Blackstone Raised $1.1B for Third Asia Real Estate Fund Amid ‘Challenging’ First Quarter

Blackstone on Thursday said it secured $1.1 billion in capital commitments for its third Asian opportunistic real estate fund in the first quarter, as a focus on hard assets helped the private equity giant weather what it called “an extremely challenging market backdrop”.

In an earnings call, executives highlighted the firm’s $1.9 billion in earnings distributable to shareholders during the first three months of 2021, representing a 63 percent year-on-year surge. That upswing came even as net income attributable to the NYSE-listed group fell 30 percent year-on-year to $1.22 billion on softening investment returns.

Stephen Schwarzman, Blackstone’s chairman, CEO and co-founder, noted that while nearly every major asset class outside commodities declined, Blackstone funds delivered a strong performance as the Manhattan-based firm’s flagship real estate strategies appreciated by 8 to 10 percent in the first quarter alone.

“Blackstone reported an exceptional start to the year, with the first quarter representing one of the two best in our 36-year history,” Schwarzman said. “This was despite increasing interest rates and ever higher inflation, driving major declines in equity and debt markets.”

APAC Deployment Begins

The company’s opportunistic APAC fund, Blackstone Real Estate Partners Asia III, reached $7.5 billion in committed capital in the first quarter after amassing $6.38 billion by the end of 2021.

Blackstone is targeting $9 billion in equity for the closed-end BREP Asia III, which began its investment period last month and is scheduled to run until September 2027. The pan-Asia fund focuses on opportunities in China, Japan, India, Australia, South Korea, Hong Kong, Singapore, New Zealand and Taiwan.

In Thursday’s call, president and chief operating officer Jonathan Gray said that, across its strategies, the group focused its capital deployment during the first quarter on hard assets and businesses where revenue could grow faster than inflationary pressures, including logistics, life sciences, rental housing, enterprise software, and digital and energy infrastructure.

“The tremendous value of what we own today is further highlighted by our realisation activity,” Gray said. “Nowhere is that more apparent than in logistics, our largest investment team comprising 40 percent of the global real estate portfolio.”

Gray, who leads Blackstone’s global real estate push and is widely viewed as Schwarzman’s heir apparent, said the group began investing in logistics at scale in 2010 as e-commerce took off and today owns $170 billion worth of warehouses.

Fund Management Flourishes

Chief financial officer Michael Chae said Blackstone’s perpetual assets under management more than doubled year-on-year to $338 billion across 18 vehicles.

“These strategies now comprise 43 percent of the firm’s fee-earning AUM, and their impact on the repeatability of our capital metrics and earnings can’t be overstated,” Chae said.

Such strategies continually fundraise and generate management fees that compound with both inflows and appreciation in net asset value, bolstering the resiliency of earnings.

Blackstone’s management fees rose 25 percent year-on-year to a record $1.5 billion in the first quarter as fee-related performance revenue more than tripled to $558 million, Chae said.