Barry Sternlicht, Chairman and CEO of Starwood Capital Group, at the Milken Conference 2024 Global Conference at the Beverly Hilton Hotel on May 7, 2024 in Beverly Hills, California Give a speech.
David Swanson | Reuters
Starwood Capital Group Chairman and CEO Barry Sternlicht defended his decision to limit investor withdrawals from his real estate funds amid mounting losses and redemption requests.
“With the media hysteria, people were saying, ‘I want to get out now and I’ll come back when the coast clears.’ So we made a very difficult decision,” Sternlicht told CNBC on Wednesday ’s “Squawk Box” show. “I decided that for the benefit of the 80% of people who have never redeemed, we are going to slow down redemptions… We hope this will continue for six months.”
The investor’s $10 billion Starwood Real Estate Income Trust, which invests in multifamily, industrial and office properties, has been struggling to refinance loans as the Federal Reserve raises interest rates sharply. The stock price fell sharply.
In a letter to shareholders On May 23, Starwood introduced new restrictions, with a monthly withdrawal limit of 0.33% of net asset value, compared with the previous limit of 2%. At the same time, the company also decided to waive the 20% management fee.
Sternlicht said he decided to impose the cap to protect loyal customers who never redeemed themselves, which accounted for 80% of his investors, according to the letter.
The real estate trust, one of the world’s largest real estate trusts, maintained $752 million in immediate liquidity as of the end of April, the company said.
Sternlicht called the Fed’s monetary policy “incredibly ineffective,” but he believed interest rates would fall soon.
“The real estate asset class is probably the biggest casualty of the unintended consequences of his actions,” he said. “Spreads are emerging, which means the market is healing and the future is becoming clearer.”
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