In late 2022, the commercial real estate industry was rattled by a sudden move from two of its biggest players: Starwood Real Estate Income Trust (SREIT) and Blackstone Real Estate Income Trust (BREIT). Both funds abruptly limited investor withdrawals after a surge in redemption requests that November—a move that sent shockwaves through the market and drew the attention of regulators. According to reports, the Securities and Exchange Commission reached out to both companies, seeking clarity on the circumstances surrounding the redemption limits and specifically inquiring whether affiliates had been allowed to redeem shares ahead of regular clients.
Now, in 2025, the industry is showing signs of recovery, though the outlook remains uncertain. On January 9, 2025, SREIT filed with the SEC to announce changes to its share repurchase plan. Beginning in June, the fund would limit share repurchases to 0.5% of its aggregate net asset value (NAV) per month, calculated based on the previous month's closing NAV—a slight increase from the previous cap of 0.33%. Starting July 1, SREIT would further adjust its policy, allowing up to 1.5% of NAV to be repurchased each quarter, again measured by the preceding quarter's NAV.
Barry Sternlicht, CEO of Starwood Capital Group, defended the redemption limits in 2024, arguing that restricting withdrawals was preferable to selling properties at depressed prices. The board also clarified its approach to handling repurchase requests: If the company cannot fulfill all requests in a given month, shares will be repurchased on a pro rata basis. However, priority will be given to requests submitted due to the death or disability of a stockholder, up to $5 million of the previous month's NAV. Accounts that would fall below $2,500 after a repurchase will also be prioritized, with any remaining funds distributed proportionally among other requests.
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SREIT's decision to sharply limit redemptions in 2024 was a clear reflection of the market's volatility. In the first quarter of that year, the fund sold $1 billion in real estate, generating $300 million in cash after mortgage repayments.
BREIT, meanwhile, has faced its own set of challenges. In April, Chilton Capital Management argued that non-traded REITs like BREIT had yet to fully adjust their NAVs to reflect the impact of higher interest rates, unlike their publicly traded counterparts. While BREIT was only redeeming 5% of its equity value per quarter as of April 2023, by February 2024, it managed to fulfill all redemption requests for the first time since October 2022.
Efforts to stabilize BREIT have included high-profile deals, such as a $4 billion investment from the University of California’s endowment, which promised a minimum net return of 11.25% over six years, according to the Financial Times Alphaville. However, the liability to the university grew throughout 2024. By March 2025, the European Real Estate News Agency reported that BREIT was expected to continue selling assets to improve liquidity and might shift its focus from commercial to residential real estate.
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