After enjoying huge success from its first foray in the global real estate sector, The Blackstone Group L.P. (NYSE:BX) is gearing up to seek around $13 billion for its next flagship global real estate fund, according to Reuters.
Citing people familiar with the developments, Reuters reports that marketing documents are to be ready in the next few weeks.
Blackstone’s phenomenal success
Real estate has overtaken private equity investment in companies for Blackstone. From buying single-family homes in the United States to distressed commercial property in Europe, the real estate sector turned out to be the most high-profile and lucrative business for The Blackstone Group L.P. (NYSE:BX).
The private equity firm has enjoyed phenomenal success in the sector, with its latest fund, Blackstone Real Estate Partners VII, which garnered $13.4 billion in 2012, reporting a net internal rate of return of 27% as of the end of September.
The Blackstone Group L.P. (NYSE:BX) is now set to launch its next flagship global real estate fund. However, the firm has sought to moderate expectations, indicating potential investors that it will be hard for the new real estate fund to beat the high returns yielded by Blackstone Real Estate Partners VII.
Hilton deal – The most profitable
The Blackstone Group L.P. (NYSE:BX) took control of the world’s largest hotel chain Hilton Worldwide Holdings Inc in 2007 for $18 billion. The firm also assumed $7 billion in debt, making it one of the hotel industry’s largest-ever debt-fueled takeovers. The private-equity owner took advantage of the rebounding commercial real estate market by floating Hilton Worldwide Holdings Inc (NYSE:HLT) as an IPO at NYSE Euronext in December.
The strong response to the IPO helped Blackstone Group to report strong earnings in January. The Hilton deal turned out to be most profitable deal in the private equity firm’s history.
Blackstone has also been quite active in the real estate sector. Last year, during his interview with CNBC, Stephen Schwarzman, Blackstone’s chairman and CEO, indicated the firm was the largest owner of individual houses in the United States.
In a conference call on October 16, The Blackstone Group L.P. (NYSE:BX) President Tony James said he saw real estate investment opportunities in Europe and emerging markets, particularly Asia. He indicated the firm would continue to sell real estate assets in the U.S. where rents are still on the rise.
The private equity firm also has regional private equity funds in real estate. The Blackstone Group L.P. (NYSE:BX)’s first Asian real estate fund is expected to complete fundraising soon at its cap of $5 billion, while its fourth European real estate fund has been reopened to investors to facilitate raising another $2 billion, bringing it to about $8.8 billion.
According to people familiar with the matter, Blackstone has already started preliminary conversations with potential investors about the new global real estate fund, and marketing documents are expected to be ready in the next few weeks.