Blackstone reaches $7.6bn in equity for BREP Europe VII

Blackstone has amassed $7.6 billion in commitments for its seventh opportunistic real estate fund in Europe, a little over a year after launching the fund.

The firm raised $2.2 billion for Blackstone Real Estate Partners Europe VII in Q1 2024, according to the New York-headquartered manager’s latest earnings results. The latest equity haul for the fund followed a close on $1 billion in Q4 2023 and $3.2 billion in Q3 2023.

According to PERE data, the opportunistic vehicle was launched in March 2023, and is now approaching its €10 billion fundraising target. Among the investors in the fund are the New Mexico State Investment Council and Minnesota State Board of Investment, both of which committed $150 million, the data shows.

BREP Europe VII’s fundraising was among several fundraising highlights for the firm during Q1 2024. Besides BREP VII, the firm also raised $807 million for BREIT and $606 million for Blackstone Real Estate Debt Strategies V.

Blackstone’s president and chief operating officer, Jon Gray, was optimistic about the firm’s deployment in real estate, particularly in Europe. When asked if real estate deployment would reach the previous record levels in the mid-to-high $40 billion range, he said: “When rates go up, the public markets tend to move much more than what we see in the private market. For real estate, I do think that creates more opportunity for scalable deployment as some of those stocks move off, particularly if the debt market hangs in there.”

The firm has seen real estate transaction activity pick up in Europe, some of which is distress-related, he added: “There’s very negative sentiment, even though the fundamentals on the ground are actually pretty good in our chosen sectors… In Europe, I think there we’ll see rates come down more quickly than the US, which is helpful. So short answer, yes, it should help real estate deployment.”

Gray compared the current investment environment to the one that followed the global financial crisis, where commercial real estate values had bottomed in 2009 but negative headlines on the sector persisted for more three years. “We spent a lot of that time, of course, deploying capital into that dislocated period where people were still cautious.

“What gives us confidence as we look forward here is this reduction in cost of capital. We’ve seen spreads tighten a fair amount, probably 125 basis points in CMBS in the first quarter and through the end of the fourth quarter last year. We also saw CMBS issuance go up fivefold versus the first quarter of 2023.”

Fed rate cuts, which are anticipated for later this year, are an important factor as well, he added.

Meanwhile, the decline in new starts in the logistics and multifamily sectors has helped to lay the groundwork for investing in the current market dislocation, Gray noted: “I would think about this period of time as a time of seed planting, that you want to be investing into this dislocation because there’s a lot of uncertainty.”

With three global or regional opportunistic funds to invest, “we’re forward leaning as it relates to deployment, even though we recognize there’s still going to be a lot of assets from the previous period working their way through the system,” he said.

The bottoming of real estate values has provided the foundation for an uptick in transaction activity, as demonstrated by several major real estate investments in recent months. Earlier this month, Blackstone announced the $10 billion take-private of Denver-based rental housing platform, Air Communities. The transaction followed a $3.5 billion deal, announced in January, to privatize Toronto’s Tricon Residential.

While the firm deployed $4.9 billion in the quarter, it also made realizations worth $3.8 billion. These included the divestment of a trophy retail asset in Milan for €1.3 billion, representing the largest real estate single-asset sale ever in Italy; the sale of a portfolio of warehouses in Southern California; and the exit from a prime office building in Seoul.