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Blackstone to Shutter Real Estate Income Fund That Held CMBS

  • Fund contained $1.1 billion of assets at the end of last year
  • The funds ‘have begun to see a recovery in pricing,’ firm says
Updated on

Blackstone Group Inc. is closing a real estate fund that used leverage to load up on commercial mortgage backed securities, investments that have slumped during the Covid-19 pandemic.

The Blackstone Real Estate Income Master Fund, with about $1.1 billion of total investments at year-end, including those purchased with leverage, will sell the assets and distribute the proceeds to shareholders, the company said in a regulatory filing this week. Its net assets have declined from almost $773 million at year-end to $553 million as of May 31.

The fund suffered a 24% decline in March as markets swooned. It had generated an average annual return of 5.52% over five years through 2019.

CMBS delinquencies in the U.S. surged to 3.59% in June from 1.46% in May, the largest month-over-month increase on record, according to Fitch Ratings. With consumers staying home and shopping online, hotels and mall-based retailers are missing mortgage and rent payments.