Blackstone’s real estate investment trust secured another $500 million commitment from University of California’s endowment as it tries to limit the damage caused by redemption requests.
Blackstone announced the additional investment on Wednesday, weeks after UC Investments committed $4 billion in the form of common equity. The latest investment, which is set to close at the start of March, brings UC Investments’ total commitment up to $4.5 billion.
Following in the path of the previous investment, the $500 million commitment will have the same structure: an effective six-year minimum hold period and a commitment from Blackstone itself, this time $125 million. It’s the same quarter match Blackstone provided for the $4 billion commitment, for which it contributed an additional $1 billion.
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Blackstone described the latest investment as “an expansion of their long-term strategic venture,” but tt’s not clear if it includes the same caveats as the initial commitment, which carried a 11.25 percent hurdle rate. If BREIT’s net annualized return exceeds the rate, Blackstone gets a 5 percent incentive fee. Otherwise, the firm must make up the difference up to the $1 billion commitment.
Blackstone declined The Real Deal’s request for comment.
UC Investments approached Blackstone after a CNBC interview with president Jon Gray. At the time, BREIT was besieged by redemption requests, forcing the $69 billion vehicle to restrict investor withdrawals; in December, demand for withdrawals exceeded 2 percent of the net asset value monthly limit and 5 percent of the quarterly threshold.
As other REITs take similar steps to restrict redemptions, Gray told the Financial Times this week it was too soon to say redemption requests were slowing but the “tone of the conversations with our advisers is much improved.”
Blackstone managed to raise $43 billion for the fund in the fourth quarter, according to FT. The firm marked its REIT down by 1.5 percent during the quarter as the fund failed to earn significant incentive fees, which propelled a decline in fee-based earnings in the company’s fourth quarter report.