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Blackstone shares fall after limit on redemptions in real estate fund

Blackstone shares tumbled on Friday after limited withdrawals from the $69 billion Reit real estate fund amid a jump in requests for withdrawals, an unprecedented blow to the product that helped the company become a global asset management giant.

By 12:47 am, Blackstone shares were down 2.4% to around $83.

The limitation was announced the day before after the market closed, after withdrawal requests reached a pre-established limit and not because Blackstone set limits on the day.

Still, it was enough to trigger concerns among investors about the future of Reit, which accounts for 17% of Blackstone’s earnings.

Barclays lowered its Blackstone stock rating on Friday from “overweight” to “equal weight” and cut its price target from $98 to $90.

Barclays cited concerns about a continued deterioration in the net asset value of the Blackstone Reit, which could impact capital inflows.

Many Reit investors are concerned that Blackstone has been slow to adjust the fund’s valuation for publicly traded Reits that have been hit by rising interest rates, a source close to the fund said. Rising interest rates weigh on real estate asset values ​​because it makes mortgages more expensive.

Blackstone reported a year-to-date Reit return of 9.3%, net of fees, versus a 22.19% return for the Dow Jones US Select REIT Total Return index over the same period.

A Blackstone representative declined to comment on how the company calculates the valuation of its Reit, but said the portfolio is focused on rental housing and logistics in the southern and western regions of the United States that show short lease contracts and values ​​that beat inflation.

The spokesperson further stated that Blackstone’s Reit is based on a long-term fixed income structure, which makes it more resilient.

“Our business is based on performance, not cash flows, and performance is solid,” the spokesperson said.

The Reit is aimed at wealthy investors. Two sources close to the matter said turmoil in Asian markets, triggered by concerns about China’s economic prospects and the country’s political stability, had contributed to the bailouts. Most of the investors who have asked for bailouts are from Asia and need liquidity, the sources said.

Blackstone told investors it would cap redemptions on the Reit after it received orders in November above 2% of monthly net asset value and 5% of quarterly net asset value. As a result, the fund enabled investors to redeem $1.3 billion in November, equivalent to about 43% of investors’ repurchase requests.

Some analysts said Blackstone’s Reit risks being caught in a spiral of having to sell assets to meet bailout demands if it fails to regain investor confidence. On Thursday, Blackstone announced that Reit had agreed to sell a 49.9% stake in two Las Vegas casinos for $1.27 billion.

Source: CNN Brasil

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