MacKenzie Makes Another Starwood REIT Tender Offer on S Shares

MacKenzie Realty Capital Inc., a publicly registered traded real estate investment trust which began trading on the Nasdaq Capital Market under the ticker symbol MKZR, launched a tender offer to purchase up to 150,000 Class S shares of Starwood Real Estate Income Trust Inc. for $15.30 per share, an approximate 30% discount to Starwood’s estimated net asset value of $21.84 as of Nov. 30, 2024.

If successful in purchasing all such shares, MacKenzie would be investing approximately $2.3 million for shares that Starwood estimates are worth nearly $3.3 million. This would represent a potential $981,000 gross profit if that estimated value is realized in the future.

Starwood is a non-traded real estate investment trust, and its share redemption program is oversubscribed. As an example, the REIT’s share redemption program redeemed approximately 4% of each stockholder’s December 2024 repurchase request. Thus, shareholders are not able to effectively redeem their shares via repurchase from Starwood unless they own less than $500, according to MacKenzie. The company said its offer gives Starwood shareholders the opportunity to get out of all shares quickly rather than taking many years at the current rate.

Last summer, MacKenzie launched a similar tender offer to purchase up to 700,000 Class S Shares of Starwood for $17.50 per share. The offer was made, together with its affiliates and represented an approximate 24% discount to Starwood’s estimated NAV of $22.94 as of May 31, 2024.

MacKenzie and its affiliates purchased over $2 million in Starwood shares in that August 2024 offer, and they have been submitted for redemption. The company said it predicts that that 4% of them will be redeemed based upon Starwood’s recent redemption rate, which would result in roughly a 25% return in less than a year on the shares redeemed.

Third-party offers such as MacKenzie’s are often rebuked by sponsor, as well as those looking for other secondary market options for investors looking for rapid liquidity.

MacKenzie, founded in 2013, is a West Coast-focused REIT that seeks to invest at least 80% of its total assets in real property, and up to a maximum of 20% of its total assets in illiquid real estate securities.  The company intends for the real property portfolio to be approximately 50% multifamily and 50% boutique class A office and said it has paid a dividend every year since inception, e.g., $0.05 per share for the quarter ended Dec. 31, 2024. The current portfolio includes interests in four multifamily properties and eight office properties, plus two multifamily developments.

MacKenzie reported net revenues for the fourth quarter of 2024 as $8 million, an increase of 124% from $3.6 million in the same period of 2023. Total shareholder equity was $97.7 million.

For more MacKenzie news, please visit their directory sponsor page.