KKR Buying $1.6B Student Housing Portfolio From Blackstone REIT

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KKR just got schooled, in a good way. 

The investment manager announced Wednesday that it had agreed to purchase a 19-property student housing portfolio from Blackstone Real Estate Income Trust (BREIT) for $1.64 billion. 

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The 10,000-bed portfolio is spread across the U.S. but includes properties near Auburn University, Arizona State University, Penn State, the University of Virginia and Virginia Tech, a source familiar with the transaction told Commercial Observer.

KKR’s new investment is being made via the firm’s KKR Real Estate Partners Americas III fund, and the transaction has an anticipated closing date of the third quarter. 

“Student housing is a sector that we have long-term conviction in,” Justin Pattner, head of real estate equity in the Americas for KKR, said in a statement. “We are pleased to be working with Blackstone to complete this transaction, which will add a diverse mix of high-quality properties to our portfolio.” 

Jacob Werner, co-head of Americas acquisitions for Blackstone Real Estate, gave the deal an A+, describing it as “an excellent outcome for BREIT’s investors, and demonstrates the strong demand for the high-quality assets in attractive markets that BREIT owns.” 

BREIT acquired the portfolio in June 2018 with joint venture partner Greystar Real Estate Partners for roughly $1.2 billion. At the time, the deal was executed in conjunction with Greystar’s purchase of Education Realty Trust — an owner, developer and manager of student housing — and the partners selected assets based on proximity to universities with strong enrollment growth, according to a release at the time. BREIT led the JV in a 95 percent/5 percent split, with the Greystar and Education Realty team managing the assets. 

When the transaction closes, that baton — err, diploma — will be passed to University Partners to oversee the portfolio instead, with the transaction bringing the Dallas-headquartered firm’s managed portfolio to $4 billion of property value across 25,000 beds. 

“Approximately half of the portfolio is in markets where we have existing operating experience, and this transaction will enable us to expand our presence into a number of attractive new markets,” Travis Roberts, CEO of University Partners, said in a statement. “We believe student housing in the top university markets will continue to benefit from strong enrollment growth and structural constraints on new supply.”

Blackstone’s commitment to the student housing sector is far from, ahem, “dorm-ant,” however. The firm continues to expand American Campus Communities, a BREIT portfolio company, which today is the largest student housing owner in the U.S. with 140,000 beds across 190 properties. 

School’s in!

Cathy Cunningham can be reached at ccunningham@commercialosberver.com