2024 Annual Report Starwood Real Estate Income Trust (“SREIT”)
APRIL 16, 2025
SREIT Highlights as of December 31, 2024 6.8% Annualized Net Return for Class I since inception in December 2018 1 5.7% Annualized Distribution Rate for Class I Share 2 5.1% Market Leading Same-Store Cash Flow Growth (Net Operating Income “NOI”) 3 100% of 2024 distributions characterized as Return of Capital (“ROC”) 4
Starwood Real Estate Income Trust (“SREIT”) 2024 Year-End Stockholder Letter
Dear SREIT Stockholder, 2024 Performance
Through year-end 2024, SREIT’s Class I shares have delivered an inception-to-date annualized return of +6.8%. Calendar year 2024 total return for the Class I shares was +0.2%. For the fifth consecutive year, 100% of SREIT’s distributions in 2024 were characterized as a Return of Capital (“ROC”) for federal income tax purposes. Our annualized distribution rate is 5.7% which equates to approximately 9.7% on a tax- equivalent basis for investors in the highest income tax bracket. Performance for the year was impacted by interest rates, both positively and negatively. Short-term interest rates (SOFR) declined with the Federal Reserve’s three rate cuts beginning in September. Lower rates, combined with a sense that the worst is behind us, led to lower credit spreads and overall borrowing costs. This helped to stabilize asset values. In fact, third-party valuations for SREIT’s portfolio were up in each of the last four quarters. The offset to lower short-term rates was a negative impact to the mark-to-market value of our interest rate hedges, which are in-place to protect distributable cash flow. Excluding these hedges, SREIT’s 2024 total net return would have been +2.4%, underscoring the positive direction of real estate values. Portfolio While rent growth slowed throughout the year due to elevated supply deliveries, fundamentals in SREIT’s portfolio remained solid with market leading +5.1% same- store cash flow (NOI) growth while maintaining 94% occupancy. Revenue growth in our two largest reporting segments (rental housing and industrial) outperformed the top 50 markets average by more than 3.0% on a combined basis. 5 This outperformance was primarily driven by our unique affordable housing portfolio within rental residential (which benefits from inflation and wage indexed rents) and allocation to in-fill, last mile and infrastructure centric industrial investments (which experienced lower levels of new supply growth). Bigger picture, supply/demand fundamentals for rental housing continue to benefit from an estimated four to five-million-unit shortfall and falling supply while industrial continues to benefit from the growth in e-commerce and the need to deliver products to consumers faster.
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SREIT | 2024 YEAR-END LETTER
FOR SREIT STOCKHOLDERS ONLY
We believe SREIT’s portfolio is strategically positioned, with 92% allocated to asset classes with strong long-term fundamentals, including rental housing, industrial, and floating-rate real estate loans. In addition, our assets are 80% located in the Sunbelt markets, which benefit from outsized long-term demand drivers including population growth, job growth, income growth, and superior affordability. Another 8% is invested internationally for diversification and in markets that typically enjoy higher barriers to new supply. Across SREIT’s balance sheet, we have emphasized downside protection with approximately 88% of our secured property debt currently being fixed-rate or hedged, and having three-and-a-half years of duration remaining. Due to an improving capital markets environment, we are looking to be opportunistic in extending loan maturities and, in several cases, reducing credit spreads. For example, we recently executed an early refinancing of the $1.2 billion loan on our extended stay hotel portfolio through March 2030 with a spread that is more than 110 bps inside previous levels, generating meaningful interest savings and increasing cash-on-cash yields. At present, our portfolio has an average cost of debt of approximately 3.8% with limited near-term loan maturities. A major challenge for most investors in this environment has been caused by maturing debt or unhedged interest rates, and we believe we are well-positioned from this perspective. Outlook As we look to 2025 and beyond, we expect to see continued cash flow growth due to several factors. We believe supply and demand fundamentals should continue to improve as new supply starts have declined 60-70% in the multifamily and industrial sectors. The realization of lower deliveries should begin to take hold and be reflected in rising rents in late 2025 / early 2026 market-by -market. In the meantime, demand for multifamily apartments remains robust with national absorption levels near 20-year highs. Affordability continues to play a key positive role in driving demand. SREIT’s average multifamily rent is nearly half that of the median