Starwood Real Estate Income Trust, Inc. Annual Report - How They Did This Year

Hey there! I'm here to help you understand SREIT's performance this past year. We'll cover what it means for your investments. This annual report looks at the fiscal year ended December 31, 2025. It gives a clear picture of SREIT's business, finances, and results.

What SREIT Does

Think of SREIT as a big landlord that owns and manages a variety of properties. They don't just stick to one type of building; their portfolio is quite diverse! They formed in 2017. Since late 2019, SREIT has been a Real Estate Investment Trust (REIT). This means they get tax breaks if they pay most of their earnings to shareholders.

SREIT is managed by an affiliate of Starwood Capital Group. This is a huge private investment firm. It manages over $130 billion in assets globally. This connection means SREIT can tap into Starwood Capital's vast experience. They use its market insights and relationships to find good investment opportunities.

Their main goal is to invest in "stabilized, income-oriented commercial real estate." This means they look for properties already generating steady rental income. Most of their properties are in the United States. However, they also spread investments globally, focusing on Europe.

As of December 31, 2025, they owned quite a bit:

• 402 real estate properties
• 878 single-family rental units (think individual houses rented out)
• They also have a couple of investments in other real estate ventures and one real estate debt investment.

They raised about $14.3 billion from investors. With their target debt levels, SREIT manages around $35.75 billion in real estate assets. This was as of December 31, 2025.

Their portfolio has five main categories. This mix helps them earn steady income and grow value over time. They spread investments across different property types and regions:

• Apartment Buildings (Multifamily): These are residential properties. Think of apartment complexes you might live in. This segment typically makes up 40-50% of their total property value. They have several multifamily portfolios. These include "Summit Multifamily Portfolio," "Azalea Multifamily Portfolio," and various affordable housing portfolios.
• Industrial Properties: This includes warehouses and logistics centers. These are crucial for getting products to stores and your doorstep. This sector has seen strong growth. It typically makes up 20-30% of their property investments. They have portfolios like "Reno Logistics Portfolio" and "Marshfield Industrial Portfolio."
• Office Buildings: These are places where many businesses operate. Examples include their "Florida Office Portfolio" and "Columbus Office Portfolios." This segment generally makes up about 10-15% of their portfolio. Market conditions can influence its allocation.
• Other Properties: This is a catch-all for various types. They invest in single-family rentals, self-storage, retail, medical offices, student housing, senior living, data centers, and manufactured housing. This diverse category typically accounts for 5-10% of their property holdings. They might buy properties needing work (renovation or repositioning). However, they generally avoid big new construction projects on their own.
• Investments in Real Estate Debt: This means they lend money for real estate projects. They also invest in securities (like bonds) backed by real estate. This can include first mortgages or subordinated loans. Subordinated loans get paid back after the main mortgage. They also use "mezzanine loans," which are riskier but can offer higher returns. They also invest in Commercial Mortgage-Backed Securities (CMBS) and Residential Mortgage-Backed Securities (RMBS). This debt component typically represents 5-10% of their overall investment portfolio. It provides additional income streams and diversification.

This mix means they're spread across different parts of the real estate market. This can be good for stability. They also use various loans, both fixed and variable rate. A credit line helps them manage their money. As of December 31, 2025, SREIT owed about $21.45 billion. This debt helps them buy and manage their many properties.

SREIT is a "perpetual-life REIT." This means it has no set end date. This gives them more flexibility. They can manage investments over the long term. They are not forced to sell properties at a bad time just to return money to investors.

What They Aim For (Their Goals)

SREIT has clear goals for its investors:

• Provide steady income: They want to give you regular, stable cash distributions (like dividends). These come from their rental income and interest from debt investments.
• Protect your money: They aim to keep your initial investment safe. They do this by investing in diversified, stabilized assets.
• Grow your investment: They want to increase the value of their properties. In turn, this grows the value of your shares. They achieve this through smart management and strategic acquisitions.
• Offer a stable alternative: They want to be a less volatile way to invest in commercial real estate. This is compared to publicly traded real estate companies. They offer a non-listed, professionally managed option.

