Imagine a REIT investment opportunity with the following characteristics:
Owns apartment buildings, single family rental homes, industrial facilities, data centers, gaming/hotel properties, office buildings, and retail stores
Deployed nearly $75 billion into real estate acquisitions during 2021-22
The sponsor’s fees are largely based on the Net Asset Value (NAV) of the fund and said NAV is determined by the sponsor
2025 earnings (AFFO and FAD as reported by the sponsor) with declines of 30% and 42% on a per share basis since 2021 and declines of 40% and 48% since 2019
A declared dividend (4.6% yield on publicized NAV) for 2025 that implies a 218% payout ratio of funds available for distribution (183% of reported AFFO)
A current “valuation” is publicized at 43x trailing earnings (AFFO, as reported) and 93x adjusted earnings (as reported AFFO less recurring CapEx, commissions, and tenant improvement allowances)
Net lease properties marked at a 30-40% premium to the implied cap rates of liquid and transparent listed REITs
How would you describe this investment? Perhaps:
“We have transformed access to private markets by delivering strong returns in an investor friendly structure.”
-or-
“Amid significant public market volatility to start the year, [the fund] continued to deliver differentiated performance and portfolio stability”
Both quotes come from recent publicly available sponsor notes.
Rational, unbiased investors, analysts, and market participants may take the other side of the sponsor’s observations, but that’s what makes a market…
The 6th installment of the year dives deep into Blackstone Real Estate Income Trust, or BREIT for short. From its history and capitalization to its operating performance and valuation to suggestions on how to think through its go-forward merits for existing stockholders (spoiler: take some chips off the table, you’ve won and can benefit from aggressive marks) and potential new investors, check out our June issue here:
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