Blackstone has done it again.
The New York-based mega manager has beaten its own largest fundraising record, closing on the largest closed-end real estate fund ever, Blackstone Real Estate Partners X. Blackstone took in $30 billion in outside commitments from investors like New York State Common Retirement Fund, California State Teachers’ Retirement System and North Carolina State Treasury, all of which committed $500 million, per PERE data. The firm raised a further $400 million in commitments from staff as a GP commitment.
BREP X is roughly 48 percent larger in size than the previous record holder, BREP IX, for which Blackstone closed on $20.5 billion in 2019. Toronto-based Brookfield holds claim to the third-largest closed-end real estate fund, the $17 billion Strategic Real Estate Partners IV fund, which closed in December.
The firm began fundraising in spring of last year, racing to $24.2 billion in capital commitments by the end of Q2 2022. Blackstone’s global co-head of real estate Kathleen McCarthy said that the remaining capital was circled at that time but some of the institutional clients and high-net-worth distribution partners needed more time to process their commitments.
Despite the early first close, Blackstone has deployed little of the fund thus far. McCarthy said the firm has done several small transactions via BREP X to date. “Effectively the full fund is fresh dry powder,” she added.
Deploying such a large fund in an environment where many are struggling to transact is no easy task. McCarthy noted that BREP X’s investment pipeline includes a number of opportunities where current owners may not be able to fulfill their business plans. The firm will also look at take-privates, of which it has completed around 50 in real estate in its history, McCarthy added. The BREP X fund can also invest via debt as well as using more creative capital structures, she said.
Market volatility does not deter the firm from deploying capital because of the sectors it is focused on. Over 80 percent of Blackstone’s real estate portfolio is in five sectors: warehouses, rental housing, hotels, data centers and life sciences office. These remain the firm’s highest conviction themes, McCarthy said.
“The sentiment for commercial real estate has gotten so negative. But commercial real estate is not a monolith and sector selection is critical. We have a lot of confidence in the fundamentals in the sectors we like,” McCarthy said. “Our insights we gain from across our portfolio, along with our scale of capital, sets us up to take advantage of compelling opportunities.”
Blackstone expects to deploy larger amounts of equity and smaller amounts of debt with its latest fund compared with predecessors in the series, given the pullback in lending in the wake of higher interest rates and turmoil in the banking sector.
“Having a larger fund that allows us to put more equity in transactions, at a time when debt may be harder to get, is a valuable asset to us and our investors,” McCarthy said.