Starwood Strikes $2.2B Deal for Brookfield Platform

Barry Sternlicht is taking a bite out of Brookfield Asset Management’s real estate holdings, agreeing to acquire a net lease platform for a 10-figure sum.

Starwood Property Trust is set to acquire Fundamental Income Properties from Brookfield for approximately $2.2 billion, Starwood announced on Wednesday. The deal is expected to close next week.

Fundamental’s portfolio includes 467 properties spanning a cumulative 12 million square feet. As of the end of the first quarter, the portfolio was fully occupied with a 17-year weighted average remaining lease term.

Tenants include companies in food production and distribution, auto services, retail, restaurants, entertainment and education. There have been no credit losses associated with the portfolio since its inception.

Acquiring Fundamental will provide Starwood with predictable cash flow for the long term, according to Starwood, buoyed by the portfolio’s quality tenants and lease structures with built-in rent increases.

“The acquisition of Fundamental marks the next evolution, but not the last, of our platform,” Sternlicht said in a statement, additionally noting that the “core commercial real estate lending business is now approximately half of our asset base.”

Starwood will assume Fundamental’s existing $1.3 billion financing facilities, which include $900 million in asset-backed security debt. Starwood plans to partially fund the acquisition with on-hand cash and debt as well as equity capital.

Starwood and Brookfield, two of the biggest companies in the commercial real estate sector, have conducted business with one another before. Last year, Brookfield Properties bought a 444-unit apartment complex near West Palm Beach from Starwood for $107.5 million, part of Brookfield’s larger $1.6 billion purchase of a 7,300-unit portfolio of 23 properties from Starwood.

Last month, Starwood hit Alan Stalcup, head of multifamily firm GVA, with a trio of lawsuits alleging the investor breached a handful of recourse guarantees on loans tied to three properties.

As of Tuesday, Starwood had $1.4 billion of liquidity after paying out its second-quarter dividend. The company is scheduled to report its second-quarter earnings in early August.