Blackstone Starts Crackdown On Nonpaying Residential Tenants, Evicting Hundreds
One of the nation's largest landlords had apparently been playing nicer than many corporate rental owners had with tenants in debt this past year — but no longer.
Blackstone and its subsidiaries began the process of evicting tenants behind on rent at its multifamily and single-family rental properties last year and anticipates ramping up evictions this year, the Financial Times reports.
The private equity giant cited those eviction plans as a factor in predicting rent growth across its portfolio at a time when economic factors may cause downward pressure on rental rates.
“Today on the ground, we're seeing 5% rent growth,” Blackstone co-Head of Global Real Estate Nadeem Meghji said during a Dec. 5 call with employees, Insider reports. “We're also seeing a meaningful increase in economic occupancy as we move past what were voluntary eviction restrictions that had been in place for the last couple of years.”
Meghji's comments came amid the sudden onset of controversy when Blackstone hit its limit on redemptions at its nontraded REIT, Blackstone Real Estate Income Trust, on Dec. 1. A run on redemption requests at Blackstone and a competing fund, Starwood Real Estate Income Trust, caused both to restrict outgoing funds.
As scrutiny around BREIT and similar funds increased, so did attention on Blackstone's internal reporting for the value and anticipated cash flow of its portfolio. A $4B infusion at the start of the year from UC Investments, the investing arm of the University of California system, came with promised returns of 11.25%.
While evicting nonpaying tenants and replacing them at higher rents would indeed help boost returns, the sheer size of Blackstone's portfolio means a more aggressive policy toward eviction could cause a noticeable rise in housing insecurity, FT reports. That portfolio has grown by leaps and bounds over the pandemic as Blackstone has completed several multibillion-dollar portfolio acquisitions and mergers.
Among those acquisitions were vast portfolios of student and affordable housing, both of which Meghi said will see rent growth this year "in the high single digits," Insider reports.
A council member for the California city of Escondido said Blackstone warned her it would soon be evicting tenants for nonpayment at the affordable housing complex it purchased from a nonprofit in the city for $1B, FT reports.
"We believe we have the most favorable resident policies among any large landlord in the U.S.," a Blackstone spokesperson said in a statement. "For over two years during Covid, we did not evict a single resident for nonpayment. Eviction is always a last resort and in each instance we offered residents a range of options, including flexible payment plans and rent forgiveness."
UPDATE, JAN. 31, 1:30 P.M. ET: This article has been updated to include a statement from Blackstone.