Blackstone limits withdrawals to $125bn property fund as investors rush to get out

Blackstone limits withdrawals to $125bn property fund as investors rush to get out

Blackstone has limited withdrawals from its $125 billion real estate investment fund following an increase in redemption requests, as investors clamor for cash and concerns grow over the long-term health of the property market. commercial real estate.

The private equity group approved just 43% of redemption requests in its Blackstone Real Estate Income Trust fund in November, according to a notice it sent to investors on Thursday. Blackstone shares fell 8%.

The withdrawal limit underscores the risks high net worth individuals have taken investing in Blackstone’s massive private real estate fund, which – after accounting for debt – has $69 billion in net assets, spanning logistics facilities, apartment buildings, casinos and doctor’s office parks.

About 70% of redemption requests come from Asia, according to people familiar with the matter, an outsized share given that non-US investors make up only about 20% of BREIT’s total assets.

A fund partner told the Financial Times that the recent poor performance of Asian markets and economies may have put pressure on investors, who now need cash to meet their obligations.

In the United States, commercial real estate is under pressure due to rising inflation and interest rates, according to a recent report by the National Association of Realtors. Overall, the mood in real estate has darkened and some big-name investors have warned of a lack of funding in parts of the sector.

The increase in takeover requests comes as Blackstone announced the sale of its nearly 50% stake in MGM Grand Las Vegas and Mandalay Bay Resort casinos in Las Vegas for $1.27 billion. Including debt, the deal valued the properties at more than $5 billion.

Proceeds from the sale, which were agreed at a premium to the properties’ book value, will help BREIT’s liquidity as it meets redemption requests – or will be reinvested in faster-growing real estate assets, said a person close to the file.

In October, BREIT received $1.8 billion in redemption requests, or approximately 2.7% of its net asset value, and has already received redemption requests in November and December exceeding the quarterly limit.

It allowed investors to withdraw $1.3 billion in November, just 43% of redemption requests it received. Blackstone would allow investors to redeem just 0.3% of the fund’s net assets this month, it added in the notice.

Private equity managers have increasingly turned to retail investors, arguing that high-net-worth investors should have the same ability as pension funds and sovereign wealth funds to diversify away from public markets. Part of the talk of fund managers is that by waiving certain liquidity rights, higher returns can be achieved.

The BREIT fund allows 2% of assets to be redeemed by clients each month, with a maximum of 5% allowed in any calendar quarter. The fund recovered more than 9% in the 9 months to the end of September, due to rising property rents and dividend payments.

Its increase in value contrasts with publicly traded real estate investment trusts, which have fallen in value sharply due to falling stock markets.

In recent years, the fund has been one of the main sources of growth in Blackstone’s assets under management, alongside a private credit fund called BCRED. In recent quarters, increased redemption requests from both funds have worried analysts as a signal of slowing asset growth.

“Our business is based on performance, not cash flow, and performance is rock solid,” Blackstone said in a statement sent to the Financial Times that highlighted the fund’s focus on rental housing and logistics in the United States. fast-growing regions of the United States and primarily fixed-rate liabilities.

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