Blackstone's Flagship BREIT Records Worst Annual Performance Since Inception

The Blackstone Real Estate Income Trust (BREIT) recorded its lowest annual return since its inception in 2017, with a .5% loss in 2023. This shows that Blackstone's flagship real estate trust for high-net wealth investors was not immune to the Federal Reserve's interest rate hiking cycle and a commercial real estate downturn. 

In a recent shareholder update, Blackstone told investors, "We built BREIT as an all-weather strategy designed to build long-term wealth across market cycles. We are pleased that BREIT has delivered an 11% annualized net return since inception seven years ago (January 1, 2017)." 

Nonetheless, the past year's sharp increase in interest rates, regional bank meltdowns, and a downturn in the commercial real estate market have ended that era (for now). This shift led to a slight loss (.5%) last year, following returns of 8.4% in 2022 and over 30% in 2021.

BREIT's performance also severely lagged behind 26% returns of the S&P500. The fund's net asset value is around $62 billion. 

Meanwhile, Blackstone has limited investor redemption requests for more than a year. It has returned $14.3 billion of investor cash since November 30, 2022, according to a shareholder letter earlier this month. The good news is that a backlog in redemption requests has been easing recently. 

Bloomberg noted, "Blackstone had enlisted interest-rate hedges to mitigate the pain from soaring borrowing costs. The firm said in a memo that even if there might be some immediate sting, sustained lower rates will lift real estate values across the fund's portfolio."