U.S. mortgage payment. Wage growth has also outpaced rent growth, improving the rent-to-income ratio of our portfolio, which now stands at a very healthy 21% in our market-rate apartment portfolio, providing significant room for future rent increases. Since affordable housing rents are formulaic (tied to inflation and wage growth) and a portion of SREIT’s historical allowable rent increases have been deferred into the future, we have good visibility into continued mid-single-digit rent growth for this part of the portfolio in 2025. Similarly, within our industrial portfolio our releasing spreads were +50% throughout 2024 and rents remain approximately 20% below market, which should also allow for continued cash flow growth as leases roll over the next several years. Liquidity We continue to work on generating sufficient liquidity for those investors seeking redemptions, while also staying focused on protecting and maximizing value for the majority of SREIT stockholders who remain invested. This requires picking the right spots to generate liquidity as the markets continue to improve. SREIT’s current liquidity as of February 28, 2025 stands at approximately $0.8 billion, representing 8.4% of NAV. From December 2024 to March 2025, we successfully executed select asset sales totaling $1.4 billion (gross). Additionally, another $0.1 billion (gross) in asset sales have been awarded to buyers or are under contract, with closings expected within the next 30 to 60 days. From a timing standpoint, our decision to wait for the first Fed rate cuts proved to be the right one. The capital markets between September and November 2024 provided an attractive window for asset sales, as short-term rates declined and investor demand was strong. Once these asset sales are finalized, we expect total liquidity to increase to $0.9 billion, or approximately 10% of SREIT’s NAV. We will continue to evaluate additional select asset sales and other strategic initiatives to strengthen liquidity throughout the year as market conditions allow. Amid today’s economic uncertainty and stock market volatility, real estate offers tangible, income-generating assets with low correlation to public market fluctuations, making it an effective portfolio diversifier. SREIT owns high-quality real estate in top performing markets with a sound balance sheet. With improving real estate fundamentals and declining competitive yields, we believe SREIT remains an attractive investment for those seeking stable, tax efficient income and long-term growth.
Thank you for your continued partnership and support.
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SREIT | 2024 YEAR-END LETTER
FOR SREIT STOCKHOLDERS ONLY
Key Takeaways 01 Strong Portfolio Construction
• Well-positioned portfolio with strong long-term fundamentals and prospects for future growth • Market leading 5.1% same-store NOI growth • Strong balance sheet: 3.8% weighted average interest rate and only 7% of loans maturing in 2025
02 Stable, Attractive Income
• 5.7% annualized distribution rate (Class I share) • Approximately 9.7% on a tax equivalent basis
• SREIT’s yield becoming attractive again with lower expected short-term rates; i.e. paid well to wait while markets recover 03 Market Dynamics Continue to Improve • Real estate markets at or near bottom • New construction starts across SREIT’s core sectors are down significantly • Lower borrowing cost are beginning to improve the capital markets 04 Focused on Transparency and Putting Investors First • Continue to have high conviction in SREIT’s portfolio, strategy and structure • Using Starwood’s 30+ years of real estate experience to protect and maximize value for stockholders
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SREIT | 2024 YEAR-END LETTER
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2024 SREIT Highlights
Key Portfolio Metrics as of December 31, 2024
658 Number of Properties
$23.9B Total Asset Value 6
$9.2B Net Asset Value 7
94% Occupancy 8
58% Leverage 9
Asset Class Selection
Market Selection ~80% Concentrated in the Southeast and Southwest U.S.
92% 88%
Allocated to Asset Classes with Strong Long-Term Fundamentals
Rental Housing, Industrial and Real Estate Loans
1%
13%
2%
21%
~30% In the Two Fastest Growing States: Florida and Texas
4%
2% <1%
Other sectors with strong long-term fundamentals
4%
7%
1%
8% In International Markets for Further Diversification
Market-Rate Apartments Affordable Housing Industrial Single-Family Rental Real Estate Loans
Self-Storage Extended Stay Hotel
49%
Office Other
Other includes Medical Office and Retail
Debt Structuring
SREIT Balance Sheet
12%
3.8% Weighted Average Interest Rate 3.6 years Average Remaining Duration
Only 7% of SREIT’s Debt Financing is rolling through 2025
88%
Fixed-Rate or Hedged* Floating-Rate
* Secured property debt; includes fixed-rate debt plus floating rate debt that is hedged with interest rate caps and swaps that are lower than the current SOFR rate.
