StepStone Group has held an above-target final close on its latest real estate secondaries fund.
The New York-headquartered firm raised $1.4 billion for StepStone Real Estate Partners IV, $870 million of which closed after the onset of the covid-19 pandemic, sister publication Secondaries Investor. The fund’s target was $1 billion.
Limited partners include sovereign wealth funds, pension funds, financial institutions, foundations, endowments and family offices from North America, the Middle East, Europe, Asia and Latin America, according to partner and head of StepStone Real Estate Jeffrey Giller.
SREP IV came to market in April last year and is double the size of its predecessor, which held its final close in 2017 with $700 million in commitments, according to PERE data.
StepStone had focused on acquiring limited partnership interests in real estate funds and switched in 2009 to focusing on more complex secondaries deals such as restructurings, acquiring LP interests in long-dated funds and preferred equity-type transactions, the statement noted.
“We are optimistic that the period of disruption caused by the covid-19 pandemic may create a similar investment environment for SREP IV,” Giller said.
SREP IV is the seventh-largest real estate secondaries fund raised, according to data from PERE.
Market sources say deal flow for limited partnership stakes is likely to return in late 2020 or early 2021, driven mainly by LPs seeking liquidity or looking to sell down unfunded positions. Co-investment stakes could also prove an attractive opportunity as overextended LPs look to free themselves of concentrated holdings. There is more than $80 billion of net asset value in real estate funds that are eight years or older, Secondaries Investor reported in August, many of which have had to extend their exit strategies by several years due to coronavirus. Uncertainty over asset valuations has driven a wedge between the expectations of buyers and sellers, putting a majority of LP- and GP-led transactions on hold since March.
Real estate secondaries volumes dropped 53.4 percent year-on-year to $890 million, making it the second-largest faller after private equity, according to data from intermediary Setter Capital.