Blackstone acquires the U.S. real estate market for $5 billion
The Blackstone Group has agreed to purchase a $5.1 billion rent-controlled apartment portfolio for low-income families. This is the second big bet on the U.S. real estate market in less than a month.
According to people familiar with the matter, the transaction covers 678 “affordable housing communities” in cities such as Boston, San Francisco and Seattle.
All development projects have received tax credits from the US government in exchange for strict restrictions on rent and occupancy rates, aimed at making it easier for low-income people to find houses.
The purchase of the house is part of a $7.3 billion transaction with AIG, according to which, Black stone It will also hold a 9.9% stake in the life and retirement business of the American insurance group, and assume responsibility for tens of billions of dollars in assets on behalf of the insurance company.
The AIG transaction happened after Blackstone last month $6 billion spent Acquired Home Partners of America, a company that buys and rents single-family homes in American suburbs, which are in the real estate boom after the pandemic.
Together, these transactions highlight how Blackstone has once again made large-scale investments in the following areas American HousingThe private equity firm pioneered a lucrative but politically controversial strategy in the years after the financial crisis when it established a new business called Invitation Homes.
Beginning in 2012, Invitation sent executives to participate in foreclosure auctions, where they purchased tens of thousands of single-family homes. The company completed its initial public offering in 2017, and Blackstone sold its position two years later.
Blackstone enjoys a low-income housing tax credit for apartments purchased from AIG. The federally funded program provides subsidies to developers who agree to limit rents to less than 20% of the local median income, while also limiting the number of high-income earners they accept as tenants.
“These communities provide important affordable housing and we look forward to becoming long-term owners,” said Kathleen McCarthy, Blackstone’s co-head of global real estate. She added that the company will make “significant investments” while complying with all rent regulations.
These regulations usually last for decades after the initial investment-but they eventually expire and provide financial investors with an opportunity to reap a return.
In 2018, a New York-based non-profit organization sued a subsidiary of AIG over an apartment building in a portfolio that Blackstone was buying, claiming that the insurance company tried to retain properties in the upscale Brooklyn area so that it could eventually be available at market prices Rent out these units.
AIG insists that it is within its contractual rights, and Riseboro Community Partnership is currently appealing a lower court ruling that may undermine its lawsuit, and is supported by New York State Attorney General Letitia James.
“For private investors, trying to distort the terms of this affordable housing plan for their own financial interests is harmful and unethical,” James said in April.