Investors nervous about Blackstone’s real estate investment trust should view it as a long-term vehicle that is well positioned for the future, the company’s president said Thursday.
black stone I had a fever in the last week to limit withdrawals From Blackstone Real Estate Income Trust (BREIT), a $69 billion private placement REIT. The move followed a redemption request that exceeded previously set limits. The company’s share price has fallen 8% in the past five days amid controversy involving Barclays’ downgrade of the alternative investment firm.
Blackstone President and Chief Operating Officer Jon Gray defended the positioning and structure, noting that investors knew there were limits on the redemption of the BREIT.
“We set up a product with limited liquidity,” Gray told CNBC. David Faber during the livesquawk on the streetInterview. “I described it as semi-liquid because I knew there would be periods of volatility at some point, because I didn’t want to sell the asset at the wrong time under pressure.”
In exchange for patience, investors are benefiting from a fund that Gray said has delivered a compound return of 13% over six years in a difficult environment.
Listed REITs have come under fire this year, especially amid a rising interest rate environment that has hit the property market hard, raising questions about the true value of private fund holdings such as Blackstone’s BREIT.$35 billion. Vanguard Real Estate ETFFor example, it has fallen 26% so far.
“The key theme here is that performance has been delivered and the structure we installed is working as intended six years ago, and we are extremely proud of the performance and structure.
Investors should “look at Blackstone and say, ‘You guys have done a great job of putting our capital in the right region, the right sector, the right balance sheet,’” he added. “I think they have confidence in us.”
But the fund was hit by a doubling of redemption demands in November, with subscriptions plummeting to less than $500 million from $880 million in September, according to Barclays.
Gray said the company could sell the assets to meet redemption, but over a useful period of time.
“We can sell it if we want,” he said. “It gives us a lot of confidence.”
Blackstone shares rose about 2% in early trading Thursday after the interview.