麻豆映画

US private equity giant Blackstone is working towards the launch of a 鈧�7 bn European real estate fund in the first quarter of next year, creating its largest ever dedicated European real estate fund, according to those who track the market.

The fund is expected to be called Blackstone Real Estate Partners Europe V and will be the natural successor to Blackstone Real Estate Partners Europe IV (BREP IV), which closed in March last year having raised 鈧�5.1 bn in just six months. It has since grown to 鈧�6.7 bn and marked Blackstone鈥檚 largest ever dedicated European real estate fund at the time.

Blackstone has to yet make details concerning the new fund public and could not be reached for comment. However, analysts expect the new fund to have a net target return of 15%, down slightly on the 19% target return of BREP IV, which reflects increasing competition for assets across Europe.

News of the fund first emerged in publication 麻豆映画 Real Estate, which reported that US pension fund San Francisco Employees鈥� Retirement System (SFERS) was considering an allocation to the vehicle.

A SFERS spokesperson, Norm Nickens, confirmed to PropertyEU on Thursday the pension fund's board voted to provide an equity commitment of up to 鈧�100 mln for the Blackstone fund.

Multi-country focus
Pan-European funds are becoming increasingly popular as investor activity reaches record levels in Europe. 鈥業nvestors will invest in a broader range of assets than a few years ago,鈥� said Nigel Almond, head of capital markets research at Cushman & Wakefield in London. 鈥楤lackstone is very adept at doing big deals, including off market. More capital is spreading out into a broader set of markets, offering better opportunities for higher returns that such fund managers seek.鈥�

BREP V is expected to invest around 60% of its capital in markets such as the UK, Germany and France, earmarking the remaining 40% for non-core European markets, a person familiar with the fund told PropertyEU. It is expected that the fund will invest in offices, industrial, retail and residential properties as well as hotels.

Like its predecessor BREP IV, the new fund will also likely invest in key European markets such as the UK, Germany, France, Spain, the Netherlands and Ireland. That fund focused on high-quality, large assets with complicated situations and limited competition, suggesting that the new fund will have a similar investment remit.

Propelled by its fundraising efforts, Blackstone has ratcheted up a string of mega deals this year, rapidly garnering a reputation for being the 鈥榞o-to company鈥� for sellers after a quick sale seeking an investor with billions to spare.

Mega deals
Earlier in November, it acquired $3 bn (鈧�2.8 bn) of global real estate fund interests from the California Public Employees鈥� Retirement System (Calpers) in what is billed as the largest secondary transaction to date. Strategic Partners Fund Solutions, Blackstone鈥檚 secondary and private market fund solutions business, will take over the interests in 43 international and domestic funds that Calpers, the largest US retirement fund, began marketing during the summer.

Also this month, Blackstone secured 鈧�468 mln for its new global core-plus real estate fund from the California State Teachers鈥� Retirement System (Calstrs).The fund manager is seeking to raise $1.8 bn for Blackstone Property Partners International, according to a Calstrs document. It is Blackstone鈥檚 second fund focusing on core-plus real estate, which typically includes properties that can be repositioned.

In April, Blackstone signed one of the biggest deals since the onset of the financial crisis in 2008 with its acquisition of a $23 bn (鈧�21.7 bn) real estate portfolio from GE Real Estate, the real estate arm of US-based General Electric, in partnership with San Francisco-based real estate lender Wells Fargo. Even more remarkably, GE Real Estate did not contact Blackstone regarding the sale of its real estate business until just one month prior to the sale, a spokesman for GE Real Estate in the US told PropertyEU at the time.

This year, there has been around 鈧�125 bn in new capital chasing deals in Europe, according to Almond at C&W. 鈥楾here were 鈧�238 bn in deals across Europe in the 12 months to the end of the third quarter,鈥� he said. 鈥榃e are forecasting about 鈧�250 bn for the full year.鈥�

Fundraising machine
Investors are increasingly upping their exposure to real estate, enabling fund managers such as Blackstone - with a strong track record 鈥� to swell their coffers. According to fund data tracker Preqin, Blackstone has raised a staggering $40 bn across four recent funds. Blackstone Capital Partners VII had an interim close size of $17 bn, with Blackstone Energy Partners II raising $4.9 bn. In addition, Blackstone Real Estate Partners VIII raised $15.8 bn and its GSO Energy Select Opportunities Fund had an interim close size of $2.3 bn, according to Preqin.

Indeed, such has been the success of Blackstone鈥檚 fund raising capabilities that it reported 鈥榰ndrawn capital (total 鈥渄ry powder鈥�) across all of its units of $46.1 bn at the end of last year, despite $30.6 bn of total capital invested and/or committed over the last year. Real estate is the single largest profit generator for the group, bringing in $1.9 bn of income in 2014 from investment returns and management fees globally. Its real estate arm now outstrips its private equity business in investment terms, accounting for $11.5 bn of investment globally last year (of which around $4 bn was in Europe), with private equity accounting for an additional $11.2 bn.

Such is the interest in real estate funds that many have been 鈥榮upersizing鈥� this year, according to Preqin. The average size of opportunistic funds has increased dramatically in the past year, from $460 mln for funds closed in 2014, to $1.47 bn for funds closed in the first nine months of 2015.

Closed-end opportunistic private real estate funds raised $47.7bn globally in the first nine months of 2015, already surpassing the $34.5 bn raised by such funds in the whole of 2014, according to Preqin. Investors are clearly flocking to opportunistic funds: they raised an aggregate $28.2 bn in the last quarter alone, or 75% of the total raised by private equity real estate funds in the quarter, far outstripping the $7.2 bn raised by opportunistic funds closed in the second quarter, Preqin said.

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By Sara Seddon-Kilbinger