Blackstone REIT Announces Large Asset Liquidations as Redemption Requests Continue

Blackstone Real Estate Investment Trust (BREIT), which recently made headlines for invoking a clause restricting owner withdrawals for consecutive months, didn't take the news lightly. Still trying to raise money for its shareholders, the real estate investment trust (REIT) recently announced the sale of its $3.1 billion commercial portfolio. The company is also rumored to be considering selling its Las Vegas portfolio.

strength in the industrial sector

Although much of the real estate market has suffered this year, industrial and warehouse real estate is still a sub-sector where there has been year-over-year growth. Blackstone is selling 70 assets from its industrial portfolio to Prologis Inc. The deal is approximately 14 million square feet and marks the continuation of a long-standing relationship between Blackstone and Prologis.

The sale, which is expected to close by the end of the second quarter, would be the latest of more than a dozen deals between Prologis and Blackstone over the past 11 years. All indications are that Prologis plans to buy and hold the assets, which would add 77 new customers to a portfolio of 50 customers.

More importantly, the deal indicates the continued resilience of the industrial/warehouse sector even as many other commercial sectors stumble in this new environment. In April, the nationwide average industrial space rent was $7.18 per square foot — up 7% from a year ago. Perhaps that's why an estimated $12.6 billion worth of industrial real estate was sold in the first four months of 2023.


Does Blackstone want to raise more money?

It's no secret that Blackstone has been restricting owner withdrawals for much of the year. With that in mind, it's not hard to imagine that the company is under tremendous pressure to liquidate assets. For that reason, the Prologis deal may not be the last the company closes this quarter. Rumors are circulating that Blackstone could sell half of the $4.25 billion stake it acquired in Las Vegas' Bellagio Resort & Casino in 2019.

If true, this would represent the liquidation of an asset that is performing well. The Bellagio is one of the more profitable establishments on the Las Vegas Strip. It's also still under the control of the owner who opened it – MGM Grand – and is in the middle of a long-term lease. These factors make Blackstone's stock an attractive asset that's likely to attract plenty of interest if the company decides to list it.

Blackstone has continually sold its casino assets over the past several years. The company sold the Cosmopolitan Hotel in 2021 for $5.65 billion, giving the company a profit nearly triple its original investment. At the time, it was one of the most profitable transactions of this type in history. In 2022, Blackstone sold 49.9% of its stakes in MGM Grand and Mandalay Bay.

What does this mean for real estate investors?

Despite being one of America's largest REITs, Blackstone still finds itself in choppy waters. The fund is liquidating assets, but the reasons for this are not entirely clear. All REITs sell real estate, and these may just be nearing the end of their investment cycle.

Or it could be the case that Blackstone tries to liquidate some high-dollar assets before interest rates rise again, which will make liquidating these types of properties more difficult in the future.

Here's a piece of wisdom for everyday investors. First, Blackstone will eventually bounce back, as will the real estate market. Second, the industrial and warehouse real estate sector remains strong, as evidenced by the fact that it has provided investors with higher returns year on year.

If you've always considered a real estate investment but have been put off by the market, industrial and storage facilities or REITs in the industrial/storage space are worth considering. If you know where to look, there are always opportunities in rising or falling markets.

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