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Last week, Blackstone Inc announced that it had once again restricted withdrawals from its real estate income trust, which has a value of $70 billion, due to a large number of investor redemption requests. In April, the trust received $4.5 billion worth of withdrawal requests, but only fulfilled $1.3 billion or 29% of the total redemption requests, according to a letter sent to investors by the company.
During March, BREIT received requests from investors for a total of $4.5 billion, but it only fulfilled $666 million, which is equivalent to 15% of those demands. In January and February, redemption requests were $5.3 billion and $3.9 billion, respectively.
Blackstone has been using its authority to prevent investors from withdrawing funds from BREIT if the requests exceed 5% of the fund's net asset value. The company stated that it has paid a total of $6.2 billion to investors who have requested to redeem their investments since November.
According to a statement from a spokesperson of Blackstone, BREIT is not a mutual fund and has never been closed for withdrawals. It is a product that offers some liquidity and is performing as intended. In fact, since the beginning of the proration period on November 30th, BREIT has paid out almost $5 billion to redeeming shareholders.
Blackstone’s President, Jonathan Gray, mentioned during an earnings call with analysts in January that they anticipate the withdrawal requests to become more consistent as they work through their backlog.
Blackstone’s stock was down by 4.2% to $84.10, which was consistent with the overall market trend of weakness. However, the stock has gained 18.4% during the first quarter of the year, following a drop of 43% in 2022.
Last year, BREIT’s net asset value increased by 8.4%, while the Dow Jones U.S. Select REIT Index, which is publicly traded, fell by 29%. According to a note to investors by Credit Suisse analysts, led by Bill Katz, they anticipate the shares may be impacted by the potential reacceleration of gross redemptions, given the expectation of a decrease in forward interest rates.
The REIT stated in an email that the most important thing is the strong performance, which BREIT has delivered with an annualized net return of 12.3% since its inception. Despite the market’s high volatility, redemptions in March were still 16% lower than their peak in January. BREIT has paid out nearly $5 billion to shareholders who redeemed their shares. It is noteworthy that in January, Blackstone REIT received a $4 billion investment from the Regents of the University of California via a joint venture with its parent company, the private equity giant Blackstone Group. November was the first month that nontraded REITs began reporting that redemption requests were exceeding their set limits.
In March, an additional $500 million was added to the investment made by the University of California system, increasing its total investment in Blackstone REIT. Without this investment, Blackstone REIT’s fundraising through February would have been approximately $420 million, based on information from Robert A. Stanger & Co., an investment banking firm.
Therefore, Blackstone REIT’s fundraising in 2023 has just kept up with the redemption of its shares since November. According to Stanger & Co., other nontraded REITs have not performed as well. Total nontraded REIT fundraising, including data from Blackstone REIT, fell to a monthly low of $489 million in February, a level not seen since August 2020.
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