Blackstone has limited investor withdrawals at its $125bn real estate investment fund after a surge in redemption requests from investors pulling cash from private assets.
The private equity group met only 43 per cent of redemption requests from investors in the Blackstone Real Estate Income Trust fund in the month of November, according to a notice it sent to investors on Thursday.
Shares in Blackstone fell as much as 8 per cent.
The withdrawal limit underscores the risks high net worth investors have taken in putting money into Blackstone’s mammoth private real estate fund, which — after accounting for debt — owns $69bn in net assets, spanning logistics facilities, apartment buildings, casinos and medical office parks.
Investors can redeem up to 5 per cent of their holdings in any given quarter, at which point Blackstone can limit withdrawal requests to prevent a fire sale of its illiquid real estate holdings.
On Thursday, Blackstone announced the sale of its 49.9 per cent interest in the MGM Grand Las Vegas and Mandalay Bay Resort casinos in Las Vegas for a $1.27bn cash consideration. Including debt, the deal valued the properties at more than $5bn.
Cash from the sales, which were agreed at a premium to the carrying values of the properties, can help with liquidity for BREIT as it meets redemption requests or be reinvested in faster-growing property assets, according to a person familiar with the matter.
In October, BREIT received $1.8bn in redemption requests, or about 2.7 per cent of its net asset value, and has already received redemption requests in November and December exceeding the quarterly limit.
It allowed investors to withdraw $1.3bn in November, or just 43 per cent of the redemption requests it received. Blackstone would allow investors to redeem just 0.3 per cent of the fund’s net assets this month, it added in the notice.
About 70 per cent of redemption requests have come from Asia, according to people familiar with the matter, an outsized share considering non-US investors account for only about 20 per cent of BREIT’s total assets.
Private capital managers have increasingly turned to retail investors, arguing high net worth investors should have the same ability as pension and sovereign wealth funds to diversify away from public markets. Part of the pitch that money managers make is that, by giving up some liquidity rights, higher returns can be achieved without assuming greater risk.
The BREIT fund allows for 2 per cent of assets to be redeemed by clients per month with a maximum of 5 per cent allowed in a calendar quarter. The fund’s net asset value has been marked up by more than 9 per cent in the 12 months to the end of September, a dramatic divergence from public markets where real estate investment trusts have declined sharply in value. Vanguard’s publicly listed real estate index fund has declined more than 22 per cent this year.
In recent years, the fund has been one of the big sources of Blackstone’s growth in assets under management, alongside a private credit fund called BCRED. In recent quarters, rising redemption requests from both funds have worried analysts as a signal of stalling asset growth.
“Our business is built on performance, not fund flows, and performance is rock solid,” said Blackstone in a statement sent to the Financial Times that emphasised the fund’s concentration in rental housing and logistics in fast-growing areas of the US and its predominantly fixed rate liabilities.