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Pummeled Blackstone Real Estate Unit Seems Poised for a Revival

As redemptions dwindle, BREIT makes acquisitions and banks on falling rates.

By Larry Light


Blackstone Inc.’s battered real estate trust appears to be in comeback mode. Commercial real estate has been the bête noire of investing for the past couple of years, and Blackstone Real Estate Income Trust took its lumps in 2023, with its main investment class losing 0.5% and lots of investors exiting.

The worst appears to be over for commercial property, with some possible exceptions such as offices. As investment manager Wilmington Trust stated in a recent research report, “fundamentals remain strong” in many CRE segments, such as industrial and multifamily, and expected lower interest rates and the absence of a recession should bring the start of a recovery in 2024’s second half.

For BREIT (assets: $61 billion), as the Blackstone trust is known, “we’ve seen a bottoming out, and in 2024, the clouds will part,” Blackstone’s global co-head of real estate, Nadeem Meghji, told shareholders last month, pointing to the anticipated rate cuts. BREIT has seen a slowing of redemption requests so that it no longer has to cap them at 2% of the fund’s net asset value monthly. 

One sign of health, or at least optimism, is making an acquisition. Amid tough times for real estate, BREIT recently announced it was buying a single-family rental company, Tricon Residential, for $3.5 billion. Also, in December 2023, BREIT agreed to buy 20% of a facility that holds a $16.8 billion senior mortgage loan portfolio, formerly owned by failed Signature Bank. This $1.2 billion investment, made in partnership with the Canada Pension Plan Investment Board and Rialto Capital, is a joint venture with the Federal Deposit Insurance Corp., which seized Signature’s assets.

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An early vote of confidence in BREIT came in January 2023 at the height of redemptions when UC Investments, which manages the University of California’s endowment, announced a $4 billion investment in the fund. “In the current environment, investors can benefit from stable cash-flowing investments that can grow with high global inflation,” Jagdeep Singh Bachher, the University of California’s CIO, said in a statement. “We consider BREIT to be one of the best-positioned, large-scale real estate portfolios in the U.S.”

BREIT is a non-public REIT, meaning it is not exchange-traded. The upside for the fund is that investor withdrawals are limited, so the trust cannot suffer a massive capital outflow all at once—an advantage that has served it well as commercial property buckled under rising mortgage rates and mounting recession fears, along with the post-pandemic change in work habits. But now the Federal Reserve is openly talking about reversing its rate hikes, and economists no longer consider a recession a certainty.

Since its launch in 2017, BREIT has done well, rising 12% annually, close to the increase in the S&P 500 over the period and (per Blackstone) more than double the return of private REITs overall. BREIT started out strong, yet faded once the Fed began escalating rates in 2022: It returned 30% in 2021 and 8.4% in 2022.

Blackstone touts BREIT’s asset allocation as a major plus going forward. It has only 3% in offices, the most troubled CRE sector, given the work-from-home mentality that has taken root thanks to the pandemic.

The fund has 25% in apartments and an identical share in the industrial sector — mostly in warehouses, but also in factories. Demand should be solid for apartments,  according to CBRE, the real estate services and investment firm. Reason: a shortage of single-family homes, which has led to an affordability issue for many people. While the pandemic-driven boom in warehouses has faded, CBRE still sees a strong future for industrials because of the ongoing onshoring of manufacturing.

Another factor favoring BREIT is that most of the fund’s holdings are in the Sun Belt, which is growing faster than the rest of the country, said Meghji. He added, “This is a great time to deploy capital.”

Related Stories:

More Real Estate Woes: Blackstone Hits Exit Limit

UC Investments Gives $4 Billion Boost to Blackstone Real Estate Fund

Blackstone’s BREIT Sells Storage Business for $2.2B as Withdrawals Abate

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Home > News > Asset Allocation > Asset Management Firms Intend to Increase AI Budgets
Asset Allocation

Asset Management Firms Intend to Increase AI Budgets

Of technology decisionmakers surveyed by Rackspace Technology, 75% expect a bigger budget in the future, and 48% said artificial intelligence has substantially increased sales at their firm.  
By Matt Toledo



Technology decisionmakers at asset management firms report that their companies plan to increase their investments in artificial intelligence technology and have already seen substantial benefits from using it, according to a report from IT and cloud computing company Rackspace Technology, which surveyed 1,420 IT decisionmakers at asset management firms in February.

The information in this story was based off of a limited preview of the research. 

The survey, conducted by Rackspace US Inc., found that 75% of IT decisionmakers plan to increase their budgets for AI this year by anywhere from $500,000 to $5 million. According to the report, 48% of respondents credited AI with substantial benefits.  The survey of asset managers was part of a report titled The 2024 Global AI Report by Rackspace Technologies and Amazon Web Services. 

“At many companies, IT departments went from being a necessary evil to getting whatever they want now that AI and the integration of data have caused the fastest transformation in technology history, as compared to the development of servers/web tech, cloud, e-commerce and mobile which took years to be adopted,” said Jeff DeVerter, chief technology evangelist at Rackspace, in a statement.  

Of the 48% of respondents who said AI brought substantial benefits, 57% said they were able to create personalized marketing campaigns using AI, 55% said AI helped increase innovation, and 48% said AI helped increase sales.  

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Other findings in the survey include: 

  • 69% identified cybersecurity as the biggest risk when adopting AI; 
  • 69% say AI will require more improvement before it can be trusted, and answers it generates currently need human interpretation; 
  • 57% said the IT division is a main driver of AI strategy at their firm; 
  • 26% said a revenue-generating division is a main driver of AI strategy at their firm; and 
  • 18% said executive leadership is a main driver of AI strategy at their firm.  

Rackspace argued that revenue-generating units at asset management firms have the most to gain by integrating AI and machine learning into their workflow. According to the survey, 35% of firms use revenue growth to measure the success of AI, even though it is mostly being used by non-revenue-generating divisions. 

“In order to allow AI to generate more revenue, more revenue-generating departments should be encouraged and enabled to use AI,” said Nirmal Ranganathan, a vice president of engineering and AI architect at Rackspace, in a statement.  

The survey also found that 55% of asset management firms have sought employees who have AI and machine learning skills. 

Related Stories: 

Goldman: Artificial Intelligence Will Boost Global GDP by 7% 

Will AI Compromise Security for Institutional Investors? 

Asset Managers Ponder Investments in AI as Security Risks Compound 

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