Starwood Property Trust is wasting no time spending the proceeds of its $921 million IPO after revealing it had closed on another $140 million of transactions.
The mortgage REIT created by Barry Sternlicht’s Starwood Capital group said last night it had acquired three first mortgage loans for $107.8 million, backed by hospitality and retail assets across the US, as well as investing $32 million in a single-borrower CMBS issuance.
The first mortgage loans included $73.8 million on a portfolio of hotels in Florida, Virginia, Maryland, North Carolina and Georgia. The REIT also acquired an $18 million loan on a Laguna Beach, California hotel and $16 million on an Orland Park, Illinois retail centre.
The firm said in a statement the loans were expected to hit unlevered returns of 11.3 percent net of fees, with a loan-to-value of 61.5 percent. The CMBS deal, which was acquired at 79 percent of its face value, had projected unlevered returns of 12 percent.
To date, the REIT – which raised more than $921 million following its IPO on 17 August – has spent $284 million of capital, primarily on first mortgages.
In December, Sternlicht warned a “liquidity bubble” was forming in the US owing to a cadre of “capital tourists” who were eyeing public and private real estate markets in search of yield in a low interest rate environment.
Speaking at the Knowledge@Wharton Road to Recovery real estate forum in New York last month, he said many asset classes were starting to over-heat once again, adding: “We have no memory as a nation … we are doing it wrong over again.
“The markets are re-equitising. There's a liquidity bubble forming … The credit markets are healing … they are over-heating.”