Barry Sternlicht, Chairman and CEO of Starwood Capital Group, speaks during sessions at the 2024 Global Milken Conference at the Beverly Hilton Hotel in Beverly Hills, California on May 7, 2024.
David Swanson | Reuters
Barry Sternlicht, chairman and CEO of Starwood Capital Group, defended his decision to limit the amount of money investors can get from his real estate fund amid mounting losses and redemption demands.
“Despite all the hysteria in the media, people are saying, ‘I want to leave now and come back later when the coast is clear.’ So we made a very difficult decision,” Sternlicht said Wednesday on CNBC’s “Squawk Box.” “I decided that in the interests of the 80% of people who never made a repayment, we would slow down the payments. … We hope it will take six months.”
The $10 billion investor-owned Starwood Real Estate Income Trust, which invests in multifamily, industrial and office properties, suffered a sharp decline as loans became difficult to refinance in light of the Federal Reserve’s aggressive rate hikes.
In a letter to shareholders On May 23, Starwood introduced new limits that cap monthly withdrawals at 0.33% of net asset value, down from the previous limit of 2%. Meanwhile, the firm has also decided to waive the 20% management fee.
Sternlicht said he decided to impose the cap to protect loyal customers who never repaid the bonds, which makes up 80% of his investors.
The firm said the real estate trust, one of the world’s largest, maintained $752 million in immediate liquidity at the end of April.
Sternlicht called the Fed’s monetary policy “incredibly ineffective” but believes interest rates will come down soon.
“The real estate asset class has probably been the biggest victim of the unintended consequences of his actions,” he said. “Spreads are widening, which means markets are recovering, the future is becoming clearer.”