Blueprint: Starwood’s biggest fund to date, BGO’s next move toward equality, why Oak Street sold to Blue Owl

Starwood stands atop the 2021 fundraising heap; BGO takes on the sector's gender parity challenge; the acquisition of a PERE 100 high-riser; and more in today's briefing, exclusively for our valued subscribers.

He said it

“There’s so much money chasing [yield] … Property values are soaring in almost every asset class. Cap rates are falling, yield is coming down and capital is chasing property because it’s in a form of yield. And it is not just a US phenomenon, it’s around the world.”

Starwood chairman and chief executive Barry Sternlicht on how a global ‘fueled rally based on liquidity’ is benefiting real estate (via CNBC).

What’s new?

In a class by itself?
With less than three months left in the year, Starwood Capital Group has closed on the first mega-fund of 2021, the $10 billion Starwood Distressed Opportunity Fund XII, smashing its $7.5 billion target. The Miami-based private investment firm is no newbie when it comes to raising mega-funds, having previously amassed $7.56 billion for Fund XI and $5.6 billion for Fund X. But as PERE previously reported [see our coverage here], the fundraise also marks Starwood’s first double-digit billion-dollar real estate vehicle. Could there be any other mega-funds to join Starwood’s by the end of the year? At last count, only three funds in market were seeking $5 billion or more, according to PERE data: Brookfield Asset Management’s Brookfield Strategic Real Estate Partners IV, with a $17 billion target; The Carlyle Group’s Carlyle Realty Fund IX, which at $7 billion has already exceeded its $6 billion equity goal; and CIM Group’s CIM Opportunity Zone Fund, which is aiming for $5 billion.

Minding the gap
Not content with setting hard recruiting targets, private real estate manager BentallGreenOak is moving on to setting clarity around its gender parity aims. The New York-based manager announced last week it was committing to achieving gender parity by 2030. How will the firm do it? Working with the coalition Paradigm for Parity, its measures include:

  1. Eliminating or minimizing unconscious bias in the workplace.
  2. Significantly increasing the number of women in senior operating roles, with the near-term goal of at least 30 percent representation in all leadership groups.
  3. Measuring targets and maintaining accountability by providing regular progress reports.
  4. Basing career progress on business results and performance, rather than physical presence in the office.
  5. Providing sponsors, not just mentors, to women well positioned for long-term success.

The announcement builds on the firm’s hardline recruitment target, set last year, which dictated two-thirds of all new hires at the $69 billion assets under management manager be women or from under-represented communities. You can read PERE’s coverage of that measure here.

Downside alignment
One of the fastest growing firms in the private equity real estate space was acquired by a listed asset manager this week. Oak Street Real Estate Capital was purchased by Blue Owl Capital in a cash and stock deal valued at $950 million. Blue Owl manages a portfolio of $62 billion of direct loans and capital solutions products. Chicago-based Oak Street debuted on the PERE 100 in spectacular fashion in 2020, jumping straight into the top 20 with $6.5 billion raised over the preceding five years. The group hangs its hat on its net lease strategy, which targets long-term, triple-net leases on properties with single institutional-grade tenants, founder and chief executive Marc Zahr told PERE last year [see our coverage here]. In a release, Zahr cited a shared focus on “downside protection and robust income generation” as key reasons for the union. After the acquisition closes, the Oak Street team will remain intact and Zahr will get a seat on Blue Owl’s board of directors.

Trending topics

Piling into Asia logistics
US logistics firm Realterm is the latest global real estate business to enter the Asia logistics sector, following several of its peers that have also recently set foot in the market. The transportation-focused logistics specialist is opening an office in Singapore where it has hired Bastian van Halder to be the managing director of Asia. Van Halder was previously a corporate finance director for APAC markets at JLL.

The Asia-Pacific logistics market is thriving on the back of rising domestic consumption and a recovery in global trade. To capitalize on these trends, global real estate firms such as AEW and EQT Exeter have established logistics platforms in the region this year. AEW has added logistics for the first time to its $1.54 billion AEW Value Investors Asia IV, while EQT Exeter is also in the process of raising a $200 million Asia real estate fund with a focus on China logistics.

Pivoting to debt
Yield-starved real estate investors are shifting from equity positions in Europe to debt, a recent INREV survey finds. Last year, 19 percent of commitments by investors to non-listed real estate platforms in the region went to debt strategies, according to the trade group, up from 5 percent in 2019. Among European investors, roughly 22 percent of respondents said they wanted to add more debt in the next two years, up from 16.3 percent last year. INREV credits this shift to three things:

  1. A gap in traditional real estate financing.
  2. A desire to diversify investments.
  3. A hunger for greater yields.

See the survey’s full findings here.

Data snapshot

Life of leisure
The leisure sector includes a variety of non-essential property types, including casinos, restaurants, pubs, movie theaters and gyms. While returns will vary across those types, Knight Frank expects the sector as a whole to outperform other property types in the years ahead [see the report here].

People moves

ESG in focus
Hines has named a head of ESG for Europe as part of its broader plan to boost its commitment to sustainability. Daniel Chang, former managing director of portfolio management at Hines, has been appointed to the role where he will report to global head of ESG Peter Epping. Chang will focus on addressing carbon emissions and social equity across the built environment in Europe. Following the footsteps of its occupiers and investors, Hines has been stepping up its ESG game since June when it appointed Epping to lead its new ESG strategy. 

Investor watch

Leaning into logistics
Oxford Properties continued to add to its logistics portfolio, which is already its largest property type exposure. The Canadian pension investor bought a portfolio of French and Danish urban and light logistics assets from M7 Real Estate for €360 million. M7, a frequent collaborator with Oxford, will continue to manage the properties, 1.8 million square feet of which are in France while the other 2.4 million are in Denmark. The purchase marks Oxford’s first venture in Nordic logistics.

This week’s investor meetings
Tuesday, Oct. 19

Wednesday, Oct. 20

Thursday, Oct. 21

Friday, Oct. 22

Monday, Oct. 25

Today’s letter was prepared by Kyle Campbell, with Evelyn LeeJonathan Brasse, and Christie Ou contributing.