A fund launched by Blackstone five years ago that grew into one of the company’s top drivers of profit is garnering less money from investors amid worsening market conditions. Blackstone Real Estate Income Trust, or BREIT, owns $70 billion worth of real estate, including multifamily, single-family homes, student housing, data centers, retail and hotels, including the Bellagio hotel and casino on Las Vegas’ Sunset Strip. While other REITs are traded in public exchanges, BREIT is funded by individuals and has been marketed as a way to bring investment in real estate properties to the general public. But the potential for decreased property values and less access to cheap debt due to rising interest rates is a major test for Blackstone’s powerhouse fund.
While BREIT is generating good returns and outperforming stocks as of September, inflows to the fund are slowing and redemptions are up, according to Bloomberg. In the third quarter of this year, money going into BREIT reached $1.2 billion, down from around $7.7 billion from the same time period last year, while withdrawals from the fund rose about 15-fold. Nadeem Meghji, head of Blackstone Real Estate Americas, told Bloomberg that BREIT, with a portfolio primarily composed of multifamily and industrial properties in the Sunbelt, was built to withstand challenging market conditions. “This is exactly what you want to own in an environment like we are in today,” he said.
Blackstone first launched BREIT as a non-traded REIT in 2017 as a platform for individual investors, starting at just $2,500. The success of BREIT led to other alternative-asset managers creating similar REITs, including Starwood Capital Group and KKR, and is part of the reason that Blackstone has such a powerful brand. In the fourth quarter of 2021, the biggest driver of earnings for Blackstone was BREIT, which takes in 1.25 percent of assets in fees and 12.5 percent of returns. More recently, BREIT took over the single-family rental giant Home Partners of America and expanded its portfolio of affordable housing assets with a $5.1 billion purchase from American International Group. Today’s investment climate looks to be the biggest challenge to BREIT in its five-year existence, but despite investors taking a more cautious approach, the REIT is still one of the top performers in the sector.