Just as the nontraded real estate investment trust industry is getting hammered with investors seeking to sell back their shares to the illiquid REITs, the largest nontraded REIT, Blackstone Real Estate Income Trust Inc., known as BREIT and with $59.3 billion in assets, continues to keep up with investor demand, according to a letter to client dated July 1.
It's been a difficult time for the nontraded REIT industry, with fundraising down significantly this year after 2021 and 2022, when the industry raised more than $30 billion from financial advisors' clients each year.
May was particularly tough. That's when the Starwood Real Estate Income Trust Inc., with $9.8 billion in assets and also known as SREIT, said it was cutting back the amount of shares it would buy back from its retail customers each month as it waits for the market for commercial real estate to rebound and interest rates to drop. Beginning July, the quarterly redemption of SREIT will decrease to 1% of stockholder net asset value – NAV – from 5%.
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That has spurred investors in other nontraded REITs to redeem their shares. And while investors are redeeming nontraded REIT shares and cashing out from such investments, the trusts managed to keep up with investor demand.
The larger capacity to buy back significant amounts of customer shares from clients was a key selling point for financial advisors when selling this generation of nontraded REITs, with BREIT the first such REIT to launch in 2016. SREIT followed two years later.
"In June, BREIT received $806 million of requests under the share repurchase plan, near the lowest level in two years," according to the company's letter. "It also represents an 85% decline from the January 2023 peak, as well as a 50% decline from last month when another nontraded REIT announced it was amending its share repurchase program."
"Given the unique circumstances driving the May spike, BREIT’s majority independent board of directors approved exceeding the 5% of NAV quarterly limit to fulfill 100% of June repurchase requests," the company said.
Nontraded REITs are public companies but aren’t registered on any public exchanges and don’t trade. Financial advisors typically sell them to clients looking for steady yields.
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