Starwood Capital Group has held a final close for its tenth opportunistic property fund, Starwood Global Opportunity Fund X, collecting approximately $5.6 billion in commitments. The vehicle, which had an original target of $4 billion to $5 billion, is the firm’s largest to date.
The capital raise, which wrapped within a year, is also one of the fastest in Starwood’s history. The firm held a first close on Fund X in late June, attracting $2.1 billion in capital in less than three months. By October, Starwood had doubled its equity haul to $4.2 billion for Fund X and originally had anticipated a final close for the vehicle by the end of the year. By comparison, the firm raised $4.2 billion for the predecessor vehicle, Fund IX, over a period of more than 18 months.
Fund X drew more than 100 limited partners, including pension funds, sovereign wealth funds and other institutional and high-net-worth investors globally. Among those investors were the Teachers’ Retirement System of the State of Illinois, which committed $300 million last May; the South Dakota Retirement System, which earmarked $150 million last June; and the Connecticut Retirement Plans and Trust Funds and the Florida State Board of Administration, both of which agreed to invest $100 million, according to documents from those institutions. Other backers included the Teacher Retirement System, the Oklahoma Teachers’ Retirement System and the Public Employees Retirement Association of New Mexico.
Fund X will primarily be focused on distressed debt, value-add assets and corporate transactions, and is expected to generate an 18 percent net internal rate of return. So far, Starwood has invested or committed more than $2 billion of equity from Fund X, split fairly evenly between the US and Europe.
Some of the most notable transactions made through the fund have been entity-level investments. For example, in December, the firm agreed to acquire the management platforms of SveaReal Fastigheter and DNB NOR Eiendomsinvest I, a Norwegian real estate firm, along with a portfolio of office, industrial, hotel, retail and other assets in Sweden and Norway for $1.4 billion, the single largest property transaction in Scandinavia last year. In January, Starwood also completed the $1.2 billion purchase of TMI Hospitality, an owner, manager and developer of select-service hotels in the US.
Additionally, the firm has agreed to buy a nearly seven-million-square-foot suburban office portfolio in Raleigh, North Carolina, Nashville, Tennessee, South Florida, and St. Louis, Missouri for $1.1 billion; and closed on the purchase of three regional malls in Texas, Virginia and Michigan for $340 million and four extended-stay hotels and one residential complex in London for $310 million.
Until its final close, Fund X was one of the largest real estate vehicles in market, behind The Blackstone Group’s Blackstone Real Estate Partners VIII, which is expected to raise approximately $10 billion in its first close and is targeting up to $15 billion in commitments, and along with Lone Star Funds’ Lone Star Real Estate Fund IV, which also has a $5 billion equity goal and is due for a first close next month.