Are CRE woes over? Not so fast.

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STILL IN THE HOLE: Hmm. Things might be looking marginally better in the office market lately, but that doesn’t mean everybody’s out of the woods yet. Not by a long shot.

STARWOOD’S $10 BILLION PROPERTY FUND
TAPS CREDIT LINE AS INVESTORS PULL MONEY

A $10bn US property fund is running low on liquidity as investors demand their money back, threatening a reckoning for a sector rocked by rising debt costs and fears over real estate valuations.

Starwood Real Estate Investment Trust (Sreit), one of the largest unlisted property funds, has drawn more than $1.3bn of its $1.55bn unsecured credit facility since the beginning of 2023 following heavy redemption requests. . . .

At the current pace of redemptions, Sreit would run out of credit and cash in the second half of this year unless it borrows more or sells more property assets. . . . [Emphasis added.]

Not encouraging! Further, if Starwood takes steps to shore up its REIT’s finances in a way similar to the deal Blackstone did with the University of California last year, the whole situation could get even worse.