Recent Blackstone REIT Common Stock Issuances Dominated by Class I
January 19, 2022 | James Sprow | Blue Vault
The Wall Street Journal on January 18, 2021, reported on the fundraising success of Blackstone Real Estate Income Trust (BREIT).
“The largest fund administered by Blackstone Group Inc., the giant investment firm known for raising capital from institutions such as pension funds and endowments, is now one that targets mostly individual investors.”
“Blackstone Real Estate Income Trust, a fund sold in increments as little as $2,500, has raised more than $50 billion since it started five years ago. The firm has used the fund, known as BREIT, to buy rental-apartment buildings, warehouses, office buildings, casinos and other property types.”
“Like other funds structured as nontraded real-estate investment trusts, BREIT experienced a decline in the early months of the Covid-19 pandemic. But by mid-2020, the pace had picked up, and last year BREIT raised an average of more than $2 billion a month, or close to 70% of all the money invested in 2021 in nontraded REITs.”
Early in the REIT’s fundraising history Blue Vault reported on the large majority of the fund’s capital raise coming from Class I shares. Class I shares were initially offered at a lower price per share to the public, with no upfront selling commissions or stockholder servicing fees. They were described as generally available for purchase in the “offering only 1) through fee-based programs, also known as wrap accounts, that provide access to Class I shares, (2) by endowments, foundations, pension funds and other institutional investors, (3) through participating broker-dealers that have alternative fee arrangements with their clients to provide access to Class I shares, (4) through certain registered investment advisers.” Interestingly, Class I share purchases could only be made in a minimum of $1,000,000, unless such minimums were waived by the Dealer Manager or if the purchases were made under the distribution reinvestment plan.
Clearly, Class I shares are not the avenue by which smaller retail investors are investing in BREIT.
Class T shares are issued subject to an upfront selling commission of up to 3.0% and an upfront dealer manager fee of 0.5%. From the prospectus: “We pay the Dealer Manager selling commissions over time as a stockholder servicing fee with respect to our outstanding Class T shares equal to 0.85% per annum of the aggregate NAV of our outstanding Class T shares.”
Class S shares have an upfront selling commission of up to 3.5% of the transaction price. The REIT pays the Dealer Manager selling commissions over time as a stockholder servicing fee equal to 0.85% per annum of the aggregate NAV of outstanding Class S shares.
Class D shares have an upfront selling commission of 1.5%. The REIT pays the Dealer Manager selling commissions over time as a stockholder servicing fee equal to 0.25% per annum of the aggregate NAV of all outstanding Class D shares. “Class D shares are generally available for purchase in this offering only (1) through fee-based programs, also known as wrap accounts, that provide access to Class D shares, (2) through participating broker-dealers that have alternative fee arrangements with their clients to provide access to Class D shares, (3) through transaction/brokerage platforms at participating broker-dealers, (4) through certain registered investment advisers, (5) through bank trust departments or any other organization or person authorized to act in a fiduciary capacity for its clients or customers or (6) by other categories of investors that we name in an amendment or supplement to this prospectus.”
The chart below shows the preponderance of Class I share issuances in the capital raised by BREIT, as well as the impact of the Covid-19 pandemic on capital raise, beginning in March 2020.
Source: Blue Vault
The quarterly reports filed by BREIT do not break down the capital raised from common stock issuances by share class, but Blue Vault can calculate an estimate of each share class contribution to the total by comparing the quarter-to-quarter changes in the shares outstanding by each class.
The total proceeds from common stock issuances (in thousands) are reported each quarter and reflect the impact that the pandemic had on the REIT’s capital raise. The 3rd Quarter of 2021 had the highest total capital raise by BREIT and the highest quarterly capital raise by any nontraded REIT in the history of the industry at $6.989 billion.
Source: Blue Vault
Through November 2021, Blackstone REIT had reported a 21.68% increase in Class I NAV per share, from $11.55 pe share as of December 31, 2020, to $14.06 as of November 30, 2021. BREIT led all continuously-offered nontraded REIT programs with a total return YTD through November 30, 2021, of 27.55%.
Sources: SEC, S&P Global Market Intelligence, Blackstone REIT website
