On January 19th, 2023, Alfonso Peccatiello, the founder of Macro Compass, went on Twitter to share that KKR, a real estate investment house, decided to limit withdrawals.
KKR, one of the largest real estate investment houses in the world, just decided to put a limit to investors' withdrawals from one of their funds.
After Blackstone, another huge real estate player trying to stop the bleeding by forcing investors to stay in and swallow the pain.
— Alf (@MacroAlf) January 19, 2023
Similar to the crypto market, the real estate market has been going through its version of turmoil since 2022 till date. For that reason, KKR has limited the amount of money investors are allowed to withdraw from its real-estate funds, joining the ranks of BlackRock, Starwood Capital Group, and Blackstone Inc to control the funds bleeding.
During the withdrawal period ending on the 13th of January, KKR received more withdrawal requests than it could fulfill under its operating rules since real estate is an illiquid asset. So it could fulfill around 62% of total withdrawal requests from its select trust Inc valued at $1.6 billion.
It seems KKR’s real estate investment trust (REIT) outperformed others in the industry in 2022. This led to users requesting to liquidate their investments for cash. But KKR’s terms of service already had a limit of withdrawal for users, and its funds were dedicated to a floating rate interest which is only profitable if held long term.
But like the crypto space, the real estate sector has not been bullish, with less demand for office space due to the Covid pandemic and the development of work-from-home tools. Added to that, the cost of borrowing has risen, which has made deals less profitable.
The move to limit withdrawals by KKR could possibly be prompted by the situation of BlackRock in 2022. Though BlackRock was one of the largest assets managers in the world, being the first to break through $10 trillion worth of assets managed, it also got the record for most user funds lost in six months. In the space of six months, the establishment lost $1.7 trillion.
Yet, some users on Twitter were quick to respond that Alf’s tweet is misleading as most investors are informed of the structure of real estate funds before they hand over their funds. Though the market is not as bullish, they are still bullish.
With all its volatility, it seems the crypto space isn’t the only one going through a bear market. Though the whole crypto market lost around $2 trillion in 2022, BlackRock’s $1.7 trillion loss almost makes up for the loss of the whole crypto space.
With blockchain use cases showing up in the real estate space, would blockchain provide the needed liquidity for the real estate space, or would the crash bleed the liquidity in the crypto space?
