Blackstone seeking to raise US$4b for real estate debt fund

[NEW YORK] Blackstone Group LP is seeking to raise US$4 billion from investors for its latest real estate mezzanine debt fund, according to documents from an investor in the vehicle.

Blackstone Real Estate Debt Strategies III LP will originate and structure mezzanine debt linked to institutional- grade real estate in North America and Europe, according to a report to the Commonwealth of Pennsylvania Public School Employees' Retirement System from the pension system's senior portfolio manager for real estate, William Stalter, at its Dec 7 board meeting. The pension board at that meeting committed as much as US$100 million to the fund, according to its website.

The fund offers investors the opportunity to underwrite complex real estate deals where traditional capital is scarce, Mr Stalter said in the report.

Fundraising for private real estate debt hit a record US$24 billion in 2014, according to data from Preqin Ltd. At Sept 15, prior to Blackstone's raising, there were 56 closed-end real estate debt funds in the market, targeting a combined US$26 billion, Preqin said.

Blackstone has lowered the performance hurdle on the new fund - the return rate it is required to meet to receive carried interest - to 6 per cent, Stalter's report said, because of the low interest rate environment. The firm has not set a cap on the fund, according to the report. A representative for Blackstone didn't immediately respond to requests for comment.

Blackstone, the world's largest alternative investment manager, has about US$10 billion in investor commitments in its real estate debt platform, which has made a 12 per cent net return since it began investing in 2008, according to Mr Stalter's report.

The firm closed its predecessor fund with US$3.5 billion in commitments in 2013, above its target of US$3 billion, according to data compiled by Bloomberg. That fund has a net internal rate of return of 9.31 per cent and a 1.12 times multiple of invested capital, Mr Stalter's report said.

BLOOMBERG