BlackRock Defers Withdrawals From Its UK Property Fund

Following in the footsteps of some major nontraded U.S. REITs, BlackRock plans to defer redemptions from its $4.2B BlackRock UK Property Fund for the third quarter of 2022.

Clients' Q3 requests to withdraw money from BlackRock's UK fund would have been fulfilled at the end of December, a source told Reuters. BlackRock had previously deferred its second-quarter withdrawals too. 

BlackRock's decision was merely the latest indication that Britain's real estate market is struggling, Reuters noted. As of November, funds controlling roughly £17B in real estate assets in the United Kingdom were limiting payouts "to prevent firesales," Reuters said. Big-name asset managers in the UK including M&G and CBRE Investment Management have placed similar restrictions on redemptions from their property funds since September 2022. 

This move is increasingly common, with some of real estate's biggest players taking the same step. Within the first week of December 2022, reports emerged that both Blackstone and Starwood were limiting withdrawals from their nontraded REITs.

These funds, which have only been around for five years, raise money through individual investors. Their portfolios are valued monthly by fund sponsors and appraisers.

This week, Blackstone's BREIT got a hefty boost from the University of California endowment, which invested $4B in the fund. In order to secure the investment, Blackstone had to agree to cover the difference up to $1B if the investment doesn't generate annual returns of at least 11.25%.

The Securities and Exchange Commission has contacted Starwood and Blackstone about their pauses on redemptions.