Three ways fundraising looks different without BREP X

PERE’s H1 fundraising report marked the first time the publication has analyzed capital raising numbers with and without the inclusion of a single fund.

The reason for this dual analysis is the fund in question – Blackstone’s $30.4 billion Blackstone Real Estate Partners X – took up 42 percent of the total capital raised in H1 2023, which was one of the worst first halves both in terms of fundraising volume and number of funds closed.

In other words, polar opposite elements were in play for private real estate capital markets during the six months. Never has a single fund claimed such a significant portion of the equity raised during a given time period since PERE began tracking fundraising data in 2008.

By comparison, the second biggest fund raised to date was the New York-based mega-manager’s Blackstone Real Estate Partners IX. BREP X’s predecessor attracted $20.5 billion in September 2019, representing around 21 percent of the total $97 billion raised in H2 2019.

There are stark differences in the composition of the H1 2023 fundraising totals with and without BREP X. Here are three of them:

Value-add would be the most popular strategy: Without BREP X, value-add represented 52 percent of the capital raised during the first half of the year, while opportunistic accounted for just 16 percent. By contrast, when BREP X was included in the fundraising totals, the most-favored strategy was clearly opportunistic, at 51 percent, while value-add represented 30 percent.

North America would continue to dominate among target regions: North America has always been the prevailing regional focus for funds closed in PERE’s fundraising reports. Without BREP X, the region would have accounted for $28.8 billion, or 41.9 percent, of the H1 fundraising totals, while multi-regional vehicles would capture just $1.38 billion, or 3.3 percent. Indeed, out of the top 10 funds closed during the first six months of the year, all but BREP X were aimed at a single region.

Sector-specific funds would feature more prominently: Among H1 2023’s 10 largest funds, four were sector-specific vehicles collecting a total of $10.98 billion. These are the $4.9 billion EQT Exeter Industrial Value Fund VI, the $2.26 billion Bridge Multifamily Fund V, the $2.22 billion Pretium Single-Family Rental Fund III and the $1.6 billion HGI Multifamily Credit Fund. The massive, diversified BREP X fund masked the prevalence of sector-specific funds that attracted some of the largest pools of capital during the period.

Blackstone is currently in market with three new mega-funds: Blackstone Real Estate Partners Europe VII, Blackstone Real Estate Partners Asia III, Blackstone Real Estate Debt Strategies V. Although these vehicles are expected to corral less capital in aggregate than BREP X, they could still have a disproportionate impact on fundraising numbers if overall capital raising activity remains at depressed levels. The same goes for Brookfield’s Brookfield Strategic Real Estate Partners V, which is the largest fund in market currently with a $15 billion target.

Analysis of Blackstone and Brookfield’s dominance in private real estate capital markets in relation to other fundraising efforts formed part of PERE’s recent coverage of the PERE 100 ranking. Until a new world order threatens, expect to see more dual analyses in the future.