Blackstone REIT Completes Initial Investments
Blackstone Real Estate Income Trust Inc., a non-traded REIT sponsored by private equity giant The Blackstone Group (NYSE: BX), recently purchased two properties and $116 million in commercial mortgage-backed securities, according to a filing with the Securities and Exchange Commission.
The REIT purchased the 388-unit Sonora Canyon Apartments near Phoenix, Arizona from an unaffiliated third party for $40.7 million. The company noted that it chose the area due to its strong rent growth and limited new residential supply. Additionally, a recently completed light rail transit hub is located near the multifamily property that should generate more accessibility, the company said.
The day-to-day operational and property management services will be provided by LivCor, a portfolio company owned by a Blackstone-advised fund. The cost for these services is expected to run approximately $300 per unit per year.
Blackstone REIT also purchased the Stockton Industrial Park, an 878,000-square-foot industrial complex, in Stockton, California for $32.5 million. Stockton is the largest industrial market in California’s Central Valley, and the property is currently 91 percent occupied in a market with net absorption significantly exceeding new supply, the company said.
Both property acquisitions were funded through proceeds from the offering.
The day-to-day operational and management services at the industrial park will be handled by EOM, a portfolio company owned by Blackstone-advised funds. The company estimates that the cost for the services will be approximately 3 percent of gross revenue for property management services, 1 percent of gross rents from new leases for leasing services, 4 percent of total project costs for construction management services, plus a per-square-foot amount for corporate services and actual costs allocated for transaction support services.
Lastly, the REIT purchased $116 million of commercial mortgage-backed securities secured by a mortgage loan on Blackstone’s Willis Tower in Chicago. The bonds were issued by a trust sponsored by Goldman Sachs.
The investment by Blackstone and its affiliates represents a 49 percent participation in several tranches of the $1 billion mortgage loan securitization. Blackstone and its affiliates, including the REIT, will forgo all non-economic rights (including voting rights) in the Willis Tower CMBS, as long as the subsidiaries of the Blackstone-advised fund own Willis Tower.
Blackstone Real Estate Income Trust launched its $4 billion offering in September 2016 and has raised approximately $477 million in investor equity since inception. The REIT, which plans to invest in stabilized income-oriented commercial real estate in the United States, is headquartered in New York City and externally managed by BX REIT Advisors., a subsidiary of Blackstone. Blackstone currently manages various private investment funds and one publicly-traded REIT.
