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Blackstone Group announced on December 7th that the number of foreclosures under its undisclosed Real Estate income Trust (REIT) program hit the scheduled maximum for the first time. This is the first time that 5% of applications have been applied for since its launch in January this year.
On this issue, Blackstone CEO Schwarzman said that many people think that a large number of redemptions are due to a problem with the product, which is not the case. This is a commodity that can not guarantee daily cash flow, after all, it is in the real estate business.
In early November last year, Powell of the US Federal Reserve also said: “there is no significant danger of financial stability in the housing market, and there is no such bad credit guarantee as before in this economic cycle.” and home loans are very prudent. ”
Blackstone focuses on traditional financial and tangible assets such as private equity and real estate, such as stocks, bonds and cash.
In the real estate industry, because there are many types of assets, the source of profit is leasing and operating costs during the operating period, so it has a strong ability to resist inflation to a certain extent. What’s more, BREIT is also their strong point.
But none of this is worth the frenzied rate hikes by the Federal Reserve, the pullback in the housing market, and the trust of investors.
In fact, problems with the fund have been apparent since July. Investors redeemed more than 2 per cent of BRIET’s total assets in July, according to the Financial Times.
Once this limit is exceeded, Blackstone will have the right to restrict purchases to investors, but for fear of alarm, Blackstone did nothing. Instead, executives used their own funds to inject more than 100 million yuan into BREIT.
In October, applications for $1.8 billion, or about 2.7 per cent of the total share capital, were filed, which, though exceeding the standard, were cashed 100 per cent with the approval of the committee.
In November, Blackstone could no longer hold out because of a large amount of redemption money, and eventually agreed to 43 per cent of BREIT’s redemption requests, totaling $1.3 billion, or 2 per cent of total equity.
As soon as the purchase restriction was issued on December 1, more investors applied for redemption one after another. Blackstone also announced on December 2nd the sale of stakes in two Las Vegas-based MGM and Mandalay Bay casinos, a deal that will bring it $12.7 million in cash to solve its current liquidity problems.
Market pressure is commonplace because the collapse of Lehman Brothers left a deep impression on people. But according to the published figures, BREIT is not so bad. In the first three months, BREIT’s net profit return was 9.3 per cent, but REITs’s market capitalization in the public market fell by 30 per cent.