Blackstone opportunistic real estate funds fall 3.2% as BREIT raises $1.3 billion

Blackstone's opportunistic real estate funds fell 3.2% in the third quarter while core-plus funds gained 1.6%, a split the firm tied to rising valuation cap rates.

Real estate distributable earnings fell 10% to $1.68 billion, Commercial Observer reported from Thursday's earnings call. Firmwide distributable earnings fell 9.2% year over year to $1.72 billion, or $1.32 a share, ahead of the $1.26 analysts expected.

BREIT, the firm's flagship private real estate investment trust, raised $1.3 billion in the quarter. As PRED reported Thursday, real estate AUM slipped to about $309 billion from $314.2 billion, while the real estate arm drew $6.3 billion of inflows and realized $7 billion.

On the call, Schwarzman said: "The third quarter of 2026 represented a highly complex environment characterized by a historic increase in bond yields globally, including U.S. Treasury yields hitting the highest level in decades." He added that "a higher cost of capital has negatively impacted investor settlement and transaction activity and triggered significant volatility in the markets."

Jon Gray, the firm's president and chief operating officer, said valuation cap rates increased across Blackstone's holdings in the quarter in response to interest rate volatility, driving the depreciation in the opportunistic funds.

Data centers and logistics account for 54% of the firm's global real estate holdings, and Gray pointed to demand in those sectors, alongside shrinking supply in other property types, as a reason the portfolio is positioned differently from past cycles. Schwarzman added: "Demand for compute is accelerating, and we see no signs of that slowing down."

Gray also cautioned: "This doesn't mean there won't be legacy equity and debt investments in real estate that will face renewed pressure from higher rates, particularly in lower growth sectors."