On Tuesday, StepStone Real Estate (SRE) announced that it has successfully closed its fourth fund—StepStone Real Estate Partners IV (SREP IV)—which will invest in special situation secondary offerings and real estate recapitalizations. In a statement announcing the news, StepStone noted that the fund’s $1.4 billion final closing exceeded the initial $1 billion funding target. Additionally, $870 million in investor commitments closed after the onset of covid-19.
This brings the newly anointed SREP IV fund to twice the size of its predecessor, SREP III, which closed in February 2017 with $700 million in primary commitments and invested capital of $1.2 billion, including capital from co-investors.
As of June 30, StepStone oversaw $292 billion in private market allocations, of which $103 billion was allocated to StepStone Real Estate. In addition to its real estate practice, StepStone also invests on behalf of its clients in private equity, infrastructure and private debt.
StepStone Real Estate Partner Jeffrey Giller characterized SREP IV’s investor base as “diverse” and “global,” including sovereign wealth funds, pension funds, financial institutions, university foundations and endowments, as well as family offices based in North America, the Middle East, Europe, Asia and Latin America.
Great Financial Pivot
Prior to the Great Financial Crisis in 2008, SRE was a leading investor in the traditional private equity secondaries market, acquiring existing passive limited partnership interests in funds.
Amid the market dislocations of 2009, the company pivoted to special situations secondaries and recapitalizations. Since that time, its investments in these areas have included acquiring limited partners’ interests in long-dated funds and other real estate vehicles, along with making capital infusions to enable managers to expand their portfolios.
Earlier this month, StepStone listed just over 20 million Class A shares in an initial public offering on the Nasdaq Exchange under the ticker STEP.
In a statement, Giller said, “The special situations secondaries and recapitalization strategy that we focused on during the GFC and recovery period was a win for our investors, a wind 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. We are optimistic that the period of disruption caused by the covid-19 pandemic may create a similar investment environment for SREP IV.”