Blackstone has continued to increase its real estate assets under management (AUM) to US$331.5bn (€314bn) and raised a further US$3.2bn for its European real estate fund in just three months, according to its latest results.
The 4% growth in real estate AUM was achieved following a difficult period for fundraising. According to Pitchbook, fundraising for real estate strategies fell from US$160bn in the first half of 2022 to US$67bn for the first six months of this year.
The US$3.2bn capital raise for Blackstone Real Estate Partners Europe Fund VII takes the European opportunistic fund to more than US$4bn in committed capital.
In an investor conference call, president Jon Gray said: “In real estate, Blackstone is in an extremely differentiated position. The majority of the equity portfolio is in logistics, data centres and student housing, which continue to benefit from robust fundamentals.”
Blackstone’s data centre business, QTS, which it acquired two years ago through its real estate and infrastructure arms, “was the single largest source of appreciation at the firm, driven by explosive growth in data creation that is being accelerated by the AI revolution”, Gray said.
Logistics, which represents Blackstone’s largest real estate sector exposure, “remained favourable”, Gray said, “with re-leasing spreads in our US warehouses of over 60% in recent months, and similarly strong dynamics in many of our other major logistics markets globally. At the same time, market rents continued to move higher.”
Blackstone is seeing “moderation in growth” in other parts of its real estate portfolio, including its US apartments. “But cash flows are stable or increasing across the vast majority of our real estate holdings,” Gray added.
“That said, higher interest rates are impacting valuation multiples in the sector. This is also having the effect of meaningfully reducing the new supply pipeline, which is favourable for values longer term.”
Construction starts have also been “falling sharply for virtually all types of real estate”, Gray said, including year-over-year declines of 30-70% for US apartment buildings, warehouses and hotels.”
Blackstone disclosed that it had US$65.8bn of capital available for the asset class. “And in a dislocated market, having $66bn of dry powder in real estate is a significant advantage,” Gray said.
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