Blackstone has corralled $2 billion in a first close for its most recent core-plus vehicle, a European fund that launched over the summer, according to the New York-based firm’s fourth-quarter earnings released Thursday.
“The pipeline is smaller but still we’ve got some interesting things in it”
– Steve Schwarzman
With the initial close, the firm continues to make inroads on its goal to bring its core-plus business to $100 billion of assets under management.
The fund, Blackstone Property Partners Europe, follows a similar investment strategy to Blackstone’s open-ended, North America-focused vehicle that launched in 2014. The firm’s entire core-plus platform had reached $27 billion in assets at year-end 2017, up 91 percent year-on-year, according to its fourth-quarter earnings reports. That $27 billion included the $6 billion asset management mandate for Logicor, the European logistics business Blackstone sold last year to sovereign wealth fund China Investment Corporation.
“When we launched this business a few years ago, I said in my vision it would eventually reach $100 billion, and I got a little resistance from people here in the firm,” chief executive Steve Schwarzman said on the firm’s Thursday analyst call. “I think we’re well on our way and I think we’re going to do it.”
The core-plus platform generated a 12 percent net internal rate of return as of December 31, compared with 16 percent for the firm’s opportunistic fund series, Blackstone Real Estate Partners, according to the firm’s earnings results.
Across its real estate strategies in 2017, the firm saw a record year of realizations, at $24.5 billion, and of capital deployment, at $23.8 billion. Last year, the firm realized $17.6 billion and invested $12.6 billion.
For its opportunistic strategies, the firm is seeing fewer opportunities in asset-level transactions, looking instead to buy undervalued or undermanaged companies, Schwarzman said on the analyst call.
“We’re finding things to do but they’ll be lumpy and large-scale where we maximize some of our advantages vis-a-vis other buyers,” he said. “The pipeline is smaller but still we’ve got some interesting things in it.”
Recently, those transactions have included last month’s agreement to privatize Canadian logistics-focused REIT Pure Industrial Real Estate Trust, in a deal valued at $3.8 billion. The firm is buying the REIT, which has assets in the US and Canada, through BPP.
Blackstone ended the year with $115.3 billion in real estate assets under management, up 13 percent year-on-year. Overall, the firm managed $434 billion, up 18 percent year-on-year.