The Blackstone Real Estate Income Trust (BREIT) recorded its lowest annual return since its inception in 2017, with a .5% loss in 2023. This shows that Blackstone's flagship real estate trust for high-net wealth investors was not immune to the Federal Reserve's interest rate hiking cycle and a commercial real estate downturn.
In a recent shareholder update, Blackstone told investors, "We built BREIT as an all-weather strategy designed to build long-term wealth across market cycles. We are pleased that BREIT has delivered an 11% annualized net return since inception seven years ago (January 1, 2017)."
Nonetheless, the past year's sharp increase in interest rates, regional bank meltdowns, and a downturn in the commercial real estate market have ended that era (for now). This shift led to a slight loss (.5%) last year, following returns of 8.4% in 2022 and over 30% in 2021.
BREIT's performance also severely lagged behind 26% returns of the S&P500. The fund's net asset value is around $62 billion.
Meanwhile, Blackstone has limited investor redemption requests for more than a year. It has returned $14.3 billion of investor cash since November 30, 2022, according to a shareholder letter earlier this month. The good news is that a backlog in redemption requests has been easing recently.
Bloomberg noted, "Blackstone had enlisted interest-rate hedges to mitigate the pain from soaring borrowing costs. The firm said in a memo that even if there might be some immediate sting, sustained lower rates will lift real estate values across the fund's portfolio."
The Blackstone Real Estate Income Trust (BREIT) recorded its lowest annual return since its inception in 2017, with a .5% loss in 2023. This shows that Blackstone’s flagship real estate trust for high-net wealth investors was not immune to the Federal Reserve’s interest rate hiking cycle and a commercial real estate downturn.
In a recent shareholder update, Blackstone told investors, “We built BREIT as an all-weather strategy designed to build long-term wealth across market cycles. We are pleased that BREIT has delivered an 11% annualized net return since inception seven years ago (January 1, 2017).”
Nonetheless, the past year’s sharp increase in interest rates, regional bank meltdowns, and a downturn in the commercial real estate market have ended that era (for now). This shift led to a slight loss (.5%) last year, following returns of 8.4% in 2022 and over 30% in 2021.
BREIT’s performance also severely lagged behind 26% returns of the S&P500. The fund’s net asset value is around $62 billion.
Meanwhile, Blackstone has limited investor redemption requests for more than a year. It has returned $14.3 billion of investor cash since November 30, 2022, according to a shareholder letter earlier this month. The good news is that a backlog in redemption requests has been easing recently.
Bloomberg noted, “Blackstone had enlisted interest-rate hedges to mitigate the pain from soaring borrowing costs. The firm said in a memo that even if there might be some immediate sting, sustained lower rates will lift real estate values across the fund’s portfolio.”
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