Blackstone seeks capital for Asia real estate fund

Investment house approaches HKMA and China Investment Corp to help launch fund targeting large-sized Asian property projects

PUBLISHED : Wednesday, 27 February, 2013, 12:00am
UPDATED : Wednesday, 27 February, 2013, 1:52am


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Blackstone, one of the world's largest investment houses, is pitching to large institutional investors in Hong Kong and mainland China to help it launch a new real estate fund for Asia, where property prices are rising strongly.

Among the potential institutional investors, known as "limited partners" for their investments in private equity funds, that Blackstone has been talking to is China Investment Corp (CIC) in Beijing, and the Hong Kong Monetary Authority (HKMA), said people familiar with the matter.

CIC is the mainland's US$300 billion sovereign wealth fund, whose funding comes mostly from the country's massive foreign exchange reserves. The HKMA is the de facto central bank for Hong Kong and also manages the city's large reserves.

Both the CIC and the HKMA have a strong desire to diversify their investments abroad for stable and higher returns, rather than merely buying traditional assets such as foreign government bonds. China is already the largest holder of US debt.

"Both CIC and HKMA were pitched. Given their long-standing good business ties with Blackstone, I think it is very likely that both will put some money in its new real estate fund," said one of the people, who declined to be identified as the talks remain private and confidential.

Both CIC and HKMA were pitched. Given their long-standing good business ties with Blackstone, I think it is very likely that both will put some money in its new real estate fund

Blackstone began marketing its new Asia-dedicated property fund late last year and it aimed to raise a total of about US$2 billion for the fund, which would bet on large-sized property investments in major Asian economic powers such as China and India, said the sources.

Last October, Stephen Schwarzman, a co-founder and chairman of Blackstone, said during a brief visit to Hong Kong that his firm would not quit the mainland's property market despite growing concerns about the outlook of the real estate sector. Such worries come after years of efforts by Beijing to check rising property prices and speculation.

Blackstone, already one of the largest property investors globally, aimed to buy property assets at "discount for size", said Schwarzman during his last trip to the city.

Blackstone competes with a growing number of American rivals in Asia, such as KKR, TPG, and the Carlyle Group. Like all the other major global private equity funds, it is also keen to make direct investments in mainland firms, but real estate investments have played a more significant role for Blackstone given some successful stories in this sector in recent years, said the sources.

In China, Antony Leung Kam-chung, a former Hong Kong Financial Secretary, has been leading Blackstone's fund-raising efforts for years, after he was appointed the firm's top executive for the so-called greater China region including Hong Kong, Macau, Taiwan and the mainland. Thanks to Leung's good relations with Beijing, he has already managed to convince CIC to invest in some other Blackstone funds.

The fundraising process of Blackstone's new Asia-dedicated real estate fund is ongoing and the first closing period could be late this year, said the sources. Typically, a large government-backed institutional investor like CIC is expected to put several hundred million US dollars in one such fund.