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Starwood Plans $3B Data Centre Push For New Fund As Private Equity Piles In


Starwood Capital is the latest real estate private equity giant to plan a big push into the data centre market, allocating a significant chunk of its latest fund to the sector. 

Starwood has launched capital raising for Starwood Distressed Opportunity Fund XIII, PERE reported, with an equity target of $10B. The global fund will have an allocation of 20% to 30% to data centres, PERE reported, which would mean Starwood investing between $2B and $3B in the sector — more if debt is used. 

Interest in data centres among real estate investors is growing, with firms enticed by the prospect of artificial intelligence tools creating increased demand. 

Blackstone said in the summer that it could invest around $8B in the sector on the back of AI-driven demand. Brookfield bought European data centre company Data4 from AXA in April for more than $3B. 

“If a Blackstone decides data centres is our new [growth] sector, they will make the market like they did in logistics, but there will be developments needed,” said one interviewee for the ULI and PwC Emerging Trends in Real Estate Europe report, published last week.

The survey of more than 1,000 real estate professionals identified data centres as having the second-best prospects for investment and development of any real estate sector over the next few years. 

Starwood invested in data centres for its last two funds but did not have a specific allocation to the sector, PERE reported. It will not necessarily be looking for distressed opportunities, despite the fund’s name, instead seeking to build a platform. 

The $10B of equity targeted for Starwood’s latest fund is the same as for its last fund, which completed capital raising in 2021. The fund will have an allocation of about 40% to residential and will also invest in assets in the industrial, hospitality, office and life sciences sectors. 

About half of the fund’s investments will be in North America, about a third in Europe and the rest in Asia-Pacific. The fund is targeting net returns of 18% to 20%.