Real estate investments climbed in the first half of 2018 as second quarter investment activity largely lived up to the strong start during the first three months of the year.
Blackstone, Apollo, Carlyle, Ares and Brookfield deployed a combined total of $23.41 billion during the first half of the year, increasing investments by a third from the first half of 2017, according to the firms’ latest earnings reports. Blackstone, the firm with the largest real estate business, deployed the most capital, accounting for almost 65 percent of the year-on-year increase.
During the first half of 2018, Blackstone put $11.3 billion to work in real estate acquisitions – up 122 percent from the $5.1 billion it invested in the first half of 2017. Capital in the first six months was largely spent on taking the industrial REIT Pure Industrial Real Estate Trust private in May. The all-cash deal, valued at $3.8 billion, gave Blackstone 62 percent of the Canadian REIT while Ivanhoe Cambridge took 38 percent of the business. Blackstone also closed on the acquisition of the majority stake in Banco Popular’s property portfolio for $1.3 billion during the first quarter.
Although on a smaller scale than Blackstone, Apollo also more than doubled its property investments year-on-year, going from $1.16 billion to $3.14 billion. Notably, the asset manager acquired a portfolio of 64 retail properties that cost an estimated $620 million from H&R REIT in June, according to data provider Real Capital Analytics. The firm declined to comment further on the details of its deals.
Carlyle increased investments by 80 percent year-on-year, deploying $2.7 billion over the first half of 2018 compared to $1.5 billion during the same period in 2017. Ares saw the smallest increase in capital deployment out of the four publicly traded firms, boosting real estate investments by 48 percent year-on-year from $390 million to $570 million.
By contrast, Brookfield saw its investment activity drop by 40 percent from the $9.5 billion it spent in H1 2017 to $5.7 billion in the first half of this year. However, some of the Toronto and New York-based firm’s major property transactions have yet to close, including the $15 billion privatization of mall REIT GGP and the $6.8 billion purchase of Forest City Realty Trust.
Fundraising activity varied across firms in the first half of the year. Blackstone increased capital raised year-on-year by 53 percent while Apollo and Ares reported little change over the 12 months. Meanwhile, Carlyle reported a 57 percent drop in fund commitments in the first half of 2018 compared to the same period last year. Brookfield reported the largest change in fundraising, increasing fund commitments by almost 80 percent to $6.8 billion in the first half of the year from $3.8 billion in H1 2017.
Total realizations dropped to $12.81 billion in the first half of the year, down from $16.88 billion in the first half of 2017. Blackstone reported a more than 50 percent decrease in realizations, from $11.3 billion in the first half of 2017 to $7 billion in the first half of 2018. Similarly, Apollo’s real estate realizations fell by 60 percent, decreasing to $300 million in H1 2018 from $780 million in H1 2017.
Carlyle bucked the trend, completing $1.4 billion in exits over the first half of the year, which represented a 56 percent increase year-on-year. The firm’s dispositions during the period included the sale of a $233 million portfolio with 10 self-storage properties in May to private real estate firm ASB Real Estate Investments, according to Real Capital Analytics. Ares and Brookfield also increased realizations during the same period, albeit from a significantly lower basis. Brookfield remained largely consistent with last year’s results, reporting $4.1 billion earned from exits in H1 2018, up 5 percent from the $3.9 billion realized in the first six months of 2017. Ares did not report realizations.