The Office of the Chief Investment Officer of the Regents of the University of California has formed a new, long-term strategic venture with Blackstone which will see UC Investments invest $4 billion in Blackstone Real Estate Income Trust Class I common shares, with Blackstone also contributing $1 billion of its current BREIT holdings.
The Office of the Chief Investment Officer of the Regents of the University of California (UC Investments) has formed a new, long-term strategic venture with Blackstone which will see UC Investments invest $4 billion in Blackstone Real Estate Income Trust (BREIT) Class I common shares, with Blackstone also contributing $1 billion of its current BREIT holdings.
UC Investments has already invested $2 billion in Blackstone funds over more than a decade. UC Investments’ co-heads of real estate, Senior Managing Director Satish Swamy and Chief Operating Officer Arthur R Guimarães, will oversee the Blackstone relationship.
This strategic venture is being formed through a two-part transaction whereby UC Investments will acquire $4 billion 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 rateably over two years after January 2028 (an effective six-year hold). Outside of the long-term nature of this investment, the Class I common shares to be acquired by UC Investments will be no different from any other outstanding Class I common shares.
In addition, 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 $1 billion 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.
BREIT Class I shares have generated a 12.7% annualised net return since inception six years ago.
