Blackstone blasts through $15 billion hard cap

The New York-based private equity real estate giant has collected all of its institutional capital for BREP VIII and now plans to raise additional money from retail investors.

The Blackstone Group has wrapped up the institutional portion of its largest-ever global property fund, Blackstone Real Estate Partners (BREP) VIII, collecting $14.5 billion from investors in less than four months. This marks the first time that the New York-based private equity and real estate giant has hauled in all of its institutional capital for a fund in a single close.

Blackstone, however, also expects to raise $1.3 billion in commitments from high-net-worth investors, according to an article in The Wall Street Journal yesterday. This additional capital would take the fund beyond its $15 billion hard cap to $15.8 billion.

The capital raise also is far and away the firm’s fastest in real estate. BREP VIII’s predecessor fund, for example, captured a total of $13.3 billion in October 2012, but was in market for approximately 21 months. The firm collected only $4 billion in the first close for BREP VII and took 10 months to reach the $10 billion mark.

The lightning-quick fundraise for BREP VIII was helped by Blackstone’s use of group due diligence sessions for the first time. Blackstone held the first of the two sessions in December at its offices in New York, shortly after it officially began marketing BREP VIII and had issued the private placement memorandum for the fund. The following month, the firm held a second session at the Waldorf Astoria. In total, about 200 institutional investors were said to have attended the two session, either in person or by speakerphone.

PERE reported in late January that Blackstone was expected to hold a first close of approximately $10 billion for BREP VIII – an unprecedented amount for an initial closing for a property fund – this month. However, earlier this month, investors told PERE that Blackstone was anticipating enough commitments in the first close to reach its hard cap.

Blackstone is targeting a 16 percent net internal rate of return and a 20 percent gross return for BREP VIII, according to documents from the New Mexico State Investment Council. Similar to the other funds in the BREP series, BREP VIII’s investment strategy will be acquiring distressed or undermanaged properties at below market prices and fixing issues related with those assets before exiting the investments. Additionally, the firm also will invest in real estate platforms where it can improve efficiencies and performance on behalf of the fund.

BREP VIII is expected to be approximately 70 percent allocated to the US, 10 percent to Asia, 10 percent to 15 percent in Europe, with the remaining capital in Latin America. In addition to New Mexico SIC, which committed $24 million to the fund last month, other limited partners include the Pennsylvania Public School Employees’ Retirement System, the New Jersey Division of Investment, Ohio Police & Fire Pension Fund and the Teachers’ Retirement System of the State of Illinois.

For PERE’s March magazine story on Blackstone’s fundraising for BREP VIII, click here.