UC Investments has already invested $2 billion in Blackstone funds for more than a decade and has a deep working relationship across the entire firm. 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 partnership will be formed by a two-part transaction in which UC Investments will acquire $4 billion of BREIT Class I common shares at the public offering price on January 1, 2023, with fees and terms consistent with existing BREIT shareholders. After January 2028, UC Investments will have the option to redeem its investment over a two-year period (an effective 6-year hold). Aside from the long-term nature of this investment, the Class I common shares that UC Investments will acquire will be identical to any other outstanding Class I common shares.
Furthermore, Blackstone and UC Investments have entered into a separate strategic agreement that establishes a waterfall structure for UC Investments’ total return on its investment in Class I common shares. As part of the deal, Blackstone will provide $1 billion of its present BREIT assets to support UC Investments’ minimum annualized net return of 11.25% over the effective 6-year hold period. In exchange, Blackstone will be entitled to a 5% cash promote payment from UC Investments on any returns in excess of the defined minimum, in addition to the existing management and incentive fees incurred by all holders of BREIT Class I shares.
Since its creation six years ago, BREIT Class I shares have achieved an annualized net return of 12.7%. 1 As long as BREIT generates more than an 8.7% annualized net return, Blackstone is expected to make additional profit over what it would receive on its contributed $1.0 billion of cash. 2 The impact of management and incentive fees on the $4 billion in fresh capital is responsible for this. Year to year, BREIT Class I shares have returned 8.4% net. 1 This acquisition has no bearing on BREIT’s recently announced repurchase guidance for the first quarter of 2023.
BREIT’s legal counsel is Simpson Thacher & Bartlett LLP, and UC Investments’ legal counsel is Goodwin Procter LLP.
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