Asset manager Blackstone said on Monday it would take private rental housing firm Apartment Income REIT, known as AIR Communities, for US$10 billion in cash, including debt, in what analysts see as a bet on easing pressure within the commercial real estate market.
Under the deal, Blackstone will pay US$39.12 for each share of the real estate investment trust, representing a premium of about 25 per cent to its closing price on Friday. Shares of the REIT jumped about 23 per cent.
Elevated interest rates have put pressure on landlords with loans on rental housing and other commercial real estate properties. Monday's deal was seen by some analysts as a vote of confidence that this pressure has begun easing.
"With this transaction, we believe Blackstone is messaging they view interest rates as stabilising and access to capital as improved, acting as a positive read-through for the sub-sector," Jefferies analysts wrote.
A top real estate investor, Blackstone has been sharpening its focus on rental housing, betting on its revival as the supply of apartments in the U.S. is expected to decline due to a slowdown in construction.
This was likely to lift rental growth, which has over the past few months remained flat or declined modestly due to fresh supply in many U.S. markets.
AIR Communities, which has a relatively diversified portfolio with apartments in both Eastern and Western coastal markets, has been largely insulated from such pressures.
"(It) represents the highest quality, large scale apartment portfolio we have ever acquired, and is located in markets where multifamily fundamentals are strong," said Nadeem Meghji, global co-head of Blackstone Real Estate.
The rental housing provider reported a 6.2 per cent rise in same-store rental revenue in the fourth quarter, higher than the 2.0 per cent to 4.0 per cent growth by other publicly listed REITs such as Mid-America Apartments and Equity Residential.
Blackstone plans to invest another US$400 million to improve the firm's 76 rental housing communities. Its flagship Blackstone Real Estate Income Trust, which stabilised after some turbulence in late 2022, has outperformed non-listed peers by 600 basis points in 2023.
The company, whose real estate portfolio is valued at US$586 billion, had in January agreed to take private Canadian single-family rental housing firm Tricon Residential.
