In 2016, private equity giant The Blackstone Group (NYSE: BX) unveiled Blackstone REIT and began the transformation of the non-traded REIT industry. “BREIT,” as it is commonly known, has gobbled up investor equity month-after-month, year-after-year, on the way to amassing a mammoth portfolio of diversified commercial real estate. Indeed, the REIT has raised more than $60 billion via a series of public offerings and built a portfolio boasting an aggregate net asset value in excess of $70 billion as of Sept. 30, 2022.
For the first time in its six-year existence, however, Blackstone REIT is now operating in the face of significant headwinds buffeting the economy as a whole.
The impact of these headwinds is apparently now being realized by BREIT as evidenced by a significant reduction in its monthly equity raise and soaring level of quarterly share repurchases, or redemptions, at the request of BREIT investors.
According to public data compiled by Robert A. Stanger & Co., in the first quarter of 2022, BREIT recorded investor inflows totaling nearly $12.5 billion, a monthly average in excess of $4.1 billion (note: both figures include $447 million received via the company’s distribution reinvestment plan). Redemptions for the first quarter equaled $871 million, or 7.1% of equity raised (including the aforementioned DRIP).
During the second quarter, BREIT encountered an unusual quarterly decline in investor inflows, which totaled approximately $10.8 billion (including DRIP proceeds of $497 million), a quarter-over-quarter decline of 13.8%. Meanwhile, quarterly redemptions more than tripled to approximately $2.9 billion, or 26.8% of equity raised during the quarter.
The decline in investor equity raised during the third quarter accelerated rapidly while redemptions soared. BREIT reported just over $7.3 billion in investor inflows during 3Q22 (including $528 billion from DRIP), a quarter-over-quarter decline of nearly 32%. Third quarter redemptions totaled nearly $3.7 billion, more than 50% of total quarterly fundraising.
It’s important to note that the relatively low rate of investor inflows to BREIT in recent months are still monstrous numbers in the history of non-traded REITs, many of which would struggle for years to raise what BREIT continues to attract in a single month. Nevertheless, the trend is an interesting one that bears watching.