Exploring Blackstone REIT’s Monthly NAV Increase

March 22, 2018 | James Sprow | Blue Vault

In a March 20 filing with the SEC, Blackstone Real Estate Income Trust announced higher transaction prices for their four share classes for subscriptions accepted as of April 1, 2018. The new prices are as follows:

The April 1 transaction price for each share class will be equal to the NAV per share as of February 28, 2018. The purchase price for common stock for each share class equals the transaction price plus applicable upfront selling commissions and dealer manager fees.

The total net asset value for the REIT increased to $2.167 billion at February 28 from a January 31 total of $1.989 billion. The total outstanding shares increased 8.6% to 203,318,000 from the previous total of 187,236,000. The value of investments in real properties increased from $4.023 billion to $4.031 billion, or just 0.19%. Therefore, the change in NAV was due to additional factors, including a decrease in the value of the REIT’s debt obligations from $2.939 billion to $2.823 billion, or 3.95%. This decrease explains over 65% of the month-to-month change in the REIT’s total NAV.

Comparing the assumptions used in the January 31 NAV calculation to those in the February 28 calculation, three changes are noted. The discount rate used in February for industrial assets increased from 7.20% to 7.30%, while the discount rate used for retail assets increased from 7.50% to 7.70%. The exit capitalization rate assumption for retail decreased from 6.20% to 6.10%. A 0.10% discount rate increase can reduce the estimated values of assets by roughly 0.7%, while a 0.10% decrease in exit capitalization rate assumptions can increase asset value estimates by roughly 0.9%. Discount rates for industrial assets and retail assets have increased 0.20% and 0.10% since the December 31 NAV calculations, respectively. Exit capitalization rate assumptions have decreased for industrial and retail assets since the December 31 NAV calculations by 0.20% and 0.10%, respectively. Overall, the effects that the changes in these assumptions have had on the REIT’s asset valuations are, on a net basis, relatively minor.

Since the decrease in the REIT’s debt obligations is the most significant contributor to the increase in total NAV between January 31 and February 28, it is interesting to note that the REIT’s offering prospectus states the following: 

“All liabilities will be valued using widely accepted methodologies specific to each type of liability. Liabilities related to stockholder servicing fees will be allocable to a specific class of shares and will only be included in the NAV calculation for that class. Our debt will typically be valued at fair value in accordance with GAAP. For purposes of calculating our NAV, the organization and offering expenses paid by the Adviser through the first anniversary of the date on which we break escrow for this offering will not be recognized as expenses or as a component of equity and reflected in our NAV until we reimburse the Adviser for these costs. The Adviser’s valuation of each investment’s liabilities, including any third-party incentive fee payments or investment level debt, deal terms and structure will not be reviewed by the independent valuation advisor or appraised.”

The REIT will be reimbursing the Adviser for organization and offering expenses beginning in January, 2018, ratably over 60 months, which could range up to $34 million if the REIT sells the maximum offering amount, according to the prospectus.

The NAV per share is updated as of the last calendar day of each month and is posted on the REIT’s website at www.breit.com. All the REIT’s property investments are appraised annually by third party appraisal firms in accordance with the REIT’s valuation guidelines and the appraisals are reviewed by the REIT’s independent valuation advisor.

In other recent news, on December 19, 2017, the REIT entered into a purchase agreement to acquire 146 industrial properties with an aggregate of 22 million square feet (the “Canyon Industrial Portfolio”) from Cabot Industrial Value Fund IV, L.P. and Cabot Industrial Value Fund IV Manager, Limited Partnership, each a third-party. On March 9, 2018, it completed the acquisition of fee simple interests in the Canyon Industrial Portfolio for a purchase price of approximately $1.8 billion, excluding closing costs. The acquisition of the Canyon Industrial Portfolio was funded through a combination of a $1.1 billion mortgage secured by the Canyon Industrial Portfolio, a $200 million mezzanine loan secured by equity interests in the Canyon Industrial Portfolio and available cash.

Blackstone Real Estate Income Trust is a perpetual life, monthly NAV REIT that invests in stabilized income-oriented commercial real estate in the United States and real estate-related securities. The company is headquartered in New York City and externally managed by BX REIT Advisors., a subsidiary of Blackstone. Blackstone REIT has raised more than $2.3 billion in investor equity since inception and currently has a $7 billion portfolio comprised of 272 properties. Blackstone REIT raised over 44% of all nontraded REIT equity in 2017 and that market share increased to 55% in Q4 2017 and 70% in February, according to Blue Vault’s industry sales reports.

Learn more about Blackstone on the Blue Vault Sponsor Focus page.

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