A Discounted Off-Ramp Appears For Starwood REIT Shares Stuck In Redemption Queue
A California-based firm is looking to help Starwood Capital Group clear its nearly $1B backlog of redemption requests for its nontraded REIT — for a price.
MacKenzie Realty Capital launched a tender offer to acquire up to 150,000 shares in Starwood Real Estate Income Trust from other investors at $16.25 per share, a roughly 22% discount on its estimated value on Aug. 31.
If fully executed, MacKenzie, a publicly traded REIT structured to have up to 20% of its assets in illiquid real estate securities, would spend a combined $2.4M to acquire SREIT shares with an estimated value of $3.1M at the August price.
Starwood’s nontraded REIT first limited redemptions in late 2022 as anxious investors lined up to pull cash from both SREIT and Blackstone Real Estate Income Trust, which also capped the amount investors could pull from the fund.
SREIT still had roughly $999M in outstanding redemption requests at the end of August, according to data from valuation firm Robert A. Stanger & Co. BREIT cleared its backlog and lifted its redemption cap in March 2024, and SREIT is practically the only major nontraded REIT that still hasn’t met customer demand to take back their money.
Starwood raised the cap on quarterly redemptions from 1% to 1.5% of SREIT’s net asset value in June, and the company has been selling properties, but its withdrawal restrictions have been described as the tightest in the industry.
Starwood fulfilled approximately 4% of repurchase requests in June, July and August, according to MacKenzie, which already has an actively managed stake in SREIT that it is looking to expand.
Starwood didn’t respond to a request for comment Tuesday morning.
In addition to the tender offer, MacKenzie Real Estate Advisers LP, the external manager of the Bay Area-based REIT, announced it had purchased 15,000 shares of the public REIT, which was trading flat at roughly $5.30 per share Tuesday morning. It has lost nearly 90% of its value since being listed on the Nasdaq Stock Market in November 2024.
The REIT reported a net operating loss of $23.5M for its fiscal year ending in June, double its $9.9M loss the prior year. Net revenues were up 40% from the prior year to $22M. It aims to have a real property portfolio evenly split between apartments and boutique, Class-A office space with a focus on the West Coast.
MacKenzie has previously executed two tender offers for SREIT, offering $17.50 per share in a July 2024 offer and $15.30 per share in February 2025. It purchased more than $3M in SREIT shares across the two offers. It made a similar tender offer for BREIT shares in October 2023.
All of the Starwood shares have been submitted to SREIT for redemption, and MacKenzie and its affiliates redeemed 6,750 shares in September at $20.76, an 18% premium on the 2024 purchase price, according to a release.
“We hope that the offer launched today will have similar results,” the firm said.
