A third of BREDS II’s capital will target non0US, mainly European, assets. Blackstone expects to hold a first closing for a second global debt fund within the next few weeks.
The group’s Blackstone Real Estate Debt Strategies (BREDS) arm is believed to have received about $1.5bn in early commitments for a follow-on fund.
BREDS 1, which was launched a year after the BREDS business in 2009 with more than $3bn of capital, is almost fully invested.
The debt funds look for mezzanine lending deals and situations where Blackstone can provide liquidity to new borrowers or banks with legacy exposure, as well as buying public debt securities.
The majority of Fund 1 was invested in the US, with the European BREDS arm opening in 2011, when Joe Pedlow was appointed from Stormharbour Securities to run it. It is expected that about one third of the second fund will be invested outside the US, mainly in Europe.
Unlike other US distressed buyers, such as Lone Star and Cerberus, BREDS does not target non-performing loans and a ‘loan-to-own’ strategy.
However, it does buy sub-performing loans, for example, legacy loans that have passed maturity and cannot be refinanced through normal bank channels.
Its biggest recent European deal was arranging the £547m refinancing of the Connaught, Claridges and Berkeley hotels for The Maybourne Group and lending around £50m of the £150m of mezzanine.
BREDS’ refinancing replaced a slightly larger loan made by Barclays that was considered all senior debt at the time it was made.
Blackstone’s other source of capital for real estate is its global Blackstone Real Estate Partners funds, which BREDS does not lend to. BREP 7 raised $13bn last October.