The Real Deal Miami

Blackstone raises record-breaking $15.8B real estate fund

20 percent of the capital is already committed

October 01, 2015 05:00PM
By Konrad Putzier

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Blackston's Jonathan Gray

Blackstone’s Jonathan Gray

From the New York website: It’s official: The Blackstone Group raised the world’s largest-ever private real estate fund, totaling $15.8 billion. News of the fundraising broke in March, but it took several months to rake in all the cash.

Twenty percent of the capital is already committed to projects, according to a press release.

Blackstone’s real estate group, headed by Jonathan Gray, is the largest private U.S. landlord and the world’s largest private real estate fund manager. As of June 30, it had $92 billion in assets under management.

In April, it bought GE Capital’s real estate portfolio for $26.5 billion in partnership with Wells Fargo and other investors, in a leveraged buyout using money from several Blackstone real estate funds. And last month, it dished out $3.9 billion for Strategic Hotels & Resorts, a deal that included Manhattan’s Essex House Hotel.

The new fund, Blackstone Real Estate Partners VIII, is the firm’s latest global fund, succeeding the $13.3 billion Blackstone Real Estate Partners VII, which it raised in late 2012. Blackstone also manages two regional real estate funds – the $8.2 billion Blackstone Real Estate Partners Europe IV and the $5 billion Blackstone Real Estate Partners Asia.

A source close to Blackstone recently told The Real Deal that investor demand for its latest fund well exceeded $15.8 billion, but that raising more cash would have made it difficult to find profitable investments. Bloomberg reported that 90 percent of the funds came from institutions, such as pension funds and insurance companies.

Fund managers generally pick target figures based both on investor demand and opportunities to spend. Recently, this has posed a dilemma: it has never been easier to raise money, and yet high-yield real estate assets are scarce amid growing competition for deals. Several fund managers have responded by entering new, less-crowded markets. Blackstone, for example, spent heavily on real estate in Southern Europe’s struggling economies.

The size of Blackstone’s funds is a crucial advantage, allowing it to buy real estate in bulk and then potentially sell of individual assets for a profit. “How many other players could have done [the GE deal]?” Scott Rechler, head of real estate investment firm RXR Realty, recently told TRD. “Over time, they have gotten to a size and scale where they can do deals few others can.”