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SREIT | 2024 YEAR-END LETTER
FOR SREIT STOCKHOLDERS ONLY
2024 Asset Class Performance Highlights
Revenue Growth
Occupancy
Rental Housing (71% of AUM)
3% Blended rent growth
95%
Industrial (13% of AUM)
50% T12 releasing spreads
96%
20% Below market rents
Real Estate Loans (4% of AUM)
12% Yield
2024 Performance Summary Total Returns (% Net of Fees) 10
2024 Total Return
Annualized Inception to Date (ITD)
Annualized Distribution Rate 8
Class I
0.20%
6.79%
5.73%
Class D (No Sales Load)*
-0.12%
6.37%
5.55%
Class D (With Sales Load)**
-1.59%
6.10%
Class S (No Sales Load)*
-0.65%
6.02%
4.82%
Class S (With Sales Load)**
-4.01%
5.41%
Class T (No Sales Load)*
-0.62%
6.06%
4.82%
Class T (With Sales Load)**
-3.98%
5.46%
* Returns are net of stockholder servicing fee. ** Assumes payment of the full upfront sales charge at initial subscription (1.5% for the Class D shares and 3.5% for Class S and Class T shares) and are net of stockholder servicing fees.
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SREIT | 2024 YEAR-END LETTER
FOR SREIT STOCKHOLDERS ONLY
Disclosures Notes: Past performance does not predict future returns. Financial data is estimated and unaudited. All figures are as of December 31, 2024 unless otherwise noted. Opinions expressed reflect the current opinions of SREIT as of the date appearing in the materials only and are based on SREIT’s opinions of the current market environment, which is subject to change. Certain information contained in the materials discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. Select Images: The selected images of certain SREIT investments are provided for illustrative purposes only, are not representative of all SREIT investments of a given property type and are not representative of SREIT’s entire portfolio. Starwood Proprietary Data: Certain information and data provided herein is based on Starwood’s proprietary knowledge and data. Such proprietary market data is used by Starwood to evaluate market trends as well as to underwrite potential and existing investments. While Starwood currently believes that such information is reliable for purposes used herein, it is subject to change, and reflects Starwood’s opinion as to whether the amount, nature and quality of the data is sufficient for the applicable conclusion, and no representations are made as to the accuracy or completeness thereof. 1. Represents Class I shares. For more information on SREIT’s performance, please visit www.starwoodnav.reit/performance. Returns shown reflect the percent change in the NAV per share from the beginning of the applicable period, plus the amount of any distribution per share declared in the period. All returns shown assume reinvestment of distributions pursuant to SREIT’s distribution reinvestment plan, are derived from unaudited financial information and are net of all SREIT expenses, including general and administrative expenses, transaction related expenses, management fees, performance participation allocation, and share class specific fees, but exclude the impact of early repurchase deductions on the repurchase of shares that have been outstanding for less than one year. Past performance is historical and not a guarantee of future results. The returns have been prepared using unaudited data and valuations of the underlying investments in SREIT’s portfolio, which are estimates of fair value and form the basis for SREIT’s NAV. Valuations based upon unaudited reports from the underlying investments may be subject to later adjustments, may not correspond to realized value and may not accurately reflect the price at which assets could be liquidated. The inception dates for the Class I, S, D and T shares are December 21, 2018. 2. Reflects the current month’s distribution annualized and divided by the prior month’s net asset value, which is inclusive of all fees and expenses. Our inception to date cash flows from operating activities funded 100% of our distributions. Distributions are not guaranteed and may be sourced from non-income items. 3. Net Operating Income (“NOI”) is a supplemental non-Generally Accepted Accounting Principles (“GAAP”) measure of our property operating results that we believe is meaningful because it enables management to evaluate the impact of occupancy, rents, leasing activity, and other controllable property operating results at our real estate. We define NOI as operating revenues less operating expenses, which excludes (i) impairment of investments in real estate, (ii) depreciation and amortization, (iii) straight-line rental income and expense amortization, (iv) amortization of above- and below-market lease intangibles, net, (v) lease termination fees, (vi) property expenses not core to the operations of such properties, and (vii) other non-property related revenue and expense items such as (a) general and administrative expenses, (b) management fees, (c) performance participation allocation, (d) loss from unconsolidated real estate ventures, (e) income from investments in real estate debt, net, (f) net gain on dispositions of real estate, (g) interest expense, and (h) other expense, net. We evaluate our consolidated results of operations on a same property basis, which allows us to analyze our property operating results excluding acquisitions and dispositions during the periods under comparison. Properties in our portfolio are considered same property if they were owned for the full periods presented, otherwise they are considered non-same property. Properties held-for-sale are excluded from same property results and are considered non-same property. We do not consider our investments in unconsolidated real estate ventures and investments in real estate-related debt to be same property. For a reconciliation of GAAP net income (loss) to same property NOI for the year ended December 31, 2024 and 2023, please refer to SREIT’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 3, 2025. 