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Blackstone’s Real Estate Fund Signaling More Pullback in Commercial Sector

In another indication that the Fed’s relentless interest rate push is holding back the real estate market, Blackstone limited withdrawals from its $69 billion unlisted real estate income trust.

Blackstone said its non-traded REIT ( BREIT ) would limit redemptions after October’s withdrawal requests exceeded its monthly limit of 2 percent of its net asset value and the trust’s quarterly threshold of 5 percent. The announcement, made public in a letter to the company’s website on Thursday, sent Blackstone shares tumbling. Blackstone’s stock fell 7.1 percent on the day. When markets opened Friday morning, they were down 2 percent further, to $83.45 a share.

Since its inception in 2017, the fund has grown significantly as it delved into commercial investments across asset classes, making Blackstone a titan in the real estate sector. The fund’s environment is currently changing rapidly due to rising borrowing costs and a slowing economy, prompting BREIT to issue a warning that future buyback requests may be limited or suspended.

Not only have the restrictions raised investor concerns about the REIT’s future (which has been a significant growth engine for Blackstone, accounting for 17 percent of the company’s profits), it is also a striking indicator of a slowdown in commercial properties.

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The Fed’s attempt to curb inflation by raising interest rates at the fastest rate in decades has been particularly painful for the real estate market; because they make financing properties more expensive, rising interest rates have a negative impact on property values. Lower values ​​mean lower returns, and lower returns lead to investor withdrawal, causing problems for the real estate industry.

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