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Blackstone’s REIT cools off after acquisition flurry

Inflows are dropping at the fund as interest rates rise

A photo illustration of Blackstone president Jon Gray (Getty, Blackstone)
A photo illustration of Blackstone president Jon Gray (Getty, Blackstone)

Blackstone has grown its real estate investment trust into a $70 billion behemoth, but market tailwinds slowing other real estate activity could spell a rocky ride.

Inflows are slowing and redemptions are rising for Blackstone Real Estate Income Trust, Bloomberg reported. Rising interest rates are hampering its ability to make acquisitions, while wealth advisors are cautioning clients against illiquid investments.

In the third quarter, BREIT gained $1.2 billion in net flows, down from $7.7 billion year over year. Investors added approximately 50 percent less new money while withdrawals increased 15-fold.

BREIT has certain thresholds on how much investors can withdraw. If those thresholds are reached, it may need to raise limits or restrict withdrawals.

Many of Blackstone’s top figures have a personal stake in the success of BREIT. In the last three months, president Jon Gray has poured $100 million into the fund, a person close to the company told the outlet, and CEO Stephen Schwarzman has done the same.

Nadeem Meghji, head of Blackstone Real Estate Americas, told the outlet the BREIT was built to withstand challenges by investing heavily in rental housing and warehouse properties in the Sun Belt.

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“This is exactly what you want to own in an environment like we are in today,” Meghji told Bloomberg in a statement.

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But growth is not equal across assets. Demand for warehouses, a sweetheart sector of the pandemic, has cooled slightly in recent months. Rents in the multifamily market surged during the pandemic at an unbelievable rate, but those gains are slowing amid backlash from renters willing to move back home or live with roommates to avoid expensive monthly payments.

After the second quarter, Gray lauded the BREIT, saying it “exemplifies the strength of our concentrated strategy.” Among its major transactions in recent years are the acquisitions of student housing company American Campus Communities for $12.8 billion and data center firm QTS Realty Trust for $10 billion.

While BREIT may be in for some more lean times than recent quarters, it is still a strong performer in the REIT sector. In the first nine months of the year, BREIT boasted a 9.3 percent net return, while publicly traded REITs dropped in value by 30 percent.

— Holden Walter-Warner

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Blackstone GroupCommercial Real EstateREITS