How You Can Invest (Share Classes & Fees)

SREIT isn't traded on a regular stock exchange. So, you buy shares directly through their public offering. They offer four different types of shares, called "classes." Each has slightly different costs:

• Class T Shares: These have upfront selling commissions and dealer manager fees of up to 3.5% of your purchase price. You'll also pay an ongoing "stockholder servicing fee" of 0.85% per year. This is based on your investment's value.
• Class S Shares: Similar to Class T, these also have upfront selling commissions of up to 3.5%. They also have an ongoing stockholder servicing fee of 0.85% per year.
• Class D Shares: These have lower upfront selling commissions of up to 1.5%. They also have a lower ongoing stockholder servicing fee of 0.25% per year.
• Class I Shares: These are the cheapest upfront. They have no selling commissions or dealer manager fees. They also have no ongoing stockholder servicing fee.

The "Dealer Manager" (who helps sell the shares) usually passes most of these fees on to the brokers who help you invest. For the year ended December 31, 2025, the Dealer Manager didn't keep any of these upfront or ongoing fees. They all went to the participating brokers.

As of March 15, 2026, SREIT had a lot of investors:

• Class T: 1,026 holders
• Class S: 30,299 holders
• Class D: 1,453 holders
• Class I: 16,892 holders In total, SREIT had 49,670 unique stockholders across all classes as of this date.

How They Performed This Year (Getting a Clearer Picture!)

We're starting to get some real numbers for how SREIT performed in 2025!

We track SREIT's performance using its Net Asset Value (NAV) per share. Think of NAV as the estimated value of all their properties and other assets. We subtract their debts, then divide by the number of shares outstanding. It's like finding out how much your share of the company's underlying assets is worth.

The NAV per share for all classes declined throughout 2025. Here's how it looked month-by-month for each share class:

As you can see, for example, the Class S NAV started the year at $21.82 and ended at $20.14. This is a decrease of about 7.7% over the year. The other classes saw similar declines. Class I NAV fell from $21.64 to $19.96, a 7.8% decrease. This indicates the estimated value of SREIT's underlying properties and assets went down during 2025. This happened after accounting for debt. This is important for investors. A declining NAV means your investment's value has decreased (excluding any distributions you received). This NAV drop shows wider trends in commercial real estate. Rising interest rates affected property values. Capitalization rates also increased.

How they figure out that NAV: SREIT's board of directors has a detailed plan to calculate this NAV. They use their own advisor, independent valuation experts, and third-party appraisal firms. These estimate the fair value of their properties and other investments. They aim to figure out what a willing buyer and seller would agree on for their assets.

It's important to remember that this NAV is an estimate. It isn't the same as the "book value" you might see on their official financial statements. Book value is based on historical costs. Real estate values involve a lot of judgment and estimates. So, the calculated NAV might not be the exact price they'd get if they sold everything today. They use different methods for different types of properties:

• Main Properties: They get quarterly updates from an independent valuation advisor. Their own advisor provides monthly updates, which the independent advisor checks. They mainly use a "discounted cash flow" method. This looks at a property's estimated rental income and future selling price.
• Joint Ventures: If they own properties with partners, they value their share. This is based on the overall value of the joint venture's assets.
• European Properties: An independent appraiser provides an annual valuation. Their advisor performs monthly checks.
• Single-Family Rentals: Independent experts value these quarterly. Their advisor performs monthly checks.
• Operating Companies: If they invest in companies that run properties, an independent appraiser values these annually.
• Real Estate Debt: This is valued based on what they think they could sell the debt for today.

Share Repurchases – How Easy Is It to Sell Your Shares? Think of a share repurchase plan as a way for you, the investor, to sell your shares back to the company if you need to. It's a way to get some of your money out. This is especially true since SREIT shares aren't traded on a stock exchange like Apple or Google.

