Fundraising

Starwood’s first infra debt fund to launch later this year – exclusive

The investment firm has been moving towards this moment since acquiring GE Capital’s energy finance business and hiring an infrastructure debt specialist from Deutsche Bank.

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Starwood Capital Group is planning to launch an infrastructure debt fund in the coming months, according to a source familiar with the matter.

The source told Infrastructure Investor that the Miami-based firm is “in the process” of creating its first infrastructure debt fund, which will provide senior-secured, first-lien loans to mostly energy infrastructure projects in the US.

Starwood, primarily a real estate investment firm managing more than $60 billion in assets, plans to raise money from its global LP base, the source added. A fundraising target has not yet been set.

Starwood has been positioning itself to move into the infrastructure debt space, starting with a deal with General Electric last August, when one of the firm’s affiliates – Starwood Property Trust, a commercial mortgage real estate investment trust – bought the project finance debt business and loan portfolio of GE Capital’s Energy Financial Services for $2.56 billion.

Later, in December, the firm announced it had hired Armin Rothauser from Deutsche Bank,  to lead Starwood Capital’s new transportation, infrastructure and energy lending business. Rothauser ran the German bank’s infrastructure lending group and had also previously co-headed Deutsche Bank’s global structured credit business and led the hard asset trading business at Goldman Sachs.

According to the source, the debt fund will be managed by Starwood Capital and not by the firm’s affiliate, Starwood Energy Group Global, an infrastructure equity business that invests in power generation, transmission, storage and related projects. Since being established in June 2005 by Starwood Capital’s chairman and chief executive Barry Sternlicht, Starwood Energy has raised over $3 billion of capital across three funds and co-investments. The most recent vehicle, Starwood Energy Infrastructure Fund III, closed in July 2018 on $1.2 billion.

According to a recent survey conducted by placement agent Probitas Partners, 18 percent of LP respondents said they are actively targeting infrastructure debt exposure, while 24 percent say they would invest in the sector opportunistically.

Starwood did not respond to a request for comment.