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Blackstone’s beset property fund secures a massive investment

By:
on Jan 3, 2023
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  • University of California to invest $4.0 billion in Blackstone's real estate fund.
  • President Jon Gray discussed the announcement on CNBC's "Squawk Box".
  • Blackstone stock is currently down roughly 30% versus its recent high.

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).

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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%.