Blackstone’s next real estate debt fund is aiming for $5B

Blackstone is aiming to raise $5 billion for its latest real estate debt fund.

The fund, Blackstone Real Estate Debt Strategies IV, will have an emphasis on the U.S. but also focus on property-related wagers globally Bloomberg reported citing an investor presentation.

Debt funds in the U.S. have seen strong interest in recent years, as investors seek better yields and protection from falls in property values. According to research firm Preqin, real estate debt funds raised $26 billion in 2018 after raising a record $33 billion in 2017, and roughly 40 percent of assets in such funds have yet to be deployed.

One known investor in Blackstone’s latest debt vehicle is the $42.7 billion Illinois Municipal Retirement Fund, which disclosed last week that it had committed up to $100 million.

Management fees, which range from 1.25 to 1.5 percent depending on the size of the investment, will be waived for four months for investors in the first close. The fund is required to meet a return rate of 6 percent to receive carried interest.

Blackstone’s previous debt fund, which raised $4.8 billion in 2016 after targeting $4 billion, originates and structures mezzanine debt on properties in North America and Europe. Blackstone’s real estate debt strategies unit oversees a total of over $17 billion in capital.

Blackstone’s new debt fund comes on the heels of a massive $22 billion it has reportedly raised for a real estate buyout fund, the largest such fund ever. With a typical 2-to-1 debt-to-equity ratio, that fund would have enough purchasing power to acquire all commercial real estate traded in New York, Chicago, and San Francisco in most of 2018.

[Bloomberg] — Kevin Sun