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Thursday, July 21, 2011

What Slump? Blackstone Raises $3 Billion for Real Estate Fund

What Slump? Blackstone Raises $3 Billion for Real Estate FundBy Craig Karmin

Blackstone Group has raised about $3 billion for a new real-estate fund, another sign that the private-equity industry’s dominant players are attracting new capital while many of the smaller funds struggle to attract new money.
Blackstone, which reports second-quarter earnings Thursday morning, expects a first closing for its seventh real-estate fund in the third quarter, according to people familiar with the matter. Overall, the firm has indicated, it is targeting about $10 billion for the fund.
The private-equity titan has brought in that amount even though it only began its money-raising for the fund in the early spring. But it is not the only big firm on the real-estate fund-raising trail.
Carlyle Group, the Washington, D.C.-based private-equity firm, has raised about $2 billion so far for what will be its sixth U.S. real-estate fund. Lone Star Funds in Dallas, meanwhile, raised $5.5 billion for a second real-estate fund that closed in May, exceeding its initial target of $4 billion to $5 billion, say people familiar with the matter.
While the market downturn hasn’t prevented several of the most sizeable and established real-estate funds from raising fresh capital, consultants say that newer funds are facing challenges in persuading pension-fund investors to take a chance with less-proven managers with fewer resources.
Blackstone is expected to raise the most of its peer group and often deploys that money in particularly large, sometimes complex transactions.
This year, for instance, Blackstone paid $9.4 billion in a deal for the U.S. malls of Centro Properties Group, an Australian real-estate investor. Blackstone also purchased Chicago developer Sam Zell’s Equity Office Properties Trust in 2007 for $39 billion, then sold about 60% of the portfolio to other investors.
This post first appeared on the WSJ’s Deal Journal blog, which has more about Blackstone and private equity.

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