KKR agreed to buy a student-housing portfolio from Blackstone for $1.64 billion, a sign that the multifamily property niche is holding its appeal to commercial real estate investors.
Funds managed by KKR will get 19 properties in the deal from Blackstone Real Estate Investment Trust, the companies said Thursday. KKR is making the investment primarily through its KKR Real Estate Partners Americas III fund. The transaction is expected to close by the third quarter.
The student housing market is booming as colleges and universities struggle to meet demand for on-campus dorm rooms and apartments. Duke University recently paid $43 million for a student-housing property near its campus in Durham, North Carolina, the highest price for any type of multifamily property in the Raleigh-Durham area since 2022.
“Student housing is a sector that we have long-term conviction in,” Justin Pattner, KKR head of real estate equity in the Americas, said in a statement.
KKR and Blackstone did not identify the specific properties that would be exchanged in the deal. The companies said 14 of the 19 properties are located near four-year public colleges in 10 states and that most are a short walk to campus.
“We believe student housing in the top university markets will continue to benefit from strong enrollment growth and structural constraints on new supply,” University Partners CEO Travis Roberts said as part of the announcement. KKR-owned University Partners manages the private equity firm’s student-housing portfolio.
Demand Outpaces Supply
Colleges are trying to build enough on-campus dorms and apartments to meet student demand, often due to lack of funds or available space, according to trade publication Chronicle for Higher Education.
The University of California, Santa Barbara attempted to build a 3,500-room dorm on campus to meet its housing crunch, but criticism of the building design forced the state-owned college to drop the design as it continued to pursue more housing.
TSB Capital Advisors, which served as co-financial adviser to Blackstone on the KKR transaction, is one of the most-active investment banks in the student housing market. The Phoenix-based company said it has closed more than $55 billion of student-housing and multifamily transactions since 2009.
One of TSB’s recent deals shows the level of interest in student housing properties. TSB advised a joint venture of Core Spaces and Harrison Street on its $100 million acquisition of a private student-housing property near the University of Oregon in Eugene. KKR financed the purchase.
Blackstone would continue to own a sizable student-housing portfolio after the KKR sale. Before the deal’s closing, Blackstone’s American Campus Communities platform owned about 190 student-housing properties in the United States.
Blackstone REIT earlier this month reported that investor requests for redemptions have slowed in a possible sign that the REIT’s net asset value may again rise. Redemption requests fell 17% in March compared to February and were down 85% from a year earlier.
For the Record
TSB Capital Advisors and J.P. Morgan Securities were financial advisers to Blackstone and Simpson Thacher & Bartlett was its legal counsel. Gibson, Dunn & Crutcher was legal counsel to KKR, which did not identify whether it used outside financial advisers.