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Jon Gray is the future of Blackstone

50 insiders reveal how the superinvestor consolidated power, elbowed out rivals, and is remaking the firm in his golden-boy image/ Casey Sullivan and Daniel Geiger, Business Insider

Jon Gray is Blackstone's No. 2 and has ushered in a massive transformation

Gray helped put together Blackstone's deal for Bumble, a dating app that's gearing up for an IPO

We talked to 50 insiders to understand Gray's rise and what it meant for the private-equity giant

It was a meeting that Jon Gray couldn't miss.

So when his transatlantic flight touched down in the early hours of a September 2019 morning, the president and chief operating officer of the nearly $600 billion alternative-asset manager Blackstone told his driver to head straight to the company's headquarters on New York's Park Avenue rather than his home on the Upper East Side.

Gray and Stephen Schwarzman, Blackstone's cofounder and CEO, had a breakfast planned with Whitney Wolfe Herd, the young founder of Bumble — a dating app where women make the first move and just the type of hip, fast-growing company in which Blackstone has increasingly sought to stake its continued expansion.

Herd, who was 30 at the time and a rising entrepreneur, had drawn investment interest from much of the private-equity world. But past partnerships had proved treacherous and Herd was cautious. Andrey Andreev, the Russian billionaire who owned Bumble via its parent company, MagicLab, had drawn scrutiny after allegations surfaced that he fostered a drug-fueled workplace where women were objectified. 

Herd had sued her previous employer, the dating site Tinder, and its parent company, IAC, accusing Tinder's top executive and chief marketing officer of sexual harassment.

Gray, a youthful 49, boundlessly affable, and the billionaire No. 2 at the largest private-equity firm, cast a different image from the traditional buyout titan.

His office was decorated with pictures of his wife, Mindy, and their four daughters. And despite a sleepless night, he was sharp, energetic, and down to earth.

"He's really a humble, good person, and you can feel that within the first 10 seconds of meeting him," Herd said. "He wanted to know about my parents and where did I grow up … not just 'let's talk about business.' It was a genuine interest in getting to know the Whitney behind the Whitney."

Two months later, Blackstone would purchase a majority share of MagicLab in a deal that valued it at $3 billion and promoted Herd as the new CEO. By January, the company, rechristened simply as Bumble, filed for an initial public offering that could more than double that valuation — and create a blockbuster exit for Blackstone in the span of just over a year.

Winning over hot businesses that have their pick of investors has become one of Gray's most visible successes in the three years since he stepped into the role of president and chief operating officer at the firm.

Gray, a Blackstone lifer who started at the firm after college at 22 years old, rose to prominence in the company's real-estate investment group, which he built over the span of 2 1/2 decades into one of the largest landlords. Acquisitions like Bumble show how both he and the company have found equal success in the broader investment world as they snap up a succession of some of the most coveted assets on Wall Street.

Gray has done it by taking a personal hand in almost every facet of Blackstone's sprawling investment business, focusing the firm's funds on forward-thinking, consumer-focused companies.

Jon Korngold, the 46-year-old head of Blackstone's growth-equity business whom Gray recruited from the competing investment firm General Atlantic two years ago, remembered an early meeting with the Swedish oat-milk brand Oatly in 2019 where Gray surprised Oatly's executives by dropping in.

Korngold says Gray often accompanies him to meet with the founders of companies with revenue still in the tens of millions of dollars — a speck in the universe of multibillion-dollar deals that Gray inhabits.

"He's intellectually curious," Korngold said. "And he loves, loves meeting growth and tech entrepreneurs. Not a single meeting, not one, have I asked him to take where he said, 'I'm sorry, I'm really jammed.' Not one."

During the summer, Blackstone invested $200 million in Oatly, which is now eyeing an IPO in 2021, according to a person familiar with the matter.

Gray lacks the gruffness of his imposing predecessor, Tony James, and is more modest than Schwarzman — who drew public ire and mockery for throwing himself lavish 60th and 70th birthaday parties. He has lent a more-inviting and likable face to the company at a moment when buyout targets have become more fickle and vast wellsprings of capital, such as pension funds, more aware of social, environmental, and political concerns and controversies.

Even Schwarzman told Insider that Gray "does better with people" than him.

