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Blackstone Group’s $60bn property fund met all of its investors’ redemption requests in February, marking the first time it did not limit such withdrawals in more than a year.
The property fund said in a letter to investors that it honoured all redemption requests last month, meaning any investor looking to pull their money received all of their requested cash back.
The milestone signals that pressure is falling on the fund, called Blackstone Real Estate Income Trust (Breit), after a dash for redemptions over fears about real estate valuations caused Blackstone to limit withdrawals in late 2022, a manoeuvre that sent the group’s public stock falling.
“We are pleased to report that Blackstone Real Estate Income Trust fulfilled 100% of repurchase requests in February,” Blackstone said in the letter.
Rival funds from Starwood and KKR continued to limit investor withdrawals as of January, according to public filings.
Breit was launched by Blackstone in 2017 as a way to give wealthy individuals access to its private real estate investment platform. By 2022, Breit had drawn tens of billions of dollars in new assets, growing into Blackstone’s single largest source of fee growth.
But interested investors were required to give up some rights to immediately cash out in return for access to the private real estate portfolio. Breit allows for 2 per cent of total assets to be redeemed by clients each month, with a maximum of 5 per cent allowed in a calendar quarter.
The fund received $961mn in redemptions in February, roughly 15 per cent below its monthly limit, Blackstone said.*
In the summer of 2022, investors began pulling their money, with a wave of redemptions coming from Asia that then spread to the US and Europe. When withdrawals breached monthly limits in December 2022, it gave the group the right to partially “gate” the fund.
Since then, investors have pulled more than $15bn from the fund, however, those seeking to get their cash back did not get their requests met in full.
To alleviate pressures on the fund’s liquidity as it met redemptions, Blackstone a year ago took a $4.5bn investment from the University of California that came with a high return promise. It also sold billions in property assets, such as hotels, self-storage operators and an interest in the Bellagio, a Las Vegas casino.
The Financial Times reported last month that Blackstone has built a $560mn liability to the US as a result of its return promise after the fund lost value last year.
Though Blackstone is not expecting a quick recovery in property markets and high interest rates continue to pressure many investments, it is returning to the offensive. It is investing heavily to build data centres and has struck deals to purchase a $17bn portfolio of bank loans and privatise a Canadian multifamily real estate business, partially by using Breit.
Blackstone’s president Jonathan Gray has also said he believes property valuations are beginning to bottom. “We really see real estate bottoming from a valuation standpoint,” he told the FT in January. “The declining cost of capital with rates coming down and spreads coming down for real estate borrowing is very helpful.”
*This story has been changed to correct the percentage figure
