After Cornering Rentals, Blackstone Is Now Doubling Down On Student Dorms

Tyler Durden's Photo
by Tyler Durden
Tuesday, Apr 19, 2022 - 09:50 PM

For much of the past decade, private equity giant Blackstone, which at last check had $881 billion in AUM, was the single largest institutional landlord in the US, and according to some, the "largest owner of real estate in the world." Then a few years ago, Blackstone lost that designation when it comes to residential housing (to this day it remains the largest commercial landlord by a wide margin); however the recent explosion in home prices and rents prompted the Wall Street titan to double down efforts to recover the title of undisputed landlord champion, and last summer the firm announced its latest transaction (funded by ultra cheap debt courtesy of the Fed) when it purchased Home Partners of America, which owns more than 17,000 houses throughout the US, for $6 billion.

Yes, despite a growing bipartisan political backlash against institutional landlords translating in popular blowback at a time when rents are soaring at the fastest pace on record, Blackstone continues to exhibit all the PR grace of a bull in a China shop, as it extends its marketshare grab in US real estate, with the firm extending its pivot to dorms, as it slowly but surely hopes to become the marginal price setter in all US real estate.

On Tuesday morning, Blackstone agreed to buy student-housing owner American Campus Communities in a cash transaction valuing the company at about $12.8 billion, a bet that rents will continue to rise as more college students return to campus.

The private equity firm will pay $65.47 a share, or about 14% above Monday’s closing price. Blackstone is taking the real-estate investment trust private through Blackstone Real Estate Income Trust and Blackstone Property Partners, which unlike its traditional private-equity funds can hold properties as long-term investments.

“American Campus Communities has a best-in-class portfolio and platform, built on longstanding relationships with some of the most distinguished and fastest growing universities in the country,” Jacob Werner, Blackstone’s co-head of Americas acquisitions, said in the statement.

American Campus Communities says it’s the nation’s largest owner, manager and developer of high-quality student housing communities. The portfolio comprises 166 owned properties in 71 markets, including Arizona State University, The University of Texas at Austin, Florida State University, and the University of California – Berkeley. About a quarter of its properties are on campus.

American Campus Properties college apartments near UCF in Orglando, FL

The purchase expands Blackstone's bet on U.S. student housing: last summer, the company formed a $784 million joint venture with Athens, Georgia-based Landmark Properties, acquiring an interest in more than 75 student-housing properties with nearly 51,000 beds.  Blackstone said at the time it was bullish on the industry because student-housing occupancy levels were quickly returning to pre-Covid levels. Since then it appears that Blackstone has only gotten more bullish.

Nadeem Meghji, Blackstone’s head of real estate for the Americas, told the WSJ that part of student housing’s appeal is that it isn’t as vulnerable to economic downturns as other sectors.

“We think student housing is a compelling sector because it’s performed through cycles and has been really quite resilient over time,” he said. He added that Blackstone plans to build new properties under ACC’s platform to meet growing demand.

“There is today a shortage of quality housing supply at many universities across the country,” he said.

And with Wall Street rapidly cornering both residential and commercial housing and now, student dorms, Blackstone's hope is that the shortage of quality housing that is not in its grip will only get worse, affording the Wall Street giant near-monopoly powers when it comes to real estate across the entire United States.