Blackstone's headquarters at 345 Park Ave. in Manhattan
NEW YORK CITY—Blackstone Group is expected to close a $20 billion real estate fund in Q1 2019, for all but some smaller retail investors, according to the Wall Street Journal. The WSJ reported that the amount raised from US and international pension funds, foreign governments and wealthy individuals is more than double of any fund ever raised by a competitor, according to the financial data firm, Preqin.
The article also pointed out that the actual buying power with the new fund is closer to $60 billion because Blackstone's real estate funds typically use $2 of debt for every dollar of equity. To illustrate the fund's financial strength the WSJ noted that $60 billion exceeds the value of all commercial real estate purchased in New York, Chicago and San Francisco in the first 11 months of last year, according to Real Capital Analytics.
Where will Blackstone invest this kind of money?
“It's really hard to invest this much money in individual assets, so I expect the fund will make several portfolio acquisitions. With REITs trading below their net asset values, a blockbuster acquisition or two—think Equity Office Properties and Hilton Hotels—wouldn't be a surprise,” says Doug Ulene, a real estate attorney who has extensive experience with real estate funds and REIT M&A. “Blackstone has expertise across every type of real property, including office, hotel, retail, industrial, single family, and more, so everything is fair game.”
Ulene, the owner of Ulene PLLC, formerly served as general counsel of Ogden CAP Properties, and Paramount Group, as well as a partner in the real estate department of the law firm Willke, Farr & Gallagher.
“I wouldn't read too much into this in terms of the current real estate market, generally, or New York City, in particular,” says Ulene. “It really says more about the institutions who are investing in the fund. They're looking to deploy dollars in real assets, perhaps as a hedge against inflation, and they're attracted by Blackstone's incredible reputation and track record.”
The WSJ notes Blackstone has acquired 11 public companies in the last two years. An example of one of the private equity and asset management firm's splashier recent acquisitions includes its purchase of a 100-asset portfolio of industrial properties for $950 million from Harvard University's endowment in November 2018.
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Betsy Kim
Betsy Kim was the bureau chief, East Coast, and New York City reporter for Real Estate Forum and GlobeSt.com. As a lawyer and journalist, Betsy has worked as the director of editorial and content for LexisNexis Lawyers.com, a TV/multi-media journalist for NBC and CBS affiliated TV stations in the Midwest, and an associate producer at Court TV.
