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Investing.com -- Blackstone (NYSE:BX) has successfully raised $8 billion for a commercial real estate debt fund, marking a significant event in the property market rebound. This fund matches the record for this type of investment vehicle, previously set by Blackstone in September 2020.
The fund, which took about two years to raise, will be active in North America, Europe, and Australia. It is a significant development for nonbank lenders, a sector that emerged following the global financial crisis when banks’ appetite for real estate risk declined significantly. These debt funds are now playing a crucial role in the recovery of the commercial real estate sector.
Despite the challenges of raising capital for real estate investments since the rise in interest rates in 2022, Blackstone managed to secure the necessary funding. It is noteworthy that commercial real estate is a highly leveraged business, and higher debt costs generally lead to a decrease in property values.
In the fourth quarter of the previous year, global real estate fundraising by private-equity firms that invest in real estate hit a five-year low at $10 billion, according to data from Preqin. It took Blackstone longer to raise this fund than the one of the same size closed in 2020.
However, the commercial real estate sector is showing signs of recovery this year. There has been an improvement in debt markets, with the issuance of commercial mortgage-backed securities nearly tripling in 2024 compared to 2023. Sales activity has also increased, providing more clarity on property values.
Blackstone’s latest real estate debt fund, which began investing in late 2023, makes property loans and buys existing loans. Often, these loans are made in partnership with banks, with Blackstone taking on the riskier, higher-yield part of the debt.
According to Tim Johnson, global head of Blackstone Real Estate Debt Strategies, the fund has been designed to capitalize on the issues facing many borrowers and lenders, even as markets recover. The fund is buying loans from banks and insurance companies looking to reduce the size of their real estate debt portfolios.
The fund is also stepping in to fill the gap for properties with expiring loans that were made when interest rates were low. If the property’s value has decreased, existing lenders are hesitant to refinance the loan for the same amount.
Blackstone Real Estate Debt Strategies V, as the fund is known, has $77 billion of assets under management and over 170 professionals globally. The fund has the flexibility to invest around the world and is deploying capital across several strategies, including global scale lending, liquid securities, structured solutions to financial institutions, and corporate credit.
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