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Private REITs: A Focus on BREIT

Real Estate Investment Trusts (REITs) offer a way for investors to gain exposure to real estate without the need to directly own, manage, or finance properties. While many are familiar with publicly traded REITs, private REITs like the Blackstone Real Estate Income Trust (BREIT) also play a significant role in the real estate market.

What is a Private REIT?

A Private REIT, such as BREIT, is a real estate investment trust that is not listed on public stock exchanges. These REITs are typically available only to accredited investors and institutional investors, making them less accessible to the general public. The primary goal of private REITs is to pool investors’ capital to invest in a diversified portfolio of income-producing real estate assets.

Structure of a Private REIT


  1. Entity Formation: Private REITs like BREIT are usually structured as corporations, trusts, or associations that own, operate, or finance real estate properties. They must comply with specific Internal Revenue Service (IRS) regulations to qualify as a REIT.
  2. Tax Treatment: To qualify as a REIT, the entity must distribute at least 90% of its taxable income to shareholders as dividends. In return, REITs generally do not pay corporate income taxes on the distributed income.


  1. Internal Management: Some private REITs are internally managed, meaning they have their own dedicated management teams to oversee operations, acquisitions, and asset management.
  2. External Management: BREIT, for example, is externally managed by Blackstone, a leading global investment firm. This external management handles the day-to-day operations, including property management, leasing, and maintenance.

Revenue Generation in Private REITs

Private REITs like BREIT generate revenue primarily through:

  1. Rental Income: The bulk of BREIT’s revenue comes from leasing space in its real estate holdings. This includes residential properties, commercial buildings, industrial spaces, and other real estate assets.
  2. Property Sales: BREIT may also generate income by buying properties at lower prices, improving them, and selling them at a profit.
  3. Financing and Lending: Some REITs, including BREIT, focus on providing financing for real estate projects and earn interest income from these loans.
  4. Development Projects: Private REITs like BREIT might engage in property development, creating new real estate projects from the ground up and selling or leasing them upon completion.

Role of Sponsors

Sponsors are crucial to the formation and success of private REITs like BREIT. Here’s how they contribute:

  1. Capital Raising: Sponsors are responsible for raising the initial capital required to launch the REIT. Blackstone, the sponsor of BREIT, attracts investors by showcasing the potential returns and benefits of the REIT’s investment strategy.
  2. Asset Acquisition: Sponsors identify and acquire properties for the REIT’s portfolio. Blackstone’s expertise and industry connections help secure high-quality assets at favorable terms.
  3. Management Oversight: In externally managed REITs like BREIT, sponsors handle the day-to-day operations and strategic planning. They ensure the properties are well-maintained and generate steady income.
  4. Alignment of Interests: Sponsors often invest their own money in the REIT, aligning their interests with those of the investors. This can enhance trust and confidence among investors.

Advantages and Disadvantages of Private REITs


  1. Diversification: Private REITs like BREIT offer investors the opportunity to diversify their portfolios with real estate assets without the need to directly purchase or manage properties.
  2. Potential for High Returns: With skilled management and strategic property acquisitions, private REITs can generate significant returns for investors.
  3. Tax Efficiency: The requirement to distribute 90% of taxable income as dividends allows investors to benefit from a steady income stream while the REIT avoids corporate income taxes.


  1. Liquidity: Unlike publicly traded REITs, private REITs like BREIT are not traded on stock exchanges, making them less liquid. Investors may find it difficult to sell their shares quickly.
  2. Accessibility: Private REITs are typically limited to accredited investors, restricting access for the general public.
  3. Transparency: Private REITs may offer less transparency compared to publicly traded REITs, as they are not subject to the same regulatory reporting requirements.


Private REITs like BREIT provide a valuable investment vehicle for those looking to diversify their portfolios with real estate assets. Understanding their structure, how they generate revenue, and the role of sponsors can help investors make informed decisions. While private REITs offer significant potential benefits, they also come with challenges such as limited liquidity and accessibility. As with any investment, it’s crucial to conduct thorough research and consider seeking advice from financial professionals before investing in a private REIT. By gaining a deeper understanding of private REITs like BREIT, investors can better navigate the real estate market and take advantage of the opportunities these investment vehicles offer.