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Blackstone’s $69 billion retail real estate fund curbed investor withdrawals for the seventh straight month in May as it continued to see outsize redemption requests.
The Blackstone Real Estate Income Trust, known as Breit, said it received $4.4 billion of redemption requests in May and paid out 30% of those requests to investors, or $1.3 billion, according to a notice posted on the Breit website Thursday morning. Breit limits monthly redemptions to 2% of its net asset value and 5% per quarter.
The redemption requests in May were down slightly from the $4.5 billion in April, little changed from March and up from $3.9 billion in February. Requests peaked at $5.3 billion in January.
(ticker: BX) began limiting withdrawals from the fund in November.
Blackstone has paid out $7.5 billion since November, when the gating of the huge fund began.
Even after paying out that $7.5 billion, Breit is still seeing sizable redemption requests that exceed what it can pay out. During June, the maximum amount of redemptions will be more limited than in May, at 1% of the fund’s NAV because Breit will be bumping up against its 5% quarterly redemption cap. The May redemptions were limited to 2% of NAV.
The six-year-old fund is getting a higher percentage of redemption requests from international investors than those in the U.S.
In its notice Thursday, Breit said its “semi-liquid structure is working as intended” by limiting investor withdrawals. It noted that investors who began putting in redemption requests in November—when the curbs started—would have received about 90% of their money back.
The structure, the fund noted, “was designed to both prevent a liquidity mismatch and maximize long-term shareholder value.” Breit is a nontraded real estate investment trust sold through major brokerage firms and financial advisors. The shares don’t trade publicly, and investors rely on the fund to provide liquidity.
Breit said its portfolio is “well positioned” with 9% cash-flow growth in the first quarter and an asset mix concentrated in two of the strongest sectors of the commercial real estate market: apartments and warehouses.
“We have virtually no exposure to certain challenged sectors such as commodity office, for-sale housing and regional malls,” Breit said Thursday.
The continuing redemption requests have been a concern for investors since late 2022, given the importance of Blackstone’s industry-leading retail business among alternative managers. But shares of Blackstone have rallied this year, gaining 15% through Wednesday and topping those of most of its major rivals.
The large withdrawal requests follow a period in 2021 and early 2022 when Breit was a magnet for money and one of the fastest-growing retail-oriented investment products.
One factor behind the high levels of redemption requests could be that Breit has outperformed comparable public REITs considerably since the start of 2022. Some investors may be rotating into the public REIT market.
Breit has returned negative 0.3% so far this year, based on its largest share class, and has generated annualized returns of 11.8% since inception, about three times that of a key REIT index.
Write to Andrew Bary at [email protected]