who oversees the fund's real-estate investments, told Insider that it was focused on future SFR investments that would buy or build new single-family rental homes.

"My ears would perk up" if an investment firm "said they were doing a build-to-rent strategy," Chapman said.

The State of Wisconsin Investment Board recently committed $150 million to an SFR investment fund managed by Hudson Advisors.

And the $300 billion pension CalSTRS — which is helmed by chief investment officer Christopher Ailman — and Pacific Coast Capital Partners recently announced a $1 billion partnership to invest in SFR homes.

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Blackstone's President and Chief Operating Officer Jonathan Gray is confident folks will return to the skies, particularly vacationers and leisure enthusiasts.

So much so, the private-equity firm is expected to increase exposure to hotels, and ancillary properties linked to hospitality like restaurants and conference venues, Gray said during Blackstone's second quarter earnings call on Thursday.

"Hospitality in real estate used to be a very large portion. We de-emphasized that. But I think that number will go up," Gray said.

With US airlines reporting increased forward-booking curves, and states easing lockdown restrictions, travel is up as vaccinated passengers crave holidays after months of staying put.

Real estate, particularly rental properties, provide a hedge against inflation for investors eyeing long-term assets that can provide stable returns while interest rates remain low.

For Blackstone, hospitality-linked real estate is just 7% of its portfolio, but Gray expects that to spike, alongside an uptick in value for its existing hospitality-linked properties, which took a beating when vacationers adhered to shelter-in-place orders last year.

"We will see a recovery in our existing assets. That was a sector hard hit by Covid," he said on the earnings call. "This is the lowest exposure we've had [to hospitality-linked real estate], but I would like to increase that exposure."

Gray, who joined the firm when he was 22 years old, rose to prominence through the real estate arm. He focused on hotels at a time when few institutional investors accepted the properties as a major real estate asset class.

Last month, Blackstone and Starwood Capital Group's takeover of Extended Stay America was approved by the hotel chain's shareholders. The private-equity firms agreed to buy Extended Stay for $20.5 a share.

In January, Blackstone acquired UK-based holiday company Bourne Leisure for about £3 billion ($4.1 billion).

Blackstone's real estate investment arm posted some big wins in the last quarter.

Total assets-under-management for real estate grew to $207.5 billion last quarter, a 24% jump on the second quarter in 2020.

Blackstone's roughly $3 billion sale of Australian warehouse and logistics assets Milestone in April propelled the real estate division to $5.3 billion in realizations last quarter and $18.7 billion over the last 12 months.

The private-equity firm also agreed to buy property owner Home Partners of America for $6 billion last month.

Overall, Blackstone posted second-quarter net income of $1.3 billion, up from $568.3 million a year earlier. The company's shares were trading at $110.5 on Thursday afternoon, up 4.4% after the earnings call.

"In a market like this, everything gets pushed to the margins. So you need to look at what's beaten up," said Rajay Bagaria, chief investment officer at Wasserstein Debt Opportunities. "You are reaching for yield, so you'll look at reflationary trades, and the last places to get returns. How do you not look at beaten up commercial real estate?"

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The housing market is stuck between a rock and a hard place. The rock: persistently high demand that's lifted prices at breakneck speed. The hard place: a historic lack of supply and an inadequate response from struggling builders.

Home shoppers have wealthy Americans, Wall Street, and millennials to thank.

The buying spree that began in 2020 drove price growth to a three-decade high, and experts say they expect home inflation to remain elevated into 2022. While construction has accelerated, it remains far from the levels needed to cool the market.

The market already favored deep-pocketed buyers who can afford to outbid others and aren't as affected by stronger inflation. Wall Street has become an increasingly powerful actor, with firms scooping up homes to rent them out for steady returns, Insider's Alex Nicoll and Daniel Geiger reported.

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With millennials squarely in their peak homebuying age, yet another lift to home demand is coming at a time of historically weak supply.

