Nontraded real-estate funds managed by KKR & Co. and Starwood received more requests for redemptions from investors than they were able to grant under the operating rules of the investment vehicles, the firms said in filings.

The redemption requests came after the funds managed to outperform public real-estate investment trusts (REITs) in 2022, which may have prompted some investors to turn to the vehicles for cash. In the case of KKR, some of its fund is dedicated to floating-rate interest vehicles, which benefit when interest rates rise.

Real-estate investing has been less bullish overall as the cost of borrowing has risen and dampened deal activity, while demand for some office space has been slack as people continue to work from home in the wake of the COVID-19 pandemic.

The moves by KKR and Starwood come after Blackstone Inc.
last month limited redemptions from the massive Blackstone Real Estate Income Trust. Earlier this month, Blackstone Real Estate Income Trust also received a $4 billion investment from the Regents of the University of California.

Also read: Blackstone’s Gray: ‘We didn’t want to have to sell assets at the wrong time, under pressure,’ after $69 billion REIT limits withdrawals

Starwood disclosed that its $4.2 billion Starwood Real Estate Income Trust Inc. honored 63% of redemption requests in November and 20% of stockholder share-repurchase requests in December, after it hit its 5% redemption cap in both months.

Starwood Capital Group, a private real-estate investment firm, was founded by Barry Sternlicht, who is chair of Starwood Real Estate Income Trust.

The $1.6 billion KKR Real Estate Select Trust generated an 8.32% net total return for 2022 while paying out an annualized net distribution rate of 5.13% as of Dec. 31, according to a filing.

The fund received purchase requests of $128 million, or 8.1% of the fund’s aggregate net asset value, in its first-quarter tender offer period, which ended Jan. 13.

KKR has historically only allowed purchase requests of up to 5% of the net asset value of the fund. KKR said it was able to fulfill 62% of redemption requests received in the first quarter.

The private-equity firm said that about 36% of the fund’s net asset value is in liquid holdings.

“We believe that maintaining a robust liquidity position is a critical component of optimal portfolio construction, particularly in more uncertain market environments such as today’s,” wrote Billy Butcher, CEO of KKR Real Estate Select Trust, in a letter to fund holders. “We expect that our robust, multifaceted approach to liquidity should continue to allow KREST to repurchase common stock equating to 5% of [net asset value] during quarterly tender offer periods without any negative impact to portfolio construction.”

A KKR spokesperson declined to comment.

stock fell 4.7% on Thursday.