Blackstone, the world's largest real estate company, has raised a further $2.2 billion (£1.8 billion) for its latest European opportunistic real estate fund as it looks to take advantage of plateauing property prices.
The Blackstone Real Estate Partners BREP Europe VII opportunistic fund is still in its fundraising period. The private equity giant began investing it in the final quarter of last year, principally across logistics, residential, hospitality and data centres.
Blackstone is seeking to raise €10 billion (£8.1 billion) for BREP VII, a dedicated Europe opportunistic real estate fund that will buy "under-managed, well-located assets". It has said globally Europe and in particular logistics were among its favoured real estate target investments. The fund has a target 15-20% gross internal rate of return and 15% net target IRR.
The latest fundraising puts the fund over €7 billion, and the quarterly results show Blackstone has invested $631.994 million of that already.
Blackstone has been vocal in recent times about its belief that real estate pricing is bottoming out and the firm is keen to deploy capital in that environment.
“We are heading to a better environment with the inflation and cost of capital environment moderating,” Jonathan Gray, Blackstone's president and chief operating officer, said on an earnings call in January.
“Real estate values are bottoming. … We would expect deal activity to pick up. … We continue to see robust fundamentals. … Our real estate will emerge from this cycle even stronger than before,” Gray said.
In April last year, Blackstone said the final close of its then-latest global real estate fund, Blackstone Real Estate Partners X, with $30.4 billion of total capital commitments, was the largest real estate or private equity drawdown fund raised on record.
In its first-quarter results Thursday Blackstone confirmed inflows into its real estate funds including $2.5 billion in BREDS Insurance separately managed accounts, $807 million of capital raised in BREIT, and $606 million in the fifth real estate debt strategies fund, Blackstone Real Estate Debt Strategies V.
It deployed $4.8 billion of capital into the real estate sector in the quarter and $17.8 billion over the last 12 months. It also committed an additional $2.9 billion in the quarter, including the privatisation of Tricon Residential by BREP and BREIT.
After quarter-end, BREP committed to the privatisation of Apartment Income REIT.
Realisations in the quarter came in at $3.8 billion and $18.2 billion over the last 12 months. These included the sale by BREIT of its remaining interest in Phoenix Tower International, the sale of Arc Place Korean Office by BPP, and the sale of US industrial assets across BREP and Core-Plus.
Opportunistic funds were flat, appreciating 0.3% in the quarter and declined 5.6% over the last 12 months; Core+ funds appreciated 1.2% in the quarter and declined 1.5% over the LTM.
Blackstone reported first-quarter distributable earnings rose 1% year-on-year aided by improved fee-related earnings offset by a decline in income from asset divestments.
Distributable earnings, the cash used to pay dividends to shareholders, rose to $1.27 billion (€1.19 billion) compared with $1.25 billion a year earlier.
Fee-related earnings, from management and advisory fees, rose 12% to $1.2 billion as strong fundraising helped its total assets under management remain over the $1 trillion mark.
Blackstone’s net profit from asset sales fell 25 per cent to $293.3 million.