Blackstone Group has secured more than $6bn in pledged capital for a new property fund, largely comprised of distressed assets, according to a person familiar with the matter.
The New York-based private equity group has been one of the world’s most aggressive buyers of commercial property, particularly since the downturn, betting on the sector at a time of continued unease about the global economy.
Blackstone Real Estate Partners VII fund started fundraising last spring and is expected to close later this year.
Blackstone declined to comment.
The company’s funds have been buying up highly leveraged properties that crumbled in value when the market collapsed. Blackstone Real Estate Partners VI fund, which raised $10.9bn and closed in 2008, was the largest real estate fund ever launched. Tony James, Blackstone president, has said previously that he expects the new fund to be at least as large as its predecessor.
Most of the Blackstone Real Estate Partners VI fund was invested in the US, primarily on restructuring and recapitalisation deals such as those of Extended Stay hotels and General Growth Properties, the shopping mall operator.
Other property funds, comprised solely of distressed assets, have found suitors since the downturn as banks and other institutions have been forced to sell off swaths of property assets.
In 2011, 31 US distressed funds closed after raising $24.4bn, according to Preqin, the alternative investment research group.
“Investors wanted to raise money early, particularly in 2008 and 2009, so they could acquire assets later at heavily discounted rates,” said Sam Chandan, president and chief economist at Chandan Economics.
“But many investors in distressed assets have subsequently grown frustrated over the lack of quality properties available in the market at attractive prices. Many funds have fared badly as they were unable to deploy capital; in turn, investors have looked outside of distressed to buy into core properties. Blackstone has few peers in the market and they are uniquely placed at the top end of the distress food chain,” said Mr Chandan.
Blackstone’s real estate fund operation is led by Jonathan Gray and has $30bn in fee-earning assets under management as of September 30.
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