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Why Private Real Estate?

Private real estate is a potential source of consistent income, with lower volatility* than public REITs. With historically low correlations to both equities and bonds, private real estate may help create a more efficient portfolio.
*BREIT's per share NAV is based on the value of real estate assets it owns and is not subject to market pricing forces as are the shares of public equities. The value of BREIT's underlying investments may fluctuate and may be worth less than BREIT initially paid for them. BREIT shares are significantly less liquid than shares of publicly traded equities and are not immune to fluctuations.

REAL ESTATE IS THE THIRD LARGEST ASSET CLASS BEHIND FIXED INCOME AND EQUITIES

Fixed Income $43 trillion total U.S. debt outstanding 1 Real Estate $17 trillion U.S. real estate market 2 Equities $26 trillion total U.S. stock market capitalization 3 Fixed Income $43 trillion total U.S. debt outstanding 1 Real Estate $17 trillion U.S. commercial real estate market 2 Equities $26 trillion total U.S. stock market capitalization 1
  • Potential income from
    tenant rents

    Yield-oriented
  • Potential appreciation from
    increased property values

    Capital appreciation-oriented
 

Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. There can be no assurance that the trends described herein will continue or not reverse. Market capitalizations as of December 31, 2018, unless otherwise noted. There is no assurance that real estate investments will achieve capital appreciation or provide regular, stable distributions. Past performance does not guarantee future results.

  1. The World Bank, Securities Industry and Financial Markets Association (SIFMA), December 31, 2018.
  2. Green Street Advisors, December 31, 2018.
  3. Bloomberg, December 31, 2018.

DIVERSIFYING WITH PRIVATE REAL ESTATE MAY CREATE A MORE EFFICIENT PORTFOLIO

Incorporating private real estate has historically driven a portfolio's returns higher while reducing overall volatility.

Returns and Risk (1999-2018, annualized)1

Return5.5%
Volatility9.2%
Return5.9%
Volatility8.5%
Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. There can be no assurance that the trends described herein will continue or not reverse. Past performance does not guarantee future results.

  1. Morningstar Direct, NCREIF. 20-year period ending December 31, 2018. Portfolios with and without private real estate are hypothetical and this is not a recommendation of how to allocate a portfolio. Returns and Volatility presented are on an annualized basis. Past performance does not guarantee future results. The indices presented represent investments that have material differences from an investment in a non-traded REIT, including those related to vehicle structure, investment objectives and restrictions, risks, fluctuation of principal, safety guarantees or insurance, fees and expenses, liquidity and tax treatment. Private real estate is represented by the NCREIF Open-End Diversified Core (ODCE) Index and reflects the returns of diversified, private core, open-end funds that invest in private real estate. NCREIF ODCE quotes returns including leverage and fund expenses, but excluding management and advisory fees. The term core typically reflects lower risk investment strategies, utilizing low leverage and generally represented by equity ownership positions in stable U.S. operating properties. Returns net of management and advisory fees would be materially lower. An investment in BREIT is different from the NCREIF ODCE, which is not an investable index. Equities are represented by the total return of the S&P 500 Index, including dividends (S&P 500 Index) and are subject to market risk. Fixed Income is represented by the Barclays U.S. Aggregate Bond Index and are subject to credit risk. The S&P 500 Index and the Barclays U.S. Aggregate Bond Index are meant to illustrate general market performance; it is not possible to invest directly in an index. BREIT shares are significantly less liquid than fixed income and equities. See page 3 for further descriptions regarding each index and footnote 1 on page 11 for further information on volatility.

A distinctive source of income

  • The majority of private real estate's total return comes from income.

Historical Yield Comparison1

Average annual yield, 2009-2018
Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. There can be no assurance that the trends described herein will continue or not reverse. Past performance does not guarantee future results.

