In another indication that the Fed’s relentless interest rate push is holding back the real estate market, Blackstone has limited withdrawals from its unlisted $69 billion real estate income trust.
Blackstone declared that its non-traded REIT (BREIT) will restrict redemptions after October’s withdrawals requests exceeded its monthly limit of 2 percent of its net-asset value and the trust’s quarterly threshold of 5 percent. The announcement, which was revealed in a letter posted to the company website on Thursday, caused Blackstone stock to tumble. Blackstone’s stock ended the day down 7.1 percent. When the markets opened on Friday morning, they were down 2 percent further, to $83.45 per share.
Since its founding in 2017, the fund has grown significantly as it delved into commercial investments across asset classes, making Blackstone a titan in the real estate sector. The fund’s environment is currently changing quickly due to rising borrowing costs and a slowing economy, prompting BREIT to issue a warning that future repurchase requests may be restricted or suspended.
The restrictions not only increased investor apprehensions regarding the REIT’s future (which was a significant growth engine for Blackstone, accounting for 17 percent of the company’s profits), it’s also a striking indication of a commercial real estate slowdown.
The Fed’s effort to muffle inflation by raising interest rates at the quickest rate in decades has been particularly painful on the real estate market; because they make financing properties more expensive, rising interest rates have a negative impact on real estate values. Lower values means lower returns, and lower returns prompt investor pullback, spelling trouble for the property industry.