Sternlicht defends Starwood REIT withdrawal withdrawal, hopes it’s ‘a six-month thing’

Barry Sternlicht, chairman and CEO of Starwood Capital Group, defended his decision to limit how much money investors could take out of his real estate fund amid mounting losses and redemption requests.

“With all the hysteria in the media, people are saying, ‘I want to leave now and I’ll come back later when the coast is clear.’ So we made a very difficult decision,” Sternlicht said on CNBC’s “Squawk Box” on Wednesday. “I decided that for the benefit of the 80% of people who have never redeemed anything, we would delay redemptions. … We hope this will be a matter of six months.”

The investor’s $10 billion Starwood Real Estate Income Trust, which invests in multifamily, industrial and office properties, has suffered a sharp decline as it became difficult to refinance loans in light of the Federal Reserve’s aggressive rate hikes .

In a letter to shareholders on May 23, Starwood introduced new restrictions that limit monthly withdrawals to 0.33% of net asset value, up from the previous limit of 2%. Meanwhile, the company also decided to waive 20% of the management fee.

Sternlicht said he decided to implement the limit to protect loyal customers who never made repayments, which represents 80% of his investors.

The company said the real estate trust, one of the largest in the world, retained $752 million in immediate liquidity at the end of April.

Sternlicht called the Fed’s monetary policy “incredibly ineffective,” but he believes interest rates will soon fall.

“The real estate industry is probably the biggest victim of the unintended consequences of his actions,” he said. “The spreads are coming in, which means the markets are healing and the future is becoming clearer.”