The Blackstone Group Co-Founder, Pete Peterson, Surprises Blackstone's First Investor, Garnett Keith, on CNBC's "Power Lunch" Live from the Four Seasons Restaurant in NYC (Transcript Included)
DATE: June 25TH
TIME: 1:40 PM ET
The following is the unofficial transcript of a CNBC interview with the Blackstone Group's first investor, Garnett Keith, on CNBC's "Power Lunch" live from The Four Seasons Restaurant today at 1:40 PM ET. All references must be sourced to CNBC.
In the interview, Garnett Keith, Blackstone's first investor and now Chairman and CEO of SeaBridge Investment Advisors, talks about how in 1985, as Prudential CEO, he was the first investor in The Blackstone Group. When 488 potential investors said "no" to Steve Schwartzman and Pete Peterson, co-founders of The Blackstone Group, Keith offered a $100 million investment. Schwartzman and Keith sealed the deal over a tuna fish sandwich. Peterson makes a surprise appearance during the interview and says, "I will just say to Garnett Keith, my dear friend, he was there when Stephen Schwartzman and I needed him and I will never forget it. My gratitude is unlimited."
SUE: WELCOME BACK TO "POWER LUNCH" WE ARE IN THE SAME BAR AREA HERE AT THE FOUR SEASONS RESTAURANT WHERE IF YOU WANT TO HAVE A QUICK BITE TO EAT, MAY BE YOUR BY YOURSELF YOU CAN COME TO THE BAR AND SIT DOWN BUT WE'RE JOINED BY BUT I HAVE BEEN CALLING OUR MYSTERY GUEST TODAY. GARNETT KEITH JOINS AS HE IS THE NOW PETTUS BRIDGE INVESTMENT. PLEASURE TO HAVE YOU HERE. THIS IS CERTAINLY NOT YOUR CLAIM TO FAME BUT IT IS AN INTERESTING PORTION OF YOUR LIFE. YOU COULD BE CALLED THE FIRST INVESTOR IN THE BLACKSTONE IPO.
GARNETT KEITH: I WAS. STEVE HAS BEEN VERY GENEROUS WITH HIS COMMENT WITH TWO MEN WAS ON THE STREETS OF NEW WORK WE TOOK THEM IN AND GAVE THEM LUNCH AND $100 MILLION.
SUE: I LIKE TO SAY AT ALL
HAPPENED AT THIS PARTICULAR
MEAL. PROBABLY NOT THIS FANCY. A LITTLE TUNA SANDWICH BECAUSE AS I UNDERSTAND IT, THE DEAL WAS DONE OVER A NICE LITTLE ALBACORE TUNA SANDWICH.
GARNETT: KEY REMINDS US THAT THE MENUS DON'T HAVE PRICES, THEY HAVE SALARIES.
SUE: YOU DID NOT RESCUE IS CERTAINLY BUT YOU HAVE FAITH IN THEM WHEN HE SAID HE HAD BEEN BEATING THE STREETS GOING TO FRIENDS AND COLLEAGUES TRYING TO START BLACKSTONE AND IT WAS THE HARDEST THING HE HAD EVER DONE. WHY DID YOU INVEST YOUR WITH CREDENTIAL AT THE TIME. WHY DID YOU DECIDE TO MAKE A MOVE?
GARNETT: THESE WERE DISTINGUISHED MEN. THAT THE SECRETARY OF COMMERCE , LEHMAN 82 WAS NOT AN EASY SHOT TO RUN. AND STEVE SCHWARTZMAN WAS VERY BRIGHT U.S. HAD OF AND A DAY. THE QUESTION WAS COULD THEY PUT TOGETHER A TEAM TO DO THIS? I THINK THE ANSWER IS PRETTY CLEARLY THEN AND NOW IS YES. THE SECOND FACTOR, AND THIS IS NOT KNOWN, I TRAINED AND LEARNED UNDER REMAND CHARLES AND RAY CHARLES IS KNOWN OF THE KING OF PRIVATE PLACEMENTS IN THE '60S AND '70S. HE TOOK EARLY RETIREMENT IN 1980 AND WENT TO WORK FOR PETERSON AT BLACKSTONE PROPOSAL MY RESPECT AND AFFECTION FOR RAY CHARLES MADE ME COME INTO THIS LUNCH WITH A LOT DISPOSITION THAT THESE GUYS CAN PUT TOGETHER AN LBO TEAM. WE WERE WORKING WITH THE HENRY KRAVIS AND KOHLBERG AT KKR'S WE THOUGHT WE KNEW THE BUSINESS BUT ALSO THEIR WE ARE.
SUE: YOU ARE ALSO KNOWN I'M SURE THE TUNA SANDWICHES MUCH APPRECIATIVE BECAUSE THIS HOUSE LIKE THEY WERE WORKING AWFULLY HARD TO GET SOME MONEY PERHAPS ARE BETTER KNOWN FOR BUILDING OUT CREDENTIALS ENTIRE AGE OF OPERATION. AT A TIME WHEN A LOT OF COMPANIES WERE NOT GOING IN THAT DIRECTION. ASIA WAS THE GREAT UNRECOGNIZED AREA OF THE WORLD. ONCE AGAIN I HAD OF YOUR TIME.
