Real Estate

Blackstone chief defends real estate fund amid rush for withdrawals

Blackstone COO Jon Gray on BREIT redemptions: We knew there would be periods of volatility

Investors nervous about Blackstone’s real estate funding belief ought to view it as a long-term automobile that is well-positioned for the long run, the agency’s president mentioned Thursday.

Blackstone has taken warmth over the previous week for limiting withdrawals from the $69 million personal REIT, the Blackstone Real Estate Income Trust (BREIT). That transfer adopted redemption requests that exceeded beforehand set limits. The company’s stock has fallen 8% over the previous 5 days amid an argument that included a Barclays downgrade of the choice funding agency.

Blackstone President and Chief Operating Officer Jon Gray defended the positioning and structure, noting that buyers knew BREIT had limits on redemptions.

“We set up the product with limitations on liquidity,” Gray informed CNBC’s David Faber throughout a reside “Squawk on the Street” interview. “We described it as semi-liquid because we knew at some point there would be a period of volatility, and we didn’t want to sell assets at the wrong time under pressure.”

In change for their persistence, buyers have benefited from a fund that Gray mentioned has delivered 13% compounded returns for six years in a difficult atmosphere.

Publicly traded REITs have gotten slammed this year amid a rising curiosity rate atmosphere that has hit the real estate market particularly onerous, elevating questions concerning the precise values of holdings in personal funds corresponding to Blackstone’s BREIT. The $35 billion Vanguard Real Estate ETF, for instance, has tumbled 26% year so far.

“The key theme here is that performance has delivered and the structure we put in place is operating exactly as we intended six years ago, and we are incredibly proud of the performance and the structure,” Gray mentioned.

Investors ought to “look at Blackstone and say, ‘You guys have done an incredible job at deploying our capital in exactly the right geography, in exactly the right sectors with the right balance sheet,'” he added. “I think they have confidence in us.”

Yet the fund was hit by a doubling in redemption requests for November whereas subscriptions noticed a considerable drop-off, to lower than half a billion {dollars} from $880 million in September, in line with Barclays.

Gray mentioned the agency can promote property to fulfill redemptions however can accomplish that over a time horizon that will probably be helpful.

“We can sell if needed,” he mentioned. “That’s what gives us a lot of confidence.”

Blackstone shares rose about 2% in early buying and selling Thursday following the interview.

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