Starwood Capital Group has raised $10.2 billion for its largest fund, as the firm positions itself around data centers, rental housing and other commercial real estate assets at a time when artificial intelligence is reshaping demand across property markets. Chairman Barry Sternlicht said Starwood could invest as much as 35% of the fund in data centers, nearly double the share committed through its previous opportunistic fund. Sternlicht framed the current moment as both exciting and intimidating, as investors try to understand how AI infrastructure demand could change the future of real estate.
The data center strategy may not be easy to execute, even for a firm of Starwood's size. These projects can be expensive to develop, slow to produce returns and highly competitive as developers chase access to power. Starwood plans to address those financing gaps by co-investing in deals and deploying capital over time. One earlier Starwood fund partnered with MARA Holdings NASDAQ:MARA to convert Bitcoin mining sites with existing power access into data centers, a structure that could become more capital-intensive once those conversions advance.
Starwood has already committed more than $3 billion from the new fund across 20 investments, including a stake in Dublin-based Echelon Data Centres, a Texas land portfolio intended for residential development and logistics properties in Northern Italy. The fund drew capital from more than 300 investors, with nearly half based in the US, while Starwood invested $100 million of its own money. Sternlicht also sees possible opportunities in US rental housing, especially in Sun Belt markets where pandemic-era supply has been absorbed and rent growth is starting to improve, while the firm is avoiding states such as New York where housing regulations make those investments less attractive.