Blackstone Shareholders Get Mini-Tender Offer From MacKenzie

MacKenzie Capital Management has offered shareholders of Blackstone Real Estate Income Trust (BREIT) an immediate cash payment of $9.27 per share, which is nearly 38% below BREIT’s net asset value of $14.88 per share.

MacKenzie’s offer of quick cash for nontraded BREIT shares, known in the industry as a mini-tender offer, is for up to 1.5M shares and expires on December 11.

MacKenzie is aiming the offer at BREIT shareholders who have been filing redemption requests with the $70B fund since November 30 2022, when BREIT began prorating these withdrawals.

A statement issued by the California-based firm noted that BREIT does not maintain a backlog of redemption requests, forcing fund investors to refile their claims each month in order to gradually recoup the full amount requested.

“The share repurchase program is oversubscribed. The [program] only redeemed between 17% and 43% of requests during each of the past six months. Each month you have to re-submit your request, and you can only have a portion of your investment returned,” said Robert Dixon, MacKenzie’s managing director, in an October 23 offer letter to BREIT shareholders.

“Admittedly, this purchase price is a 38% discount to [BREIT's] estimated net asset value of $14.88 per Class S Share as of August 31, 2023. Factored into our offer is the illiquidity, price, and market risk that MacKenzie assumes in purchasing these shares from you, while providing you with prompt payment for your funds,” Dixon’s letter continued.

“It should be noted that you would receive more over time if you repeatedly submit your shares into the REIT’s share repurchase plan, but our offer may be particularly attractive to those who desire liquidity and have not been able to redeem their shares completely,” Dixon added.

Blackstone fired back, calling MacKenzie’s discounted cash payment offer “offensive” and “predatory.”

“This predatory offer is an attempt to mislead and take advantage of unsuspecting shareholders by trying to purchase shares at a nearly 40% discount when BREIT’s semi-liquid structure provides monthly liquidity to shareholders with no discount,” Blackstone said, in a statement provided to Globe St.

BREIT’s board of directors sent a letter to shareholders on October 23 unanimously recommending that they reject MacKenzie’s offer.

“It is irrational to sell at an over 37% discount when BREIT provides liquidity monthly at NAV with no discount,” said the letter, signed by BREIT CEO Frank Cohen. “MacKenzie provides no explanation for how its deeply discounted Offer was determined and substantially undervalues BREIT’s real estate.”

Cohen’s letter noted that BREIT has paid $11.3 billion at NAV to redeeming stockholders since November 30 and a stockholder submitting repurchase requests over that period has received 97% of their money back.

“In the last three months alone, an investor would have received 73% of their money back and we continue to satisfy repurchase requests each month at NAV with no discount,” Cohen said, in the letter.

“Further, repurchase requests continue to decline: September 2023 was the lowest month of repurchase requests since October 2022, the fifth consecutive month of declining requests and 60% lower than the peak in January 2023,” the BREIT CEO added.

Blackstone also cited an SEC caution to investors, dated January 31, 2008, warning that mini-tender offers “have increasingly been used to catch investors off guard.”

“Many investors who hear about mini-tender offers surrender their securities without investigating the offer, assuming that the price offered includes the premium usually present in larger, traditional tender offers,” said the 2008 SEC publication, entitled Mini-Tender Offers: Tips for Investors.

As a non-traded REIT, BREIT has thresholds on how much money investors can take out of its fund in order to avoid forced selling of assets. In a Dec. 1 letter to investors, BREIT said redemption requests had exceeded its 2% of net asset value monthly limit and its 5% quarterly threshold.