Starwood REIT Sells $1 Billion Stake in Apartments to Free Redemption Pressures
Apollo Global Management will pay $1.02 billion for a 41.5% stake in a joint venture holding roughly 120 affordable housing properties owned by Starwood Real Estate Income Trust. SREIT will use the proceeds to pay down its credit facility, a move the company described as critical to improving liquidity and shareholder returns. Barry Sternlicht’s Starwood Capital manages the $22.5 billion non-traded REIT, which halted redemptions earlier this year to avoid selling assets at depressed prices. SREIT first tightened redemption limits more than two years ago.
Apollo will receive a portion of the cash flow from the apartment properties under the joint venture structure. SREIT retains a call option to buy back Apollo’s stake at certain times, with the call price capped at a 7% internal rate of return if exercised between five and 10 years after closing. The structure offers SREIT a path to reclaim full ownership once market conditions improve.
Non-traded REITs have faced mounting pressure as rising interest rates reduced property values and prompted investor withdrawals. Several large funds suspended or limited redemptions over the past two years to avoid fire sales. The Apollo transaction offers SREIT a way to raise capital without liquidating assets, though the fund remains under redemption restrictions.
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