EXCLUSIVE: Blackstone in unprecedented $10bn first close

The New York-based private equity and real estate firm is expected to haul in nearly its entire target during the initial close of BREP VIII.

The Blackstone Group is on the cusp of breaking another fundraising record with its latest real estate opportunity vehicle, Blackstone Real Estate Partners (BREP) VIII, PERE can reveal.

The New York-based private equity real estate giant is expected to amass approximately $10 billion in the fund’s first close in March, according to three people familiar with the fund. Blackstone declined to comment.

The $10 billion fundraise is an unprecedented amount for a first close for a fund that is on track to be the largest property vehicle ever raised. Seeking at least $13 billion in commitments, BREP VIII is currently the largest real estate fund in market, with a target that is more than double that of the second-largest property vehicles, Starwood Capital Group’s Starwood Distressed Opportunity Fund X and Lone Star Funds’ Lone Star Real Estate Fund IV, according to PERE Research & Analytics. Both of the latter funds have equity goals of $5 billion.

Blackstone registered BREP VIII with the US Securities and Exchange Commission earlier this month, but has been marketing the offering since the fourth quarter, PERE’s sources said. One of the early investors in the fund is the Maine Public Employees Retirement System, which committed up to $50 million at its board meeting earlier this month.

In an investor call last July, Blackstone chairman Stephen Schwarzman said the firm would likely be back in the market with its next flagship global property fund by early 2015. The predecessor vehicle, BREP VII, which had an original target of $10 billion, collected a total of $13.3 billion at its final close in October 2012. The largest real estate fund ever raised, Blackstone gathered only $4 billion in the first close for that fund, and took about nine months to reach the $10 billion mark. BREP VII had available capital of $4.08 billion as of September 30, according to its third-quarter earnings report.

Schwarzman said at the time that the firm hoped that BREP VIII that would be at least as large as the prior fund. One source said that the fundraise could gather as much as $15 billion to accommodate all of the interest from investors.

The BREP series has been focused on acquisitions of high-quality real estate assets globally at a discount to replacement costs and that typically involve large, complex situations. With BREP VII, Blackstone has targeted opportunities in the US, Europe and Asia, sometimes investing in deals alongside its regional property funds.

Last year was a busy year for Blackstone on the real estate fundraising front.  Last March, the firm raised the largest-ever European opportunistic property fund, BREP Europe IV, with $5.5 billion in commitments.  In an unusual move, Blackstone went on to reopen the fund and expand it by an additional $2 billion last fall. The firm also gathered a record $5 billion for its debut Asia-focused real estate fund, BREP Asia, in December.  Additionally, it raised $1.7 billion in the first close for its debut core-plus fund, Blackstone Property Partners, in mid-November.

“As a firm, we’ve moved away from the episodic fundraising of years’ past, which caused AUM to ebb and flow somewhat,” said Blackstone president Tony James during the July earnings call. “Now, given the breadth and balance of our product line, we’re always in the market.”