Dive Brief:

• In the wake of the announcement that New York City-based investment manager Blackstone plans to buy Apartment Income REIT Corp. for $10 billion, S&P Global Ratings placed the Denver-based REIT on its CreditWatch list with negative implications.
• While acknowledging that Blackstone's capital structure was unknown, S&P regards the private equity giant “as a financial sponsor that is likely to continue to saddle aggressive debt leverage upon its portfolio companies during leveraged buyouts. AIR may carry higher debt following the deal than it had under public ownership,” read report released last week.
• S&P said it expects to resolve the BBB issuer credit rating when the acquisition closes in the third quarter of 2024. If it does not receive sufficient information regarding the company’s capital structure under its new ownership, it anticipates either downgrading AIR or discontinuing its ratings. 

Dive Insight:

A day after S&P’s note was released, Bloomberg reported that Blackstone explored borrowing more than $1 billion on a net-asset-value loan backed by deals in its $18 billion flagship private equity fund, which debuted in 2016.

Although Bloomberg made no connection to the AIR deal, it said Blackstone executives indicated the firm won’t use the loan for cash distributions to investors. Instead, according to the outlet's source, it would fund reserves for operations and support portfolio companies’ growth.

Before the run-up in interest rates froze the apartment transaction market, Blackstone had bought several housing firms, including Austin, Texas-based student housing REIT American Campus Communities for $13 billion in August 2022, Atlanta-based Preferred Apartment Communities for $5.8 billion in June 2022 and Philadelphia-based Resource REIT for $3.7 billion in January 2022.

After a pause, the investment manager appears to be again going on the offensive. In January, it announced that Blackstone Real Estate Partners X fund and Blackstone Real Estate Income Trust would buy Tricon Residential for $3.5 billion.

Blackstone bought the Toronto-based owner, operator and developer of approximately 38,000 single-family rental homes in the Sun Belt and multifamily apartments in Toronto for a 42% premium to the volume weighted average share price on the New York Stock Exchange over the previous 90 days before the announcement. 

The acquisitions of Tricon and now AIR show that Blackstone is continuing to make a big bet on rental housing.

“With [the AIR acquisition] — combined with the earlier announced acquisition this year of Tricon Residential — it appears to us that Blackstone is sending an unambiguous message regarding its conviction about the future demand for all types of rental housing in the U.S.,” said Raymond James Equity Research analyst Buck Horne in a research note shared with Multifamily Dive after the AIR deal was announced. 

Click here to sign up to receive multifamily and apartment news like this article in your inbox every weekday.