Big buy-in for Blackstone's BREIT; pension fund-backed deals faded in 2022

S&P Global Market Intelligence offers our top picks of global private equity news stories and more published throughout the week.

Blackstone Inc.'s nontraded real estate income trust just got a major vote of confidence from a big institutional investor. That will go a long way toward calming the nerves of the retail investors for whom Blackstone Real Estate Income Trust Inc., or BREIT, was designed, executives suggested on the firm's fourth-quarter 2022 earnings call.

Blackstone was forced to gate redemptions from BREIT last fall when those same retail investors rushed to withdraw funds. It raised several questions: Did those investors, or their advisers, read the fine print in the marketing materials, where BREIT was described as "generally illiquid"? And after being told they could get some of their cash back right away but would have to wait for the rest, would they even want to stay in BREIT?

Blackstone is still paying out on redemption requests filed in November and December of last year, according to COO Jonathan Gray. But it is also touting a significant infusion of capital from UC Investments, which manages a $152 billion portfolio for the University of California system and committed $4 billion to BREIT at the start of 2023. UC Investments is planning to buy another $500 million worth of BREIT shares in March.

Gray called the investment deal "a real affirmation" of BREIT, whose holdings are concentrated in fast-growing parts of the Southern and Western U.S., including rental housing and logistics properties.

Acknowledging that it would take time to rebuild the momentum it lost with retail investors, Gray nevertheless said the UC Investments deal was "really important in terms of psychological confidence" for potential investors in the fund.

Read more about Blackstone's fourth-quarter and full-year 2022 results.

CHART OF THE WEEK: A slow year for pension fund investments

⮞ Global pension fund-backed dealmaking added up to $26.8 billion in 2022, falling nearly 75% from the 2021 full-year total of $105.6 billion, according to S&P Global Market Intelligence data.

⮞ The fourth quarter of 2022 was the slowest of the year for pension fund-backed deal activity, with just 28 transactions. Global transaction value also fell 83.5% year over year to just more than $5 billion.

⮞ Private equity firms invested in six of the 10 biggest pension fund-backed deals of the fourth quarter.

DEALS AND FUNDRAISING

* EnCap Investments LP agreed to sell Advance Energy Partners Holdings LLC, including certain oil and natural gas producing properties and undeveloped acreage, to Matador Resources Co. The deal, which includes an initial cash payment of $1.6 billion, is expected to close in the second quarter.

* A Bain Capital Pvt. Equity LP affiliate will sell a 35% stake in Indian shipping company J M Baxi Ports & Logistics Ltd. to German peer Hapag-Lloyd AG.

* New Enterprise Associates Inc. raised about $6.2 billion across two funds. The firm will dedicate one fund to early-stage investing and the other to venture growth-stage opportunities.

* Sterling Investment Partners received $934 million in capital commitments for Sterling Investment Partners IV LP at final close. The initial target for the fund, which will invest in middle-market distribution and business services companies, was $900 million.

* Vision Ridge Partners LLC's SAF Annex Fund closed with $700 million of capital commitments. The fund will invest in assets across the energy, transportation and agriculture sectors.

ELSEWHERE IN THE INDUSTRY

* GEF Capital Partners LLC provided growth capital to MURF Electric Bikes, an electric-bike maker.

* Ridgemont Equity Partners recapitalized food distributor Green Farms Inc., or Worldwide Produce. Sole Source Capital LLC, Worldwide Produce's existing financial sponsor, will continue to own a meaningful minority stake in the business.

* Consumer electronics company Gamber-Johnson LLC received a capital injection of $40 million from Main Street Capital Corp.

FOCUS ON: INDUSTRIAL

* Clearlake Capital Group LP sold a majority stake in industrial pipes and fittings supplier FloWorks International LLC to Wynnchurch Capital LP.

* Salt Creek Capital completed the acquisition of Broco Rankin, a group of businesses comprising Broco Inc., Rankin Industries Inc. and Strong Welding Products. The group specializes in underwater and industrial cutting and welding equipment.

* Cotton Creek Capital Management LLC closed the sale of Vecta Environmental Services LLC, an industrial and environmental services provider.

For further private equity deals, read our latest In Play Today report, which looks at potential private equity-backed M&A, including rumored transactions, each week.