Blackstone expects to raise the vast majority of the $10 billion it is targeting for Blackstone Real Estate Partners Europe VI in the coming weeks, according to president and chief operating officer Jon Gray.
The vehicle is the sixth European opportunistic real estate fund in the series. Launched in 2019, according to PERE data, it has raised capital from institutional investors that include the Arkansas Teacher Retirement System, Illinois Municipal Retirement Fund, State Universities Retirement System of Illinois and the Teachers’ Retirement System of Louisiana.
Its predecessor vehicle, Blackstone Real Estate Partners Europe V, launched in March 2016 and closed on $7.86 billion in May 2017, according to PERE data. The fund surpassed its $7 billion target, securing commitments from institutional investors such as the California State Teachers’ Retirement System, Florida State Board of Administration and Fubon Life Insurance.
Blackstone Real Estate Partners Europe VI’s $10 billion target makes it the largest European opportunistic real estate fund on the market. If successful in reaching that target, it will upend its predecessor vehicle as Blackstone’s largest European opportunistic fund and become the largest European opportunistic fund ever raised.
“The ability to raise record-setting funds, and close to a one-and-done basis, speaks to the strength of the global franchise,” Gray said on the firm’s first quarter earnings call.
Blackstone Real Estate Partners Europe VI and the $20 billion Blackstone Real Estate Partners IX global real estate fund are among the four flagship funds that will reach a collective $65 billion in capital raised, Gray said. Approximately 70 percent of the capital for these four funds – which also include corporate private equity fund Blackstone Capital Partners VIII and private equity secondaries fund Strategic Partners Fund VIII – has already been raised, he noted.
Gray also gave an update on the firm’s core-plus real estate platform, which previously set a goal of reaching $60 billion in assets under management in the next two to three years and $100 billion in AUM by 2024. The platform has now hit $36 billion, having grown 22 percent over the last five years. Some of this growth could be attributed to Blackstone’s non-traded REIT, BREIT, according to Gray.
The firm expanded BREIT distribution globally and to the independent broker-dealer channel, and the REIT has grown to $6 billion over the last two years, Gray said. This boost from the retail channel adds to the firm’s collective $76 billion in perpetual capital AUM across 13 funds.
Blackstone is putting a growing focus on retail investors as it recognizes that there has been a shift from defined benefit plans to defined contribution plans. The firm has been speaking to politicians in Washington, DC about opening up the retirement community to alternative investments, including private real estate, Gray said. He believes these long-term pools of capital from individual investors will eventually have access to alternative investments.
Chief financial officer Michael Chae believes that when alternative investments become more accessible to individual retail investors, Blackstone alternative products will be included in target date funds. Rather than allowing individual investors to directly invest in closed-ended real estate funds, it is more likely that Blackstone vehicles will be embedded in other products as a start, he said on the earnings call.
During the first quarter, Blackstone raised more than $5 billion in equity for real estate and $42.9 billion across all asset classes. The firm was a net capital raiser for the quarter, deploying $3 billion for real estate and nearly $11.8 billion across all asset classes. Meanwhile, total assets under management grew 14 percent year-on-year to $511.8 billion from the $449.6 billion reported in the first quarter of 2018. Real estate AUM rose to $140.3 billion during the first quarter of 2019 from $449.6 billion during the same period in 2018, representing a 13.8 percent year-on-year increase.