Starwood Halts Redemptions At SREIT, Says Now Is Not The Time To Force Sales
Starwood Capital Group froze redemptions for its $22B real estate fund to shore up liquidity and avoid having to sell what it describes as its top-tier assets into a middling marketplace.
Billionaire Barry Sternlicht’s investment firm said it was “temporarily suspending” redemptions in its Starwood Real Estate Income Trust in a note to shareholders and filed with the Securities and Exchange Commission on Wednesday. The move follows a strategic review, with Sternlicht telling investors the unabating flood of redemption requests, not the performance of the portfolio, necessitated the freeze.
“The issue we are addressing is not the real estate,” Sternlicht wrote in the letter, describing SREIT’s 2024 5.1% net operating income as best-in-class and defending 2025’s 1.5% NOI growth against headwinds in the multifamily sector.
“It is the pressure created by elevated redemption requests, which rose quite suddenly when interest rates spiked and have remained high,” he wrote.
Along with the pause in redemptions, Starwood is capping SREIT’s annualized distribution rate at 4.7% for Class I shares, down from 6.3%.
Sternlicht said in the letter that the strategic pivot would allow SREIT to “preserve the opportunity to realize better outcomes as market conditions improve.” Redemptions drove a 6% decline in the REIT’s net asset value per share over the last 12 months, he wrote.
Starwood is still exploring strategic fundraising to support liquidity and potentially drive performance through new investments and plans to make strategic asset sales to support the nontraded REIT.
Starwood committed to reintroducing liquidity “when it can be done in a consistent and sustainable way.”
Until then, most investors with more than $5K in SREIT will be unable to pull their cash.
“Our goal is straightforward: to have all shareholders benefit from improved performance, and for those seeking liquidity to do so at values that better reflect the stability of the portfolio,” Sternlicht wrote in the letter.
SREIT’s portfolio included 598 properties valued at $22.4B with a 94% occupancy rate at the end of March. The REIT holds more than 63,000 apartment units, accounting for 71% of its allocated value. Another 19% of its holdings are spread across industrial, self-storage and real estate debt.
SREIT launched in 2018 and saw redemptions surpass their 5% cap and be limited for the first time in late 2022 as the pandemic ravaged the global economy. SREIT later cut the redemption cap to 2% of net asset value, before further slashing it to 0.33% in June 2024 in a move that rippled across the capital markets landscape.
The cap was periodically raised in the roughly two years since, hitting 1.5% in June 2025 as investors lined up to pull roughly $850M from the fund.
Nontraded REITs faced a broad-based sell-off during the depths of the pandemic and the early period of the recovery that followed.
Blackstone Real Estate Investment Trust also faced a high-profile capital squeeze that led redemptions to be capped from late 2022 until March 2024, by which time the volume of requests to redeem shares in BREIT had fallen 82% from its peak.
Nontraded REITs collectively fulfilled $56B worth of redemption requests by October, with just $1B remaining in the backlog, practically all of which came from requests to pull cash from SREIT.
Some investment firms have tried to take advantage of the freeze by offering to buy SREIT shares at steep discounts. California-based MacKenzie Realty Capital announced an offer to buy up to 150,000 SREIT shares from investors at $16.25 per share, a 22% discount of the estimated share price at the end of August.
Hedge fund Saba Capital Management made a similar offer in March, offering to buy around 20 million SREIT shares at a roughly 25% discount, depending on the class of share.
Saba CEO Boaz Weinstein told CNBC this week that demand from SREIT shareholders, as well as interest in a tender offer that was launched around the same time for a Blue Owl Capital fund, came in “below initial expectations.”
The New York-based hedge fund acquired shares with a face value of roughly $10M across 190 trades, “substantially all” of which were for SREIT shares, with the Blue Owl tender offer generating less than 1% of what was offered.
