Starwood Capital Group (Starwood) has raised $10.2bn for its latest opportunistic real estate fund – the ‘Starwood Distressed Opportunity Fund XII’. The firm has strategically positioned itself around data centres, rental housing and other commercial real estate assets. This arrives at a time when artificial intelligence (AI) is rapidly reshaping demand across the property markets.
Chairman Barry Sternlicht mentions Starwood could invest up to 35% of the fund in data centres, which marks nearly double the share committed through its previous opportunistic fund. Barry also framed the current moment as both exciting and intimidating, as investors try to understand how AI infrastructure demand could affect the future of real estate.
“We are very grateful for our investors’ continued strong support. This is a testament to the strength of our team and the trust our LPs place in us.
“We are excited about the opportunities we have already sourced for this fund and are proud of our track record of delivering results for our investors through market cycles.
“With our scale, resources and breadth of talent, we are well-positioned to execute on opportunities in this compelling environment for real estate.”
Barry Sternlicht, Chairman and CEO, Starwood Capital Group
The data centre strategy the firms has is ambitious, and the project could be expensive to develop, slow to produce returns and highly competitive as developers chase access to power. Starwood plans to bridge the financing gaps by co-investing in deals and deploying capital over time.
“We could not be more proud of our brand, our strategy and our team’s capabilities, and of the results we have consistently delivered for our investors.
“With a growing team of more than 350 investment professionals and an expanding global footprint, we have the talent, scale and conviction to continue delivering great performance.
“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, Starwood Capital Group
An earlier Starwood fund partnership with MARA Holdings was formed to convert Bitcoin mining sites with existing power access into data centres, a structure that could become more capital-intensive once those conversions advance.
Starwood has already committed over $3bn from the new fund across 20 investments, including a stake in Dublin-based Echelon Data Centres, a Texas land portfolio designed for residential development and logistics properties in Northern Italy.
The fund has drawn capital from over 300 investors, with nearly half based in the US, while Starwood invested $100m of its own money. Barry also sees possible opportunities in US rental housing, especially in Sun Belt markets where pandemic-era supply has been absorbed and rent growth is moderately improving.
