Starwood Property Trust and Starwood Capital Group, a leading global private investment firm, on behalf of Starwood Distressed Opportunity Fund IX, have entered into a definitive agreement to acquire LNR Property LLC for a total purchase price of $1.05 billion in cash.
LNR, founded in 1969, is a leading diversified real estate investment, finance, management andfirm with over 550 employees located in 12 offices throughout the U.S. and Europe.
Under the terms of the agreement, Starwood Property Trust will acquire the following LNR business segments for a total purchase price of $856 million:
U.S. Special Servicer: the largest U.S. special servicer with over $131 billion in loans under management and real estate owned;
U.S. Investment Securities Portfolio: a portfolio of legacy whole loans,and CDO investments;
Archetype Mortgage Capital: a commercial real estate conduit loan origination platform designed to provide unique financing solutions throughout the U.S.;
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 percent 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 $197 million both LNR's U.S. Commercial Property Group and the other 50 percent 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," Starwood Property Trust Chairm and CEO Barry Sternlicht said in a statement. "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."
"The entire LNR team is extremely excited to be joining the Starwood family,” Toby Cobb and Justin Kennedy , Co-CEOs of LNR said in a statement. “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.
LNR is currently owned by affiliates of Aozora Bank Ltd, a subsidiary of certain investment funds managed by Cerberus Capital Management L.P., iStar Financial, a subsidiary of certain investment funds managed by Oaktree Capital Management, L.P. and Vornado Realty Trust.