Starwood Capital Group, under the leadership of Barry Sternlicht, is currently exploring the possibility of selling over 2,000 single-family rental homes. According to insiders who wished to remain anonymous due to the private nature of the matter, many of these homes are part of a portfolio acquired from Pretium Partners in late 2021, according to a report by Bloomberg Wire. It has been reported that Pretium intends to re-acquire approximately 100 of these homes. While the homes are not offered at distressed prices, sources indicate that Starwood may choose to retain the majority of the properties. Both Starwood and Pretium representatives have declined to provide comments on the matter.
As of March 31, SREIT (Starwood Real Estate Income Trust) owned a total of 3,210 single-family rental homes with an estimated value of $1.26 billion, as stated in a filing. During the first quarter, the trust recognized an impairment charge of nearly $80 million on various single-family rental properties, citing revised cash-flow assumptions and an increased likelihood of near-term disposition. Starwood also possesses rental houses outside of SREIT.
In recent months, the Starwood REIT, which primarily focuses on housing and industrial buildings, has experienced higher redemption requests, prompting the firm to impose restrictions on the amount of money returned by the trust at any given time. Similar funds catering to affluent retail investors, such as Blackstone Real Estate Income Trust, have also implemented redemption limitations.
Some of these trusts have sought to sell properties that have demonstrated greater resilience in the face of the real estate market downturn. Barry Sternlicht has expressed his belief that residential real estate offers better prospects compared to assets like offices, which are grappling with higher borrowing costs and difficulties in tenant occupancy due to the rise of remote and hybrid work.
According to a filing, SREIT reported redemption requests totaling 4.2 percent of its aggregate net asset value in April. The trust fulfilled slightly less than half of these requests. Starwood is one of the largest residential landlords and significantly expanded its single-family rental business during the pandemic, acquiring homes from suburban families as well as engaging in larger transactions, including the purchase of 2,300 homes from Pretium for over $1 billion in 2021.
Industry dynamics shifted when the Federal Reserve accelerated interest rate hikes in 2022. As a result, Starwood considerably reduced its pace of acquisitions, leading one partner firm to downsize its staff significantly. Barry Sternlicht criticized the Fed’s rate hike campaign, describing it as “bordering on idiotic” during a conference call in May.