Blackstone has limited withdrawals from its $125 billion real estate investment fund in the wake of a surge in redemption requests, as investors demand to get their hands on the cash and concerns grow about the long-term health of the commercial real estate market.
The private equity group approved only 43% of redemption requests for the Blackstone Real Estate Income Trust in November, according to a notice it sent to investors Thursday. Participate in Black stone decreased as much as 8 percent.
The drawdown limit underscores the risks affluent individuals take by investing in Blackstone’s massive private real estate fund, which — after factoring in debt — owns $69 billion in net assets, sprawling logistics facilities, apartment buildings, casinos, and medical office complexes.
About 70 percent of redemption requests came from Asia, according to people familiar with the matter, a huge share given that non-US investors account for only about 20 percent of BREIT’s total assets.
A partner in the fund told the Financial Times that the poor performance of Asian markets and economies may have put pressure on investors, who now need cash to meet their commitments.
In the United States, commercial real estate is under pressure from rising inflation and interest rates, according to a recent report from the National Association of Realtors. Globally, the mood in real estate has worsened and some high-profile investors have warned of a funding shortfall in parts of the sector.
The increase in redemption requests comes as Blackstone announced the sale of nearly 50 percent of its stake in the MGM Grand Las Vegas casino and Mandalay Bay Resort in Las Vegas for $1.27 billion. Including debt, the deal valued the real estate at more than $5 billion.
A person familiar with the matter said the sale proceeds, which were agreed upon at a premium to the book value of the property, will help provide liquidity for BREIT as it meets redemption requests — or reinvestment in fast-growing real estate assets. .
In October, BREIT received $1.8 billion in redemption requests, or about 2.7 percent of its net asset value, and has already received redemption requests in November and December that exceed the quarterly limit.
It allowed investors to withdraw $1.3 billion in November, or just 43 percent of the redemption requests it received. It added in the notice that Blackstone will allow investors to redeem only 0.3 percent of the fund’s net assets this month.
Private capital managers have increasingly turned to retail investors, arguing that high net worth investors should have the same ability as pension funds and sovereign wealth funds to diversify away from the public markets. Part of the offer that money managers are making is that by giving up some liquidity rights, higher returns can be achieved.
The BREIT fund allows 2 percent of assets to be redeemed by clients each month, with a maximum of 5 percent allowed in a calendar quarter. The fund regained more than 9 percent in the 9 months to the end of September, due to higher rents from real estate and dividend payments.
The increase in value contrasts with publicly traded REITs, which have fallen sharply in value in line with the slump in stock markets.
In recent years, the fund has been one of the big sources of Blackstone’s growth in assets under management, along with a private trust called BCRED. In recent quarters, a rise in redemption requests from both funds has alarmed analysts as a sign of stagnant asset growth.
Blackstone said in a statement sent to the Financial Times that it emphasized the fund’s focus in rental housing and logistics services in fast-growing areas of the US, mostly in fixed-rate liabilities.
