Starwood Property Trust is hungry for affordable housing.

Barry Sternlicht
Barry Sternlicht

The Greenwich, Conn.–based firm recently acquired a 31-community portfolio of low-income housing tax credit (LIHTC) properties from Tampa-based The Wilson Co., totaling nearly 9,000 units in Florida.

The average vintage of the properties is about 16 years—or a year after the LIHTC compliance period ends. The deal was approved by the Florida Housing Finance Agency last fall.

The enormous deal represents a different kind of strategy for Starwood. While Starwood Capital is a huge market-rate housing owner, its sister company, Starwood Property Trust, is taking a longer-term view in terms of exit strategies.

“We’re going to own those properties a very long time,” says Chris Graham, senior managing director and head of real estate acquisitions for the Americas for Starwood. “They have consistent low double-digit cash-on-cash returns in a yield-starved world.

"They may not experience quite as much rent growth as market-rate apartments, but they also are more likely to not go down because they’re regulated by the government, so we bought those for the rising cash flow long term,” Graham adds.

In its most recent earnings call, Starwood chairman and CEO Barry Sternlicht characterized the deal as “ … stable, very affordable housing, great stuff in terms of quality; we really wanted that deal because it gives us a double-digit growing yield we think for the foreseeable future … “

According to Graham, that Wilson acquisition may just be the beginning of Starwood Property Trust’s affinity for LIHTC deals.

“We would absolutely do more of those kinds of deals if we could find them in large quantities,” says Graham.