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Starwood Capital Group has temporarily suspended redemptions in its USD 22 billion real estate fund following a strategic review, citing ongoing market pressures. The move comes after redemption activity reduced the fund’s net asset value by 6% over the past year. The company has also lowered its distribution rate and indicated it will explore capital raising and asset sales. The fund, launched in 2018, remains largely occupied and continues to hold a diversified portfolio. The decision reflects broader stress in private markets, including private credit, due to global uncertainty and tighter financial conditions.
Starwood Capital Group has temporarily halted redemptions in its USD 22 billion real estate fund after completing a strategic review, as it waits for more stable market conditions. The decision was communicated to shareholders by CEO Barry Sternlicht, who indicated that recent redemption requests had impacted the fund’s performance. Advertisement
Over the past 12 months, redemption activity led to a 6% decline in the fund’s net asset value. Sternlicht noted that such pressure is not expected to continue at the same pace going forward. The suspension applies to share repurchase requests submitted for April, although exceptions have been made for accounts with balances below USD 5,000 and in cases involving death or disability.
Alongside the suspension, the fund has reduced its annualised distribution rate for Class I shares to 4.7%, down from 6.3% in the previous month. The company acknowledged that the move may not be well received by all investors but stated that it is aimed at preserving long-term value and improving outcomes once market conditions stabilise.
The firm also indicated that liquidity will be reintroduced only when it can be maintained in a consistent and sustainable manner. It is currently waiting for signs of revenue growth returning to the real estate sector. Sternlicht highlighted broader macroeconomic expectations, including easing inflation, lower oil prices, and a more supportive interest rate environment, as factors that could help improve conditions.
In the interim, Starwood Capital plans to actively explore capital raising opportunities and pursue selective asset sales to strengthen the fund’s position.
Launched in 2018, the real estate investment trust currently owns 598 income-generating properties valued at USD 22.4 billion, with an occupancy rate of 94% as of the end of March. Starwood Capital itself has invested USD 500 million into the fund and, along with its employees and affiliates, holds around 7% of its equity.
The development comes at a time when private market investments, including private credit, are facing increasing redemption pressure. This trend is being driven by global geopolitical uncertainties, concerns around artificial intelligence’s impact on markets, and heightened scrutiny of alternative investment structures.
Source Reuters
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