We have been tracking the Blackstone Real Estate Investment Trust (BREIT) since UC's $4.5 billion bailout as BREIT experience a slow-motion run. In the most recent month, although investors who pulled their money out for the first time got all they requested, it is worth noting two things.
1) Gradually, those who wanted to get out eventually have been able to do so, even though the pace of withdrawal was rationed by BREIT. So perhaps it is not surprising that the rationing has ceased, despite the ongoing drain.
2) As noted in our post last month, the extra return promised to UC has in effect been put on a tab, rather than paid outright.* So the payouts to those exiting has been partly funded by delaying cash payments to UC. From Globest:
...Blackstone Real Estate Income Trust (BREIT) fund finally delivered full liquidity to investors who requested redemptions in February. After more than a year of proration, BREIT reported in a March 1 letter to shareholders that it fulfilled 100% of the redemption requests it received last month. “We are pleased to report that BREIT fulfilled 100% of repurchase requests in February,” the letter said. “BREIT was designed with a semi-liquid structure, trading a measure of liquidity for the potential for higher net returns. We could not be more proud that this structure has worked as intended to both prevent a liquidity mismatch and maximize long-term shareholder value.”
BREIT’s letter said it received $961M in repurchase requests last month, which was below the fund’s 2% of net asset value monthly limit and 26% lower than the $1.3B in requests it received in January...
Full story at https://www.globest.com/2024/03/04/blackstone-fulfills-all-redemption-requests/.
As we have been stating all along, the issue is less whether in the long run UC's investment pays off but rather the Regents' approval of the deal without raising risk/return questions. Only one Regent raised the issue. The others were mainly concerned - to the extent they were - by charges that BREIT wasn't being a good landlord, a separate issue.
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*https://uclafacultyassociation.blogspot.com/2024/02/does-this-make-you-nervous.html.
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