Investors anticipating Blackstone’s highly anticipated tenth global opportunistic real estate private equity fund, Blackstone Real Estate Partners X, should expect to see it this quarter, the firm said on its Q4 2021 earnings call this week.
The successor to private equity real estate’s biggest closed-end fund – the $21 billion BREP IX, which closed in September 2019 – is part of what Blackstone described as a “new flagship fundraising cycle” expected to pull in about $150 billion for global funds across the firm’s asset classes.
“Given the strong pace of deployment across the firm, we’re now moving into a new flagship fundraising cycle,” said Blackstone president and chief operating officer Jon Gray. He said the next iteration of the flagship real estate fund series would be among the first two vehicles included in the cycle.
“Over the next 18 months, we expect to have launched and substantially complete fundraising for nearly all of the firm’s major drawdown strategies,” Gray said. “We expect to start raising our two largest flagships, global real estate and corporate private equity, this quarter.” A total of 17 vehicles are expected to be raised over the coming 18 months, he said.
The update follows on from his remarks on the firm’s previous quarterly call on which he said BREP IX had less than $10 billion of available capital as of September 30 last year. Typically, follow-on closed-end private funds can be marketed after the majority of the capital in the predecessor has been committed.
Gray said that, at the end of the year, the only closed-end vehicle in real estate Blackstone had in the market was BREP Asia III. The firm is targeting $9 billion for that fund and has raised almost $6.4 billion so far, including $2.4 billion in Q4, per supplementary earnings data provided by Blackstone. The manager’s sixth European fund was closed in 2020 with €9.8 billion in capital commitments.
Real estate led the firm’s returns in the fourth quarter, contributing to almost half its earnings, chief executive Stephen Schwarzman said. The opportunistic funds appreciated 44 percent, chief financial officer Michael Chae added.
More than 70 percent of Blackstone’s $280 billion real estate portfolio is allocated to logistics, residential and life sciences offices, all sectors that will continue to attract interest from investors in the next cycle, the firm said.
Blackstone’s executives were questioned on the call by investors about the current inflation prospects and the implications for rising interest rates. Gray said that might contribute to some slowdowns, but Blackstone’s outlook remains positive.
“In my 30-year career, I’ve never seen real estate fundamentals in the sectors where we are focused as strong as they are today.”