StepStone Closes Fund with $1.4B in Capital Commitments
The final closing total exceeded the $1 billion target.
StepStone Real Estate announced the final closing of its fourth in a series of funds focused on special situations secondaries and recapitalizations of real estate vehicles.
StepStone says the $1.4 billion final closing exceeded the $1 billion target for the fund called Stepstone Real Estate Partners IV (SREP IV). The firm closed $870 million of the commitments after the COVID-19 pandemic began.
“A lot of investors had put a lot of capital to work at the peak of the market, where the returns were going to be probably lower or under pressure,” Jeffrey Giller, partner and head of SRE, tells GlobeSt.com. “Then, they wanted to take advantage of a more lucrative return environment by investing during the downturn. So a lot of investors leaned into the market with additional capital.”
SRE has a history of investing in challenging economic environments. In 2009, the firm’s partners also pivoted to partnering with managers to focus on special situations secondaries and recapitalizations.
“Having been to the movie before and knowing the script and the ending, it was very easy for us to pivot and reorient our strategy to more of a distressed environment,” Giller says.
In this environment, Giller says SRE’s capital can help general partners pay down debt and sustain their assets. It can also provide working capital to complete developments and provide leasing commissions and tenant improvements.
During stable market conditions, Giller says that SRE’s capital can help GPs wind up long-dated funds and other types of real estate vehicles. SREP III, which had its final closing in February 2017 with $700 million in primary commitments and invested capital of approximately $1.2 billion, operated in this environment.
“A lot of our deals were oriented towards helping GPs create liquidity for their vehicles in long-dated funds where the LPs had made attractive returns over time and were ready for a liquidity event,” Giller says. “The GP thought they could take their assets to another level. So we partnered in that new endeavor.”
StepStone Real Estate is part of StepStone Group, a global private markets investment firm focused on providing customized investment solutions and advisory and data services to its clients. As of June 30, 2020, StepStone oversaw $292 billion of private market allocations. StepStone Real Estate constituted $103 billion of that total.