Blackstone to Tap Asian Real Estate Market

on Dec 6, 2012

**Blackstone Starting Asian Real Estate Fund**

US private equity firm Blackstone Group (NYSE:BX) has announced that it will launch a new Asia-focused real estate fund as the company seizes on a “golden moment” for property in the region, Reuters reported on 5 December 2012, citing Blackstone’s president Tony James.
Tapping the Asian real estate market is Blackstone’s latest step towards expansion of its real estate business. Without offering further details on the new fund, the company’s president Mr James told the Goldman Sachs financial services conference in New York on Wednesday: “Right now we are offering an Asian real estate fund. There is not another pan-Asian real estate fund in existence.”

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**No Stranger to [Asian] Property Deals**
Although best-known for its private equity business, Blackstone, which was founded by Peter Peterson and Stephen Schwarzman almost three decades ago, is no stranger to the property business. In fact, currently the company is the world’s largest private real estate firm with $53.5 billion (£33.2 billion) of property assets under management, including office developments, shopping centres and hotel chains such as Hilton Worldwide Inc. And while property represents only a quarter of its holdings, real estate is actually Blackstone’s most profitable business, accounting for almost a half of its total third-quarter earnings. The US firm even announced in October, that it had raised $13.3 billion (£8.2 billion) for its latest global real estate fund which is the largest opportunistic property fund to date.

Blackstone’s president Mr James said: “We have virtually a unique position. Before the meltdown in real estate our key competitors were Goldman Sachs and Morgan Stanley, Bear Stearns, Lehman Brothers. They are all out of the business.”
Even though the launch of an Asian real estate fund is the first such venture for Blackstone, the company has certain experience with Asian property deals due to its global real estate fund’s operations. The New York-based firm also has a foothold in the continent’s property market through its $2 billion Asian real estate fund, MB, which Blackstone acquired from Bank of America-Merrill Lynch two years ago.

**“Golden Moment” to Buy and Sell in Property Market**
Earlier this year, Blackstone’s founder and chief executive Stephen Schwarzman said that he expected the company to be amongst the main buyers of commercial property in Australia and India. Indeed, the largest commercial real estate deal in India this year was made by Blackstone, which invested $170 million (£105 million) in a portfolio of three office complexes in the south and west parts of the country. The company’s real estate business also covers the European and US property markets through their local funds there.

!m[US Private Equity Firm Launches Asia-Focused Real Estate Fund as It Seizes on Market’s “Golden MomentAccording to Mr James, Blackstone’s strategy of purchasing distressed property assets and turning them around has allowed the company to record 20 per cent returns by selling them to investors seeking safer, “core” real estate assets showing between 5 and 6 per cent returns.
Reuters quoted Mr James as saying: “I have never seen, almost or very rarely in any market do you see a huge market where it is simultaneously a great time to buy and a great time to sell. That is what real estate is today. It is a golden moment.”


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