New Low-Cost Way to Access Top-Ranked Blackstone Real Estate Income Trust (BREIT)
Updated: Sep 20, 2023
BREIT is by far the largest and one of the best diversified core+ strategy funds (which along with core has historically outperformed all other strategies). But accessing it cheaply has been impossible for most investors. Until now.
(Usual disclaimer: I'm just an investor and not a financial advisor, attorney or accountant. Consult your own financial professional before making any financial decisions).
Blackstone Real Estate Income Trust (BREIT) is one of the rare, conservative strategy, core + funds that are virtually impossible to find in crowdfunding/syndications. (Core/core plus has historically outperformed all other strategies, due to better performance in downturns from more conservative leverage and strategy). The sponsor, Blackstone, has 26 years of experience through multiple cycles and manages a mind blowing $115 billion of real estate.
It's leveraged at a fairly conservative 48% ltv (average for core plus is 50%) and contains 126 properties ($5.3 billion in assets) and an unusually diversified mix. It's diversified across commercial real estate types (69% multifamily, 21% industrial, 7% hospitality, 3% retail), geography (52% South, 31% West, 9% Midwest, 8% East) and capital stack location (80% in equity and 20% debt). This fund is currently returning 5.79% net in distributions, and 10.9% net in total return (distributions + price appreciation).
The Blackstone management fee is 1.25% of NAV per year. The profit split is a 5% preferred return to the investor, after which the investor takes 81.5% of the profit in the fund takes 12.5%. (There is also a high watermark to provide a little bit of additional investor protection). They also charge no acquisition or management fee.
The lockup and withdrawal are also one of the best in the industry. You can even withdraw your money in the 1st year, although you will pay a 5% penalty. After that there is no penalty at all. And you can redeem in any month.
Great. But how do I get access?
The *biggest downside* is that there are 4 classes of shares with different share class specific fees, and the cheaper ones are difficult/impossible to gain access to (although, there is an alternative which I will discuss in the next section). Class S and class T charge a difficult to swallow upfront selling commission up to 3.5% and yearly servicing fees of 0.85% per year. Class I has no share class fees, but requires a $1 million investment, which puts it beyond the reach of most (however, see below for an alternative). On the surface, class D looks like a good compromise, because it has no upfront selling commission and only has a 0.25% yearly servicing fee for a $2500 minimum. However, it is actually really hard to get access to this normally. It's only available through certain fee-based advisors, and these typically require things that most investors can't or don't want to do (unless they already have accounts with them). For example:
Merrill Lynch requires half million dollars of total assets to be invested with them.
Fidelity Alternative Investment Platform requires one million-dollars of total assets to be invested with them.
Ameriprise, Raymond James, LPL financial do not offer BREIT.
So this leaves most investors stuck with the expensive class S or class T (3.5% upfront selling commission and 0.85% per year).
Thankfully there is now an alternative. A Cheaper Alternative
Manhattan Ridge Advisors (http://www.manhattanridge.com/) is offering members of The Real Estate Crowdfunding Review Investor Club access to BREIT Class I (normally requires $1 million minimum investment in exchange for no share class fees). They will charge only a 1% to 0.5% fee per year, depending on how much the investor chooses to put in.
Their one condition is that the club put in at least $1 million in total across all investors (to make it worth the expense to them to set this up). So far over half a million dollars of interest has been indicated, so it's very likely to happen. (Ethics code/disclosure: as usual, the club makes no money from this offering in any way, including no money for referring investors, nor commissions nor fees.)
If you're interested in possibly participating, please express your interest on the spreadsheet link at the bottom of this BREIT posting. (Note: the above is a link to The Real Estate Crowdfunding Review Investor Club. If you are not yet a member, membership is free but does require verifying your identity and agreeing to club terms such as a nondisclosure. More information is here.)
