- Blackstone successfully raised an $8B commercial property debt fund, matching a record set in 2020.
- The fund will be deployed across North America, Europe, and Australia, focusing on property loans and purchasing existing loans.
- Blackstone’s approach includes partnering with banks to take on the riskier, higher-yield portion of real estate debt.
- Despite a challenging fundraising environment in 2024, the overall CRE market is recovering, especially in debt markets and sales.
Blackstone (BX) just closed on an $8B commercial real estate debt fund, matching the record amount set back in 2020, according to WSJ.
The new debt fund, which took two years to raise, will focus on opportunities in North America, Europe, and Australia.
Making History
Debt funds as large as this one are key to today’s CRE market, as traditional banks pulled back from lending due to rising risks and stricter underwriting regulations.
With the new $8B fund, Blackstone aims to capitalize on opportunities from financially pressured property owners and lenders, especially those who need to restructure loans or reduce their exposure to real estate debt.
This latest move is broadly seen as optimistic for the CRE market, even as challenges persist due to high interest rates and refinancing struggles.
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Plugging Loan Gaps
The fund’s strategy involves providing loans to properties having trouble securing refinancing, often due to lower valuations due to rising interest rates. This is especially true for loans made during the low interest rate era, when the value of the property may no longer support the original loan amount.
Blackstone is stepping in where banks are unwilling to refinance by buying loans from traditional lenders and financial institutions like banks and insurance companies looking to offload risk.
The fund also partners with banks, where the financial institution takes the less risky, senior portion of the debt, while Blackstone assumes the higher-risk, higher-yield portion. This structure allows the firm to target higher returns while reducing overall exposure for its partners.
Emerging Opportunities
Despite the broader challenges in fundraising—private equity raised just $10B for global real estate funds in Q4 2024, a 5-year low—commercial real estate debt markets are showing signs of recovery.
Commercial mortgage-backed securities (CMBS) issuance surged nearly 300% in 2024 compared to the previous year. Additionally, rebounding property sales is providing much-needed clarity on assets, offering more confidence to both lenders and borrowers.
Blackstone’s new fund, which began investing in late 2023, will play a key role in bridging the gap between the market’s recovery and borrowers’s needs.
