Starwood Capital Group has held an interim close for its latest global opportunistic real estate fund and has already surpassed its equity goal, PERE has learned.
The Greenwich, Connecticut-based private alternative investment firm has closed on $5.6 billion out of an upper target of $6 billion for Starwood Opportunity Fund XI Global, according to a filing with the Securities and Exchange Commission. However, PERE understands that Starwood has secured more than $6 billion of approved commitments for the fund.
Starwood launched the vehicle in 2016 with a target of between $5 billion and $6 billion and had gathered $2.7 billion by October of that year, its largest initial closing to date. The fund attracted an additional $681 million at year-end 2016 and had collected $3.38 billion as of February, according to documents from Connecticut Retirement Plans and Trust Funds.
A final close for Fund XI is expected by the end of the year or for early 2018, but the vehicle is already the firm’s largest to date. Starwood, led by chairman and chief executive Barry Sternlicht, collected a total of $5.6 billion for Fund X in March 2015 and $4.2 billion for Fund IX in April 2013.
Among the first-close investors were Illinois Municipal Retirement Fund, which committed $75 million to the vehicle in May 2016; Public Employees Retirement Association of New Mexico, which designated $75 million in June 2016; the Teachers’ Retirement System of the State of Illinois, which agreed to invest $300 million in August 2016; and the Teacher Retirement System of Texas, which pledged $200 million in September 2016.
More recent commitments included $150 million from South Dakota Investment Council in November; up to $100 million from CRPTF in March; and $300 million from the California State Teachers’ Retirement System, also in March, according to those pensions.
With Fund XI, Starwood is targeting gross returns of 17-20 percent and net returns of 14-16 percent, with a net equity multiple of 1.5x to 1.6x, according to a memorandum from CRPTF. The pension system’s real estate consultant, The Townsend Group, noted the mixed relative performance of Starwood’s funds, some of which have fallen below median performance and have failed to achieve their target returns according to its benchmark.
However, the firm had strong realized performance from the early to mid-1990s and two of its more recent funds, Fund VIII and IX, are in the top quartile for their respective vintages, with net projected internal rates of return of 13 percent and 24 percent and net projected multiples of 1.6x and 1.8x, respectively, according to the CRPTF documents. Since inception, Starwood has generated annual net returns of 17 percent.
Through the fund, the firm primarily will pursue assets in need of repositioning or recapitalization, distressed assets, large property portfolios and companies. Fund XI will focus on multifamily, hospitality and office properties, with up to half of the fund’s capital to be allocated in Europe and half in the US, the CRPTF documents said.
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