Questions have been raised about the business practices of one of Oxford University’s most prominent donors – who gave £150 million to the University in 2019 – after comments he made at the Goldman Sachs US Financial Services Virtual Conference.
Stephen Schwarzman, the Chairman, CEO and Co-Founder of Blackstone, an investment firm – with a personal worth of $20 billion – said that “Blackstone was a huge winner coming out of the global financial crisis. And I think something similar is going to happen [following the pandemic].
“Now, about half of the firm’s earnings are from a real estate business. Just to give you some idea how this breaks, we pick the good neighbourhoods, if you will. Real estate has a lot of different sub asset classes. And we’ve concentrated in logistics. It’s about 36% of all the real estate we own. We’re the largest owner of real estate in the private world. And that asset class has boomed with huge increases in rents, almost no occupancies, rent collections from almost everyone”.
The comments come as renters across the globe face losing their homes as a result of the pandemic. At the same time, Blackstone has been accused of increasing rates for its tenants and filing eviction cases. A spokesperson for Blackstone told Cherwell: “The comments made were specifically related to our investments in the logistics space and were characterized as such at the time. Any implication that these comments relate to our investments in the housing space or that we are pursuing evictions is entirely inaccurate.”
City Monitor has reported that rent levels for housing owned by Blackstone in Torrejón de Ardoz in Spain have risen during the pandemic for properties which previously had rent controls. In certain instances, this led to rates nearly doubling, with some tenants saying they will be unable to afford to continue living in their homes.
The Private Equity Stakeholder Project has also recorded instances of Blackstone filing for evictions of tenants from its properties in America, despite the pandemic and the eviction moratorium designed to protect renters. Overall, 30 to 40 million people in America are deemed to be at risk of eviction following the expiration of the eviction moratorium.
Following the 2008 financial crisis, Blackstone bought up thousands of properties which were either mortgaged by banks or were former social homes sold off by governments to try and raise funds. In a recent UN report, Blackstone was identified as a lead contributor to the current housing crisis. Leilani Farha, a UN special rapporteur, explained: “Properties are being purchased en masse, renovated and then offered at a higher rental rate, pricing tenants out of their own homes and communities.” Blackstone’s full response to these allegations can be found here.
It also has long-term investments in areas such as global logistics, which have performed relatively strongly during the pandemic. Schwarzman told Robert Peston in 2008 that “the real golden age comes when you have a mess. You have economies that are on their back. You know, capital inadequate. And when you start buying businesses at that part in the cycle you inevitably do extremely well”. Schwarzman has certainly done extremely well – Michael Gross, author of a book about the building the tycoon lives in, describes him as “the epitome of American capitalism.”
In response to the allegation that such business practices during a pandemic may be unethical, Blackstone told Cherwell: “This comment was in response to a question about the types of firms investors chose to allocate capital to after the financial crisis. We are proud to have earned the trust of investors around the globe, including pension funds representing tens of millions of retirees, by focusing on careful sector selection and deploying capital in areas that we believe can be resilient across economic cycles.”
“We are not evicting tenants during these challenging times. The only cases of eviction that have been filed involve matters of public nuisance and/or risk to public health or public safety. Our first priority is ensuring the safety and health of our residents, while making sure they can remain in their homes, and we have rolled out financial relief options across our portfolio of residential properties.”
In 2019, Oxford University announced that Schwarzman had donated £150 million towards humanities and artificial intelligence research. This was the single largest donation in the University’s history. The new Stephen A Schwarzman Centre for the Humanities, which will be built with the money, is set to open for the 2024/25 academic year. It will house seven faculties in order to encourage “cross-disciplinary and collaborative study”.
Oxford University’s decision to accept Schwarzman’s money led to controversy, with an open letter signed by forty-two locals, students, academics, councillors and activists claiming that the donation came from “the proceeds of the exploitation and disenfranchisement of vulnerable people across the world”. At the time a spokesperson for Blackstone said that “the allegations which were put to us are false and unsupported by the facts” and that they act in full compliance with all applicable laws, rules and regulations.
A spokesperson for Oxford University told Cherwell: “Mr Schwarzman has been approved by our rigorous due diligence procedures which consider ethical, legal, financial and reputational issues. The idea of a humanities building has been in ongoing discussion and consultation for more than a decade but we did not have funding for the building until Mr Schwarzman’s gift. The Schwarzman Centre for the Humanities will benefit teaching and research in the humanities at Oxford; its performing arts and exhibition venues will bring new audiences to the University; and it will build upon our world-class capabilities in the humanities to lead the study of the ethical implications of AI”. In February, the University refused to release documents to Oxford Students’ Union relating to the vetting of Schwarzman’s donation.
Schwarzman has donated to a number of educational institutions in addition to Oxford University, including the Massachusetts Institute of Technology and Yale. He is also a prominent Republican, who backed Donald Trump and spent over $27 million in donations to US politicians this year. Bloomberg’s analysis of election funding found that Schwarzman had given Trump’s re-election campaign $3.7 million of the $4.8 million that Blackstone had raised from the U.S. financial industry in the previous 18 months, far more than any other figure or business in American finance.
The Financial Times also reported that, in a call with senior business leaders, Schwarzman appeared to defend Trump’s challenge to the 2020 election results, asking “whether other participants did not find it surprising that early votes in Pennsylvania had favoured Mr Trump, only for later counts to tip the state in Mr Biden’s favour”. In a later statement, Schwarzman said: “In my comments three days after the election, I was trying to be a voice of reason and express why it’s in the national interest to have all Americans believe the election is being resolved correctly. But the outcome is very certain today, and the country should move on.” He continued: “Like many in the business community, I am ready to help President-elect Biden and his team as they confront the significant challenges of rebuilding our post-Covid economy.”
Image Credit: World Economic Forum (www.weforum.org), swiss-image.ch/Photo by Remy Steinegger. Licence: CC-BY-SA 2.0.