Blackstone readies new Asia real estate fund of at least $5 billion

Hong Kong: Blackstone Group LP is readying a new Asia-focused real estate fund that aims to raise a record $5 billion or more, betting on strong returns from property investments in the region, people familiar with the plans told Reuters.

The world’s biggest alternative asset manager will likely launch the fund in the next 12-16 months, the people said. It has invested more than 70% of the $5.08 billion it raised in its first Asia-focused property fund, a threshold when buyout firms typically start considering and preparing for follow-up capital raising.

New York-based Blackstone intends to boost investments in assets such as warehouses and shopping malls in China, India, Southeast Asia and Australia, one of the people said.

Global investors have shown robust appetite for shopping malls, warehouses and other property assets in Asia as they have sought the relative safety and stable returns of real estate, buoyed by growing urbanization and rising incomes in its two most populous countries of China and India.

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Underscoring this trend, 22 Asia-focused property funds raised a total of $10.6 billion in 2016, data provider Preqin said. There’s already $33 billion of unused capital, or dry powder, in such Asia-focused real estate funds, it said.

Blackstone declined to comment on plans for a new Asia-focused real estate fund.

But when commenting on the fundraising outlook for 2017 in the company’s third quarter earnings conference call, Blackstone’s chief financial officer Michael Chae said there were “significant” fundraises coming up next year, including a possible new Asia fund.

The people declined to be named because details of the new Asia fund aren’t yet public.

Blackstone’s first Asia-focused property fund, the $5.08 billion Blackstone Real Estate Partners (BREP) Asia that closed in 2014, is the biggest such fund to focus wholly on Asia, Preqin data shows. The new fund could exceed the first one in size.

The first Blackstone fund invested in Japanese residential real estate, office space in Australia and Chinese shopping malls, posting an internal rate of return of 17% through September 2016, according to Blackstone’s most recent earnings report.

In China, the company has a joint venture with developer China Vanke Co Ltd for logistics investments. Blackstone sold $1.9 billion of commercial property to Vanke last year.

Blackstone is also one of the largest owners of office space in India. Embassy Office Park REIT, which Blackstone co-owns with local developer Embassy Group, is awaiting approval from authorities to launch the country’s first ever real estate investment trust (REIT), which Thomson Reuters publication IFR reported could raise $500 million-$1 billion in a 2017 initial public offering. Reuters