Dynamic dealmaking: Blackstone gears up for more take-privates amid dislocation

The New York-based manager’s own property portfolio has been critical to the firm's due diligence on potential transactions.

For private real estate’s 800-pound gorilla, volatile times are favorable times to deploy capital. Indeed, Blackstone is gearing up to execute on more privatizations of public real estate companies after an already busy year in take-privates.

“I would say there’s a greater focus at the moment on transactions with public companies, simply because that’s where we see the greatest dislocation today,” says Nadeem Meghji, head of real estate in the Americas for the New York-based manager.

Nadeem Meghji: Public companies face the greatest dislocation and are ripe for investment.

Two key factors give Blackstone the confidence to take on complex, large-scale transactions in a dislocated market. One is ample access to real-time data. The firm’s scale helps with conducting diligence on potential take-privates, as Blackstone can look at real-time data across sectors through its own property portfolio. The firm scrutinizes its properties’ rent growth, customer preferences and other data points when analyzing deals. A recent example is its planned $13 billion acquisition of American Campus Communities, which was announced in April. He says that because Blackstone already owns over 30,000 student beds, the data on those assets gave the firm “extraordinary conviction” in that deal.

“There is an obsession at Blackstone with focusing on real-time data. It’s core to how we invest,” Meghji explains.

The other factor is the firm’s substantial dedicated vehicles for its different real estate strategies. With the ACC deal, for example, Blackstone will be using capital from its core-plus perpetual capital vehicles, which includes its non-traded real estate investment trust Blackstone Real Estate Income Trust and its open-ended core-plus real estate fund, Blackstone Property Partners. “In both good times and in more challenging moments, we benefit from having different pools of capital,” Meghji says. “It enables us to see everything and capitalize on different types of opportunities.”

Those pools of capital, moreover, are vast, which aligns well with the need to write larger checks for take-privates. Blackstone raised an average of $2 billion per month in BREIT last year and is nearing the final close for its latest global opportunistic real estate fund, the more than $30 billion Blackstone Real Estate Partners X.

In 2022, the firm has executed five take-privates. They include its $7.6 billion purchase last month of PS Business Parks, a Glendale, California-based developer and owner of commercial properties; its June acquisition of Preferred Apartment Communities, an Atlanta-based multifamily REIT, for $5.8 billion via BREIT; its June purchase of Australia’s Crown Resorts through a combination of real estate and private equity funds; and the $3.7 billion takeover of Resource REIT, a Philadelphia-based suburban apartment REIT in May, also through BREIT.