Ah guess I could have made that more clear. By par I just mean the current stated NAV for BREIT - that's the 100 cents on the dollar in my analysis here. So the 25% discount is imputed from UC's $4 billion investment at current stated NAV less the $1b in face value collateral Blackstone posted (3 / 4 billion). However because if there is an actual impairment to NAV then the collateral itself is also impaired, and therefore is worth less. So the implied discount is more like 20% to NAV.
Insofar as the quote below - I just meant that the collateral only applies in scenarios that include a loss up to an 11.25% annualized return - above that it goes away. So UC's upside isn't the same as if they actually just bought in at a flat price discount, the discount only applies in the scenarios from loss to 11.25% return. That lack of upside itself has some value too so you could argue this would further reduce UC's implied discount, but I figured that was getting too far into the weeds.
Could you explain how does BS posting a $1B collateral equate to UC getting a discount of 20% to NAV? I understand the math, but not clear on the structure/mechanics of it. Thanks Hawkins. Great read.
You lost me at the very beginning because you do not explain at all how you get to UC buying at a 25% discount. I understand the current NAV is complete bullshit but I’m not even sure what you mean when you say par, when par value for the stock is a penny… “If you value BREIT’s stock at par, UC is buying it at an effective 25% discount to NAV, up to an 11.25% return.”
Are you saying the buy-in NAV for UC is the present value of BREITs current NAV using an 11.25% discount rate for 6 years?
Besides that looking forward to more posts, never understood why there aren’t more of you around (private/public) in the real estate world. Maybe LPs don’t like the dual mandate but as an LP I would never want my GP to be pigeon holed to a particular market if there are opportunities.
Ah guess I could have made that more clear. By par I just mean the current stated NAV for BREIT - that's the 100 cents on the dollar in my analysis here. So the 25% discount is imputed from UC's $4 billion investment at current stated NAV less the $1b in face value collateral Blackstone posted (3 / 4 billion). However because if there is an actual impairment to NAV then the collateral itself is also impaired, and therefore is worth less. So the implied discount is more like 20% to NAV.
Insofar as the quote below - I just meant that the collateral only applies in scenarios that include a loss up to an 11.25% annualized return - above that it goes away. So UC's upside isn't the same as if they actually just bought in at a flat price discount, the discount only applies in the scenarios from loss to 11.25% return. That lack of upside itself has some value too so you could argue this would further reduce UC's implied discount, but I figured that was getting too far into the weeds.
Great piece. Looking forward to reading more stuff from you.
Could you explain how does BS posting a $1B collateral equate to UC getting a discount of 20% to NAV? I understand the math, but not clear on the structure/mechanics of it. Thanks Hawkins. Great read.
How did you calculate the multiple/IRR for your comparative returns table?
You lost me at the very beginning because you do not explain at all how you get to UC buying at a 25% discount. I understand the current NAV is complete bullshit but I’m not even sure what you mean when you say par, when par value for the stock is a penny… “If you value BREIT’s stock at par, UC is buying it at an effective 25% discount to NAV, up to an 11.25% return.”
Are you saying the buy-in NAV for UC is the present value of BREITs current NAV using an 11.25% discount rate for 6 years?
Besides that looking forward to more posts, never understood why there aren’t more of you around (private/public) in the real estate world. Maybe LPs don’t like the dual mandate but as an LP I would never want my GP to be pigeon holed to a particular market if there are opportunities.