• New fund will originate and structure mezzanine debt
  • Fundraising for private real estate debt hit record last year

Blackstone Group LP is seeking to raise $4 billion from investors for its latest real estate mezzanine debt fund, according to documents from an investor in the vehicle.

Blackstone Real Estate Debt Strategies III LP will originate and structure mezzanine debt linked to institutional-grade real estate in North America and Europe, according to a report to the Commonwealth of Pennsylvania Public School Employees’ Retirement System from the pension system’s senior portfolio manager for real estate, William Stalter, at its Dec. 7 board meeting. The pension board at that meeting committed as much as $100 million to the fund, according to its website.

The fund offers investors the opportunity to underwrite complex real estate deals where traditional capital is scarce, Stalter said in the report.

Fundraising for private real estate debt hit a record $24 billion in 2014, according to data from Preqin Ltd. At Sept. 15, prior to Blackstone’s raising, there were 56 closed-end real estate debt funds in the market, targeting a combined $26 billion, Preqin said.

Blackstone has lowered the performance hurdle on the new fund -- the return rate it is required to meet to receive carried interest -- to 6 percent, Stalter’s report said, because of the low interest rate environment. The firm has not set a cap on the fund, according to the report. A representative for Blackstone didn’t immediately respond to requests for comment.

Blackstone, the world’s largest alternative investment manager, has about $10 billion in investor commitments in its real estate debt platform, which has made a 12 percent net return since it began investing in 2008, according to Stalter’s report.

The firm closed its predecessor fund with $3.5 billion in commitments in 2013, above its target of $3 billion, according to data compiled by Bloomberg. That fund has a net internal rate of return of 9.31 percent and a 1.12 times multiple of invested capital, Stalter’s report said.

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