Starwood Capital Raises $10B for Distressed CRE Fund
It surpassed the $7.6 billion raised for its predecessor vehicle.
Starwood Capital Group has closed its latest opportunistic real estate fund, Starwood Distressed Opportunity Fund XII, with capital commitments exceeding $10 billion, surpassing the $7.6 billion raised for its predecessor vehicle, SOF XI.
Together with existing commitments to other private real estate investment vehicles, Starwood Property Trust, Inc., Starwood Real Estate Income Trust, Inc. and Starwood Energy Partners, Starwood Capital’s assets under management now total over $95 billion.
Starwood Capital affiliates have already closed or committed to 25 transactions in SOF XII, requiring over $3.5 billion of equity.
Noteworthy investments in SOF XII to date include: a U.S. single family rental home platform that has acquired more than 4,500 homes; the privatization of Extended Stay America, a leading owner and operator of economy extended-stay hotels; the privatization of RDI REIT, a UK listed company with a large real estate portfolio anchored by high-quality industrial and logistics assets in Europe; and a portfolio of well-located office properties in Tokyo acquired on an off-market basis during COVID-19 uncertainty.
“Our sourcing capabilities continue to yield a robust pipeline of investment opportunities, and our market expertise around the globe continues to generate attractive returns for investors, CEO Barry Sternlicht said in prepared remarks. “SOF XII is off to an excellent start and we are confident it will continue our tradition of finding valuable investments with over 35% of the fund deployed in closed and approved transactions.”
The Wall Street Journal reported that during fundraising meetings, investors queried Starwood executives about the hospitality sector and the long-term effects of the pandemic, as well as the future of office properties amid the rise in remote working, Sternlicht said. The campaign took place entirely during the pandemic.
Properties that rely on business travel could face prolonged recoveries, Sternlicht told WSJ. But he noted that demand is strong for hotels and resorts within driving distance of major markets.
“While some major markets are likely to experience a slower recovery in office demand, we continue to focus on high-growth Sunbelt markets that are recovering quickly,” Sternlicht told WSJ. The new fund can invest in properties that aren’t distressed as well, he said.