BlackRock, the world’s largest asset manager, agreed to buy single-tenant, build-to-suit property investor ElmTree Funds as part of an effort to offer clients more access to private market investments beyond stocks and bonds.
The purchase of St. Louis-based ElmTree, a private equity firm with $7.3 billion in assets under management as of March 31, will be paid mainly in an unspecified amount of stock, with the potential for additional consideration subject to ElmTree performance over the next five years, New York-based BlackRock said Monday in a statement. A BlackRock spokesperson declined to provide the purchase price.
Founded in 2011, ElmTree has bought, developed or financed what’s billed as “an extensive portfolio” of build-to-suit, net-lease industrial properties that are considered favorable to investors for typically providing steady cash flow as tenants pay building expenses including taxes, insurance and maintenance.
ElmTree targets investments in primary and secondary markets across the United States that are net-leased to investment-grade tenants on a long-term basis, BlackRock said, adding it has a “broad” geographic footprint that includes six office locations and investments in 122 properties across 31 U.S. states.
Besides St. Louis, ElmTree has offices in New York, Chicago, Phoenix, Austin, Texas, and Newport Beach, California, according to its website. Its properties include an Amazon fulfillment center at 5180 S. 49th West Ave. in Tulsa, Oklahoma, according to CoStar data. In response to a CoStar News request seeking details on its properties, ElmTree declined to comment.
When the transaction is closed, expected this quarter, BlackRock plans to integrate ElmTree into its Private Financing Solutions business, newly created through BlackRock’s purchase this month of global credit investment manager HPS Investment Partners. Key to the platform is “an integrated private credit franchise with $190 billion in client assets,” BlackRock has said.
Seeking long-term growth
The combination with ElmTree will position Private Financing Solutions to “scale its real estate offering, while expanding into new markets as an owner-operator,” BlackRock said Monday. ElmTree will help “accelerate the long-term growth” of the platform by combining its know-how and relationships in commercial real estate with HPS’s expertise as a leading credit investor, BlackRock said, adding that the integration also will help offer “the long-term, stable income investment solutions” its clients seek.
“Structural shifts in the real estate sector are creating new opportunities for private capital,” Scott Kapnick, chairman of PFS Executive Office and CEO of HPS, said in the 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 net-lease market is estimated at $1 trillion, said ElmTree CEO and founder James Koman, who will continue to lead ElmTree after the sale to BlackRock is completed. “Our specialized bricks-and-mortar expertise will be augmented by HPS’s ability to provide financing and other solutions that fuel the corporations and developers driving the economy forward,” Koman said.
The planned purchase of ElmTree comes as BlackRock Chief Executive Larry Fink said in his 2025 annual shareholders letter that the “future standard portfolio” in investing is no longer roughly 60% stocks and 40% bonds but instead may look more like 50/30/20 with stocks, bonds, and private assets like real estate, infrastructure and private credit.
“The beauty of investing in private markets isn't about owning a particular bridge, tunnel, or mid-sized company,” he said. “It's how these assets complement your stocks and bonds — diversification.”
While private assets may “carry greater risk, they also provide great benefits” such as stability and less volatility and “inflation protection.”
As part of its expansion in the private markets, BlackRock in October bought Global Infrastructure Partners, the world’s largest independent infrastructure manager, whose portfolio includes, according to Fink, London’s Gatwick Airport, key energy pipelines and over 40 global data centers. That purchase connects “BlackRock’s clients directly to the world’s $68 trillion infrastructure boom, including data centers,” he said.
For the record
Skadden, Arps, Slate, Meagher & Flom, Fried, Frank, Harris, Shriver & Jacobson, and Sidley Austin are acting as legal counsel to BlackRock and HPS. Goldman Sachs & Co. served as financial adviser to HPS. Berkshire Global Advisors served as financial adviser and Kirkland & Ellis acted as legal counsel to ElmTree Funds.