BREIT exits self-storage, shifts billions into QTS data centers

Blackstone Real Estate Income Trust has sold its final 79 self-storage properties, exiting an asset class it once used for steady rent. The sales brought $852.3 million in net proceeds and a $177.3 million net gain, the trust said in its second-quarter earnings report. The properties total 5 million square feet, most acquired in 2019 and 2020, according to a March 31 presentation. AltsWire first reported the figures; Bisnow carried them. The exit began three years ago, when BREIT sold a 9 million-square-foot portfolio to Public Storage for $2.2 billion.

That transaction started the unwind; these 79 sales finish it. Self-storage no longer appears among the trust's assets. In the same quarter, BREIT sold 20 rental housing properties and 27 industrial properties, bringing combined net proceeds from all three dispositions to $2.1 billion and a net realized gain of $294 million.

The sales came in the same quarter BREIT invested $3.3 billion into development at QTS, the data center platform Blackstone's joint venture acquired in 2021 for $10 billion. BREIT owns a 35.7% interest in QTS with a $1 billion book value. The trust said the data centers under construction are fully leased, in substantially all cases to investment-grade tenants. QTS's second-quarter leasing rose more than 50% year over year, and its first-half investment in preleased data center development reached $5.7 billion, according to QTS's shareholder letter.

A Blackstone spokesperson told Bisnow the storage sale reflects "our broader strategy of actively managing BREIT's portfolio and investing in our highest-conviction investment themes." The spokesperson said BREIT is now roughly 90% concentrated in data centers, industrial and rental housing, and that this positioning was key to recent performance, with a 10.3% Class I net return over the past year.

As of June 30, BREIT held interests in 4,530 properties. Rental housing accounted for 42% of assets, data centers 27% and industrial 20% — 89% of the portfolio combined. Regionally, the South held 35% of assets, the West 28% and the East 20%.

Storage and data centers sit at opposite ends of the private-REIT spectrum. Self-storage is a stable, low-touch cash flow; data centers are capital-heavy, long-dated and concentrated among a few giant tenants. BREIT builds only preleased space, and QTS's leasing growth suggests tenants are willing to commit early.

The trust's numbers tell the same story from different angles. It reported a $466 million net loss for the quarter, an improvement from the $569 million loss a year earlier. Its 10.3% one-year Class I return includes the gains from the storage sales and the industrial and rental housing dispositions. A quarterly loss and a positive total return can coexist when the loss is mark-to-market on existing assets and the return is compounded over a year of sales and reallocation.

The Public Storage sale began the storage exit; the 79-property disposal locked it in. The open question is whether the data center leases signed today will still be in force when the buildings come online. BREIT now has $852.3 million in fresh liquidity to help answer that.