Barclays downgrades Blackstone shares after agency limits withdrawals from actual property fund
Barclays sees a difficult near-term forward for Blackstone after the funding agency on Thursday restricted withdrawals from its massive retail actual property fund. The financial institution downgraded shares of Blackstone to equal weight from obese and minimize its value goal to $90 from $98. That means upside of practically 6% for the inventory. “Whereas we’re constructive on the longer-term retail alternative for various belongings (and BX typically) we expect near-term sentiment for each retail and BX shares will likely be very difficult,” wrote Benjamin Budish in a observe. BREIT withdrawal debacle Blackstone needed to restrict withdrawals from its $69 million retail actual property fund, or BREIT, for November and December after the funding car acquired repurchase requests that exceeded each the two% NAV month-to-month restrict and the 5% quarterly restrict. That despatched shares of the agency down greater than 7% on Thursday. “In November, BREIT repurchased ~$1.3B of shares, representing ~43% of of redemption requests within the month, indicating simply over $3B of whole redemption requests in November, practically doubling month over month,” stated Budish. “Moreover, our evaluation of the fund’s most up-to-date 10-Q and Prospectus submitting signifies new November subscriptions slowed to ~$484M, down from $880M in September and properly over $1B prior.” Many of the redemptions had been from Asia-based traders, who withdrew at a charge eight occasions that of U.S. traders. Whereas offshore traders symbolize about 20% of the fund, they make up roughly 70% of withdrawals this yr. “That stated, now that redemptions have been capped, we fear that detrimental headlines across the product, and restricted liquidity by the tip of the yr and maybe longer, may each drive additional runon-the-bank sort redemption requests, in addition to stress new inflows, as advisors will likely be much less prone to advocate a product that’s (for the second) limiting liquidity,” stated Budish. Macro forces at play On the similar time, Barclays worries that the rising rate of interest setting and moderated efficiency of BREIT will additional weigh on demand for brand new subscriptions to the fund. Whereas previous efficiency of the fund has been strong – it was up practically 29% in 2021- the present anticipated return is extra muted and features a roughly 4.4% annualized month-to-month distribution. “Given the fast rise in charges, we anticipate the relative attractiveness of BREIT (vs. short-term treasuries at 4%+) will recede going ahead,” stated Budish. Regardless of the near-term pressures on the fund, Barclays continues to be optimistic on the longer-term retail alternative for various belongings and sees Blackstone as a well-positioned beneficiary. “Whereas the problems associated to BREIT largely originated with macro components, we consider Blackstone has finished an in any other case outstanding job constructing out a gross sales drive and educating advisors, and because the macro setting turns into extra supportive, we expect internet retail flows listed below are prone to return to progress,” stated Budish. “That stated, it stays to be seen to what extent the capping of redemptions turns into a reputational problem for the corporate.” — CNBC’s Michael Bloom contributed to this report.