Private equity and real estate giants The Blackstone Group and The Carlyle Group have made early inroads into their respective fundraising endeavours for new opportunity funds.
US pension fund, the Pennsylvania Public School Employees’ Retirement System, revealed it resolved last week to approve a commitment of up to $300 million to Blackstone Real Estate Partners VII (BREP VII), Blackstone’s latest global private equity real estate fund. The fund also approved a commitment of up to $200 million to Carlyle’s Carlyle Realty Partners VI (CRP VI) fund. Both commitments followed recommendations from Charles Spiller, PSERS’ managing director for private markets and real estate.
The commitments were part of a wider raft of capital outlays by PSERS that included up to $220 million to three private equity vehicles.
According to PSERS documents, BREP VII, which is targeting $10 billion in total but has no hard cap, will focus primarily on US and Canadian markets but across ‘a broad range of real estate and real estate-related investments’. It will focus on ‘acquiring high quality assets by targeting large, complicated situations where competition is limited’. PSERS highlighted Blackstone’s preference for distressed and undermanaged assets that could trade below market pricing levels. The firm intends to reposition the assets and then sell at higher values.
CRP VI, which has a hard cap of $2 billion, is expected to invest predominantly in the US also focussing on ‘high quality assets at discounts to replacement costs,’ PSERS said specifying target markets including Washington DC, New York City, Northern and Southern California. The pension fund added that Carlyle would focus on single property transactions too.
Of the two firm’s most recent performances, PSERS said Blackstone’s BREP VI, which closed on $10.9 billion in 2007 was currently producing a net IRR of 8.3 percent, while Carlyle’s CRP V, which closed in 2006, is currently producing a net IRR of 1 percent.