The tale of the BREIT (Blackstone Real Estate Investment Trust) continues. As blog readers will know, UC's chief investments officer threw $4.5 billion of UC pension and endowment money to BREIT which was experiencing a run on the bank. Unlike commercial banks, BREIT can limit withdrawals. So, in the face of a run, it doles out less than requested.
UC's bailout was in exchange for a "guaranteed" 11.25% return, presumably at the expense of those trying to exit. Blog readers will also know that we have questioned the lack of questioning by the Regents about the risk/reward tradeoff and potential legal risk entailed. Only one Regent seemed to be concerned about that issue, dispute the fiduciary responsibities of the Regents. The others were mainly concerned about landlord-tenant relations of the BREIT because of public comments on that issue, but seemed to be satisfied by PR reps from BREIT.
Meanwhile, the slow-motion run continues:
Blackstone Real Estate Income Trust Inc., a non-traded real estate investment trust sponsored by Blackstone Group, received redemption requests totaling $4.4 billion in May, which decreased by 4% month-over-month and 18% lower compared to January 2023, according to the company. In accordance with their repurchase plan, BREIT is fulfilling approximately $1.3 billion, which is equal to 2% of NAV and represents 30% of the shares submitted for repurchase. May marks the seventh straight month during which BREIT has limited repurchases requests.
The company noted that it has repurchased a total of $7.5 billion of common stock since proration began in November, and that a hypothetical investor who continually requested redemption since then would have received approximately 90% of their investment back and that “the semi-liquid structure is working as intended” to prevent a liquidity mismatch and maximize long-term shareholder value...
Full story at https://thediwire.com/breit-redemptions-total-4-4-billion-in-may-says-semi-liquid-structure-working-as-intended/.
As we have noted in the past, yours truly can't say whether the UC investment in BREIT will turn out to be a good deal or not. But he does question the lack of Regental interest in playing their fiduciary role in this matter. Indeed, at the most recent meeting of the Investments Committee, the Regents were given a report indicating that the portfolio has been underperforming relative to its own selected benchmarks. But no one seemed to want to ask any questions about that, either.
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