BX/BREIT

The Credit Strategist Blog

Blackstone Inc. (BX) has seen its stock drop more than 25% over the last month in part due to its decision to limit withdrawals from its $69 billion private REIT, the Blackstone Real Estate Income Trust (BREIT). The stock was also hit by the end of the latest bear market rally that is faltering as we approach the Federal Reserve meeting next week where everyone is expecting a 50-basis point interest rate hike which certainly won’t help the private equity and real estate giant’s businesses.

BX made the decision to limit withdrawals from BREIT after redemption requests exceeded previously set limits (2% monthly, 5% quarterly). Those limits were established in order to allow effective management of real estate assets that are inherently illiquid. Investors in BREIT knew of those limitations and BX was entirely within its rights to impose them to protect the value of the fund’s assets and avoid selling them below fair value. BREIT produced 13% annualized returns over the last six years so BX is doing something right.