Blackstone Matches Record With $8B Commercial Debt Fund

For the second time in five years, Blackstone notched a record for a commercial property debt fundraise.

The investment giant closed on an $8 billion commercial real estate debt fund this week, the Wall Street Journal reported. That ties for the largest fundraise for the type of investment vehicle, matching a fund Blackstone raised and closed in September 2020.

Blackstone spent two years raising this latest fund. The firm plans to deploy the capital on making property loans and buying existing loans in North America, Europe and Australia.

The fund will partner with banks on select deals, taking the riskier position in those transactions, which could result in higher yields. It will also target loans held by banks and insurance companies aiming to slash the size of their real estate debt portfolios.

It took longer for Blackstone to hit the $8 billion mark than it did for the historic raise five years ago. That’s emblematic of a larger slowdown for private equity firms in the space, which raised a total of $10 billion in the fourth quarter last year, a five-year low according to Preqin.

Still, the impressive fundraise gives Blackstone the opportunity to take advantage of financing areas historically reserved for banks, which became more cautious after the Great Recession. It also demonstrates a belief among investors that the commercial property market is on the rebound after the pandemic, despite stubbornly elevated interest rates.

The world’s largest alternative asset manager is coming off one of its “best quarters” ever — Stephen Schwarzman’s words — as net income for the fourth quarter quarter totaled $1.3 billion, or $0.92 per share, a 1,120% increase from $109 million a year earlier.

“Real estate is a cyclical asset class that has been through a cyclical downturn,” president Jon Gray noted during the most recent earnings call. “And we believe Blackstone is the best positioned firm in the world to benefit from the recovery.”

— Holden Walter-Warner