Starwood REIT Limits Shareholder Redemptions Amid Liquidity Challenges

Posted on August 16th, 2024 at 10:18 AM
Starwood REIT Limits Shareholder Redemptions Amid Liquidity Challenges

From the desk of Jim Eccleston at Eccleston Law

According to InvestmentNews, Starwood Real Estate Income Trust Inc. (SREIT), has announced a significant reduction in the amount of shares it will repurchase from retail investors, a move aimed at preserving liquidity during challenging market conditions. The decision comes as SREIT, managing $9.8 billion in assets, faces a surge in redemption requests while dealing with a market downturn in commercial real estate and rising interest rates.

In the first quarter of this year, SREIT received $1.3 billion in withdrawal requests but could fulfill less than $500 million. To address these liquidity constraints, SREIT will reduce its monthly share repurchases from 2 percent of stockholder NAV to 0.33 percent starting this month. Additionally, quarterly redemptions will be cut from 5 percent to 1 percent of stockholder NAV.

This temporary measure, outlined in a filing with the Securities and Exchange Commission, is part of SREIT’s broader strategy to stabilize its financial position. The company also announced it will waive 20 percent of its monthly base management fees during this period.

InvestmentNews reports that non-traded REITs like SREIT, which are public but not listed on exchanges, have been hit hard by the current economic environment. Rising interest rates, declining sales, and investor concerns have led to significant challenges for the industry. Unlike its competitor, Blackstone Real Estate Income Trust Inc., SREIT has opted to lower its redemption capacity to protect its existing investors.

Industry experts, such as Kevin T. Gannon, Chairman and CEO of Robert A. Stanger & Co. Inc., have supported SREIT’s approach, noting that it strikes a balance between managing redemptions and maintaining the trust’s financial health without diluting shareholder value.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

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