Starwood Property completes US$144 mil in deals

CHICAGO: Barry Sternlicht’s Starwood Property Trust Inc, the commercial real estate mortgage investor and lender, completed US$144 million (RM484.7 million) in investments in its first 60 days.

Starwood completed the US$110 million acquisition of loans on seven properties leased to a single tenant and also invested US$10.9 million in bonds secured by the first mortgage of a New York City hotel, the Greenwich, Connecticut-based company said on Nov 16 in a statement.

Sternlicht, 48, plans to profit in the commercial real estate market by buying distressed debt and originating loans. The credit crisis has driven US$138 billion worth of US commercial properties into default, foreclosure or debt restructuring, according to New York-based Real Capital Analytics Inc.

“We’re basically focusing on investments we can understand,” Barry Sternlicht, chairman and chief executive officer, said in a conference call with analysts. “We’re seeing more and more deals.”

Starwood also on Nov 16 reported a third-quarter net loss of US$1.9 million, or four cents a share. The company said the loss was largely the result of non-cash, stock compensation expenses.

The company said a partnership with Starwood Global Opportunity Fund VIII obtained US$171.6 million of financing from the Term Asset Backed Securities Loan Facility at an average rate of 3.82% and an expected average yield of more than 16% at maturity.

Starwood Property is managed and advised by an affiliate of his Starwood Capital Group, a closely held private equity firm. Sternlicht has been chief executive officer of Starwood Capital since its founding in 1991.

“He’s the key,” David Fick, an analyst at Stifel Nicolaus & Co, said of Sternlicht, before the results were issued. “He’s a deal maker and he’s staking his reputation on this deal.”

Lenders are reluctant to extend credit as property values fall and unemployment rises. Commercial real estate prices have plunged almost 41% since October 2007, the Moody’s/REAL Commercial Property Price Indices show.

Starwood Property boosted the size of its initial public offering by 62% on strong demand from investors. The company raised US$931.5 million from investors in the offering and an additional US$20 million in a private placement with an affiliate of Starwood Capital.

Starwood Property’s IPO success contrasts with other companies that have sold shares or have filed to sell shares after its August sale.

Apollo Commercial Real Estate Finance Inc and Colony Financial Inc cut the size of their IPOs in September and Ladder Capital Realty Finance Inc and Foursquare Capital Corp postponed initial share sales.

Sternlicht was chairman of Starwood Hotels, the third- largest US lodging company, from 1997 to 2005. – Bloomberg LP