By Dawn Lim | Bloomberg
Blackstone Inc. is betting big on American ownership with a deal to buy student housing operator American Campus Communities Inc. for $12.8 billion.
The all-cash transaction is the largest student housing transaction by Blackstone Real Estate Income Trust. Known as BREIT, the $97 billion fund invested in the industry last year through a $784 million joint venture with Landmark Properties.
New York-based Blackstone has reclaimed U.S. real estate assets of all kinds as the pandemic reshapes where Americans work and live, which, along with low borrowing costs and supply constraints, has led to a spike in real estate values across the country and has led to the highest monthly rent increases in decades.
BREIT in particular has become a force to be reckoned with in the real estate industry since its launch in 2017. Earlier this year it reached a deal to buy apartment landlord Preferred Apartment Communities Inc. in the part of a $5.8 billion deal. It also bought Home Partners of America Inc., which rents single-family homes, in a $6 billion deal last year.
“American Campus Communities has a best-in-class portfolio and platform, built on longstanding relationships with some of the nation’s most distinguished and fastest-growing universities,” co-lead Jacob Werner said Tuesday. Blackstone acquisitions for the Americas. .
Blackstone will pay $65.47 per share, according to the release, about 14% above Monday’s closing price. Shares of American Campus, based in Austin, Texas, jumped 12.7% to $64.91 at 9:52 a.m. in New York.
More than half of BREIT’s assets are in residential real estate, according to its latest fact sheet, with nearly 20% of its real estate holdings in Las Vegas and Atlanta.
Blackstone’s deeper expansion into the US housing market comes at a time when investors are watching the industry closely for signs of a slowdown, with 30-year mortgage rates hitting 5% for the first time since 2011. Potential buyers signaled dismay at high rates, in addition to record prices, in a survey released this week by the Federal Reserve Bank of New York.
American Campus claims to be the nation’s largest owner, manager, and developer of high-quality student housing communities. It had 166 student housing with about 111,900 beds as of Dec. 31, including around Arizona State University, Florida State University and UC Berkeley. Nearly a quarter of its buildings are on campus.
Private equity firms are betting that private student housing complexes will offer better returns compared to apartments and other residential assets. Dormitory rates can be reset every year, which serves as a hedge against inflation.
The student housing market will expand to 9.2 million beds by 2031 from 8.5 million in 2020, according to the National Multifamily Housing Council.
BREIT invests in American Campus Communities Inc. alongside other Blackstone perpetual capital vehicles. These funds have no deadline to exit bets, a sign of how the company is developing from its previous strategy of buying properties with the aim of returning them to a deep-pocketed buyer.