Barry Sternlicht’s next big real estate play is officially underway after Starwood Capital Group raised more than $10 billion to fund deals for distressed real estate.
The Starwood Distressed Opportunity Fund XII easily outpaced a previous fund that raised about $7.6 billion in 2018, the Wall Street Journal reports. All of the money raised in this fund was generated during the pandemic.
The company is planning on investing the money in both the United States and Europe, the Journal reports. Sternlicht during fundraising meetings discussed hotels and resorts near major markets as one opportunity with strong demand. The firm is reportedly also targeting the multifamily market, affordable housing, offices and industrial properties.
The firm has already committed about a third of the pot — $3.5 billion of equity — across 25 deals, including the acquisition of 4,500 single-family rental properties. The Journal reports Starwood plans on making 65 to 85 investments through the fund, averaging an equity check of about $100 million.
The Oklahoma City Employee Retirement System put $15 million into the fund, according to the Journal, and public documents show Starwood is expecting net internal return rates between 14 and 16 percent.
Distressed and opportunistic funds have taken off during the pandemic. Oaktree Capital Management raised $4.7 billion in an opportunity fund that closed in March, while KKR raised $4.3 billion in a fund that closed in the past couple of weeks.
Starwood and the Blackstone Group teamed up in March for an acquisition of Extended Stay America at a value of roughly $6 billion. The deal at the time marked the largest of its kind in the pandemic and set the companies’ bet on the hotel industry’s recovery.
Meanwhile, Starwood is still making a play to acquire Monmouth Real Estate, a family-run firm based in New Jersey that owns 120 warehouses across the country. The firm and Equity Commonwealth have engaged in a bidding war for the REIT, sparking one of the summer’s most dramatic real estate events.
[WSJ] — Holden Walter-Warner