Market Extra: Blackstone limits investor redemptions on $70 billion real-estate fund: shareholder letter

A mammoth $69 billion Blackstone

real-estate fund has placed limits on investor redemptions after requests exceeded the fund’s monthly and quarterly limits, according to a Dec. 1 shareholder letter.

Blackstone Real Estate Income Trust fund, which has a focus on U.S. residential rental properties, saw redemptions of about $1.8 billion in October, or more than the 2% of its monthly net asset value limit, according to the letter.

While those redemptions in October were fully granted, limits of roughly 43% of each investor request were placed on redemptions in November after the 2% cap was again exceeded, according to the letter.

The 5% quarterly cap also was exceed in the fourth quarter of 2022 for the first time in the fund’s near six-year history, after it received concentrated redemption requests from investors in Asia, a person with direct knowledge of the matter told MarketWatch.

“If BREIT receives elevated repurchase requests in the first quarter of 2023, BREIT intends to fulfill repurchases at the 2% of NAV monthly limit, subject to the 5% of NAV quarterly limit,” the shareholder letter said.

The BREIT fund was up about 9.3% on the year through October, outperforming the broader market in a tough year for financial assets as the Federal Reserve has dramatically raised interest rates to fight high U.S. inflation.

The Dow Jones Industrial Average

was down about 5.5% on the year through Thursday, while the S&P 500 index

was off 14.5% and the DJ Equity REIT

was down 21.7% for the same stretch, according to FactSet data. Bitcoin

was off nearly 64% on the year so far, according to CoinDesk.

Beyond the slump seen in crypto assets this year, high use of leverage also has contributed to volatility in less speculative parts of the market, including U.K. government debt, as central banks have looked to tamp down elevated levels of inflation.

The Blackstone fund has about a 55% exposure to rental housing and another 23% exposure to industrial properties, both areas of high demand in the U.S. real-estate market since the pandemic. The fund pegged its leverage ratio at 46%.

However, skyrocketing U.S. mortgage rates this year and a decade of undersupply in the U.S. housing market that have led to an affordability crisis have benefited many rental property owners.

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