Blackstone real estate fundraise passes $10bn

The private equity real estate division of Blackstone has yet to reach a final close, but its commitments to date mean the New York alternatives giant now controls the largest funds in both private equity and private equity real estate.

The real estate deal market may be slow, but 2007 looks set to crack 2006’s fundraising record with The Blackstone Group surging past the $10 billion mark for its latest private equity real estate vehicle.

Blackstone Real Estate Partners VI has not yet reached a final close. But the firm has secured commitments in excess of $10 billion, making it the largest private equity real estate fund ever raised. In August the firm announced a final close on a $21.7 billion private equity fund – the largest such vehicle yet raised.

The real estate fundraising figures were confirmed in publicly traded Blackstone’s third quarter earnings conference call, during which Blackstone chief financial officer Mike Puglisi said the firm has “held additional closings on Blackstone Real Estate Partners VI, the largest real estate opportunity fund in the world, in the third quarter such now that we have $10 billion of limited partner commitments to this fund.”

On November 14, Blackstone chairman and co-founder Stephen Schwarzman spoke at the Merrill Lynch Banking and Financial Services Investor Conference, where he was quoted as saying that his real estate division has “the largest real estate opportunity funds in the world which we just finished, a little over $10 billion.” Additionally, said Schwarzman, “We also have other real estate funds in Europe, which will bring us up to $13 to $14 billion range.”

Previously, the largest private equity real estate fund was Morgan Stanley Real Estate’s $8 billion international property vehicle, which announced a final close in June.

Real estate has been a strong performer for Blackstone, which closed its fifth fund, Blackstone Real Estate Partners V, on $5.3 billion in 2006. At the Merrill Lynch conference, Schwarzman said that the real estate business had generated a 39 percent gross return since its 1992 inception. “The returns that we have had in real estate are really shoot-the-lights-out kind of returns,” Schwarzman said.