However, SREIT's ability to repurchase shares is limited. They don't always have enough cash to buy back all the shares investors want to sell. This means they might not be able to repurchase all submitted shares. They can even change or stop the plan altogether.

This became very clear in the last three months of 2025 (October, November, and December). SREIT did repurchase about 6.5 million shares at an average price of $20.47 per share during this quarter. However, they received many more requests than they could fulfill. In fact, for each of those months, only about 4% of each stockholder's repurchase request was actually satisfied. This means if you wanted to sell 100 shares, you could only sell about 4 of them. This indicates high demand from investors wanting to sell shares. SREIT couldn't fully meet this demand due to the repurchase plan's limits. They fund these repurchases using new share sales, borrowed money, and selling off some assets.

It's also worth noting that their Advisor (Starwood Capital's affiliate) had about 526,000 Class I shares repurchased outside the regular plan. This was mainly to cover their tax bills. This specific repurchase didn't count towards the limits placed on regular investors.

Capital Raising Efforts: While the NAV declined, we do know they've been very active in raising capital:

• As of March 20, 2026, they've raised a whopping $14.3 billion. This came from selling shares to investors through public offerings since they started. They're currently in their fourth public offering, aiming to raise another $10 billion! This shows a strong ability to attract investor money. This is true even as their previous offerings have closed (the initial, follow-on, and third public offerings have all terminated, making way for the new one).
• They also launched a new program in April 2024. It's called the DST Program. It has raised about $62.2 million as of March 20, 2026. This program helps investors make tax-deferred exchanges. This is a smart way for SREIT to bring in more capital and diversify its funding sources.

How They Use Debt (Leverage)

Like many real estate companies, SREIT uses borrowed money (debt) to buy more properties. They could not buy as many with just investor money. This is called leverage. It can boost returns, but it also adds risk.

• Their Target: They aim for their debt to be between 50% and 65% of their properties' value. This includes other real estate investments, after subtracting cash. As of December 31, 2025, SREIT owed about $21.45 billion. This debt represents roughly 60% of their estimated total asset value of $35.75 billion. This falls within their target range.
• Flexibility: They can go above this target sometimes. This happens especially if they're borrowing to buy back shares. It also occurs if property values temporarily drop. Their board of directors reviews their debt levels regularly.
• Limits: While they have flexibility, their company rules (charter) generally limit their total debt. It is capped at about 75% of their investments' cost. They can go higher than this. However, it requires approval from their independent directors. They must also tell shareholders why.

They also use more complex debt tools. These include "repurchase agreements" and "derivatives" like total return swaps. These can increase their overall debt. They use them to manage interest rate risk or boost returns. But these tools also add more complexity and risk.

Important Things to Watch Out For (Risks)

Investing always comes with risks, and SREIT is no different. Here are some key things to keep in mind:

