US: In a real estate fund managed by Blackstone, the University of California Investment Office (UC) is set to invest $4 billion acquiring rental and student housing.
The strategic venture between UC and Blackstone will see UC acquire $4 billion in Blackstone Real Estate Income Trust (BREIT) Common Shares. UC has committed to holding its shares for at least six years.
In addition, Blackstone will contribute $1 billion of its current holdings in BREIT to support an 11.25 per cent minimum annualised net return for UC during the hold period. In exchange, Blackstone will receive an incremental five per cent cash promote payment from UC on any returns received in excess of the specified minimum.
Richard Sherman, chair of the investments committee at the University of California, said: “This type of large, opportunistic investment effectively leverages the UC’s more than $150 billion portfolio to benefit the 600,000 students, faculty, staff, and pensioners from our 10 campuses and six academic health centres.”
Jagdeep Singh Bachher, the University of California’s chief investment officer, said: “In the current environment, investors can benefit from stable cash-flowing investments that can grow with high global inflation. We consider BREIT to be one of the best positioned, large-scale real estate portfolios in the US, managed by one of the world’s top real estate investors. This is an opportunity that comes only through strong, trusted partnership. This investment should provide UC Investments’ clients with a well-diversified real estate portfolio.”
Stephen Schwarzman, chairman, CEO and co-founder of Blackstone, said: “Blackstone is committed to bringing the highest quality alternative investment products to individual investors to improve their returns. UC Investments’ $4 billion investment is validation of this strategy, and we are proud to add the UC system to the more than 200,000 investors already benefitting from BREIT. 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.”
For over a decade, UC has invested $2 billion in Blackstone funds. UC Investment’s co-head of real estate and senior managing director, Satish Swamy, said: “We have tremendous confidence in how the Blackstone team have curated a high quality real estate portfolio that is well positioned to deliver over the long-term. We initiated this transaction and look forward to working closely with the Blackstone portfolio companies to explore and build upon mutual opportunities, especially in student housing, staff and faculty housing, and affordable housing in California.”
Jon Gray, president and COO of Blackstone, added: “We are extremely pleased to have the endorsement of UC Investments, one of the most sophisticated institutional investors globally. This investment will further enable BREIT to deliver for our investors. We are so proud of how this vehicle has performed over the past six years and we remain confident in its future. The team at UC Investments has a deep partnership with Blackstone and we are highly aligned through this investment to further our relationship.”
Simpson Thacher & Bartlett LLP acted as BREIT’s legal counsel, with Goodwin Procter LLP as UC Investments’ legal counsel.
