Blackstone readies its next real estate private equity fund, Blackstone Real Estate Partners X L.P., and it’s going to be a whopper.
A Form D filing with the SEC for the new fund shows there’s already been $24.1 billion in “total Limited Partner commitments as well as sales in parallel funds under Regulation D and/or Regulation S.” But the total offering and total remaining to be sold are both listed as indefinite, so the final fund size could get much larger. Blackstone has estimated the sales commissions it will pay at $50 million.
According to IPE Real Assets, three US public pension funds have disclosed planned investments. “Teachers’ Retirement System of Louisiana (TRSL) and Arkansas Teacher Retirement System have each made a $75m (€70.6m) commitment to Blackstone Real Estate Partners X and the Oklahoma Teachers’ Retirement System has placed $100m into the fund, the pensions fund disclosed in their board meeting documents,” the publication wrote.
Blackstone declined to comment to GlobeSt.com on the filing for the new fund.
“The strongest areas of the market I anticipate them investing in are multi-family and industrial,” Joe Muratore, a co-founder and principal at Graceada Partners, tells GlobeSt.com. “With rising interest rates, it is more expensive to buy a house. Apartment demand is expected to stay strong. In an inflationary environment, construction costs will go up which makes it harder to produce new product, which will increase rents. If interest rates are rising at 2% and inflation rates are rising at 9%, it still makes sense to borrow and invest.”
The fund-raising success of the new fund has been better than the overall company’s second quarter, in which it lost $256 million, although it had still made $2.2 billion in total for the first half of its fiscal year.
The new fund’s predecessor—Blackstone Real Estate Partners IX L.P.—was filed in 2018 before any sales occurred but ultimately closed that fund at $20.5 billion. The result was a lot of fiscal activity.
A joint venture transaction between Blackstone Real Estate Partners IX and Centerbridge Partners, L.P. gave the previous fund a 65% controlling interest in Great Wolf Resorts. The fund also acquired a $5.7 billion, 60 million-square-foot light industrial portfolio from Colony Capital.
A Wall Street Journal report says that the new fund will likely hit $30.3 billion when finalized, which would be “the largest traditional private-equity vehicle in history.”
“Together with funds dedicated to real estate in Asia and Europe, Blackstone will have a war chest of more than $50 billion to do so-called opportunistic investments, which tend to be higher-risk deals with the potential for higher returns,” the Journal wrote.
With cap rates deflated in many CRE sectors and Federal Reserve interest rate hikes to battle inflation also pushing up financing rates, there could be projects that collapse from insufficient funding, a reduction in competition for properties and the likely deflation of prices, which has already begun to happen, and a broad chance, long missing, for distressed prices and bargain shopping.