The University of California is financing $4 billion in a real estate fund handled by a private equity firm known as Blackstone to obtain rental and student housing, which both entities foresee as the bright spots in the cooling real estate market of the United States.
The investment arrives at a critical time for Blackstone’s Real Estate Income Trust Inc. Fund, also known as BREIT, a $68 billion property investment vehicle that finances warehouses, data centers, and other commercial properties. The fund took a hit in December 2022 when Blackstone restricted withdrawals after the finance giant got redemption requests that surpassed the company’s liquidity limits.
While capitalists can sell their fund shares monthly, in accordance with a joint statement issued by the parties, the University of California has been dedicated to keeping its shares for at least six years.
Jagdeep Singh Baccher, the Chief Investment Officer at the University of California, said that they consider BREIT one of the best-positioned, large-scale real estate portfolios in the United States, handled by top real estate investors in the world. He added that this is a chance that comes only through a strong and trusted partnership.
During the pandemic, investors’ interest in student housing developments increased. As a result, in accordance with the data from the commercial real estate firm (CBR), the sector has seen more than $10 billion in sales in 2021, the most recent year of the available data, which is more than two times as much as the asset class observed in 2020.
However, the multifamily market of California faces an uncertain future as increasing interest rates and declining migration patterns challenge homebuilders in the state, per an economic outlook from the University of Southern California’s Lusk Center of Real Estate.
Following the data from Green Street, a commercial real estate analytics organization, retail property values in the United States were reduced by 13% year-on-year in November 2022 as high-interest rates and the fame of remote work drove investors away.
Since its inception occurred six years ago, BREIT has posted a year-by-year net return of almost 13%, conforming to Blackstone. About 70% of the fund’s portfolio is situated in sunbelt markets like Nevada, Texas, and Florida. More than half of BREIT’s portfolio is also separated between rental and industrial properties.
The investment of the University of California could become an example for other universities with significant endowment funds, typically in billions of dollars, that desire to invest in real estate investment trusts or commercial real estate assets.
BREIT’s portfolio includes holdings in famous college towns like Fort Collins, Colorado, where Colorado’s State University is situated, and Baton Rouge, Louisiana, which is home to Louisiana State University, conforming to the fund’s website.
As a part of the agreement, Blackstone will also give more than $1 billion to support an 11.25% annualized return on the university’s investment. In addition, if returns surpass that amount, Blackstone will be entitled to a 5% incentive free.
Stephen Schwarzman, CEO and Co-Founder of Blackstone, said the investment arrives at an auspicious deployment period for all their investors.
- Published By Team Nation Press News