Starwood Capital Group announced capital commitments in excess of $10.2 billion with the final closing of its latest opportunistic real estate fund, Starwood Distressed Opportunity Fund XIII, according to a July 1 press release.
SOF XIII will focus on a strategic mix of residential, data center, industrial and hospitality assets across the United States and Europe, with selective opportunities in the Asia-Pacific.
A representative from Starwood did not respond to Multifamily Dive’s questions about U.S. multifamily’s role in the fund and the firm’s geographic and product-type focus for its residential acquisitions as of press time.
More major firms are diversifying product types across their funds to survive the ups and downs of real estate cycles, Jim Costello, chief real estate economist at MSCI, told Multifamily Dive.
“Managers don't want just one property type and get killed because of one shock to just that one property type,” Costello said. “They want their own kind of diversification, so that they can keep the lights on and keep managing the firm.”
Together with existing commitments to Starwood Capital's other investment vehicles, the firm's assets under management now total approximately $130 billion.
Starwood has already committed more than $3 billion of equity in SOF XIII by closing or contracting 20 transactions in housing, industrial and data centers in the United States, Europe and Asia, per the release.
“We are seeing strong tailwinds driven by slowing supply in traditional real estate asset classes and tremendous growth in technology and manufacturing – this is an exciting time to be investing in real estate,” Jonathan Pollack, president of Starwood Capital, said in the news release.
A multifamily track record
Starwood has not appeared in recent National Multifamily Housing Council Top 50 lists, but it ranked No. 1 in 2022 with 115,056 units. It also owns Addiston, Texas-based property manager Highmark Residential.
SOF XIII was supported by more than 300 new and existing investors across approximately 20 countries, including pensions, sovereign wealth funds, foundations, endowments, wealth managers, family offices and high-net-worth investors. Starwood Capital Group and related parties have also committed $100 million to the fund, per the release.
The fund is welcome news for the real estate industry, according to Hugh Frater, chairman of the board at Vessel Technologies and board member at the Bipartisan Policy Center. “I'm happy that there's that kind of capital out there that wants to be deployed in the real estate markets,” Frater said. “I think that's a very positive sign. As to where the proper allocation for that $10.2 billion is, that's a different question.”
While few companies can match Starwood’s size, others across the multifamily space have closed or launched opportunistic or distressed funds this year.
Heitman announced the final close of Heitman Value Partners Fund VI, its largest closed-end fundraise to date, in January. The vehicle received commitments totaling $2 billion, exceeding its $1.75 billion target and reaching its hard cap.
On a smaller scale, Neighborhood Ventures launched Opportunistic Fund II in January, a $25 million vehicle that will acquire five to eight distressed multifamily properties across high-growth U.S. markets, including Denver; Tampa, Florida; Salt Lake City; Charlotte, North Carolina; Dallas; and Phoenix.
“Since we had a very active year last year, we have a lot of brokers reaching out to us now with off-market deals that the sellers want to quietly sell for big losses,” co-founder and CEO Jamison Manwaring said at the time. “We launched Fund II to continue on the trajectory of buying these distressed assets.”
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