Public REITs, on the other hand, trade at a >6% dividend yield in many cases with lower payout ratios, and also offer significant upside potential since they are priced at large discounts to their net asset value. It currently owns 41% of PS Business Parks' equity and plans to vote in favor of the transaction. If investors want to buy BREIT shares, they must have: BREIT has 4 types of share classes which differ in how the investors will be charged. Dividends are paid and capital gains, if any, are shared. I'll do that again for you. Blackstone has outperformed the market over the past 15 years by 5.0% annually. Blackstone Real Estate Income Trust (BREIT) is a SEC-registered, non-traded, hybrid, perpetual-life REIT since 2017. Like the BPP funds, BREIT doesn't buy fixer-uppers. The chart below shows the YTD performance of all class share classes, plus the since inception date returns. The sale was part of Blackstone's acquisition of the Scentre Group office portfolio in August 2019 and Link's financing was completed late last week. In many cases, the discount is 20, 30, 40, or even 50% in extreme cases. In fact, Blackstone is close to finalizing what could be the biggest traditional private-equity real estate investment fund in history, according to the Wall Street Journal. Blackstone limited withdrawals from its $69 billion unlisted REIT on Thursday after redemption requests hit pre-set limits amid investor concerns it was slow to adjust valuations as interest rates . According to their 2020 annual report, they hold 1,370 real estate properties and 228 positions in real estate debt investments. The asset manager is buying so aggressively because REIT valuations are significantly below the private market valuations of their real estate. On Thursday, the firm said the REIT had agreed to sell its 49.9% interest in two Las Vegas casinos for $1.27 billion. Cost basis and return based on previous market day close. And management is also skilled and motivated, as insiders own around 40% of the company. I am not receiving compensation for it (other than from Seeking Alpha). This limits your ability to get in and out of the real estate market, increasing risks, and potentially also limiting your ability to act on new investment opportunities. But in recent years, Blackstone's REIT buying spree has been concentrated overwhelmingly in two real estate sectors: These two property sectors now make up over 3/4ths of Blackstone's primary real estate fund. We have over 500 five-star reviews from happy members who are already profiting from our real estate strategies. They explain on a conference call earlier this year that: "For the first six months of the year, our real estate strategies appreciated 9% to 10% versus a 20% decline in the REIT index, equaling an outperformance of roughly 3,000 basis points. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. The $71 billion Blackstone Real Estate Income Trust (BRET) saw investor withdrawals of nearly $9.9 billion last year. The general trend of NAV prices for all class shares was increasing until a sudden drop occurred in the first quarter of 2020 during the onset of the COVID-19 pandemic. Global investment firm Blackstone-sponsored Nexus Select Trust has filed the draft paper with market regulator Sebi to launch India's first public issue of retail REIT to raise around US$ 500 million (about Rs 4,000 crore), sources said. The REIT is marketed to wealthy individual investors. Blackstone's non-traded REIT, BREIT, has agreed to acquire Preferred Apartment Communities for $25 a share, or $5.8 billion. Residential, specifically multi-family homes, bring the most rental revenue to BREITs portfolio, followed by the industrial sector. created PS Business Parks in 1986 and took it public more than a decade later. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. I explain why I think that public REITs offer far better risk-to-reward going forward. The unconsolidated investments come from their joint venture with MGM Growth Properties LLC, wherein BREIT owns 49.9% of interest. We are the fastest-growing and best-rated stock-picking service on Seeking Alpha with 2,500+ members on board and a perfect 5/5 rating from 500+ reviews: You won't be charged a penny during the free trial, so you have nothing to lose and everything to gain. BREIT has 4 types of common shares which differ in how the investors will be charged. Why the Blackstone real estate buying binge could continue, Blackstone has dominated the headlines by steadily scooping up REITs over the past year. Resource REIT (non-traded) for $3.7 billion. Public Storage expects to recognize a $2.3 billion after-tax gain, which it intends to distribute to its shareholders. They both have quality management teams with significant skin in the game. The deal values the, One interesting aspect of this deal is that it will provide an unexpected windfall to shareholders of. Indeed, according to Green Street Advisors, REITs are currently trading