Stoneshield raises €750m for third opportunistic vehicle

The Southern Europe-focused manager took just five months to reach a final close for the fund, well below the European average.

Manager Stoneshield Capital, which invests in real estate across Southern Europe, has completed a final close for Stoneshield Opportunity Fund III with €750 million in commitments, PERE can reveal.

The Luxembourg-based firm launched the opportunistic vehicle at the end of last year with a target size of €700 million, and was oversubscribed after just five months on the road. According to PERE data, this is notably faster than the most recent European average, whereby closed-end private real estate funds focused on the region had spent an average of 23.4 months in market upon final close in 2023.

The investors in Fund III are located across Europe, North America and the Middle East. Newcomers to the fund series constituted around a third of the fund’s investor base, and include US endowments/foundations, pension funds from the US and Middle East, and global asset managers. PJT Park Hill served as adviser and placement agent to Stoneshield.

Stoneshield was founded in 2018 by Juan Pepa and Felipe Morenés, both former partners at US opportunistic real estate manager Lone Star Funds. The prior fund in Stoneshield’s flagship opportunistic fund series, Stoneshield Southern European Real Estate II, closed with $600 million in November 2023 and is fully deployed.

For Fund III’s investments, Stoneshield seeks returns in excess of 20 percent gross IRR and targets a loan-to-value ratio of 50 percent. Through the fund, the firm will invest in real estate, corporate platforms and non-performing loans across the data center, residential, life science, industrial outdoor storage and logistics sectors in Spain, Portugal and Italy.

Morenés: foresees compelling opportunities in IOS in Southern Europe

Even with a five-month fundraise, one-quarter of the fund’s capital has already been committed to opportunistic acquisitions, said Morenés. He declined to comment on the nature of those deals, but added that the firm sees significant opportunity in the NPL space owing to the €150 billion-plus of real estate debt due to mature in Europe in the next two years.

“Most of that collateral is located in countries like the UK or Germany, but whenever those assets are located in Spain, Portugal or Italy, there are not that many truly local niche investors with discretionary capital like Stoneshield who can execute,” he said.

Morenés singled out IOS as another key strategic focus for Fund III’s investments, and cited the recent success of US manager Alterra Property Group’s third IOS fund offering – which exceeded its hard-cap to raise $925 million within eight months, as reported by PERE last week – as an example of the strength of investor appetite for the property type.

“Many global investors are seeking IOS exposure as a niche strategy diversified away from traditional industrial,” said Morenés. “We foresee opportunities to be especially compelling in Southern Europe and plan to scale our existing €200 million IOS platform.”

Because Spain and Portugal are home to many ports located across some of the most important global maritime routes, the logistics sector can benefit from onshoring trends, he noted.

OpCo strategy

Across the multiple property sectors in which it invests, Stoneshield integrates assets acquired into operating platforms backed by the firm. “Our strategy is the convergence of operational real estate platforms and special situations,” explained Pepa. Current platforms include Iberian student housing operator MiCampus, Spanish listed housing developer Neinor Homes, and Spanish life sciences laboratory and office platform MaSID.

Pepa: owning OpCos is key to maximizing asset value

“We believe owning OpCos is the key to maximizing the value of assets,” he added. “By owning the OpCos, we are able to closely monitor the assets and have a better view on how to extract more value from them, such as through increasing revenue capacity, cost streamlining and [creating] synergies across the portfolio. Furthermore, by acquiring or creating strategic OpCos, we avoid having to externalize this service to more expensive third-party providers.”

In the data center space, the firm acquired Spanish platform XData Properties in 2021, which owned an asset in Madrid with 1MW of installed capacity. Having scaled the asset to 131MW of secured power supply, Stoneshield sold the business to US data center company Iron Mountain in November 2022.

Since inception, Stoneshield has raised more than €2 billion of equity across four discretionary funds. Last week, PERE revealed Stoneshield had attracted an additional €100 million in commitments for European Student Accommodation Core Fund, an open-end core-plus fund investing in purpose-built student accommodation assets across Southern Europe. The fund has now attracted a total of €600 million since it was launched in March last year, and the firm expects it to exceed €2 billion in size in the long term.