Starwood locked in a $1B capital infusion for its nontraded REIT, which has faced a liquidity crunch as investors try to pull cash.
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Investment giant Apollo Global Management is providing $1B to Starwood Real Estate Income Trust in exchange for a 41.5% stake in the equity interest of a 120-property affordable housing portfolio. SREIT plans to use the cash to pay a “significant portion” of its credit facility, “a critical step in the Company’s broader plan to improve liquidity,” according to a filing with the Securities and Exchange Commission.
Starwood halted redemptions at the $22B real estate fund in April to shore up liquidity and avoid forced sales to meet withdrawal requests.
The REIT had 598 assets valued at $22.4B and a 94% occupancy rate at the time of the redemption freeze, which CEO Barry Sternlicht said was driven purely by the flood of calls for cash and not the portfolio’s underlying performance.
As part of the new joint venture, SREIT will pay out regular distributions from the profits generated by the portfolio and guarantee an annual minimum yield for Apollo that could leave Starwood paying the bill if the assets underperform.
The joint venture appears to be open-ended, with Starwood maintaining call options at specific points in the deal to buy back Apollo’s shares.
SREIT reported $14.6B in total liabilities in the first quarter, including $12B in mortgage notes and secured credit facilities and a $1.5B unsecured line of credit. Roughly $4B of that debt was due within 12 months at the end of March.
Nontraded REITs hit a rough patch in late 2022 as investors with jitters about the strength of commercial real estate valuations flooded in with redemption requests. Blackstone’s REIT was also squeezed and capped redemptions from late 2022 until March 2024.
Nontraded REITs collectively fulfilled $56B in redemptions by October, effectively clearing the backlog across the sector — except for SREIT, which still had $999M in outstanding requests.
Investors in SREIT have consistently run up against its quarterly and annual ceilings for distributions, the latter of which was decreased for Class I shares in April to 4.7% of net asset value instead of 6.3%.
Apollo has been actively managing its real estate portfolio across 2026, including by liquidating its own mortgage REIT after selling most of its $9B holdings to Athene Holdings, the insurance firm Apollo acquired in 2022. In March, the investment giant pledged $1B to a joint venture with Realty Income Corp. that will buy single-tenant retail assets.
Apollo also announced this week plans for a second headquarters in Austin, where it expects most of its future growth to take place.
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