StepStone attracts $1.4bn for real estate fund

StepStone Real Estate, a division of the newly listed StepStone Group, announced the close of its latest fund at $1.4 billion, handily exceeding its $1 billion target.

The StepStone Real Estate Partners IV (SREP IV) is the fourth in a series of funds focused on special situations secondaries and recapitalization of real estate vehicles. Officials added that $870 million of the fund’s commitments closed after the coronavirus pandemic began.

The fund is double the size of its predecessor SREP III that closed in 2017 with $700 million in primary commitments and invested capital of approximately $1.2 billion, which includes capital from co-investors.

SREP IV’s diverse global investor base consists of sovereign wealth funds, pension funds, financial institutions, university foundations and endowments, and family offices from North America, the Middle East, Europe, Asia and Latin America, said Jeffrey Giller, partner and head of StepStone Real Estate, which manages $103 billion.

The roots of the fund’s strategy date back to the global financial crisis of 2008 and the recovery. Prior to the crisis, the firm’s principals were among the main investors in the traditional secondaries sector, focused on buying passive limited partnership interests in funds.

In 2009, the team began partnering with managers to invest in special situations secondaries and recapitalizations. The work included helping managers to recapitalize their real estate vehicles and/or purchasing their limited partners’ interests in long-dated funds and other types of real estate vehicles, as well as providing infusions of fresh capital to help managers expand their portfolios.

“The special situations secondaries and recapitalization strategy that we focused on during the GFC and recovery period was a win for our investors, a win for the limited partners that benefited from liquidity at a time they really needed it, and a win for the managers that we partnered with to address both challenges in their existing portfolios and positive opportunities in the market,” said Giller. “We are optimistic that the period of disruption caused by the COVID-19 pandemic may create a similar investment environment for SREP IV.”