The Blackstone Group once again has wowed its rivals, pulling in more equity in the first closing of its debut Asia-focused real estate opportunity fund than any other firm since the start of the global financial crisis. With major commitments from investors, especially Western ones, the New York-based private equity and real estate giant last month recorded a $1.5 billion first close for Blackstone Real Estate Partners (BREP) Asia. It was a major step toward Blackstone’s ultimate target of $3.5 billion for the pan-Asia vehicle.
The private real estate industry in Asia can well regard Blackstone’s success as a giant leap, given how far it dwarfs the first closing efforts of the firm’s peers. Indeed, in one closing, BREP Asia matches seven other first closings by value-added and opportunistic real estate funds with Asia strategies in the previous 12 months.
The investors that committed to Blackstone’s Asia fund are signaling growing confidence in the region’s real estate. For example, the $72.8 billion New Jersey Division of Investment committed $500 million to BREP Asia in March, marking the US pension plan’s largest-ever ticket to a private real estate fund. The Illinois Municipal Retirement Fund also committed $100 million just last month.
BREP Asia will have a primary focus on China, India, Japan and Australia and, now that it has held its first close, it is expected to begin making investments immediately. In the past, investments in the region have been made from the firm’s global BREP series. Going forward, Blackstone will continue to make investments in Asia from that fund, but in tandem with BREP Asia, just as it does with its separate European opportunistic fund series.
Since opening its first office in Asia in 2008, Blackstone has invested $1.46 billion in the region. According to New Jersey documents recommending its $500 million commitment to BREP Asia, the firm’s investments in Asian real estate to date are projecting a 15 percent net IRR and a 1.8x equity multiple.
In its last earnings call, Blackstone president Hamilton ‘Tony’ James explained the firm’s pulling power by stating “we have by far the biggest footprint in real estate in Asia, we have great returns and there’s, to my knowledge, no other way that an investor who wants to participate in Asian growth through real estate can invest in a fund that’s pan-Asian.” Strong words, but words backed up with big money.