Starwood Capital Group has successfully raised $10.2 billion for a new fund, earmarked for investments in data centers, rental housing, and other commercial real estate sectors. This strategic move represents a significant expansion of its portfolio into these areas, which are being reshaped by the rapid advancement of artificial intelligence.
Starwood Capital Group's Chairman, Barry Sternlicht, indicated in an interview that the firm anticipates allocating up to 35% of the fund's capital towards data center projects. This allocation target is nearly double the proportion invested in data centers by its previous opportunistic fund.
"Everyone is concerned about what the future holds," Sternlicht remarked. "I often say we have never been more excited, and we have never been more scared."
Investing in data centers presents considerable challenges, even for a firm of Starwood Capital's scale, due to the high development costs and extended timelines for investment returns. This difficulty is compounded by intense competition among numerous developers for access to essential power resources.
To address the funding gap, Starwood Capital is employing a strategy of co-investing in data center projects and injecting capital progressively as these developments advance. A previous fund from the company collaborated with MARA Holdings to convert a Bitcoin mining facility with existing power infrastructure into a data center.
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