Blackstone $10 Billion Deal Is Latest Bet Property Near Lows

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Blackstone Inc. struck a roughly $10 billion deal for an apartment landlord in the latest sign that the real estate investor sees a ripe moment to pour money into the property market.

Blackstone agreed to acquire Apartment Income REIT, known as AIR Communities, in an all-cash deal for $39.12 a share, according to a statement Monday. That’s a 25% premium from the company’s share price of $31.35 at the close of trading on April 5.

The asset manager plans to invest more than $400 million to maintain and bolster the company’s apartment portfolio. Blackstone Real Estate Partners X, a fund that raised more than $30 billion, will purchase the shares.

The AIR Communities acquisition is Blackstone’s latest housing bet, following its $3.5 billion agreement to take single-family landlord Tricon private earlier this year. The company is stepping up its hunt for deals as prices fall in commercial property markets, with President Jon Gray telling investors the firm believes “real estate values are bottoming.”

“AIR Communities represents the highest quality, large-scale apartment portfolio we have ever acquired, and is located in markets where multifamily fundamentals are strong” Nadeem Meghji, global co-head of Blackstone Real Estate, said in the statement.

AIR Communities, based in Denver, has a portfolio of 76 apartment communities marketed to high-end renters, with concentrated holdings in Miami, Washington and other large markets. The average household income of the company’s tenants was $237,000 in 2023, with average revenue of more than $2,700 per unit, according to a presentation.

What Bloomberg Intelligence Says

“The reported takeout price of $39.12 a share in cash, a 25% premium to the last trading price, implies a multiple consistent with the priciest coastal apartment REITs AvalonBay and Equity Residential.”

— Jeffrey Langbaum, senior industry analyst

The apartment market has come under pressure in recent months as owners confront higher borrowing costs and falling valuations. Prices of those buildings in the past 12 months through March have dropped 8%, according to real estate analytics firm Green Street.

The deal is expected to close in the third quarter, according to the statement. The Wall Street Journal earlier reported the deal.

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Article by Patrick Clark of Bloomberg News, Advisor Perspectives

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