Starwood Real Estate Income Trust’s Third-Quarter AFFO Falls 93% to $4 Million
Starwood Real Estate Income Trust Inc., or SREIT, a nontraded real estate investment trust managed by Starwood Capital Group, reported adjusted funds from operations attributable to stockholders of $4 million for the third quarter, down from $58.3 million a year earlier.
For the first nine months of 2026, AFFO totaled $90.5 million, compared with $229.3 million in the same period of 2025.
SREIT declared $82.2 million of distributions on its common stock in the third quarter. Operating cash flow covered 77% of distributions declared in the first nine months, down from 92% a year earlier, the company said. Another 21%, or $63.4 million, came from offering proceeds, which SREIT defines as distributions reinvested through its distribution reinvestment plan. None of the year-earlier payout came from that source.
Interest expense rose to $184.8 million in the quarter from $159.9 million a year earlier, driven mainly by higher interest on mortgage notes, the company said. SREIT also recorded $27.0 million in realized losses on settled interest rate caps and swaps, compared with $0.3 million in realized gains in the year-earlier quarter. Income attributed to Apollo Global Management’s stake in an affordable housing joint venture totaled $11.9 million for the roughly two months after the deal closed.
SREIT’s net loss attributable to stockholders narrowed to $134.4 million from $168.5 million. The result included $46.2 million in unrealized gains on interest rate caps and swaps, compared with $39.7 million in unrealized losses a year earlier.
SREIT’s net asset value per share fell 1.8% during the quarter. The company attributed the decline partly to lower values in its market-rate multifamily portfolio, but said the larger drivers were lower property cash flow, higher interest expense, and costs tied to refinancing property debt and its revolver.
Class I shares returned negative 0.6% for the quarter and negative 0.2% annualized year to date, including distributions, the company said. Total NAV was approximately $7.87 billion as of Sept. 30, with Class I shares at $19.16, AltsWire previously reported.
SREIT has declared a monthly gross distribution of $0.0770 per share since April. The average annualized distribution rate for Class I shares was 4.8% in the third quarter, the company said.
SREIT disclosed more detail on the $1.02 billion joint venture with Apollo that closed Aug. 3, under which Apollo affiliates took a 41.5% stake in approximately 120 of SREIT’s affordable housing properties.
Apollo is entitled to a minimum annual yield of 3.5%, increasing to 6.0% by July 2035, which SREIT has agreed to support. SREIT is also responsible for payments that may come due on asset sales and for periodic make-whole payments. SREIT and an affiliate guaranteed the payment obligations of the subsidiary that holds SREIT’s interest in the venture.
The agreement includes financial covenants for SREIT and an affiliate. If a covenant breach is not cured, SREIT’s call right accelerates and it would be obligated to pay Apollo a redemption price. Apollo can also require redemption upon a change of control of SREIT’s interest in the venture or if Apollo’s target return is not met by a specified date.
SREIT said it was in compliance with all covenants as of Sept. 30 and expects cash flows from the venture to be sufficient to cover the minimum yield. The redemption value of Apollo’s interest was approximately $1 billion at quarter-end.
SREIT used the Apollo proceeds to retire its senior secured revolving credit facility and repay approximately $876.0 million of line of credit borrowings, AltsWire previously reported. Leverage declined to 54% at Sept. 30 from 58% at June 30, the company said.
Total indebtedness stood at $13.3 billion, down from $13.9 billion at the end of 2025. SREIT reported $1.04 billion in available liquidity, including $193.5 million in cash and $842.0 million of undrawn line of credit capacity. The company said it has completed approximately $7.4 billion in refinancings since early 2025, excluding its credit lines.
As of Sept. 30, SREIT owned 402 consolidated properties and held interests in two unconsolidated real estate ventures. Portfolio occupancy was 93%. Combined new and renewal lease trade-outs in SREIT’s market-rate multifamily portfolio rose to 0.9% in the third quarter, from 0.2% in the second quarter and negative 0.9% in the first, the company said.
SREIT’s share repurchase plan remains limited to requests made upon a stockholder’s death or qualifying disability and to accounts below $5,000, after its board suspended most redemptions in April. The REIT accepted approximately $13.0 million of repurchases under those terms in the third quarter. SREIT said it intends to reinstate the program when it can be done in a sustainable manner.
SREIT’s adviser continues to waive 20% of its management fee, reducing it to 1% of NAV from 1.25%, until the repurchase plan returns to monthly and quarterly limits of 2% and 5% of NAV, respectively.
On Aug. 11, SREIT amended and restated its advisory agreement and its operating partnership’s limited partnership agreement to make updates requested by a state securities examiner, among other things, the company said. SREIT did not say whether its board renewed the advisory agreement, whose one-year term ran through Nov. 11.
As of Sept. 30, SREIT owned 402 consolidated properties and held interests in two unconsolidated real estate ventures.
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