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.
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.