Non-traded real estate funds managed by KKR & Co. and Starwood have received more redemption requests from investors than they could grant under the rules for operating investment vehicles, the firms said in reports. documents filed.
The redemption requests came after the funds managed to outperform public real estate investment trusts (REITs) in 2022, which may have prompted some investors to look to the vehicles for cash. In the case of KKR, part of its fund is dedicated to variable rate vehicles, which benefit from rising interest rates.
Real estate investment was less bullish overall as the cost of borrowing rose and dampened business activity, while demand for some office space was weak as people continued to work from home in following the COVID-19 pandemic.
KKR and Starwood’s moves come after Blackstone Inc.
bx,
last month saw limited redemptions from the huge Blackstone Real Estate Income Trust. Earlier this month, Blackstone Real Estate Income Trust also received a $4 billion investment from the Regents of the University of California.
Starwood revealed that its $4.2 billion Starwood Real Estate Income Trust Inc. honored 63% of redemption requests in November and 20% of shareholder redemption requests in December, after hitting its cap. redemption of 5% during the two months.
Starwood Capital Group, a private real estate investment firm, was founded by Barry Sternlicht, president of Starwood Real Estate Income Trust.
The $1.6 billion KKR Real Estate Select Trust has generated a net total return of 8.32% for 2022 while paying an annualized net distribution rate of 5.13% as of December 31, according to a deposit.
The fund received purchase requests of $128 million, or 8.1% of the fund’s overall net asset value, during its first quarter tender offer period, which ended on January 13.
KKR historically only allowed buy requests up to 5% of the fund’s net asset value. KKR said it was able to respond to 62% of redemption requests received in the first quarter.
The private equity firm said about 36% of the fund’s net asset value was in liquid assets.
“We believe that maintaining a strong liquidity position is a critical part of optimal portfolio construction, especially in more uncertain market environments like today,” wrote CEO Billy Butcher. of KKR Real Estate Select Trust, in a letter to fundholders. “We anticipate that our robust and multifaceted approach to liquidity should continue to allow KREST to repurchase common stock equivalent to 5% of [net asset value] during quarterly takeover bids with no negative impact on portfolio construction.
A KKR spokesperson declined to comment.
KKR
KKR,
the stock fell 4.7% on Thursday.