Blackstone BDC, mortgage REIT, cut dividends

Leading alternative asset manager Blackstone Inc. continued to be a focus of attention for financial advisors and financial advice executives last week when the Wall Street powerhouse said it was cutting the dividends on two funds. 

The cuts in dividends come at the end of a year that has seen new sales in illiquid business development companies, or BDCs, slow due to investors’ and advisors’ fear of loans to technology companies increasingly threatened by the advancement of artificial intelligence.

Investors in some nontraded BDCs have overwhelmed the funds with requests to sell their shares back to the companies, a process known as redemptions. Advisors sell alternative investments like BDCs and REITs to clients who often seek high yields. 

“A lot of private credit funds and BDCs are seeing fund raising slow dramatically, and that’s only going to put more pressure on these funds,” said Brian King, CEO of Lodas Markets, a trading platform for alternative investments.

A Blackstone spokesperson on Monday did not comment by deadline. 

Blackstone has seen incredible success with financial advisors over the last decade with sales of two nontraded funds, the Blackstone Real Estate Income Trust Inc. and  the Blackstone Private Credit Fund, a BDC. Both in the past few years have hit bumps in the road and investors have redeemed or sold shares back to the fund, looking to exit.

A traded BDC, the Blackstone Secured Lending Fund, with the ticker symbol BXSL, said last Wednesday it was cutting its dividend per share to 60 cents in the fourth quarter, compared to it most recent payment last month of 77 cents per quarter. That’s a reduction of 22%.

And the Blackstone Mortgage Trust Inc., or BXMT, on Thursday said it was also cut its dividend going forward to 30 cents per share per quarter from 47 cents, a reduction of 36% as it reduces some older loans in its portfolio.

“This reset will represent an annualized distribution yield of approximately 9.5% on our” third quarter net asset value, said Brad Marshall, Global Head of Private Credit Strategies, CEO of the fund during a conference call last Wednesday with analysts. “We believe this is an attractive level for a portfolio that is nearly 96% first-lien senior secured, among the highest across our traded BDC peers.”

“And that benefits from among the lowest operating and financing costs in the peer group,” Marshall said. “While asset yields are improving, as I mentioned earlier, we are also midway through refinancing approximately $3.2 billion of lower cost fixed rate notes issued in 2020 and 2021 at an average coupon of 2.97% fixed.”

Meanwhile, the Wall Street Journal over the weekend reported that there has been a “string of high-level departures from Blackstone’s real-estate business that is “shaking up the world’s biggest property investor.”

“Nearly a third of the unit’s senior managing directors have left the firm over the past three years as its investment funds for the sector have slumped,” according to the report.