BlackRock Investments, the global fund manager, has partnered with Australian asset manager Federation to create a new real estate investment trust (REIT) that will focus entirely on early childhood education and care (ECEC) real estate and build on Federation’s initial commitments to the sector. 

The joint venture is expected to raise around $600 million in initial gross commitments and comes just days after real estate manager HomeCo’s Healthco REIT, who are also committed to building ECEC exposure, confirmed the acquisition of thirteen newly built metro based centres for $108 million.

The first tranche of the new Federation BlackRock venture’s capital will be spent on acquiring Federation’s existing eight ECEC centre assets after which the new REIT will become the exclusive funder of acquisitions and greenfield development sites going forward. 

Federation partner Jason Walter said the tie-up with BlackRock would help the fund manager capture the significant opportunity in childcare, a government-supported sector, backed by demographic tailwinds and long leases.

“We were out there seeking some larger institutional commitment to build our education REIT,” Federation partner Jason Walter told The Australian Financial Review (AFR).

“BlackRock was one of the parties we talked to. We felt there were some really great alignments and vision for Environment, Social and Governance (ESG) as a sector. We both saw the social benefits of the sector. They saw the opportunity to grow this with us in a long-term joint venture.”

Hamish MacDonald, BlackRock Real Assets’ head of investments for APAC Real Estate, said childcare real estate remained “a large but fragmented market.”

“The joint venture is well-positioned to benefit from Federation’s industry relationships and solid track record, as well as strong fundamental demand drivers such as increased female participation in the labour force and a flight to quality child care infrastructure.”

“The positive social impact of these assets will be an important component of Australia’s forecast economic growth.”

To access the AFR coverage of this story, please see here.