Blackstone’s beset property fund secures a massive investment

Blackstone Inc (NYSE: BX) is in focus on Tuesday after the University of California announced a $4.0 billion investment into its real estate fund more broadly known as the BREIT.

President Gray reacts to the news

The stock market news brings much-needed relief for the Blackstone Real Estate Investment Trust that came under pressure last month as fears related to the strength of commercial real estate fuelled redemptions (read more).

More importantly, the University of California agreed to hold its common equity investment for six years. Reacting to the cash infusion on CNBC’s “Squawk Box”, Jon Gray – the President and COO of Blackstone said:

This is a massive affirmation of the quality of what we built with BREIT, the asset values, and the outlook for the business. We came up with a structure that’s a win-win. It’s great for our investors and terrific for UC system as well.

Terms of the structured deal

Over the said six-year period, the University of California will get a guaranteed 11.25% annualised return, as per the press release. Since inception, the Blackstone Real Estate Investment Trust has returned 12.7% annually.

They’re investing in common stock of BREIT on the same fees and terms as other investors. That’s important [as] you wouldn’t put this capital into BREIT without a lot of confidence in underlying assets, their values and the outlook.

Blackstone has a long-standing relationship with the University of California. The latter has invested over $2.0 billion in its funds for over a decade.

Versus its recent high, Blackstone stock is currently down about 30%.  

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