After persuading wealthy individuals to back a $68 billion real estate trust, the private equity company became the envy of the industry.

Traditional institutional investors swooped in when too many people rushed for the exits at the same time.

The private equity titan announced Tuesday that it turned to the University of California for a $4 billion injection into the Blackstone Real Estate Income Trust, a deal sweetened by the fact that the university system would get $1 billion as a backstop.

The unusual transaction with the university system falls squarely in the wheelhouse of what the private equity firm has been known for: doing business with deep-pocketed clients.

Jonathan Gray, the president of the private equity firm, said in a television interview that the University of California investment was a big win for them.

Blackstone Group Inc. President Jonathan Gray discusses the University of California’s investment in his firm’s Blackstone Real Estate Income Trust, investment strategy, and Federal Reserve policy on “Bloomberg The Open.”

After a rough patch for BREIT, the university pledged to hold the deal for about six years. The real estate trust invested in everything from warehouses to apartment buildings across the US to become a giant in the industry.

The tide for one of the private equity firm's crown jewels began to shift last year as retail investors pulled back due to swings in markets. The fund's net asset value was requested to be withdrawn by investors in December.

BREIT's challenges in the past few months are a warning that individuals are not always the same.

The company will keep pushing to reach individual investors. The private equity firm is committed to bringing its investments to those investors and it views the University of California's investment as validation, according to the CEO.

Investors Redeeming

One of the biggest challenges for the company last month was reaching individuals. After the private equity firm announced that the trust had hit its redemption limits, Gray went on CNBC to drum up support for the trust.

The University of California has invested in the company for more than a decade. The University of California's chief investment officer reached out to a private equity firm.

Some investors might be concerned that it is an unusual transaction for BREIT, but we think most will see it as confirmation of the portfolio and strategy by a big institutional player.

One of the people said that the university's investment arm wouldn't have influence over BREIT's investments. The capital injection could help deepen ties.

Satish Swamy, co-head of real estate for the university system's investment arm, said the investor is looking forward to working with the portfolio companies to explore potential deals in areas such as student, staff and faculty housing

The University of California didn't reply to requests for more information.

Capital Injection

The University of California will inject $4 billion into BREIT and the university system will backstop its investment if returns fall short. The university system will give a higher payment if the investment makes more than 11 percent. The company said that it will make money if returns are at least 8.7%. Over the last six years, the fund has had an average return of 12.7%.

The deal is a sign that big investors will demand more protections to bet on property investments at a time when commercial real estate valuations are declining.

The transaction provides a negative read-through to the commercial real estate sector, according to analysts Jade Rahmani and Michael Brown.

He told the regents that he and his team at the university had been looking for ways to invest in dorms and laboratories and had ventured into bets on the real estate surrounding campuses. Direct owners of real estate have their own challenges.

At the time, he said he didn't want to be a real estate developer.