Private equity giant Blackstone Group said the final close of its latest global real estate fund, Blackstone Real Estate Partners X, with $30.4 billion of total capital commitments is the largest real estate or private equity drawdown fund raised on record.
The world’s largest property owner added that its three opportunistic strategies — global, Asia and Europe — now have $50 billion of capital commitments. With the large influx of capital, Blackstone expects to no longer invest in traditional property sectors, such as retail or office, which have been ravaged by the remote working trend.
In July, New York-based Blackstone had raised $24.4 billion for its 10th global opportunistic real estate fund, the largest closed-end private equity real estate fund at the time. It completed that raise in just three months and said then it would hold a final close of the fund at likely over $30 billion in capital.
Blackstone’s record-breaking fund before this, BREP IX, took close to a year to raise $20.5 billion.
The firm also reported a 16% net internal rate of return on over $100 billion of committed capital in the BREP global funds over more than 30 years.
Blackstone said that, anticipating changing macro trends, it has been shifting its portfolio away from assets facing "headwinds" such as traditional office and malls and is now approximately 80% concentrated in logistics, rental housing, hospitality, lab office and data hubs. It said it is ready to take advantage of opportunities in its highest conviction sectors across the globe.
Ken Caplan, global co-head of Blackstone Real Estate, said, “sector selection has never been more critical as we witness the bifurcation of performance within real estate, which is favoring our high-conviction themes.”
Blackstone’s real estate business was founded in 1991 and has $326 billion of investor capital under management as of year-end 2022. The firm said it is the largest owner of commercial real estate globally, owning and operating assets across every major geography and sector, including logistics, residential, office, hospitality and retail.
Volatility Stokes Investor Fears
Blackstone has not been immune to the more difficult environment for real estate investment in recent times. Its nontraded real estate investment trust, Blackstone Real Estate Income Trust, or BREIT, was forced to again limit redemption requests from investors in March, after requests for share buybacks exceeded levels established by the firm.
It began limiting redemptions last year as rising interest rates and a volatile economy hit sentiment around commercial real estate.
But the wider business has remained aggressively active investing in its preferred areas. The firm agreed to an $860 million (£700 million) take-private of Industrials REIT, the U.K.-based multilet industrial-focused real estate investment trust, earlier this month.
Despite the brokerage Savills recording U.K. commercial real estate investment volumes of $6.9 billion (£5.6 billion) in the first quarter, the lowest quarterly volume since 2009, apart from the second quarter of 2020, it is predicting investment volumes will improve over the year because there is so much capital ready to deploy.
It says there is an estimated $811 billion in dry powder sitting in the accounts of unlisted funds globally.
Savills reported in its April commercial market minutes report: “This, combined with pricing movements, has created a pool of willing buyers, but, at this stage, sellers remain in short supply.”