"He can say difficult things in a way where you end up liking him after he's had a very tough conversation," Schwarzman said.

Schwarzman said he had turned over much of the firm's day-to-day operations to Gray. James, meanwhile, said that having groomed a successor in Gray, he has begun the process of retiring, the final step in a quiet yet seismic changing of the guard in Blackstone's C-suite.

"No one is perfect, but Jon is as close as they come," James said. "I think it might be time for me to move on, but I've got to sit down with Steve and Jon and talk about that."

Insider talked to 50 people who know Gray about his path to the top of the alternative-asset management giant.

They revealed sides of Gray that few people outside Blackstone have seen, including the tireless focus, drive to perform, and ruthlessness behind his calm and amicable exterior.

Those sharper edges were on display in a recent shake-up of Blackstone's underperforming $78 billion hedge-fund unit, BAAM, when Gray relieved the fund's head, John McCormick, of investing duties and handed them over to Joe Dowling, the head of Brown University's investment office. Another senior BAAM executive was pushed out in the shake-up.

"If I'm not on top of my business and my issues, he'll know it and we'll be talking about it," David Blitzer, a longtime Blackstone executive, said of Gray's attention to detail. "We all have to be all in, no question."

Gray's little-known power play

Gray can be cold and calculating when dealing with those he feels are underperformers. He exhibited those tendencies during a notable episode a decade ago, when he quietly facilitated the exit of the executive who co-led the company's real-estate group with him.

The story was recounted by a person with direct knowledge of the events and confirmed by another person close to the situation. 

By then, Gray was responsible for two of the largest real-estate buyouts ever, the $39 billion and $26 billion respective acquisitions of Equity Office Properties and Hilton, both in 2007, and had built Blackstone's real-estate investment business into a juggernaut. His counterpart, Chad Pike, was in London and presided over a European arm that was just a fraction of the size.

Gray labored around the clock, answering emails through the night and weekends. He used daily walks from his home on the Upper East Side to Blackstone's office to devour market intelligence, internal investment memos, and field calls with Wall Street glitterati.

Pike, meanwhile, had hobbies he wasn't hesitant to indulge in. He traveled with his family to exotic locales to heli-ski and became so passionate about the outdoors that he launched a side business of small luxury lodges and tours catering to sports like fly-fishing and mountain biking.

The differences between the two men had begun to grate on Gray, but at the time he didn't yet have the clout to push Pike out on his own.

Instead, he went behind Pike's back and triggered a series of events that would force his colleague's ouster, according to the people familiar with the events.

Gray turned to James, whose job included sorting through internal rivalries and conflicts. The partnership between him and Pike had frayed, Gray told him, and leadership of the group could no longer remain bifurcated. Pike, he believed, had lost focus.

Gray described the fissure in a way that gave James the impression that Pike felt not only a mutual disaffection but also a readiness to discuss his exit from the group. James flew to London to find the young executive blindsided by the whole affair.

Schwarzman was asked to step in. Pike, Schwarzman quickly decided, would be reassigned to a group within a new investment arm called tactical opportunities. Gray would be named the singular head of real estate.

"Yes, of course, I did go to London. That's a fact," James said. "But you have too much drama around it."

James declined to go into specifics about the incident, but he did not dispute any of its broad details. Pike, who quietly retired in 2020, declined to comment for this story.

"I think if you talk to Chad, the tac-opps era was the most fun he has had in his career," James said.

Gray's drive ignites at Blackstone

As far back as Gray's earliest days at Blackstone, his friends and colleagues described a young executive who, through charm or guile, had a knack for getting his way.

Gray joined Blackstone in 1992 as an analyst. When the firm proposed that he, like many young talents on Wall Street, take a hiatus to attend business school, he finagled his way out of that path on the belief that gaining real-world investment experience would better launch his career.

Blackstone, which was founded by Schwarzman and Pete Peterson in 1987 to handle traditional private-equity investments, had by then just unveiled a real-estate investment arm. Gray trained his focus on the group, believing its nascency and small pool of executives would give him a better chance to transition from a support staffer to a more important and lucrative role sourcing and executing actual deals.

Schwarzman had recruited John Schreiber, a top executive from the real-estate investment firm JMB Group, to spearhead the effort. Gray, as it happened, was stationed in the cubicle next to Schreiber and one day popped his head over the partition.