  1. As of December 31, 2018. Morningstar Direct, NCREIF. Past performance does not guarantee future results. An investment in BREIT is not a direct investment in real estate, and has material differences from a direct investment in real estate, including those related to fees and expenses, liquidity and tax treatment. BREIT’s share price is subject to less volatility because its per share NAV is based on the value of real estate assets it owns and is not subject to market pricing forces as is the price of public REITs, investment-grade bonds, equities or T-bills. Although BREIT’s share price is subject to less volatility, BREIT shares are significantly less liquid than these asset classes, and are not immune to fluctuations. Private real estate is not traded on an exchange and will have less liquidity and price transparency. The value private real estate may fluctuate and may be worth less than was initially paid for it. Private real estate is represented by the NCREIF Open-End Diversified Core (ODCE) index, which is an equal weighted, time weighted index of open-end core real estate funds reported net of fees. The term core typically reflects lower risk investment strategies, utilizing low leverage and generally represented by equity ownership positions in stable U.S. operating properties. Funds are weighted equally, regardless of size. NCREIF ODCE represents the broad-based private real estate market, with its income returns based on net operating income after debt service; distributions from BREIT are not guaranteed and may be sourced from non-income items including, without limitation, the sale of assets, borrowings, return of capital or offering processed, and we have no limits on the amounts we may pay from such sources. While funds used in this benchmark have characteristics that differ from BREIT (including differing management fees and leverage), BREIT’s management feels that the NCREIF ODCE is an appropriate and accepted index for the purpose of evaluating the historic yields of direct real estate funds. Investors cannot invest in this index. Comparisons shown are for illustrative purposes only and do not represent specific investments. BREIT has the ability to utilize higher leverage than is allowed for the funds in the NCREIF ODCE, which could increase BREIT’s volatility relative to the index. Additionally, an investment in BREIT is subject to certain fees that are not contemplated in the NCREIF ODCE, which is not an investable index. Public REITs are represented by the MSCI U.S. REIT Index. The MSCI U.S. REIT Index is a free float-adjusted market capitalization index that is comprised of equity REITs. Stocks are represented by the dividend yield of the S&P 500 Index. The S&P 500 Index is a widely used barometer of U.S. stock market performance; the key risk of the S&P 500 Index is the volatility that comes with exposure to the stock market. Investment-grade bonds are represented by bond yield to maturity of the Barclays U.S. Aggregate Bond Index. Investment grade bonds provide broad exposure to U.S. investment grade bonds including government bonds. Increases in interest rates may cause the price of bonds to decrease. Corporate bonds are subject to credit risk. T-bills are represented by the BofAML 3 Month T-Bill Index and are subject to interest rate risk. Treasury Bills are guaranteed as to the timely payment of principal and interest. Indices are meant to illustrate general market performance; it is not possible to invest directly in an index. An investment in investment grade bonds and T-bills is generally considered to be a less risky investment than private real estate.

A Potential Inflation Hedge

REAL ESTATE INCOME AND INFLATION1

Indexed, 1995=100

  • Private real estate income has increased faster than inflation over the past 20+ years.
  • Growth in real estate income was driven by a number of factors, including market rent growth and rent escalation clauses.
Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. There can be no assurance that the trends described herein will continue or not reverse. Past performance does not guarantee future results.

  1. As of December 31, 2018. Green Street Advisors, Bureau of Labor Statistics. Net operating income (NOI) growth represents the average NOI growth by year across the apartment, industrial, mall, office and strip retail sectors. The Consumer Price Index (CPI) measures changes in the prices paid by urban consumers for a representative basket of goods and services. NOI may not be correlated to or continue to keep pace with inflation.

ATTRACTIVE TOTAL RETURNS WITH LOWER VOLATILITY

  • Private real estate has exhibited 70% less volatility than public REITs. 1
  • The property value of private real estate may fluctuate.

QUARTERLY U.S. REAL ESTATE RETURNS2

Indexed, 2011=100
Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. There can be no assurance that the trends described herein will continue or not reverse. Past performance does not guarantee future results.