4. Tax Information: A portion of REIT distributions may be tax deferred given the ability to characterize ordinary income as Return of Capital (“ROC”). ROC distributions reduce the stockholder’s tax basis in the year the dividend is received, and generally defer taxes on that portion until the stockholder’s stock is sold via redemption. Certain non-cash deductions, such as depreciation and amortization, lower the taxable income for REIT distributions. Investors should be aware that a REIT’s ROC percentage may vary significantly in a given year and, as a result, the impact of the tax law and any related advantages may vary significantly from year to year. SREIT’s return of capital was 92% in 2019, 100% in 2020, 100% in 2021, 100% in 2022, and 100% in 2023. SREIT’s Return of Capital for 2024 was 100%, which means the maximum effective tax rate on SREIT’s 2024 distributions is 0%. This assumes the maximum ordinary tax bracket of 37%. Please note the effective tax rate is after the 20% reduction in rates introduced under the Tax Cuts and Jobs Act of 2017. The Tax Cuts and Jobs Act of 2017 is not applicable to capital gain dividends or certain qualified dividend income. It is only available for qualified REITs and the board is authorized to revoke the REIT election. The tax benefit is set to expire in 2026. There may be adverse legislative or regulatory tax changes. Other investments may offer tax advantages. An accelerated depreciation schedule does not guarantee a profitable return on investment. 5. Based on Green Street’s U.S. Apartment Outlook published January 27, 2025 and U.S. Industrial Outlook published January 28, 2025. The metrics utilized include Green Street’s 2024 M-RevPAF growth of +1.4% for the top 50 apartment markets vs. SREIT’s +3.8% same-store apartment rental revenue growth for its portfolio and Green Street’s M-RevPAF growth of -4.0% for the top 50 industrial markets vs. SREIT’s +5.8% same-store industrial rental revenue growth for its portfolio. These growth metrics were weighted based on SREIT’s December 31, 2024 sector values of 70% apartment and 13% industrial. 6. Total asset value is measured as the gross asset value of real estate investments (based on fair value) plus the total fair value of real estate-related securities as well as the addition of any other assets (including cash or any other cash equivalents, but excluding cash associated with subscriptions received in advance). 7. NAV is calculated in accordance with the valuation guidelines approved by our board of directors. NAV is not a measure used under generally accepted accounting principles in the United States (“GAAP”), and the valuations of and certain adjustments made to our assets and liabilities used in the determination of NAV will differ from GAAP. You should not consider NAV to be equivalent to stockholders’ equity or any other GAAP measure. Please refer to our annual and quarterly reports filed with the SEC, which are available at www.starwoodnav.reit, for a reconciliation of NAV to GAAP measures. For information on how we calculate NAV, see the “Net Asset Value Calculation and Valuation Guidelines” section of our prospectus.
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SREIT | 2024 YEAR-END LETTER
FOR SREIT STOCKHOLDERS ONLY
8. Reflects real estate property investments only and does not include real estate debt investments. Occupancy is weighted by the total real estate asset value of all real estate properties, excluding hospitality. For our multifamily investments, occupancy represents the percentage of all leased units divided by the total unit count as of the date indicated. For our office and industrial investments, occupancy represents the percentage of all leased square footage divided by the total available square footage as of the date indicated. 9. Leverage is measured on gross real estate assets (calculated using the greater of fair market value and cost of gross real estate assets, including equity in our real estate debt investments), inclusive of property-level and entity-level debt net of cash, but excluding indebtedness on our real estate debt investments. The leverage ratio would be higher if indebtedness on our real estate debt investments was taken into account. 10. Returns shown reflect the percent change in the NAV per share from the beginning of the applicable period, plus the amount of any distribution per share declared in the period. All returns shown assume reinvestment of distributions pursuant to SREIT’s distribution reinvestment plan, are derived from unaudited financial information and are net of all SREIT expenses, including general and administrative expenses, transaction related expenses, management fees, performance participation allocation, and share class specific fees, but exclude the impact of early repurchase deductions on the repurchase of shares that have been outstanding for less than one year. Past performance is historical and not a guarantee of future results. Class S, Class D and Class T shares listed as (With Sales Load) reflect the returns after the maximum upfront selling commission and dealer manager fees. Class S, Class D and Class T shares listed as (No Sales Load) exclude upfront selling commissions and dealer manager fees. Class I shares have no upfront selling commissions or dealer manager fees. The returns have been prepared using unaudited data and valuations of the underlying investments in SREIT’s portfolio, which are estimates of fair value and form the basis for SREIT’s NAV. Valuations based upon unaudited reports from the underlying investments may be subject to later adjustments, may not correspond to realized value and may not accurately reflect the price at which assets could be liquidated. The inception dates for the Class I, S, D and T shares are December 21, 2018. For more information on SREIT’s performance, please visit www.starwoodnav.reit/performance.
