Starwood Capital Group, the global private investment firm led by Barry Sternlicht, is reportedly considering the sale of over 2,000 single-family rental homes from its Real Estate Income Trust (SREIT) that were acquired from Pretium Partners towards the end of 2021 during the Covid-19 pandemic.
Interestingly, people familiar with the matter told Bloomberg that Pretium is allegedly in the midst of re-purchasing around 100 homes, although these properties aren’t being marketed at distressed prices. According to an undisclosed filing, SREIT possessed 3,210 single-family rental homes worth approximately $1.26 billion as of March 31. The trust also recorded a nearly $80 million impairment charge on various single-family rental properties during the first quarter due to amended cash-flow assumptions, resulting from the increased likelihood of near-term disposition.
Amid the real estate market downturn, some trusts have been looking to offload properties that are maintaining their market performance. Sternlicht expressed optimism about the residential real estate sector compared to office properties, which are facing challenges from rising borrowing costs and lower occupancy due to the increase in remote and hybrid working arrangements. He stated in a May conference call that single-family and multifamily properties were “doing fine,” with the only issue being the office market.
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Starwood is one of America’s biggest residential landlords and expanded its single-family rental business significantly during the pandemic. The firm has been buying homes via larger transactions, including the $1 billion acquisition of 2,300 homes from Pretium in 2021.
The landscape of the industry started to change when the Federal Reserve decided to increase interest rates more rapidly in 2022. In response, Starwood dramatically slowed its rate of acquisitions, leading one partner firm to significantly downsize its workforce. Sternlicht criticized the Fed’s rate hike campaign as “bordering on idiotic.”
Information for this story was found via Bloomberg. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
