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Singapore Group Obtains Starwood Office Portfolio in First U.S. Purchase, Sources State

The Innovation Corporate Center in San Diego’s Rancho Bernando becomes part of a big workplace portfolio that Starwood Capital Group looks for to sell.Investment firm Starwood Capital Group has actually sold 33 prime workplace properties totaling 3.3 million square feet in San Diego; Portland, Oregon; and Raleigh, North Carolina, to a Singapore-based developer in its very first foray into U.S. real estate financial investment, inning accordance with sources familiar with the deal. Starwood Capital had actually been silently going shopping the portfolio with New york city brokerage Eastdil Secured and accepted an offer from Ascendas-Singbridge Group, a developer and investor jointly owned by Singapore state-owned real estate business Temasek Holdings and JTC Corp., said the sources, who are not authorized to openly go over the transaction. In a brief release that did not mention Starwood, Ascendas-Singbridge stated Friday it

plans to broaden within the United States and is opening a workplace in San Francisco to supply assistance for property management, business development and other associated services. Ascendas-Singbridge manages more than$14.6 billion in worldwide assets, predominantly in Asia and Australia. According to its website, Miguel Ko, the current executive director and group chief executive of Ascendas-Singbridge, is the former chairman and president of Starwood Hotels & Resorts, Asia Pacific Division. The discussions come as the group and parent business Temasek likewise intend to buy into the rewarding North American shared workspace market as part of a

$45 million financial investment in Breather, a versatile office supplier. Sources in Los Angeles, San Diego and Portland stated the portfolio consists of the majority of Starwood Capital’s workplace holdings in San Diego and the Portland suburb of Beaverton

, Oregon, plus properties in North Carolina. The portfolio consists of a heavy concentration of office and flex homes in the Rancho Bernardo and Sorrento Mesa areas of San Diego, home to many technology and life science companies, a source said. Starwood acquired 12 San Diego structures in 2014 totaling more than 1 million square feet in Rancho Bernardo and Sorrento Mesa from Los Angeles-based developer Kilroy Realty Corp. for$295

million, inning accordance with CoStar data. The homes, primarily constructed between 2000 and 2006, consist of 6 office complex and a flex structure at a workplace park in Rancho Bernardo referred to as Innovation Corporate Center, a source said. The San Diego properties being sold also consist of the three-story, 318,000-square-foot Pacific Corporate Center at 10020 Pacific Mesa Blvd., inhabited by medical device maker Becton, Dickinson and

Co., and numerous structures at Sorrento Mesa’s The Campus at Sorrento Gateway, the source said. The bulk of Starwood’s present Portland portfolio is comprised of workplace and flex structures in Beaverton got from Glendale, California-based PS Service Parks Inc. Starwood acquired 25 low-rise buildings, ranging from 16,500 to

65,500 square feet each from PS in October 2014 for$164.1 million, inning accordance with CoStar data. A lot of were built in the 1980s and 1990s. Eastdil and Ascendas-Singbridge did not right away return calls or emails asking for comment on the deal. Starwood Capital didn’t immediately comment. The portfolio purchase is the first major real estate financial investment in The United States and Canada for Ascendas-Singbridge, which has homes

in 28 cities in Australia, China, India, Indonesia, Singapore and South Korea. The group, under its subsidiary Ascendas, manages 3 Singapore exchange-listed funds

, consisting of Ascendas Realty Investment Trust, Ascendas India Trust and Ascendas Hospitality Trust. Ascendas-Singbridge likewise manages a number of private property funds. Ascendas REIT just last month announced its very first push beyond Australia and Asia into Europe, that includes a plan to buy 12 logistics homes in the United Kingdom. Ascendas-Singbridge Group Chief Financial Investment Officer He Jihong stated in a declaration the relocation”fits well with Ascendas-Singbridge Group’s strategies to broaden our global

presence.”Ascendas-Singbridge and Temasek are likewise intending to indirectly enter the shared office organisation through their investment in Breather, a versatile office supplier focusing on leases of less than a year. Breather, launched in Montreal by business owners Caterina Rizzi and Julien Smith in 2013, announced in June it had actually raised$45 million from Ascendas-Singbridge, Temasek, Menlo Ventures, Canadian pension fund Caisse de dépôt et positioning du Québec, and others to expand into more markets and supply” longer period bookings.”

