Blackstone’s real estate prophecy

One thing to start: OpenAI has established a $4bn credit facility from top banks, including JPMorgan Chase and Goldman Sachs, giving the ChatGPT maker access to more than $10bn in liquidity as it looks to stay ahead of rivals developing artificial intelligence tools.

In today’s newsletter:

• Blackstone sees a rebound in real estate dealmaking

• Wall Street warms to Kamala

• US-China tensions hit the pharma sector

Gray’s Anatomy of the $4tn property market

The world’s most prolific real estate dealmaker expects merger and acquisition activity to return to a $4tn sector that was pummelled by higher interest rates and a surge of office property defaults.

Jonathan Gray, the architect of Blackstone’s more than $300bn property investment unit, predicted a recovery in the valuations of publicly listed real estate companies is setting the stage for a wave of M&A activity.

Gray told the FT that dealmaking by listed property trusts was on the precipice of a rebound. The reason: shares of many of these companies have surged this year, allowing them to issue new shares to fund acquisitions.

“I think there will be some Reit IPOs,” Gray told the FT’s Joshua Oliver and DD’s Antoine Gara, referring to real estate investment trusts. “But I also think you’ll see existing public companies who will issue equity to sellers and/or do secondary offerings. I would expect the Reits will end up being fairly acquisitive.”

In July, the large IPO of Lineage Logistics, a cold storage-Reit backed by Stonepeak, helped revive optimism about a pipeline of new listings. Other investment firms including DigitalBridge are also reportedly considering listing large companies they own, such as data-centre operator Switch.

Blackstone has been the real estate sector’s most prolific buyer in recent years.

It used its non-traded property fund, Breit, to acquire about a dozen listed companies between 2017 and 2022 as more than $50bn of investor cash flowed into the fund.

But Breit was stung by heavy redemptions in recent years that turned the fund into a major seller. It ended up dumping more than $15bn in property to return cash to investors.

Blackstone, nonetheless, has been aggressive in striking recent acquisitions, including the A$20bn (US$13.5bn) take-private of Australian data centre operator AirTrunk, and apartment landlords AIR Communities and Tricon Residential.

The deals come ahead of what Gray says is a clear bottoming in valuations as interest rates move lower.

Gray, the heir apparent to Blackstone co-founder Stephen Schwarzman, told the FT that property investors had learned hard lessons from the Federal Reserve’s aggressive pace of rate increases in 2022 and 2023.

The widespread pain being absorbed by the sector is “another reminder of the interest rate sensitivity to the asset class”, Gray said, a lesson that is forgotten every cycle. “There tends to be a lot of recency bias in the [investment] world.”

Kamala’s Wall Street charm offensive

Any major deal requires a small army of devout advisers. It’s no different with Kamala Harris’s bid for the White House.

Harris has corralled Democratic donors and bundlers such as Blackstone’s Gray, Centerview’s Blair Effron and Lazard’s Ray McGuire to help broker relationships with the country’s financiers.

The behind-the-scenes courtship appears to be working, with Wall Street warming up to Harris even as some executives still lean towards Donald Trump and his plans for deep tax cuts.

One leading private equity investor said he had planned to vote for Trump, but now might reconsider. “Trump is still better on taxes but Harris seems to be more like Clinton than Obama or Biden,” he said.

The Democratic party’s push for Wall Street’s support was on full display in August at the convention, where Ken Chenault, the former CEO of American Express and now chair of private equity group General Catalyst, took the stage during a prominent speaking slot.

And Harris’s attempts to rally support from corporate America haven’t been confined to Wall Street.

She’s hosted chief executives including Karen Lynch of CVS, Ryan McInerney of Visa, Charles Phillips of Infor and Greg Brown of Motorola, at her home in Washington.

Her decision to court Wall Street has also kept some high-profile Republican donors on the sidelines. Citadel founder Ken Griffin, who backed Republican Nikki Haley’s campaign for the White House earlier this year, has not endorsed Trump and is now focused on supporting candidates for Congress.

