Blackstone Still Leads in Real Estate Investment and Performance
Alternatives Have Record Dry Powder, Fewer Opportunities in 2016
Profits falling
Alternative asset managers (IYF) have seen their profits fall in real estate over the past couple of quarters. However, real estate has been relatively strong, as employment and pay scales have improved over the past few years.
Blackstone (BX) reported a 50% fall in its real estate division’s total revenue to $457 million. That compares to $915 million in the same quarter last year. The division’s opportunistic funds’ carrying value rose by 1.8% during the quarter. The operating fundamentals offset the fall in public investment values. Its Core+ funds’ carrying value rose by 4.4% during the quarter.
The Carlyle Group (CG) saw its real estate funds appreciate by 27% in 2015. The company made investments in Chinese real estate website operator SouFun Holdings. In 1Q16, Carlyle’s real estate funds appreciated by 1% with net accrued performance fees of $144 million.
Fundraising
Blackstone realized a total of $3.5 billion in its real estate division in 1Q16, despite public market dislocation. Over the past few years, the company has returned $40 billion to its investors. The real estate market attracted new investments on the back of an improving housing market. Blackstone raised $8.4 billion during the quarter. Of this, $5.2 billion was raised for the first closing of the fifth European opportunistic fund.
KKR (KKR) manages $1.8 billion through Real Estate Partners Americas and Real Estate Partners Europe. Apollo Global Management (APO) saw its real estate portfolio appreciate in low single digits in 1Q16 and 16.3% in 2015.
Blackstone expanded its investment activity during the quarter to take advantage of weaker Market conditions and attractive valuations. It made a record level of investment activity. It had $3.8 billion invested or committed at the end of the quarter. Investments were targeted to capitalize on public Market dislocation, with four public-to-private transactions closed or committed in 2015.
In the next part, we’ll see how the oil price rebound has impacted alternative managers.
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