President @ Queens' College, Cambridge | Finance, Economics Expert
From The Wall Street Journal article, “A $10 Billion Real-Estate Fund Is Bleeding Cash and Running Out of Options.” The liquidity challenge facing this fund is attracting attention well beyond the investors in the fund and in the sector as a whole. Its remedial actions — namely, the mix between more borrowing, disposing of properties/assets, and restricting investor redemptions — will influence the extent of the spillover effects to other similar funds, the sector and creditors. #econony #markets #cre #commercialrealestate #realestate
Listed REITs will be the capital solution to the “stuck” private market, much like the early 90s. Invitation Homes already bought $650mm of single family for rents assets from SREIT.
Post BREIT now SREIT, and I am sure other non-traded REITs will follow in tow at this juncture in the sector's cycle. A salient example of the need for any prospective investor to diligently review, wholly comprehend, and then fully buy into the "conditional redemption" characteristics of these types of semi-liquid pooled investment funds. The current issues BREIT and SREIT are experiencing are of course part of "normal" market cycle in the asset class, hence both funds drawing on their liquidity management mechanisms and levers to weather the storm, as should be expected. What will be fascinating to observe is whether the story on these semi-liquid funds ultimately plays out in reality as planned for in theory - given both funds are the posterchildren for the wave of new product development and product launches seen in the semi-liquid fund space in recent times.
Clearly this was sold as “ private real estate with liquidity.” If it was sold as low volatility then you wouldn’t have these issues of redemptions as investors would continue to hold as a low vol investment in private real estate and ride out a downturn with some income flow. They need a CALPERs type transaction that BREIT did two years ago. It’s gonna be expensive.
I've said this many times here: contrary to what countless mortgage brokers and real estate agents tell themselves and each other, there is precious little capitalism in real estate markets. It is a market that is thoroughly addicted to, and dependent on, continued stimulus and subsidization from the central bank. In multifamily, high OPEX and no NOI are what's killing that sub-asset class.
Chris Scibelli
4mo
Note to self... ...Starwood and Blackstone, two of the bluest of blue chip names, each with big funds on the ropes. Weaker dominoes have to be teetering.
The fund is really feeling the pinch as investors rush to pull out their money, signaling possible trouble ahead for the wider economy. With only a fraction of the requested withdrawals met, we might see banks tightening up loans, investors getting jittery, and a potential drop in commercial property prices. This could force regulators to step in or funds like Starwood's to rethink how they handle cash. We're at a pivotal point where the commercial real estate market could face significant shifts in value and strategy.
The answer to this may be boring but it is quite simple: Tokenize the assets (not lost on Larry Fink at BlackRock), mature both primary and secondary markets. Build liquidity into the assets using better information on markets (AI) and focus intensely on two things: 1. Value optimisation and trust in it 2. Velocity of transactions (VOTs) to rapidly redeploy when liquidity is necessary This is evolving now in practical ways ( such as disassociating the complexity of e.g. title transfer from the transaction itself). We just need the real estate sector and its investors to get off their butts and start thinking and investing faster into a world outside their boxes instead of banging the insides and trying to get out of the traditional liquidity trap. The tech and opportunity is ready and markets developing. It just needs a strong coffee. ;)
When Barry has appeared on CNBC over the last 2 years commenting about the Fed and how they should lower rates, he was clearly talking his own book. We can't have perpetual ZIRP which fostered an environment of excessive risk-taking and poor buy decisions specific to CRE, especially within office buildings (which Starwood has participated in outside of SREIT). Current outstanding debt is out of balance with valuations combined with a liquidity mismatch in the investment vehicle.
Thanks, Mohamed! Jason Starr Kyle Asher #realestate