Blackstone, the world’s largest real estate asset manager, has raised €5.5bn for a new European real estate fund as investors in the sector shift their focus from the US towards Europe.
The New York-based private equity house is on track to equal its own previous record of $7bn for a Europe-focused real estate vehicle when it closes the fund later this year.
Private equity funds investing in Europe raised $40bn in the first quarter of 2016, up from $30bn the previous quarter, while fundraising for North America-focused funds declined from $89bn to $60bn, according to data from Preqin, a research firm.
Anthony Myers, managing director at Blackstone, told a real estate audience at an event last week that “it is getting harder to find opportunities that will give you some kind of excess liquid return in the US, but Europe is behind the US”.
“There’s a perception that Europe is a less efficient market and that you need to be with folks who have teams on the ground and experience,” he added.
Blackstone’s fund, Europe Real Estate Investors V, will target the same returns as its previous one launched in 2014 — a 20 per cent gross internal rate of return, or 15 per cent net of fees. It will mainly invest in the UK, Germany, France, Italy and Spain.
It has attracted backing from institutions including the California State Teachers’ Retirement System and the San Francisco Employees’ Retirement System.
Blackstone has a record of assembling large portfolios of assets in sectors such as hotels or industrial property, which it then floats or sells.
Like other private equity firms, Blackstone is eyeing the non-performing loans market in Italy, where banks hold about €360bn of such loans, many backed by commercial real estate. The country’s strongest banks, insurers and asset managers agreed in April to create a €4.25bn rescue fund to help ailing lenders.
But few private equity firms have so far bought up large portfolios of non-performing loans as they have in Ireland, Spain and elsewhere, partly because of what is seen as a weak regime for reclaiming collateral.
“We are doing what others are doing which is evaluating the landscape. We have a little bit of experience in non-performing loans, but in Italy it is more challenging structurally, given the judicial system,” Mr Myers said.
“It’s a huge opportunity that is out there. There is talk by the government of making changes to the system to allow for more efficient foreclosure processes, which is to some extent holding back the ability of Italian banks to take the necessary writedowns.”
Source: FT