Blackstone Is Attempting To Stop Investors From Leaving The Real Estate Market

Real estate investment funds are being redeemed in waves.

As there were several demands for redemptions of the invested money from the $69 billion real estate investment fund in the fourth quarter of 2022, Blackstone is attempting to keep investors from leaving it.

Blackstone Real Estate Income Trust (Breit) Chairman Jonathan Gray makes it plain in an interview with the Financial Times that it is too early to determine if these demands are slowing down in the fund. “Compared to November and December, we are now seeing a slowdown. I’d argue that the conversations we have with our advisers now have a much better tone.”

As concerns about the long-term status of the real estate market grew in December of last year, the investment fund was able to restrict the amount of money that its customers could withdraw. Breit is built in a manner that gives its customers more exposure to real estates, such as warehouses, housing complexes, and office skyscrapers. The value of all of Blackstone’s assets has increased as a result of this fund’s incorporation of assets worth tens of billions of dollars and euros.

The surge of redemptions that broke out last summer, however, brought to light the dangers of investing in illiquid assets with cash. Blackstone could change the way it prepares these sorts of funds as a result of this. “I think that personal property investment products will develop over time. Although an investment product has performed as expected, may there be issues that make things better? Definitely, “He claims. He points out that the most recent funds do not let their consumers withdraw their invested money on a regular basis.

Blackstone released its financial results for the fourth quarter of 2022 on Thursday. This quarter saw a decline in commission income as a consequence of Breit’s underwhelming performance. Particularly, commission earnings fell 42% to €1.1 billion.

Early in 2022, Blackstone switched from its previous quarterly to annual tracking of commissions received from Breit. The corporation would have seen a 19% decline in commission income if this policy had gone into effect in 2021.

Blackstone’s shares fell when it attempted to restrict redemptions, but it has since written off the majority of those losses, benefiting from both the market’s overall rebound and the University of California’s $4 billion investment in the market in January. The same institution said yesterday that it will contribute an extra 500 million euros to the venture.

In the fourth quarter of 2022, the investment firm raised more than €43 billion, raising the total amount of assets under control to $975 billion.

Gray is upbeat about luring additional funds from affluent investors despite the difficulties the fund, Breit, is experiencing.

In actuality, it believes that only 1% of the 85 trillion euros are insufficient. The amount of money that can be invested in real estate for alternative investments will rise in the future. “I recall predicting that institutional investors would quit making alternative investments in 2008 and 2009. Clearly, this was not verified “Finally, he says.