JPMorgan Chase chief executive Jamie Dimon made waves earlier this year with his positive comments about Trump, but he recently declined to endorse either candidate.

One chief executive of a large US asset manager wondered whether her ‘I love capitalism’ centre-left image will stick.

“Even if you believe that she’s reasonable left of centre, will she be able to govern there?”

US-China tensions hit the biopharma sector

For years, the Chinese tech sector has been under fire from US legislators. It culminated earlier this year with President Joe Biden signing legislation that would ban TikTok unless it severed ties with its Chinese parent, ByteDance.

Now, the Chinese pharmaceutical sector has found itself in the US government’s crosshairs. And the threat of looming restrictions on Chinese interests has started to churn up potential deals, the FT’s Oliver Barnes and Eleanor Olcott and DD’s James Fontanella-Khan report.

The Biosecure Act, which would ban drugmakers with US government contracts from using Chinese groups’ services after 2032, has already overwhelmingly passed in the House of Representatives.

And although it hasn’t yet passed the Senate, the bill’s effects are already beginning to ripple through the industry.

Two affiliated Chinese drug manufacturers called WuXi AppTec and WuXi Biologics, which are targeted by the bill, are working on sales of some of their operations, according to people familiar with the matter. Together, the two companies are valued at about $36bn.

WuXi AppTec has put its cell and gene therapy manufacturing arm, which operates four laboratories and manufacturing facilities in Philadelphia, up for sale; WuXi Biologics is assessing interest in some of its European production facilities, including two German manufacturing plants it bought from Bayer.

European biopharma companies that have or are seeking US federal contracts have become reluctant to use WuXi in light of the pending legislation.

WuXi Biologics told the FT it “continues to experience good business momentum. We are consistently securing new projects across all regions including the US, EU, China and the rest of Asia.”

The WuXi companies are key cogs in the global pharmaceutical supply chain, playing a role in the production of AbbVie’s $3.5bn-a-year cancer drug Imbruvica and Pfizer’s anti-Covid pill Paxlovid.

Even the threat of restrictions — long before any legislation has passed — is reshaping drugmaker M&A.

Job moves

• Wall Street block trader Andrew Liebeskind has left hedge fund LMR Partners after less than a year and is joining rival ExodusPoint Capital Management as global head of equity capital markets, according to people with knowledge of the moves.

• AustralianSuper, one of the world’s largest pension funds, has made a handful of appointments in the US. Mikaël Limpalaër has been named head of the Americas, Maria Reed will be the head of fund services in the region, and Nick Ward will relocate to New York as head of private credit.

• O’Melveny has hired David Carter and Braeden Donnelly as partners to focus on private equity. They join from Ashurst.

Smart reads

Luxury kickbacks Posh hotel suites, a Mercedes-Benz convertible and Michelin-starred sushi dinners are just a sampling of the alleged kickbacks US politicians have received recently, the FT reports. Is it that easy to buy American influence?

Next frontier Private credit titans are jostling to bring the $1.7tn market to the masses, The Wall Street Journal reports. The regulatory hurdles are steep.

Britain’s richest woman Denise Coates built a multibillion-dollar empire by allowing users to gamble all hours of the day, The Guardian writes. Are there wider human costs to her huge success?

News round-up

Anglo American chief says not ‘inevitable’ buyer will emerge after group slims down (FT)

Jupiter poaches team from rival Origin as part of push into global equities (FT)

Revolut urges Meta to share cost of reimbursing fraud victims (FT)

Steinhoff’s former finance chief sentenced to prison in South Africa (FT)

CEOs turn to podcasts to control their message (FT)

Listed landlords gaining upper hand over private equity, says British Land boss (FT)

UK consumers in ‘good shape’ ahead of Christmas, says Tesco boss (FT)