Blackstone Shares Hurt by Increased BREIT Redemption Requests

While Blackstone’s BX shares traded down more than 3% on April 3 on news that redemption requests for the Blackstone Real Estate Income Trust ticked up again in March, we do not expect to alter our fair value estimate or narrow moat rating on the firm. BREIT, which is geared more toward income-oriented investors above a certain wealth threshold (but below the standard threshold for most of Blackstone’s private equity and private credit funds), was designed to generate steady cash flows for investors, with its annualized distribution rate being 4.5% since inception and the fund itself increasing in value 14.7% on an annualized basis over the past three years at the end of February 2023.

The past month marked the sixth straight month of elevated redemption requests for BREIT, with March’s gross redemption requests of $4.5 billion representing a deterioration from $3.9 billion in redemption requests during February 2023 but still better than the $5.5 billion of redemption requests reported for January 2023. As BREIT has policies in place allowing the fund to raise redemption gates once monthly redemptions hit 2% of its net asset value (with a quarterly threshold for redemptions set at 5% of NAV), the firm fulfilled just $666 million, $1.4 billion, and $1.3 billion of redemption requests during March, February, and January, respectively.

The uptick in redemptions has been less of a concern for us the past couple of quarters as we had already been projecting quarterly redemptions of around 5% of average assets under management for the firm’s real estate segment, believing that some investors, that had done well in their nonlisted REIT investments, would look to move some of that capital into other yield-generating vehicles with less perceived risk or just wanted to lock in gains relative to publicly traded REITs, which have performed poorly over the past year as interest rates have risen.