It looks now like the convulsions of 2020 and 2021 in the housing market have resulted in a new floor for house prices that's permanently higher. Here's why.

The market's new floor

Wealthier Americans are snapping up many of the homes on the market. Sales of homes priced as high as $250,000 declined from June 2020 to June 2021, according to the National Association of Realtors, while homes sales for at least $750,000 more than doubled over that period.

The shift reflects just how much prices have risen across the board, Ali Wolf, the chief economist at Zonda, wrote in a June tweet. Sales of homes costing more than $300,000 took a greater share of market activity over the past year, while the market share for sales of cheaper homes declined.

The shift also comes ahead of an unprecedented demand surge. Millennials will reach their peak homebuying years from 2022 to 2024, which will lead household formation to further outstrip home inventory. The phenomenon is "historic," and it could bring so many new buyers that prices rip higher all over again, Logan Mohtashami, the lead analyst at Housing Wire, told Insider.

"My worst-case scenario is kind of like what's happening this year," he said. "My concern for next year and 2023 is that there are just too many buyers and it prevents inventory channels from really increasing."

Wall Street is providing a similar boost. Firms like Blackstone have ramped up their activity in the single-family-rental market, buying suburban homes for steady rental income. Others have partnered with homebuilders to create entire neighborhoods for rentals. While investors' buying counts for a small portion of home sales, it's set to grow and provide new competition for everyday Americans.

"Investors took a huge pause during the pandemic, and they still haven't made up for all the homes they didn't purchase during that period," Daryl Fairweather, the chief economist at the real-estate marketplace Redfin, told Insider last month.

Don't hold your breath for new supply

Other gauges signal contractors aren't rushing to solve the problem. The three-month average for monthly home inventory rose to 5.5 in June, according to the US Census Bureau. In other words, there was an average of 5.5 months' worth of supply on the housing market. That's roughly the same level as during the previous economic expansion, though it's more a reflection of slowing sales than rebounding construction.

Still, the signal should keep builders happy with their current pace, Mohtashami said. Contractors typically boost construction when the three-month average is below 4.3 months and curb building when supply reaches 6.5 months, he told Insider. So while buyers risk being priced out, builders are happy with the current environment, he added.

"I don't believe the builders are ever going to have a construction boom in America," Mohtashami said. "We're just in an average market for them."

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Here's a rundown of hires, exits, and promotions from the past week.  Are we missing anyone? Let us know.

• Credit Suisse appointed David Wildermuth to be chief risk officer and a member of the executive board, the firm announced Tuesday. Wildermuth previously spent 24 years at Goldman Sachs, most recently as the deputy chief risk office. His hire comes nearly months after former chief risk officer, Laura Werner, stepped down immediately following the Archegos scandal. Interim chief risk officer Joachim Oechslin will remain in his role until Wildermuth joins the firm, which will be no later than February 1.
• Borzu Masoudi, head of equity macro derivatives at JPMorgan, resigned to join Millennium Partners, Insider reported. Masoudi, who joined JPMorgan three years ago from Goldman Sachs, will be a portfolio manager under Millennium's growing volatility-trading business. 
• John Collmer joined Citi as its new global head of private capital markets within the equity capital markets group, according to a memo reviewed by Insider. Collmer comes to Citi from Bank of America, where he was the firm's global head of private capital markets. 
• Private equity giant Blackstone made two key hires this week.
  • The firm announced the appointment of Brian Tierney, former CFO and 23-year veteran of American Electric Power, as senior managing director and global head of infrastructure portfolio operations and asset management on Monday.
  • Stevi Petrelli also joined as managing director and head of Blackstone Innovations Investments (BXI Investments) from Goldman Sachs' Firmwide Strategy team, the firm announced Tuesday. 
• Bank of America hired Uday Malhotra from Goldman Sachs to be head of leveraged finance origination for EMEA, Financial News reported Friday. Malhotra was previously a senior dealmaker at Goldman and was also its head of leveraged finance origination for EMEA.
• Multiple senior ExodusPoint employees have departed the $13.5 billion fund, Insider reported Wednesday:
  • Sonny Baillargeon, the global head of infrastructure, and Anil Chandroth, the head of data science, have both left the firm. It is unclear where they're headed or who will replace them, but the two were part of the leadership team for the firm's 158 tech employees.
  • Quant portfolio managers Ryan Sandor and David Qian are also departing the firm. Sandor is heading to Citadel's New York office in October, where he'll be an index rebalancing portfolio manager, while Qian is joining Balyasny Asset Management, according to Hedge Fund Alert.
• Robert Wall joined Lazard Asset Management from investment manager Federated Hermes, Axios reported. Wall, who will be based in London, starts at Lazard as managing director and head of sustainable private infrastructure in October. 

