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Blackstone’s $69 billion real estate fund hits redemption limit

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“Our business is built on performance, not cash flow, and performance has been solid,” said a Blackstone spokesperson, adding that BREIT is focused on Sunbelt rental housing and logistics. So, he added, it will continue to be well positioned going forward. By November, the fund had amassed more than $20 billion in swap contracts this year to combat rising interest rates.

Since its inception in 2017, the fund has become a real estate giant and has grown rapidly, buying up apartments, suburban homes and dormitories in an era of ultra-low interest rates as investors hunt for yield. Rising borrowing costs and a cooling economy are now rapidly changing the fund’s landscape, and BREIT has warned that it may limit or suspend future buyback requests.

Blackstone’s creation of BREIT put the spotlight on the non-trading real estate investment trust sector. Unlike many real estate investment trusts, BREIT shares are not traded on an exchange. There is a threshold for how much money an investor can withdraw to avoid a forced sale. This means that the fund’s board can choose to limit withdrawals or raise the limit if too many people head for the exit. According to BREIT, the request exceeds the monthly net worth limit of 2% and the quarterly threshold of 5%.

“If BREIT receives a buyback request in the first quarter of 2023, BREIT will execute the buyback at 2% of NAV monthly limit, subject to 5% of NAV quarterly limit,” BREIT said. said in a letter on Thursday.

Blackstone management is betting heavily on this fund. Bloomberg reported last month that President John Gray has injected another $100 million of his own money into BREIT since July.

Over the past year, wealthy individuals, family offices and financial advisors have become wary of tying money to assets that are difficult to trade or value. I’m here. The majority of the fund redemptions this year have come from Asia, said a person familiar with the matter, who asked not to be identified because of the private information.

Keefe Bruyette & Woods analyst Michael Brown said in a note on Thursday that “the bear case of the BREIT outflow is unfolding and impacting equities this morning. Equities will continue to overhang for the next few quarters.” I expect it to continue,” he said. Gates is on the rise.” “Growth in the retail channel has been a key driver of BX’s success in recent years, and the growth challenges facing the company on the retail side may continue to weigh on BX’s valuation.” Yes,” Brown said.

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