Opinion ID: 2366732
Heading Depth: 1
Heading Rank: 4

Heading: Real Estate Investments

Text: As noted above, Blackstone's Real Estate segment constitutes 22.6% of its total assets under management. Although the parties seem to agree that the majority of Blackstone's real estate investments were non-residential in nature, the Registration Statement provides that its real estate opportunity funds have made a significant number of investments in lodging, major urban office buildings, residential properties, distribution and warehousing centers and a variety of real estate operating companies. Moreover, Blackstone concedes that its real estate funds maintained at least one modest-sized residential real estate investment. There is no indication in the record, however, of the exact dollar amount of Blackstone's residential real estate investment(s), and thus it is not possible to discern the exact percentage of the Real Estate segment's assets under management attributable to residential properties. [6] As detailed above with respect to FGIC, several factors were causing the real estate and mortgage securities markets to deteriorate by the time of the IPO, including the adverse effects of a series of negative developments in the credit markets. Thus, plaintiffs allege, it was foreseeable that Blackstone would have performance fees clawed back in connection with its real estate investments and that Blackstone would not generate additional performance fees on those investments. In addition to Blackstone's alleged material omission of information related to the downward trend in the real estate market and its likely impact on Blackstone's real estate investments, plaintiffs allege that the Registration Statement included the following affirmative material misstatement: The real estate industry is also experiencing historically high levels of growth and liquidity driven by the strength of the U.S. economy . . . and the availability of financing for acquiring real estate assets. . . . The strong investor demand for real estate assets is due to a number of factors, including persistent, reasonable levels of interest rates . . . and the ability of lenders to repackage their loans into securitizations, thereby diversifying and limiting their risk. These factors have combined to significantly increase the capital committed to real estate funds from a variety of institutional investors.