BlackRock’s Latest Acquisition Is a Commercial Real Estate Bet

BlackRock, under CEO Larry Fink, aims to double its market capitalization and operating income by 2030. (Jamie McCarthy/Getty Images)

BlackRock is buying a small, St. Louis, M0.-based private-equity real estate firm in its latest bid to build out its private markets prowess.

The world’s largest asset manager said Monday it is acquiring ElmTree Funds, a firm that manages $7.3 billion of assets, for an undisclosed sum. The deal marks BlackRock’s fourth private-assets acquisition since early 2024 and underlines the firm’s broader strategy in the space.

ElmTree focuses on commercial, industrial real estate investments in segments known as net-lease—arrangements where tenants pay their landlord’s operating expenses on top of rent—and built-to-suit, which refers to building a property tailored to a specific tenant’s needs.

“Structural shifts in the real estate sector are creating new opportunities for private capital,” Scott Kapnick, the chief executive of BlackRock’s HPS Investment Partners business, in a statement. “The combination of a premier triple-net investor with our leading private financing solutions platform will position us to capture these opportunities for our clients.”

The deal fits into key long-term goals BlackRock has laid out for investors in its quest to double both its market capitalization and operating income by 2030.

At the firm’s investor day event last month, executives said by that year they were targeting $400 billion of private markets fund-raising as well as revenue contributions of at least 30% from its technology and private markets businesses. That figure was 15% last year.

ElmTree is the newest piece of the puzzle. New York-based BlackRock acquired Global Infrastructure Partners, private-credit manager HPS, and private-markets data provider Preqin over the past year and a half.

Cathy Seifert, vice president at CFRA Research who has a Buy rating on BlackRock shares, wrote in a note to clients on Monday that while ElmTree isn’t “financially significant” to its acquirer with $7.3 billion of assets relative to BlackRock’s $11.6 trillion, it represents another piece of the acquisition strategy.

In an article in March, Barron’s described BlackRock’s evolution from a giant of public markets into an asset manager increasingly prioritizing the lucrative, rapidly expanding private markets.

On its website, 14-year-old ElmTree touts its focus on assets leased on long-term basis, which it defines as at least a decade, for tenants with credit ratings between AAA and BBB-. Its deals are between $20 million and about $150 million. The deal is expected to close this quarter.

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com