Meredith Mazzilli, Reed Alexander, Alex Morrell, and Bradley Saacks contributed to this report.

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Reese Witherspoon's media business, Hello Sunshine, has been sold to a media firm backed by private-equity group Blackstone Group, the companies said in a joint statement on Monday.

Terms of the agreement have not been publicly disclosed, but people familiar with the matter told the Wall Street Journal the deal gives Hello Sunshine a valuation of about $900 million.

Witherspoon launched Hello Sunshine in 2016 and the production company has delivered several hits with HBO's "Big Little Lies," Hulu's "Little Fires Everywhere," and Apple's "The Morning Show," amassing 18 nominations for the 2020 Emmy Awards.

"I started this company to change the way all women are seen in media," Witherspoon said in a statement. "I am committed to continuing to create opportunity for filmmakers, authors and creators of all backgrounds and experiences to tell their stories in their own way, and to reach more audiences who will see that their stories matter."

The Blackstone-backed media firm does not yet have a name, but will be led by former Walt Disney executives Kevin Mayer and Tom Staggs, the companies said in a statement to Insider. The statement also said the company will be "an independent, creator-friendly home for cutting-edge, high-quality, category-defining brands and franchises."

Witherspoon and Hello Sunshine CEO Sarah Harden will join the firm's board following the purchase, and will continue to run the company.

The new media company will follow in the mode of Hello Sunshine by licensing programs to any studio or network, unlike in-house production companies whose distribution channels are more limited, Mayer said, according to the Journal.

"Our goal is to bring to life different perspectives, different stories, different narratives,"Harden told Insider back in 2018. "There are too few stories where you've had women driving action. There's room for excellent storytelling [and] finding the combination of IP, talent and the right partners."

For Blackstone, the move marks a growing interest in the media industry with investments in studios, offices, and intellectual property rights, with the company's global head of private equity, Joe Baratta, citing "long-dated demand for high quality content."

"Reese is a visionary founder and entrepreneur who has built an extraordinary business with a long runway for continued expansion." Baratta said.

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As firms across Wall Street embrace public and hybrid cloud strategies to boost their tech prowess, one private investing giant is looking to Amazon Web Services.

John Stecher, Blackstone's chief technology officer, told Insider the private-equity giant is in the midst of a "firm-wide initiative" to migrate much of Blackstone's technology operations to Amazon Web Service's public cloud by roughly the end of this year.

"We want to be able to use best-of-breed hardware and software programming models that AWS gives you to be able to deliver features and function at the speed that the business needs and that our engineers are truly capable of," Stecher told Insider.

Stecher described the migration to AWS as an opportunity to take an "advantage over our competitors both in the traditional private equity, but also in just the alternative asset management space."

Wall Street is embracing cloud tech

Blackstone follows others on Wall Street in recent years who have come around on using the public cloud. Big public cloud providers — AWS, Google Cloud, Microsoft Azure, and IBM — have noticed financial firms' increased appetite for the tech, launching banking-specific business lines and features this year. 

AWS, for its part, has solidified partnerships with some of the biggest names in finance.

