Starwood Capital Sets $6 Billion Target for Its New Global Fund

  • Pool would be biggest yet for real estate investment manager
  • Riskier strategies are dominating private property fundraising

Starwood Capital Group LLC is seeking $6 billion from investors for its latest global opportunistic property pool.

The new fund, Starwood Global Opportunity Fund XI LP, would be the firm’s biggest yet. It will be invested primarily in North America and Europe, Starwood Capital Chief Financial Officer Jerome Silvey said in comments recorded on June 30 at the Public Employees Retirement Association of New Mexico’s investment-committee meeting. The fund could invest more in Europe than its predecessors because the U.K.’s vote to leave the European Union is likely to cause some market dislocation and produce investment opportunities, he said.

“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,” Silvey said at the meeting.

The fundraising comes amid stronger demand from investors for riskier real estate strategies as they seek higher returns. In the second quarter, opportunistic strategies dominated private real estate fundraising, with $16.8 billion secured for nine funds that reached their final close during the period, according to Preqin Ltd. That compared with $2.2 billion for four lower-risk core and core-plus vehicles, the data provider said.

Return Rate

Starwood Capital -- one of the biggest real estate managers in the world, with about $51 billion of assets under management -- is aiming for a 14 to 16 percent net internal rate of return on the new fund, Silvey said. The Greenwich, Connecticut-based company closed its last fund for the strategy, Starwood Global Opportunity Fund X, in March 2015, having received $5.6 billion in commitments.

The New Mexico pension, based in Albuquerque, committed $75 million to the new fund, according to the meeting recording.

Starwood’s new pool is the second-biggest real estate fund currently being raised, figures compiled by Bloomberg show. Blackstone Group LP is trying to raise 7 billion euros ($7.8 billion) for Blackstone Real Estate Partners Europe V LP, and has closed on 5.7 billion euros, according to data compiled by Bloomberg.

Silvey did not respond to e-mailed or telephone requests for comment.

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