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An Investor's Journey with Blackstone REIT (BREIT)

CEO Khai Intela
Key Takeaways Blackstone Real Estate Income Trust (BREIT) is a unique non-traded REIT that offers a hybrid, perpetual-life investment opportunity in real estate properties. BREIT invests in a diverse range of real estate sectors and...

Key Takeaways

  • Blackstone Real Estate Income Trust (BREIT) is a unique non-traded REIT that offers a hybrid, perpetual-life investment opportunity in real estate properties.
  • BREIT invests in a diverse range of real estate sectors and real estate debt, providing stability and potential for attractive returns.
  • Despite challenges posed by the COVID-19 pandemic, BREIT has maintained high occupancy rates in most sectors and continues to deliver consistent monthly distributions.
  • With a strong track record and solid performance, BREIT has outperformed traditional traded REITs and offers a potentially rewarding investment opportunity.

Company Background

Imagine having the opportunity to invest in a real estate trust that offers a wide range of investments across various sectors, including residential, industrial, office, storage, and hotel/hospitality. That's exactly what Blackstone Real Estate Income Trust, Inc. (BREIT) offers. BREIT is sponsored by The Blackstone Group, Inc., a trusted name in real estate with decades of experience.

BREIT is a Maryland corporation founded in 2015 and has been operating as a non-traded REIT since 2017. With their investment strategy focusing on stabilized and diverse real estate portfolios, BREIT aims to provide income and potential value appreciation to its investors. Their headquarters are located at 345 Park Avenue in New York.

Blackstone REIT Type

BREIT is a public, non-traded, perpetual-life REIT registered with the SEC since 2017. While the company reports its financial statements and updates through SEC filings, it does not trade shares on public exchanges like NYSE or NASDAQ. To become a BREIT shareholder, investors need to meet certain suitability requirements and make a minimum investment ranging from $2,500 to $1 million, depending on the class of shares.

The different classes of common shares have varying management fee structures. It's important to note that, unlike traditional traded REITs, BREIT's common stocks are priced based on their net asset value (NAV), which is determined daily or monthly. This approach helps ensure stability and mitigate market volatility unrelated to real estate.

BREIT Source: BREIT Fact Card

As of August 1, 2021, BREIT has the following breakdown of common shares:

  • Class I shares: 1,573,576,957
  • Class D shares: 217,635,951
  • Class S shares: 1,024,512,149
  • Class T shares: 53,024,993

It's important to understand that, as a non-traded REIT, BREIT's common shares are not easily liquidated. If you need to sell your shares, you will need to request a repurchase from BREIT, which is not guaranteed. Furthermore, the share price at which they are repurchased may result in capital losses.

BREIT Portfolio

Diverse Mix of Sectors

BREIT boasts a diverse real estate portfolio that spans across various sectors. Their recent investments include residential, industrial, net lease, hospitality, self-storage, retail, and office properties. Additionally, BREIT has expressed interest in expanding to healthcare and data center sectors in the future.

BREIT Properties Source: BREIT Prospectus (as of June 30, 2021)

As of July 2021, BREIT holds a total of 1,508 real estate properties across the United States, with a small portion in Europe. These properties include residential units, industrial spaces, net lease assets, hospitality properties, self-storage facilities, retail locations, and office spaces.

BREIT maintains high occupancy rates in most sectors, with rates above 90% across the board. The hotels/hospitality sector was an exception due to the impact of the COVID-19 pandemic on the leisure market. However, as the world recovers from the pandemic, there is optimism for this sector's revival.

Real Estate Debt

In addition to their real estate investments, BREIT also invests in real estate debt. This includes commercial and residential mortgage-backed securities, corporate bonds, mezzanine loans, and other real estate-related loans. They use leverage through financing to enhance potential returns. As of their Q2 2021 report, BREIT's real estate debt investments have a fair value of $5.7 billion, with a weighted average coupon of 5% and a weighted average maturity date of July 5, 2025.

BREIT Debt Investments Source: BREIT Q2 2021 Report

BREIT's expertise in real estate debt investments allows them to diversify their portfolio and provide added liquidity for cash management and share repurchase plans.

Blackstone REIT Performance

Historical NAV Per Share

BREIT's shares are priced based on their net asset value (NAV), which is determined daily or monthly. This approach helps reduce volatility and provides investors with a reliable valuation metric. While the NAV prices initially experienced a dip during the onset of the COVID-19 pandemic, they have since recovered.

NAV Per Share

Hypothetically, if you had invested in BREIT four years ago, you could have enjoyed an average return of 24% to 25% across all share classes. Keep in mind that these returns do not account for the monthly distributions you may have received during your investment period.

Key Performance Metrics

To evaluate BREIT's operating performance, it's important to consider key metrics such as total equity, total revenue, net income (loss), and funds from operations (FFO). These metrics offer insights into the company's financial health and profitability.

Here's a summary of these key performance metrics over the years:

Fiscal Year Total Equity Total Revenue Net Loss (attributable to BREIT stockholders) FFO
June 2021 $23B $1.5B ($146M) $483M
FY 2020 $16.1B $2.5B ($853M) $406M
FY 2019 $10.6B $1.7B ($401M) $358M
FY 2018 $3.9B $723M ($281M) $110M
FY 2017 $1.5B $158M ($86.2M) $33M

Despite incurring net losses, mainly due to their real estate debt portfolio, BREIT has consistently shown growth in total equity and total revenue. Fundamentally, the company remains strong and has demonstrated positive performance since its inception.

Dividends Distribution History

One of the key attractions of investing in BREIT is their consistent monthly distributions to shareholders. For the fiscal year 2020, the highest total net distribution per share was $0.6354 for Class I shares, closely followed by $0.608 for Class D shares. These distributions provide regular income to investors and contribute to the overall returns of the investment.

Total Returns History

Total returns take into account paid distributions and capital gains or losses from changes in the NAV price. Despite the challenges posed by the COVID-19 pandemic, BREIT has delivered attractive returns. In 2021, their YTD returns have been especially high, with a strong recovery from the pandemic's impact.

Since inception, the total returns (without initial sales charge fees) have ranged between 10% and 11% across all share classes. BREIT has outperformed the MSCI U.S. REIT Index, which generated a net return of -7.6% in 2020.

Overall, BREIT's performance and track record demonstrate their ability to navigate challenging market conditions and offer potential value appreciation to investors.

Conclusion

Investing in Blackstone Real Estate Income Trust (BREIT) provides an opportunity to participate in a unique non-traded REIT with a hybrid, perpetual-life structure. BREIT's diverse portfolio, consisting of real estate properties and real estate debt investments, offers stability and potential for attractive returns.

Despite the impact of the COVID-19 pandemic, BREIT has maintained high occupancy rates in most sectors and consistently delivered monthly distributions to its investors. Their historical NAV prices and key performance metrics demonstrate the company's resiliency and ability to generate value.

If you're looking for an investment opportunity in the real estate sector, BREIT presents a compelling option. With its strong track record and focus on long-term value, BREIT has the potential to deliver consistent income and growth over time.

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