Following a rush of investors seeking redemptions, Blackstone has now limited withdrawals from its nontraded real estate investment trust, joining a number of other firms which have implemented the same restriction.
In November, Blackstone Real Estate Investment Trust (BREIT) allowed $1.3 billion in withdrawals, representing only about 43% of the redemption requests it received, according to a new report in the Financial Times. The report cited a notice sent on Thursday by the private REIT to investors. As of September 30th, BREIT had almost $145 billion in total assets.
Investors have now been notified that to prevent Blackstone from having to engage in forced sales of its real estate holdings, they can only redeem up to 5% of their holdings per quarter, at which point Blackstone can limit withdrawal requests.
Blackstone made the policy change as real estate investors have begun to worry about how the increasing economic slowdown, and rising interest rates are depressing property values, and how that affects the commercial property market. Presently US interest rates have hit record highs, as the Federal Reserve has sought to try and tame rampant inflation.
Blackstone has tried to assuage investor worries as it has faced increasing outflows, by pointing out BREIT has shown strong performance and has large investments in multi-family and industrial real estate, which for several years running have proven to be some of the strongest sectors.
In a statement, Blackstone said, “Our business is built on performance, not fund flows, and performance is rock solid. BREIT has delivered extraordinary returns to investors since inception nearly six years ago and is well positioned for the future given its concentration in rental housing and logistics in the Sun Belt and its long-term fixed rate debt structure.”
Blackstone has joined other firms which have limited redemptions lately such as London-based asset manager M&G, which restricted redemptions from a U.K. property fund by institutional investors as well as Schroders, BlackRock, and Columbia Threadneedle, which have imposed redemption limits on some property funds used by institutional investors.
So far this year, BREIT’s Class I shares, its largest class of shares, have returned a 9.3% net return, with a net asset value of almost $36 billion according to the latest monthly NAV report BREIT filed with the US Securities & Exchange Commission.
BREIT concentrates its portfolio approximately 80% in rental housing and industrial. In addition, it has focused about 71% of its holdings in the Sun Belt, where job growth is eight times higher than average and the the population is growing five times faster than the national average, according to data provided by BREIT.
BREIT maintains it is its sector and market selections which have driven a 13% increase same-property net operating income growth over the nine months ending September 30th.
However the increased redemptions have led BREIT to begin liquidating some of its property assets. BREIT announced the sale of the 49.9% interest in the MGM Grand Las Vegas and Mandalay Bay Resort and Casino real estate it held to its partner Vici Properties for $5.5 billion on Thursday.
Blackstone’s third quarter report showed BREIT is not the only Blackstone fund seeing increased redemptions. In the third quarter, the firm saw $8.85 billion in outflows, which was a sharp increase from the $822 million seen in the same quarter one year prior.
