They’ve been active in that area, but as Jim mentioned before, active again today with the acquisition of American Campus Communities, a $13 billion deal, which is two of Blackstone’s funds, both B reit, which I’ve already mentioned, but wanted to talk a little bit more about because it’s an important product in the real estate industry.
This is also their Blackstone fund, which is a core fund, you know it’s targeting a seven percent return, but looking at American Campus this morning, of course, this deal does represent a fourteen percent premium, and yesterday it kept going up, it kept going up, and by the way, the capital ratio is 4.
25, and a couple of interesting things to note, at the end of last year, before interest rates went up significantly That capital rate may have been common, but despite the rise in interest rates, you’re still talking about a capital rate below 4.
25%, and that was before capital expenditures and before sg a, so what you’re really talking about is a return that’s maybe in the high 3x range, student housing is what we uh, the key portfolio is, is usually trading at a spread to traditional leasing, and certainly there’s probably more risk that because if you lose a tenant, you’re not going to get a new tenant, right? But the fact that asset prices haven’t fallen despite rising interest rates is an important factor, as well as the overall growth of this product.
When it comes to about a 4% dividend, there’s capital appreciation, a high net worth individual’s broker might say yes, 4% dividend, it’s BlackRock, it’s real estate, they’re the experts, look what they’ve done, it’s capital appreciation, it’s also an inflation hedge, you don’t have enough real estate in your portfolio.
Your portfolio is adding $3 billion every month, that’s what they need to spend by the way, Starwood has a program called ESRI that’s generating $1 billion every month, that number is staggering, what’s in here, what’s going to continue to be in there, what does that mean so they’re willing to pay the price they’re not the most aggressive investor, they’re using some leverage, maybe in this transaction they’re not going to use any leverage, I don’t know exactly what, maybe they’ll use leverage later because right now it looks like they have positive leverage, maybe they think rates are going to go down, but Jim, it’s an interesting asset class. To say the least, this BREIT has been the leader, not a publicly traded garland, but one of the biggest, and every month there are bigger investments and bigger deals, like this one, they’re at least part of it, they’re not the only buyer, they’re buying it with another Blackstone. You can’t give up on a deal just because the Justice Department or the FTC is being tough, this company is the trickiest because it’s parents paying for their kids and they tend to go for dorms that are in good condition, basically dorms that the parents are paying for and I thought coming out of Covet people would go back to school but I didn’t think it would get bids, I mean, you know not too long ago people were staying home and So it was a ballsy gutsy move but I do think that I’ve always liked anything that involves parents paying for their kids and I did Shepard Smith, thank you for reading cnbc on youtube
