Amid the rush to put capital to work in today’s re-opened property markets, many fund managers are struggling to find quality investment opportunities. But not Blackstone.
The New York-based mega-manager is ahead of schedule on deployment for several of its closed-end vehicles, chief operating officer Jonathan Gray said during the firm’s third-quarter earnings call Thursday, including three real estate vehicles. If that pace continues, he added, it could accelerate the launch of new fundraising campaigns.
“Several of our drawdown funds are deploying capital faster than our original expectations and are now over 50 percent committed, including global private equity, global and European real estate, growth equity, private equity energy, European credit and energy credit and our secondary real estate funds,” he said. “The timing of successor funds will be a function of investment pace.”
For example, Blackstone’s latest global real estate fund, the $21 billion Blackstone Real Estate Partners IX, had less than $10 billion of available capital as of September 30, while the €9.8 billion BREP Europe VI had available capital of €6 billion.
Last quarter was Blackstone’s biggest ever for deployment across all its businesses, as it put $37 billion to work, Gray said on the call. Additionally, it made another $30 billion in commitments that have not yet closed.
Blackstone deployed $14 billion into real estate during the quarter, according to its earnings report. More than $10.4 billion of that deployment came from Blackstone core-plus real estate vehicles. Opportunistic accounted for nearly $3.2 billion and real estate debt comprised $737 million. Key acquisitions included the Home Partners of America single-family rental platform, the City Center mixed-use development project in Las Vegas and the take-private of QTS Data Centers.
Blackstone has $10 billion of pending real estate transactions, including the acquisition of AIG’s affordable housing platform and a 15 million-square-foot portfolio of US logistics properties.
Blackstone’s real estate platforms saw significant value appreciation during the quarter, too, Gray said. Its opportunistic platform was up 16 percent on the quarter and 36 percent year over year. Its core-plus funds were up 7.6 and 22.6 percent, respectively, over the same time periods.
On top of its recent string of acquisitions, the manager still has $39.5 billion of dry powder for real estate, part of a broader war chest of $127 billion to deploy across its various businesses. And it continues to raise still more capital. Gray said Blackstone has closed $4 billion for its latest Asian opportunistic fund, BREP Asia III, which is targeting $9 billion.
“It is impossible to not feel energized about the firm’s prospects,” he said. “Blackstone is a branded, fast-growing, capital-light asset manager with an enormous addressable market, and the future is bright.”
Perhaps the brightest part of that future is Blackstone’s ever-expanding collection of perpetual-life vehicles. The firm added Blackstone European Property Income Fund, or BEPIF, to its stable of offerings in the segment. That vehicle will accept its first investments this quarter.
Perpetual-life capital, which comes from both retail and institutional investors, already accounts for a huge share of Blackstone’s fundraising apparatus, Gray said. Of the $148 billion the firm has raised during the past 12 months, nearly half has been for its open-end, core-plus vehicles.
Blackstone’s perpetual-capital vehicles now total nearly $200 billion, up 70 percent year over year and threefold since 2018, Gray said.
“[Having perpetual capital vehicles] allows us to broaden who we serve, and where we can invest,” he said during the call. “We compare this to a ship moving from a narrow channel into open waters. And we believe this process has just begun.”
Blackstone’s new suite of perpetual life vehicles have also become tools for large acquisitions. Gray said the 10 biggest deals the firm made last quarter all came from perpetual-life vehicles, none of which existed five years prior. “Deploying capital at scale has gotten easier because we have more oars in that water,” he said.