Starwood Property Trust (NYSE: STWD), one of the few hybrid real estate investment trusts (REITs) that invests both in debt and equity real estate, just closed out of its newest opportunity fund. The company, which has completed 11 previous funds focused on opportunistic or distressed real estate, just completed a $10 billion raise, making SOF XII its largest fund raise to date. This fund will target distressed real estate. Now that the raise is complete, where will Starwood spend the money?
Hitting the ground running
Starwood Property Trust and its subsidiaries currently manage roughly $95 billion worth of assets to date across a wide range of asset classes. The latest opportunity fund will be focused on distressed assets, which will be sourced through a robust pipeline of diverse investment opportunities. And clearly, there's an abundance of opportunities.
CEO and chairman of Starwood Barry Sternlicht stated 35% of the funds capital has already been deployed on approved or closed 25 transactions, which equate to $3.5 billion of equity. The investments are located across the globe, with current investments for the fund in Australia, England, Denmark, Ireland, Italy, Japan, Spain and the United States.
Starwood has disclosed a few of the investment classes, including a single-family rental (SFR) platform in the United States, that has more than 4,500 homes under acquisition. This is in addition to a few privatization projects, including Extended Stay America, one of the leading owners and operators of economy extended-stay hotels, and RDI REIT, a publicly traded REIT in the U.K. that owns, manages, and invests in industrial and logistics properties across Europe. This is in addition to several office properties in Tokyo the company calls "well-located."
Where will Starwood go next?
Sternlicht shared with the Wall Street Journal that while many of the investments by nature are distressed, the fund's investments aren't limited to just distressed assets. A perfect example is the SFR platform that was recently acquired. Sternlicht also shared Starwood plans to "focus on high-growth Sun Belt markets that are recovering quickly."
When it comes to distressed real estate, there's no shortage of opportunities in the global market. In the United States alone, office, hotel, and some retail properties including malls are getting hit bigtime with lulled demand and record-high vacancy rates. Sternlicht told the Wall Street Journal that despite reduced desire for business travel, there is still a strong demand for hotels and resorts within driving distance of major markets. This means distressed opportunities may be found in alternative arenas.
The Millionacres bottom line
It seems Starwood is really focused on the global opportunities in the distressed marketplace, which means we could see its buying increase in foreign countries before our own. Considering Starwood still has $6.5 billion to spend, there's a lot of buying power backing it right now. Investors who own shares in Starwood will definitely see this new venture as welcome news.