The Real Deal New York

Starwood records $39.8 million in earnings in 4Q

February 29, 2012 04:30PM
By David Jones

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Barry Sternlicht, CEO of Starwood Capital Group

Starwood Property Trust, the real estate investment trust led by Barry Sternlicht, reported fourth-quarter earnings of almost $40 million in the fourth quarter, about even with year-ago figures, but said it was reviewing about $1 billion in potential deals and expects to close a majority within the next two months.

The Greenwich, Conn.-based firm said fourth-quarter earnings were $39.8 million, or 42 cents a share, compared with $39.3 million, or 42 cents in the year-ago quarter. Net income, however, tripled to $41 million, or 44 cents a share, compared with year-ago net income of $17.6 million, or 32 cents in the year-ago quarter.

For the year, Starwood reported $146.6 million, or $1.70 a share in earnings, a 27 percent increase over year-ago earnings of $1.34 a share. Net income was $119.4 million, or $1.38 a share, compared with $57 million, or $1.14 per share in the year-ago quarter.

Sternlicht said Starwood originated, acquired or funded $563.5 million in new investments, including several large commercial mortgages and senior notes. On Dec. 30, the firm acquired 26 separate commercial mortgage loans, with a face value of $333 million, at a discount. The portfolio included 23 first mortgages and three second mortgages backed by office, retail, multi-family and assisted living centers measuring more than 3 million square feet across 13 states. The company expects to see a 12 percent return on this investment.

On Dec. 9, Starwood acquired a $184 million A-note backed by a portfolio of 143 limited-service hotels, totaling nearly 17,000 rooms in 29 states. The firm expects a 14 percent return on this deal. On Nov. 1, the firm originated a $34.5 million first mortgage backed by a multi-family building in Gainsville, Va., and it acquired $21.3 million in residential mortgage-backed securities.

Just this month, Starwood had originated or acquired $483.1 million in new loans, including $206.4 million in CMBS, backed by nearly all the assets of a major hotel and resort company. Starwood also agreed to buy a $125 million stake in a senior loan backed by a hotel company, for a discounted price of $115.7 million and is rolling over an existing investment into $95.3 million worth of B-notes backed by four United Kingdom resorts.

Sternlicht, on a conference call with analysts, noted that he’s seeing much stronger investment activity in the global credit markets, and saw additional opportunities in Europe, where banks have large senior notes, and most deals have little to no mezzanine debt underlying them.

“We want to grow as long as it’s smart growth,” Sternlicht told analysts. “On the positive you have reasonably very good markets. For the most part the markets are not overbuilt, yet rents can be quite volatile in Europe.”

Starwood did not elaborate on the specifics of the $1 billion worth of deals in the pipeline.

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