A fund that was launched by Blackstone five years ago and has grown to become one of the company’s top profit drivers is getting less money from investors amid worsening market conditions. Blackstone Real Estate Income Trust, or BREIT, owns $70 billion in real estate, including multifamily homes, 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 on public exchanges, BREIT is funded by individuals and has been marketed as a way to bring real estate investing to the general public. But the potential for reduced property values and less access to cheap debt due to rising interest rates is a big test for Blackstone’s powerhouse fund.
While BREIT is generating good returns and outperforming stocks as of September, inflows into 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 about $7.7 billion over the same 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 consisting primarily of multifamily and industrial properties in the Sunbelt, is built to withstand challenging market conditions. “That’s exactly what you want to own in an environment like we’re 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 has led other alternative asset managers to create similar REITs, including Starwood Capital Group and KKR, and is part of the reason why Blackstone has such a powerful brand. In the fourth quarter of 2021, the biggest driver of earnings for Blackstone was BREIT, which takes 1.25 percent of assets in fees and 12.5 percent of revenue. More recently, BREIT acquired single-family rental giant Home Partners of America and expanded its portfolio of affordable housing assets with a $5.1 billion purchase of American International Group. Today’s investment climate looks like the biggest challenge for 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.