Investors are withdrawing money from REITs in record quantities

[Manny Vasquez]

I just read an article on the Wall Street Journal https://www.wsj.com/articles/i... stating the fact that investors have responded to rising interest rates by pulling money out of real estate funds in record quantities. As a matter of fact, nontraded REIT's, such as Starwood Capital Group and Blackstone , have paid out $3.7 billion in withdrawals in Q3 2022 - which is an alarming increase of 12 times from that same period in 2021 (Y-O-Y). Both of those companies have limited the amount of investor withdrawals . These withdrawal limits are triggered in order to prevent the fund from having to make forced sales.

However, even with pre-set withdrawal limits from these REIT companies, investors can continue to withdraw their money in the future, which has several negative effects on REITs:

1) It prevents REITS from buying properties or continue existing projects (in order to hold-on to cash reserves and pay back investors)  

2) If investors continue to withdraw money, this may lead to a downward spiral of selling assets if it can't gain the trust of its investors (i.e. the forced sales of its properties).   

2a) As a matter of fact, Blackstone has put up for sale its 49.9% interest in MGM Grand Las Vegas and Mandalay Bay Resort & Casino

Given the above news and with Zillow, Redfin and Opendoor closing down there iBuying departments, Is this another bellweather for dire commercial and residential economic conditions to come? 

Postcript: Personally, I couldn't be more elated with the above news as this opens-the-door (no pun intended) for the little guy to buy (both residential and commercial).