Dive Brief:

• The University of California’s investment arm, UC Investments, will inject $4 billion into Blackstone Real Estate Income Trust (BREIT). 
• Blackstone will also contribute $1 billion of its current BREIT holdings in a strategic venture with UC Investments to support an 11.25% minimum annualized net return over a 6-year hold period — giving the endowment downside protection. In return, the New York City-based investment manager will receive an incremental 5% cash promote payment from the endowment on any returns received over the minimum.
• In a press statement released on Jan. 3, Stephen A. Schwarzman, CEO of Blackstone, called the $4 billion investment a “validation” of Blackstone’s strategy. “UC Investments’ commitment builds upon its 15-year partnership with Blackstone and gives BREIT increased balance sheet flexibility and capital during an opportune deployment period for all our investors,” he said in the press release.

Dive Brief:

In December, news that Blackstone was limiting withdrawals from its $69 billion BREIT flooded the financial press and led many multifamily executives and analysts to wonder if some of the apartment units that the private REIT collected over the past couple of years might come back on the market.

Blackstone limited withdrawals after redemption requests exceeded previous set limits, according to press reports. At the same time, subscription requests dropped. In a December interview with CNBC, Blackstone President and Chief Operating Officer Jon Gray said that investors knew BREIT had limits on redemptions.

Gray described the REIT as “semi-liquid” because the firm knew there would be volatility and didn’t want to sell “at the wrong time under pressure.” However, he did leave open the possibility of selling assets to meet redemptions, though BREIT could do it over a time horizon that is “beneficial.”

However, a Blackstone spokesperson told Multifamily Dive in an email that “BREIT is structured to never be a forced seller of assets.” 

After Gray’s December interview, the University of California’s Chief Investment Officer

Jagdeep Singh Bachher reached out to the Blackstone executive, asking about a potential opportunity to deploy capital into BREIT.

“We spent a bunch of time talking about a potential structure, and we came up with a structure that was a win-win here for us and them,” Gray told CNBC yesterday. “And then they went out around the country, meeting with the CEOs of our portfolio companies, seeing real estate, looking at the financials, the valuation and the liquidity, and concluded that this is where they want to deploy capital.”

UC Investments has invested $2 billion in Blackstone’s funds over more than a decade. UC Investments’ co-head of real estate, Senior Managing Director Satish Swamy, said in a press release that the endowment would work with Blackstone portfolio companies to “explore and build upon mutual opportunities, especially in student housing, staff and faculty housing, and affordable housing in California.”

A major player

Over the past couple of years, BREIT has been an apartment acquisition powerhouse. 

In 2021, BREIT ranked as the No. 1 buyer of apartments with more than $10 billion in purchases, according to information shared with Multifamily Dive from MSCI Real Assets, a New York–based firm that provides tools and services for the global investment community. But it didn’t stop there. Blackstone’s non-REIT buying activity came in second.

BREIT’s activity surpassed non-traded REITs, including Starwood’s SREIT vehicle, which came in third. In all, non-traded REITs bought a record $213.9 billion of U.S. apartment buildings last year, according to MSCI.

Recent BREIT deals include:

• December 2021: BREIT bought a $5.1 billion portfolio of affordable housing from AIG.
• May 2022: BREIT bought Resource REIT for $3.7 billion.
• June 2022: BREIT purchased Preferred Apartment Communities for $5.8 billion.
• August 2022: BREIT, along with other company funds, closed the acquisition of Austin, -Texas–based American Campus Communities in a $13 billion deal.

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