Nearly a third of the senior managing directors for Blackstone’s real estate business have left the firm during the past three years as the sector’s investment funds have suffered from poor returns, according to The Wall Street Journal.

The Journal reports that some of the executives left for other jobs, while others have started their own businesses or retired. But also playing a role may be the poor performance of Blackstone’s funds, which are no longer making the returns they once did and are reducing the income of the division’s executives.

“With borrowing costs high and commercial real estate struggling, industry executives don’t see prospects for that changing any time soon,” the Journal writes.

Advertisement

The departures may be part of a larger trend being seen in private equity, where firms are having difficulty earning high profits as commercial real estate continues to struggle.

CRED iQ reported earlier this month that the national rate of commercial mortgage-backed securities in distress in October had climbed to 11.2% from 10.9% a year ago. The office sector’s share of distressed CMBS loans rose to 16.4% compared to 14.7% for the year-ago period, with Los Angeles experiencing a particularly sharp uptick in office distress.

At Blackstone, the largest property investor in the world, the lost leadership included Nadeem Meghji, the firm’s global head of real estate. The Journal reports that Meghji announced in September he was leaving the company at the end of the year, saying he wanted to spend more time with his family.

The former co-head of the division, Kathleen McCarthy Baldwin, left at the end of 2025 after 15 years with Blackstone. Her reported reason was that it was “time for my next chapter.”

The net annual internal rate of return on Blackstone Real Estate Partners funds that closed between 2007 and June 2019 ranged from 11% to 14%. But those days appear to be over. Blackstone’s 2025 annual report showed that four of the company’s 13 real estate funds were below the return thresholds for the firm to collect carried interest, which is a share of the fund’s profits typically paid out to executives as a bonus.

One fund with $20.5 billion in assets that closed in 2019 recorded a return rate of 3% through September, showing that the compensation outlook continues to deteriorate as overall commercial real estate performs poorly.

During better years, Blackstone’s senior managing directors were paid millions in compensation. Real estate executives made about $2 million in annual salary but also receive carried-interest payouts that sometimes reached $15 million per year. The Journal reports that the top real estate managers could earn double that or even more in years when the funds performed well.

But in recent years, other parts of the Blackstone company have grown faster than real estate, which has suffered due to the challenges facing many areas of commercial real estate, including the moribund office sector. Despite growth in data centers, the company reported in a February filing with the Securities and Exchange Commission that the real estate funds showed limited growth in 2025, with challenges being seen in the life sciences office sector, student housing and select logistics holdings.