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Blackstone’s BREIT defence | Financial Times

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In all the crypto excitement, I missed an update from another article that was legitimately interesting. Blackstone Real Estate Income Trust Third quarter results.

last month, big post BREIT’s rapid growth, its growing importance to Blackstone, the increasingly wide divergence between its performance (up about 9.3% this year) and listed real estate trusts (down about 28% in 2022), and its future Research your outlook. Rising interest rates and a weakening real estate market.This is the subject I am receiving more When more Note.

Not surprisingly, Blackstone thinks all this chatter is overkill. 10-Q it also released Q&A with Nadeem Meghzi, the head of American real estate who seeks to address all these issues. tl;dr Blackstone is great. They love BREIT, so you should too.

Since its inception almost six years ago, BREIT has delivered extraordinary returns to investors. We cannot be proud of the portfolio we have built. Demonstrating our belief in BREIT, Blackstone employees have invested over $1 billion of their own money into the company, including over $300 million of his senior management investment over the past four months. .

This Q&A will give you an idea of ​​why Blackstone is so much better than listed real estate, an explanation for the outflow of funds (most likely due to the wealthy in Asia), and how to value that property Worth reading for.

Emphasis on the following:

BREIT updates its valuations monthly to reflect what is happening in the private real estate market and has their values ​​reviewed by an independent third party.

Higher interest rates led to substantially higher cap rates (lower valuation multiples) that negatively impacted valuations. BREIT’s valuation reflects this change, Year-to-date, we increased our assumed rental housing and industrial exit cap and discount rates by 14% and 6%, respectively.

At the same time, BREIT’s strong cash flow growth, stable earnings, and increased value from interest rate hedging have more than offset the negative valuation impact of a significant increase in cap rates.

Our notional residential and industrial exit cap rate of 5.4% is 160bps above the 3.8% 10-year Treasury yield.

So far this year, BREIT has sold an average of $2 billion in real estate An 8% premium to the book value attributed to these assets by BREIT.

Today’s residential and industrial exit cap rate assumptions are higher than many untraded REITs that have not moved their valuation assumptions significantly.

If you’re a completist, you can watch it too in the accompanying video Blackstone President Jonathan Gray He talks about the prospects for the BREIT despite the ‘challenging times’ for the market.as if the vehicle Essential Blackstone’s financial results…

However, the third quarter report and monthly portfolio updates show that not everyone is convinced. After blistering growth since its inception, BREIT’s net worth dropped from $70.4 billion at the end of September to $69.5 billion at the end of October. (Total wealth at the time he was valued at $144.9 billion).

As Jefferies analysts noted in a report this morning, outflows in the form of investor stock buybacks have slowed since the summer, but “funds mature in the face of an unconstructive backdrop.” It is being watched carefully as it goes on.”

The question is, to what extent will BREIT’s hard currency prove if the US real estate market collapses and Blackstone is forced to devalue its holdings? This can make the performance suddenly not look so great. Fed Pivot.

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