The Blackstone Group has raised the single largest pool of discretionary capital ever for a dedicated European real estate opportunity fund, PERE can reveal.
According to sources, the group has so far raised $5.52 billion (€4.1 billion) for Blackstone Real Estate Partners (BREP) Europe IV – with more commitments to come as the vehicle is not yet closed. Already the figure means it has smashed the record for a European fund – also held by Blackstone – which is €3.1 billion for BEREP Europe III, the predecessor vehicle that closed in June 2009.
The giant figure is bound to skew fundraising statistics for European real estate opportunistic and value added funds in 2014 given it is three times larger than the biggest fund raised by any other firm this cycle. Indeed it is almost as much equity as the combined total raised in the last 18 months by the four most successful firms; Patron Capital, Perella Weinberg Partners, Orion Capital Managers and Tristan Capital. Tristan is strongly tipped to have hit its €900 million hard cap for European Property Investors Special Opportunities 3 (EPISO 3) as reported late last year.
The tally underlines the feeling already in global private equity real estate that Blackstone, perhaps along with Lone Star, is in a league of its own when it comes to fundraising. Only yesterday, PERE reported how Blackstone had raised $3 billion for an Asia equivalent. That fund too looks likely to set a record for the most raised in the region.
There is little surprise that the company is having success in terms of limited partners and a European product given the deal pipeline for opportunistic firms in Europe appears stronger now than at any point since 2008.
A few days ago, Lee Millstein, senior managing director of Cerberus Capital Management, told PERE: “Looking at the first quarter of 2014 – like all the quarters recently – our pipeline seems to be bigger than any other time.” Millstein added stress tests by the European Central Bank (ECB) this year could lead to even greater deal flow in Europe. “Banks are trying to get ahead of these tests, looking to sell assets that are deemed problem assets,” he said.
Fundraising in general is on the comeback after difficult years in the aftermath of the global financial crisis. According to PERE Research and Analytics, private equity real estate funds raised $101.7 billion in 2013, the highest annual amount secured for the asset class since 2008. PERE’s annual investor survey, published in October 2013, revealed that 87 percent of investors would at least maintain their current levels of exposure to private real estate. However, 2013’s total was raised by just 203 funds globally – 37 fewer than 2012. The consolidation of capital with fewer managers comes as no surprise as the same survey showed that investors, while keen on the asset class, planned to trim the number of managers they worked with. One in four investors said they had too many managers on their books.
Lone Star Real Estate Fund III, managed by Lone Star Funds, was the largest real estate fund to close in 2013. Closing in the fourth quarter, it collected $6.6 billion for global investment opportunities.
Three other firms, Blackstone Group, Starwood Capital Group and Brookfield Asset Management closed funds of over $3 billion in the year. Funds with a global investment mandate and those focused on North America proved most popular in 2013, collecting $31.0 and $32.4 billion respectively.