Barry Sternlicht, the chairman and CEO of Starwood Capital Group, recently made a controversial decision to limit the amount of money investors could withdraw from his real estate fund. This move comes as the fund faces mounting losses and increasing redemption requests. In a statement on CNBC’s “Squawk Box,” Sternlicht explained that the decision was made in order to protect the interests of the majority of investors who have chosen to remain with the fund.
The $10 billion Starwood Real Estate Income Trust, which focuses on investing in multifamily, industrial, and office properties, has experienced significant declines due to challenges in refinancing loans amidst the Federal Reserve’s aggressive rate hikes. Sternlicht’s decision to cap monthly withdrawals at 0.33% of net asset value, down from the previous 2% limit, aims to stabilize the fund and protect remaining investors from the current market volatility.
Adapting to Economic Conditions
In a letter to shareholders, Starwood introduced these new restrictions and also announced a waiver of 20% of its management fee. Sternlicht emphasized that the cap was implemented to safeguard loyal clients who have stayed invested in the fund, which accounts for 80% of total investors. Despite the challenges posed by the Fed’s monetary policy, Sternlicht expressed optimism that interest rates will decrease in the near future, providing some relief for the real estate asset class.
While facing criticism for the decision to limit withdrawals, Sternlicht remains confident that this measure is necessary to weather the current economic storm. The firm disclosed that the real estate trust maintains a substantial $752 million in immediate liquidity, signaling its preparedness to navigate the challenges ahead. As the market continues to grapple with uncertainties, Sternlicht’s strategic approach underscores the importance of prioritizing stability and long-term growth over short-term disruptions.
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