What happened

Shares of Blackstone (BX -0.68%) plunged 18.9% in December, according to data provided by S&P Global Market Intelligence. The biggest factor weighing on shares of the leading alternative asset manager was a surge in redemption requests at its non-traded REIT, Blackstone Real Estate Income Trust (BREIT). That spooked investors and caused analysts to lower their expectations for the stock. 

So what

Blackstone started tapping into the retail investor market in 2017 when it launched BREIT to provide high-net-worth investors access to institutional quality private real estate investments. It crafted that product to meet retail investors' need for liquidity, which it offers monthly. However, it caps redemptions at 2% of its net asset value (NAV) in a calendar month and 5% of its quarterly NAV, so it doesn't need to sell real estate at an inopportune time to repurchase shares. 

With the public stock and bond markets selling off last year, a growing number of BREIT investors, especially those in even harder-hit Asian markets, sought to cash in on their BREIT shares, which had held their value. These redemption requests exceeded Blackstone's limit in November. As a result, the company could only fulfill 43% of the redemption requests it received. 

That news spooked investors who feared the REIT was having liquidity issues. Blackstone quickly addressed those concerns by taking steps to increase BREIT's liquidity. It cashed in on its casino investments in Las Vegas, selling its stakes in two properties to its partner VICI Properties for $1.27 billion in cash plus the assumption of the associated debt. Meanwhile, in early January, BREIT got a vote of confidence after UC Investments agreed to buy $4 billion in its shares, which it will hold for at least six years. 

The market's concerns about BREIT led several analysts to downgrade their view on Blackstone's stock. For example, Barclays analyst Ben Budish downgraded shares from overweight to equal weight and cut their price target from $98 to $90 per share. The analyst noted that while there's a long-term opportunity in retail, the near-term sentiment for Blackstone's stock "will be very challenging." Meanwhile, BMO Capital analyst James Fotheringham cut that firm's price target from $109 to $90 a share. Fotheringham believes redemptions at BREIT will be a significant headwind for Blackstone in the medium term, and cut the stock's earnings view for 2023. 

Now what

BREIT has been a big growth driver for Blackstone in recent years. Although it's facing an increase in redemptions, the REIT's underlying performance remains strong. Because of that, it should continue to attract high-net-worth investors in the future. In the meantime, the sell-off in Blackstone's stock looks like a great buying opportunity for long-term investors, given the growth potential of the retail market.