Securities Lawyers Blog
The securities lawyers of Gana Weinstein LLP are investigating broker-dealers and advisors who sold Starwood Real Estate Income Trust Inc., otherwise known as SREIT – a non-traded net asset value real estate investment trust (non-traded REIT). Our representations focus on the failure of brokerage firms to conduct adequate due diligence on Starwood REIT and the failure of advisors to act in the best interests of their clients. Investment advisors are obligated to conduct due diligence on securities recommended by the firm. The due diligence rule is heightened for non-traded REITs because the offering is non-public and investors have access to little publicly available information.
Starwood is the second largest interval non-traded REIT with $9.8 billion in assets. Its competitor – Blackstone REIT – has claimed in 2024 to have assets of $114 billion. Back in May 2024, Starwood REIT announced it limiting redemptions each month due to conditions in the the market for commercial real estate and due to high interest rates. It has been further reported, that Starwood REIT is trying to preserve its available cash and credit as the fund was hit with $1.3 billion in withdrawal requests earlier in 2024 but satisfied less than $500 million of them.
Non-traded REITs have come under close scrutiny by investor groups and regulators for several decades now. Not only do non-traded REITs like SREIT get large fees but they also pay hefty commissions to financial advisors who steer their clients to invest. For example, the aforementioned Blackstone REIT has paid Wall Street brokers more than $700 million in brokerage fees that can add up to a cap of 8.75% of the investment amount.
However, important questions have been raised as the valuation policies by non-traded REITs and the actual value of their real estate holdings. The problem is that it’s impossible to know how valuable non-traded REITs like Starwood REIT are because the market doesn’t determine its share price – Starwood’s management does. In other words, investors have to trust a company that makes more fees the higher the value is to determine what the price of the assets should be.
When it comes to non-traded REITs like Starwood REIT, investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
The investment lawyers at Gana Weinstein LLP represent investors who have suffered investment losses due to allegations of wrongdoing. The majority of these claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.