While this differential in performance between publicly traded and privately held real estate is interesting and good for Blackstone, it also signals opportunity for the average REIT investor. Jussi is also the President of Leonberg Capital - a value-oriented investment boutique specializing in mispriced real estate securities often trading at high discounts to NAV and excessive yields. Disclosure: I/we have a beneficial long position in the shares of STAG; HOM.U either through stock ownership, options, or other derivatives. 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. I wrote this article myself, and it expresses my own opinions. Blackstone Group (BX 1.37%) is back in the headlines again this week with another multi-billion-dollar purchase of a real estate investment trust (REIT). The information in his articles and his comments on SeekingAlpha.com or elsewhere is provided for information purposes only. Just because something isn't quoted does not mean that it isn't correlated or volatile. But I think that public REITs are today far more opportunistic than BREIT. BREIT is a hybrid REIT because it deals with both. Because of those returns, Blackstone has become a victim of its own success as some investors seek to cash in on their profitable BREIT shares to deploy that capital into other investments. "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. For the first half of 2021, the NAV price soared high with Class S shares at the top values at $12.92/share (July 2021). The Motley Fool has a disclosure policy. The majority of their real estate properties are in the residential (especially multifamily homes) and industrial sectors. Instead of daily price fluctuations, NAV REITs have a much less volatile movement. BREIT outperformed the MSCI U.S. REIT Index net return in 2020 (-7.6%) with a 6.1% net return of Class S shares which has the most number of stockholders among its common shares. Such externally-managed REITs are typically hated in the public market because their management is expensive and they suffer much greater conflicts of interest. It is today priced at just 35 cents on the dollar due to the war in Ukraine and we think that it is very opportunistic. BREITs common stocks are priced at their fair value in terms of NAV net asset value. On Blackstone's third-quarter earnings call in October, Gray blamed REIT redemptions on market volatility, which he said had driven away individual investors from active equity and fixed income funds. As of FY 2020, each common stock class received a gross distribution of $0.6354 per share. Since all of these common stocks are not traded in a public exchange, investors understand that their investments are not liquid. Even Blackstone's COO indirectly told us in the Q2 conference call that public REITs are a lot more opportunistic today: "The best opportunities today are clearly in the public markets on the screen and that's where we're spending a lot of time.". This time it's buyingPS Business Parks(PSB) for $7.6 billion. Despite the pandemic, they acquired worth $10.5B of real estate properties in the multifamily, industrial, and net lease sectors in 2020. Blackstone has agreed to pay $187.50 per share in cash for PS Business Parks, a roughly 15% premium to its average share price over the last two months. EdR Student Housing Portfolio (10,610 units), Southeast MH portfolio (8,563 units), Acorn Multifamily Portfolio (8,309 units), etc. Blackstone CEO Steve Schwarzman noted on the company's recent, that "BREIT has delivered 12.5% net returns annually since inception six years ago for its largest share class, earning over three times the public REIT index. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. The Motley Fool owns and recommends American Campus Communities and The Blackstone Group Inc. ET, 3 Dividend Stocks to Buy Before the Bear Market Ends. BREITs common stocks are priced at their fair value in terms of NAV net asset value. Clearly, that is Blackstone's view. 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. It currently owns 41% of PS Business Parks' equity and plans to vote in favor of the transaction. This is a big draw for investor interest in REITs. So far, its highest total net distribution (includes deductions of corresponding fees already) was Class I shares in FY 2019. In July, we saw another example of this accretive capital recycling as STAG sold two properties for $82 million at a 5.2% cap rate after having purchased them several years prior at an average cap rate of 6.2%. 