Blackstone has limited investor redemption requests from its $68 billion real estate trust for high-net wealth investors for nine consecutive months while storm clouds continue to gather over commercial real estate markets.
According to a letter obtained by Bloomberg, Blackstone Real Estate Income Trust (BREIT) recorded investor outflows of $3.7 billion in July -- the lowest redemption requests since the run on the fund began in November 2022. However, BREIT only returned about $1.3 billion, or approximately 34% of what was requested -- as it continues to gate redemption to prevent massive outflows.
"This structure was designed to both prevent a liquidity mismatch and maximize long-term shareholder value.
"A shareholder who began submitting repurchase requests when proration began has received approximately 94% of their money back and the semi-liquid structure is working as intended," according to the letter.
BREIT has been working through redemption requests for the last nine months. We have provided a detailed account of the panic out of BREIT as CRE markets come under pressure in a high-rate environment:
- Blackstone Urges Investment Advisors To 'Keep Clients Calm' As It Limits Redemptions Of Commercial REIT
- Another Blackstone Fund Just Hit Redemption Limits
- SEC Begins To Ask Questions As Blackstone's Flagship Funds Hit Redemption Limits
Remember when BREIT received a $4 billion
bailout cash infusion from the University of California earlier this year?
Late January, Blackstone President Jonathan Gray told Financial Times that BREIT was experiencing a "backlog" of redemption requests.
Redemption requests surged in Spring:
- Blackstone BREIT Redemption Requests Surge To $4.5 Billion, Only $666 Million Granted
- Blackstone's BREIT Suffers Sixth Consecutive Month Of Withdraws As CRE Deteriorates
Bloomberg said BREIT had sold CRE assets to raise capital:
BREIT has sold $12 billion of real estate assets since the beginning of 2022, generating $2.5 billion of profit during its ownership, according to Blackstone. Recent transactions include an $800 million sale of a Texas hotel, and a $2.2 billion deal to offload a self-storage business.
A Financial Times report spun the negative asset sales story into a puff piece about how BREIT prepares to "invest billions in data centers to feed the artificial intelligence boom."
BREIT should prioritize meeting redemption requests and quelling the ongoing panic withdrawals before capitalizing on the AI boom.
We've pointed out ("New "Big Short" Hits Record Low As Focus Turns To $400 Billion CRE Debt Maturity Wall") that the regional banking crisis kick-started CRE turmoil. JPM, Morgan Stanley, and Goldman Sachs have all joined the CRE gloom parade.
Also, thank the Federal Reserve's aggressive rate hikes for the CRE mess.