With property values sinking, investors rushed to withdraw money from a real estate fund managed by private equity giant Blackstone last month. But the fund soon found a savior in the Golden State:University officials said they believed the privately negotiated deal would provide profits and benefits for the college system, students and employees for years.
After the housing crash of 2008, Blackstone began buying up large numbers of single-family homes that banks had foreclosed upon and turning them into rentals. Other Wall Street firms followed suit, and investors big and small continue to scoop up an increasing number of homes across the country., the number of homes bought by investors reached a high of more than 20% of all purchased homes in late 2021, up from about 10% a decade before.
They said that 67% of the fund’s residential properties in California are designated as affordable housing where rents are set by the federal government. “We have committed $500 million to maintain and improve these communities, while working to preserve affordability beyond when government programs expire,” they said.
That’s when UC’s chief investment officer, Jagdeep Singh Bachher, contacted Blackstone President Jonathan Gray, according toThe resulting deal is designed to bring UC an annual return of 11.25% over the next six years, according to a Jan. 3 news release sent by Blackstone and UC. The university must pay Blackstone management and incentive fees in amounts that were not disclosed. Blackstone will also get more money if UC’s annual return exceeds 11.25%.
UC Regent Richard Sherman, who is also the chief executive at David Geffen Co., called the deal an “opportunistic investment” that would benefit UC’s students, faculty, staff and pensioners. One of those speakers was Sarah Guzman, who has been working to organize the tenants as part of her work for the Alliance of Californians for Community Empowerment.
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