Blackstone Real Estate Income Trust was forced to again limit redemption requests from investors in March, after requests for share buybacks exceeded levels established by the firm.
The nontraded real estate investment trust, known as BREIT, began limiting redemptions last year as rising interest rates and a volatile economy dimmed prospects for commercial real estate. In March, the economy was further buffeted by a banking crisis that saw two regional U.S. banks fail.
Blackstone Real Estate Income Trust said it saw its request for share buybacks far exceed the levels it is allowed to redeem in any one quarter or month. Meeting redemption requests can be a drain on the trust’s liquidity — money that would be put to additional investments. The giant fund has amassed holdings in rental housing and logistics properties.
Blackstone REIT said it received repurchase requests of $4.5 billion in March. The amount was higher than $3.9 billion of requests in February but 16% lower than in January, according to Blackstone REIT’s monthly letter to investors posted on the company’s website.
Blackstone REIT fulfilled about $666 million of the March redemption requests, which is equal to 1% of net asset value and represents 15% of the shares submitted for repurchase. By limits Blackstone REIT has in place, it can only redeem 5% of outstanding shares per quarter. It had redeemed 2% in each of the two previous months.
The REIT has not released its March fundraising total, a spokesman for the company told CoStar News in an email.
“Strong performance is what matters and BREIT has delivered: 12.3% annualized net return since inception,” the REIT said in its emailed statement. “As for March redemptions, they remain 16% below their January peak despite elevated market volatility. BREIT is not a mutual fund and has never gated. It is a semi-liquid product and is working exactly as planned. In fact, BREIT has paid out nearly $5 billion to redeeming shareholders since November 30th when proration began.”
November was the first month nontraded REITs began disclosing that redemption requests were starting to exceed their set limits.
The $5 billion figure is notable in that in January, Blackstone REIT received a $4 billion investment from the Regents of the University of California through a joint venture with its parent, private equity giant Blackstone Group. That investment was boosted by an additional $500 million that was to be recorded in March.
Without the University of California system investments, Blackstone REIT’s fundraising through February would come in at about $420 million, according to data from investment banking firm Robert A. Stanger & Co.
So Blackstone REIT’s 2023 fundraising has just barely kept pace with its redemption of shares since November.
Other nontraded REITs have not fared as well, according to Stanger & Co.
Including Blackstone REIT’s data, total nontraded REIT February fundraising sank to a monthly low of $489 million, a level not seen since August 2020. In the meantime, monthly share buybacks exceeded $1.7 billion, an amount reflecting 351% of fundraising, Stanger & Co. said.