Starwood, KKR Retail Real Estate Funds Limit Investor Withdrawals
Investors increasingly want out of nontraded real estate funds—and the operators of those funds are putting up gates to limit redemptions.
Starwood Real Estate Income Trust and KKR KKR –4.79% Real Estate Select Trust disclosed in filings Wednesday that they have curbed redemptions after elevated investor withdrawal requests.
The Starwood real estate investment trust, known as SREIT, said investors holding 4.2% of the $14.2 billion fund requested redemptions in December, and that the fund honored just 20% of those requests based on a quarterly redemption cap of 5% of its net asset value. The 4.2% figure implies that holders of more than $500 million of the fund wanted their money back in December.
The Starwood REIT is run by Starwood Capital Group, a private real estate investment firm founded and headed by Barry Sternlicht. Sternlicht is chairman of SREIT.
The smaller KKR Real Estate Select Trust, run by alternatives investment manager KKR (ticker: KKR), said that investors sought redemptions for more than its 5% quarterly limit in the past three months and that it honored 62% of those requests.
The redemption percentage, or proration, indicates that investors holding about 8% of the REIT wanted their money back in the latest quarter. The KKR fund has a net asset value of $1.6 billion.
The actions by the KKR and Starwood funds follow the move by Blackstone Real Estate Income Trust, the largest nontraded REIT at about $69 billion, to pay out just 4% of investor requests for withdrawals in December to stay within its 5% quarterly cap.
Investors have stepped up withdrawal requests from nontraded REITs, which limit redemptions to 5% each quarter, after the REITs vastly outperformed public peers in 2022, creating an incentive for redemption. The nontraded REIT market had exploded in size during 2021 and early 2022.