Starwood Property Trust (NYSE: STWD) has agreed to buy 28 affordable housing properties with a combined 6,185 units in Florida for approximately $600 million.
The portfolio is 99% leased and predominately located in Orlando, with smaller concentrations in the West Palm Beach, Tampa, and Miami metro areas. Starwood officials said they are acquiring the portfolio with a combination of units in a newly formed subsidiary, which are exchangeable into STWD common shares, cash, and debt financing.
"This uniquely structured, off-market investment in a high-quality, multifamily affordable housing portfolio is a great way to begin 2018," said Starwood chairman and CEO Barry Sternlicht in a statement. "The properties are located in Florida markets with strong fundamentals. Given the persistent supply/demand imbalance for high-quality, rent-restricted housing coupled with its attractive financing, we believe this investment will provide stable and attractive double-digit cash-on-cash returns over the long term."
The company, a leading diversified real estate finance company and the largest commercial mortgage REIT in the United States, did not identify the seller.
The move follows the Greenwich, Conn., firm’s acquisition of nearly 9,000 units in 31 low-income housing tax credit (LIHTC) properties from Florida-based The Wilson Co. in 2016.
"This transaction is an extension of Starwood Property Trust's previous successful investment in the affordable multifamily housing sector, and upon closing our portfolio will consist of over 15,100 units of housing located predominately in Florida,” Sternlicht said. “Additionally, the REIT's manager, Starwood Capital Group, has investments in nearly 20,000 market-rate units in complementary Florida markets, which provide us significant confidence in this investment.”
The latest transaction is expected to close in phases due to timing of regulatory approvals and the assumption of in-place financing. The first phase, comprising 1,740 units, closed late in December 2017. The company expects to complete the remaining phases of the transaction by the end of the second quarter 2018, subject to customary closing conditions.
