The Blackstone Group is apparently well on its way to raising the industry’s first fund with a $13 billion equity target. After less than a month of official fundraising, BREP VIII is reportedly ready to hold its first close with $10 billion of commitments. Most of this is undoubtedly from current investors who re-upped when given the chance this past autumn, and it seems likely the rest will quickly follow.
I know, BREP VII closed at $13.3 billion in 2012, but it had only officially targeted $10 billion. Given that BREP VII overshot its minimum target raise by 33 percent, there is the real possibility that we might actually be looking at the first $15 billion fund.
It’s hard to overestimate what a big deal this is. According to the IREI FundTracker Database, Blackstone has raised more than $27 billion during the past three years. This is followed by Lone Star Funds, which brought in about $20.6 billion in that same timeframe. After that, the totals fall off sharply. Fortress Group raised a bit more than $7 billion, and Brookfield received commitments of $5.5 billion. So Blackstone’s $10 billion one-month first close comprises more capital than any other firm except Lone Star has been able to raise in three years. Talk about sucking the oxygen out of the room.
The 2015 Global Investor Survey, produced by IREI and Kingsley Associates and just released this week at VIP – Americas, estimates that U.S. investors will deploy $46 billion in new capital in 2015. The IREI FundTracker Database, however, tracks more than of $350 billion being targeted. (There is actually more capital being sought than this indicates because most open-end funds don’t indicate a target raise, but for simplicity, we’ll use the $350 billion figure.) If we assume U.S. investors will deploy around $50 billion in 2015 (they seem to always deploy a little more than the survey indicates), there is only $1.00 available for every $7.00 being sought. If you deduct Blackstone’s $13 billion from both the available capital and the sought capital, you end up with only $1.00 for each $9.00 being sought.
Even if you assume that LPs will actually put out more than $50 billion, and you know there are investors in Europe and Asia making commitments (INREV estimates Europe investors will deploy €42.5 billion in international strategies) it still comes nowhere near the more than $350 billion being sought.
Fundraising is never easy. Going up against a behemoth like Blackstone makes it even harder. People talk about timing the market to buy low, sell high. I wonder if fundraisers might begin timing the market to avoid the Blackstone years. It probably wouldn’t hurt.
Not a subscriber to IREI Insights blog? Sign up to receive alerts on new blog posts.
Sheila Hopkins is a senior editor with Institutional Real Estate, Inc.
