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Starwood REIT cracks down on withdrawal limits as cash runs short
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KKR pumps $50M into property fund in tense moment for REITS
KREST injection comes after clamping down on withdrawals
A photo illustration of KKR Co-CEO Joseph Bae (Getty)
As one firm braces for a difficult period ahead with its real estate investment trust, another is propping up its property fund.
KKR injected $50 million of fresh capital into KKR Real Estate Select Trust, otherwise known as KREST, Bloomberg reported. KKR used its balance sheet to make the move last week, purchasing its shares at a price of $25.56.
In another move, KKR promised to cancel up to 7.7 million of its shares in KREST if the stock price is not above $27 on June 1, 2027. KKR will contribute any shares to bring the net asset value above that level.
“We have confidence in KREST and the likelihood of a real estate recovery, which allows us to offer these benefits to shareholders,” KKR said in a letter.
The moves should give the property fund more liquidity and financing capacity, according to the chair of investment bank Robert A. Stanger & Co., who called KKR’s decision a “smart and bold move to offer enhanced downside protection for returns that has the potential to reignite fundraising at KREST.”
In the second quarter, redemption requests at KREST exceeded its limit of 5 percent of net asset value, according to a filing. The property fund only fulfilled 48 percent of each shareholder’s redemption request for the quarter.
KKR initially started curbing withdrawals from its real estate fund at the beginning of last year, mirroring similar clampdowns by the likes of Blackstone and Starwood Capital. While Blackstone’s signature fund has since shown signs of recovery, Barry Sternlicht recently lowered the gates on Starwood Real Estate Income Trust again.
Amid a liquidity crunch, SREIT tightened the limits on how much shareholders can take out of the $10 billion real estate fund. Previously capped at 2 percent of net asset value, Starwood moved the boundaries to 0.33 percent of net asset value each month, while also cutting its management fees.
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KKR clamps down on REIT withdrawals, joining Blackstone, Starwood
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Banks are more exposed to commercial real estate than regulators realize
A recent study led by New York University economics professor Viral Acharya, Frankfurt School of Finance & Management assistant professor Max Jager and more also raised alarms about bank exposure to real estate investment trusts.
The researchers found that big banks’ exposure to commercial real estate lending grows by 40% when indirect REIT lending is considered — a less-scrutinized burden than loans on bank balance sheets.