BREIT sells last self-storage assets, pours into data centers

Blackstone's BREIT has sold its last self-storage properties. The trust unloaded the remaining 79 assets in the sector in the second quarter, according to The Real Deal, which cited Bisnow and the trust's earnings report. The sale brought in $852 million. BREIT booked $177 million in gains on that portfolio. The properties cover about 5 million square feet. BREIT acquired a majority of them in 2019 and 2020.

Self-storage had a short, profitable run inside the trust. Blackstone bought Simply Self Storage from Brookfield Asset Management in 2020. The price was $1.2 billion. Brookfield had owned the company for four years. Three years later, BREIT sold Simply to Public Storage. The sale price was $2.2 billion. The deal left a $600 million profit. Early in the pandemic, self-storage was one of the hottest property sectors, as households made room for returning family members and home offices. Demand cooled afterward.

That money did not leave real estate. It moved into data centers.

During the second quarter, BREIT put $3.3 billion into data centers through QTS. QTS is the platform Blackstone acquired in 2021. The purchase price was $10 billion. The trust holds a 35.7 percent stake. Data centers now account for 27 percent of the portfolio. That is the second-biggest slice, behind multifamily at 47 percent. BREIT holds interests in roughly 4,500 properties.

A Blackstone spokesperson described the sale as portfolio management centered on the firm's strongest convictions. About 90 percent of BREIT's portfolio is now in data centers, industrial and rental housing. Over the last year, the trust delivered a 10.3 percent Class I net return. The bottom line remains in the red: BREIT posted a $466 million net loss in the second quarter. That is an improvement over the $569 million loss a year earlier. The storage sale, combined with multifamily and industrial dispositions, brought in $2.1 billion in net proceeds. It also produced a $294 million net realized gain.

The rotation is a bet on a different kind of demand. Self-storage was the stay-at-home trade of 2020; data centers are the AI trade of this cycle, booming yet controversial. BREIT funded the second with the first. It poured $3.3 billion into QTS in that same quarter. The quarter also brought in $2.1 billion in net proceeds. The payoff is not in these numbers. Storage earned $177 million on the way out. It produced another $600 million from the Simply deal. The data center position has yet to show income of that scale. The next earnings report will show whether a 27 percent allocation generates returns or keeps consuming capital.