Blueprint: Starwood’s redemption limits, CPP’s real estate exposure shift, Stoneweg’s Cromwell acquisition

Starwood Capital takes limiting redemption requests at its Starwood Real Estate Income Trust to the next level; Swiss manager Stoneweg puts itself on the map via the acquisition of Cromwell Property Group's European business; how the Canada Pension Plan's exposure to real estate keeps reducing; and more in today's briefing, exclusively for our valued subscribers.

They said it

“The simple fact is distress is quite a few years off” 

Mat Oakley, head of Savills’ UK and European commercial property research team, speaking at his firm’s Financing Property event in London last week.

What’s new

Barry Sternlicht, Starwood

Starwood shuts the gate

Amid a flurry of headlines about its cash crisis, Starwood Capital has moved to limit redemptions for its private REIT. Starwood chief executive Barry Sternlicht last week wrote to stockholders in Starwood Real Estate Income Trust saying the firm would begin limiting share repurchases in the month of May to 0.33 percent of NAV per month, down from 2 percent. From July 1, the firm will limit share repurchases to 1 percent of NAV per quarter. The move is temporary, he assured, and will likely be in place for six to 12 months “in anticipation of a lower interest rate environment and improved real estate capital market.” The manager said the REIT’s liquidity was at $752 million as of April, a level described as “dangerously low” by Kevin Gannon, chief executive of investment bank Robert A Stanger. Read how he, nonetheless considered the gating as making sense in PERE‘s coverage here, and why Starwood may not be the only firm to take these steps.

Doubling up

Geneva-based manager Stoneweg is set to almost double its current AUM of €4 billion with the acquisition of Australian manager Cromwell Property Group’s European business. The deal, announced last week, will see Stoneweg acquire Cromwell Europe Limited, all of the managing entity of the Singapore-listed Cromwell European Real Estate Investment Trust (CEREIT), a 27.8 percent unitholding in CEREIT itself, and half of the Cromwell Urban Italy Logistics Fund. Stoneweg founder and CEO Jaume Sabater told PERE expanding the firm’s geographic exposure was a major motivation behind the deal, in addition to the wider mix of property types afforded by the addition of Cromwell’s platform. Noting the limited overlap between both firms’ existing exposures, Sabater added he saw “great opportunities between both businesses to build a one-stop shop for institutional real estate investors in Europe.”

For Cromwell, the sale was a strategic decision to refocus on its home market of Australia, according to CEO Jonathan Callaghan, who told PERE the firm is shifting “from a global manager to a local one” in light of the “vast scale” needed to be successful at the former.

Canada’s office drag

CPP Investments, the investment arm of the Canada Pension Plan, lowered its real estate exposure again as the asset class posted a negative return last fiscal year. Real estate holdings account for 8 percent of the fund’s overall portfolio, according to its most recent annual report, down from 9 percent the year prior and down from 12.1 percent at the end of fiscal year 2019. The decrease comes primarily from a 3 percent annual drop in the value of its office holdings, which now account for 6 percent of its overall real estate holdings and are tied with retail for its smallest allocation in the asset class. CPP’s real estate holdings last year posted a 5 percent performance loss, and since 2019 have appreciated in value by just 0.7 percent. Only CPP’s government bonds, which fall when interest rates rise, performed worse with a -0.3 percent five-year depreciation. You can read PERE’s coverage here.

Trending topics

Invesco’s land lease down under

Invesco Real Estate has made its first investment in land lease housing in Australia with a strategic open-ended partnership with Australian developer Stockland. Through its flagship pan-Asian core fund, Invesco will hold a 49.9 percent stake in the venture, with Stockland holding 50.1 percent. Seeded with three land lease community assets, the vehicle is expected to generate A$1.1 billion ($730 million; €670 million) in gross development revenue. In a land lease community, home buyers own the home but lease the land from the community operator. It is a growing residential sector in Australia, gathering steam off the back of a housing shortage and an aging population. Earlier this month, Proprium Capital Partners-owned Avid Property Group also entered the market, targeting the formation of a A$1.4 billion portfolio.

Royal assent for life sciences

UK readers will be familiar with Debenhams, a centuries-old, now-defunct department store chain, which at its height operated 178 stores primarily across the UK. While many former Debenhams sites remain empty, the Oxford location is now set to be transformed into a life sciences, technology and innovation space through new investment spearheaded by The Crown Estate. Through an initial investment of £125 million ($160 million; €147 million), the landowner has acquired the long leasehold of the site from manager DTZ Investors, and has announced a longer-term partnership with venture fund Oxford Science Enterprises and specialist operator Pioneer Group to invest up to £1.5 billion regenerating and developing UK property to support the science, technology and innovation sectors. The Crown Estate is ranked 32nd on the PERE Global Investor 100 ranking, with $17.8 billion invested in private real estate. With its history dating back to 1760, the independent corporation manages estates owned by the British monarchy and directs all profits to the UK Treasury.

Data snapshot

Fund metrics turn positive in Q1

European core and value-added funds’ performance improved in the first quarter of 2024, according to the INREV quarterly fund index, which landed at 0 percent, marking an increase from -1.9 percent the previous quarter and landing outside negative territory for the first time since the second quarter of 2022.


From navigation to the cockpit 

Savills Investment Management has promoted Andrew Allen to global chief investment officer. Allen [his LinkedIn here] was formerly global head of research, product strategy and development at the London-based manager, where he has worked since 2021, and began in his new role at the beginning of last month. His appointment was announced internally at the end of last year, after months of searching for a candidate to replace the global CIO responsibilities of Kiran Patel. He announced he was retiring from the role of deputy chief executive and global CIO last summer.

Speaking with PERE last week, CEO Alex Jeffrey explained Savills IM “was always open to the prospect of an internal appointment” in the search for the new global CIO, and that Allen “was the right person for the job.” Patel’s remaining duties were taken up by Kevin Aitchison, who fulfilled the new position of managing director, equity investments UK and Europe after joining from fellow UK manager Knight Frank Investment Management at the end of last year.

Investor watch

Mineworkers’ portfolio rebalancing

It is one thing to avoid investing in secondary office assets. It is another to dispose of existing secondary office properties in this market. UK pension fund Mineworkers’ Pension Scheme, however, is doing exactly that. The scheme is one sale away from completing the liquidation of its secondary office holdings. In all, it has sold five such properties since the last quarter of 2023 as part of a larger overhaul of its approximately £1 billion ($1.28 billion; €1.17 billion) real estate portfolio. Secondary office assets have been “difficult to sell,” said Daniel Berger, director of property and funds at London-based manager Delancey, which took over management of MPS’s real estate portfolio from LaSalle Investment Management in 2022. Some of the properties traded at a significant discount to their previous sale value. For example, Kingsmead Business Park in High Wycombe, which LaSalle acquired for approximately £40 million in 2015, sold for £10.5 million this quarter. For more on MPS’s portfolio rebalancing, read the full story here.

This week’s investor meetings

Wednesday May 29

Thursday, May 30

Friday, May 31

Today’s letter was prepared by Miriam Hall, with Evelyn Lee, Charlotte D’Souza, Christie Ou, Harrison Connery and Guelda Voien cotributing.