Starwood Capital Group issued a press release on July 1 announcing that its latest opportunistic real estate fund, Starwood Distressed Opportunity Fund XIII (SOF XIII), has completed its final closing with total capital commitments exceeding $10.2 billion.

The fund will focus on residential, data center, industrial, and hotel assets in the United States and Europe, with selective attention to investment opportunities in the Asia-Pacific region. As of press time, Starwood representatives did not respond to Multifamily Dive's questions about the role of U.S. multifamily housing in the fund and the geographic and product type focus of its residential acquisitions.

More large institutions are responding to volatility in the real estate cycle by diversifying across asset classes. Jim Costello, chief real estate economist at MSCI, told Multifamily Dive: "Managers don't want to hold just one property type and get hit hard if that property type gets hit. They want to diversify themselves so they can keep operating and keep managing the firm."

Together with existing commitments from other Starwood Capital investment vehicles, the company's total assets under management now stand at approximately $130 billion. According to the press release, Starwood has committed over $3 billion in equity to SOF XIII through 20 transactions completed or signed in the United States, Europe, and Asia.

Jonathan Pollack, president of Starwood Capital, said in the press release: "We are seeing strong tailwinds from slowing supply in traditional real estate asset classes and tremendous growth in technology and manufacturing—this is an exciting time to invest in real estate."

Track record in the multifamily sector

Starwood has not recently appeared on the National Multifamily Housing Council (NMHC) Top 50 list, but it topped the list in 2022 with 115,056 units. The company also owns Highmark Residential, a property management firm based in Addison, Texas.

SOF XIII received support from more than 300 new and existing investors across approximately 20 countries, including pension funds, sovereign wealth funds, foundations, endowments, wealth management firms, family offices, and high-net-worth individuals. Starwood Capital Group and its affiliates also committed $100 million to the fund.

The fund's formation is positive news for the real estate industry. Hugh Frater, chairman of the board of Vessel Technologies and a board member of the Bipartisan Policy Center, said: "I'm glad to see capital willing to be deployed into the real estate market. I think it's a very positive signal. How that $10.2 billion should be allocated wisely is another question."

Although few companies can match Starwood's scale, several other firms in the multifamily sector have closed or launched opportunistic or distressed funds this year.

Heitman announced in January that its Heitman Value Partners Fund VI had completed its final closing, marking the firm's largest closed-end fund raise to date. The fund received total commitments of $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. The $25 million fund will acquire five to eight distressed multifamily properties in high-growth U.S. markets, including Denver; Tampa, Florida; Salt Lake City; Charlotte, North Carolina; Dallas; and Phoenix.

Co-founder and CEO Jamison Manwaring said at the time: "Because we were so active last year, a lot of brokers are now reaching out to us with off-market deals where sellers want to quietly sell at significant losses. We launched Fund II to continue that trajectory of acquiring distressed assets."

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