3 Beaten-Down Dividend Stocks to Buy Without Hesitation, My Top 3 Dividend Stocks to Buy Today (and It's Not Even Close), 2 FAANG Stocks Billionaires Are Selling in Droves and 1 They Can't Stop Buying, 3 Stocks That Could Join Apple, Microsoft, and Alphabet in the $1 Trillion Club, 1 Bargain-Basement Warren Buffett Stock Down 78% to Buy Before It Starts Soaring, 2 Growth Stocks That Can Turn $250,000 Into $1 Million by 2030, According to Bloomberg, investors requested to pull more than $5 billion out of, Blackstone created BREIT in 2016 to provide high-net-worth individual investors with access to institutional-quality private real estate investments. Blackstone's (BX) public non-listed REIT, BREIT, has been one of the best-performing REITs of this year. Global investment firm Blackstone-sponsored Nexus Select Trust has filed the draft paper with market regulator Sebi to launch India's first public issue of retail REIT to raise around US$ 500 million (about Rs 4,000 crore), sources said. Today, he is the author of "High Yield Landlord - the #1 ranked real estate service on Seeking Alpha. Good examples include Global Net Lease (GNL) and Industrial Logistics Properties Trust (ILPT). The curbs came because redemptions hit pre-set limits, rather than Blackstone setting the limits on the day. As of their Q2 2021 report, total real estate debt investments have a fair value of $5.7B with a weighted average coupon of 5% and a weighted average maturity date of July 5, 2025. Despite the COVID-19 pandemic, BREIT achieved a 6.1% net return in 2020 for the Class S shares which has the most number of stockholders among its common shares. To make the world smarter, happier, and richer. BREIT is a SEC-registered REIT since 2017. Is It a Buy Right Now? And, as you can see from the metrics above, this portfolio has exhibited incredibly strong organic performance so far this year. Dividends are paid and capital gains, if any, are shared. This was followed close behind by Class I shares at $12.9/share. NAV REITs do away with daily price fluctuations, making them less volatile compared to traded REITs. Public Storage expects to recognize a $2.3 billion after-tax gain, which it intends to distribute to its shareholders. Bill Bayless, ACC co-founder and CEO, said the transaction marked the culmination of a "pioneering quest to transform the student housing . Invest better with The Motley Fool. Click here to learn more!. Do your own research or seek the advice of a qualified professional. They always want to grow because it maximizes the fees that they own. But most public REITs are internally-managed. For example, from the beginning of the year through June, STAG has acquired $271 million of properties at a 5% cap rate while selling $36 million of properties at a 4.4% cap rate. However, it recovered by the end of 2020 and soared in the first half of 2021. Blackstone Group has been on an aggressive REIT buying spree in the last few years. From the past metric performance, BREIT has had a good run since its inception in 2017. In a regulatory filing last month, Blackstone said that it has secured $24.1 billion of commitments for its latest real estate fund called Blackstone Real Estate Partners X. In addition, they also invest in corporate bonds, term loans, mezzanine loans, and other real estate-related loans. Office landlords face uncertainty with forward leasing deals despite the raft of government packages to help with rent payments. This was followed by the Class I shares, Class D shares, and then the Class T shares. Jussi is also the President of Leonberg Capital - a value-oriented investment boutique specializing in mispriced real estate securities often trading at high discounts to NAV and excessive yields. Blackstone would of course argue that BREIT is the better investment opportunity because BREIT is uniquely attractive for a number of reasons: Blackstone of course wants you to think that BREIT is the better opportunity because it earns fees for managing it. Matthew DiLallo has positions in Blackstone and has the following options: short June 2023 $60 puts on Blackstone. Making the world smarter, happier, and richer. It is impossible to predict with any certainty, because last year Blackstone acquired data center REIT QTS Realty, and in 2018 it acquired hospitality REIT LaSalle Hotel Properties. Funds controlled by Stephen . The $71 billion Blackstone Real Estate Income Trust (BRET) saw investor withdrawals of nearly $9.9 billion last year. 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. That was almost 70% of all the capital raised by non-traded REITs that year. Please disable your ad-blocker and refresh. ) LONDON (Reuters) -While there has been little wider fallout from this week's surge in redemption requests at an unlisted Blackstone real estate income trust (REIT), it is being read by some as a warning sign. Having invested in data centres in the US and Europe, Blackstone has eyes on Asia-Pacific - starting with India. 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.". 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