The Real Deal New York

Crexus rejects $254M Starwood Property offer

March 29, 2011 10:54AM
By David Jones

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Crexus Investment Group said yesterday evening that it rejected an unsolicited $254 million acquisition offer by Starwood Property Trust.

In the late afternoon yesterday, Starwood made the $14-a-share-offer to acquire Crexus, a Manhattan-based real estate investment trust. The Starwood offer was contingent on Crexus suspending its previously announced offer to buy $586 million in real estate assets from Barclays Capital Real Estate Finance. Crexus planned to launch an initial public offering of $50 million shares of common stock, which would be used to finance the acquisition of the Barclays assets.

Starwood sent a letter to the Crexus board of directors arguing that the offer represented a 17 percent premium over Crexus’ closing share price on March 25 and would create the nation’s largest commercial REIT.

Barry Sternlicht, chairman and CEO of Starwood, urged Crexus’ board to accept the offer, arguing that $419 million of the $739 million face value of the loans in the Barclays portfolio would be coming due before the end of 2011. The Barclays portfolio includes mortgages, mezzanine loans and subordinate notes backed by various properties, including condominiums, hotels, office buildings and retail.

“Based on the scale of Crexus’ asset base, we would be concerned that the maturity of these loans would cause Crexus’ dividend to fall, perhaps significantly, until new investments could be acquired or made,” Sternlicht said in the letter.

Crexus, a REIT backed by Manhattan-based Annaly Capital Management, was launched in 2009. According to filings with the U.S. Securities and Exchange Commission, about 14 percent of Crexus’ CMBS portfolio in 2010 included properties in New York, while 6.7 percent were properties in Florida.

Starwood earlier this month said it earned $57 million, or $1.14 a share in its first full year of operations. Starwood Capital Group, founded by Sternlicht, launched Starwood Property Trust in August 2009 as a publicly traded real estate finance company to originate commercial real estate loans and other investments.

Starwood said earlier this month that it would originate a $30 million mezzanine loan to refinance an unnamed 188-room luxury hotel on the Upper East Side, part of a $352 million deployment of capital in different parts of the country. The Greenwich, Conn.-based firm also originated $165.5 million in loans on six full-service hotels in California and a $188 million mezzanine loan secured by 10 office buildings in northern Virginia.

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