Blackstone Says Asia Fund on Target After Pension Fund Report

US private equity giant Blackstone says its Asia real estate fund is on track to reach its $9 billion goal, after a US pension manager had cited a 22 percent lower target for the opportunistic vehicle.

Blackstone representatives told Mingtiandi this morning that the firm expects Blackstone Real Estate Partners Asia III to raise the full $9 billion amount after a report released by New Mexico’s State Investment Council, one of the fund’s backers, put the target at $7 billion.

The report by the southwestern state’s pension body, which manages investments for New Mexico’s four permanent funds, is inaccurate, the Blackstone spokesperson said, while pointing out that company president and chief executive Jonathan Gray had confirmed the $9 billion target in October during a third-quarter earnings call.

The New Mexico SIC issued the statement in minutes for its 22 February meeting, which also revealed that the state committed $75 million to the fund and noted that the council’s staff and advisor Townsend Group recommended the commitment to BREP Asia III because of its “unique advantages of size and scale” and exposure to the Asia Pacific region.

Signals Crossed

“Blackstone Real Estate Partners Asia III is seeking to raise a $7.0 billion closed‐end commingled fund that aims to follow broadly the same investment strategy as its predecessor funds,” New Mexico’s SIC said in its meeting minutes, which were made available to Mingtiandi.

Blackstone’s Gray had revealed during the firm’s third-quarter earnings call that BREP Asia III had already closed on $4 billion on its way to the $9 billion target.

Gray elaborated that BREP Asia III would be “30 percent larger than the prior fund” in the series, BREP Asia II, which achieved a $7.1 billion final closing in 2018.

The Manhattan-based group’s 2021 earnings report released in January indicated that BREP Asia III had amassed $6.38 billion in capital commitments as of 31 December 2021.

The closed-end pan-Asia fund focuses on opportunistic real estate in China, Japan, India, Australia, South Korea, Hong Kong, Singapore, New Zealand and Taiwan.

According to SIC’s investment summary, the fund’s manager uses a “buy‐fix‐sell” strategy to acquire high‐quality, well‐located but undermanaged assets at discounts to estimated replacement cost, address any property or business issues through proactive asset management, and sell the assets once the fund’s objectives are achieved.

State Spigots

Besides SIC, Blackstone has been scooping up capital commitments for BREP Asia III from other US state fund managers in recent months.

The group chaired by billionaire co-founder Stephen Schwarzman secured a $200 million pledge to the fund from the Virginia Retirement System in December, part of nearly $2.4 billion in fresh funds earmarked for the vehicle during the final quarter of 2021.

In the same period, Blackstone obtained a $100 million commitment to BREP Asia III from Florida’s State Board of Administration, which manages the assets of the Florida Retirement System and other funds.

In November, Mingtiandi reported that the Teachers’ Retirement System of Illinois had committed to invest $100 million in BREP Asia III. The TRS has been an active investor in funds managed by Blackstone, with $620 million of its total $9.6 billion real assets portfolio handled by the group.

BREP Asia III was scheduled to receive another $100 million in backing from the Minnesota State Board of Investment, a public pension fund, according to a report by IPE Real Assets last August.

Note: this story was updated to include new information from Blackstone