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Blackstone’s US CRE push underscores the attractiveness of the sector

With markets around the world facing uncertainty over the state of war in Ukraine, the US ranks as a stable destination for commercial real estate investment. Among the firms to capitalize on the sector’s ongoing rapid growth is private equity giant Blackstone: In the past month, Blackstone announced a new portfolio company specializing in major US real estate acquisitions and affordable housing with a deal worth nearly $6 billion. has continued. , The firm has become the nation’s top buyer of office, industrial, apartment and hotel properties over the past year, and its continued growth demonstrates that US commercial real estate property remains a popular investment option despite market uncertainty around the world. Will continue to be seen.

For example, in mid-February, Blackstone went public with news that it was buying Preferred Apartment Communities for $5.8 billion at $25 a share, with the deal expected to close in the second quarter of this year. The announcement saw the share price of Blackstone Real Estate Income Trust (BREIT) rise 7 percent. The Preferred portfolio includes 40 properties located in the Sun Belt in Atlanta, Charlotte, NC, Nashville, Tenn. and Jacksonville, Orlando and Tampa, Fla. The properties have a total of around 12,000 units.

“Investing using BREIT’s sustainable capital will enable us to be long-term owners of these vibrant communities,” says Jacob Werner, co-head of Americas Acquisitions for Blackstone Real Estate. “The company’s grocery-anchor retail portfolio performance has also been strong and resilient, and we believe this type of need-oriented property located in areas with growing populations is well-positioned for continued growth.” According to Werner, the Preferred acquisition will help Blackstone focus on building its expertise and relationships in the Sun Belt markets.

According to Joseph Zidl, chief investment strategist at Blackstone, a resilient and booming housing sector is one reason the US remains a safe bet for capital, while much of the world faces unrest caused by the war in Ukraine. For example, real estate-focused index funds like the SPDR S&P Homebuilders ETF have shown major gains in 2022, up from 20 percent at the end of the first quarter.

Last year, nearly half of Blackstone’s revenue came from its real estate portfolio, which stood at $279 billion in the fourth quarter of 2021. President and CEO Stephen A. Schwarzman said the firm’s equity holdings are showing “the most remarkable results in our history.” Almost every metric. ,

Blackstone and BREIT were the top two buyers of US real estate assets by volume in 2021, according to real estate data firm Real Capital Analytics (RCA). These acquisitions were focused on high-value properties: for real estate purchases by volume, two ranked second and third in 2021, well below the top buyer of US commercial real estate, Realty Income Corp. However, Blackstone captured three of the 10 largest portfolios and unit sales in 2021, acquiring portfolios from QTS Realty Trust and AIG as well as Extended Stay America in a joint venture with Starwood Capital.

The strategy saw Blackstone and Breit as the top buyers in most US regions. BREIT took first place for the Midwest, Southeast and Southwest, while Blackstone took the top spot for the Mid-Atlantic, Northeast and West. The only other firms to rank in the top two slots for either region were Realty Income (ranked second in the Midwest), CSCDA (ranked second in the West) and Alexandria in the Northeast.

On the settlement side, Blackstone has a similar focus on large deals, ranking fifth for sales by volume at a fraction of the top two firms. BREIT left very few properties in 2021 and did not rank in RCA’s record of the top 25 sellers of US real estate.

Last year Blackstone significantly expanded its access to new capital streams as its assets under management topped $880 billion with a market capitalization of $155 billion.

In late February, Blackstone also announced a new project called April Housing, focused on supporting affordable housing in the US by facilitating capital and managing a portfolio of 90,000 housing units from the Blackstone Real Estate Income Trust. . Blackstone says the new company will invest more than $500 million in its portfolio. Kathleen McCarthy, global co-head of Blackstone Real Estate, emphasized that the effort is aimed at expanding the country’s supply of affordable housing, with almost all of April Housing’s initial holding under the US government’s low-income housing tax credit (LIHTC). Under the rent is under control. Program. Properties currently held by April Housing are located in Austin, Dallas, Denver, Fort Lauderdale, Fla., Houston, Los Angeles, Miami and San Francisco.

The new portfolio company will be led by CEO Alice Carr, formerly head of community development banking at JPMorgan Chase and leader of the Diversity, Equity and Inclusion (DEI) council for the commercial real estate business.

The April Housing and Preferred announcements come on the heels of a similar acquisition of BREIT’s Resources REIT in late January for $3.7 billion at $14.75 per share. Resource Acquisition comprises a portfolio of 42 apartment properties with approximately 12,600 units in 13 states. BREIT also acquired Home Partners of America last year for $6 billion.

According to Asim Hamid, senior managing director at Blackstone Real Estate, the deal is part of the firm’s strategy to invest in “high-quality multifamily communities in growth markets across the US.”

“Blackstone intends to capitalize on our expertise, scale and best-in-class management practices to keep these properties well maintained and provide an exceptional experience for residents,” he notes.

Back in December, news broke that Blackstone Real Estate would acquire BlueRock Residential Development REIT in a $3.6 billion deal that includes 30 multifamily properties with approximately 11,000 housing units. According to Blackstone, the units include “high-quality garden-style properties with significant green space and resort-style amenities” and are located in Atlanta, Austin, Denver, Orlando and Phoenix. Prior to the acquisition—expected to close in the second quarter of 2022—BlueRock will sell its single-family rental business property to shareholders, transferring ownership of approximately 3,400 homes to a newly-established external manager, BlueRock Homes Trust. .

At this time, most of Blackstone’s equity — though not most — is focused on rental housing, logistics and life science assets. About 70 percent of the properties recently acquired through the Preferred deal are rental apartments – which corresponds to a ratio of about 70 percent rental and logistics for Breitt’s real estate. Blackstone executives have said a focus on investing in rental housing could help counterbalance the effects of rising inflation.

Nationwide, prices in housing markets continue to rise as inventory remains low; Housing inventory so far in the first quarter of 2022 is still seen at 42 percent below pre-pandemic levels, and Zillow predicts year-over-year home value growth will exceed 21 percent in May.

Meanwhile, Blackstone has also recently sold some properties, including Las Vegas resort The Cosmopolitan, for $5.65 billion. The deal gives MGM Resorts International control of the resort’s operations, while the real estate for the property will go into a partnership between Cherng Family Trust, StonePeak Partners and BREIT.

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