Speaker 1: Hi everyone, I'm friends seeing and I really hope you're
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Speaker 1: preview of the conversation we have coming up next week
Speaker 1: with John Gray, number two at Blackstone. You're known as
Speaker 1: the Hilton deal guy. Right twenty years ago, you take
Speaker 1: this massive bet on Hilton, you pay twenty six billion
Speaker 1: for it at Blackstone with twenty billion debt. What were
Speaker 1: you thinking?
Speaker 2: I wasn't as wise back then, I guess at the time.
Speaker 2: If you go back, this is right before the financial crisis,
Speaker 2: and I was running our real estate business, and what
Speaker 2: we were looking for was how could we buy great
Speaker 2: real estate or operating businesses at reasonable prices. And there
Speaker 2: were so much debt in the market fueling private real
Speaker 2: estate values that we found we could buy the public
Speaker 2: companies at better prices. So we ended up paying a
Speaker 2: big premium thirty plus percent over where the company was trading,
Speaker 2: and we committed in July of seven. We closed in
Speaker 2: late October. By early eight, things are going badly. The
Speaker 2: financial crisis really picks up, and the company has a
Speaker 2: twenty percent decline in revenue and a forty percent decline
Speaker 2: in cash flow, and we put a lot of debt
Speaker 2: on it. And I would say at that moment it
Speaker 2: did feel like it was career shortening and that I
Speaker 2: shouldn't be sitting here today.
Speaker 1: Did you think, what have I done? Or did you think?
Speaker 1: I think?
Speaker 2: There was part of me that was what have I done?
Speaker 2: But there was also part of me that was this
Speaker 2: is a great business. We still thought that travel was
Speaker 2: a long term growth business and that the core of
Speaker 2: the company, the branded hotel business where you manage enfranchise
Speaker 2: hotels Hilton, Hilton Garden and Hampton Waldorf, that that business
Speaker 2: could grow a lot beyond the United States. And then
Speaker 2: we just had to weather this storm. And so we
Speaker 2: ended up putting in an extra eight hundred million dollars
Speaker 2: at the bottom. By the way, we wrote off quite
Speaker 2: a storm. It was quite a storm. We wrote down
Speaker 2: the investment by seventy one percent, So the largest investment
Speaker 2: in our firm's history we wrote down by seventy one percent.
Speaker 2: You had to go to meetings with investors and I'd
Speaker 2: had to say to them, hey, I know we've done this,
Speaker 2: but it's unrealized we're going to get through this. And
Speaker 2: there was obviously, rightfully a lot of concern. Ultimately, the
Speaker 2: sun came back out, the business grew, we took the
Speaker 2: company public, and we made fourteen billion dollars and by
Speaker 2: all accounts, that should not have happened. And so the
Speaker 2: question becomes what you learned. One is the importance of
Speaker 2: staying calm. So I always say to my kids, and
Speaker 2: now I say to everyone in Blackstone, stay calm, stay positive,
Speaker 2: never give up. And I think that was really important
Speaker 2: in a moment like this.
Speaker 1: That was a taste of my interview with John Gray.
Speaker 1: The full episode will be out on Monday. Please subscribe
Speaker 1: and share with friends.