Brookfield, Blackstone REITs Posted Losses in 2023

Last year’s choppy commercial real estate waters led to record losses for real estate investment trusts affiliated with a pair of major companies.

Brookfield Real Estate Income Trust and Blackstone Real Estate Income Trust both posted losses in 2023. Each REIT set its individual mark for the biggest annual loss in the respective entity’s history.

Brookfield REIT ended the year down 6.7 percent, Bloomberg reported, closing out 2023 with two consecutive months of losses. The $2.2 billion fund is largely concentrated in rental housing and logistics and has gained 9.3 percent annualized since launching in 2019. It took over property management from subsidiary Oaktree Capital Management in 2021.

The rise in interest rates and sluggish property market drove some of Brookfield REIT’s losses last year, but the managers of the fund say that they are seeing opportunity in dislocation, turning to property credit for higher yields.

Brookfield REIT had a change in leadership last year as Brian Kingston replaced Zachary Vaughan as chief executive officer of the fund, which was designed to compete with private REITs run by Blackstone and Barry Sternlicht’s Starwood Capital Group.

Blackstone’s REIT ran into its own issues last year, posting an 0.5 percent loss in 2023, according to Bloomberg. That represented the lowest annual return for the wealthy investor fund since its 2017 origin and failed to clear a 5 percent threshold that would allow the asset manager to share in profits.

BREIT also struggled in the world of rising interest rates and slow property markets. Its net asset value, which peaked at $70 billion, is down to $62 billion. BREIT returned more than 30 percent in 2021 and 8.4 percent in 2022.

The fund posted a loss in December because it hedged on interest rates as they kept rising. Last month, key borrowing rates fell as the Federal Reserve held steady on the central rate.

The fund has also been forced to contend with a rampant redemption play, which has resulted in $14.3 billion being returned to investors since the end of November 2022. That crunch is easing, though, as redemption requisitions declined by 80 percent over the last year, according to Blackstone.

Blackstone president Jon Gray told analysts in October that all was well with the trust, designed to provide investors liquidity while keeping performance intact. The fund has $66 billion waiting to be deployed, Blackstone said in a statement.

— Holden Walter-Warner