Open-End Real Estate Funds Turn to Secondary Sales Amid Redemption Pressure
Blackstone is facilitating a secondary sale for investors in one of its Blackstone Property Partners funds, a US vehicle with $11 billion in net asset value. The firm is playing a more formal role than typical secondary market transactions, arranging conversations with potential buyers to help existing investors exit. BPP also cut management fees by 30% for investors who kept redemption requests below a certain threshold, according to documents from a California pension.
The move follows a period of depressed returns across BPP’s $57.7 billion strategy, which manages perpetual funds investing in industrial, office, residential, and data center assets. Holdings include Stuyvesant Town-Peter Cooper Village in Manhattan and American Campus Communities. Performance has shown early signs of recovery in recent quarters, driven by growing exposure to data centers and a broader real estate rebound. Returns across commercial real estate funds suffered after 2022 rate hikes pushed property values down roughly 25% from their prior peak, according to JPMorgan.
Other open-ended funds are adopting similar strategies. Invesco recently announced a tender offer for its US core real estate fund and reduced management fees. Blackstone’s retail-focused BREIT began limiting redemptions in late 2022 and returned to full redemptions in 2024 after raising more than $4 billion from the University of California Regents. BREIT posted net inflows in February for the first time since 2022 and has returned 11.2% over the past year.
Open-ended real estate vehicles typically allow quarterly redemptions without withdrawal limits, but managers grew reluctant to sell assets at a discount when values dropped. The secondary sale approach lets funds provide liquidity without forcing property dispositions. Data center exposure has lifted performance for some managers, but investor concern persists across the sector as values remain well below 2022 peaks.
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