Blackstone is limiting withdrawals from its $69B actual property funding fund after a surge of redemption requests from traders looking for to money out breached the REIT’s quarterly repurchase restrict.
The stampede of traders looking for to liquefy their property at one of many largest international non-public fairness funding funds is an ominous signal that financial headwinds are constructing in business property markets.
As a nontraded REIT, Blackstone Actual Property Revenue Belief has thresholds on how a lot cash traders can take out to keep away from compelled promoting. In a letter to traders on Thursday, BREIT mentioned redemption requests have exceeded the two% of the online asset worth month-to-month restrict and the 5% quarterly threshold.
BREIT mentioned it acquired $1.8B in redemption requests, or about 2.7% of its web asset worth, and has acquired redemption requests in November and December exceeding the quarterly restrict.
Blackstone allowed traders to withdraw $1.3bn in November, or simply 43% of the redemption requests it acquired. Blackstone would permit traders to redeem simply 0.3% of the fund’s web property this month, the letter mentioned.
“If BREIT receives elevated repurchase requests within the first quarter of 2023, BREIT intends to meet repurchases on the 2% of NAV month-to-month restrict, topic to the 5% of NAV quarterly restrict,” the letter mentioned.
The announcement of the limitation on withdrawals despatched Blackstone’s inventory worth plunging by 10% on Thursday.
In line with a report within the Monetary Instances, about 70% of the redemption requests have come from Asia, although non-US traders make up solely about 20% of the fund’s property.
JPMorgan analysts advised FT that as a result of a giant promoting level of Blackstone’s actual property fund has been the supply of month-to-month liquidity, the analysts consider “advisors will assume twice earlier than allocating new capital to the fund.”
The analysts additionally instructed that the limitation on withdrawals would possibly drive extra traders to hunt redemptions from BREIT.
The withdrawal restrict provides context to an enormous deal Blackstone introduced this week to promote its stake in two Las Vegas motels for $5.65B—a deal that was largely a money transaction which is able to inject the REIT with liquidity to cowl the surge of withdrawals from its fund.
Vici Properties, majority proprietor of the MGM Grand Las Vegas and the Mandalay Bay, acquired Blackstone’s 49.9% stake in each motels for $5.5B, the most important hotel-casino commerce in Las Vegas this 12 months.
Blackstone will obtain $1.27B in money and Vici will assume Blackstone’s share of about $3B in debt, in line with a report within the Wall Road Journal.
Earlier this 12 months, Blackstone bought the Cosmopolitan on line casino and lodge on the Las Vegas Strip for $5.65B, which the agency mentioned was its most worthwhile transaction of single asset.
“If there may be excellent news, it’s that BREIT has loads of liquidity with what seems like a distant probability of being a compelled vendor,” JPMorgan mentioned.
