Starwood Capital Group, led by Barry Sternlicht, is exploring a sale of more than 2,000 single-family rental homes.
Many of the homes being offered for sale by Starwood Real Estate Income Trust are part of a portfolio acquired from Pretium Partners in late 2021, according to people familiar with the matter, who asked not to be named because the effort is private.
Pretium is re-acquiring about 100 homes, people familiar with the matter said. The homes are not being offered at distressed prices and it’s possible that Starwood holds onto the bulk of the homes, the people said.
Representatives for Starwood and Pretium declined to comment.
SREIT owned 3,210 single-family rental homes valued at $1.26 billion as of March 31, according to a filing. It recognized a nearly $80 million impairment charge on various single-family rental properties during the first quarter on revised cash-flow assumptions “due to an increased probability of a near-term disposition,” the trust reported. Starwood also owns rental houses outside of SREIT.
The Starwood REIT, with a net asset value of $12.8 billion and a portfolio concentrated in housing and industrial buildings, has faced higher redemptions in recent months, leading the firm to restrict how much money the trust returns at one time. Similar funds sold to affluent retail investors, such as Blackstone Real Estate Income Trust, have also limited redemptions.
Some of the trusts have sought to sell properties that are holding up better in the real estate market downturn. Sternlicht has said that residential real estate has better prospects than assets such as offices, which are facing pressures from both higher borrowing costs as well as a struggle to fill the buildings with tenants given the rise in remote and hybrid work.
“Single family and multifamily is doing fine,” Sternlicht said on a conference call in May. “The only issue is office.”
Redemption Requests
SREIT reported that it received redemption requests equal to 4.2% of its aggregate net asset value in April, according to a filing. It met slightly under half of those requests, the filing said.
Starwood is among the largest residential landlords. The firm ramped up its single-family rental business during the pandemic, buying homes from suburban families and also in larger transactions, such as the 2021 deal to acquire 2,300 homes from Pretium for more than $1 billion.
Industry dynamics shifted when the Federal Reserve accelerated interest rate hikes in 2022. Starwood reduced its pace of acquisitions sharply in a move that led one partner firm to drastically reduce staff. Starwood’s Sternlicht has said the Fed’s campaign to hike rates is “bordering on idiotic.”
--With assistance from John Gittelsohn.