Blackstone shares have been under pressure because of fears around their BREIT Real-Estate Vehicle, which we discussed in December. 📰
For those who aren’t up to speed, the private real estate investment saw redemptions cross their quarterly limit in November as investors worry about real estate values. The uptick in redemption requests caused the fund to limit redemptions, sparking broader fears about the fund’s (and Blackstone’s) overall health.
News broke today that the University of California is investing $4 billion in the unlisted real estate income trust (BREIT). And while some investors saw this as a significant vote of confidence from a large institution, others were less impressed by the deal terms. 📝
Under the deal, UC Investments will hold its investment in BREIT for at least six years. Meanwhile, Blackstone will offer $1 billion of its own investment in BREIT as collateral to make up for any shortfall if the university fails to achieve at least an 11.25% annualized net return through January 2028.
In other words, Blackstone guaranteed an 11.25% annualized return net of fees to secure this investment. 😮
Bearish investors view this as a sign of more severe problems in the real estate fund. However, bullish investors see this investment as a net positive, especially since Blackstone can charge its standard fees and an additional profit sharing once the minimum 11.25% return is met.
Time will tell who is right. But the initial reaction from the market was positive, with $BX shares rising 2.47%. 🔺