Starwood Capital Group reportedly became the second nontraded real estate investment trust limit withdrawals this week.
The firm notified investors Tuesday that it would restrict the money they could pull from its $14.6 billion real-estate fund, according to published reports. The move comes just days after Blackstone Inc. announced it would limit withdrawals from its $69 billion fund.
The funds normally allows investors to withdraw money each month or quarter, but with limitations. Last week, redemptions from Blackstone and Starwood’s nontraded REITs exceeded those limitations.
The decisions from the two largest nontraded REITs come in response to a surge in redemption requests as individual and institutional investors react to a commercial property sector that is under siege. Rising interest rates, weak demand for office space, soaring borrowing costs and a cooling economy are all depressing yields.
While the rise in redemptions could be short-lived, some pension funds and university endowments have reportedly started pulling money out of real estate funds.
Because these need to sell buildings to raise cash in order to pay back investors, ongoing redemptions could signal significant challenges coming for the real estate market.
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