When you read the below from The WSJ on the lack of liquidity in commercial real estate, remember that buyers were sold on the idea that real estate never goes down:
Starwood Capital Group’s move to severely tighten restrictions on investor withdrawals from its $10 billion real-estate fund is rippling through the $90 billion private real-estate fund business.
After the giant investment firm announced the new restrictions in May, sponsors of similar funds said they experienced a jump in redemption requests. Investors in these funds, mostly individuals who paid as little as $2,500, appear worried that their funds might also tighten the withdrawal spigot, forcing them to wait indefinitely in line if they want to cash out.
“When Starwood started cutting redemptions, the first thing you think about is: what’s my guy going to do,” said Kevin Gannon, chief executive of Robert A. Stanger, an investment bank that specializes in real-estate funds. “There’s a natural knee-jerk reaction.”
Action Line: When it comes to your retirement portfolio, make sure you know what you’re getting into. As you can see above, there’s a long list of investors trying to get out, but can’t.
