Blackstone’s property fund BREIT has gone from a net buyer to a net seller, cycling out of some of its lodging assets and investing in data centers, a thematic pivot into the quickening future of artificial intelligence .
A recent Financial Times article noted that the $68-billion BREIT had acquired some $60 billion in real estate from the latter part of 2021 through the third quarter of last year, including hotels, warehouses and self-storage facilities, but since the fall of last year not only made no large purchases but had begun to wind out of some of its assets, to the tune of $10 billion in sales in order meet a deluge of redemption requests.
Blackstone reported its Q2 earnings in late July, pumping out $601.3 million in net income compared to a $29.4-million loss at the same time a year ago. Total revenue was $2.81 billion in the quarter, a 77% increase over Q2 2022. BREIT, Blackstone’s non-listed REIT that invests primarily in stabilized income-generating commercial real estate investments across asset classes, has had a net return of 12% over the past six-plus years, three times the public REIT market, Jon Gray, Blackstone president and COO, said.
BREIT redemptions were down nearly 30% in June, the lowest rate since a January peak.
As FT reported, “the sales were at 4% above the values for which BREIT holds the properties on its balance sheet and created about $2.5 billion in investment gains. They have helped BREIT return more than $8 billion to investors since November of last year, when the fund limited withdrawals amid a wave of requests among investors to pull cash.
Some of these
disposals have been in the lodging space. In June, BREIT sold the JW Marriott Hill Country Resort and Spa in San Antonio to Ryman Hospitality for $800 million. In late 2022, VICI Properties
bought out the remaining 49.9% interest that BREIT had in the MGM Grand Las Vegas and Mandalay Bay Resort for approximately $1.27 billion, three years after the joint venture
acquired the properties for $4.6 billion.
“With approximately $10 billion in immediate liquidity, BREIT has significant financial flexibility,” Blackstone told the FT.
As Blackstone pivots from some asset classes, it’s leaning hard into other, FT reports, raising cash to invest hard in the development of data centers that handle computing demand “from a boom in artificial intelligence.”
Sources told the FT that Blackstone has committed to spend more than $8 billion to build these new centers for large technology companies, such as Microsoft, Google, Meta and Amazon, which will need to invest some $1 trillion in the future to keep up with the demand in AI. Blackstone has reportedly already spent $1 billion on land alone.
“Large technology companies are in the midst of an AI arms race which we believe will be a once-in-a-generation engine for future growth in data centers and is driving tremendous demand on the ground,” BREIT recently told its investors.
