Starwood Property Trust and Starwood Capital Group, a private investment firm, on behalf of Starwood Distressed Opportunity Fund IX, is to acquire LNR Property for a total purchase price of USD1.05bn in cash.
LNR, founded in 1969, is a diversified real estate investment, finance, management and development firm with over 550 employees located in 12 offices throughout the US and Europe.
Under the terms of the agreement, Starwood Property Trust will acquire the following LNR business segments for a total purchase price of USD856m:
• US Special Servicer – the largest US special servicer with over USD131bn in loans under management and real estate owned;
• US Investment Securities Portfolio – a portfolio of legacy whole loans, CMBS and CDO investments;
• Archetype Mortgage Capital – a commercial real estate conduit loan origination platform designed to provide unique financing solutions throughout the US;
• Archetype Financial Institution Services – an acquirer, manager, and servicer of portfolios of small balance commercial loans and real estate assets;
• LNR Europe – which consists of Hatfield Philips, the largest independent primary and special servicer in Europe, and LNR European Investment Fund, a European CRE debt fund; and
• Auction.com – 50 per cent of LNR's interest in the nation's leading real estate exchange selling residential and commercial real estate via auction.
In addition, Starwood Capital Group will acquire for USD197m both LNR's US commercial property group and the other 50 per cent of LNR's ownership interest in Auction.com.
"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," says Barry Sternlicht (pictured), Starwood Property Trust's chairman and chief executive officer. "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.
"We are pleased to add LNR's deep and talented team of experienced professionals, who have a demonstrated track record of generating profits through all stages of the real estate cycle."
Toby Cobb and Justin Kennedy, co-chief executive officers of LNR, say: "The entire LNR team is extremely excited to be joining the Starwood family. Having partnered on several large transactions, we knew that Starwood Property Trust's unique capital and investment capabilities would be a perfect complement for LNR's operating platform and diligence capabilities. This is a truly powerful combination and we look forward to continuing to grow the business."
The acquisition is expected to be accretive to earnings and cash flow in 2013 (before transaction expenses) and 2014, resulting in enhanced dividend coverage for Starwood Property Trust's shareholders.