• Property Management & Competition: If their property managers aren't good at keeping buildings full or managing them efficiently, it could hurt their income. The same is true if there's a lot of competition for tenants. High vacancy rates or declining rental income directly impact SREIT's ability to generate cash flow and make distributions.
• Debt Risks:
  • Interest Rates: If interest rates go up, their loan payments could increase. This means less money for distributions to you. Much of their debt, including their credit line and some property loans, has variable interest rates. This makes them sensitive to rate increases.
  • Market Volatility: Tough economic times can make it harder for them to get new loans. It also makes refinancing existing ones on good terms difficult. This could lead to higher borrowing costs. Or, they might be unable to access capital when needed.
  • Loan Defaults: If they lend money for real estate projects, and those projects don't do well, they might not get their money back. This is especially true with "non-recourse" loans. Here, they can only go after the property, not the borrower's other assets. Some debt investments, like "high-yield securities" or "mezzanine loans," are riskier. They get paid back after other, safer loans. This means a higher risk of loss if borrowers default.
• Limited Liquidity / Share Repurchase Plan Risks: Unlike stocks traded on an exchange, SREIT shares aren't easy to sell whenever you want. They have a share repurchase plan. This allows investors to sell shares back to the company. However, this plan has significant limitations. SREIT might not have enough cash to buy back all the shares investors want to sell. They can choose to limit, modify, or even suspend the plan at any time. As seen in the last three months of 2025, only a small fraction (about 4%) of investor repurchase requests were fulfilled. This means you might not be able to sell your shares when you want to. Or, you might only be able to sell a small portion. This is a major consideration for investors needing access to their funds. This lack of liquidity means your investment is long-term. It is not suitable for those needing quick access to capital.
• Advisor Conflicts:
  • Fees: The fees SREIT pays to its advisor (Starwood Capital's affiliate) are partly based on SREIT's Net Asset Value (NAV). The advisor helps determine this NAV. This could create a situation where the advisor might be tempted to make decisions that boost NAV. This might happen even if they are not always best for long-term investor returns. Or, it could involve taking on excessive risk.
  • Other Funds: Starwood Capital manages many other funds. These have similar investment goals. SREIT might not always get the very best investment opportunities. Those could go to other Starwood funds. This "allocation of investment opportunities" risk means SREIT might not always have first dibs on the most attractive deals. These deals are sourced by its experienced advisor.
• REIT Status: If SREIT ever fails to meet the strict rules to qualify as a REIT, it would face significant tax penalties. This would mean a lot less money available for distributions to shareholders. The company would be subject to corporate income tax. Also, their board could decide to revoke the REIT election without shareholder approval. This could have negative consequences for investors. They rely on the tax-advantaged nature of REIT distributions.
• International Investments: Investing in properties outside the U.S. (like in Europe) can bring additional taxes and complexities. These affect maintaining their REIT status. These investments also face currency changes. Foreign markets can be unstable politically and economically. Different laws and rules also exist. All these can affect returns.
• Cybersecurity Threats: In today's digital world, all companies face cyberattack risks. These could disrupt operations, steal sensitive information, or cause financial losses. SREIT's manager, Starwood Capital, has a comprehensive plan to tackle this. They have cybersecurity insurance and a multi-layered approach:
  • Employee Training: All employees get annual training. This teaches them how to spot threats and what to do if there's a breach. They're even regularly tested with fake phishing emails to keep them sharp!
  • System Checks: They do annual risk assessments for new security threats. They also regularly run vulnerability and penetration tests. These "ethical hacks" find and fix system weaknesses all year.
  • Constant Monitoring: They use advanced security tools in their systems and the cloud. Specialized outside experts provide real-time monitoring. These experts gather data from key systems. They filter out noise and use smart analysis. This helps Starwood Capital quickly find and analyze threats.
  • Third-Party Oversight: They're very careful about who they work with. They use an outside platform to check vendor cybersecurity risks. This includes financial service providers and property managers. They evaluate, rate, monitor, and track these risks. They regularly monitor partners' security. Outside experts also review how vendors fix cybersecurity issues. For any software hosted by a vendor, they check for industry-standard security reports (like SOC 1 or SOC 2). If a vendor lacks these reports, Starwood Capital takes extra steps. They assess the vendor's cybersecurity readiness. This helps them decide on the relationship. This vendor check is part of Starwood Capital’s wider cybersecurity risk plan.
  • Strong Leadership: The board of directors oversees cybersecurity risks. They tasked the audit committee with reviewing the details. This committee gets updates from the Advisor at least twice a year. These cover the cybersecurity program, incidents, and how they are handled. Starwood Capital's Chief Technology Officer (CTO) leads cybersecurity. The CTO has vast experience in tech leadership and financial services cybersecurity. The CTO sets the strategy and manages threat responses. A skilled IT security team supports them. This team has certifications and incident response experience. They also use outside cybersecurity firms to boost their abilities. While they have many defenses in place, the risk of a successful cyberattack is always present. It could lead to financial losses, reputational damage, or operational disruptions.
• Legal Proceedings: As of December 31, 2025, SREIT was not involved in any significant legal battles. This is good news. It means they are not currently facing major distractions or potential financial liabilities from lawsuits.