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Blackstone returns with fifth European real estate fund

  • Blackstone targeting 7 bln euros
  • Fund V offers three month fee break for first close investors
  • $500 mln commitments to receive significant management fee discount

Blackstone Group is marketing its fifth European real estate fund with a 7 billion euros ($7.5 billion) target, according to San Francisco Employees’ Retirement System documents.

The firm has not set a hard cap for Blackstone Real Estate Partners Europe V, according San Francisco documents. The pension committed up to 100 million euros to the fund at its November 18 meeting.

San Francisco staff hopes to get its commitment into the fund’s initial close, which would qualify the pension for a three-month fee holiday offered to first-close investors, according to pension documents.

At 100 million euros, San Francisco’s commitment would not qualify for some of the fee breaks Blackstone is offering to its largest limited partners. Investors who commit more than $500 million to Fund V will pay a 1.1 percent management fee during the fund’s five-year investment period and 1.1 percent on invested capital thereafter. LPs who put down between $250 million and $500 million will be charged 1.25 percent. Sub-$250 million fund stakes come with a 1.5 percent management fee.

Blackstone could not be reached for comment.

Blackstone Real Estate Partners Europe V arrives less than two years after the firm held a 5.1 billion euro final close on Fund IV. In a third quarter earnings call, Blackstone President Hamilton “Tony” James predicted an imminent return to market with a follow-up to its “chunky” fourth fund.

Though still very early in its investment period, Fund IV netted a 21 percent internal rate of return and 1.2x multiple as of September 30, according to San Francisco documents. Blackstone hopes to net a 15 percent internal rate of return and 1.7x multiple from the new fund.

Much like Fund IV, Blackstone’s latest European real estate fund will invest opportunistically in distressed high-quality real estate assets throughout the continent. Roughly 60 percent of the fund will go toward deals in the United Kingdom, Germany and France, though it will also pursue deals in highly distressed assets located in less stable markets like Ireland, Spain and Italy.

Action Item: See San Francisco’s memo on BREP Europe V here: http://bit.ly/1Ib7n0P

Photo: Blackstone’s Tony James (L) speaks with Steve Gelsi of Buyouts at the LP-GP Summit in New York on Sept. 18, 2014. Photo by Robert Paul for Buyouts Insider