Blackstone maintained limits on investors’ ability to cash out of a huge property fund in February even as their redemption requests slowed, the fund manager said in an update on the vehicle.
The $71bn Blackstone Real Estate Income Trust has become a barometer of the health of the commercial property market and a driver of asset and fee growth at Blackstone, the world’s largest private equity firm.
Blackstone first raised “gates” on the fund in December as investors clamoured to exit. In January redemption requests rose to a record $5.3bn, with Blackstone fulfilling just a quarter of that amount.
The fund manager on Wednesday said that it received total requests of $3.9bn in February and granted $1.4bn, or 35 per cent, of them. The decline from January’s level of requests was the first in six months for the fund.
Blackstone said that the repurchase requests declined “despite significant market volatility”, adding that Breit has provided a 12.3 per cent annualised net return since its inception in 2017, outperforming publicly traded real estate investment trusts.
Breit is among the most high-profile example of a number of property funds forced to limit withdrawals as investors flee real estate investments in reaction to rising interest rates. UK funds were hit particularly hard following the British government’s disastrous mini-Budget proposal in the autumn.
Schroders, Columbia Threadneedle, M&G and BlackRock were among fund managers to restrict withdrawals. The crunch set off a property fire sale as managers moved to raise cash and meet investor demands.
Blackstone has been able to avoid widespread liquidation of its assets. However, it sold two casinos in Las Vegas and raised $4.5bn in new investment from the University of California endowment.
Breit was launched in 2017 as a way to give wealthy individuals access to its private real estate investment platform. In recent years, Breit drew in tens of billions of dollars in new assets, growing into Blackstone’s largest source of fee growth.
Investors face a trade-off, giving 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. When withdrawals breached those levels in autumn, it gave the group the right to “gate” the fund.
Blackstone president Jonathan Gray in January told the Financial Times it was “too early” to tell whether redemption pressures were moderating, citing the heavy requests in November and December.
“I will say the tone of the conversations with our advisers is much improved,” he said.