Starwood Refinances 13,000 Apartments With $1.7B In Freddie Mac Debt
A Starwood Capital Group fund refinanced a huge chunk of its portfolio with more than $1.7B of Freddie Mac loans.
The properties are owned by Starwood Real Estate Income Trust, Miami-based Starwood's $8.2B nontraded REIT. The mortgage covers almost 13,000 units that are primarily workforce and affordable housing, roughly a fifth of SREIT's multifamily portfolio.
The 10-year Freddie Mac loans refinanced 52 assets across 10 states that SREIT purchased in 2021. A Walker & Dunlop team of Dustin Stolly, Aaron Appel, Jonathan Schwartz, Keith Kurland, Adam Schwartz, Sean Reimer, Michael Stepniewski and Michael Ianno arranged the mortgages.
“With a large majority of units in high-growth, high-migration markets, we believe the fundamentals are strong for the long term for our lenders and investors,” Starwood Capital President Jonathan Pollack said in a statement.
Starwood and Walker & Dunlop declined to comment on which properties were refinanced.
Multifamily makes up 75% of the fund's real estate portfolio, according to its annual report filed last month with the Securities and Exchange Commission. SREIT owned 271 multifamily properties encompassing more than 63,000 units operating at 94% occupancy on average at the end of last year.
The deal is a stabilizing move for the beleaguered fund, which has been limiting redemptions by its investors since 2022.
That was the year that interest rates started spiking and investors in the semiliquid funds tried to pull money out en masse. Managers of nontraded REITs, largely private equity giants like Starwood, Blackstone, Brookfield and KKR, limited those redemptions to prevent being forced to sell assets into a down market.
By the middle of last year, the market stabilized, and most funds cleared their redemption backlogs. Nontraded REITs fulfilled $56B worth of redemptions by October last year, but SREIT, the second-largest fund of its kind, hasn't caught up to its peers.
Nontraded REITs typically repurchase a maximum of shares equivalent to 2.5% of their net asset value per month or 5% per quarter. In 2024, as it was staring down a liquidity crunch, SREIT limited its repurchases to just 0.3% of its NAV per month. Last year, it raised the limit slightly to 0.5% of NAV per month and 1% per quarter, according to its SEC filings.
Investors in SREIT were able to withdraw $2.6B in 2023, $1.1B in 2024 and $500M in 2025, according to SEC filings. Between January and March, Starwood repurchased roughly $100M of common stock but fulfilled less than 4% of withdrawal requests.
Investors of SREIT were still waiting to pull more than $1B as of February, according to data from valuation firm Robert A. Stanger & Co. The backlog is by far the largest of any nontraded REIT. In second place is KKR's fund, which had a $25.5M backlog. Sixteen of the 20 nontraded REITs tracked by Stanger fulfilled every share repurchase request in February.
