BREIT Records Worst Annual Return In Its History

Blackstone Real Estate Income Trust posted a 0.5% loss in 2023, the REIT's worst yearly performance since its creation in 2017.

BREIT’s returns fell short of the 5% annual gain threshold that enables the firm to take a share of profits, Bloomberg reports. For the first time, the trust missed the target to earn carried interest, which incentivizes deal-makers and rewards them for generating returns.

At one point, the nontraded REIT catering to affluent investors sat on $70B in value. It was a favorite of financial advisers and individual investors alike as it bet big on favored property sectors.

But the trust took a hit in December, posting a 1.2% loss due to hedges that dropped in value when borrowing rates declined in late 2023, according to Bloomberg. Blackstone deployed interest rate hedges to ease the pain from an uptick in borrowing costs.

The trust reported results falling well short of the 26% total return of the S&P 500 in 2023 and significantly lower than the 8.4% return it posted in 2022 and the 30% return it reported in 2021, according to Bloomberg.

The REIT has about $62B in net asset value.

“BREIT has delivered an 11% annualized net return on Class I since inception seven years ago, approximately 2x publicly traded REITs, making it one of the best performing REIT investments through the pandemic and this period of rising rates,” a Blackstone spokesperson told Bisnow in a statement.

Amid the stress of the past year or so, BREIT clients flocked to withdraw funds, with the company handing over $14.3B of investor cash since November 2022, according to a January shareholder letter cited by Bloomberg.

Last month, the trust received $1.1B in redemption requests, down 41% from November and 80% from the redemption peak in January 2023. BREIT began limiting redemptions in late 2022 and kept those limits in place in 2023.

UPDATE, JAN. 17, 3:45 P.M. CT: This story has been updated to include a statement from a Blackstone spokesperson.

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