Blackstone breaks the bank

The New York-based firm raises a record $5.3 billion private equity real estate fund.

The Blackstone Group has closed on the largest private equity real estate fund ever raised, with capital commitments of $5.3 billion (€4.2 billion), more than double the size of its previous fund.

Blackstone spokesman John Ford called the current fund global in nature and said it would look for the best opportunities across sectors.

“Opportunity funds are called opportunity funds for a good reason,” he said. “We'll invest in the best opportunities, whether that means offices in Southern California or hotels in Northern Germany. But what that will be exactly I can't say.”

Blackstone Real Estate Partners V is the firm's first vehicle since last year's departure of Jon Kukral, who co-founded the firm's property arm alongside Tom Saylak, who left Blackstone a couple of years prior. In their stead, New York-based senior managing director Jonathan Gray and London-based senior managing director Chad Pike now serve as co-heads of the real estate group.

“We have a solid pipeline of potential real estate investments both in Europe and North America and this fund will give us the resources to take full advantage of those opportunities,” Pike said in a statement.

In the past few years, Blackstone has focused primarily on the hotel and office sectors, including last month's joint venture with Brookfield Properties to buy Trizec, one of the largest commercial landlords in the US, and Trizec Canada for a combined $8.9 billion. The firm has also taken private a number of publicly traded real estate entities over the past two years, including Wyndham, La Quinta, Meristar, NHP, Hospitality Europe and CarrAmerica.

Ford said Blackstone Real Estate Partners V has made two “small” investments but declined to discuss details because the firm has not formally closed on them yet.

Blackstone has raised seven real estate funds with total capital of $12.7 billion since its inception. Two of the funds were focused specifically on Western Europe, including BREP International II, which closed on €1.6 billion in 2005.

While Blackstone has succeeded in raising the largest real estate private equity fund, it also hopes to do the same in the traditional private equity category. Blackstone, along with Kohlberg Kravis Roberts and Texas Pacific Group, are all jockeying for position as they look to raise more than $15 billion each for LBO investments.