Blackstone Urges Investment Advisors To 'Keep Clients Calm' As It Limits Redemptions Of Commercial REIT

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by Tyler Durden
Friday, Dec 02, 2022 - 08:45 PM

By Felice Maranz, Bloomberg Markets Live reporter and analyst.,

Investors already concerned about the state of commercial real estate -- as interest rates climb and the economy seems poised to slow -- got another worrying signal with a massive Blackstone real estate fund hitting its redemption limit.

MLIV recently flagged the frozen commercial-property market. Transactions have fallen off a cliff, making it hard for investors to determine how deep any looming price crash, if there is one coming, may be. Development is down too. Bloomberg’s REIT index is underperforming the broader S&P 500 significantly this year.

Source: Bloomberg 

A recent Fed survey on bank lending had added to signals of slowing economic growth. The senior loan officer survey (aka “Sloos”), revealed both weaker demand and tighter standards for commercial real estate loans.

Bloomberg’s office REIT index is doing particularly poorly, sinking ~35% this year. Today’s jobs data beat expectations, but the labor force participation rate dropped again, and small businesses are shedding workers, while work forces haven’t fully returned to pre-pandemic office life.

Blackstone officials may be halting redemptions if they can’t -- or don’t want to -- sell assets because they aren’t confident they can get a price that matches their current valuations, Bloomberg Intelligence’s Jeffrey Langbaum tells me. He warns that a repricing for private market values is coming, as it has to, based on interest rates. Blackstone shares have tumbled around 10% in two days.

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Blackstone has prepared investment advisors with "help guide conversations" to keep clients calm due to increasing uncertainty about the fund. 

We wonder if it's parts of a bigger systematic issue...