Blackstone Brings Fundraising for Asia Real Estate Strategy to Over $8B

Despite facing what chairman and chief executive Stephen Schwarzman calls “one of the most difficult periods for markets in decades” Blackstone has now raised $8.06 billion in committed capital for its Asia Pacific opportunistic real estate fund, according to a third quarter update by the company.

The world’s largest real estate fund manager continued to close in on the $9 billion target for Blackstone Real Estate Partners Asia III during the July through September period, which saw the firm boost its total real estate assets under management 39 percent year-on-year to $319.3 billion, according to its latest earnings results.

“While most money managers focusing on liquid markets have seen declining assets under management, we’ve continued to grow,” Schwarzman said in the earnings call, which took place last week.

Even while reporting what it called “strong results”, Blackstone took a hit from rising interest rates and volatile stock markets, reporting a 16 percent year-on-year decline in distributable earnings to $1.37 billion for the three months ended 30 September. During the quarter, the firm realised just under $4.1 billion from disposals of real estate assets, which was about 41 percent less than the amount it had sold in the same period a year earlier.

Funding Moves

Despite the macro headwinds, Blackstone continued a fundraising streak in the July through September period, with units of Samsung Group having announced a combined $650 million in commitments to funds managed by Blackstone last month.

Just less than a week before the Samsung agreements were announced, Blackstone said in a filing with the SEC that its BREP Asia III strategy had gained nearly $7.88 billion in commitments.

In August the firm had already welcomed one of Korea’s largest investors, with the country’s National Pension Service committing an undisclosed sum to Blackstone Credit’s Sustainable Resources Platform, according to The Korea Economic Daily.

Although Blackstone has continued its fundraising success in 2022, its stock price has declined by about 26 percent since 3 January, closing at $92.74 per share on Wednesday.

Going Niche

“High inflation, rising interest rates and a slower economy, combined with geopolitical turmoil, have created an extremely difficult environment for investors to navigate,” Schwarzman said.

“Investors are more capital-constrained,” added Blackstone president and chief operating officer Jonathan Gray in response to media questions during the call. “I think it will be tougher for many groups to raise capital, and that will be until markets get better, a bit tougher.”

With rising borrowing costs putting pressure on core office investments and other low-yielding sectors, Blackstone is increasingly focusing its real estate acquisitions on operating businesses and other non-traditional niches.

“(In) real estate, approximately 80 percent of our portfolio is in sectors where rents are growing above the rate of inflation, including logistics, rental housing, life science office, and hotels,” said Schwarzman in the earnings call.

Just last week a Blackstone joint venture closed on its purchase of a Hong Kong industrial building for HK$850 million ($108.2 million). That transaction brought the joint venture’s acquisitions in the city to more than HK$2 billion in 18 months, according to a source familiar with the deal.

At the Mingtiandi Singapore Forum last week, Peng Wei Tan a managing director with Blackstone’s real estate division said in a panel discussion that the firm sees Singapore and Seoul as “very interesting markets,” especially with the Lion City “having established itself as a regional hub”.