Blackstone chief defends real estate fund amid rush for withdrawals

Traders nervous about Blackstone’s actual property funding belief ought to view it as a long-term car that is nicely positioned for the longer term, the agency’s president stated Thursday.

Blackstone has taken warmth over the previous week for limiting withdrawals from the $69 billion non-public REIT, the Blackstone Actual Property Earnings Belief, or BREIT. That transfer adopted redemption requests that exceeded beforehand set limits. The corporate’s inventory has fallen 8% over the previous 5 days amid an issue that included a Barclays downgrade of the choice funding agency.

Blackstone President and Chief Working Officer Jon Grey defended the positioning and construction, noting that traders knew BREIT had limits on redemptions.

“We arrange the product with limitations on liquidity,” Grey instructed CNBC’s David Faber throughout a stay “Squawk on the Road” interview. “We described it as semi-liquid as a result of we knew sooner or later there can be a interval of volatility, and we did not need to promote property on the unsuitable time below strain.”

In trade for his or her endurance, traders have benefited from a fund that Grey stated has delivered 13% compounded returns for six years in a difficult atmosphere.

Publicly traded REITs have gotten slammed this yr amid a rising rate of interest atmosphere that has hit the actual property market particularly exhausting, elevating questions in regards to the precise values of holdings in non-public funds equivalent to Blackstone’s BREIT. The $35 billion Vanguard Actual Property ETF, for instance, has tumbled 26% yr thus far.

“The important thing theme right here is that efficiency has delivered and the construction we put in place is working precisely as we meant six years in the past, and we’re extremely happy with the efficiency and the construction,” Grey stated.

Traders ought to “have a look at Blackstone and say, ‘You guys have executed an unimaginable job at deploying our capital in precisely the fitting geography, in precisely the fitting sectors with the fitting stability sheet,'” he added. “I feel they’ve confidence in us.”

But the fund was hit by a doubling in redemption requests for November whereas subscriptions noticed a considerable drop-off, to lower than half a billion {dollars} from $880 million in September, in line with Barclays.

Grey stated the agency can promote property to fulfill redemptions however can achieve this over a time horizon that might be helpful.

“We are able to promote if wanted,” he stated. “That is what provides us a number of confidence.”

Blackstone shares rose about 2% in early buying and selling Thursday following the interview.