Blackstone is buying up debt-ridden public and private properties

Crains New York

Blackstone Group LP is seeking $5 billion for its latest fund that invests in real estate debt, according to a person familiar with the matter.

The vehicle, Blackstone Real Estate Debt Strategies IV, will focus on property-related wagers in public and private debt globally, according to an investor presentation seen by Bloomberg. The pool will have an emphasis on the U.S.

The firm is tapping into sustained interest in private real estate debt as investors search for yield. In 2018, $26 billion was raised by funds dedicated to real estate debt, on the heels of a record $33 billion the year prior, according to data from Preqin. Roughly 40% of the assets in real estate debt vehicles have yet to be invested, an effect of the strategy’s relatively recent growth, the data provider said.

Paula Chirhart, a spokeswoman for New York-based Blackstone, declined to comment.

Blackstone’s new fund scored a commitment of up to $100 million from the $42.7 billion Illinois Municipal Retirement Fund, the pension disclosed last week on its website. Management fees will be waived for four months for investors in the first close, saving the pension as much as $500,000 based on its commitment.

The fund is charging a 15% incentive fee with a performance hurdle -- the return rate it is required to meet to receive carried interest -- of 6%. It will charge 1.25% management fees per year on invested capital for commitments of at least $400 million, and 1.5% for those below that level.

Hedge fund landlords are tripping balls capitalizing on home foreclosures

CBC


A new documentary argues that housing has become a commodity much like gold, to be bought and sold on the stock market in bulk — and that the practice is driving up rents globally.
Fredrik Gertten, director of Push, says that hedge funds can snap up real estate quickly and forcefully.

 

"They have more money than a normal landlord, so it's kind of almost like a landlord on speed," he told The Current's Anna Maria Tremonti.

The result is often an owner who lives very far away from the property, he said.
"
You can't knock on his door and talk to him about your problems because your landlord is now a hedge fund ... somewhere [in a] totally different part of the world, maybe."


Leilani Farha, the United Nations' special rapporteur on adequate housing, explained that private equity firms and asset management firms "survey landscapes all around the world looking for what they call undervalued properties."

"When they find them, they buy them up with their liquid capital — backed by banks — and their model is to then refurbish the units and increase the rents, forcing people out," Farha, who is featured in Push, told Tremonti.


She said the business model isn't just gentrification, but a financialization of housing, driven by an "unprecedented amount of wealth."

"This is on a totally different scale. They're buying thousands of units at a time," she said.