BREIT fund limits withdrawls?
what do you guys think of Blackstone news on limiting Investor withdrawal from its BREIT?
is there any oversight on their fund performance and their Valuations? I always wondered if they really produced alpha for Investors or made money for themselves on fund flows and AUM.
The main thing it shows is that investors are nervous. They want to go to cash or buy 2 year Treasuries since they're yielding 4.25%. Real estate funds are illiquid by design, so it makes sense there is a gate to avoid forced liquidations. Normal thing, no big deal. Whether or not the NAV is way off is open to debate, but reports are that Jon Gray and Steve Schwarzman have each invested $100mm of their own money into BREIT since July...
It doesn't show this at all - it depends on where those redemptions are coming from, and why. If it's a lot of American funds pulling out to reallocate risk, then yes, that isn't the greatest sign. If, as it seems it is in this case, it's a bunch of Chinese institutions pulling money out because they're getting hammered in their domestic market, that isn't nearly as meaningful.
Probably because they think it's undervalued against the assets it contains. Again, if every underlying asset (or effectively all) is performing, then the "valuation" of those assets is fairly meaningless. I suppose you could argue that exuberant valuations by BREIT investors prior to 2022 drove the share value too high on a wave of cheap credit, but that is a separate issue from the actual value of the assets in the fund. Which, as I said, are tied to cash flow.
If I’m understanding your comment correctly, you are suggesting NAVs in BREIT are overstated (ie they haven’t written positions down to keep up with the rapid cap rate expansion in the market)? I would not disagree w that.
on the second piece, sounds like terrible timing for them to buy $100mm chunks especially in light if they haven’t even fully marked NAV to market. Am I missing something?
Just looked at their latest quarterly update. They adjusted their exit cap assumptions in their valuations from 4.8% last December to 5.4% this September.
Whats your source for this? I am looking through this and can't get there
https://www.breit.com/wp-content/uploads/sites/33/2022/05/BREIT-Quarter…
totally overblown. most redemptions are from Asia. BREIT will be fine...
There's a lot of hyperbole surrounding the topic but overall agree they'll be fine. The investment market in Asia has shifted, and a bunch of investors want to pull back for stability, but with this type of investment vehicle, it's obviously not aligned.
Blackstone already has it outlined that they can close the fund and lock redemption periods, but of course, news sites are going to jump on it because to someone not familiar with the topic (and how private REITs work), the wording sounds similar to the SBF situation (and the other companies that went under due to the FTX collapse).
Respectfully, BX was down 7% on the news. Either the entire market and equity analysts are 'not familiar with how private REITs work' or perhaps the news is actually meaningful.
Is the news meaningful? Yes
Are some people in the media bringing about a touch too much hyperbole to spook people? In my view, also yes. My comment about a lack of knowledge was more of the public response independent of the market.
It definitely isn't great news to hear, but also isn't the great undoing and financial turmoil that I've seen outlined by some commentators. I think a lot of investors relating to BX have been weary following their past earnings drop, with the news coming out now only furthering the selloff.
It also dropped about that much when COVID hit, and then went on to gain 44% in value over the ensuing 30 months. So obviously, despite the immediate reaction, that news wasn't particularly important to the underlying outlook, either.
Quoting the market price of a security as evidence for anything is tricky. Investors, especially retail investors, are notorious for jumping ship at the bottom and buying back in at the top. Does the collapse of China's housing market really have anything to do with the quality of the assets in BREIT? Because that is what was driving redemptions. The fact that enough people get spooked at the news of BREIT limiting redemptions doesn't actually mean anything about the underlying real estate. If it turns out that they've been cooking the books, or are looking at a wave of defaults, then you have a different story of course... but the market reacting to a piece of news doesn't always correlate to "this news is meaningful". People make stupid, irrational decisions all the time. It's why anyone gets rich in the first place.
Honestly, the industry is very opaque, so maybe the analysts do not quite understand. All of ODCE has been dealing with this redemption problem all year, but no real retail investor exposure there, and no news. The fund has a fiduciary duty to the investors that want to stay in, so no asset firesales, and redemptions get limited. It is a bad sign for private RE, everyone’s expecting value declines of 20% average next year, like all other assets have been revalued on higher risk free rate.
do these Redemption limits spelled out when Investors sign up to Invest in these REITs?
Yeah it’s non-traded REIT 101. Spelled very clearly and if you don’t know that as an investor, you are simply negligent and shouldn’t be investing in these types of products.
Is anybody on here looking at any of BX’s product in the market? Heard they have a lot out.
Yup decent sized apartment portfolio is being sold to another PE.
Where is that? Do you know pricing in terms of cap rate?
I think most of this is due to re-allocation. Their equities positions have gone down, many of which quite substantially. Therefore, due to the denominator effect, they’re over allocated to real estate.
This isn’t something that’s just started happening within the past couple of weeks. We’ve seen this happening for a couple of months now, across all private reits. Starwood and blackstone are just the biggest household names.
I don’t think it’s that these investors don’t want to be allocated to real estate as it’s coming off a super hot run. And the alts industry in general is gaining more investor attention than it’s historically had relative to your traditional asset classes.
Still not good news, but not real estate Armageddon.
I think it's pretty obvious that BREIT is bullshitting on their marks. NAV is up what 9% YTD? I suspect their actual marks should probably be somewhere near -15%. Just look at Camden, MAA, Prologis, etc. How have they done YTD?
Some of the withdrawals can be explained by Asian investors getting hammered in their markets, but I'm sure some people are clearly selling at the overinflated BREIT NAV and reallocating elsewhere. Or at least they should be!
Great listening to a whole generation that hasn't seen a down market yet chime in on this. It's a very bad sign.
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