Blackstone Targets $5 Billion for Latest Real Estate Debt Fund

(Bloomberg) -- Blackstone Group LP is seeking $5 billion for its latest fund that invests in real estate debt, according to a person familiar with the matter.

The vehicle, Blackstone Real Estate Debt Strategies IV, will focus on property-related wagers in public and private debt globally, according to an investor presentation seen by Bloomberg. The pool will have an emphasis on the U.S.

The firm is tapping into sustained interest in private real estate debt as investors search for yield. In 2018, $26 billion was raised by funds dedicated to real estate debt, on the heels of a record $33 billion the year prior, according to data from Preqin. Roughly 40% of the assets in real estate debt vehicles have yet to be invested, an effect of the strategy’s relatively recent growth, the data provider said.

Paula Chirhart, a spokeswoman for New York-based Blackstone, declined to comment.

Blackstone’s new fund scored a commitment of up to $100 million from the $42.7 billion Illinois Municipal Retirement Fund, the pension disclosed last week on its website. Management fees will be waived for four months for investors in the first close, saving the pension as much as $500,000 based on its commitment.

Fund Fees

The fund is charging a 15% incentive fee with a performance hurdle -- the return rate it is required to meet to receive carried interest -- of 6%. It will charge 1.25% management fees per year on invested capital for commitments of at least $400 million, and 1.5% for those below that level.

The firm’s predecessor pool raised about $4.8 billion in 2016, exceeding an initial $4 billion target, according to data compiled by Bloomberg. That fund, Blackstone Real Estate Debt Strategies III, originates and structures mezzanine debt linked to institutional-grade real estate in North America and Europe, Bloomberg previously reported.

Blackstone’s real estate debt strategies, or Breds, unit oversees more than $17 billion of investor capital, according to the investor presentation seen by Bloomberg. Blackstone’s combined real estate-related assets under management were $140 billion as of March 31, according to filings.

To contact the reporters on this story: Gillian Tan in New York at gtan129@bloomberg.net;Melissa Karsh in New York at mkarsh@bloomberg.net

To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Josh Friedman, Dan Reichl

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