EXCLUSIVE: Blackstone raises $1bn for Asia core

The New York-based private equity real estate giant’s almost weekly assault on the news headlines continues as it emerges that it has formed a dedicated pool of capital for stabilized, incoming-generating assets in Asia.

New York-based private equity real estate giant The Blackstone Group has added to its already massive capital resources with $1 billion-plus of equity for core real estate investments in Asia, PERE can reveal.

The raising comes in the same month it collected $14.5 billion for the latest fund in its flagship global property fund series, Blackstone Real Estate Partners VIII, and agreed the largest private property investment since the global financial crisis in its $23 billion purchase of the bulk of GE Capital’s real estate assets.

Blackstone declined to comment, but it is understood the capital has been raised for a limited-life, separate account vehicle called Blackstone Property Partners (BPP) Asia.

The money collected is expected to be deployed into stabilized, income-generating assets in gateway cities across Asia over the coming two years. The targeted gross returns from these investments are expected to be between 11 percent and 14 percent. The firm is yet to make its first investment for the vehicle.

In February, Blackstone completed its first core-plus investment in the region, a 25 percent stake in Sydney office tower Liberty Place, in partnership with Ivanhoe Cambridge, the real estate arm of Canadian pension fund, La Caisse de dépôt et placement du Québec. That deal is understood to sit outside of BPP Asia.

The branching out into core real estate investments in Asia follows earlier waves made by the firm in the lower risk and return arena in the US and Europe where it has raised more than $5 billion for the strategy via a vehicle called Blackstone Property Partners.

While core real estate investing constitutes the larger part of the investment universe in the US and Europe, it is less common in Asia which, besides markets like Japan, Australia, Hong Kong and Singapore, has been traditionally regarded as more suitable for growth-based strategies than income-based strategies.

As the region matures, however, that perception has started to dilute with the introduction of an increasing array of vehicles targeting well-tenanted real estate on stable leases. Blackstone’s strong financial backing for such a strategy will only further underline how it is gaining traction with institutional investors.

Earlier this month, PERE revealed how PAG, the Hong Kong-based private equity and real estate firm, was on the cusp of collecting $400 million for the first closing of its pan-Asia, core vehicle, PAG Real Estate Partners. It is aiming to raise $1 billion in total. Other firms that have collected capital for pan-regional core real estate strategies include M&G Real Estate, Invesco Real Estate, Pramerica Real Estate Investors and BlackRock Real Estate.

For further analysis of Asia’s core real estate market, see the forthcoming May issue of PERE magazine.