"Could I get a job?" Schreiber said he recalled him asking bluntly.

Schreiber bonded with Gray over their mutual Illinois roots, Gray hailing from the wealthy Chicago suburb of Highland Park and Schreiber from Lake Forest. He noticed Gray's people skills, a key talent in the real-estate business, where personal connections and reputation are essential to bringing in deals. Schreiber came to call Gray "The Natural," after the 1984 film starring Robert Redford, who plays a baseball player oozing the ability to make it big in the major league.

After he worked out the details with another partner on the team, Ken Whitney, Gray was in. Having majored in English at the University of Pennsylvania, Gray's initial role was to add sparkle to the group's early marketing materials.

"We had to develop our story," Whitney said. "Jon took some of our thoughts about what we do, fleshed it out, and made it look pretty good."

Gray soon took on more responsibility, working on small deals just a few million dollars in size.

Neither he nor his colleagues could know they were on their way to creating the biggest revenue engine at the firm.

Gray hones in on a blue ocean

As the real-estate venture got off the ground, Gray showed a proclivity for spotting undervalued assets before they garnered widespread notice.

He focused on hotel deals, for instance, which in the mid-1990s hadn't yet achieved acceptance among institutional investors as a major real-estate asset class. As that changed, Gray would be there to capitalize on it.

In 2001, he oversaw the acquisition of Homestead Studio Suites, an unexciting portfolio of extended-stay properties, for $740 million. It would be a game-changing opportunity for Blackstone and kick Gray's career into overdrive.

In doing the deal, Gray had an epiphany. Blackstone could acquire vast collections of real estate by buying whole companies that held property assets, rather than picking off single buildings here and there the way investors normally did. Such buyouts weren't common at the time nor were they considered economical using the expensive debt available for mergers and acquisitions. Gray instead had the idea to tap a voracious real-estate lending market, where loans were being cut into securities and sold to bondholders at far lower rates.

It was a formula Gray would use to complete a succession of multibillion-dollar deals that, in the span of less than a decade, transformed Blackstone from an obscure real-estate player into the industry's marquee investor.

Gray was only in his early 30s at the time, but his legend quickly grew. He was known as scrupulous, straightforward, and hypnotically persuasive. Even in heated negotiations, he remained unfailingly polite.

"You could almost hear the other side of the phone getting louder and more frustrated and Jon would be even-keeled," Steve Orbuch, a former colleague of Gray's at Blackstone, said.

While most dealmakers as prodigious and ambitious as Gray tended to leave the particulars of executing such transactions to subordinates and attorneys, those who worked with Gray said he was absorbed in details.

"What distinguishes him is his ability to telescope to the outer edges of the atmosphere and then close in on the Mariana Trench details of a situation and do it fluidly," said Roy March, who worked with Gray on some of Blackstone's largest transactions, such as Equity Office Properties.

"He knows the big picture and then he can go down to knowing what rents and vacancy and occupancy rates are in a specific location in a specific submarket. That's rare," March added.

Khaled Kudsi, a young member of Blackstone's real-estate team at the time, said he remembered Gray reciting how during the company's acquisition of Hilton, which had a global portfolio of hotels, revenue would need to be collected in special lockbox accounts in places like Egypt and Turkey to meet the servicing requirements of Blackstone's securitized debt.

"Jon never said, 'Let the lawyers figure that out,'" Kudsi said.

Gray worked around-the-clock. Even during outings like a yearly ski trip taken by the real-estate group to blow off steam, he was often the first to pull away from drinks at the bar and retire for the night. New hires began to look to him as a model for greatness.

In one instance, associates unfurled a mock banner that rebranded Blackstone as "Graystone" during a year-end skit in the early 2000s.

'The Natural'

Gray's ambition wasn't always well-received by members of the real-estate team, at least one of whom said they felt he could hog the spotlight and lobby against colleagues behind the scenes.

That person described an instance in the early 2000s when a more senior real-estate executive, with a deep knowledge of the commercial-office market, joined the group. Gray wouldn't openly disparage the executive but would often refer to him, the source said, in a way that made him seem hopelessly lost in unimportant minutiae, such as the dimensions of an office building's column spacing.

