Breit cannot stop the March conference on sector opportunities from reducing efforts to take money out of BreitBlackstone clients asked to pull $4.5bn from a closely followed real estate fund in March, even as the company’s executives were promoting investment opportunities in the sector that they said would arise from US economic turbulence.
After the collapse of Silicon Valley Bank’s Silicon Valley Bank, withdrawal requests for the $70bn Blackstone Real Estate income Trust (Breit), rose 15% to $4.5bn in March. This was the fifth consecutive month of the group limiting redemptions.
The redemptions indicate that investor concerns remained high even though Blackstone president Jonathan Gray convened over 200 investors on March 8th and March 9th to present forecasts for new investment opportunities due to the financial upheaval. After announcing large losses in securities sales and an unsuccessful equity raise, SVB was taken by regulators March 10.
According to four people present, Blackstone stated that the financial crisis would boost Breit’s earnings at the Spring Place private members club, Manhattan. It would limit bank financing for new residential real estate construction. This would crimp supply and put upward pressure on rents at the properties.
Blackstone executives explained to the group that the large number of apartments entering the market will not hurt profits long-term. Blackstone predicts that the US’s major lender of apartments will reduce new lending commitments due to rising interest rates and deposit outflows.
Larry Swedroe (director of research at Buckingham Strategic Wealth) stated that pricing will not be an issue for multifamily apartments.
Nadeem Meghji is the head of Blackstone’s Americas real estate business. He said that Breit would be “playing offence”, using its $12 billion in liquid assets while other competitors scale back or are sold. He said that the group plans to announce large deals for data centers to be built by technology giants looking to compete in artificial Intelligence products.
The pitch did not stop a flood of outflows. In March, investors asked for $4.5bn to be redeemed from Breit. This was more than the $3.9bn that investors wanted to withdraw in February. Due to the withdrawal cap, Blackstone only paid $666mn for these requests.
Breit was launched by Blackstone in 2017 to provide real estate investments for wealthy people. Clients can redeem 2 percent of their net assets per month and a maximum 5 percent each quarter.
Blackstone stated that Breit had shown strong performance in all market cycles in a notice regarding the March withdrawal curbs. It noted that redemption requests were 16% lower than the January high.
Blackstone stated that the restrictions protect investors from a fire sale of their property holdings at the Breit event. Swedroe stated that “they told the same story they had been telling for a long while.” It is a characteristic of the fund that there are limited liquidity.
Since November 30, Blackstone has paid $5bn to redeeming shareholders. People familiar with the flows said that withdrawals have been highest in Asia. Over the past year, non-US investors have nearly halved exposure to Breit.
Many investors are still confident in the fund. Patrick Dwyer, managing director of NewEdge Wealth and a large Breit investor, stated that the fund is a great way to grow your cash flow over time.