Sternlicht defends gating Starwood REIT withdrawals, hopes it will be a ‘six-month thing’ as rates fall

Barry Sternlicht, Starwood Capital Group chairman and CEO, defended his choice to cap how a lot cash traders might pull from his actual property fund amid mounting losses and redemption requests.

“With all of the hysteria within the media, individuals are saying, ‘I need to get out now and I am going to come again in later when the coast is obvious.’ So we took a really robust choice,” Sternlicht mentioned on CNBC’s “Squawk Field” Wednesday. “I made a decision that for the advantage of the 80% of people that’ve by no means redeemed we’d decelerate redemptions. … We hope that is going to be a six-month factor.”

The investor’s $10 billion Starwood Actual Property Earnings Belief, which invests in multifamily, industrial and workplace properties, has suffered from steep declines because it turned tough to refinance loans in gentle of the Federal Reserve’s aggressive fee hikes.

In a letter to shareholders on Might 23, Starwood launched new restrictions that cap month-to-month withdrawals at 0.33% of internet asset worth, in contrast with the earlier 2% restrict. In the meantime, the agency additionally determined to waive 20% of its administration price.

Sternlicht mentioned he determined to implement the cap to guard loyal purchasers who by no means redeemed, which represents 80% of his traders, in accordance with the letter.

The agency mentioned the true property belief, one of many largest on the planet, maintained $752 million of quick liquidity as of the tip of April.

Sternlicht referred to as the Fed’s financial coverage “unbelievably ineffective,” however he believes rates of interest will come down quickly.

“The true property asset class might be the largest sufferer of the unintended consequence of his actions,” he mentioned. “The spreads are coming in, which suggests the markets are therapeutic, the long run’s getting clearer.”