In January, Blackstone’s prized real estate trust encountered a monthly redemption threshold as a result of a queue of investors seeking to withdraw their funds, amounting to $69 billion.
According to a recent letter to investors, Blackstone Real Estate Income Trust disclosed that it met redemption requests equivalent to 2% of its net asset value, representing approximately 25% of the total amount that investors sought to withdraw. Bloomberg’s estimations indicate that the January repurchase requests surpassed $5 billion.
Prior to this, Jon Gray, the President of Blackstone, had warned that a substantial portion of the redemption requests made in January were for unfulfilled demands from November and December.
January requests were “in line with the aggregate unfulfilled amount for November and December,” Blackstone said in a statement Wednesday. “We expect it will take some time to work through this backlog and that flows will normalize over time as BREIT continues to deliver for investors.”
By acquiring various properties, from the opulent Bellagio hotel and casino in Las Vegas to student housing and storage facilities, Blackstone transformed BREIT into an enormous real estate trust. Its success has been instrumental in expanding the private equity firm’s influence among affluent individuals..
However, the real estate trust encountered obstacles last year as a result of unstable markets, leading more investors to seek to withdraw their funds. Toward the end of the year, BREIT reached its redemption thresholds, compelling it to limit the amount that investors could withdraw in December.
In recent months, executives have restated their endorsement of BREIT, with Blackstone’s CEO, Steve Schwarzman, stating the firm’s commitment to leveraging its expertise to benefit individual investors.
“We remain confident that BREIT’s portfolio can deliver strong performance and a tax-advantaged distribution yield,” BREIT said in the letter Wednesday. “We believe we have selected the right sectors and geographies and positioned our balance sheet to continue to produce meaningful cash-flow growth.”
BREIT’s portfolio is heavily focused on rental housing and logistics. According to a filing, the real estate trust approximates that net operating income for the same properties increased by 13% in 2022.
According to Mr. Gray, certain BREIT investors have made requests for more substantial sums than they genuinely intend to withdraw, assuming that they won’t receive the entire amount back. As he mentioned on Blackstone’s earnings call last month, this could result in higher redemption rates at the beginning of the year.
During the earnings call with analysts, he stated that “we anticipate being able to reduce this backlog gradually over time,” although he did not specify a particular timeline.
In the beginning of this year, BREIT obtained a $4 billion cash injection from the University of California’s investment office, providing the trust with a more sustained source of capital during a time of volatility in the markets. Subsequently, the university added another $500 million to BREIT.
In comparison to a Bloomberg index of publicly traded real estate investment trusts that incurred a loss of 28%, BREIT’s most popular share class achieved a return of 8.4% last year.
BREIT invests in commercial real estate, which has encountered difficulties due to the surge in borrowing costs, leading to a decline in values. Green Street reports that U.S. commercial-property prices dropped by 13% in 2022.
As the fund faces a crucial moment, the person in charge of the business that houses BREIT will undergo a significant test. Blackstone has recently promoted Wesley LePatner to head its “Core+” real estate business, replacing Frank Cohen. Nonetheless, Mr. Cohen will continue to serve as the chairman and CEO of BREIT.
Source: Pionline
