Blackstone infra team to spin out

The Blackstone Group’s infrastructure team is in the process of separating from the private equity firm to form its own business, Infrastructure Investor has learned.

Details of the separation are still being worked out, but the goal is to provide the team a more independent platform from which to continue raising their debut fund, Blackstone Infrastructure Partners.

Michael Dorrell

The fund has been in the market since early 2009 and has so far attracted $400 million against a target of up to $2 billion. The $400 million is third-party capital that excludes Blackstone’s cornerstone commitment of $50 million.

Market feedback indicated a private equity-owned infrastructure fund was not popular with potential investors. Blackstone also has been in the process of raising an energy fund, an area that often overlaps with infrastructure. The separation is aimed at helping the team overcome both of these concerns.

Trent Vichie

Trent Vichie and Michael Dorrell, New York-based senior managing directors that Blackstone hired from Macquarie in 2008 to lead its infrastructure team, will head the new spinout. It is unclear yet how many members of Blackstone’s 11-strong infrastructure team will join them, but the duo plan to make additional hires in the near term.

For its part, Blackstone will retain an ongoing interest in the fund and is still expected to support the team by referring deals and sitting on its investment committee. The team’s $400 million in capital commitments also will stay with them as they separate from Blackstone.

The team recently inked its first deal, a desalinisation plant in California’s San Diego County that is being constructed by Connecticut-based water developer Poseidon Resources. The team previously had looked at other deals including a $125 million purchase of preferred shares in Crosstex Energy, a Texas pipeline operator – a deal ultimately executed by GSO Capital Partners, Blackstone’s credit investment unit.