at an average discount to net asset value ("NAV") of about 10%. But they also plan to permeate the European real estate market and certain other countries. Some investors are seeking liquidity to cover losses incurred elsewhere. Excellent. Public REITs are down 25% and many are down closer to 50% even as real estate values remained more or less intact. Instead of daily price fluctuations, NAV REITs have a much less volatile movement. Notes: Class D shares dont include the upfront 1.5% sales charge at initial subscription yet. NEW YORK, Dec 1 (Reuters) - (This Dec. 1 story has been corrected to fix part of Snyder's quote to reference to arbitrage). As of June 30, 2021, their total properties were 1,463. Using different valuation methods, real estate services firm Jones Lang LaSalle (JLL) recently posited that REITs' discount to NAV is over 15%, commenting that a "sustained dislocation in public and private values could be a precursor of opportunities for fundamentals driven private market participants, leading to take-private M&A.". These cash reserves totaled $2.7 billion as of the end of October, according to its prospectus. "The impact on Blackstone depends on whether the REIT is able to stabilize its net asset value over time, or is forced to enter an extended run-off scenario, with significant asset sales and ongoing redemption backlog too early to tell, in our view," BMO Capital Markets analysts wrote in a note. By 2030, the institutions may hold some 7.6 million homes, or more than 40% of all single-family rentals on the market, according to the 2022 forecast by MetLife Investment Management. This button displays the currently selected search type. Since inception date to July 31, 2021, total returns (without initial sales charge fees) were between 10% 11% across all types of share classes. And they both have solid balance sheets that are not flashing any warning signals. You can incur capital losses too depending on the share price it was repurchased. He has authored award-winning academic papers on REIT investing, been featured on numerous financial media outlets, has over 50,000 followers on SeekingAlpha, and built relationships with many top REIT executives. . Rising interest rates weigh on real estate values because they make financing properties more expensive. US private equity giant Blackstone Group has defied market jitters and pulled off a mega sale of an office tower above the Westfield mall in Sydney's CBD to Hong Kong-based Link REIT for $683 . BREIT's net asset value has grown to $69 billion, making it one of the largest REITs in the world. This time it's buyingPS Business Parks(PSB) for $7.6 billion. Consider These Alternative Real Estate Investments. The firm owned 20,221 shares of the asset manager's stock after acquiring an additional 5,035 shares during the quarter. That was . Cap rates have expanded a bit, but so has the property NOI in most cases. Ultimately, private REITs pool investors' capital and purchase various properties based on the fund's mandate. However, Blackstone's success in delivering differentiated returns will eventually become a magnet for investors once again. Clearly, that is Blackstone's view. This implies that the REIT was able to sell properties at a significant gain from its original purchase price. Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks. Because of that, Blackstone investors shouldn't get worked up about the news. And apparently this is the new target. Jupiter 12 Industrial Portfolio, Canyon Industrial Portfolio, Meridian Industrial Properties, etc. The company sees a massive untapped opportunity for high-net-worth investors since they have a low percentage of their portfolios currently allocated to alternatives. They earn income by leasing out rental spaces to clients. This is a big draw for investor interest in REITs. The REIT turmoil is a setback for two of Blackstone's strategies that helped it become the world's biggest alternative asset manager with $951 billion in assets: real estate investing and attracting high net-worth individuals. Learn More. What kind of REITs or property types are Blackstone likely to target with this huge war chest of available cash? For instance, in the first quarter of this year, cash same-store net operating income grew 4.8%, while the REIT has guided for same-store NOI to grow 4-5% for the full year. Blackstone of course wants you to invest in BREIT because they earn fees for managing it. High Yield Landlord is managed by Leonberg Capital. I have no business relationship with any company whose stock is mentioned in this article. Blackstone (BX.N) limited withdrawals from its $69 billion unlisted REIT on Thursday after redemption requests hit pre-set limits . STAG offers an attractive, 4.7% dividend yield with a payout ratio slightly below 70%. Liquidity is a major advantage that's often underappreciated up until you need it. The majority of investors redeeming were from Asia and needed the liquidity, they