June 13, 2024
Money

Investors pull money from Starwood $10bn property fund


A $10bn US commercial property fund is running low on liquidity as investors grow worried about the stability of the sector.

Starwood Real Estate Investment Trust (Sreit) is managed by Starwood Capital’s Barry Sternlicht. It is one of the largest unlisted property funds in the US, and has drawn more than $1.3bn of its $1.55bn unsecured credit facility since the beginning of 2023 following heavy redemption requests.

At the current pace of redemptions, Sreit would run out of credit and cash in the second half of this year unless it borrows more or sells more property assets.

Investors have pulled billions from commercial property funds since US interest rates shot up in 2022 amid concerns about property valuations.

A larger fund run by Blackstone has also experienced high volumes of withdrawals which have recently slowed. The fund was able to meet monthly withdrawal requests in full for the first time since late 2022, redemptions at Sreit remain at record highs.

A person familiar with Starwood’s fund said it would have greater liquidity later this month after asset sales that would soon close. Starwood could sell other assets to raise cash, this person said. The fund has also announced a plan to dispose of $1bn of property through special tax-efficient deals with wealthy individuals.

Read the full story here.

Here’s what else I’m keeping tabs on today:

  • Walmart: The world’s largest retailer will report earnings this morning and give insight into how consumer spending held up in the first quarter amid persistent inflation. Earnings are forecast to rise almost 150 per cent year on year to 52 cents a share on revenue expected to increase 4.7 per cent to $159.5bn. 

  • Other results: Deere, Under Armour and Canada Goose will report earnings before the bell.

  • US jobless claims: New applications for unemployment aid are forecast to have dropped to 220,000 in the week ended May 11. A week before, unemployment claims edged up to 231,000 claims. 

  • Middle East: Leaders from 22 member states meet in Bahrain for the Arab League summit, where a peace proposal on the Israel-Hamas war and a Palestinian state are expected to be discussed.

Five more top stories

1. Exclusive: fashion giant Shein is shifting focus to London as its plans for a New York listing stall. In an interview with executive chair Donald Tang, he said the company had made some progress in persuading Wall Street that the company was not controlled by China, “but not enough” to win over US lawmakers. Read about Shein’s plan to list in the UK here.

2. Pfizer has offered $250mn to settle thousands of lawsuits over cancer risks related to heartburn drug Zanac. The move is designed to reduce Pfizer’s potential liability. An analyst note published by Morgan Stanley estimated potential liabilities of $45bn for companies linked to the drug. Read about Pfizer’s plan to settle the court cases here.

3. Slovakia’s Prime Minister Robert Fico underwent surgery yesterday evening and is “no longer in a life-threatening situation”. The assassination attempt is the first on a sitting European leader in over two decades. The country’s security council has said it will hold an extraordinary meeting on Thursday. Follow updates here.

4. Ray Dalio has warned that rising US government debt could hit Treasury bonds, arguing that investors should move some of their money to foreign markets. The billionaire founder of hedge fund giant Bridgewater Associates raised wide-ranging concerns including the potential for the country to become involved in another international conflict, in an interview with the FT.

  • US inflation: Stocks closed at a record high after data showed inflation had fallen slightly in April, prompting traders to increase bets on rate cuts this year.

5. Berkshire Hathaway has quietly built a minority stake in insurer Chubb, one of the world’s biggest insurance companies. The position is worth $6.7bn and highlights Buffett’s continued bets in the finance sector. Stock in Chubb increased by 9 per cent after the announcement. Read more about Berkshire’s most recent investments here.

News in-depth

Xi Jinping and Vladimir Putin
© FT montage; AFP/Getty Images

Vladimir Putin will meet Xi Jinping today in a sign of their countries’ burgeoning ties, not just in terms of trade but also with a deepening military relationship. Western governments have so far been most concerned about Chinese backing for Russia’s war in Ukraine, but two weeks ago US officials raised alarm over their co-operation in another key security theatre: the seas around Taiwan.

We’re also reading . . . 

  • Fortress America: Despite writing the rule book, the US is growing tired of upholding the law on global trade, writes Ed Luce.

  • Greenwashing: Companies are getting craftier at posing as more climate-friendly than they are, writes Andreas Hoepner of University College Dublin.

  • Paramount: The tussle for the Hollywood studio has been billed as the money men against the creatives, but the outcome could decide who survives in the streaming era.

  • Musk vs Brazil: In a rare interview, the country’s supreme court president linked X’s owner with what he called a “destructive” far-right movement intent on destabilising democracies.

Chart of the day

The market for green tax credits has ballooned in size since the introduction of Biden’s Inflation Reduction Act in 2022. It is approaching $50bn in size and forecast to hit $100bn by 2030. Among the buyers are oil and gas companies, but the market is varied.

Column chart of IRA tax credit market volume by year ($bn) showing more than $100bn worth of tax credits will be up for sale by 2030

Take a break from the news

It’s the most important meal of the day, but could it also be the most joyous? HTSI takes you on a trip to sample some of the world’s best breakfasts, from rural China to cosmopolitan Italy.

Additional contributions from Tee Zhuo and Benjamin Wilhelm

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