GARNETT: THAT WAS EASY BECAUSE THERE AGAIN IT IS ALL YOUR FRIENDS. I HAD TWO GREAT FRIENDS WHEN A JAPAN AND VICTOR AND CHINA AND SOUTHEAST ASIA. AND WORKING WITH THEM WE'RE ABLE TO GREAT INSURANCE OPERATION AND A GREAT INVESTMENT OPERATION WAS BUILT IN HONG KONG AND SINGAPORE UNDER VICTOR.
SUE: GIVEN THE FACT THAT YOU HAD BEEN EARLY ON AT LEAST THOSE TWO DEVELOPMENTS I'M SURE THERE ARE OTHERS I DON'T KNOW ABOUT, NOW YOU'RE RUNNING YOUR OWN FIRM, WOULD YOU LOOKING AT NOW? WHAT IS ATTRACTIVE TO YOU IN THIS ENVIRONMENT? POWER YOU MAKING MONEY?
GARNETT: WE ARE REASONABLE PRICE INVESTORS AND THE LAST TWO YEARS, WE HAVE SIX PEOPLE WORKING WITH US IN ASIA AND CHINA. WE THINK THE STORY THERE IS IN THE EARLY STAGES. IT HAS BEEN A VERY GOOD STORY IN THE LAST COUPLE YEARS BUT WE THINK THE STORY WILL GO ON FOR DECADES. SO WE'RE RUNNING GLOBALLY DIVERSIFIED PORTFOLIOS WITH GROWTH OUTSIDE THE U.S. FASTER THAN INSIDE. IS EASIER TO FIND INVESTMENTS THAT SEEM APPEALING TO US OUT THERE.
SUE: I LIKE TO BRING AN OLD A OF A FRIEND OF YOURS.
GARNETT: OH GOOD GRIEF AT.
PETERSON: CAN I GIVE YOU A HUG?
BILL GRIFFITH: THIS IS THE CO-FOUNDER OF BLACKSTONE AND TELL THE STORY HERE.
PETERSON: I WILL JUST SAY TO GARNETT KEITH, MY DEAR FRIEND, HE WAS THERE WHEN STEPHEN SCHWARTZMAN AND I NEEDED HIM AND I WILL NEVER FORGET IT. MY GRATITUDE IS UNLIMITED.
SUE: WE HAVE EIGHT TUNA SANDWICHES HERE FOR YOU. I KNOW YOU LIKE SPAGHETTI BUT I BROUGHT THE TWO NIZAM WHICH.
BILL: HOW MANY PEOPLE DID YOU HAVE TO GO TO BEFORE YOU FINALLY GOT YOUR YES?
PETERSON: MY LAWYERS ARE TELLING ME MY COMMENTS HAVE TO BE VERY BRIEF DURING THIS QUIET PERIOD BUT I WILL SAY MORE THAN I WANT TO REMEMBER IT.
GARNETT: WE WERE NOT THE FIRST CALL.
SUE: THAT YOU WERE THE MOST IMPORTANT. CONGRATULATIONS THANK YOU FOR COMING BY. I THINK IS A WONDERFUL THING WE'RE JUST TALKING ABOUT ASIA, LET ME JUST STAND UP. YOU THINK THE CHINA STORY WILL GO ON FOR THE NEXT DECADE. A LOT OF PEOPLE THINK CHINA IS WAY OVER HERE IT.
GARNETT: THAT IS NOT TOTALLY INCONSISTENT OBVIOUSLY THEY HAVE A NONCONVERTIBLE POLICY THAT IS GENERATING HUGE LIQUIDITY WITH THEIR EXCHANGE RATE. THAT IS TRAPPED IN THE COUNTRY AND PUSH UP THE REAL ESTATE AND THE MARKETS IN SHANGHAI PART OF THAT IS VERY DIFFERENT FROM IS CHINA WILL GROW SEVEN OR 8 OR NINE OR 10 PERCENT BLACKS WE ARE INVESTING MORE IN 23 AT OR TAIWAN OR DOING BUSINESS IN CHINA THAN INVESTING IN COMPANIES.
SUE: AS YOU ARE NOT DONNING A PURE CHINA PLAY? YORK LOOK LOOKING AT GROWTH AND THAT WHOLE AREA?
GARNETT: WE HAVE A FEW. SO THEY ARE NOT QUITE READY TO WILL LEAD DICE IN THE MARKET BUT IF THEY CAN'T FIND A WAY TO CAPTURE THAT GROWTH AND DELIVER IN THE FUTURE BETTER RETURN THEY CAN GET IN THIS MARKET THEN THEY'RE HAPPY TO WORK WITH US ON THAT.
SUE: THAT IS THE KEY THE RETURNS THAT YOU CAN GIVE IN THIS MARKET. THAT YOU STILL FIND UNITED STATES COMPELLING FROM AN INVESTMENT STANDPOINT? OR DO FIND THE OPPORTUNITIES OVERSEAS BETTER?
GARNETT: WE LOOK AT BOTH AS GLOBAL INVESTORS. WE CAN FIND SOME THINGS IN THE U.S. DOES SO ATTRACTIVE BUT IT IS STILL A LOT EASIER TO FIND THINGS IN ASIA SPECIFICALLY, OR AT A FEW AND LATIN AMERICA OR EASTERN EUROPE. SO OUR PORTFOLIOS ARE WELL IVERSIFIED WITH MARKETS FULLY VALUED WE WANT TO BE WELL DIVERSIFIED.
SUE: THANK YOU SO MUCH FOR SPENDING TIME AND TAKING A TRIP DOWN MEMORY LANE. WE DON'T OFTEN GET THAT.
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