Commercial real-estate firm Starwood Property Trust Inc. (NYSE: STWD) and private equity firm Starwood Capital Group, which are both controlled by Barry Sternlicht, have agreed to pay $1.05 billion for privately held LNR Property LLC. The deal is expected to close in the second quarter of 2013.
Starwood Property Trust, a REIT, will pay $856 million for six of LNR’s business properties, including a 50% stake in Auction.com, the largest online real-estate exchange in the United States. Starwood Capital will pay $197 million of the acquisition cost in exchange for 50% of LNR’s ownership interest in Auction.com and another LNR business.
Starwood’s Sternlicht said:
We are delighted to announce this transformative and highly strategic acquisition that diversifies Starwood Property Trust’s revenue sources, adds significant scale to our operating platform and dramatically expands our proprietary origination capabilities. We expect the combination of LNR’s capabilities, Starwood Property Trust’s superior access to capital, and both firms’ underwriting expertise to result in a long-term and sustainable competitive advantage.
Through this acquisition, Starwood gains entry into the commercial mortgage backed securities (CMBS) sector, which the company notes, “are counter-cyclical investments and provide a natural hedge in a variety of economic scenarios.” Like, for example, a decline in real-estate values in Europe, where LNR currently operates a commercial real-estate debt fund.
Shares of Starwood are inactive in premarket trading this morning, having closed at $24.01 last night, in a 52-week range of $19.30 to $24.56.