Another former colleague of Gray's said that in the 2000s, Gray made it known that he felt he wasn't being fairly compensated. Some on the team began to wonder whether he would leave the firm.

Management moved quickly to smooth over the situation behind closed doors. Later, as Gray rose through the ranks, he sometimes would remind colleagues just how powerful he had become, quipping that he was the firm's second-largest shareholder after Schwarzman — a stake that firmly moved him into billionaire territory.

But among counterparties and partners in the real-estate business, Gray was beloved. His sterling reputation would come in handy.

The Equity Office Properties and Hilton acquisitions closed at the peak of the pre-financial-crisis property bubble. During the subsequent downturn, Gray and his team were able to persuade lenders to write off billions of dollars of Hilton's debt. He also convinced Blackstone's fund investors to ride through the storm, even as the firm was forced to acknowledge billions of dollars in paper losses.

"When you are down, having people who like you matters," another former colleague of Gray's said.

Eventually, both Hilton and EOP would rebound to be among the most profitable real-estate deals in history. Blackstone sold the remainder of EOP in 2019, reporting a $7 billion gain. The company took Hilton public in 2013 and sold off the remainder of its shares in 2018, reaping a staggering $14 billion in profits.

Settling into his seat

Given his credentials and track record, friends said that Gray's appointment to president and chief operating officer was surprising only in that it didn't happen sooner.

Two sources said his promotion may have been hastened by an interview in November 2016 Gray took with then-President-elect Donald Trump for Treasury Secretary. Gray, at the time, was already in the process of being groomed by James to succeed him.

Schwarzman, a close friend of Trump's, dismissed the possibility that a Democratic supporter like Gray would be offered a key slot in a Republican Cabinet.

But the interview projected that by then, he was a business star of renown who had options. James was concerned.

"After all the time I invested in Jon, I was horrified at the thought he might leave," James told Insider.

By February 2018, just in time for Gray's 48th birthday on February 4, a press release was written announcing Gray's promotion.

The Jon Gray agenda

In his new leadership role, Gray has labored to create more coordination and collaboration between the company's myriad and sometimes competing business units, expanding upon the decades of growth led by Schwarzman and James, but at an increasingly large and more challenging scale.

"I'm not going to say there's never been a time when someone says, 'I think that looks a little more like that should go here,' and someone else says, 'No I think that should go there,'" Blitzer, the head of Blackstone's tactical opportunities, said, describing the behind-the-scenes friction among funds hungry to invest capital.

This jostling has become even more complex and pressing as Gray adds business units, expanding into growth equity and life sciences, whose investments can also fit within the purview of several of Blackstone's existing funds.

On the Bumble deal, Blackstone had initially negotiated to take a preferred equity interest, then a minority stake. After both fell apart, Gray stepped in, according to Blitzer, bringing together several funds in cooperation to pool enough capital to take control.

"Let's think about turning this into a buyout," Blitzer said he remembered Gray telling him. "Because there's a lot of things we want to do with this business that we might not be able to effectuate as a minority investor."

Korngold said that after the Oatly deal, Gray sought for ways to make Oatly both a client and a beneficiary of Blackstone's portfolio, creating a virtuous circle of mutual growth.

He invited Oatly's leaders, for instance, to meet with executives involved in Blackstone's expansive warehouse-property business, which caters to the storage and distribution of consumer goods. He also suggested the brand confer with Blackstone's lending arm to discuss credit lines that could facilitate its operations and growth.

"He sits at a level where he sees connections across the organization," Korngold said.

Gray has also been keen to glean the insights of one unit and use them as kindling for the next lucrative investment of another. Joseph Baratta, who oversees Blackstone's $190 billion private-equity operations, said the firm's 2016 purchase of BioMed Realty Trust, a public company that owns a multimillion-square-foot portfolio of life-sciences-focused properties, helped it realize the booming growth in that sector.

"It was just very clear that this was a megatrend that also was good for humanity, and if we could find a way to deploy capital, we should be able to participate in that," Baratta said.

Two years later, Blackstone acquired Clarus, an investment firm that specializes in big-budget late-stage pharmaceutical development.

"Jon's changed the approach of people at the firm," Schwarzman said. "We're now able to take an individual investment opportunity, and if it doesn't fit one part of the firm, he can move it around to other parts."

