Much has changed since PERE began an annual ranking of private real estate’s top fundraising managers in 2008. But one thing has remained constant: the name at the top.

The Blackstone gap, the distance between the firm and the number two capital collector each year, has waxed and waned since PERE’s inaugural ranking. But it has never faltered. Since the start, the difference increased by a factor of 12 and the gulf has not been less than $20 billion since 2014. Blackstone has yet again amassed the most five-year direct capital commitments with nearly $65 billion raised since 2015, eclipsing its own ranking record of $55 billion, set last year. The New York-based mega-manager also bested another of its high-watermarks by outraising the second-place firm, Brookfield Asset Management, by nearly $36 billion.

“They’re able to do things with their portfolio allocations on a global basis hard to replicate by either separate accounts or smaller funds,” Anthony Breault, senior real estate investment officer for the US pension, Oregon State Treasury, tells PERE. “Scale is definitely a differentiator and it is what defines Blackstone, in many ways, as well as their investment opportunities.”

Blackstone is not the only firm capable of raising large funds. This year, seven other managers reported five-year totals of $10 billion or more, including four that raised at least $16 billion. Private real estate’s upper echelon is considerably more crowded than in 2015, when only two other firms raised more than $10 billion, though both less $15 billion.
Brookfield emerged as the next-most formidable fundraiser as of late. Its five-year efforts have ranked second for three years running, each time posting totals just shy of $30 billion – a threshold only Blackstone has crossed. Yet the gap between the two firms has widened in each of the past two years, first by $5 billion, then $10 billion.

As Blackstone has made a habit of doubling its closest competitor, it stands alone in the industry’s top tier. Brookfield, Lone Star Funds and Starwood Capital – each of which has finished runner up to Blackstone – and a handful of others, have firmly cemented themselves on the second rung of the PERE 100 ladder. But none has come close to challenging for the top spot. “There’s a whole next group of managers. But it’s a distant second in terms of capital raising,” Doug Weill, co-managing partner of the New York-based advisory firm Hodes Weill & Associates, tells PERE.

Past rivals

The last firm to compete neck and neck with Blackstone was Morgan Stanley Real Estate Investing, which remained within a few billion dollars of Blackstone in the rankings from 2008-11. Following almost opposite post-global financial crisis fortunes, the private equity firm pulled away from the investment bank in 2012, expanding its advantage to $16.4 billion. The paradigm shifted to its current state the following year, the first ranking to consider capital raised after the crisis; Morgan Stanley’s private real estate business fell out of the top 10, Starwood took its place at number two and the Blackstone gap ballooned to $24.1 billion.

Blackstone’s track record over that period won it loyalty from the institutional investor universe, Weill says. Funds in the global opportunistic Blackstone Real Estate Partners series have cumulatively achieved a total internal rate of return of 15 percent and 1.9x multiple, according to its most recent regulatory filing. “What would distinguish other firms would be out-performance relative to the returns that Blackstone has been delivering consistently,” Weill says.

However, Matt Casper, partner at the New York-based capital advisory Park Hill Group, which used to be owned by Blackstone, suggests there might not be enough investment capital to support multiple Blackstone-like fundraisers. “The market is only so large,” he says. “If only about $100 billion-$150 billion of capital is committed each year, it’s fairly ambitious to try to capture between 5 and 10 percent given the hundreds of managers competing for capital at any given time. That’s a pretty big lift and the market can only absorb so much.”

Oregon committed $300 million to Blackstone’s latest global opportunity fund, Real Estate Partners IX, which contributed $20.5 billion to the firm’s five-year total. In addition to scale, Breault says he continues to invest with Blackstone because of its transparency and its ability to identify trends in the market.

He is not alone. In total, the firm has reported some $44 billion in dry powder committed by its investors to take advantage of current market distress.

That figure emerged from the firm’s first quarter earnings call, on which chief operating officer Jon Gray told investors: “What we’re looking for are businesses that are cyclically – not secularly – under pressure. The opportunity to invest in them across various parts of the capital structure should be robust.”

Given the impacts of the coronavirus pandemic on private real estate markets around the world, Blackstone is likely to find such businesses, capitalize on the opportunity and maintain a notable fundraising advantage over its competition.