Persistence Pays Off for Blackstone Investors

Blackstone on Monday disclosed that Blackstone Real Estate Income Trust (BREIT) received another $4.5B in redemption requests in April from investors in its $70B fund, the same amount it received in March.

The company said it redeemed $1.3B, or 29%, of the April withdrawal requests, an improvement over the $666M (15%) that were redeemed in March.

BREIT also received redemption requests totaling $5.3B and $3.9B in January and February, respectively. Since the end of November, BREIT has been exercising its right to limit withdrawals after requests exceeded 5% of the net asset value of the fund.

The company said Monday it has paid out $6.2B to BREIT investors thus far since it began prorating withdrawals on November 30.

BREIT declined to provide an estimate of the total amount of redemption requests the company has received since November, but the total is likely to be much less than the more than $18B reported in the past four months—once you factor in repeat requests.

In a statement to GlobeSt. on Monday, Blackstone said that the $6.2B in redemption payouts to investors thus far represents as much as 84% of the withdrawals requested by investors who have made repeated monthly requests.

“An investor that has been submitting repurchase requests since November 30^th when proration began has received approximately 84% of their money back,” Blackstone said.

“BREIT is a semi-liquid product and is working exactly as designed. Approximately 96% of our US investors and 93% of investors overall chose to remain in the fund in April,” the company’s statement said.

Until this month, Blackstone has been referring to the redemption requests as a “backlog,” but BREIT’s May 1 letter to stockholders clearly states “under the Repurchase Plan, unfulfilled repurchase requests are not carried over automatically to the next month.”

“If you would like to resubmit any unsatisfied portion of your current repurchase request for repurchase in the future, you will need to submit a new repurchase request for these shares,” the letter states.

Jon Gray, Blackstone’s president, said in a Q1 earnings call last week that he expects that the overall performance of the fund will be the most important factor in addressing investors’ concerns in coming months.

“What’s going to impact the redemptions? I think it will be multiple months of positive performance. We’ll show people and give them confidence as volatility in the marketplace [comes] down,” Gray said. “Right now, we’re seeing investors cautious really towards all equity vehicles.”

“If we deliver, given the portfolio we built, the structure we’ve got here, this is working for investors—12% since inception, triple the public REIT index. That’s ultimately what matters,” Gray said.

“The portfolio positioning, that what’s matters, and then as that performance shows up, as markets become a little less volatile, then I think you’ll see a resumption of more positive flows,” he added.

As a non-traded REIT, BREIT has thresholds on how much money investors can take out of its fund in order to avoid forced selling of assets. In a Dec. 1 letter to investors, BREIT said redemption requests had exceeded its 2% of net asset value monthly limit and its 5% quarterly threshold.

Starwood (SREIT) and KKR’s KREST fund, both non-traded REITs, also have limited fund withdrawals as retail investors—wealthy individuals, primarily from overseas—have bombarded the funds with redemption requests.