For the sixth month in a row, Blackstone Real Estate Income Trust has received more stockholder requests for share buybacks than it’s allowed to give.
Since November, when share redemptions first exceeded the monthly allowable amount, the fund has paid out $6.2 billion, according to BREIT’s Monday letter to stockholders. The redemptions have come as investors contend with higher interest rates, record-high office vacancies and worries over a possible recession.
Even as BREIT pays out the maximum allowed in any given month, the nontraded real estate investment trust has access to almost twice that in available cash, according to its 2022 year-end filing with the SEC. “We believe we have sufficient liquidity to operate our business, with $11.9 billion of liquidity,” the filing said.
BREIT is controlled by New York-based private-equity giant Blackstone Group, which bills itself as the work’s largest real estate owner. Blackstone blamed declining real estate performance last month that fueled a drop in first-quarter profit.
Since BREIT’s formation over six years ago, its share plan allows for repurchases up to 2% of net asset value in any month and 5% of NAV in a calendar quarter. This structure was designed to both prevent the need to sell assets to meet redemption requests and help preserve long-term shareholder value, according to the fund.
Nontraded REITS are not publicly traded on an open exchange but are still registered with the SEC. Since coming to prominence in the 1990s, nontraded REITs have made it standard business practice to determine their owns methods for how they allow investors to redeem shares.
An investor that began submitting repurchase requests when share redemptions began has received about 84% of its money back, BREIT said Monday, indicating the plan is “working as intended.”
BREIT received another $4.5 billion in repurchase requests in April. That’s the same amount as in March and $600 million more than in February, but 15% lower than the peak in January despite market volatility, according to BREIT.
BREIT fulfilled roughly $1.3 billion in repurchase requests, which is equal to 2% of NAV and represents 29% of the shares submitted for repurchase.
“Importantly, about 96% of our U.S. investor base and about 93% of investors overall elected to remain invested” in April, BREIT said in its stockholder letter.
While BREIT has been returning money to investors through share buybacks, its acquisition activity has flattened out. However, the redemptions have not played a part in the slowdown, a BREIT spokesperson said in an email to CoStar News without elaborating.
In an SEC filing last week, BREIT said, “Moments of volatility create dislocation and opportunity for seasoned investors and BREIT benefits from Blackstone Real Estate’s 30-plus year track record of successfully navigating market cycles, disruptions and volatility. We remain confident that BREIT’s disciplined approach will continue to deliver for our investors in the current environment.”
BREIT’s investment portfolio is concentrated in about 80% rental housing, industrial and data centers where fundamentals and cash flows remain strong, BREIT said.
“Just as critical is what we don’t own,” BREIT said in its letter Monday. “We have virtually no exposure to certain challenged sectors such as commodity office, for-sale housing and regional malls, and BREIT has a strong balance sheet with [about] 90% fixed-rate debt for the next six-plus years.”