  1. Annualized standard deviation of the NCREIF ODCE index relative to the MSCI U.S. REIT index for the 24 year period ending June 30, 2019.
  2. As of June 30, 2019. Morningstar Direct, NCREIF. Past performance does not guarantee future results. An investment in BREIT is not a direct investment in real estate, and has material differences from a direct investment in real estate, including those related to fees and expenses, liquidity and tax treatment. BREIT’s share price is subject to less volatility because its per share NAV is based on the value of real estate assets it owns and is not subject to market pricing forces as is the price of public REITs. Although BREIT’s share price is subject to less volatility, the value of real estate may fluctuate and may be worth less than was initially paid for it. BREIT shares are significantly less liquid than public REITs, and are not immune to fluctuations. Private real estate is represented by the NCREIF ODCE and reflects the total returns of diversified, private core, open-end funds including leverage and fund expenses, but excluding management and advisory fees. The term core typically reflects lower risk investment strategies, utilizing low leverage and generally represented by equity ownership positions in stable U.S. operating properties. Funds are weighted equally, regardless of size. While funds used in this benchmark have characteristics that differ from BREIT (including differing management fees and leverage), BREIT’s management feels that the NCREIF ODCE is an appropriate and accepted index for the purpose of evaluating the total returns of direct real estate funds. Investors cannot invest in this index. Comparisons shown are for illustrative purposes only and do not represent specific investments. BREIT has the ability to utilize higher leverage than is allowed for the funds in the NCREIF ODCE, which could increase BREIT’s volatility relative to the index. Additionally, an investment in BREIT is subject to certain fees that are not contemplated in the NCREIF ODCE. Public REITs are represented by the MSCI U.S. REIT Index. The MSCI U.S. REIT Index is a free float-adjusted market capitalization index that is comprised of equity REITs. Indices are meant to illustrate general market performance; it is not possible to invest directly in an index. Indices are meant to illustrate general market performance; it is not possible to invest directly in an index.

Historically Stable Income

  • Income from private real estate has been historically consistent.
  • Quarterly income was between 1% and 2% 83% of the time and between 2% and 3% 18% of the time.

QUARTERLY INCOME DISTRIBUTIONS OVER TIME1

1999-2018
Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. There can be no assurance that the trends described herein will continue or not reverse. Totals may not sum due to rounding. Past performance is no guarantee of future results. Performance data shown represents the performance of an index and not that of BREIT. There is no assurance we will pay distributions in any particular amount, if at all. Any distributions we make will be at the discretion of our board of directors. We may fund any distributions from sources other than cash flow from operations, including, without limitation, the sale of assets, borrowings, return of capital or offering proceeds (including from sales of our common stock or Operating Partnership units to the Special Limited Partner, an affiliate of Blackstone), and we have no limits on the amounts we may pay from such sources.

  1. NCREIF, 20-year period ending December 31, 2018. NCREIF ODCE quotes returns including leverage and fund expenses, but excluding management and advisory fees. Returns net of management and advisory fees would be materially lower. It is not possible to invest in an index.

Returns and Risk by Asset Class

20 year annualized returns1

1999-2018
  • Private real estate historically has generated attractive returns and has exhibited less volatility than public equities.2
  • Private real estate is not traded on an exchange and will have less liquidity than public REITs.
Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. There can be no assurance that the trends described herein will continue or not reverse. Past performance does not guarantee future results.