The $52 billion hedge fund Millennium Management is using AWS almost exclusively to give its portfolio managers more customized tech. Bank of Montreal announced in June that AWS was its "preferred, strategic cloud partner." Capital One tapped AWS as its main public cloud partner in 2016, becoming fully-cloud enabled in 2020. 

"Everybody wants to move there," Stecher said of the cloud, adding that converting an entire set of applications to operate in the cloud instead of in on-premises data centers represents a difficult task. 

"Blackstone's portfolio of applications consists of various software architectures, underlying technologies, and performance requirements each of which requires a targeted approach while still enabling engineers to move at high velocity," he added.

On top of technical rewiring, regulatory uncertainty around the public cloud is giving some Wall Street firms pause from pushing deeper into the public cloud, according to recent Google Cloud data.

But there are benefits that come with adopting public cloud beyond newer tech tools. Millennium Management's AWS-hosted data and analytics tools have been key to the firm's recruitment and retention efforts, the hedge fund's top cloud executive told Insider.

Blackstone's push onto the cloud has also been helpful in recruiting tech talent.

"We have a lot of top-flight engineers that have come in because they want to use the new tools and expand our capabilities and scale around data science and machine learning, for example," Stecher said.

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Private equity firm Blackstone has combined its mobile ad tech firms Liftoff and Vungle, following the lead of other private equity firms that made billions by acquiring and uniting different mobile adtech startups.

Blackstone invested $750 million into Vungle in 2019, and $400 million into Liftoff in 2020. Liftoff caters to marketers and uses machine learning to improve ad buying and tracking across 500,000 mobile apps over 140 countries, according to the company. Vungle, on the other hand, sells video ad inventory on behalf of 100,000 mobile app publishers and 15,000 individual content creators.

In rolling those two investments into the same company, called Liftoff+Vungle, Blackstone seems to be taking a page out of PE firm KKR's playbook with mobile games marketing platform AppLovin, said Matt Barash, SVP of global publishing and platform partnerships at customer intelligence platform Zeotap. 

KKR bought a $400 million stake in AppLovin in 2018, bolstered it with a string of other acquisitions including marketing platform Adjust and mobile gaming studio Machine Zone, and netted $6.8 billion when AppLovin went public this April.

To be fair, Liftoff+Vungle combines different features than the AppLovin rollup. 

Liftoff CEO and co-founder Mark Ellis said the combined company, which he will lead, is in a better position to compete with tech giants like Facebook and Google as well as AppLovin. Vungle CEO Jeremy Bondy will serve as president, and Ellis said he doesn't anticipate layoffs.

Sachin Bavishi, managing director of Blackstone's Private Equity Group declined to comment on its future strategy with Liftoff+Vungle, but said that he had faith in the combined company's ability to drive value in the future.

But the PE firm does own other mobile companies it could bolt on in the future, like game developer Murka, which it acquired in 2019. Consider how AppLovin inherited a huge trove of user data when it acquired MachineZone, raising the value of its offering. So bundling Murka with the new company could create a mobile ad network comparable to AppLovin, said Barash.

"Scale and user data are the two key metrics that determine success in a world where Apple has scrambled the mobile app market," he said. "So a roll up strategy with more acquisitions to come down the line makes sense for Blackstone."

Blackstone could also add a measurement company to Liftoff+Vungle, Barash added, similar to AppLovin's acquisition of Adjust.

Blackstone isn't the only investor hoping to mint money by combining mobile companies. Mobile game developer Zynga, for instance, is following a similar playbook, with its acquisitions of Rollic and Chartboost, said Barash.

Mobile M&A has been heating up overall amid uncertainty around Apple's restrictions around ad targeting. The enormous amounts of time consumers' spend on mobile and gaming apps is driving growth, such that worldwide mobile ad spending is projected to reach nearly $500 billion by 2024, up from $341.18 billion in 2021, according to Insider Intelligence's eMarketer. 

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