Starwood Property Trust Deploys $352M in Three Transactions

Though the credit markets have not defrosted completely, there is capital out there.

March 23, 2011
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user Chris Harley

The credit markets have not defrosted completely, but there is capital out there and Starwood Property Trust is among those doling it out. Recently, the commercial real estate finance company deployed an aggregate $352 million in capital through three separate transactions involving hotel and office properties.

In a deal that entailed a six-property portfolio of full-service hotels scattered across California, Starwood originated a $165.5 million package. The financing consisted of a $107 million first mortgage loan and a $38 million mezzanine loan–at a loan-to-value ratio of about 75 percent on an aggregate basis–secured by five hotels encompassing 1,050 guestrooms. A $20.5 million corporate loan secured by the last of the six lodging properties was also part of the deal.

A second transaction involved Starwood’s delivery of a $30 million mezzanine loan with an LTV ratio of 53 percent for the refinancing of a luxury boutique hotel encompassing 188 guestrooms on Manhattan’s Upper East Side.

The company’s recent activity included assets in the office sector as well. The third transaction consisted of the acquisition of a $188 million loan secured by a 3 million-square-foot portfolio at a discounted price of $156.5 million with an LTV ratio of 54 percent. The group of assets includes nine buildings accounting for a total of approximately 2.5 million square feet of Class A and Class B office space, and another property being constructed to provide 538,000 square feet of premier office accommodations.

Barry Sternlicht, chairman & CEO of Starwood, noted that the deployment took place at attractive risk-adjusted returns. He added that since the firm’s secondary equity offering in December 2010, it has invested $650 million of gross capital, 76 percent of which was originations and 24 percent was acquisitions. He said the firm expects that its entire portfolio of target assets, which has a weighted average LTV of less than 64 percent, will yield approximately 12 percent.

In the fourth quarter of 2010, Starwood deployed capital totaling more than $543 million.