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Just the Peaks This newsletter, at a glance
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In the first quarter of 2019, Blackstone Group plans to finalize its $20B fund
Here’s how the record-shattering venture is shaking up CRE
What a way to ring in the New Year.
In the early weeks of 2019, The Wall Street Journal reported on Blackstone Group, the multinational asset management and financial services firm, and its historic $20-billion fund set to close by April. Until now, spokespeople have been tight-lipped. But investors and top execs did share some of the juicy scoop with reporters.
According to the WSJ, the New York-based fund is nearly double the closest competitor, propelling Blackstone into record-breaking territory. Investors include foreign governments, pension fund managers, and various well-to-do individuals from across the globe. As for the fund’s targets, we’re taking an educated guess.
Smashing CRE records
Beyond the numbers, Blackstone’s close could signal huge changes across real estate markets. Given their sheer size and scope of influence, the firm has the ability to sway domestic (even global) markets, including prices paid for malls and shopping centers, hotels and resorts, office buildings, and other commercial projects.
To wrap your head around the impact, consider the news in numbers.
– $10 billion – Average amount of competing funds
– $4.2 billion – More money raised since their last fund
– $20 billion – The firm’s estimated buying power
– $2 dollars – Debt they use for every $1 of equity
So, how will Blackstone make their fortune? If history repeats itself, the fund will likely focus on revitalizing distressed properties. Insiders have heard rumblings of some major projects.
“Executives told one investor this fall that it was considering investing in distribution centers near high-population areas that are seeing demand spike thanks to a surge in online retail,” says Jessica Geurin of HousingWire. “Other targets may include rental housing, resorts in remote areas that make construction difficult, and properties in cities popular among younger, tech-oriented professionals.”
Financial experts seem to have a positive outlook, what with Blackstone’s solid track record. When it comes to real estate, their high-risk approach has paid off with annual returns hovering at around 16%. Still, rising interest rates may complicate things.
The firm clocked a whopping $472 billion in reported assets as of December 31st, 2018. That’s an increase of 9% since the year prior, as reported by Pensions & Investments. So, what do we takeaway from this monumental CRE feat?
Through rocky market conditions, strategic opportunities are still waiting to be found. Are you ready to make your move?
More investment stories to come in Q1