After a few years of struggles in the real estate industry, some investors have shared their optimism for a rebound in 2025. But in the view of University of California Chief Investment Officer Jagdeep Singh Bachher, “that ain’t happening,” he said.
“And that V-shape recovery in real estate is causing a lot more pain,” he said during a March 18 investment committee meeting.
He pointed to the University of California’s 2023 agreement with Blackstone for a long-term strategic venture in which UC invested $4 billion in Class I common shares of the Blackstone Real Estate Income Trust.
Through the deal, the university’s investment office has the option to redeem its investment ratably over two years after the end of a six-year holding period in January 2028. And under terms of a separate strategic agreement, Blackstone would contribute $1 billion of its current holdings in BREIT to support an 11.25% minimum annualized net return for the university over the effective six-year hold period, in exchange for an incremental 5% cash promote payment from the university on any returns received in excess of the specified minimum.
When the deal was announced, a coalition of unions representing university staff asked the UC Board of Regents to divest from the $4 billion BREIT commitment and another $2 billion in prior commitments to Blackstone funds, citing the New York-based alternatives manager’s role in worsening the national housing crisis.
“We’re probably getting close to eating up all our collateral that we had from Blackstone just to be very candid about it,” the CIO said. “That 11.25% — certainly we’ve done well in the first two years, but I could see a scenario with real estate not giving you a V-shaped recovery that I’m planning.”
Bachher added that the return could end up around 10%, with 9% being “more as a floor.”
“Things can change, but I’m not anticipating with this delayed environment that everything will be absolutely perfect,” he noted. “Nevertheless, it’s still a good return, but I want to be candid about the fact that those are some of the questions we’re considering and thinking about as we look into the future.”
Earlier in the meeting, Bachher had called on Treasury Secretary Scott Bessent and the executives of the largest money management firms — including Blackstone Chair, CEO and co-founder Stephen Schwarzman as well as President and COO Jonathan Gray — to leverage their access to U.S. President Donald Trump to support educational institutions.
His message comes amid bills that propose hikes on endowment taxes, and threats to cut federal grants.
Two days later on March 20, Trump signed an executive order to close the Department of Education. While Congress has the power to create and dismantle federal agencies, a Jan. 31 bill introduced by Rep. Thomas Massie, R-Ky., proposed the termination of the Department of Education, which provides federal loans and financial aid to students.
The University of California’s investment office had $184 billion in assets as of March 14. This includes $142.7 billion in pension and retirement assets, $30.1 billion in its two endowment pools, and $10.7 billion in working capital. The overall investment portfolio allocated 20.6% to private assets — including 10.5% to private equity, 0.5% to absolute return, 1.8% to private credit, 5.8% to real estate and 2% to real assets.
