Blackstone’s real estate fund lures China-source

by on July 26, 2012 4:07 pm BST

July 26 |
Thu Jul 26, 2012 12:07pm EDT

(Reuters) – Blackstone Real Estate Partners VII, the
fund that has proved one of Blackstone Group LP’s most
popular offerings with investors, has secured a rare commitment
from the Chinese government, a source familiar with the matter
said on Thursday.

The investment underscores China’s growing appetite for
alternative assets with little correlation to securities such as
stocks and bonds, that are currently rocked by macroeconomic
volatility, but also its faith in U.S. commercial real estate.

The secretive State Administration of Foreign Exchange
(Safe), which manages China’s more than $3 trillion in foreign
exchange reserves, has agreed to invest about $500 million in
Blackstone’s latest real estate fund, the source said.

Blackstone declined to comment while Safe could not
immediately be reached for comment.

Blackstone’s global real estate arm is active in nearly
every major sector of commercial real estate, owning offices,
warehouse and distribution centers, shopping centers and hotels.
It has been able to capitalize on limited supply and slowly
increasing demand for commercial space in the United States and
benefit from occupancy improvement and rent growth.

Blackstone has raised over $12 billion for Blackstone Real
Estate Partners VII and expects to reach its $13.3 billion
fundraising target in a few months, Blackstone CEO Stephen
Schwarzman told analysts on a conference call last week.

China, which holds close to $1.2 trillion in U.S.
treasuries, has also been looking to capitalize on the liquidity
concerns of assets managers such as pension funds amid financial
market volatility by snapping up their private equity assets.

General Motor Co’s underfunded pension plan has
agreed to sell a private equity portfolio to Safe for a price
tag in the region of $1.5 billion to $2 billion, the Financial
Times reported last week.

The Wall Street Journal reported on Safe’s investment in
Blackstone’s real estate fund earlier on Thursday.