Blackstone Raises An $8 Billion Fund To Invest In Commercial Real Estate To Buy Debt Portfolios From Banks And Insurance Companies

Private equity juggernaut Blackstone BX has matched its own record for a commercial real-estate debt fund by closing on a $8 billion deal. It’s a further indication of the sector’s rebound, The Wall Street Journal reported.

In a company statement, Tim Johnson, global head of Blackstone real estate debt strategies, said, “We are extraordinarily appreciative of our investors for allocating this amount of capital during this period of market dislocation. We could not be more enthusiastic about the opportunities ahead and with the support of the largest owner of commercial real estate as well as the largest alternative real estate credit platform in the world, BREDS V is well-positioned to deliver in this attractive vintage.”

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High Interest Rates Have Complicated Issues

The fund — Blackstone Real Estate Debt Strategies V — which took two years to raise, will be active in North America, Europe, and Australia. The only other time Blackstone raised $8 billion for a real-estate debt fund was in September 2020. They are among the private-equity firms that stepped in to fill the gap after the financial crash of 2008 when traditional lenders became skittish about backing real estate. Complicating issues, however, has been the rise in interest rates as commercial real estate is traditionally very leveraged.  

According to data firm Preqin, despite a drop in global real estate fundraising by private equity firms in recent years, the Blackstone deal is a sign of commercial real estate recovery, with commercial mortgage-backed securities up nearly three times as much in 2024 compared with 2023. 

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Banks See An Upswing For Commercial Real Estate

Blackstone both buys existing loans and makes loans with its real estate fund, often partnering with commercial banks when loaning money, with banks taking on the senior less risky, higher performing part of the loan. Regarding the changing winds of commercial real estate, Al Brooks, vice chair of commercial banking at JP Morgan Chase JPM recently said: 

“The 2025 commercial real estate outlook is largely optimistic, with robust performance in the industrial sector and steady retail growth. While climate change concerns, cybersecurity threats, and interest rate uncertainty persist, opportunities in affordable housing and public-private relationships offer promise for growth and innovation.”  

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Return To Office Mandates Are A Boost

The return-to-office mandates issued by major companies is also a boost to commercial real estate. Reuters reported that Blackstone is scouting for office properties in New York and San Francisco, quoting Blackstone President Jonathan Gray, who said at a conference: 

“In New York, you have financial services firms who are growing rapidly, you don’t have any new building. In San Francisco, the values fell very hard, in some cases 75%, and AI and technology innovation really (are) housed in San Francisco.”

The Market Is Ripe To Buy Troubled Assets

Blackstone sees the market as ripe for taking loans from troubled borrowers and lenders who might want to reduce the size of their real-estate debt portfolios or face the expiration of low-interest rate loans and thus have an asset that will drop in value once the rate increases.

“That’s not a loan a bank wants to refinance dollar for dollar,” Johnson said. “Someone has to step in and fill that gap.”

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