Blueprint: Blackstone’s $1trn credit ambition, PERE Japan Korea Week begins, Alecta’s investigation by financial regulator

Blackstone’s real estate credit platform secures massive CalPERS commitment as the mega-manager sets $1 trillion AUM goal for debt businesses; PERE Japan Korea Week kicks off in Seoul; Alecta comes under scrutiny by Sweden’s financial regulator for its largest real estate investment; and more in today's briefing, exclusively for our valued subscribers.

What’s new?

Stephen Schwarzman, Blackstone

Blackstone looks to take more credit

It is all about the credit space these days at New York-based private markets mega-manager Blackstone. Chairman and chief executive officer Stephen Schwarzman posted on LinkedIn last week how he expected the firm’s debt businesses to “collectively reach $1 trillion in AUM within the next 10 years.” Announcing the formation of an integrated platform called Blackstone Credit and Insurance, or BXCI, Schwarzman said the firm now has a “one-stop solution that we believe will allow us to be a more effective lender” to address the opportunity. Notably, while the firm – which reached $1 trillion in overall assets in July – said its $1 trillion target included real estate credit, it also said its property debt business would remain a separate unit.

But Blackstone Real Estate Credit is doing well enough on its own. Indeed, CalPERS, the biggest US pension fund, confirmed last week it had committed $1.5 billion to Blackstone’s fifth real estate credit fund, Blackstone Real Estate Debt Strategies V, its biggest single commitment among more than $10 billion committed across private funds in the first quarter of the year. According to PERE data, BREDS V reached a third closing in June, collecting $3.7 billion of commitments so far against an $8 billion target.

Alecta comes under investigation

Sweden’s Financial Supervisory Authority is investigating Alecta, the country’s largest pension fund, for its investment in European residential real estate company Heimstaden Bostad. “AFI’s supervision includes examining and assessing whether the occupational pension companies follow rules that apply to investments,” the regulator stated in a notice posted last week. The investigation will include checking whether Alecta complied with regulations on vigilance, governance and risk management.

Heimstaden Bostad – which the Swedish pension fund established with the former’s parent company, Heimstaden AB, in 2013 – is Alecta’s largest investment, representing 4.3-4.6 percent of the total assets for the underlying pension companies, according to the investor’s 2022 annual and sustainability report. Both Heimstaden AB and Alecta own 38 percent of shares in Heimstaden Bostad, although the former has 50 percent of the voting shares while the latter has 30 percent, according to Heimstaden Bostad’s website. In an email to Reuters earlier this month, Alecta CEO Peder Hasslev acknowledged Heimstaden Bostad – which has posted negative cashflows since Q3 2022 – was in need of more capital and the pension plan was prepared to “contribute to a refinancing.”

PERE Japan Korea Week begins

PERE has officially kicked off its annual PERE Japan Korea Week. The conference program started today with the 9th PERE Seoul Forum at Fairmont Ambassador Seoul and will resume with the 10th PERE Tokyo Forum at the Shangri-la Tokyo on Thursday. With more than 200 delegates signed up for each forum, there are eight investor sessions across the two days where attendees will hear from industry heavyweights such as South Korea’s National Pension Service, Korea Investment Corporation, Japan Science and Technology Agency and Japan Post Bank on their real estate allocation plans and their outlook on where the market is headed. Look out for PERE‘s senior reporter Christie Ou, who will be performing on-stage duties and covering the live events.

Here are some of the week’s highlights to look out for (and check out the full agenda here):

  • Keynote panel: The to-do list for the next five years if you want to thrive in domestic and overseas real estate markets (PERE Seoul)
  • Investor panel: Interpreting the market trends and how Korean institutional investors will respond (PERE Seoul)
  • Investor panel: Investors compare appetite for real estate and their game plans to tackle market uncertainty (PERE Tokyo)
  • Investor panel: What are Japanese pension funds looking for in the year of 2024? (PERE Tokyo)

Trending topics

Hines sees signs of a rebound

Houston-based manager Hines has provided a noticeable counter-narrative to all the research demonstrating falling investment volumes around the world. In a white paper published last week, the firm highlighted signs of rebounding activity in all three major regions of the globe. In Market Outlook: Opportunistic Patience Prevails, Hines pointed to how plummeting office investment volumes in the US and Europe are distracting from increased transactions in other property types. For instance, although overall transaction volumes in the US were down 68 percent year-on-year in the second quarter, apartment dealflow had grown 10 percent, according to the report, which used research from data provider MSCI Real Assets. In Europe, meanwhile, industrial, retail and apartment transaction activity had increased 12.4 percent, 11.5 percent and a massive 81 percent, respectively. And in Asia, industrial volumes rose 22.4 percent during the same period, while retail went up 15.9 percent.

