Blackstone’s retail real estate fund, valued at $69 billion, experienced a seventh consecutive month of limited investor withdrawals in May, as it faced substantial redemption requests. The fund, known as the Blackstone Real Estate Income Trust or BREIT, disclosed that it received $4.4 billion in redemption requests during May, according to a recent report by Barron’s. It fulfilled 30 percent of these requests, amounting to $1.3 billion, as stated in a notice to its stockholders. The fund restricts monthly redemptions to 2 percent of its net asset value and 5 percent per quarter.
The redemption requests in May were slightly lower than April’s $4.5 billion, relatively unchanged from March, and higher than February’s $3.9 billion. The peak in requests occurred in January, reaching $5.3 billion. In November, Blackstone (BX) initiated limitations on withdrawals from the fund.
Since the gating of the fund began in November, Blackstone has paid out a total of $7.5 billion. However, despite these payouts, BREIT continues to face significant redemption requests that surpass its ability to fulfill them. In June, the maximum amount of redemptions will be further restricted compared to May, allowing for only 1 percent of the fund’s net asset value due to the 5 percent quarterly redemption cap. In May, redemptions were limited to 2 percent of the net asset value.
The six-year-old fund is experiencing a higher proportion of redemption requests from international investors compared to those in the United States.
In its notice to investors on Thursday, BREIT expressed that its “semi-liquid structure is functioning as intended” by restricting investor withdrawals. It highlighted that investors who initiated redemption requests in November, when the limitations were introduced, have received approximately 90 percent of their invested capital back. The fund emphasized that its structure was designed to prevent liquidity mismatches and optimize long-term shareholder value. BREIT, a non-traded real estate investment trust, is sold through prominent brokerage firms and financial advisors. The shares are not publicly traded, and investors rely on the fund for liquidity.
BREIT stated that its portfolio is well-positioned, having achieved 9 percent cash-flow growth in the first quarter. It primarily focuses on multifamily and industrial assets, two robust segments of the commercial real estate market. The fund stated it has minimal exposure to struggling sectors such as commodity office spaces, for-sale housing, and regional malls.
The persistent redemption requests have been a source of concern for investors since late 2022, given Blackstone’s leading position in the retail sector among alternative asset managers. Nevertheless, Blackstone’s shares have performed well this year, with a 15 percent increase through Wednesday, surpassing most of its major competitors.
Following a period in 2021 and early 2022 when BREIT attracted significant investments and rapidly expanded as a retail-oriented investment product, it is now facing substantial withdrawal requests. One possible reason for the high level of redemptions is that BREIT has outperformed comparable publicly traded REITs since the beginning of 2022. Some investors may be shifting their investments toward the public REIT market.
Based on its largest share class, BREIT has returned a negative 0.3 percent year-to-date and has achieved annualized returns of 11.8 percent since its inception, roughly three times the performance of a key REIT index.