Jan 4, 2023 - Economy & Business

The University of California makes a $4 billion bet on Blackstone

Source: Axios Visuals
Source: Axios Visuals

The University of California agreed to invest $4 billion into Blackstone Real Estate Income Trust, a $68 billion nontraded REIT whose holdings include residential homes and warehouses.

Why it matters: It's a major vote of confidence for BREIT, at a time when Blackstone needs it most.

  • BREIT's semi-liquid structure has helped the firm attract a new class of individual investor, but a late-year redemption surge caused Blackstone to pause withdrawals; leading to a double-digit percentage decline in its stock price.

Details: UC will receive a minimum 11.25% annual return, which also serves as a hurdle rate for BREIT's managers. If performance falls short, Blackstone will make up the difference, up to $1 billion. In exchange, UC committed to a six-year lockup.

The bottom line: UC's injection into consumer-focused BREIT is most notable for how it reaches back into the classic private equity playbook. The massive size, the institutional origin and the illiquidity.

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