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Starwood REIT limits withdrawals to preserve liquidity

Investing.com - Starwood's Real Estate Income Trust is limiting the ability of investors to redeem their investments as it attempts to reserve liquidity and avert a potential cash crunch as interest rates remain elevated.

The Starwood REIT, which manages about $10 billion, said on Thursday that it would buy back only 1 percent of the value of the fund’s assets every quarter, down from 5 percent earlier.

The Trust said that it had chosen this move because it was facing more withdrawals than it could meet with its cash on hand, as high interest rates hurt the real estate market, adding this was a better plan than selling properties at dirt-cheap levels.

In a letter to shareholders, reported by the New York Times, Mr. Sternlicht, who leads the Starwood Capital Group, and Sean Harris, the chief executive of Starwood’s REIT, said: “We cannot recommend being an aggressive seller of real estate assets today given what we believe to be a near-bottom market with limited transaction volumes, and our belief that the real estate markets will improve.”

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The real estate market has run into difficulties since the Federal Reserve started its campaign to tame inflation by raising interest rates two years ago, resulting in higher mortgage rates and thus raised costs.

Since the beginning of 2023, investors have redeemed nearly $3 billion from Starwood REIT. In the first quarter, investors asked for $1.3 billion in cash back, but received only about 38 per cent on a pro-rata basis.

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