For more information, please visit www.starwoodnav.reit
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SREIT | 2024 YEAR-END LETTER
FOR SREIT STOCKHOLDERS ONLY
10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K
(Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2024 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission file number 000-56046
STARWOOD REAL ESTATE INCOME TRUST, INC. ( Exact name of Registrant as specified in Its Charter)
2340 Collins Avenue Miami Beach, FL 33139
Maryland
82-2023409 (I.R.S. Employer Identification No.)
(State or other jurisdiction of incorporation or organization)
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (305) 695-5500 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Title of Each Class
Class T Common Stock, $0.01 par value per share Class S Common Stock, $0.01 par value per share Class D Common Stock, $0.01 par value per share Class I Common Stock, $0.01 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report . ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the common stock held by non-affiliates of the registrant: No established market exists for the registrant’s common stock. As of March 20, 2025, the registrant had the following shares outstanding: 5,039,393 shares of Class T common stock, 180,684,817 shares of Class S common stock, 25,450,524 shares of Class D common stock and 189,735,122 shares of Class I common stock.
TABLE OF CONTENTS
Page
PART I. ITEM 1.
BUSINESS ........................................................................................................................................................... 6 ITEM 1A. RISK FACTORS.................................................................................................................................................. 10 ITEM 1B. UNRESOLVED STAFF COMMENTS .............................................................................................................. 59 ITEM 1C. CYBERSECURITY ............................................................................................................................................. 59 ITEM 2. PROPERTIES ...................................................................................................................................................... 60 ITEM 3. LEGAL PROCEEDINGS.................................................................................................................................... 60 ITEM 4. MINE SAFETY DISCLOSURES........................................................................................................................ 60
PART II. ITEM 5. ITEM 6. ITEM 7.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES..................................................................................... 61 RESERVED ......................................................................................................................................................... 70
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................................................................................................................... 71 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.................................... 85 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................................................... 86 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE......................................................................................................................... 86 ITEM 9A. CONTROLS AND PROCEDURES.................................................................................................................... 86 ITEM 9B. OTHER INFORMATION.................................................................................................................................... 87 ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS................... 87
PART III. ITEM 10. ITEM 11. ITEM 12.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ............................................ 89 EXECUTIVE COMPENSATION....................................................................................................................... 93 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.................................................................................................... 95 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE .......................................................................................................................................... 96 PRINCIPAL ACCOUNTING FEES AND SERVICES...................................................................................... 103
ITEM 13.
ITEM 14.
