Blackstone Sweetens Student Housing Deal With Seller Financing

Blackstone Inc. (BX) has introduced seller financing to enhance the appeal of a $1B student housing portfolio deal.
  • Blackstone Inc. offered below-market financing on a student housing deal to make the $1B package more attractive.
  • KKR & Co. secured the portfolio from Blackstone Real Estate Income Trust (BREIT).
  • Asset managers are doing what they can to facilitate sales and manage redemptions amid falling property values.
Key Takeaways

According to Bloomberg, Blackstone Inc. (BX) is taking unprecedented steps to make its real estate deals more attractive. For the first time, the firm offered seller financing to facilitate the $1B sale of a student housing portfolio.

Sweetening The Deal

The rapid rise in interest rates has pressured real estate returns, prompting big asset managers to explore financial tactics to maintain liquidity and command high prices.

In the recent student housing sale between KKR & Co. (KKR), the buyer, and BREIT, the seller, Blackstone offered $800M in low-rate debt, coupled with below-market financing. 

This helped KKR secure the properties in time for a crucial shareholder call. BREIT also earned a 7% premium on the sale.

Balancing Act

BREIT has been facing crushing investor redemption requests since 2022, allowing higher-than-normal withdrawals in May to maintain investor confidence. The trust sold $20B of real estate at a premium without in-place transferable debt, adeptly handling challenging conditions.

Meanwhile, Blackstone’s strategic use of seller financing, typically reserved for struggling assets, aims to facilitate stalled or otherwise undoable deals. 

While this approach delays upfront payments and offers lower interest rates than market norms, it also supports higher bid prices and investor returns.

Why It Matters

Optics matter in the world of billion-dollar REITs, and BREIT has reassured investors they can trust Blackstone with their assets. Despite macroeconomic headwinds, Blackstone has even managed to maintain its share repurchase program without drawing on a line of credit.

BREIT’s approach contrasts with that of other firms, like Starwood Real Estate Income Trust (STWD), which recently tightened its redemption limits. While capping withdrawals helps control liquidity, it can also risk stoking investor panic.

RECENT NEWSLETTERS
View All
Steve Ross Steps Down from Related, Launches West Palm Firm
July 12, 2024
READ MORE
Private Equity Seeks Bargains in US Real Estate
July 11, 2024
READ MORE
Powell Hints at Possible Rate Cut Amid Risks of Higher-for-Longer
July 10, 2024
READ MORE
Apartment Absorption Nears Record High in Q2
July 9, 2024
READ MORE

podcast

No CAP by CRE Daily

No Cap by CRE Daily is a weekly podcast offering an unfiltered look into commercial real estate’s biggest trends and influential figures.

Join 65k+
  • operators
  • developers
  • brokers
  • owners
  • landlords
  • investors
  • lenders

who start their day with CRE Daily.

The latest news and trends in commercial real estate delivered to your inbox. Get smarter about what matters in just 5-minutes or less.