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Starwood REIT Joins Blackstone REIT in Limiting Redemptions

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Starwood Real Estate Income Trust, a publicly registered non-traded real estate investment trust sponsored by Starwood Capital Group, limited redemptions as investor withdrawal requests surpassed November’s monthly limit.

As The DI Wire reported, Blackstone Real Estate Income Trust (ticker: BX), the largest nontraded REIT with $69 billion of net assets, also limited redemptions after it failed to fulfill all investor repurchase requests made during November.

SREIT, the second-largest nontraded REIT with $15 billion of net assets, allows for monthly redemptions of 2% of net asset value and 5% of NAV in a calendar quarter.

In a letter to financial advisors that was first reported by Barron’s, the REIT said it received repurchase requests equal to 3.2% of NAV in November. Based on the 2% monthly limit, it fulfilled 63% of investor redemption requests.

The letter states that any requests that weren’t filled will have to be made again in December.

“These [monthly] limits are designed to protect existing investors and the long-term health of the vehicle, and ultimately to maximize shareholder value,” SREIT wrote in its letter.

According to public filings made by Starwood, SREIT’s annual base fee is 1.25% of net assets and a performance fee of 12.5% subject to a 5% hurdle rate. It has reported inception-to-date annualized returns ranging from 13.6% to 14.4%, depending on share class, since Dec. 21, 2018. The REIT’s year-to-date return through October ranged from 9.5% to 10.2%. SREIT had $2.5 billion of immediate liquidity at the end of September, consisting of $1.7 billion of borrowing power and $800 million of cash.

Starwood Real Estate Income Trust invests in stabilized real estate across the United States and Europe. Its initial $5 billion offering launched in December 2017 and raised approximately $3.9 billion from investors before closing in June 2021. The first follow-on offering, comprised of $10 billion in shares, launched immediately afterward and raised approximately $8 billion. The second follow-on offering, which is currently offering up to $18 billion in shares of common stock, launched in August 2022 and has raised approximately $516.6 million in the primary offering to-date. As of Sept. 30, 2022, the REIT’s NAV was approximately $14.6 billion.

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