UC Investments Creates Strategic Venture with Blackstone to Invest $4 Billion in BREIT Common Shares
January 03 2023 - 08:30AM
Business Wire
The Office of the Chief Investment Officer of the Regents of the
University of California (“UC Investments”) and Blackstone (NYSE:
BX) today announced a long-term strategic venture in which UC
Investments will invest $4 billion in Blackstone Real Estate Income
Trust, Inc. (“BREIT”) Class I common shares, the largest existing
share class. Blackstone will then contribute $1 billion of its
current BREIT holdings as part of a strategic venture with UC
Investments.
Stephen A. 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.”
University of California Regent Richard Sherman, Chair of the
Investments Committee, 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
centers.”
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 U.S., 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 and exemplifies the culture
of The UC Investments Way.”
Jon Gray, President and Chief Operating Officer of Blackstone,
said, “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.”
UC Investments has already invested $2 billion in Blackstone
funds for more than a decade and has a deep working relationship
across the entire firm. UC Investments’ co-heads of real estate,
Senior Managing Director Satish Swamy and Chief Operating Officer
Arthur R. Guimarães, will oversee the Blackstone relationship. Said
Swamy, “We have tremendous confidence in how Jon Gray and 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.”
This strategic venture is being formed through a two-part
transaction whereby UC Investments will acquire $4 billion of BREIT
Class I common shares at the January 1, 2023 public offering price
with fees and terms consistent with existing BREIT shareholders. UC
Investments will have the option to redeem its investment ratably
over two years after January 2028 (an effective 6-year hold).
Outside of the long-term nature of this investment, the Class I
common shares to be acquired by UC Investments will be no different
from any other outstanding Class I common shares.
In addition, Blackstone and UC Investments have entered into a
separate strategic agreement that provides for a waterfall
structure with respect to the total return to be received by UC
Investments on its investment in the Class I common shares. As part
of the agreement, Blackstone will contribute $1 billion of its
current holdings in BREIT to support an 11.25% minimum annualized
net return for UC Investments over the effective 6-year hold
period. In exchange, Blackstone will be entitled to receive an
incremental 5% cash promote payment from UC Investments on any
returns received in excess of the specified minimum, in addition to
the existing management and incentive fees borne by all holders of
Class I shares of BREIT.
BREIT Class I shares have generated a 12.7% annualized net
return since inception six years ago.1 As long as BREIT produces in
excess of an 8.7% annualized net return, Blackstone is expected to
achieve incremental profit above what it otherwise would earn on
its contributed $1.0 billion of capital.2 This is due to the impact
of management and incentive fees on the $4 billion of new capital.
BREIT Class I shares have also generated a 8.4% net return year to
date.1 This transaction does not change BREIT’s recently
communicated repurchase guidance for Q1 2023.
Simpson Thacher & Bartlett LLP is acting as BREIT’s legal
counsel and Goodwin Procter LLP is acting as UC Investments’ legal
counsel.
About Blackstone
Blackstone is the world’s largest alternative asset manager. We
seek to create positive economic impact and long-term value for our
investors, the companies we invest in, and the communities in which
we work. We do this by using extraordinary people and flexible
capital to help companies solve problems. Our $951 billion in
assets under management include investment vehicles focused on
private equity, real estate, public debt and equity,
infrastructure, life sciences, growth equity, opportunistic,
non-investment grade credit, real assets and secondary funds, all
on a global basis. Further information is available at
www.blackstone.com. Follow @blackstone on LinkedIn, Twitter, and
Instagram.
Forward-Looking Statements
This press release includes “forward-looking” statements and
“safe harbor statements” within the meaning of the Private
Securities Litigation Reform Act of 1995 that involve risks and/or
uncertainties, including those described in Blackstone’s and
BREIT’s public filings with the Securities and Exchange Commission
(the “SEC”). Blackstone and BREIT have based forward-looking
statements on current expectations and assumptions and not on
historical facts. Examples of these statements include, but are not
limited to, any benefits expected to be achieved as a result of the
transaction and statements regarding future performance. These
forward-looking statements involve a number of risks and
uncertainties. Among the important factors that could cause actual
results to differ materially from those indicated in such
forward-looking statements include the risks and other factors
described in Blackstone and BREIT’s annual reports for the most
recent fiscal year and any such updated factors included in their
periodic filings with the SEC, as well as those described under the
section entitled “Risk Factors” in BREIT’s prospectus, each of
which are accessible on the SEC’s website at www.sec.gov. In
providing forward-looking statements, neither Blackstone nor BREIT
is undertaking any duty or obligation to update these statements
publicly as a result of new information, future events or
otherwise, except as required by law. If Blackstone or BREIT
updates one or more forward-looking statements, no inference should
be drawn that it will make additional updates with respect to those
other forward-looking statements.
Explanatory End Notes
- As of November 30, 2022 for Class I common stock, BREIT’s
largest share class. BREIT performance varies by share class. For
more information, please refer to BREIT’s most recent SEC periodic
report.
- Assumes a constant distribution per share based on BREIT’s
historical distribution rate and annual NAV appreciation
meaningfully lower than BREIT’s historical performance.
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Blackstone Jeffrey Kauth Jeffrey.Kauth@Blackstone.com
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