Blackstone announced a $17.3 billion institutional close on its latest global opportunistic real estate fund, Blackstone Real Estate Partners IX, during its fourth quarter and full year 2018 earnings call on Thursday.
The New York-based asset manager expects the already oversubscribed fund to hit its $20 billion cap, with retail investor closings to come over the course of the year.
“One of the reasons why you see these big closes early in Blackstone funds is that investors recognize the scarcity issue,” said Jon Gray, Blackstone president and chief operating officer.
The hard-cap on the fund encouraged investors to move more quickly on their commitments, according to Gray. Given the oversubscription on BREP IX, preference was given to existing investors that were doing re-ups, he added.
Historically, Blackstone has raised most of the capital for its BREP funds from institutional investors but has also set aside a portion of the funds for retail investors. The latter are expected to account for $2.7 billion in commitments, which would take BREP IX to its $20 billion cap. Gray noted that a growing number of these investors have been consistently investing in the firm’s funds across asset classes.
Blackstone expects to raise more than $60 billion collectively from four funds, mostly by the end of 2019, according to Gray. That includes an anticipated $20 billion from BREP IX, more than $20 billion from corporate private equity fund Blackstone Capital Partners VIII, and approximately $10 billion each from the new Blackstone Real Estate Partners Europe VI and private equity secondaries vehicle Strategic Partners Fund VIII.
The firm’s core-plus real estate platform, which includes the open-ended funds Blackstone Property Partners and Blackstone Property Partners Europe, as well as non-traded real estate investment trust BREIT, has grown to $35 billion in five years, according to Gray. He noted $2.5 billion of inflows for the strategy during the fourth quarter of 2018.
During its investor day in September, Blackstone outlined a goal to increase its global core-plus assets under management to $60 billion over the next two to three years. This would put the firm on track to fulfill chief executive Stephen Schwarzman’s vision of a $100 billion core-plus portfolio by 2024.
As for investment opportunities, Blackstone sees continued strength in office properties with tech firm tenants, US rental housing, global logistics assets and India’s real estate market, Gray said. Across all asset classes, Asia will be a point of focus for the firm.
“Even with slower growth in China, Asia represents two-thirds of global growth and we expect the region will comprise a larger percentage of our dealflow over time,” Gray said.
Blackstone has $10 billion of capital dedicated to its existing Asia-focused opportunistic vehicles Blackstone Real Estate Partners Asia II and private equity vehicle Blackstone Capital Partners Asia. Gray also said the firm had launched a new open-ended core-plus real estate vehicle in Asia: Blackstone Property Partners Asia.
In its full year 2018 assessment, Blackstone reported positive net inflows, raising more than $31 billion for real estate. By comparison, the firm deployed nearly $19 billion and realized a little over $14 billion for the asset class during the year.
Real estate assets under management grew 18 percent year-on-year from $115.3 billion in 2017 to $136.2 billion in 2018. Property accounted for the largest share of Blackstone’s total AUM, exceeding the $130.7 billion, $77.8 billion and $127.5 billion for private equity, hedge fund solutions and credit, respectively. Total AUM increased nearly 9 percent year-on-year from $434.1 billion in 2017 to $472.2 billion in 2018.
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