Starwood Real Estate Fund Temporarily Suspends Redemptions

Starwood Capital Group said ‌on Wednesday it would temporarily suspend redemptions at its $22-billion real estate fund following a strategic review, as it waits for market conditions to improve.

Here are a few details:

• Redemptions have driven the fund's net asset value down 6% in the last 12 ‌months, Starwood Capital CEO Barry Sternlicht said in a letter to ​the REIT's shareholders, adding that he does not expect the pressure going forward.
• The suspension is effective Wednesday and ⁠applies to share repurchase requests submitted for April, with exceptions to redeem accounts ​with balances below $5,000 and requests in the case of death or disability.
• From ⁠April, the REIT is also cutting its annualized distribution rate to 4.7% for its Class I share, down from 6.3% in March.
• "We recognize this decision may be frustrating for ‌some shareholders. However, taking this step now allows us to preserve the ​opportunity to realize ‌better outcomes as market conditions improve," Sternlicht added.
• The REIT will reintroduce liquidity when it can be ‌done in a "consistent and sustainable way," he said, adding that it was waiting for revenue growth to return to the sector.
• "We would also expect ⁠the war with Iran to conclude, ‌oil prices to subside, inflation ⁠to stabilize, and for Kevin Warsh to be seated as Fed Chair, supporting a lower ⁠interest ⁠rate environment," Sternlicht added.
• The company will actively explore capital raises pursue asset sales, it said.
• Starwood Capital, ‌one of the world's largest real estate investment managers, launched SREIT in 2018. The REIT owns 598 income-producing properties valued at $22.4 billion, with 94% occupancy, as of March ‌31.
• Starwood ​Capital has invested $500 million ‌in the REIT, and along with employees and affiliates, own about 7% of its equity.
• The news comes as the private credit ​industry also faces redemption pressure amid geopolitical volatility, concerns over AI and increased scrutiny of private credit.