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Blackstone Group
LP completed the closing of the largest commercial real estate fund ever, with commitments of $ 20.5 billion despite an increasingly difficult market for commercial real estate.
The giant investment company, which managed $ 153.6 billion in real estate assets at the end of the second quarter, was the world's largest real estate fundraiser.
Before closing the last global fund, Blackstone was among the top five real estate funds ever, according to data firm Preqin. Its previous real estate fund, which closed in 2015, raised $ 15.8 billion, a record to date.
The company's success in fundraising partly reflects a record of double-digit returns. Blackstone's "opportunistic" funds, which take higher risks to achieve higher returns, have generated average annual net returns of 15% over the last 27 years, according to the company's filings.
Blackstone has also been a leader in recent years, as pension funds, endowments and other investors are turning to the big names in the equity industry. Another successful fundraiser, based in Toronto
Brookfield Asset Management
Inc.
closed a $ 15 billion fund earlier this year.
Blackstone has pursued a strategy of buying, developing and selling office buildings, warehouses, stores and other properties.
Jonathan Gray,
The former director of the company, last year, was promoted to president and chief operating officer and he is widely perceived as the heir to the CEO of Blackstone.
Stephen Schwarzman.
But high yields became more difficult at the end of the real estate cycle, compared to the early years of the recovery, which were up sharply. Today's funds are more dependent on increased income from the properties they buy, which requires a good sense of location and smart strategies to increase rents and occupations.
Some private equity firms store cash, in part because of the difficulty of finding properties to buy and partly because transactions may be more numerous during downturns when homeowners are in distress. In September, companies had $ 334.8 billion worth of "dry powder", compared to $ 243.6 billion at the end of 2016, according to Preqin.
Blackstone executives said they had no trouble finding deals. "Despite a challenging investment environment, we have deployed a record $ 56 billion in the last 12 months," Gray said in July when a call about second quarter results.
One of Blackstone's real estate strategies has been to focus on high demand industrial real estate, in part due to the growth of online shopping. Earlier this year, the company announced the purchase of a network of US warehouses and distribution centers from GLP, based in Singapore, for $ 18.7 billion. This purchase should be finalized in the coming weeks. The opportunistic funds of the company generated $ 13.4 billion.
Write to Peter Grant at [email protected]
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