Blackstone Inc. is getting a $4 billion cash infusion from the University of California for its massive real estate fund Blackstone Real Estate Income Trust, which is facing heightened pressure from investors pulling cash.
UC Investments will invest the $4 billion in the Class I common shares, according to a statement on Tuesday. The deal will give the $68 billion BREIT a longer-term source of capital. In exchange, the agreement ensures that the University of California nabs a minimum annualized net return of 11.25% over the six-year holding period of its investment thanks to a $1 billion backstop from Blackstone.
Blackstone stock was little changed in trading after initially rising as much as 5% Tuesday.
BREIT, which was designed for wealthy individual investors, has struggled in recent months and been forced to limit withdrawals, raising concerns about Blackstone's growing reliance on the mass affluent, who are proving more fickle in volatile markets than the firm's traditional institutional investor base. The redemption restrictions across the industry have prompted queries from the Securities and Exchange Commission.
The University of California's investment arm, which oversees $150 billion, reached out to Blackstone after media reports about BREIT's difficulties.
The deal is "a massive affirmation of the quality of the portfolio we have constructed, of the values of the assets here and the performance outlook," Jon Gray, Blackstone's president, said on Bloomberg Television.
The deal could prove to be a major boost to BREIT in one of its first challenging markets. The transaction is a new tool for BREIT in striking a deal with institutional capital, Gray told CNBC in an interview.
The University of California has a long-standing relationship with Blackstone,...
