Starwood Real Estate Income Trust Inc. (SREIT), one of the largest non-traded REITs in the country, is under increased scrutiny for its high fees, limited transparency, and troubling redemption restrictions. Investors in SREIT and similar non-traded REITs have faced steep losses, often without realizing the risks they were exposed to at the time of sale.
If you or someone you know has suffered significant investment losses working through Starwood Real Estate Income Trust or another non-traded REIT, don’t hesitate to reach out to Meyer Wilson Werning today. Our attorneys are experienced in securities fraud cases and will help to guide you through the process with a free consultation to determine whether your losses are the result of actionable misconduct.
How Non-Traded REITs Like SREIT Operate
Non-traded REITs offer exposure to real estate assets without the daily volatility of the public markets, but this comes at a cost many investors don’t fully understand.
Valuation and Liquidity Problems
Non-traded REITs are not publicly traded, meaning investors cannot rely on market pricing to know what their shares are worth. Instead, firms like Starwood assign their own valuations—a practice that creates serious conflicts of interest. These firms earn fees based on asset size and performance, giving them a financial incentive to keep valuations high even when real estate markets struggle.
Investors also face liquidity restrictions. In early 2024, Starwood REIT received $1.3 billion in redemption requests but fulfilled less than $500 million of those. To stem the tide, the company began limiting redemptions due to what it called “market conditions” and a need to preserve cash and credit lines.
Advisor Commissions and Conflicts of Interest
Non-traded REITs often come with substantial fees—both at the fund level and through commissions paid to advisors. These products can carry upfront sales loads of up to 8.75% of the total investment. For context, Blackstone’s non-traded REIT has reportedly paid brokers over $700 million in commissions. This fee structure can incentivize financial advisors to recommend non-traded REITs even when they are not in the investor’s best interest.
To learn more about non-traded REITs like SREIT and how they operate, watch our video below:
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The Economic Risks Amplifying Investor Losses
Recent economic trends have only made the situation more challenging for investors in SREIT and other non-traded REITs.
Rising Interest Rates and Commercial Real Estate Declines
Interest rates have risen significantly over the past two years, directly impacting the performance of REITs. Higher borrowing costs reduce profitability, limit expansion opportunities, and weigh down portfolio returns. Starwood itself cited rising rates and declining commercial real estate valuations as reasons for restricting redemptions beginning in May 2024.
Investors may assume real estate is a stable investment, but the lack of market transparency and the rising economic pressure mean that SREIT’s actual performance may lag far behind what investors were led to believe.
Delayed Awareness of Investment Losses
Unlike publicly traded securities, losses in non-traded REITs often go unnoticed until years later—when investors attempt to redeem or transfer their shares and learn that their value has declined significantly. In many cases, investors are unaware that they’ve been exposed to excessive fees, valuation risks, and liquidity restrictions until it’s too late to act.
Oversight Failures by Financial Advisors and Brokerage Firms
Many of the issues tied to SREIT stem from failures by financial professionals to meet their legal obligations.
Inadequate Due Diligence on SREIT
Brokerage firms and financial advisors are required to conduct thorough due diligence before recommending a security, particularly when it’s not traded publicly. Non-traded REITs like SREIT require heightened scrutiny because they offer minimal transparency and lack market-based pricing. Advisors should fully understand a product’s structure, risks, fees, and performance history before presenting it to clients.
Failing to Act in the Client’s Best Interest
When advisors recommend products with high commissions and limited investor protections—like SREIT—it raises serious concerns about whether they acted in their clients’ best interests. Many of these sales may have driven by high commissions rather than investor needs. This can constitute a breach of fiduciary duty or violations of securities regulations, depending on the circumstances.
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Meyer Wilson Werning Can Help Investors Harmed by SREIT
At Meyer Wilson Werning, we are investigating financial advisors and brokerage firms that recommended Starwood Real Estate Income Trust Inc. without proper due diligence or full disclosure. With $9.8 billion in assets, SREIT is the second-largest non-traded REIT of its kind, but its recent redemption issues and opaque valuation policies have left many investors in a vulnerable position.
Contact our team at Meyer Wilson Werning today. With over 20 years of experience and $350 million in recovered losses for our clients, we are well-versed in handling cases such as these.
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Frequently Asked Questions
What is a non-traded REIT, and how is it different from a publicly traded REIT?
Non-traded REITs are not listed on public stock exchanges, meaning their value isn’t set by market demand. Instead, management determines share value, which reduces transparency and can make it harder for investors to know the true worth of their investment.
Why are non-traded REITs like SREIT considered risky?
They often carry high fees, lack liquidity, and are subject to internal valuations. These factors, combined with potential conflicts of interest from financial advisors, can lead to unexpected losses for investors.
How do redemption limits affect investors?
Redemption limits restrict when and how much investors can withdraw from their investment. During market stress or rising interest rate environments, these restrictions can prevent investors from accessing their funds when they need them most.
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