  1. As of December 31, 2018. Morningstar Direct, NCREIF. Past performance does not guarantee future results. An investment in BREIT is not a direct investment in real estate, and has material differences from a direct investment in real estate, including those related to fees and expenses, liquidity and tax treatment. BREIT’s share price is subject to less volatility because its per share NAV is based on the value of real estate assets it owns and is not subject to market pricing forces as is the price of investment-grade bonds, equities or T-bills. Although BREIT’s share price is subject to less volatility, BREIT shares are significantly less liquid than these asset classes, and are not immune to fluctuations. Although NAV based real estate may exhibit less price volatility, private real estate is not traded on an exchange and will have less liquidity and price transparency. The value of private real estate may fluctuate and may be worth less than was initially paid for it. An investment in private real estate is subject to the ability to value, or sell, underlying properties as opposed to an investment in public real estate, where market forces determine the value of investments. Private real estate is represented by the NCREIF ODCE Index, which is an equal weighted, time weighted index of open-end core real estate funds reported net of fees. The term core typically reflects lower risk investment strategies, utilizing low leverage and generally represented by equity ownership positions in stable U.S. operating properties. Funds are weighted equally, regardless of size. While funds used in this benchmark have characteristics that differ from BREIT (including differing management fees and leverage), BREIT’s management feels that the NCREIF ODCE is an appropriate and accepted index for the purpose of evaluating the historic yields of direct real estate funds. Investors cannot invest in this index. Comparisons shown are for illustrative purposes only and do not represent specific investments. BREIT has the ability to utilize higher leverage than is allowed for the funds in the NCREIF ODCE, which could increase BREIT’s volatility relative to the index. Additionally, an investment in BREIT is subject to certain fees that are not contemplated in the NCREIF ODCE, which is not an investable index. Public REITs are represented by the MSCI U.S. REIT Index. The MSCI U.S. REIT Index is a free float-adjusted market capitalization index that is comprised of equity REITs. Stocks are represented by the total return of the S&P 500 Index. The S&P 500 Index is a widely used barometer of U..S. stock market performance; the key risk of the S&P 500 Index is the volatility that comes with exposure to the stock market. Investment-grade bonds are represented by the total return of the Barclays U.S. Aggregate Bond Index. Investment grade bonds provide broad exposure to U.S. investment grade bonds including government bonds. Increases in interest rates may cause the price of bonds to decrease. Corporate bonds are subject to credit risk. T-bills are represented by the BofAML 3 Month T-Bill Index and are subject to interest rate risk. Treasury Bills are guaranteed as to the timely payment of principal and interest. Indices are meant to illustrate general market performance; it is not possible to invest directly in an index. An investment in investment grade bonds and T-Bills is generally considered a less risky investment than private real estate.
  2. Annualized standard deviation of the NCREIF ODCE relative to the MSCI REIT Index for the 20-year period ending December 31, 2018.

An Inherent Diversifier

  • Private real estate historically has exhibited low or negative correlation to both equites and fixed income.

PRIVATE REAL ESTATE CORRELATIONS1

20-Year Period (1999-2018)
Note: Represents Blackstone’s view of the current market environment as of the date appearing in this material only. There can be no assurance that the trends described herein will continue or not reverse. Past performance does not guarantee future results.

  1. Morningstar Direct, NCREIF, 20 year period ending December 31, 2018. Private Real Estate represented by the NCREIF ODCE Index. Stocks are represented by the total return of the S&P 500 Index. The S&P 500 Index is a widely used barometer of U.S. stock market performance; the key risk of the S&P 500 Index is the volatility that comes with exposure to the stock market. Investment-grade bonds are represented by the total return of the Barclays US aggregate Bond Index. Investment grade bonds provide broad exposure to U.S. investment grade bonds including government bonds. Increases in interest rates may cause the price of bonds to decrease. Corporate bonds are subject to credit risk. Correlation measures how one investment performs in relation to another, with a coefficient of +1 being a perfect, positive correlation and a coefficient of -1 being a perfect, negative correlation. When two asset classes have a correlation of +1, they will both move up or down by the same amount in the same direction. Conversely, a correlation of -1 indicates that when one asset class moves up or down, the other moves in the opposite direction by the same amount. In general, asset classes with a correlation of less than 0.70 or greater than -0.70 are considered to have relatively low correlation.