Starwood markets biggest fund yet

Starwood Capital Group is back on the fundraising trail with its biggest opportunistic real estate fund to date.

The Greenwich, Connecticut-based firm has an up to $6 billion target for Starwood Global Opportunity Fund XI, according to June meeting minutes from the New Mexico Public Employees’ Retirement Association (PERA). The pension system, which allocated $75 million to the fund at its June 30 meeting, has invested in the firm’s opportunistic fund series since 2008.

A spokesperson for Starwood declined to comment on the fundraise.

With capital from the latest vehicle, Starwood plans to invest in 50 to 60 transactions with a net internal rate of return target of 14 percent to 16 percent, according to PERA. At the June meeting, Jerome Silvey, Starwood’s chief financial officer, said the firm planned to hold a first close at the end of the month.

Other investors in the fund include the Illinois Municipal Retirement Fund, which earmarked $75 million, and the Houston Municipal Employees’ Pension System, which allocated $20 million, according to PERE research.
Silvey said the firm plans to invest in US and Europe with capital from the fund. Starwood had not made a European investment in the last seven months because of uncertainty surrounding the UK’s referendum on its EU membership, which made financing difficult.

However, Silvey noted volatility can be beneficial for acquisitions.

“Whenever there is panic in the marketplace, whenever there is dislocation of capital, either equity capital or debt capital, it is an opportunity for funds like ours to buy assets at a discounted value to replacement cost or to whatever market values should be,” he said in a statement recorded at the meeting.

Starwood closed Fund X in March 2015 with $5.6 billion in commitments, exceeding its $4.5 billion target, according to an announcement at the time. That capital raise, which wrapped within a year, was one of the fastest in its history. Starwood held a first close on Fund X in late June 2014, attracting $2.1 billion in capital in less than three months.

By comparison, the firm raised $4.2 billion for the predecessor vehicle, Fund IX, over a period of more than 18 months, closing the vehicle in April 2013. Fund X is primarily focused on distressed debt, value-add assets and corporate transactions, and has an 18 percent net IRR target, PERE reported when the vehicle closed.

The firm has nearly fully invested Fund X’s capital in 41 investments, which have generated a 22 percent net IRR, Silvey said at the meeting. Fund IX has 56 investments, with 45 investments remaining in the fund, according to Silvey.

Starwood’s most recent publicly disclosed transaction was the sale of Woodland Meadows (pictured), a 296-unit apartment property in Fort Lauderdale, Florida. The firm and its partner, Gaia Real Estate Holdings, sold the asset, located at 5903 Northwest 57th Court, to a joint venture comprising Canyon Partners and Citigroup for $33 million, according to real estate data provider Real Capital Analytics.

Starwood has over $51 billion in assets under management, according to PERA.