“While quarter-over-quarter data can be volatile and we prefer to see a more sustained increase in transaction activity before calling a bottom, the gains we did see in Q2 are encouraging,” commented Josh Scoville, managing director of Hines’ proprietary research, wrote in the paper.

The future is in the data

Investment has poured into data centers since the pandemic, with $44 billion of private capital funding for the sector last year alone, according to telecoms specialist Synergy Research Group. With the growth of AI and cloud data, demand for the real assets that house the necessary storage grows in tandem. Property services firm JLL reports that data centers are now the fifth-largest investment grade real estate sector globally.

PERE’s latest Data Centers special report reveals the extent to which the growth of this sector is now being driven by demand for hyperscale data centers, typically those facilities with more than 5,000 servers and 10,000 square feet. JLL notes there were 259 such data centers in 2015 but that number is expected to exceed 1,000 by the end of 2024. Amid this growth, efficiency and sustainability are rising up the agenda for the sector. These trends and more are covered in the report.

New podcast

Time for a new approach

PERE’s latest edition of Spotlight, sponsored by Manchester-based manager Arrow Global, shines a light on the changes in investment approach the firm believes are necessary to identify the best opportunities in today’s resetting global economy. Beyond the headlines about inflation and interest rates, Arrow’s principal and head of real estate Marc Fuhrmann dives into the implications of a recession on top of rapidly changing secular behaviors on accommodation ranging from work spaces to living quarters, hotels and resorts to retail premises. You can listen to the podcast by clicking here.

Data snapshot

Fair forecast

Another indicator that the commercial real estate market outlook is getting rosier can be seen in the latest results of the Pension Real Estate Association’s Consensus Forecast survey. The survey respondents expected total returns in the NCREIF Property Index – the primary index used by US institutional investors to analyze commercial real estate performance – to turn from negative to positive in all sectors except office next year.


Kennedy Wilson to lose ‘fearless leader’

Los Angeles-based manager Kennedy Wilson last week announced president Mary Ricks will be retiring after a 33-year tenure at the company. Among Ricks’ notable achievements at the firm were launching its European business, Kennedy Wilson Europe, for which she later served as president and chief executive, as well as establishing investment platforms in the Irish private rented sector, UK/Irish logistics and value-add real estate. In the announcement, Kennedy Wilson chairman and CEO William McMorrow called Ricks “a fearless leader with a team-first attitude.” The firm has promoted former executive vice-president Matt Windisch to president of Kennedy Wilson and former head of UK Mike Pegler to president of Kennedy Wilson Europe. Ricks will remain a consultant to ensure a smooth transition.

Growth hire for India and China

Logistics heavyweight Prologis has hired Claire Cormier Thielke [her LinkedIn profile here] as chief investment officer for Asia as the firm looks to expand in China and India, according to an announcement. Based in Hong Kong, the former Hines executive will lead the investment strategy, deployment, M&A and fundraising activities in Asia ex-Japan. She will report to the firm’s managing director of global strategic capital Karsten Kallevig. The Asia real estate veteran was most recently Hines’ country head of Greater China, a role in which she oversaw the firm’s acquisitions, development, and new business opportunities in the country. Currently, Prologis has a dedicated China strategy with its open-ended logistics flagship fund, Prologis China Core, which was launched in 2019 and has now reached 12.84 billion yuan ($1.76 billion; €1.65 billion) in assets. However, the firm does not have an India-focused vehicle, according to PERE data.

Investor watch

TIAA backs affordable housing strategy

Insurance company TIAA has made a $250 million seed commitment to Nuveen’s Nuveen Real Estate US Impact Housing Fund, an open-ended fund focusing on affordable housing across the US, PERE reported today. But the plan for the targeted $3 billion-$5 billion core-plus vehicle is broader than simply preserving and creating affordable housing, says Pamela West, portfolio manager for impact investing at the Chicago-based firm. Nuveen sees an opportunity to create a new kind of purpose-built affordable housing when bringing new units online, she adds: “We want to reinvent that housing model into one focusing on mixed-income housing and mixed-use assets with affordable housing at the core of the strategy.”

This week’s investor meetings

Tuesday, September 19

Wednesday, September 20

Thursday, September 21

Friday, September 22

Today’s letter was prepared by Evelyn Lee with Jonathan Brasse, Christie Ou  and Samantha Rowan contributing