PART IV. ITEM 15. ITEM 16.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES................................................................................... 105 FORM 10-K SUMMARY.................................................................................................................................... 106 SIGNATURES........................................................................................................................................................................... 107
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PART I. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements about our business, including, in particular, statements about our plans, strategies and objectives. Forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. These statements include our plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds, and are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond our control. Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate and our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. In light of the significant uncertainties inherent in these forward- looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved. Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. RISK FACTOR SUMMARY We are subject to numerous risks and uncertainties that could cause our actual results and future events to differ materially from those set forth or contemplated in our forward-looking statements, including those summarized below. The following list of risks and uncertainties is only a summary of some of the most important factors and is not intended to be exhaustive. This risk factor summary should be read together with the more detailed discussion of risks and uncertainties set forth under Item 1A. “Risk We have incurred GAAP (defined below) net losses attributable to stockholders and an accumulated deficit in the past and may incur GAAP net losses attributable to stockholders and continue to have an accumulated deficit in the future. • We have held certain of our current investments for only a limited period of time, and investors will not have the opportunity to evaluate our future investments before we make them. • Since there is no public trading market for shares of our common stock, repurchase of shares by us will likely be the only way to dispose of your shares. Our share repurchase plan provides stockholders with the opportunity to request that we repurchase their shares on a monthly basis, but we are not obligated to repurchase any shares and may choose to repurchase only some, or even none, of the shares that have been requested to be repurchased in any particular month in our discretion. In addition, repurchases are subject to available liquidity and other significant restrictions, including monthly and quarterly repurchase limits. Since October 2022, repurchase requests have consistently exceeded the applicable monthly and/or quarterly limits of our share repurchase plan and may continue to do so in the future. Further, our board of directors may modify or suspend our share repurchase plan if it deems such action to be in our best interest and the best interest of our stockholders. As a result, our shares should be considered as having only limited liquidity and at times may be illiquid. • We cannot guarantee that we will make distributions, and if we do, we may fund such distributions from sources other than cash flow from operations, including, without limitation, the sale of assets, borrowings or offering proceeds (including from sales of our common stock or Operating Partnership (defined below) units to the Special Limited Partner (defined below)), and we have no limits on the amounts we may pay from such sources. • The purchase and repurchase price for shares of our common stock are generally based on our prior month’s net asset value (“NAV”) (subject to material changes) and are not based on any public trading market. While there are independent annual appraisals of our properties, the appraisal of properties is inherently subjective and our NAV may not accurately reflect the actual price at which our properties could be liquidated on any given day. • We are dependent on Starwood Capital and its affiliates, including Starwood REIT Advisors, L.L.C. (the “Advisor”), and their key personnel who provide services to us through the Advisory Agreement (defined below), and we may not find a suitable replacement for the Advisor if the Advisory Agreement is terminated, or for these key personnel if they leave Starwood Capital or otherwise become unavailable to us. • Valuations and appraisals of our assets are estimates of fair value and may not necessarily correspond to realizable value. Factors” of this Annual Report on Form 10-K. Risks Related to Our Organizational Structure •
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• Our NAV per share amounts may change materially if the appraised values of our properties materially change from prior appraisals or the actual operating results for a particular month differ from what we originally budgeted for that month. • The return on an investment in our stock may be reduced if we are required to register as an investment company under the Investment Company Act of 1940 (the “Investment Company Act”). General Risks Related to Investments in Real Estate • Our operating results may be affected by economic and regulatory changes that impact the real estate market in general. • Our portfolio may be concentrated in a limited number of asset types, geographies or investments. • Our board of directors may change our investment and operational policies or our investment guidelines without stockholder consent. • We may have difficulty selling our properties, which may limit our flexibility and ability to pay distributions. • Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of our joint venture partners and disputes between us and our joint venture partners. • The inability of property managers to effectively operate our properties and leasing agents to profitably lease vacancies in our properties would hurt our financial performance. • Our properties face significant competition. General Risks Related to Investments in Real Estate Debt • Our debt investments face prepayment risk and interest rate fluctuations that may adversely affect our results of operations and financial condition. • Real estate debt investments face a number of general market-related risks that can affect the creditworthiness of issuers, and modifications to certain loan structures and market terms make it more difficult to monitor and evaluate investments. • We may invest in commercial mortgage loans, which are non-recourse in nature and include limited options for financial recovery in the event of default; an event of default may adversely affect our results of operations and financial condition. • We may invest in high-yield securities which are generally subject to more risk than higher rated securities. • We have and may in the future acquire and sell residential credit investments, which may subject us to legal, regulatory and other risks that could adversely impact our business and financial results. Risks Related to Debt Financing • We have incurred mortgage indebtedness and other borrowings and expect to incur additional debt, which may increase our business risks, hinder our ability to make distributions and decrease the value of our stockholders’ investments. • If we draw on a line of credit to fund repurchases or for any other reason, our financial leverage ratio could increase beyond our target. • Increases in interest rates could increase the amount of our loan payments and adversely affect our ability to make distributions to our stockholders. • Volatility in the financial markets and challenging economic conditions could adversely affect our ability to secure debt financing on attractive terms and our ability to service any future indebtedness that we may incur. Risks Related to our Relationship with the Advisor and the Dealer Manager; Risks Related to Conflicts of Interest • The Advisor’s management fee and the Special Limited Partner’s performance participation interest may not create proper incentives or may induce the Advisor and its affiliates to make certain investments, including speculative investments that increase the risk of our real estate portfolio. • The Advisor faces a conflict of interest because the fees it receives for services performed are based in part on our NAV, which the Advisor is ultimately responsible for determining. • Certain other investment funds and accounts sponsored by affiliates of the Advisor have similar or overlapping investment objectives and guidelines, and we will not be allocated certain opportunities and may be allocated only opportunities with lower relative returns.