The new life-sciences unit struck a $2 billion deal in August that pulled capital from various Blackstone funds to acquire 50% of the royalties for inclisiran, a highly anticipated cholesterol drug that is pending Food and Drug Administration approval.

Nicholas Galakatos, Clarus' cofounder and managing director who now leads Blackstone's life-sciences investment platform, said Gray quickly caught on to the sector's most promising business opportunities, even though he has no background in biology or pharmaceutical development. He also promised to give Galakatos the runway to make big bets on groundbreaking drugs.

"What he said to me is, 'Look, I'm going to pay a lot of attention to this,'" Galakatos said. "And he has. It's been very exciting."

Stamping out discord

For Gray, as important to the choreography of success has been stamping out discord.

He dismissed a handful of executives in the firm's distressed-debt hedge fund, which James brought to Blackstone via the purchase of the credit firm GSO Capital Partners in 2008.

The team had caught the eye of regulators and strained relationships with key counterparties, including Goldman Sachs, by instructing a debtor to make payments past a deadline so that Blackstone could cash in on swaps, a type of insurance, it had taken to protect itself against such a default.

After the imbroglio unfolded in 2018, Gray smoothed over the rift with Goldman's then-CEO, Lloyd Blankfein, over lunch. 

Sources say that Blackstone's management teams have become more unified under Gray, with important investment committees manned by a collection of young executives, many of whom are his acolytes or close associates.

That's a departure from the more fractious days of pre-2018, when Tom Hill, the former leader of BAAM, used to fight with Tony James on everything from strategy to bonuses, according to two people familiar with the matter. Rather than working out their differences one-on-one, Hill made it a habit to appeal directly to Schwarzman, a Harvard Business School classmate.

Even before the pandemic, Gray launched a morning broadcast every Monday he dubbed "Blackstone TV" to help foster connection and awareness across the company's ranks and communicate his values and vision. He ends each meeting with one of his signature mantras: "Stay calm. Stay positive. Never give up."

In recent years, he has also overseen the production of an annual holiday video. Modeled after the television show "The Office," it offers a self-deprecating take on Blackstone's workplace and culture.

The skits are more than just harmless fun. Part of running a firm like Blackstone is effectively managing the task of softening its image in the face of the perpetual criticism that stems from its investment activities. Lasting tarnish to Blackstone's brand, after all, could scare off investors or hamper deals. Gray also just dislikes bad press, in large part because it's not good for Blackstone's stock price, according to people familiar with his thinking. 

Over the past decade, Blackstone drew scrutiny for buying up tens of thousands of single-family homes across the country, many of them casualties of the subprime-mortgage crisis. The image of a Wall Street baron supplanting the dream of homeownership didn't spin a flattering portrait. The press was bad, but it fell short of toxic, in part because of Gray's insistence that Blackstone acquire only properties that had already passed through foreclosure.

"He would never buy a home in foreclosure or in any way that would impact the credit worthiness of the owner," Laurence Tosi, Blackstone's chief financial officer between 2008 and 2015, said. "He never wanted to be in a position where someone was thrown out of the house. He was absolutely insistent from the beginning."

Its investment in an environmentally focused company like Oatly, meanwhile, revived criticism of Blackstone's ownership stake in Hidrovias, a Brazilian builder of shipping infrastructure that has been accused of building a major highway that is contributing to deforestation in the Amazon. Blackstone denies the company is involved in the highway project.

Gray seemed to anticipate the controversy. He purchased the Oatly stake through an investment group that he decided would include the high-wattage celebrities Oprah Winfrey, Natalie Portman, and Jay-Z's entertainment company.

Gray's philanthropy

Gray has also made sure his wealth and personal philanthropy fly under the radar, a contrast to Schwarzman, who has requested that some of his donations come with naming rights, such as when he donated # 100 million to New York Public Library in exchange for renaming its main branch on Bryant Park the Stephen A. Schwarzman Building. 

Gray serves on the board of Harlem Village Academy, a charter school in New York that offers education to low-income students.

During a tour of a prospective new facility in upper Manhattan with Deborah Kenny, the school's CEO, the pair were stranded in an elevator, which ground to a halt between the first and second floors. A janitor had to pry open the elevator doors in the building's lobby and help them climb out of the dangling cab, she said.

