Welcome to a special episode of the Real Estate Forum, a podcast from the Paul Milstein Center for Real Estate at Columbia Business School. I'm your host, Raphael Sadilski.
Columbia Business School had the privilege of hosting John Gray, president and chief operating officer of Blackstone, for a fireside chat with Professor Brian Lancaster. This event, recorded on April 29, 2025, was part of the Finance Division's Capital Markets Series and co-sponsored by the Columbia Business School Distinguished Speaker Series. In this conversation, John Gray shares insights on how data, artificial intelligence, and a culture of excellence fuels Blackstone's growth, along with valuable advice for the next generation of real estate leaders. Enjoy this engaging conversation on innovation and leadership in real estate.
First, I just wanted to thank Blackstone and Ken Kaplan, who you put me in touch with. John, actually, when I first started teaching real estate finance, you were not so high up at Blackstone, and he came and spoke in my real estate finance class. And little did I know — it seems like all the Blackstone people that speak in my classes keep getting promoted and promoted.
Mike Nyberg started in my real estate debt markets and now he's, you know, very senior, like Ken Kaplan. So yeah, really fantastic. And I also wanted to thank you, Ken, and Blackstone. When we do these trips, we do international trips abroad. We've been to India and Australia and we visited many of the Blackstone properties. We went to your one in Hyderabad, which actually I'm invested in, BREP Asia. So it was sort of my bit of due diligence. It was incredible to really see that. Speaking of your childhood, so let's start a little bit in Chicago, right? What were you thinking? I don't know how many people know this, but your family firm was Blackstone. So what was it like growing up in Chicago? You know, what were your dreams? What did John want to do? What were your ambitions?
I wanted to be a professional athlete, like all little boys, I guess, in the '70s in Chicago. I, you know, I played sports; that's what mattered to me.
I would say school was not a primary focus. I got to that probably a little later than most people, certainly high-achieving people like the folks in this room. And the most frustrating thing was I grew late, so my high school athletic career was not what I would have hoped it would be. But you know, it was interesting you mentioned Blackstone, which is a funny story. My grandfather had a manufacturing company that did automotive parts called Blackstone Manufacturing Corporation, and unfortunately it got into financial trouble in the late '70s, early '80s. But I was very proud of the fact that when I got the job at Blackstone, straight out of college, just before my grandfather passed, I told him, 'I'm going to work at Blackstone.' So he was very happy about that. But I would say, you know, I was focused on making friends, sports, athletics, and the good thing was I did good enough in school that I was able to get to the East Coast and get to Penn. And that's really where sort of everything changed for me.
Oh, okay, great. So when you were at Penn, at that time Blackstone, I think, was pretty small then. I think what, 75 people, maybe $750 million in assets. So was it just luck, or you had no idea, or did you do some research on it? Why did you join Blackstone then?
I would say luck has been a core competency for me for a long time. I, you know what happened? So first of all, I'd never been to the East Coast. So connecting the dots from Chicago to Blackstone.
I got to Penn. I remember, by the way, I came to New York and it was at Columbia. I had a friend who'd gone to Columbia, and fall break of my freshman year in 1988, I came to New York and I was like, wow, this is amazing. But I made a really good decision at Penn, which was to get a dual degree. I was an English major and I was in Wharton in finance, and that turned out great in terms of all sorts of life skills. But most importantly, in my senior year, I met a young woman in romantic poetry class, and yeah, and I got a job at this very small investment advisory firm, Blackstone. And if you said why did I go to Blackstone?
I think part of it was I was a bit of a political junkie, and Pete Peterson, one of the co-founders with Steve, had been a former Secretary of Commerce at the time. Roger Altman, who'd been in the Treasury Department, David Stockman, who'd been the head of OMB. And people were talking about this new LBO business — it wasn't even called private equity. And it seemed sort of exciting to go to a smaller place, and I was very fortunate to get that opportunity. And you're right, I joined a tiny little firm with 75 people and $750 million. And no, I had no idea that 33 years later we'd have a trillion two and this global thing. It was just — it seemed like a really interesting place to go. There were very compelling people running the firm, and this LBO business seemed particularly interesting.
What was — you just mentioned how much the firm has grown, a trillion-dollar business in 33 years. I mean, I get this question from students: should I join a small firm or a bulge bracket firm? I mean, myself, you know, once you've worked in different businesses — like I worked at Bear Stearns, it felt like a big high school. Everyone knew each other. It was very, you know, there was no dead wood or anything like that. And then you work at larger firms, not to disparage them, but you know, it's sort of like working in the Roman army, you know, like a Wells Fargo. So what was it like at Blackstone? What was the culture like there that, you know, you think — what was in the water, as I think you would say, that caused it to grow so rapidly?
I would say a couple of things. First off, I think big firms can still be great places, because I think big firms can train you, which is super valuable to get basic skills. I also think you can work in a small group at a big place and that can feel very entrepreneurial.
