The big questions are hanging over the fund

The New York Times

The numbers behind a big fund On Wall Street, one mystery has been whispered about for months: How accurate is the valuation of Blackstone’s flagship real estate fund?
The speculation has arisen because the fund, the $59 billion Blackstone Real Estate Income Trust — more commonly known as BREIT — has managed to keep an “appraised” value of its assets that far exceeds virtually every other real estate fund.
Many rivals have fallen in value, some quite dramatically, in the face of high interest rates and a flagging property market.
BREIT’s performance has floated above its competition, and it has boasted a 10.5 percent annual return since its 2017 debut.
(Those appraisals help to determine a firm’s management fees: The higher the appraisal value, the higher the fees.)
While it uses a third-party appraiser and an outside auditor, the firm has the final say on the appraised value of its own assets.
Blackstone is open about its approach.
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The figures underlying a large fund.

For months, there has been a mystery on Wall Street: How accurate is the valuation of Blackstone’s premier real estate fund?

Blackstone Real Estate Income Trust, or BREIT, is a $59 billion real estate fund. It has kept its asset value well above virtually all other funds, which has given rise to speculation. Due to rising borrowing costs and a faltering real estate market, the value of many competitors has decreased, some quite significantly.

With a 10 percent annual return since its launch in 2017, BREIT has outperformed its competitors in terms of performance.

DealBook’s Andrew Ross Sorkin and Michael de la Merced report that because of Blackstone’s methodology for determining the appraised value of its assets, the discussion surrounding the fund’s remarkable performance has gained more weight and intensity. To ensure that investors can trust that the appraised value is accurate and not unduly influenced by the firms, many major firms rely on an independent appraiser to determine the worth of a fund’s assets. (Those evaluations are used to calculate a company’s management fees; the higher the appraisal value, the higher the fees). ).

It seems like Blackstone does it differently. Even though it works with an outside auditor and a third-party appraiser, the firm has the last word on how much its own assets are worth.

Blackstone is transparent about its methodology. Based on a current prospectus:.

“Our independent valuation advisor reviews the assumptions made by the adviser. “.

Although Blackstone makes clear how it arrives at the ultimate valuation, some on Wall Street have questioned how much discretion firms should have when valuing their own assets.

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