Key Takeaways
- • Blackstone is marketing a real estate secondaries fund targeting at least $3 billion, according to people familiar with the plan who asked not to be named.
- • The fund would buy stakes in other managers' core real estate vehicles focused on data centers, rental housing, and industrial properties, at discounts to net asset value.
- • Blackstone's secondary unit, Strategic Partners, raised $2.6 billion for an earlier version of this strategy in 2023.
- • Manager-led real estate secondary transactions reached $14.5 billion last year, up 60% from the prior year, according to an Ares Management report that also projected volumes could roughly double in coming years.
- • A Blackstone representative declined to comment on the fund.
Summary
Blackstone is courting investors for a new real estate secondaries fund with a target of no less than $3 billion, according to people familiar with the plan who asked not to be named because the effort is not public. A Blackstone representative declined to comment. The vehicle would purchase positions in other asset managers' real estate funds, concentrating on core real estate strategies with heavy exposure to data centers, rental housing, and industrial properties. The intent is to acquire these interests at prices below the funds' stated net asset values.
The pitch follows Strategic Partners, Blackstone's secondary business, which raised $2.6 billion in 2023 for an earlier version of the strategy. Executives tied that fundraising to growing liquidity pressures faced by asset managers and their limited partners. The new fund aims to address similar needs by serving as a buyer for fund stakes when sellers want to exit.
The push comes against a difficult backdrop for U.S. real estate, which has absorbed the pandemic's impact on offices and the Federal Reserve's rate hikes that began in 2022, both of which cooled deal activity. Blackstone's real estate arm is still working through the effects of that period. The slowdown has shifted more activity into the secondary market. Ares Management reported that manager-led real estate secondary transactions reached $14.5 billion last year, a 60% increase from the prior year, and said volumes could roughly double in the coming years.
Continuation vehicles, which transfer current holdings into a newly formed vehicle while bringing in additional capital, are also gaining traction among real estate managers. Jefferies noted that private-asset firms are using them more often to retain marquee holdings in logistics, data centers, and senior housing. If secondaries and continuation funds keep growing, additional liquidity options may emerge across private real assets, with implications for pricing, discounts to NAV, and investor access points.
The pitch follows Strategic Partners, Blackstone's secondary business, which raised $2.6 billion in 2023 for an earlier version of the strategy. Executives tied that fundraising to growing liquidity pressures faced by asset managers and their limited partners. The new fund aims to address similar needs by serving as a buyer for fund stakes when sellers want to exit.
The push comes against a difficult backdrop for U.S. real estate, which has absorbed the pandemic's impact on offices and the Federal Reserve's rate hikes that began in 2022, both of which cooled deal activity. Blackstone's real estate arm is still working through the effects of that period. The slowdown has shifted more activity into the secondary market. Ares Management reported that manager-led real estate secondary transactions reached $14.5 billion last year, a 60% increase from the prior year, and said volumes could roughly double in the coming years.
Continuation vehicles, which transfer current holdings into a newly formed vehicle while bringing in additional capital, are also gaining traction among real estate managers. Jefferies noted that private-asset firms are using them more often to retain marquee holdings in logistics, data centers, and senior housing. If secondaries and continuation funds keep growing, additional liquidity options may emerge across private real assets, with implications for pricing, discounts to NAV, and investor access points.
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