In yet another fundraising feat, the New York-based private equity real estate firm The Blackstone Group, has raised $1 billion in equity for core real estate investments in Asia.
PERE has learnt that the capital has been raised for a limited-life separate account vehicle called Blackstone Property Partners (BPP) Asia. The equity raised via the vehicle will be deployed into stabilized, income-generating assets in gateway cities across Asia in the coming two years. No investments have been made so far.
Blackstone declined to comment, but it is understood that the firm is targeting gross returns between 11 percent and 14 percent.
The separate account equity comes as the company ramps up activity to raise and deploy money for low risk/return investment strategies globally, and in early 2015 announced that senior director, AJ Agarwal, would be overseeing the firm’s core-plus investments.
In December last year, it held a first close of $1.7 billion for its debut core-plus property fund called Blackstone Property Partners (BPP), which is focused on acquiring stable commercial real estate assets in US and Canada. So far, it is understood to have raised as much as $5 billion for the strategy in the US and European markets.
In Asia, Blackstone’s first core-plus investment was made earlier this year in February, when it partnered with Ivanhoé Cambridge, the real estate arm of Canadian pension fund, La Caisse de depot et placement du Quebec, to acquire a 25 percent stake in a Sydney office tower, Liberty Place in a deal valued at A$240 million. Blackstone took over the interest from LaSalle Investment Management via a core-plus mandate for the Canadian investor.
Blackstone continues to have an unrivalled dominance in the private equity real estate space. As this year’s PERE 50 rankings indicate, the firm has once again emerged as the top performer after raising $46.3 billion in the last five years, more than the amount raised by the next three firms in the ranking combined. The firm has been leading the ranking since 2008.
One industry source, however, told PERE about his reservations on the firm’s foray into core and core-plus real estate investments.
“I don’t know if you can be a good core and opportunistic investor. These two are very different strategies and require [different] skills, especially for Asia,” he said. The question of what is actually considered as core investments in Asia at the moment could also be a conundrum for many.
“When you are doing a core strategy, you have low leverage with very core quality assets, but that doesn’t necessarily mean you will get high single digit returns,” said Nick Crockett, executive director for CBRE’s capital advisory team in Asia Pacific. “The return objectives are changing and the yield in some markets is very low.”