After about 18 months of fundraising, The Blackstone Group has closed its latest global opportunistic real estate fund oversubscribed. With $13.3 billion in equity commitments, Blackstone Real Estate Partners (BREP) VII is now the largest real estate opportunity vehicle ever raised. Blackstone declined to comment.
According to sources, the New York-based private equity and real estate giant officially launched BREP VII in April 2011 with an initial target of $10 billion and a hard cap of $13 billion. Blackstone succeeded in raising $4 billion of capital a mere four months after launching the fund, attracting investments from such LPs as the New Jersey Division of Investment and the Pennsylvania Public School Employees’ Retirement System.
Blackstone offered a concession to investors participating in the first close of the fund, entitling them to a management fee waiver for four months, according to documents from New Jersey, which made a $300 million commitment to BREP VII in July 2011. Other investors, including the Teachers’ Retirement System of the State of Illinois and the State of Wisconsin Investment Board, climbed aboard later, increasing the capital-raising total to $6 billion by the end of 2011.
The fund managed to close on another $4 billion in equity during the first two months of 2012, bringing BREP VII to its initial target. Investors who came aboard in January and February included the National Pension Service of Korea, the Ohio Police & Fire Pension Fund and the Los Angeles Department of Water and Power Employees’ Retirement System.
Since February, Blackstone has collected another $3.3 billion in commitments from LPs. Among the latest investors are the Florida State Board of Administration, the New Mexico State Investment Council and China’s State Administration of Foreign Exchange.
Through the commingled vehicle, Blackstone is focusing primarily on real estate opportunities in the US and Canada. Investment records from Blackstone show that, as of 30 June, BREP VII had realised investments of $122.6 million and unrealised investments of $2.5 billion, which yielded a realised net internal rate of return of 81 percent and a total IRR of 33 percent.
Approximately 35 percent of BREP VII already is invested. Transactions on behalf of Blackstone’s mega-fund include the $473.1 million acquisition of 36 US shopping centres from Equity One; the purchase of a 10.1 million-square-foot suburban office portfolio in the US from Duke Realty for $1.08 billion; the $335 million purchase of a 3.5 million-square-foot portfolio of UK industrial properties from Prologis; and the acquisition of a portfolio of real estate debt and equity interests on assets in the US, Europe and Latin America from Bank of America Merrill Lynch.
Other recent deals made on behalf of BREP VII include the purchase of hotel operator Accor’s Motel 6 budget chain of North American hotels for $1.9 billion in May; the acquisition in conjunction with Morgan Stanley Real Estate Investing of a portfolio of distressed property loans in Australia from Lloyd’s Banking Group for A$620 million (€482 million, $603 million) in June; and the recapitalisation of a 31-property, 4.5 million-square-foot office portfolio in Southern California for $85 million this month.
For further analysis on BREP VII’s place in fundraising history and the other largest real estate funds to ever hit the market, click here.