Unions Call for University of California to Divest Blackstone Holdings

In the wake of a $4B investment earlier this month into Blackstone Real Estate Income Trust by the University of California—an infusion of funding widely viewed as a liquidity “reprieve” for the BREIT, which had to limit shareholder redemptions in Q4—UC now is getting pushback from its employee unions.

Unions representing an estimated 110,000 workers in the University of California system, the nation’s largest, demanded in a letter made public on Friday that UC divest its Blackstone holdings, including the $4B pension fund investment, according to a report in Bloomberg.

According to the letter, the deal between UC and BREIT will worsen the shortage of affordable housing for students and employees.

“The University of California’s current housing investment strategy, combined with the bolstering of Blackstone’s BREIT will only further deepen a hostile housing market for millions across California,” said the letter, addressed to Jagdeep Bachher, chief investment officer for UC’s $152B pension and endowments funds.

UC said it is reviewing the letter, referring all requests for comments to Bachher’s announcement of UC’s $4B investment in BREIT earlier this month, which the University CIO called “a long-term strategic venture” in a “well-diversified” real estate portfolio with “a strong, trusted partner.”

According to the terms of the deal, UC Investments will acquire $4B in BREIT Class I common shares, the largest existing share class, and BREIT will contribute $1B of its current BREIT holdings as part of a specified strategic venture with UC investments. UC’s investment partnership with Blackstone dates back more than a decade and encompassed more than $2B before this month’s investment, Bloomberg reported.

In a statement, Blackstone CEO Stephen Schwarzman said UC’s $4B commitment, which according to BREIT has an effective minimum hold period of six years, would give BREIT “increased balance sheet flexibility and capital,” a reference to the investment giant’s liquidity issues last month.

In a Dec. 1 letter to its investors, BREIT said it was limiting withdrawals from its $70B+ investment fund after a surge of redemption requests from investors—primarily in Asia—seeking to cash out breached the fund’s quarterly repurchase limit.

As a nontraded REIT, Blackstone Real Estate Income Trust has thresholds on how much money investors can take out to avoid forced selling. In its letter to investors, BREIT said redemption requests had exceeded the 2% of the net asset value monthly limit and the 5% quarterly threshold.

Blackstone allowed investors to withdraw $1.3B in November, or just 43% of the redemption requests it received; the firm limited December withdrawals to 0.3% of the fund’s net assets.

Last year, Blackstone purchased the largest student-housing landlord, American Campus Communities, in an acquisition worth nearly $13B.