Blackstone investors back move into Asia property

With a target of US$4b, the fund's first pledges show enthusiasm for region's prospects

PUBLISHED : Friday, 14 June, 2013, 12:00am
UPDATED : Friday, 14 June, 2013, 3:49am

Blackstone Group, the world's biggest manager of alternative assets, has US$1.5 billion of capital commitments for its first Asian property fund, targeted at US$4 billion, according to a letter sent to investors.

Blackstone held a first close on the Asia real estate fund on June 7, according to the letter.

The New York-based company said it planned to begin investing the money immediately. The firm will focus on China, India, Australia and Japan, a person with knowledge of its plans said in December. The Asia-Pacific region's economic growth and decline in property values have attracted private-equity investors.

In the United States, Blackstone has been the biggest buyer of commercial property since prices bottomed more than three years ago. The company last year completed the largest private real estate fund, with US$13.3 billion of pledges.

There's "a pretty sharp contrast" in growth in Asia compared with Europe and the US, Jonathan Gray, Blackstone's global head of real estate, said at the firm's investor day on May 3. "And yet, there's not a lot of capital."

Blackstone Real Estate Partners Asia is the largest private property fund being raised for the region, followed by the US$1 billion Alpha Asia Macro Trends Fund II, according to Preqin, a London-based research firm.

Christine Anderson, a spokeswoman for Blackstone, declined to comment on the fundraising.

The New Jersey Division of Investment pledged US$500 million in the fund's first close, said Timothy Walsh, the director.

The commitment was driven by Blackstone's record of returns, attractive fees, Asia's scarcity of investment capital relative to the US, and the state's desire to expand in Asian property, he said.

"We have minimal exposure there," he said. The division oversees the state's US$75.6 billion pension fund.

"BREP Asia is by far the largest and best-established Asia-Pacific investment manager with the widest geographic presence among its competitors," Walsh wrote in a March 15 memo to New Jersey's State Investment Council recommending the investment.

Since 2010, Blackstone has invested about US$1.46 billion of equity in 15 Asia-Pacific transactions that are projected to achieve a net return of 1.8 times invested capital, according to the memo. While the new pool will be Blackstone's first real estate fund devoted to Asia, the firm has been among the biggest buyers of property in Australia and India, chairman and chief executive Stephen Schwarzman said last year in Hong Kong.

At the end of last year, Blackstone bought the Top Ryde mall in Sydney in a foreclosure sale for 50 per cent less than its A$700 million (HK$5.1 billion) construction cost, Gray said at the investor day.