Gray funded the acquisition of the property but refused to put his name on it, Kenny said. Instead, at Kenny's insistence, he agreed to name the school after his grandfather Leon H. Gray, whom he told her taught him about civil rights as a child.

The staff at University of Pennsylvania, Gray's alma mater, meanwhile, say Gray visits annually for pep talks to recipients of a scholarship he gifted to low-income New Yorkers and to cancer researchers funded by Gray and his wife's foundation. On at least one occasion, he has told students to call him if they need help with their homework, according to University of Pennsylvania President Amy Gutmann.

"He has this infectious energy — my team calls it 'the Jon Gray effect,'" Gutmann said. "He is the opposite of intimidating. He just draws you in and lifts you up."

Pay drama and ruffled feathers

Gray's tenure has not been without missteps.

Over the summer, he scrapped a firmwide practice of granting special shares to senior managing directors, reserving the issuance of such shares to standard offerings that raise capital. He also proposed a fee on retired partners with legacy shares that earn an outsize dividend — a bid to boost the firm's stock. Gray underestimated the pushback and wound up halving the fee.

According to James, Gray had a tendency not to read a room before laying out his cards.

"My style was, a little bit more than Jon's, to let people talk for a while, whereas I think Jon likes to start out with a meeting so people know where he stands," James said.

James saw it as a correctable quirk.

"It's like telling LeBron James you got to work on something; they're minor things," James said.

A recent Gray initiative invited executives across all Blackstone business units to participate in an investment tutorial given by a private-equity team. One person who dialed in said they found the presentation laughable in its assumption that attendees needed a refresher on basic investing skills.

Some also say they feel that Gray is too quick to pass over lucrative investment opportunities when he fears they could trigger outsize controversy. For instance, in 2019, a Blackstone hedge fund had wanted to invest in the power company PG&E amid pending lawsuits over its liability in contributing to devastating wildfires in California. Gray canned the idea in a move that irked hedge-fund executives who felt it showed Gray cared more about optics than making money.

Some observers said Gray's success as a real-estate investor himself came over a span of decades when market conditions had been generally favorable and perhaps easy, in hindsight, to take for granted. In the aftermath of the great financial crisis, for instance, interest rates trailed down and stayed at record lows, boosting a recovery of property prices that padded the bottom line of real-estate investors across the market, including Blackstone.

Rising rates brought on by unprecedented national debt and the potential for increasing taxes and regulation ushered in by President Joe Biden's administration could fundamentally upend the prevailing macroeconomic conditions in which the firm has thrived.

"The wind might not be at their back anymore; it might be in their face," Barry Sternlicht, the chairman of Starwood Capital Group and a friend of Gray's, said. "Hopefully it's a gentle wind."

Blackstone, meanwhile, is under relentless pressure to deploy capital. In 2019, it announced the largest-ever property fund, which tallied $20.5 billion. Last year, it raised the largest debt fund, which totaled $8 billion.

"I respect Jon more than anyone," Sternlicht said. "It's incredible pressure to handle the capital that they have to handle. They pay big prices for things because they have to put the money out. There are so many pockets in their firm where they can put a deal. I can't even keep track."

Squash matches in Jamaica

The challenges for Gray are underscored by Schwarzman's monumental ambitions for his tenure.

"The firm will be vastly larger; it will be truly global. It will have products at a whole variety of different rates of return and cover the world," Schwarzman said. "He'll build a really remarkable company with a huge number of people of enormous capability."

Those who know Gray best say he is uniquely suited to handle the inevitable setbacks and obstacles along the way.

Bill Ackman, the billionaire CEO of the hedge fund Pershing Square and a friend of Gray's, recalled a family vacation the pair took to Jamaica in 2002. The house they had rented unexpectedly had a squash court, and Ackman, an avid tennis player, and Gray, who spends little time playing sports, struck up a friendly game.

Unsurprisingly, Ackman easily mopped the floor with Gray, who was unable to score even a single point. Familiar with Wall Street's delicate egos, he thought it would be their first and last match, but Gray insisted on playing every day during the trip, stomaching countless blowout rounds. But eventually, Gray started winning points here and there and, by the end of their stay, a match.

"Tells you a little bit about the guy," Ackman said. "He doesn't give up, he's not discouraged when he loses, and he wants to win."