Blackstone's COO Is Bullish On BREIT And This Could Be The Reason

Blackstone Inc BX has taken heat over the past week for limiting withdrawals from its $69 billion private BREIT, or Blackstone Real Estate Income Trust.

What Happened: That action was taken in response to redemption requests that exceeded previously established limits — but Blackstone Chief Operations Officer Jon Gray defended the fund, telling concerned investors rushing to redeem that the fund benefits from below-market rents in its portfolio.

"What we have in housing in the united states is a chronic shortage since the financial crisis in logistics,” Gray told CNBC on Thursday. "And then we also have the benefit of below-market rents in our portfolio."

Also read: Is A Blow Up In The Private REIT Space Coming? What May Be Ahead For Blackstone's BREIT

A startling 55% of the $69 billion total NAV in BREIT is linked to rental property, implying that Blackstone may still hike rents in those below-market locations, providing some comfort to those anxious investors.

Blackstone shares have shed 15% since Dec. 1, after the firm disclosed limited redemptions from the BREIT for the first time, sending shocks to investors concerned with the funds performance.

Why It Matters: The investment bank blamed the above-normal redemption requests on investors being roiled by market volatility rather than dissatisfaction with the fund.

"If you are an investor who's got margin debt and your market goes down 40%, you can imagine what it was like to be one of those individuals ... As the world is busy shrinking, people get scared," Blackstone CEO Stephen Schwarzman said.

Other similar funds have had large redemptions, with investment company Starwood Capital alerting investors last week that its $14.6 billion non-traded REIT has also raised the gates, according to Reuters.

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