Deals

Starwood raises $2bn for Fund IX, eyes year-end close

The Greenwich, Connecticut-based firm is expected to round out its latest distressed opportunity fund at close to $3 billion by the end of 2012, near the high end of its original target range.

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Starwood Capital Group has raised $2 billion in equity for its ninth opportunity fund, with expectations the firm could hold a final close of nearly $3 billion at the end of 2012. The Greenwich, Connecticut-based real estate investment firm, led by Barry Sternlicht, first held a first close of $1.2 billion in December 2011.
 
According to several people familiar with the matter, Starwood has now closed on a total of $2 billion in equity and is eyeing a final close in the fourth quarter. Sources said the final amount could reach $3 billion, against an original target of between $2 billion and $3 billion. Starwood declined to comment.
 
As previously reported by PERE, the distressed opportunity fund – which, for the first time in its history, saw Starwood offer management fee breaks to institutional investors joining the first close and to larger investors committing more than $150 million of equity – has corralled commitments from US pensions, endowments and foundations, as well as foreign institutional investors. In July, the New York State Teachers’ Retirement System committed $50 million to the vehicle, while the Teachers’ Retirement System of the State of Illinois committed $150 million in February.
 
Fund IX, which is believed to be 25 percent invested, is focused predominantly on distressed opportunities in the US, although the firm also is believed to be eyeing Europe and Brazil for opportunities. The investments to date are believed to be generating 14 percent cash-on-cash returns.
 
In May, Starwood bought a 9,500-unit multifamily portfolio spanning five states in the US with Gaia Real Estate. Starwood and Gaia acquired the units for $446 million through a bankruptcy auction after agreeing to invest $22.5 million of new equity to acquire and recapitalise the portfolio’s owner, PJ Finance.

That same month, Starwood teamed with New York Life Investment Management to acquire 1372 Broadway in New York. The firm bought the building for $175 million, while New York Life acquired the freehold for $150 million. Both deals were purchased on behalf of Fund IX.