Blackstone Real Estate Investment Trust (BREIT), which recently broke news of exercising a provision restricting owner withdrawals for several months in a row, didn’t take the news. The REIT is still trying to raise money for its shareholders and recently announced the sale of $3.1 billion worth of its trading portfolio. It is also rumored that she is considering selling her Las Vegas portfolio.
strength in the industrial sector
Although much of the real estate market has suffered this year, industrial and warehousing continues to be a sub-sector where there has been year-over-year growth. Blackstone is selling 70 assets of its industrial portfolio to Prologis Inc. The transaction includes approximately 14 million square feet and represents a continuation of a long-standing relationship between Blackstone and Prologis.
The sale, which is expected to be completed by the end of the second quarter, will be the latest in more than a dozen deals between Prologis and Blackstone in the past 11 years. All indications are that Prologis plans to acquire and hold the assets, which will add 77 new clients to a portfolio of 50 clients.
More importantly, the deal signals continued resilience in the industrial/warehouse sector, even as many other business sectors have faltered in this new environment. As of April, national average The rental rate for industrial space was $7.18 per square foot — 7% higher than the rate a year ago. Perhaps that’s why an estimated $12.6 billion in industrial real estate was sold in the first four months of 2023.
paying off:
Is Blackstone looking to raise more funds?
It’s no secret that Blackstone has been crediting owners’ withdrawals for almost the entire year. With that in mind, it’s not hard to imagine he’s under tremendous pressure to liquidate assets. That’s why the Prologis deal may not be the last it pulls this quarter. Rumors are circulating that Blackstone may sell half of the $4.25 billion interest it took in the Bellagio Resort & Casino in Las Vegas in 2019.
If true, it represents the liquidation of an asset that is doing well. Bellagio is one of the most profitable operations on the Las Vegas Strip. It is also still under the control of the owner who opened it – MGM Grand – and in the middle of a long-term lease. These factors make Blackstone Share an attractive asset that is likely to find many suitors if you decide to put it on the market.
Blackstone has been steadily selling its casino assets for the past several years. It sold The Cosmopolitan Hotel for $5.65 billion in 2021, bringing the company nearly three times its original investment. At the time, it was one of the most profitable transactions of its kind in history. In 2022, Blackstone sold its 49.9% ownership of MGM Grand and Mandalay Bay.
What does this mean for real estate investors
Despite being one of the largest REITs in America, Blackstone is still navigating choppy waters. The fund is liquidating assets, but the reasons are not entirely clear. All REITs sell real estate, and these could have just reached the end of their investment cycles.
Or it could be that Blackstone is trying to liquidate some high-dollar assets before interest rates rise again, which will make these types of properties more difficult to liquidate in the future.
There is a kernel of wisdom here for the average investor. First, Blackstone will eventually bounce back and so will the real estate market. Secondly, the Industrial and Warehouse segment of real estate continues to be strong, as evidenced by the fact that it has generated increasing returns for investors year on year.
If you are looking to make a real estate investment but are spooked by the market, Industrial and Warehouse Assets or Industry/Warehouse REITs are worth considering. There is always opportunity in a bull or bear market if you know where to look.
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