(Bloomberg) -- Blackstone Inc.’s $69 billion real estate trust hit a monthly redemption limit in January, as the firm’s crown jewel continues to wrestle with a line of investors seeking to get money out.

Blackstone Real Estate Income Trust told investors Wednesday that it fulfilled repurchase requests for 2% of its net asset value. That accounted for about 25% of what investors wanted to pull out, according to a letter. January repurchase requests were north of $5 billion, according to Bloomberg calculations.

Blackstone President Jon Gray had previously cautioned that a chunk of redemptions in January involved unfulfilled requests from November and December. 

January requests were “in line with the aggregate unfulfilled amount for November and December,” Blackstone said in a statement Wednesday. “We expect it will take some time to work through this backlog and that flows will normalize over time as BREIT continues to deliver for investors.”

Blackstone built BREIT into a massive real estate trust owning properties from Las Vegas’s lavish Bellagio hotel and casino to student housing and storage centers. Its success helped expand the private equity firm’s reach with rich individuals. 

But the trust faced challenges last year as more investors sought to pull money out, given volatile markets. BREIT hit redemption limits toward the end of last year, causing it to restrict how much investors could take out in December. 

Executives have reiterated their support for BREIT in recent months, with Blackstone Chief Executive Officer Steve Schwarzman previously saying the firm is committed to bringing its expertise to individual investors.

“We remain confident that BREIT’s portfolio can deliver strong performance and a tax-advantaged distribution yield,” BREIT said in the letter Wednesday. “We believe we have selected the right sectors and geographies and positioned our balance sheet to continue to produce meaningful cash-flow growth.”

Request Backlog

The fund is heavily concentrated in rental housing and logistics. In a filing, BREIT said it estimates same-property net operating income climbed 13% in 2022.

Gray has said that some BREIT investors have been making larger requests than they actually want to achieve, in expectation that they won’t receive all of the money back. That might cause redemptions to be elevated at the start of the year, he said last month on Blackstone’s earnings call. 

“We think over time, we’ll be able to work down this backlog,” he told analysts, without providing a specific timeline.

Earlier this year, BREIT secured a $4 billion cash infusion from the University of California’s investment office, giving the trust a longer-term source of capital during a volatile time in the markets. The university later added $500 million more to BREIT.

Returns totaled 8.4% for BREIT’s most popular share class last year, compared with a 28% loss for a Bloomberg index of publicly traded real estate investment trusts.

Commercial real estate, which BREIT invests in, has been facing challenges as a surge in borrowing costs drove down values. US commercial-property prices fell 13% in 2022, according to Green Street. 

This critical moment for BREIT will be a key test for the leader atop the business that houses the fund. Blackstone recently promoted Wesley LePatner to lead its “Core+” real estate business, taking over from Frank Cohen. Cohen will remain chairman and chief executive officer of BREIT.

(Updates with Blackstone statement starting in third paragraph, leadership switch in 15th paragraph.)

©2023 Bloomberg L.P.