Last Updated: June 2024
Starwood Real Estate Income Trust
Starwood (also known as SREIT) manages about $10 billion and is one of the largest real estate trusts around. SREIT is managed by a company owned by billionaire investor Barry Sternlicht. According to recent press and regulatory filings, the company has drawn more than $1.3 billion of its unsecured credit line since the start of 2023, leaving only $225 million available. It’s speculated that unless the company sells some of its assets or incurs additional borrowing, reserves will be exhausted by the end of 2024.
SREIT’s investments include industrial real estate, self-storage facilities and multifamily.
Redemption Requests Creating Cash Squeeze For SREIT
Investors concerned about interest rates and the effect on real estate values have created a cash crunch for the company. Last year investors withdrew $2.6 billion from the property fund. In the first quarter of 2024, investors requested $1.3 billion in redemptions, but the company only honored $501 million, on a pro-rata basis due to the quarterly withdrawal cap of 5% of net assets.
In a recent filing with the Securities and Exchange Commission, SREIT announced that they are cutting back the amount of shares they will redeem in the repurchase program to 0.33% of net asset value. The cap previously was 2%. Starwood has indicated that it will cut its management fees as a conciliatory gesture.
REITs and Alternative Investments
Alternative Investments: These are assets that are not stocks, bonds or cash. Alternative investments generally fall within five categories: hedge funds, private capital, natural resources (oil and gas, energy), real estate (REITs) and infrastructure. They are typically less liquid that conventional investments, less regulated with higher fees and generally higher risk.
Non-traded REITs are public companies however they aren’t registered or traded on any public exchange, making them highly illiquid.
One nationally prominent financial expert, SLCG Economic Consulting, suggests that SREIT has made deceptive claims regarding its past returns & after-tax and tax-equivalent returns.
Brokers Have a Duty to Make Suitable Recommendations
[LEARN MORE]: Firms Have a Duty to Supervise their Financial Advisors (FINRA Rules 3110 & 2090)
Brokers and their firms have a duty to comply with the FINRA suitability rule which requires that they have a reasonable basis to believe that a recommendation is suitable for the customer.
[LEARN MORE]: FINRA Rule 2111- suitability -Regulation Best Interest
If you believe your advisor made an unsuitable recommendation which has caused you losses, you may be able to recover damages through FINRA arbitration. When considering suitability an advisor must take into account your age, level of financial sophistication, health, risk tolerance and investment objectives.
The Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates stockbrokers and brokerage firms. FINRA requires brokers and brokerage firms to report customer complaints and disputes as well as regulatory sanctions. In addition brokers are required to disclose certain financial matters such as personal bankruptcies, judgments and liens.
Rex Securities Law
[LEARN MORE]: See this for more information on REITs and Other Alternative Investments
With offices in Boca Raton, FL and Austin, TX, stockbroker fraud attorney Rex Securities Law provides representation to investors nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers, financial advisors and broker dealers.
If you have questions about how your account has been handled, call (877) 224-3199 to speak with an experienced securities attorney at no cost to you.
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