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Blackstone CEO says financially distressed investors driving REIT redemptions

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NEW YORK (Reuters) – Blackstone Chief Executive Officer Steven Schwartzman said Wednesday that the redemption of the company’s $69 billion non-trading real estate income trust (REIT) was not a complaint against the fund. He said it was caused by investors upset by market volatility.

Blackstone shares first revealed limited redemption from a REIT that the New York-based company is selling to high net worth investors rather than institutional investors like pension funds Dec. 1 It has since lost 15% of its value. and an insurance company. Blackstone relies on his REIT for about 17% of its earnings.

Investment firm Starwood Capital last week informed investors that a $14.6 billion non-trading REIT had also raised its gates, and other such funds have also seen large redemptions.

There was also a wave of redemptions of other non-trading Blackstone funds marketed to wealthy investors. The private equity firm said earlier this week that a $50 billion non-trading business development firm, a provider of corporate credit, had reached a pre-set limit on redemptions even though withdrawals were not capped. clarified.

Speaking at a Goldman Sachs financial services conference, Schwartzman said retail investors were facing financial difficulties as the Hang Seng Index plummeted and many had to cover their accumulated positions with debt, causing financial hardships. He said the liquidity crisis had hit him particularly hard.

“If you were an investor with margin debt and the market dropped 40%, you can imagine what it was like to be one of those individuals,” Schwartzman said. Redemption does not mean that investors are not happy with the REIT and its earnings, he added.

Blackstone reports year-to-date returns (net of fees) for REITs. This contrasts with the publicly traded Dow Jones US Select REIT Total Return Index, which fell 22.19% over the same period.

Schwartzman said the REIT’s returns came from its warehouse and apartment portfolios in the southern and western United States, which were underpinned by strong population growth and short-term leases that offered the opportunity to adjust prices in line with inflation. It is said that He also added that the fund generated $5 billion in gains from interest rate hedges set ahead of the Federal Reserve’s rate hike cycle.

“If interest rates go down, all real estate will be worth a lot more, so we’re really rooting for that,” Schwartzman said.

REITs backed by asset managers such as Blackstone, Starwood, Ares Management Corp, KKR & Co Inc and Brookfield have seen an increase in redemption requests in the first nine months of the year highlighting real estate. According to data compiled by advisory firm Robert A., Stanger & Company, Inc.

“As confidence builds, such as when the Fed stops hiking rates or other triggering events, if these types of products perform well, we will put money in,” Schwartzman said.

(Reporting by Chibuike Og, New York; Editing by Stephen Coates)

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