BlackRock is doubling down on its growing real estate credit business with the acquisition of a major net lease industrial firm.

The investment giant will acquire ElmTree Funds, which has $7.3B in assets under management, primarily through an exchange of stock, BlackRock announced Monday. The price wasn't disclosed, but the deal includes five years of performance incentives that could add to the all-in cost for BlackRock.

ElmTree CEO James Koman will stay atop the firm after the deal, which is expected to close in the third quarter after securing approval from regulators. ElmTree has six offices and investments in 122 properties across 31 states. The net lease firm was founded in 2011 and has grown with a focus on build-to-suit industrial assets, which Koman said in a statement would continue to drive the firm’s performance.

BlackRock plans to roll ElmTree’s business into the private financing solutions platform it rolled out earlier this month after completing the acquisition of HPS Investment Partners, an alternative credit provider with $157B in assets under management.

The PFS business combines several of BlackRock’s private credit offerings into one integrated product that had $190B in client assets before including the ElmTree acquisition.

“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,” Koman said in a statement. “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.”

After a lackluster 2024, investment in net-leased assets accelerated in early 2025, with CBRE projecting that elevated Treasury bond prices will continue to make the sector an attractive investment opportunity.

ElmTree shareholders will be paid in BlackRock shares for the acquisition, and the additional earnout structure baked into the deal “is designed to align the interests of BlackRock and ElmTree leadership,” according to BlackRock’s statement.

BlackRock’s stock was trading flat on the announcement Monday morning amid broader market malaise as President Donald Trump promises sweeping new tariff announcements in the coming days.

BlackRock CEO Larry Fink emphasized on BlackRock’s first-quarter earnings call in April that the uncertain macroeconomic environment had boosted private credit demand.

“We're seeing how sensitive public markets are to uncertainty and how quickly they can move in reaction to policy proposals,” he said. “These dynamics could drive even more capital flows into private markets as investors look to insulate portfolios from tariff impacts and seek attractive income and growth.”