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Risks Related to our REIT Status and Certain Other Tax Items •
If we do not qualify as a REIT (defined below), we will face serious tax consequences that will substantially reduce the funds available to satisfy our obligations, to implement our business strategy and to make distributions to our stockholders for each of the years involved. • Compliance with REIT requirements may cause us to forego otherwise attractive opportunities, which may hinder or delay our ability to meet our investment objectives and reduce your overall return. • Investments outside the United States may subject us to additional taxes and could present additional complications to our ability to satisfy the REIT qualification requirements. • We may incur tax liabilities that would reduce our cash available for distribution to our stockholders. • Our board of directors is authorized to revoke our REIT election without stockholder approval, which may cause adverse consequences to our stockholders.
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ITEM 1. BUSINESS References herein to “Starwood Real Estate Income Trust,” “Company,” “we,” “us,” or “our” refer to Starwood Real Estate Income Trust, Inc., a Maryland corporation, and its subsidiaries unless the context specifically requires otherwise. General Description of Business and Operations We were formed on June 22, 2017 as a Maryland corporation and elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2019. We are organized to invest primarily in stabilized, income-oriented commercial real estate and debt secured by commercial real estate. Our portfolio is principally comprised of properties located in the United States and is diversified on a global basis through investments in properties outside of the United States, with a focus on Europe. To a lesser extent, we also invest in real estate debt, which could include loans secured by real estate and real estate-related securities. We are the sole general partner of Starwood REIT Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). Starwood REIT Special Limited Partner, L.L.C. (the “Special Limited Partner”), a wholly owned subsidiary of Starwood Capital Group Holdings, L.P. (the “Sponsor”), owns a special limited partner interest in the Operating Partnership. Substantially all of our business is conducted through the Operating Partnership. We and the Operating Partnership are externally managed by the Advisor, an affiliate of the Sponsor. Our board of directors has at all times had oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure with respect to the Operating Partnership. Pursuant to an advisory agreement among the Advisor, the Operating Partnership and us (the “Advisory Agreement”), we have delegated to the Advisor the authority to source, evaluate and monitor our investment opportunities and make decisions related to the acquisition, management, financing and disposition of our assets, in accordance with our investment objectives, guidelines, policies and limitations, subject to oversight by our board of directors. As of December 31, 2024, we owned 461 consolidated real estate properties, 933 single-family rental units, two investments in unconsolidated real-estate ventures and one real estate debt investment. We currently operate in seven reportable segments: Multifamily, Single-Family Rental, Industrial, Office, Self-Storage, Other and Investments in Real Estate Debt. Effective January 1, 2022, the Hospitality and Medical Office segments were combined within the Other segment and previous amounts have been recasted. On December 27, 2017, we commenced our initial public offering of up to $5.0 billion in shares of common stock. On June 2, 2021, our initial public offering terminated and we commenced a follow-on public offering of up to $10.0 billion in shares of common stock. On August 10, 2022, our follow-on public offering terminated and we commenced our third public offering of up to $18.0 billion in shares of common stock, consisting of up to $16.0 billion in shares in our primary offering and up to $2.0 billion in shares pursuant to our distribution reinvestment plan. We intend to continue selling shares in our third public offering on a monthly basis. As of March 21, 2025, we had received net proceeds of $14.1 billion from the sale of our common stock through our public offerings. We have contributed the net proceeds from our public offerings to the Operating Partnership in exchange for a corresponding number of Class T, Class S, Class D and Class I units. The Operating Partnership has primarily used the net proceeds to make investments in real estate, real estate debt and real estate-related securities. In April 2024, we launched a program (the “DST Program”) to raise capital, through the Operating Partnership, through private placement offerings exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by selling beneficial interests (the “DST Interests”) in specific Delaware statutory trusts (“DSTs”) holding real properties (the “DST Properties”). We expect that the DST Program will give us the opportunity to expand and diversify our capital-raising strategies by offering what we believe to be an attractive investment product for investors that may be seeking like-kind replacement properties to complete tax-deferred exchange transactions under Section 1031 of the Internal Revenue Code (the “Code”). Affiliates of the Advisor will receive fees in connection with the sale of the DST Interests and the management of the DSTs. We intend to use the net offering proceeds from the DST Program to make investments in accordance with our investment strategy and policies, reduce our borrowings, repay indebtedness, fund the repurchase of shares under our share repurchase plan and for other corporate purposes. As of March 21, 2025, we have raised approximately $37.0 million in gross offering proceeds through the DST Program. Investment Objectives Our investment objectives are to invest in assets that will enable us to: • provide current income in the form of regular, stable cash distributions to achieve an attractive distribution yield; • preserve and protect invested capital; • realize appreciation in NAV from proactive investment management and asset management; and
