Starwood latest nontraded REIT with concerns

investmentnews.com:

Making a widely anticipated move to limit shareholder redemptions, the Starwood Real Estate Income Trust Inc., with $9.8 billion in assets, yesterday announced it was cutting back the amount of shares it would buy back from its retail customers each month as it waits for the market for commercial real estate to rebound and interest rates to drop.

On Monday, the Wall Street Journal reported the dire straits that the Starwood REIT, known as SREIT, was facing. SREIT was trying to preserve its available cash and credit by limiting investor redemptions, according to the report. In the first quarter, the fund was hit with $1.3 billion in withdrawal requests but satisfied less than $500 million of them.

Essentially, the fund’s liquidity, consisting of cash, marketable securities and a bank line of credit, was drying up, according to the report. By limiting client redemptions of shares customers bought from financial advisors and may want to sell back to the REIT, SREIT intends to stabilize the company.

According to a filing with the Securities and Exchange Commission, SREIT has cut the amount of shares it is buying back from clients in its repurchase plan beginning this month, to 0.33% of stockholder NAV from 2%.

Beginning July, the quarterly redemption will decrease to 1% of stockholder NAV from 5%. SREIT stated in the filing that it intends the move to be temporary and is waving 20% of its monthly base management fees.

Non-traded REITs are public companies but aren’t registered on any public exchanges and don’t trade. As InvestmentNews reported in November, sales of non-traded REITs tanked last year, with the industry raising just $9 billion through September after successive years in which it took in more than $30