SREIT: What Happens When You Buy at the Peak?
How an $11 billion fundraising boom became a 48-month redemption crisis
I presented in a real estate MBA class at UC Irvine last week (Go, Anteaters!), and a great question came up:
“What happens to funds that raised billions in the Sunbelt at the market peak?”
It so happens that we have the perfect case study: Starwood Real Estate Income Trust. The fund raised $11.2 billion in 2021–2022, right as multifamily real estate peaked. Just a little over three years later, NAV is down 29%, redemptions are frozen, and investors who invested at the peak can currently access exactly $0.
“How do non-traded REITs come up with asset valuations?” Here you go:
👉 And here’s a recent case study on the subject:
In today’s post, we’ll look at what happened with SREIT: the fundraising surge, the redemption spiral, the leverage dynamics, and what can happen when fundamentally illiquid assets are placed inside a liquid wrapper (also, I have homework for you).
And here’s a fun case study on a single multifamily deal in Houston (acquired in 2022):
Disclosure: This case study is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.
Raising Billions at the Peak
Starwood REIT’s fundraising tells the story of the euphoric years in commercial real estate. After modest growth from 2019–2020, subscriptions exploded: $5.8 billion in 2021, followed by another $5.4 billion in 2022.
That $11.2 billion was raised at the absolute peak.
What were they buying? As of December 2022, 65% of assets were multifamily apartments, and 58% of the portfolio was concentrated in the South (primarily Texas, Florida, Georgia, and Arizona).
In other words, this was a leveraged bet on Sunbelt multifamily at the exact moment valuations were peaking (and roughly a year before supply went parabolic).
The pitch was compelling: stable income from essential real estate, tax-efficient distributions, and professional management.
The reality: they were buying apartments at the top of the cycle, just as supply surged and interest rates were about to spike.
Liquidity Meets Leverage
Evergreen real estate funds face an age-old problem: they promise monthly liquidity while owning illiquid assets.
That works beautifully until it doesn’t.
When real estate values decline, redemption requests accelerate. One option is to shrink a fund into oblivion gracefully: sell assets, cut distributions, de-lever, and slowly return capital.
Starwood chose a different path.
As redemption requests accelerated through 2023–2025, the fund sold assets ($1.2 billion in 2025 alone), but did not materially reduce leverage.
Total debt stayed roughly flat at around $14 billion, while equity collapsed from $10.1 billion in 2022 to $4.0 billion in 2025. The debt-to-equity ratio exploded from 1.5x to 3.5x, while NAV per share fell from $26.34 to $19.65.
The fund’s stated leverage policy targets 50–65% (debt net of cash divided by gross real estate assets). By late 2025, actual leverage had climbed to approximately 64–67%, effectively sitting at or above the high end of the stated range.
100% to 0% in 48 months
The redemption tsunami happened as they usually do: