Analysts believe that Blackstone's acquisition of private rental housing company Apartment Income REIT is betting on easing pressure in the commercial real estate market.
Asset management company Blackstone (BX.US) said on Monday that it will buy private rental housing company Apartment Income REIT (AIRC.US) — also known as AIR Communities — for $10 billion in cash, including debt. Analysts believe Blackstone's move is a bet to ease pressure on the commercial real estate market.
According to the agreement, Bestom will buy the real estate investment trust at a price of $39.12 per share, a 25% premium over the fund's closing price last Friday. The real estate investment trust's shares rose by around 23% on Monday. Rising interest rates are putting pressure on landlords of rental housing and other commercial properties. Some analysts believe Monday's agreement is a vote of confidence that this pressure has begun to ease.
The Jefferies analyst wrote: “We believe that through this deal, Blackstone's message is that they believe interest rates are stabilizing and access to capital has improved, which is a positive sign for this industry segment.”
As a top real estate investor, Blackstone has been increasing its focus on rental housing, betting on the recovery of rental housing, as the supply of apartments in the US is expected to decline due to a slowdown in construction. This is likely to boost rental growth, which has remained steady or declined slightly over the past few months due to new supply in many US markets.
The AIR Communities portfolio is relatively diversified, with condos in the eastern and western coastal markets of the US, and it is largely unaffected by this pressure. Nadeem Meghji, global co-head of Blackstone Real Estate, said: “[It] represents the highest quality large apartment portfolio we have ever acquired, and is located in a market with strong multi-family fundamentals.”
The rental housing provider reported a 6.2% increase in same-store rental revenue in the fourth quarter of last year, higher than the 2%-4% increase of other listed REITs, such as MAA Real Estate Trust (MAA.US) and Asset Housing Company (EQR.US).
Blackstone plans to invest another $400 million to improve the company's 76 rental housing communities. Its flagship product, Blackstone Real Estate Income Trust (Blackstone Real Estate Income Trust), stabilized after experiencing some turbulence in late 2022, and its performance in 2023 was 600 basis points higher than its unlisted counterpart. Blackstone's real estate portfolio is worth $586 billion, and the company agreed to privatize Canadian single-family rental housing company Tricon Residential (TCN.US) in January.