BlackRock has confirmed plans to acquire ElmTree Funds, a US-based real estate investment firm managing assets worth $7.3 billion.

The deal, which will see BlackRock pay upfront primarily in shares, also includes provisions for additional payouts tied to ElmTree’s future performance over the next five years. While precise financial terms remain under wraps, the agreement is seen as a significant step for BlackRock’s ambitions in the private financing market.

Established in 2011, ElmTree has carved out a strong reputation in the commercial net-lease space, focusing on single-tenant, build-to-suit properties that are vital to the day-to-day operations of corporate occupiers. With six offices and a portfolio of 122 properties spanning 31 states, ElmTree has positioned itself as a major player in the sector, backed by deep ties with corporate tenants and developers alike.

Once the deal concludes, ElmTree’s operations will be folded into Private Financing Solutions (PFS), BlackRock’s newly established platform born from its tie-up with HPS Investment Partners. The addition of ElmTree is expected to bolster PFS’s real estate footprint and fuel expansion as a hands-on owner-operator.

Commenting on the deal, Scott Kapnick, Chairman of PFS Executive Office and CEO of HPS, said: “Structural shifts in the real estate sector are creating new opportunities for private capital. 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. ElmTree has the team, expertise, and relationships that will help drive growth and deliver differentiated investment solutions, and we are thrilled to welcome Jim and his entire team.”

ElmTree’s founder and CEO, James Koman, added: “The net lease market is estimated at $1 trillion, and our continued belief in the industrial build-to-suit model is rooted in the mission-critical nature of this asset class. 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. 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.”

The agreement also includes long-term performance incentives aimed at aligning both parties’ interests. Mr Koman will remain at the helm of ElmTree’s investment operations following the acquisition.

Pending regulatory clearance and customary closing conditions, the deal is expected to complete in the third quarter of 2025.

Legal advisers involved in the transaction include Skadden, Arps, Slate, Meagher & Flom LLP, Fried, Frank, Harris, Shriver & Jacobson LLP, and Sidley Austin LLP on behalf of BlackRock and HPS, with Goldman Sachs acting as financial advisor to HPS. ElmTree was advised by Berkshire Global Advisors and Kirkland & Ellis LLP.