OCTOBER 1, 2012

Blackstone Group launches debt strategy fund

by Andrea Waitrovich

The Blackstone Group launched its latest real estate debt strategy fund, Blackstone Real Estate Debt Strategies II (BREDS II), and is aiming to raise $4 billion. BREDS II is expected to invest primarily in mezzanine debt with a focus on preservation of investor capital where the last dollar of risk is well below current values and replacement cost. Through this strategy, BREDS II seeks to generate attractive returns and make quarterly current income distributions to its limited partners. 

BREDS II is part of the firm's Blackstone Real Estate Debt Strategies (BREDS) platform, which started in 2008 in response to the dislocation in the global real estate and credit markets.

BREDS II’s predecessor funds, collectively Blackstone Real Estate Debt Strategies I (BREDS I), were launched in 2009 and have approximately $3 billion in equity capital. BREDS I provides needed debt capital to commercial real estate. Some transactions include providing mezzanine loans that facilitated RLJ Development’s acquisition of the Doubletree Metropolitan Hotel in Manhattan, Savanna Partners’ acquisition and recapitalization of 1375 Broadway in Manhattan, and mezzanine financing for Republic Properties Corp.’s recapitalization of 25 Massachusetts Ave. in Washington, D.C., as well as enabling the refinancing of the Four Seasons Austin and Miami Airport Corporate Center. It is expected that BREDS II will begin investing in late 2012 or early 2013 after BREDS I is fully invested. 

As of June 30, Blackstone Real Estate had approximately $50 billion of real estate assets under management including approximately $12.9 billion of available capital in its real estate portfolio. Some recent transactions include the $770 million purchase of a 65-property U.S. industrial portfolio from Australia-based Dexus Property Group and a $1.9 billion acquisition of the 1,102-property Motel 6 portfolio from French hotel operator Accor. Both acquisitions were completed by Blackstone Real Estate Partners VII, a $13 billion opportunistic fund.

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