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
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