The University of California is to invest $4bn (€3.78bn) in Blackstone Real Estate Income Trust (BREIT), a $69bn open-ended fund that was forced to limit redemptions in November.
UC Investments, which manages $152bn of endowment, retirement and cash assets, plans to acquire $4bn of class-I shares at their current net asset value.
The university has agreed to remain invested until at least January 2028. From that date it can begin to request redemptions. Blackstone, meanwhile, is committing $1bn to effectively guarantee a minimum annualised return of 11.25% over the six-year period.
The UC Investments deal comes at a time when BREIT has been under redemption pressure from investors. Blackstone disclosed this week that redemption demand in the fund had risen to around $3.8bn in December, up from about $3bn in November.
Blackstone exercised its right in November to limit redemptions in BREIT after it received investor requests for redemptions of more than 5% of the fund’s net asset value.
Jon Gray, president and chief operating officer of Blackstone, said the investment would enable BREIT to continue to “deliver for its investors”. Blackstone said BREIT Class I shares had generated a 12.7% annualised net return since their inception six years ago.
“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,” said Stephen Schwarzman, chairman, CEO and co-founder of Blackstone.
University of California Regent, Richard Sherman, chair of the investments committee, said: “This type of large, opportunistic investment effectively leverages the UC’s more than US$150bn portfolio to benefit the 600,000 students, faculty, staff, and pensioners from our 10 campuses and six academic health centres.”
Jagdeep Singh Bachher, the University of California’s CIO, said: “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.”
Blackstone already manages $2bn of investments on behalf of UC Investments. Gray said: “The team at UC Investments has a deep partnership with Blackstone and we are highly aligned through this investment to further our relationship.”
UC Investments’ co-heads of real estate – senior managing director Satish Swamy and chief operating officer Arthur Guimarães – will oversee the Blackstone relationship.
“We have tremendous confidence in how Jon Gray and the Blackstone team have curated a high-quality real estate portfolio that is well positioned to deliver over the long term,” said Swamy.
“We initiated this transaction and look forward to working closely with the Blackstone portfolio companies to explore and build upon mutual opportunities, especially in student housing, staff and faculty housing, and affordable housing in California.”
