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Blueprint: StepStone is ready to spend; Blackstone, Starwood draw questions for latest hotel play; Gaw launches proptech fund

What StepStone plans to do with $3.5 billion of dry powder; a closer look at the price Blackstone, Starwood paid for Extended Stay America; Gaw Capital's latest proptech investment strategy, and more in today's briefing, exclusively for our valued subscribers.

He said it

“There’s a headline rate and then various discounts. Fees used to be more of a negotiation, whereas now everyone is more transparent.”

Steven Cowins, partner at global law firm Greenberg Traurig, tells PERE how manager fees have become more transparent but also more rigid.

What’s new?

Stepping up deployment
By his own admission, StepStone Real Estate head Jeff Giller said his firm had been slow to deploy capital in the two years leading up to the covid-19 pandemic. In fact, although Stepstone has looked at 112 secondaries and co-investment opportunities with an aggregate transaction value of more than $13 billion since the start of the crisis, the firm closed on its first investment in more than a year only last month, with a co-investment in a Japanese industrial portfolio. Now, Stepstone is sitting atop $3.5 billion in dry powder and intends to deploy the capital over the next three years amid the post-covid recovery, with the help of a new senior hire. The firm is currently conducting due diligence on more than $900 million in investments globally, of which approximately 40 percent is in Europe, 40 percent in the US and 20 percent in Asia.

Questionable value
One of private real estate’s biggest take-private transactions in the past 12 months has taken place in a sector facing major pandemic-triggered headwinds. Last week, Blackstone and Starwood Capital Group signed an agreement to acquire Extended Stay America, one of the largest lodging REITs in the country, in an all-cash transaction valued at approximately $6 billion. The mega transaction – and the price at which it was concluded – is being closely analyzed by industry watchers to understand what it says about the state of the hospitality industry as vaccine rollout continues and domestic travel picks up pace. According to a statement, the $19.5 per paired share transaction represented a 15.1 percent premium over the stock’s closing price on March 12, 2021. However, two stakeholders of Extended Stay have now come out to say the offer undervalues the company, and expressed disappointment about the pricing and timing of the deal, according to a Bloomberg report.

Next steps
Gaw Capital has not been afraid to stretch its real estate platform beyond traditional bricks and mortar. The Hong Kong-based manager has invested in real estate-focused technologies since 2016, using balance sheet capital, a separate account assignment and its commingled funds to deploy at least $100 million to the space. Now, as the proptech sector evolves, Gaw is taking the next steps, too. It is targeting $400 million for its debut growth equity fund and has raised more than $200 million for the strategy so far, PERE has learned [our coverage here]. Gaw is also considering a special-purpose acquisition company to corral retail capital and bring an Asia-based tech company to the US public equities market. With a full battery of tools at its disposal for proptech investment, the next step for Gaw will be determining the structures that resonate most with investors.

Data snapshot

Bargain buyers
Most European investors are happy to pay full price for logistics assets and even stabilized offices, but some property types must be discounted.

Trending topics

Is there anybody else out there?
It is unsurprising that Sonny Kalsi, chief executive officer BentallGreenOak, spoke out against racism once again after the murders of Asian women at massage parlors in Atlanta earlier this month. “As a proud Asian American, I know too well the issues many of us have faced and continue to face in our daily lives,” he said. “What is happening now around the world is both unacceptable and cannot be tolerated at any level.” Readers of PERE will recall how Kalsi [his LinkedIn here] and his firm stand out for backing his rhetoric with action. In September, he revealed to us plans to force a more inclusive working environment for women and minorities at the company in an effort to redress issues of inequity [our coverage here]. In PERE’s own commentary on BGO’s policy [our coverage here], we sought further senior private real estate individuals and organizations willing to force similar changes. Six months later and we are still hoping to hear from these individuals and organizations. If you are out there, please do contact us ASAP. For our part: we will provide all substantive D&I measures presented to us with meaningful press coverage. Write to senior editor Jonathan Brasse at jonathan.b@peimedia.com in the first instance.

SPAC in action
Cushman & Wakefield is the latest real estate company to launch a special purpose acquisition company [Nasdaq details here]. The brokerage hopes to raise $250 million, selling shares at $10 apiece. Counting its own contribution to the vehicle, C&W’s SPAC will have $313 million on hand to take another company public. Like Tishman Speyer, CBRE and others, it will take a keen look at proptech groups or other companies that could benefit from its expertise. Roughly $90 billion has been raised by SPACs so far this year [SPAC Research’s total here], which eclipses 2020’s $83 billion record. For more on how the world’s SPACs and real estate intersect, see our coverage here.

First movers
While old hands of private equity real estate sit with their mountains of dry powder on the sidelines and wait for greater stability, some industry newcomers are making moves. Last week, a trio of unheralded investors – private equity real estate group Arkhouse, New York real estate firm the Sapir Organization and Singaporean asset manager 8F Group – floated an unsolicited $2.4 billion bid to take Columbia Property Trust private [announcement here]. The office-heavy REIT has been hammered by pandemic uncertainty. But the group seems to think it would thrive in private hands. At the same time, another little-known firm, American Venture Partners, launched a $1 billion fundraising effort for a distressed real estate vehicle [announcement here]. The group hopes to raise capital from foreign investors bullish on an American real estate recovery.

Investor watch

Getting in on the SFR action
Allianz Real Estate has teamed up with US homebuilder Lennar Corporation once again. But instead of anchoring multifamily rental ventures as it had done in the past, Allianz has backed Lennar’s Upward America Venture, one of the world’s largest private single-family rental vehicles. Allianz’s commitment of $300 million represents nearly 25 percent of the total $1.25 billion in equity raised from institutions that also included lead investor Centerbridge Partners. The venture is expected to acquire more than $4 billion of new single-family rental homes across the US.

This week’s investor meetings
Tuesday, March 23

Wednesday, March 24

Thursday, March 25

Friday, March 26


Today’s letter was prepared by Kyle Campbell with Jonathan BrasseEvelyn LeeArshia Khullar and Christie Ou and contributing.

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