But if you said, you know, what was in the water, I would say there was this incredible drive, and it really starts with Steve Schwarzman. This sort of will to win, that we've got to keep going, innovating. You want to be at a place where there's just this passionate drive to be successful and to be excellent at what you do. And you see that with entertainers or athletes or people who really succeed. They have this passion, and that was there. I think there also was a sense there that we should hire really great people. And so if you go to work at a place where there are amazingly talented human beings who are, of course, again, very driven, that good things can happen. And the great thing about finance is you're making it up as you go along. So what the rules were 10 years ago or 20 years ago, you can change the rules. You can invest in a new asset class. You can come up with a new structure. So if you have a firm that has very driven people who are also very talented, that I think is a great combination. And then look, the decision by the founders to not just be another M&A boutique advisory firm but to go into this private equity business was very smart, because the business was just starting. It was back in a world where there were only a handful of firms doing private equity, raising capital from institutions to buy businesses.
And then quickly thereafter, which is where my story sort of picks up, they had the idea — and Steve really pushed this — which is, if we can do private equity, well, why can't we do, you know, real estate private equity, and then why can't we invest in hedge funds, and why can't we invest in credit? And oftentimes it's the same customers, and then you're getting more and more intellectual capital from this. And so for me in my story, you know, a year into this, I did M&A and private equity work, I was offered the opportunity to go to a fledgling real estate business that was just starting. They had hired one guy out of Chicago named John Schreiber. They had really no one there. And they said, 'Hey, do you want to help with this?' And I talked to my consigliere and my parents, and it was like, okay, why not? So, but I do think being at a place where there is this real drive, this will to win, to me, that's the thing you want to be around. And then if you overlay that with some real entrepreneurial spirit, special things can happen. And by the way, you still make plenty of mistakes along the way, but there's this sort of relentless drive to win.
Talk about when it's been challenging at Blackstone. I think you would say equanimity is one of the most important things. Talk to us a little bit about that and your philosophy there. You know, Blackstone weathered the Great Financial Crisis. I remember the Equity Office Properties — we actually used it. You know, when I first was teaching real estate finance, when you came in, we used that as a case study. It was sort of done right in the middle of all of the madness, and it was a pretty risky deal.
Well, look, I think the hardest thing about investing is things don't go up in a straight line. There are cycles and things that happen. Look at what happened here on April 2nd. The world can change quickly. There can be natural disasters. You can have a management team that does something unethical. You can have a great investing segment — US housing went up in value, you know, basically from 1944 till 2007-2008 uninterrupted. And everyone thought that would be the case, and things can change. And so I think what begins to happen to you as you work at an investment firm and things go wrong, you begin to develop some muscle memory about this, and you quickly try to identify: is what happened, you know, cyclical in nature? There's been a recession, a slowdown, but the long-term demand for this product or service will continue to grow. Or is it secular? Is it the taxi cab medallion, which because Uber shows up, demand plummets relative to historic levels? And you also begin to realize when you experience these things that your best investment opportunities tend to come along at the moments of greatest dislocation. You know, when things feel great — 2000, 2007, 2021 — no one's worried. The prices are really high, and you're actually taking on the greatest amount of risk. And yet when things reset, and it's the financial crisis, the Great Financial Crisis, stocks are down 50%, real estate's down massively, everyone can only think about what further can go wrong, when actually at that point you should be thinking about what could go right.
So, you know, I would say for me the thing that was the hardest was we bought Hilton Hotels in 2007, in one of the worst times for investments in world history. We committed in the summer, shortly after Blackstone as a firm went public. We closed in the fall. We bought it for $26 billion and we borrowed $20 billion, which is not something at this age I would do anymore, but we did back then. And within 18 months, cash flow to the business was down 40%. And you were reading in the paper all the time how this business was going to go bankrupt. And I was lucky to be the architect of this transaction. And to make it doubly worse, it was the biggest investment ever in our real estate business and our private equity business.
So we had put a lot of chips in on this. So it didn't feel great. But then at one point in the spring of '09, we also had a lawsuit, both a civil and then a potential criminal lawsuit, about taking information from a competitor. Nothing ever came of that. And I remember talking to the CEO, Chris Nassetta, who's a great guy and a friend and still runs Hilton. And I said to Chris, 'Well, Chris, the good news is we were on the cover of the Journal for this potential scandal.' You know, we had written the investment down by 75%. And I said, 'Chris, the good news is it cannot possibly get any worse than this.' And so ultimately, in that case, we put $800 million into the company to help delever it, get the debt extended. The business kept growing outside the US. Ultimately, the hotel business was cyclical and recovered. And it grew a bunch. We took it public. We broke it into three companies. Ultimately, we made 14-plus billion dollars in the most successful private equity or real estate private equity deal of all time. And so, to your question, Brian, yes, I think you need a certain level of equanimity, but you also need to recognize sometimes you've just made a bad call, right? Like you've fundamentally overpaid for something. You got caught up in the hype, like in the dot-com era or something, and you have to try to recognize the difference. But I think as an investor, you've got to hang in there. And months like this last month can be scary, and people's immediate reaction is just sell everything, but you've got to hang in there. And I'm sure we'll talk about the current environment, but I think having a little bit of a longer-term approach — and we have this, I think, as a firm — I think it's so important if you're going to go into the investment business.