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• provide an investment alternative for stockholders seeking to allocate a portion of their long-term investment portfolios to commercial real estate with lower volatility than public real estate companies. We cannot assure you that we will achieve our investment objectives. See Item 1A. — “Risk Factors” section of this Annual
Report on Form 10-K. Review of our Policies
Our independent directors have reviewed our policies and determined that they are in the best interests of our stockholders. Set forth below is a discussion of the basis for such determination. In addition, our board of directors, including our independent directors, has examined the material terms, factors and circumstances surrounding any related party transactions or arrangements described herein. On the basis of such examination, our board of directors, including our independent directors, has determined that such transactions occurring in the year ended December 31, 2024 are fair and reasonable to us and on terms and conditions not less favorable to us than those available from unaffiliated third parties. Investment Strategy Our investment strategy seeks to capitalize on Starwood Capital’s scale and the real-time information provided by its real estate holdings to identify and acquire our target investments at attractive pricing. We also seek to benefit from Starwood Capital’s reputation and ability to transact in scale with speed and certainty, and its long-standing and extensive relationships in the real estate industry. Starwood Capital is a private investment firm with a primary focus on global real estate. Since its inception in 1991, Starwood Capital has raised over $80 billion of capital and currently has approximately $115 billion of assets under management. Our objective is to bring Starwood Capital’s leading real estate investment platform to income-focused investors. Our investment strategy is primarily to acquire stabilized, income-oriented commercial real estate. Our portfolio is principally comprised of properties located in the United States and is diversified on a global basis through investments in properties outside of the United States, with a focus on Europe. To a lesser extent, and subject to the investment limitations described herein, we may also invest in real estate debt, including loans secured by real estate and real estate-related debt securities, and real estate- related equity securities. Our investments in real estate-related debt and equity securities provide us with current income, a source of liquidity for our share repurchase plan, cash management and other purposes. We believe that our structure as a perpetual-life REIT will allow us to acquire and manage our investment portfolio in a more active and flexible manner. We do not have a pre-determined operational period or the need to provide a “liquidity” event, potentially in an unfavorable market, at the end of that period. Investments in Properties To execute our investment strategy, we invest primarily in stabilized, income-oriented commercial real estate. Our portfolio is principally comprised of properties located in the United States and is diversified on a global basis through investments in properties outside of the United States, with a focus on Europe. These may include multifamily, single-family rental, industrial, office, and self-storage assets, as well as other property types, including, without limitation, retail, medical office, student housing, senior living, data centers, and manufactured housing properties. We may also acquire assets that require some amount of capital investment in order to be renovated or repositioned. We generally will limit investment in new developments on a standalone basis, but we may consider development that is ancillary to an overall investment. We do not designate specific sector allocations for the portfolio; rather we invest in markets or asset classes where we see the best opportunities that support our investment objectives. Investments in Real Estate Debt While our portfolio is principally comprised of properties, to a lesser extent, we may also invest in real estate debt, including loans secured by real estate and real estate-related debt securities. An allocation of our overall portfolio to real estate debt may allow us to add sources of income and further diversify our portfolio. Our investments in loans secured by real estate may include first mortgages, subordinated mortgages and mezzanine loans, participations in such loans and other debt secured by or relating to the types of commercial real estate that are the focus of our real estate strategy. The type of real estate debt investments we seek to acquire are obligations backed principally by real estate of the type that generally meets our criteria for direct investment. Mortgage loans are typically secured by multifamily or commercial property and are subject to risks of delinquency and foreclosure. The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of such property rather than upon the existence of independent income or assets of the borrower. Mezzanine loans may take the form of subordinated loans secured by a pledge of the ownership interests of either the entity owning the real property or an entity that owns (directly or indirectly) the interest in the entity owning the real property. These types of investments may involve a higher degree of risk than mortgage
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