Despite Criticism, University Of California Ups BREIT Investment By $500M

UC Investments, which oversees the portfolio of investments totaling about $152B for the University of California system, expanded its holdings in Blackstone Real Estate Income Trust by an additional $500M in common shares in the nontraded REIT.

The new investment will have the same terms and fees as a $4B investment the school system made early in January, including an effective six-year minimum hold period. Blackstone will contribute a further $125M of its BREIT holdings into the venture.

Union leaders representing 110,000 of the university system's workers criticized the previous deal, asserting in a letter that Blackstone and other institutional investors are exacerbating the housing affordability crisis in California by acquiring residential properties and driving up rents.

“Across the U.S., hedge fund and private equity firms — such as Blackstone Inc. — are acquiring residential properties at unprecedented rates, converting them into rental units, raising rents, and evicting and displacing residents in the process, even during the pandemic,” the letter says.

Speaking at the World Economic Forum in Davos, Switzerland, Blackstone CEO Stephen Schwarzman didn't address the criticism but said BREIT realized returns of 8% in 2022, a yield most REITs fell well short of.

“It’s because we own all this wonderful stuff in the right places,” he said.

Other investors in BREIT are less sanguine about the nontraded REIT's prospects, with so many of them attempting to withdraw their investments that Blackstone limited redemptions late last year.

In an interview with the Financial Times, Blackstone President Jonathan Gray said the fund is dealing with a backlog of redemption requests from November and December.

Blackstone released its fourth-quarter earnings Thursday, showing a drop in profits, but BREIT posted a return of 8.4% in 2022.