Blackstone’s Jonathan Gray (Blackstone, iStock)
Blackstone sees riches in the volatility of REIT valuations.
The investment giant is pursuing private takeovers as the public-market valuations of REITs suffer, the Financial Times reported. Inflation and rising interest rates have led to REIT share prices dropping, presenting the company with bargains if it can take the companies private.
Blackstone president Jonathan Gray explained his rationale, telling the publication that the public REIT market is “not necessarily reflective of what’s happening at any one time in real estate.”
Blackstone’s own private REIT, Blackstone Real Estate Income Trust, has reportedly raised $63 billion since inception five years ago. And since the start of the pandemic, Blackstone has taken four real estate companies private.
Last June, Blackstone and Starwood Capital dished out $6.3 billion to acquire the 62,000-key portfolio of Extended Stay America, one of the biggest real estate deals of the Covid era. The acquisition took the country’s largest lodging REIT private at a price of $20.5 per share.
Earlier this month, Blackstone agreed to buy American Campus Communities in a deal valuing the student housing provider at $12.8 billion, including debt. The Austin-based company is the largest publicly traded student housing owner and developer in the United States; Blackstone is paying $65.47 per share to buy the company and plans to take it private.
And on Monday, the Wall Street Journal reported that the firm agreed to buy PS Business Parks, a suburban office REIT, in a deal valued at $7.6 billion, including debt. The deal is expected to close in the third quarter.
REITs pay out the bulk of their income annually in exchange for corporate tax exemptions. In taking them private, Blackstone benefits from investors having fewer ways of cashing out, while investors could benefit from a lack of knee-jerk reaction to market volatility.
[FT, WSJ] — Holden Walter-Warner
