(Bloomberg) -- Blackstone Inc.’s $68 billion real estate trust agreed to sell Simply Self Storage to Public Storage for $2.2 billion as the property vehicle grapples with investor withdrawals and upheaval in the commercial-property sector.

Blackstone Real Estate Income Trust will sell the self-storage business, the companies said Monday in a statement. The deal, expected to close in the third quarter, will result in more than $600 million in profit for BREIT, Blackstone said. 

Blackstone built BREIT into a massive player in the real estate industry, attracting investors as it snapped up properties from student housing to data centers across the US. The trust started to come under pressure last year as more investors sought to pull money amid the shift in markets. 

BREIT has limited withdrawals for eight straight months, although requests eased in June from a month earlier and are down from a peak in January.

Commercial-property owners are facing changing economics as borrowing costs rise. An index for property prices has fallen 12% in the past year, according to real estate analytics firm Green Street. Offices have taken the brunt of the hit as landlords grapple with a change in tenant demand given the rise in remote work and layoffs. 

BREIT’s portfolio is heavily concentrated in properties such as rental housing, warehouses and data centers, with “virtually no” exposure to struggling parts of the market including commodity offices, according to a letter to stockholders. 

A major BREIT share class was up 1% in June, bringing its net return over the past year to 2.5%.

Analysts at Keefe, Bruyette & Woods said Monday that gains from the deal will help BREIT, but they still hold a “cautious” view on the trust given redemptions and a “tough” operating environment. While the fund hasn’t been a forced seller, the analysts questioned whether BREIT is exiting assets earlier and at a lower price than it would otherwise if it weren’t facing redemption requests. 

“Overall the sale represents a good outcome for BREIT that should help performance and liquidity,” KBW’s Michael Brown and Aidan Hall said in the note. “The sale will help provide liquidity to the fund that can be opportunistically deployed into new real estate investment opportunities or to meet redemption requests.”

Recent Sales

The Simply Self Storage transaction is one of the latest sales for BREIT, which has struck deals to offload a resort and spa in San Antonio, Texas, and its stake in a joint venture that owns MGM Grand Las Vegas and the Mandalay Bay. With the storage deal, BREIT has sold, or is under contract to sell, $12 billion of real estate at prices that are, on average, above carrying values, Blackstone said. 

The self-storage transaction will allow BREIT to concentrate its focus on its highest growth sectors, according to Nadeem Meghji, head of Blackstone Real Estate Americas. 

Public Storage will expand its reach with Simply Self Storage’s assets, which include 127 wholly owned properties and 25 third-party managed properties, according to a presentation. The deal will boost its presence in the Sun Belt and the company expects it will generate “significant earnings upside,” according to the presentation.

Public Storage has been expanding in recent years, boosting its net rentable square feet by about 55 million since 2019. Earlier this year, Public Storage unsuccessfully sought to purchase Life Storage Inc., which was later bought by Extra Space Storage Inc. 

The deal will be funded with unsecured debt, the company said. Public Storage shares climbed 0.6% to $293.48 at 10:16 a.m. in New York, bringing its gains so far this year to 4.7%. 

(Updates with commercial real estate details in fifth paragraph, analyst note starting in eighth paragraph, and shares starting in 14th paragraph.)

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