What It Takes: Lessons in the Pursuit of Excellence

by Stephen A. Schwarzman

Across the United States, house prices fell sharply. In the worst-hit areas, like Southern California, Phoenix, Atlanta, and Florida, new home construction all but stopped. Millions of Americans were now looking to rent instead of buy their homes. Historically, mom-and-pop operations dominated the business of buying, fixing, and renting out houses in America. Of the 13 million rental homes, most belonged to individuals or small real estate businesses. Many landlords were absentee and didn’t maintain their properties to the standard of a professionally run apartment complex. Our real estate team saw an opportunity to consolidate and professionalize the sector. Were we the right people to try this? Blackstone did huge, multibillion-dollar real estate deals, the biggest in the industry, for hotel chains, office complexes, and warehouses. Why would we consider the small-time buy-to-let business? Our banks weren’t convinced and wouldn’t lend to us. Sam Zell, who knows more about real estate than anyone else, told us, “No way.” But Jon Gray and his team were insistent. The basic math of the opportunity seemed straightforward—and unprecedented. Here was the biggest asset class in the world, in our home market, trading at historic lows, and the whole world was frozen. It was the right point in the cycle and exactly the kind of moment for investors like us. I’d seen something similar in the early 1990s, when we had made our first investments with Joe Robert: a real estate market di...