Blackstone holds final close on $8bn real estate debt fund

The private markets giant says this is the largest such fund ever, and it will seek to deploy capital opportunistically.

Blackstone has broken another fundraising record, holding a final close of its most recent real estate debt fund on $8 billion.

The private markets giant says Blackstone Real Estate Debt Strategies IV is the largest real estate credit fund ever raised. Its predecessor fund, Blackstone Real Estate Debt Strategies III, closed on $4.5 billion in 2016, according to sister publication PERE.

The latest fund, which was officially launched in May 2019, will have flexible capital to lend around the globe and will follow a variety of investment strategies, including lending, liquid securities, structured solutions for financial institutions and corporate credit, Blackstone said in a statement.

BREDS IV is focusing on public and private debt deals globally, with an emphasis on the US, per PERE. Blackstone declined to comment beyond the statement, but a source close to the firm said that no more than 49.9 percent of capital commitments may be deployed in investments outside the US. Since BREDS IV’s inception in April 2020, Blackstone has invested or committed 10 percent of the fund across the US, Europe and Australia, the source said.

The Blackstone statement said that its opportunistic funds seek to acquire under-managed, well-located assets around the world. The commercial real estate market has been severely stressed from the covid-19 pandemic. Commercial mortgage-backed securities, for example, approached their worst peaks since the global financial crisis during the summer. Given that pressure, there likely will be many opportunities for Blackstone to deploy its capital.

The latest real estate fundraise “reflects the significant demand for capital in the real estate debt markets and the continued confidence in our business from our limited partners,” Jonathan Pollack, global head of Blackstone Real Estate Debt Strategies, said in the statement.

“The breadth and scale of our global real estate platform allows us to see a wide range of opportunities, while bringing Blackstone’s expertise to every investment decision.”

During Blackstone’s second-quarter earnings call in late July, Jonathan Gray, the company’s president and chief operating officer, said that “LP demand for credit products in this environment, coupled with the Blackstone franchise, has been a powerful combination.” Although Blackstone declined to name any investors in BREDS IV, PERE reported in July that they include US public pensions such as the Texas County District Retirement System, with a $150 million commitment; the Illinois Municipal Retirement Fund, with a $100 million commitment; and the San Francisco Employees’ Retirement System, with a $50 million commitment. Taiwan’s Cathay Life Insurance, with a $60 million commitment, is among the fund’s foreign investors, per PERE data.

A Bloomberg news report said the fund has a performance hurdle of 6 percent, and there is a 15 percent incentive fee linked to the hurdle rate.

The BREDS funds were generating a multiple on invested capital of 1.2x, a realised net return of 11 percent, and a total net return of 10 percent as of 30 June, according to Blackstone’s second-quarter results.

Blackstone Real Estate Debt Strategies has $26 billion of assets under management, and Blackstone Real Estate had a total of $167 billion of investor capital under management as of the end of the second quarter. Blackstone is one of the largest property owners in the world, owning and operating assets across every major geography and sector, including logistics, multifamily and single-family housing, office, hospitality and retail, it said in its statement.

Last September, Blackstone raised a $20.5 billion real estate fund, the largest ever, to be invested in property assets around the world.