Blackstone’s Secondary Fund Raises $1.9B

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Blackstone’s secondary and fund solutions business, Strategic Partners, has completed the final close for Strategic Partners Real Estate VII LP, having raised $1.9 billion for the fund and its related committed program vehicles. The close comes four years after the final capital raise for predecessor fund Strategic Partners Real Estate VI, which reached its hard cap of $1.3 billion in September 2016.

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SP Real Estate VII launched in late 2018 and roughly one year later in November 2019, the investment vehicle completed its first close with commitments totaling $620.7 million. Like its predecessor funds, SP Real Estate VII acquires secondary interests in real estate funds and assets, with a focus on high-quality portfolios in major commercial real estate markets and gateway cities. The fund also co-invests in conjunction with proven sponsors around the world.

As Mark Burton, head of Strategic Partners Real Estate, noted in a prepared statement, Strategic Partners’ ability to partner with both investors seeking liquidity and general partners and operators seeking strategic portfolio solutions will allow SP Real Estate VII to put capital to work in a wide range of real estate opportunities globally.

Secondary success

The secondary market has blossomed over the last 10 years, and secondary funds now rank as the fastest-growing private equity sub-asset class, according to Palico, a leading private equity secondaries digital marketplace. And the market’s appeal appears to be holding up amid today’s economic uncertainty. “The secondary market is still seeing some level of activity, despite volume softening because of the pandemic, especially with COVID-resistant assets pricing relatively well,” Palico notes in a recap of its July 16 webinar. “Deal volume will likely pick up as of July this year, when [general partners] release second quarter valuations, giving more visibility to investors.”

Strategic Partners wasn’t the only secondaries player to complete a successful capital raise amid the pandemic. In May, Goldman Sachs revealed that Vintage Real Estate Partners II, its second dedicated real estate secondaries fund, had raised nearly $2.8 billion in capital commitments, surpassing its $1.3 billion target.