Blackstone's $69 billion real estate fund put limits on redemptions

A Mammoth $69 billion Blackstone BX real-estate fund has put limits on investor redemptions after requests exceeded the fund's monthly and quarterly limits, according to a Dec. 1 shareholder letter.

The letter said that the Blackstone Real Estate Income Trust fund, which is focused on U.S. residential rental properties, saw redemptions of about $1.8 billion in October, or more than the 2% of its monthly net asset value limit.

Limits of around 43% of each investor request were placed on redemptions in November after the 2% cap was exceeded, according to the letter.

The quarterly cap was over 5% in the fourth quarter of 2022 for the first time in the fund's six-year history, after it received concentrated redemption requests from investors in Asia, a person with direct knowledge of the matter told MarketWatch.

BREIT intends to fulfill repurchases at the 2% of NAV monthly limit, subject to the 5% of NAV quarterly limit, if BREIT receives elevated repurchase requests in the first quarter of 2023, according to the shareholder letter.

The BREIT fund was up 9.3% over the year through October, outperforming the broader market in a tough year for financial assets as the Federal Reserve raised interest rates to fight high U.S. inflation.

The Dow Jones Industrial Average DJIA was down about 5.5% on the year through Thursday, while the S&P 500 index SPX was off 14.5% and DJ Equity REIT DJIA was down 21.7% for the same stretch, according to FactSet data. According to CoinDesk, the BTCUSD was off nearly 64% on the year so far.

High use of leverage has also contributed to volatility in less speculative parts of the market, including U.K. government debt, as central banks have looked to tamp down elevated levels of inflation, as well as the slump seen in assets this year.

The Blackstone fund has about 55% exposure to rental housing and another 23% exposure to industrial properties, both areas of high demand in the U.S. real estate market since the Pandemic. The fund has a leverage ratio of 46%.

A decade of undersupply in the U.S. housing market and skyrocketing U.S. mortgage rates have benefited many rental property owners, as well as skyrocketing U.S. mortgage rates this year.