Blackstone CEO Steve Schwarzman said that recent elevated redemptions at the company’s big retail real-estate fund have been “preponderantly” coming from Asian investors, and that the fund is well-positioned with a focus on apartments and warehouses.
Speaking at the Goldman Sachs financial-services conference in New York, Schwarzman said that “the idea that something is going wrong” at the fund “because some people are redeeming” is incorrect.
Blackstone Real Estate Income Trust, a nontraded real-estate investment trust known as BREIT with $69 billion in net assets, said last week that it had limited redemptions—a practice known as gating—after hitting a 5% quarterly cap in the current quarter.
Credit Suisse analyst Bill Katz projected in a client note Wednesday that BREIT redemptions should remain high at the quarterly 5% cap through the third quarter of 2023.
Investor concerns about Blackstone’s retail business, a major source of its growth in the past two years, have depressed its stock, which is off nearly 15% since the BREIT gating news last week. The stock is down 0.2% Wednesday to $78.57 after hitting a new 52-week low.
Schwarzman said BREIT investors are “a happy group of people,” given that the trust has returned 9% this year while comparable public REITs are down about 30%. That gap is creating incentive for BREIT to redeem shares.
BREIT has about 80% of its assets in apartments and warehouses, two of the strongest sectors of the commercial real-estate market in recent years.
On the Asian selling, Schwarzman said that many Asian investors have been hurt by the equity selloff in key regional markets with Hong Kong stocks down about 20% this year. Margin debt is commonly used by Asian investors and that has magnified the losses, he said. BREIT has been a rare bright spot in Asian portfolios and those of investors generally. “For most investors, BREIT is the best thing they have” this year, he added.
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