Starwood's real estate fund limits share redemptions as rate-cut bets ease

Starwood Real Estate Income Trust (SREIT) is temporarily limiting share redemptions to avoid forced sales of its real estate holdings in a market that continues to be pressured by high interest rates, it said on Thursday.

The fund had been selling its property investments to meet redemption demands, which have remained above the monthly and quarterly limits for the past year and a half, it said.

But receding expectations of rate cuts have made such sales more difficult, and the fund said it was waiting for "sunnier skies" ahead.

SREIT, run by Barry Sternlicht-led Starwood Capital, will limit monthly redemptions to 0.33% of its net asset value (NAV) starting May, compared to the current limit of 2%.

Starting July, quarterly redemptions would be capped at 1% per quarter compared to the current 5%, it said, adding that the new limits could be in place for the next six to 12 months.

Turmoil in the real estate industry has also hit regional banks like New York Community Bancorp NNYCB, whose shares have lost nearly two-thirds of their value since it reported a surprise quarterly loss due to its exposure to commercial real estate.

In March, shareholders had applied to redeem $408 million from the fund, and 24% of each investor's request was honored, it disclosed in regulatory filings earlier this month.

As of April 30, the fund had maintained $752 million of immediate liquidity, consisting of $446 million in cash, $275 million of an undrawn line of credit and $31 million in liquid securities.