Mark Heschmeyer | CoStar News
The announcement by Blackstone’s nontraded real estate investment trust that it was able to redeem all share repurchase requests it got in a month for the first time since December 2022 can be seen as a positive sign this investment type could meet more requests this year.
Kevin Gannon, chairman of investment banking firm Robert A. Stanger & Co., expects excessive redemption requests to drag on fundraising for most of 2024, but he said nontraded REITs should be able to meet more of the requests. Unlike publicly traded REITs, nontraded REITs are considered a better indication of real estate values because they aren’t linked to public sentiment affecting the securities market.
In general, nontraded REITs have had to preserve capital to meet requests of investors with concerns about the economy wanting to cash out.
Nontraded REITs raised $33.2 billion in 2022, but that fell to $10.2 billion last year, according to Stanger. January 2024’s total fundraising was a low $317 million, down from nearly $4.6 billion in January 2023, but last year’s figure included a $4 billion investment from the University of California in Blackstone REIT.
REITs adopt a ceiling of redeeming repurchase requests of no more than 2% of net asset value per month and cap it at 5% per quarter.
“The industry has successfully met redemptions up to the 2% monthly and 5% quarterly caps to date, with sufficient liquidity sleeves and expected proceeds from asset sales to meet redemptions,” Gannon noted in a recent report.
Blackstone REIT received and redeemed $961 million in repurchase requests in February, the REIT disclosed in a monthly performance report to shareholders. That was below the 2% monthly limit on requests.
The occurrence does not necessarily mark an end to excessive redemptions, or Blackstone’s ability to meet all of its quarterly redemption requests.
Blackstone’s January repurchase requests exceeded the 2% monthly limit, leaving the private-equity giant little leeway in March.
Meeting its February repurchase requests, though, does mark an ongoing reduction in such requests. Blackstone’s February requests were 82% less than the January 2023 peak for its REIT.
Over the past 15 months, Blackstone has returned more than $15 billion to shareholders through repurchase requests, according to the company.
