Blackstone Real Estate Income Trust (BREIT), a $68 billion real estate trust, has reached an agreement to sell Simply Self Storage to Public Storage for $2.2 billion. The move comes as BREIT faces investor withdrawals and challenges in the commercial-property market. The sale of Simply Self Storage is expected to result in a profit of over $600 million for Blackstone.
In recent years, Blackstone had built BREIT into a major player in the real estate industry, attracting investors with its diverse portfolio of properties across the US. However, the trust began facing pressure as more investors sought to withdraw their investments amid market shifts. BREIT has experienced eight straight months of limited withdrawals, although the rate of requests has eased since January.
Commercial-property owners are grappling with changing economics as borrowing costs rise. Property prices have fallen by 12% in the past year, particularly affecting office spaces due to shifts in tenant demand caused by remote work and layoffs.
BREIT's portfolio is largely concentrated in rental housing, warehouses, and data centers, with minimal exposure to struggling areas of the market such as commodity offices. This positioning has helped the trust maintain stability in a challenging operating environment. In June, one major BREIT share class saw a 1% increase, contributing to a net return of 2.5% over the past year.
Analysts at Keefe, Bruyette & Woods believe that the proceeds from the sale of Simply Self Storage will benefit BREIT. However, they maintain a cautious view on the trust given the ongoing redemptions and the challenging market conditions. They raised concerns about whether BREIT is selling assets earlier and at lower prices than it would if redemption requests were not a factor.
The sale of Simply Self Storage is part of a series of divestments by BREIT. The trust has previously sold a resort and spa in Texas and its stake in a joint venture that owns MGM Grand Las Vegas and Mandalay Bay. Overall, Blackstone stated that BREIT has sold or is under contract to sell $12 billion worth of real estate at prices above carrying values.
The acquisition of Simply Self Storage by Public Storage will expand its reach, adding 127 wholly owned properties and 25 third-party managed properties to its portfolio. Public Storage expects the deal to generate significant earnings upside, particularly in the Sun Belt region. The transaction will be funded with unsecured debt. Public Storage shares rose by 0.6% following the announcement.
Through this sale, BREIT aims to concentrate its focus on high growth sectors, according to Nadeem Meghji, head of Blackstone Real Estate Americas. Meanwhile, Public Storage continues its expansion strategy, having recently sought to acquire Life Storage Inc., which was eventually purchased by Extra Space Storage Inc.