““We knew at some point there would be periods of volatility. And we didn’t want to have to sell assets at the wrong time, under pressure.””
— Jon Gray, Blackstone president and chief operating officer
That’s Blackstone’s Jonathan Gray, in an interview with CNBC on Thursday, defending recent limits placed on investor withdrawals from the real estate giant’s $69 billion private real-estate fund. Investors were rattled when Blackstone Real Estate Income Fund Trust, or BREIT, in recent weeks limited withdrawals from the mega fund, which focuses on U.S. residential real-estate rental and industrial properties.
“What’s happened has been very surprising, given our performance,” Gray, Blackstone’s president and chief operating officer, told the network. “I think it’s really been a disconnect between performance and fund flows.”
Gray said the fund returned “more than 13% net to our customers” since it was created about six years ago. It’s 3-year annualized return was pegged at 15.5% in October, with a year-to-date return of 9.3%. Shares of all public REITs were down about 25% on the year through November, according to NAREIT data. The S&P 500 index
was about 17% lower on the year through Thursday, while the Dow Jones Industrial Average
was off about 7%, according to FactSet. The Blackstone president told CNBC that the fund’s semi-liquid nature was fully disclosed to investors. Gray also said the fund was already positioned for this year’s volatility as the Federal Reserve has sharply increased interest rates as part of its fight to tame high inflation. Read: Blackstone limits investor redemptions on $70 billion real-estate fund: shareholder letter “We would be in a much different position if we’d bought office buildings or enclosed shopping malls,” Gray said. Investors in the fund were warned in early December that limits on withdrawals from the fund could continue into the first quarter. Related: As Twitter rethinks its San Francisco footprint, a bigger $9 billion question hangs over the city’s office market