Starwood Real Estate Income Trust has halted redemptions as mounting pressure exposes flaws in its bet on lower interest rates. The high-profile property fund temporarily suspended most redemptions after investors requested withdrawals amid persistently high rates. Barry Sternlicht, the billionaire founder and CEO, stated the issue was not the real estate itself but rather liquidity pressures from sudden redemption requests.

The fund slashed its distribution from 6.3% to 4.7% to conserve capital as it navigates a weak property market that has struggled since interest rates began rising four years ago. Sreit owns 598 properties across the US and previously restricted investors' liquidity rights by over 80% two years ago when it tapped its credit facility.

Saba Capital last month offered to buy 5% of Sreit at a 20% discount of the fund's most recent stated value. Sternlicht expects conditions to improve when the war with Iran concludes, oil prices subside, inflation stabilizes, and Kevin Warsh becomes Fed Chair. Similar private credit funds sponsored by Blue Owl and BlackRock have also halted redemptions this year.