BREIT vs SREIT - What Investors Should Know

hank

Blackstone has taken a formerly high minimum fund designed for institutions and wealthy individuals and lowered the minimum to just $2,500. As reported in the WSJ recently, in so doing Blackstone has transformed the fund (BREIT) into a retail offering. I’m not currently interested in owning this. Just thought I’d toss it out if anyone has experience they’d care to share.

Separately, I’m leary of real estate as an investment at this time due to bubble-like valuations. But I could be wrong.The appeal as an inflation hedge is hard to deny.

https://www.millionacres.com/real-estate-investing/articles/breit-vs-sreit-what-investors-should-know/

little5bee

I own BREIT through my RIA. Very pleased with the performance and the steady monthly income. It prices once a month...usually around the 20th.

yogibearbull

New developments - BReit suspends redemptions.
BReit is an unlisted/nontraded interval-fund that has limited redemptions (2% per mo, 5% per qtr). If redemptions resume in Jan, fine; else, a problem.
https://community.morningstar.com/s/question/0D53o000060xKYGCA2/blackstone-real-estate

Edit/Add: From BX, https://www.breit.com/wp-content/uploads/sites/33/2022/12/Notice-to-Stockholders-December-1-2022.pdf

Crash

gulp.

carew388

+1 yep-not for me !

Sven

limited redemptions (2% per mo, 5% per qtr).

Something to ponder ..

Mark

From the Hoya Capital blog:

Blackstone Redemptions • Mixed Jobs Data • REIT M&A

'Blog' reports are supposedly readable by anyone but just in case here's a snippet.

"Real estate asset manager Blackstone (BX) was in focus today after its massive $70B nontraded REIT platform - BREIT - announced that it has begun limiting withdrawals after a wave of redemption requests that exceeded its monthly and quarterly limits. An issue that we predicted in our State of the REIT Nation Report last month, BREIT reported that its Net Asset Value has increased 9.3% this year through September 30 - claiming roughly 40% outperformance over the public REIT indexes despite paying "top-dollar" to acquire a half-dozen public REITs over the past two years whose closest public REIT peers are trading lower by an average of 30% this year. Naturally, investors have seized on the opportunity to redeem shares at these premium valuations. We've discussed the risks of non-traded REIT ("NTR") space across many reports over the past half-decade and continue to watch the area for signs of stress given their typically-high leverage and sensitivity to investor fund flows - which we expect could eventually become an area that's "ripe for picking" for the more conservatively-managed REITs."

newgirl

What effect if any might this have on private Mortgage Backed Securities ?

yogibearbull

UC invests $4 billion in a special class I of BREIT that will guarantee 11.25%+ return over 6 years. Sort of an expensive financing for BREIT. UC reached out to Blackstone/BX for the deal.

https://finance.yahoo.com/news/blackstone-breit-gets-4-billion-133750550.html

Sven

That is nuts for Blackstone to meet that 11% return for next 6 years. That is several % higher than average stock return.

carew388

For reference, UC is University of California, although I could see the University of Chicago doing a similar deal.

yogibearbull

Blackstone/BX CEO Stephen Schwarzman said at WEF, Davos that nontraded-REIT BREIT was overweight in apartments and warehouses, and underweight in malls and offices. Most of its debt had maturity/duration (?) of 6.5 years, so it was less impacted by rising short-term rates. That is why it did better than some of its competitors.

As the article may be behind paywall, I have summarized his comments about BREIT; his other comments related to economy, Fed, etc. The 2nd link from FN-London has the same article and seems open.

https://www.barrons.com/articles/blackstone-ceo-breit-real-estate-fund-51674076115?mod=bol-social-tw

https://www.fnlondon.com/articles/blackstone-ceo-backs-real-estate-fund-to-thrive-in-tough-market-20230118?mod=author_panel

hank

I couldn’t remember posting this topic. Check the date. A year old (January 2022). So my
comment in the OP “I’m leary of real estate as an investment at this time due to bubble-like valuations.” may no longer apply.

Real Estate funds, as a category, fell 25.67% in 2022 according to Morningstar.
-


EDIT - Wouldn’t you know? The morning after I posted the above, I came across possibly relevant article in MarketWatch so am sharing it here.

Blackstone CEO Says Two Big Bets Will Keep Paying Off for Its Real Estate

Excerpt: - Blackstone CEO Stephen Schwarzman said exposure to warehouses and apartments buoyed its mega real estate fund in a punishing environment where some rivals lost up to a quarter of their value. In a Wednesday interview with Barron’s editor in chief David Cho at the World Economic Forum in Davos, Schwarzman said the Blackstone Real Estate Income Trust, known as BREIT, weathered an environment of higher interest rates by avoiding areas of “real stress” in the real estate market, such as offices and shopping malls. BREIT, which is up about 8% through November, is concentrated in warehouses and apartments, two bets the chief executive said will continue to pay off. The online shopping boom and trend of bringing manufacturing capabilities back to the U.S. have benefited warehouses, while apartments have done well as people struggle to enter the housing market, Schwarzman noted.

This is a for-pay site, but may be possible to pull up article for free one time.

yogibearbull

Gates/restricted-redemptions are spreading. After Blackstone BREIT, Starwood SREIT, now is KKR KREST.

@hank, recent posts on this thread have been on gates for nontraded-REITs that started a few months ago. Media posts have been alarmist on this, but these gates are allowed if requests exceed periodic & optional offers.

​https://ca.finance.yahoo.com/news/kkr-caps-withdrawals-real-estate-165237465.html

hank

@Yogibearbull. Yes.. There’s a lot in the current Barron’s about “illiquid securities” and “private equity,” and “leveraging”. Several panelists in the “Roundtable” sounded alarms. They view the issue as potentially affecting the entire 2023 investment landscape.

ISTM folks who bought into these instruments should have understood the risks they were undertaking. Outsized gains generally entail additional risk on the part of participants. Hedge funds, for example, typically limit redemptions. One reason they’re not available to small retail investors. Not disagreeing with anything you said.

Re: My OP - A lot of water has passed under the bridge in the year since I initially posted the story. The Fed has “tossed out” its initial assessment of “transient” inflation and has been aggressively / rapidly pushing up interest rates. Real estate values & REITS have fallen sharply in response. I have to believe all this is somehow related to the higher requests for redemptions and the restrictions (gates) put in place to slow redemptions - from a shrinking pot. It’s hard to discuss one facet of the problem without at least touching on the other.