Blackstone is becoming a legend in its own time after pulling off its latest remarkable feat.

Blackstone is becoming a legend in its own time after pulling off its latest remarkable feat.

Earlier this week, PropertyEU revealed that one of the biggest real estate deals globally since the onset of the financial crisis in 2008 was signed, sealed and delivered in just a matter of weeks. The transaction, announced on 9 April, involved the US private equity giant acquiring a $23 bn (€21.7 bn) real estate portfolio from GE Real Estate, the real estate arm of US-based General Electric Co, in partnership with San Francisco-based real estate lender Wells Fargo. Blackstone’s European real estate fund, BREP Europe IV, agreed to purchase the European equity real estate assets for €1.9 bn.

According to a spokesman for GE Real Estate in the US, the company did not contact Blackstone regarding the sale of its real estate business until just last month. ‘We have a 20-year relationship with Blackstone and they know us very well,’ he said. ‘They also have a great reputation when it comes to speed and certainty on deals, so I think this will go down as one of the fastest deals ever.’

Clearly, the Blackstone Group has become the go-to company for sellers seeking a quick sale – and an investor with deep enough pockets to come to the rescue. The secret of its success is beyond the scope of this column but a London-based fund manager recently shed some light on one possible factor: ‘Blackstone is really good at hiring very, very smart people who think very quickly on their feet. As a firm, they are well-known for being able to put together complex deals in an unusually short time.’

Blackstone is by no means a stranger to blockbuster deals. In the autumn of 2007, it acquired hotel company Hilton Worldwide Holdings in a $26 bn leveraged buyout, pulling off a paper profit of $12 bn just four years later. The deal came hot on the heels of Blackstone’s $36 bn acquisition of US-based office owner Equity Office Properties Trust the previous year, which marked the largest leveraged buyout in history at the time. Blackstone paid $20 bn for the firm and assumed $16 bn in debt.

Prodigious fundraising
Such deals have been made possible by Blackstone’s prodigious fundraising drive in recent years. Such has been the success of its fund raising capabilities that it reported undrawn capital (total ‘dry powder’) across all of its units of $46.1 bn at the end of last year, despite $30.6 bn of total capital invested and/or committed over the last year.

Real estate is the single largest profit generator for Blackstone, bringing in $1.9 bn of income in 2014 from investment returns and management fees globally. Its real estate arm now outstrips its private equity business in investment terms, accounting for $11.5 bn of investment globally last year (of which around $4 bn was in Europe), with private equity accounting for an additional $11.2 bn. In total, the firm had around $81 bn of AUM globally as of end-December 2014.

And as many former powerhouses, including Goldman Sachs and Morgan Stanley, all but retreat from the real estate scene, Blackstone has fewer heavyweight rivals to contend with. Many real estate funds focusing on Europe in the past two years have a target size of less than a billion euros, including AEW Europe’s ‘Logistis’ fund, which had a final size of €820 mln and LaSalle Investment Management’s Real Estate Debt Strategies II fund, which had a final size of €723 mln, according to Preqin.

Those funds are dwarfed by the $14.5 bn that Blackstone raised in the first quarter for its Blackstone Real Estate Partners VIII fund – the largest-ever closed-end real estate fund - after reportedly spending just four months marketing it. (A further $1.3 bn is expected to be raised from retail investors.)

Starwood Capital Group raised $5.6 bn for its Starwood Global Opportunity Fund X and CIM Group raised $2.4 bn for its CIM Fund VIII, according to Preqin.

Even Blackstone’s chief executive, Steven Schwarzman, readily admits that Blackstone’s deep pockets give the firm an enviable advantage over its rivals. Speaking at an investor conference last year, he reportedly said: ‘If you are so much bigger than everyone else, you can really just write a check even with no financing to just make something happen. If you’re having a dialogue with a financial institution, it’s almost like, “Tell us how much you want to sell, we’ll give you a price.”’

That quote would make a great punch line if Blackstone the movie is ever made. For if there was ever a candidate for a blockbuster on demand on the global real estate stage, Blackstone would have to be it.

Sara Seddon Kilbinger
Correspondent UK & German-speaking countries


Blackstone took the 3rd spot in our ranking of Top 100 Investors in terms of deal activity in Europe in 2014 and was the fastest riser in our ranking of Top 100 Investors in Europe in terms of real estate assets under management in the same year. For more background information and our recent coverage of Blackstone, please see the links below.