BlackRock announced Monday it has entered into a definitive agreement to acquire ElmTree Funds, a net-lease real estate investment firm managing $7.3 billion in assets, as the world's largest asset manager continues its push into private markets. The acquisition marks BlackRock's latest move to expand its alternative investment capabilities following its recent completion of the HPS Investment Partners deal.
The transaction, expected to close in the third quarter, will integrate ElmTree into BlackRock's new Private Financing Solutions platform, which was created through the HPS acquisition that closed earlier this month. Upfront consideration will be paid primarily in stock, with potential additional payments tied to ElmTree's performance over the next five years.
ElmTree specializes in single-tenant, build-to-suit industrial assets leased to investment-grade tenants on a long-term basis1. The St. Louis-based firm, founded in 2011, operates six offices and holds investments in 122 properties across 31 states21.
"Structural shifts in the real estate sector are creating new opportunities for private capital," said Scott Kapnick, chairman of PFS executive office and chief executive of HPS3. The combination will position the platform to capture these opportunities by pairing ElmTree's real estate expertise with HPS's credit investment capabilities3.
James Koman, ElmTree's CEO and founder, will continue leading the firm's investment strategies after the acquisition3. ElmTree closed nearly $500 million in transactions across seven markets in 20244.
The ElmTree acquisition advances BlackRock's ambitious private markets strategy. The firm is targeting $400 billion in cumulative private markets fundraising by 2030, part of a plan to boost total revenue to $35 billion1. BlackRock's private market assets under management have grown 15% year-over-year to approximately $175 billion2.
Industry projections estimate private markets will expand from $13 trillion today to more than $20 trillion by 20303. The net-lease market alone is valued at $1 trillion, according to Koman1.
"The net lease market is estimated at $1tn, and our continued belief in the industrial build-to-suit model is rooted in the mission-critical nature of this asset class," Koman said1. "By joining HPS and BlackRock, we are better positioned to meet market demand and serve our partners by growing alongside them for the long term."
