Wednesday, June 19, 2024

Blackstone hits $40bn target for infra unit six years after launch

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Blackstone has reached the $40 billion targeted volume for its infrastructure business at least a few years earlier than originally predicted.

The company’s latest quarterly financial results revealed that the open-end Blackstone Infrastructure Partners strategy has reached a total size of $39.8 billion, which includes $31.4 billion of blind-pool fund commitments and $8.4 billion of co-investment capital. BIP is set to receive up to $20 billion in blind-pool match funding from Saudi Arabia’s Public Investment Fund, so there is still a little over $4 billion to be committed by the sovereign wealth fund, Infrastructure Investor understands.

However, between the blind-pool and co-investment capital, BIP has reached its $40 billion target in about six years, despite then Blackstone president Tony James stating in 2018 that the $40 billion was a “very long-term target” which would be reached “over the next decade or so”. Blackstone’s launch announcement for its infrastructure “programme” in 2017 did not specify how much of the $40 billion would come from co-mingled fund commitments versus co-investment capital.

Blackstone president Jonathan Gray predicted in the earnings call that the group’s infrastructure business could grow to $100 billion “over time”, after it reached its initial $40 billion target.

Gray told analysts on the firm’s Q3 earnings call that “the immense funding needs for infrastructure projects globally”, combined with the performance of its fund, will be key determinants for reaching this milestone. Its private equity and real estate businesses, which have been investing since the late 1980s and early 1990s, have $148 billion and $171 billion, respectively, of assets under management.

Gray had first told Infrastructure Investor of the $100 billion infrastructure aim in an interview in September 2021, caveating that with “it’s not going to happen overnight for us – it never does”.

The fund’s performance was described on the latest earnings call as “extraordinary” by Gray, displaying a 17 percent net return since inception, despite the BIP vehicle targeting net returns of about 10 percent. Gray added that the infrastructure portfolio had grown 28 percent in the last 12 months and singled out QTS Realty – the data centre company taken private by Blackstone’s infrastructure and real estate businesses in 2021 for $10 billion – as a particular driver.

“[QTS] was the single largest source of appreciation at the firm, driven by explosive growth in data creation that is being accelerated by the AI revolution,” Gray said. “Since privatising the company two years ago, leased capacity has grown six-fold, with a development pipeline pre-leased to major tech companies. And we are evaluating additional deployment opportunities in the space.”

A source with knowledge of the plans told Infrastructure Investor that about half of the raised capital in recent fundraising rounds is slated for existing portfolio companies, while the other half is set aside for new investments.

In June, Blackstone announced it was acquiring a 19.9 percent interest in Indiana-based utility NiSource for $2.15 billion, while in the same week it announced a further $1 billion invested in renewables developer Invenergy, having already deployed $3 billion into the company prior to that. Also in June, marine terminal operator Carrix – one of BIP’s earlier investments – announced a deal thought to be worth about $1 billion to buy Ceres Terminals, an operator of 18 locations in the United States and Canada, from Macquarie Infrastructure Partners III, Macquarie Asset Management’s $3 billion 2013-vintage North America-focused fund.

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