Blackstone confirms $4bn joint venture investment from UC Investments

Written by Michael Griffiths

04/01/2023

UC Investments and Blackstone have announced a strategic venture that will see the investment of $4bn in the Blackstone Real Estate Income Trust (BREIT) common shares.

The deal will then see Blackstone contribute $1bn of its current BREIT holdings.

Blackstone is the world’s largest alternative asset manager and has $951bn in global assets under management that 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.

This latest venture is being formed through a two-part transaction that sees UC Investments acquire $4bn of BREIT Class I common shares at the 1 January 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, and is therefore an effective six-year hold.

Outside of the long-term nature of the investment, the Class I common shares to be acquired by UC Investments will be no different from any other outstanding Class I common shares.

Furthermore, 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 $1bn of its current holdings in BREIT to support an 11.25% minimum annualised net return for UC Investments over the effective six-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.

Chairman, CEO and co-founder of Blackstone, Stephen A. Schwarzman, commented: “Blackstone is committed to bringing the highest quality alternative investment products to individual investors to improve their returns.

“UC Investments’ $4bn 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.”

The University of California’s chief investment officer, Jagdeep Singh Bachher, added: “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 and exemplifies the culture of the UC Investments way.”

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