Blackstone’s infrastructure fund seals first two deals

The two investments – one in midstream the second in transportation – ‘should provide additional momentum’ to the firm’s infra business, Schwarzman says.

A $3.3 billion midstream investment and an undisclosed transportation deal are the first steps toward building what Blackstone hopes will become one of the largest infrastructure businesses in the world, the firm’s executives said.

The New York-based firm announced in a statement it had purchased a 44 percent stake in Tallgrass Energy, a midstream company headquartered in Kansas, and a controlling stake in its general partner. GIC, Singapore’s sovereign wealth fund, is joining as a minority investor in the transaction. The deal is expected to close this quarter.

Separately, Blackstone founder and chairman Stephen Schwarzman said on an earnings call that the firm has signed an undisclosed deal to invest in the transportation sector which will be revealed in coming months.

He said both transactions required “very large equity checks” from the firm’s open-ended fund Blackstone Infrastructure Partners, “giving us significant firepower to pursue large, unique transactions”.

“These two investments should provide additional momentum for a business we believe will ultimately become one of the largest infrastructure platforms in the world,” he added.

Before this week, Blackstone’s infrastructure group had not made an investment since launching the vehicle in May 2017.

“These deals are larger and take a longer time to gestate than typical real estate or private equity deals,” Blackstone president Jonathan Gray said on the call. “We think our competitive advantage is being able to do very large transactions.”

The firm is seeking investments of $1 billion or more in primarily North American core and core-plus assets, according to public pension documents. Gray said Blackstone’s infrastructure group is interested in transportation, midstream, telecommunications and renewable energy deals.

Blackstone launched its $40 billion open-ended infrastructure vehicle in May 2017 alongside PIF, Saudi Arabia’s sovereign wealth fund, which committed to match dollar-for-dollar up to half the amount the firm raises.

Last June, the Blackstone held first close on the fund on $5 billion. Since then, the firm has raised an additional $1 billion from LPs and the same amount from PIF, according to a source familiar with the matter.

Blackstone had been aiming to raise $15 billion early this year, according to documents from the Pennsylvania Public School Employees’ Retirement System, which has committed $500 million to the fund.