Yeah. Speaking of that, let's talk a little bit about the decision-making process. Like, Blackstone has gone really big into life sciences, data centers, you know, logistics. Could you talk a little bit about your thematic investing? Maybe we'll focus on data centers. That's extremely topical. Stein just wrote a very good piece on it. Who introduced you and — you know, what do you see as the atmosphere there? Is there still a huge opportunity set, or is it more of like a dot-com craze now? Everybody's going into it, or what are your thoughts?
So, let's go back to the Hilton story for a sec, because after the Hilton experience as an investor, you look back and say, 'Well, gosh, I paid a huge price for a business. I bought it at the absolute worst time, and yet I ultimately had this amazing outcome.' And by the way, if we had just held on to our Hilton stock, it would have gone up another three, four, five times, because it's just such a good underlying business. And what I came to believe was that too often we're looking at our 50-page model and the footnote on a certain thing, and we're forgetting what really matters is sort of that first paragraph. Like, what's the neighborhood you're investing in? And is there a long-term tailwind that makes this a compelling opportunity? And it's always possible to buy a business in a good neighborhood — you could overpay, or you could buy a bad business in a good neighborhood. But if you tend to fish in a better pond, your chance of success goes up. So I'll talk about data centers, which I think are actually in a very good pond. It's much harder to buy old media businesses or landline phone companies or department stores, right? So why do I think data centers are in a good neighborhood? And then I'll get to the specific question about is it a bubble.
We have a simple view that our lives are moving online — that obviously we're going to shop more online, we're going to be in social media, we're going to share all this information. But the biggest change is really coming. By the way, our cars over time will not be driven by us. But that AI in particular is going to revolutionize everything we do. And there are 8 billion people, and I don't know how many, but there are going to be billions of virtual bots helping us do a million things. It's going to change, you know, how you interact with companies, everything you do, how you get information. And every time you do a query, or every time you put a photo into ChatGPT and ask for something back, that requires data. And ultimately, when we have a lot of robots that are doing a lot of different things, that's going to require data, and the physical manifestation of the data and the compute power is the data center. So that would argue that there's going to be a lot of need for data centers, which today are obviously filled with a lot of GPUs. And by the way, adjacent to that, there's going to be enormous demand for power. So boring things like utilities become much more interesting. You know, electrical equipment providers, utility services — there's just going to be huge need for electricity and power, well above what we've experienced, which has basically been flat power usage for 25 years. It's starting to grow 4-plus percent a year.
So the question is on the data centers. Well, you know, there was a lot of need for railroads after the Civil War, but we built too many of them. And you could go through a lot of examples of great and important things where they were great, but everybody got overenthused. The thing I like about the data centers is you don't build a $2 billion data center speculatively. So these are not condos in Miami or Dubai. These are things that require — they're very specialized and they cost a lot of money. So that is a limiting factor. The second limiting factor is the power, which normally you would think, if you had big companies, the big hyperscalers out there — Microsoft and Google and Amazon and Facebook and so forth — you would think all the leverage would necessarily fall to them and drive the economics down. Obviously, as major tenants, they do have that, but because the power is hard to come by, if you can have a site that's entitled, you can have a reasonable negotiation about the economics.
And so, if you engage in this business and you're not doing speculative behavior and you're signing long-term leases that are 15 to 20 years with the biggest companies in the world, that seems like a reasonable thing. Now, is it possible that people started — big companies went out there and started pre-leasing a little too much space, need to pause? You know, are there concerns generally about capital availability and return on capital from AI, and could that make people pause? Sure. But do I think the direction of travel will be the need for more and more data centers? I absolutely do. And therefore, if we own the biggest data center company in the US and we own the biggest data center company in Asia, we have the biggest powered land bank in Europe, I think that's a good place to be.
Speaking of data centers, one of your colleagues — is it, if I pronounce it correctly, Nadim Mehra?
So he actually spoke — I've had all these Blackstone people speaking in my classes. He spoke in my capital markets class a few years ago and said — I said, 'How would you describe Blackstone?' And he said, 'Blackstone is a data center.' And what he meant — which was really interesting to me — and he used the example of how you guys are into everything. You have thousands of apartments now, you have infrastructure. So his statement was, for example, with the CPI, who was coming out, he said, 'We think the inflation is going to be higher than everyone else does.' It's public information, but our rents are — you know, apartments are going higher and the numbers are high, which I think — rents, housing makes up like a third of the CPI. So, you know, we think inflation is going to be higher, the Fed's going to be more aggressive in raising rates. Could you talk a little bit about that? Like, you know, in terms of your — well, if you think about how you're processing that information and AI, I mean, that's what it does. It just takes huge amounts of information and makes sense of it. So how are you using that?
Well, I like Nadim's analogy. Nadim, by the way, was a Columbia undergrad.
