So Blackstone have raised over $6 billion for their latest REPE fund and are targeting $10 billion by the end of their fund-raising.
It seems like Jon Gray and his guys are operating on a different scale to their competitors.
Do you guys seen anyone giving them a run for their money? either from the other PE funds, Hedge Funds or maybe BB spin-offs?
It doesn't look like they'll be screwing their associates out of their bonuses anytime soon...
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haha pray the lockup terms expire before the next drawdown period for housing
Do you really see LPs reneging on their commitments? A big selling point of this type of fund is to take advantage of distressed.
was only kidding--distressed RE has been an interesting idea for a year or so now, and only a few platforms can do the sourcing/transaction/maintenance etc. it's the mechanics of the entire trade that is hard to execute (it's a really obvious trade idea a few years out from a bubble), so only a few players can really do it, BX being one of them. you just don't want to be held with a bag of coal when the entire premise of the trade idea was that it was slightly better than a bag of coal in the first place lol
I don't think the drawdown issue would be significant for BX as their LP base is very diversified. However, it was an issue for some smaller funds during the 2008/09 crash as their LPs became as cash strapped as some of the funds' targets... ok, I exaggerate, but it was an issue.
I've definitely seen folks overpay recently (I'm thinking foreclosed residential/office out in secondary cities). I think its more of an issue of bad underwriting, which is fund/investor specific, or pressure to be invested. I'm more concerned with REITs "holding a bag of coal" as they're more dependent on rental/asset growth.
There are a couple of firms out there that are doing the distressed RE trade in an interesting way. Brookfield comes to mind. Anyone care to comment on their Kerzner debt to equity acquisition? Apparently its not done yet.
Also, I personally like the debt to equity deals that Fortress have pulled off in 2010/2009. They look on track to exit profitably. I wonder if they'll go further in developing their RE platform (i.e. grow their ability to work out/manage the physical assets, not just the loans).
Anyone see other PE firms like KKR commit to RE in the same way?
Would love to hear comments even from non-real estate people.
Does anyone know how the system works for analysts? I often times see positions advertised for real estate private equity analysts but rarely for cf pe analysts. I saw that RE PE at BX also covers healthcare? Can anyone explain the setup?
Being an REPE analyst (acquisitions) is one of the best starts to a career in real estate in my opinion. Most of your work will be modelling/deal analysis, writing internal investment memos and due diligence/execution. It is a niche investment market though as most of your experience & network will be sector specific.
At smaller funds you'll get exposure and build your network with other RE investors/operators/entrepreneurs, brokers, banks, insurance companies & debt providers in your sector pretty quickly (if your fund is good and has money to invest).
At a mega fund like Blackstone / Carlyle you'll have less relationship exposure initially (much like general corporate PE), but will have better deal flow and will be a great candidate for internal promotion/development and other acquisition roles throughout real estate (REITs, developers, etc...). At the mid levels (Senior Associate+) at mega funds you will start to build out your network with the most influential land/asset owners in your market/country (its a small circle and everyone knows everyone in the same market). At mega funds you might also get exposure to doing corporate real estate deals (i.e. LBOs/restructuring of real estate or hotel companies, not just asset acquisitions/development).
RE is more niche than general corporate PE and thus firms tend to hold on to their analysts with a view that they will grow with the fund (assuming it doesn't blow up). There is generally less of a pressure from the firm to leave to do an MBA like there is in banking. Some REPE firms, listed REITs and other investors do value a couple of years of investment banking experience if you don't have real estate investing experience, but you'll have to show interest in real estate.
However note that hiring in real estate is very much needs based and the pay is more variable between firms than in other sectors. It's not usually as structured as investment banking or corporate PE unless you're at a mega fund or your fund is part of a bulge bracket investment bank.
What do people feel about BX's real estate debt fund? Good opportunity or potentially risky?
To invest in, or to work for? Both great opportunities in my opinion.
As I understand it the RE debt fund is managed by the same RE team that manages their opportunity fund, pretty much. I like that they have the flexibility to do various things with the capital (existing and new mezz, preferred equity, performing an non-performing loans, etc...) and take a value investing approach
A year and a half later, it seems like this discussion is worth picking back-up. Lone Star and Starwood appear to have no problems bringing it in. Starwood actually made some really interesting plays earlier this year like Tri Pointe and LNR. KKR also raised an enormous amount of capital for their re fund, especially for a pe firm that doesn't specialize in re. It seems like competition has really stepped up. Any thoughts?
I had a chance to talk to the global head of capital markets at CW the other night. He said Blackstone is paying top dollar (read over paying?) for core assets just to fill in holes in their portfolio. Sounds like they have a ton of cash and are looking to lever up on core assets while financing is still relativly cheap.
+1 to this, funds are overpaying on core left and right. Sub-5 caps on industrial is ridiculous
Think BlackRock can make a push in this space given their recent acquisition of MGPA?
It doesn't seem likely that blackrock will be able to take any market share from other repe funds (at least, not just from this aquisition) because they want to use their mgpa to expand their real estate offering focusing on Asia. Frankly, the clients interested in mgpa's Asian focus probably already invest with Mgpa, and blackrock would probably just offer the "new" asset class to its existing clients.
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