said. February 27, 2023 3:33 PM. While commercial real estate itself is performing extraordinarily well this year and retaining its value, publicly traded REITs have shed around 20% of their value and now mostly trade at discounts to NAV. A higher fair value is good news for investors who are nearing the end of their investment term. Certain parameters from financial statements will tell you how the company managed its investments through the ups and downs of the business cycle. So this review has been updated with that information. Though the dividend yield of ~3.2% may seem low, it is actually quite high compared to the yields of its closest peers in the Sunbelt multifamily space: With over 30% upside to fair value, it would not be surprising if Blackstone at least made an attempt to buy BSR. Blackstone's public non-listed REIT, BREIT, has been one of the best-performing REITs of this year.It has managed to deliver a 9% total return with low volatility even as the public . Retention remains high, and rent growth for new and renewal leases is rising rapidly. "People are taking profits at the value Blackstone says their REIT shares are at," said Snyder. We're currently running a sale at my private investing ideas service, High Yield Landlord, where members get access to portfolios, market alerts, real-time chat, and more. As a result, it will receive about $2.7 billion in cash when the deal closes. With billions of dollars in dry powder across its real estate private equity funds and cash continuing to pour into its funds, Blackstone will likely continue its real estate shopping spree. I wrote this article myself, and it expresses my own opinions. Raven Select Service Portfolio, Hyatt Regency Atlanta (GA), JW Marriott San Antonio Hill Resort (TX), etc. BREITs common stocks are priced at their fair value in terms of NAV net asset value. Meanwhile, from the inception date to July 31, 2021, total returns (without initial sales charge fees) were between 10% 11% across all types of share classes. HPA's unique, resident-led business model expands housing access and choice, while providing a clear path to . If you can't get your money back, does the "paper valuation" then have any meaning? Please disable your ad-blocker and refresh. ) In addition to having passed all CFA exams, Jussi holds a BSc in Real Estate Finance from University Nrtingen-Geislingen (Germany) and a BSc in Property Management from University of South Wales (UK). Investors always going with the big names to their detriment. Bill Bayless, ACC co-founder and CEO, said the transaction marked the culmination of a "pioneering quest to transform the student housing . Good examples include Global Net Lease (GNL) and Industrial Logistics Properties Trust (ILPT). Credit Suisse analysts wrote in a note that they expected the REIT's woes to weigh on Blackstone's fee-related earnings and assets under management. Try it Free for 2-Weeks. Liz Brumer-Smith (Blackstone): Blackstone is one of the leading alternative asset-management companies in the world. And others could be selling at what they believe is a near-term peak in pricing for private real estate values, which have yet to see the same pricing correction as publicly traded REITs. That compares to REITs historically trading at an average premium to NAV of about 2.5%. Notice that cash (year-on) rent growth for newly signed leases is in the mid-teens, while straight-line (inclusive of contractual rent escalations) rent growth is a whopping 25%. Is this happening to you frequently? Focusing on the common shares, BREIT has a total of 112,104 holders across the 4 types of class shares as of March 17, 2021. Jussi Askola is a former private equity real estate investor with experience working for a +$250 million investment firm in Dallas, Texas; and performing property acquisition in Germany. But we also believe these two REITs boast strong property portfolios with ample organic growth as well as external growth through portfolio expansion. The acquisition represents about 1.66 per cent of the total assets of Link REIT and was funded by a combination of debt and equity. Many non-traded REITs suspended their repurchase programs during the early days of the pandemic. As a result, the REIT allowed investors in November to redeem $1.3 billion, equivalent to approximately 43% of investors' repurchase requests. For the first six months of the year, our real estate strategies appreciated 9% to 10% versus a 20% decline in the REIT index, equaling an outperformance of roughly 3,000 basis points. I wrote this article myself, and it expresses my own opinions. Driving those returns was the company's thematic investment approach, currently focused on rental housing and industrial real estate in the Southern and Western parts of the country. JOIN THE CONVERSATION. The information in his articles and his comments on SeekingAlpha.com or elsewhere is provided for information purposes only. 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