REITs Redemptions

[Elliott]

I remember back in 2021 seeing lots of REIT advertisements, promising 12% returns. And as they say, "if it sounds to good to be true, it probably isn't true."

WSJ 7/1/24



"Starwood Capital Group’s move to severely tighten restrictions on investor withdrawals from its $10 billion real-estate fund is rippling through the $90 billion private real-estate fund business.

After the giant investment firm announced the new restrictions in May, sponsors of similar funds said they experienced a jump in redemption requests. Investors in these funds, mostly individuals who paid as little as $2,500, appear worried that their funds might also tighten the withdrawal spigot, forcing them to wait indefinitely in line if they want to cash out.

KKR in June responded to the high redemptions in its $1.2 billion fund by investing $50 million in fresh capital and promising to cancel $200 million worth of the firm’s stake in the fund if its share price, at $25.56 on May 31, doesn’t hit $27 in three years. “We have confidence in a real-estate recovery,” KKR said in a letter to shareholders. Blackstone said the increase in shareholder withdrawal requests following Starwood’s action in May exceeded the 2% monthly limit.

The shrinking fund business is one of the most dramatic signs of the commercial-property downturn caused by the jump in interest rates and flagging demand in the office sector. Investors who enjoyed outsize returns when real estate boomed have lost money in recent months as property values have fallen."

 

[Joe Flacco]

Everybody keeps looking for the fed rate cuts but with the curve inverted I am not really expecting much movement in the long end of the curve.

 

[Charles West]

I remember back in 2021 seeing lots of REIT advertisements, promising 12% returns. And as they say, "if it sounds to good to be true, it probably isn't true."

WSJ 7/1/24

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"Starwood Capital Group’s move to severely tighten restrictions on investor withdrawals from its $10 billion real-estate fund is rippling through the $90 billion private real-estate fund business.

After the giant investment firm announced the new restrictions in May, sponsors of similar funds said they experienced a jump in redemption requests. Investors in these funds, mostly individuals who paid as little as $2,500, appear worried that their funds might also tighten the withdrawal spigot, forcing them to wait indefinitely in line if they want to cash out.

KKR in June responded to the high redemptions in its $1.2 billion fund by investing $50 million in fresh capital and promising to cancel $200 million worth of the firm’s stake in the fund if its share price, at $25.56 on May 31, doesn’t hit $27 in three years. “We have confidence in a real-estate recovery,” KKR said in a letter to shareholders. Blackstone said the increase in shareholder withdrawal requests following Starwood’s action in May exceeded the 2% monthly limit.

The shrinking fund business is one of the most dramatic signs of the commercial-property downturn caused by the jump in interest rates and flagging demand in the office sector. Investors who enjoyed outsize returns when real estate boomed have lost money in recent months as property values have fallen."

Having your money locked up like an annuity from an insurance company is scary.

 

[Fernando]

Commercial properties are going down. Who in their right mind want to invest in risky commercials.
REITs' value should keep going down.