Starwood'' s Sternlicht Opens Up at Property Conference

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Starwood Capital Group CEO Barry Sternlicht resolved a variety of subjects in a discussion with PGIM Property executive Cathy Marcus at the University of Miami Realty Impact Conference.

Credit: University of Miami.Barry Sternlicht

, chairman and CEO of Starwood Capital Group, is not bashful in big groups. Sternlicht weighed in on a number

of subjects throughout last Friday’s University of Miami’s Realty Effect Conference in front of a number of hundred individuals. He even dropped an f-bomb in chastising legislators for passing a$ 300 billion spending costs after consenting to tax reform, calling the deficit spending irresponsible and blaming it as the source of recent stock exchange volatility.” This is going to get too hot the economy,” he stated.

“( Interest) rates are going to go up. How fast they go up, nobody knows for sure right now. “Throughout an hour-long discussion with PGIM Realty executive Cathy Marcus to begin the conference, Sternlicht prompted the crowd of brokers, developers and trainees to welcome modification.” My objective is to not be Kodak,” Sternlicht stated.” How did Kodak miss out on the digital film transformation?” In other observations throughout the annual property conference, Sternlicht stated:” On micro-unit condominiums:”

I wouldn’t wish to be residing in a shoebox,” he stated, before yielding they are

necessary in areas with high real estate costs.” On Airbnb:” It’s a really powerful business,” but he included that hotels aren’t going away.

” On retailing: Starwood owns 23 shopping malls.” I ‘d be lying if I stated I wanted to own them,” he stated, noting that some shopping centers will make it through while other will be transformed or repurposed to consist of apartments and hotels close by.” The kids do not go shopping the method they utilized to. It’s going to be very capital extensive to obtain from here to there. Where balance is, I have no idea. “” While Amazon is the market titan, he said the company much better watch on Walmart, which he thinks has

the cash and resources to go head-to-head with Amazon.” Companies” were beaten up “during the Obama administration and they stand a better chance during Trump’s presidency, he stated.

” As an organisation man,( I) desire him to be successful.” “On Florida:” It has a lot going for it. I like this state. I wish it had more hills, but I’ll handle it.” Sternlicht released Starwood in 1991 and has

supervised roughly $ 92 billion in investments. The firm has bought approximately 172,500 multifamily and

apartment systems; 2,900 hotels; 74 million square feet of offices; 54 million square feet of retail and 52,000 domestic land lots. He likewise is chairman of Starwood Home Trust( NYSE: STWD), among the nation’s largest industrial home mortgage real

estate financial investment trusts. Last month, the REIT said it has consented to purchase 28 economical real estate homes throughout Florida for$ 600 million in an off-market transaction. Paul Owers, South Florida Market Press Reporter CoStar Group.

Starwood Selling 3 Westin Hotels in Prospective $525 Million Deal

Hotels in Ottawa, Calgary and Edmonton on Block With Sellers Searching For $475 Million to $525 Million From Sale

Imagined: The Westin Ottawa, among 3 hotels being noted by Starwood Capital Group.Starwood Capital Group is offering its Westin-branded hotels in Ottawa, Calgary and Edmonton in a deal anticipated to bring $ 475 million to $525 million.

Cushman & & Wakefield is managing the sale of what is being branded as the Westin Hotels Portfolio Canada, but the residential or commercial properties may be sold separately, Curtis Gallagher, vice president of hotel financial investments, said in an interview.

” These are 3 excellent hotels in great cities,” said Gallagher, about the properties, noting Starwood, which has partners, is the lead investor in the portfolio, which was acquired in 2005.
” We will offer them together, or we will offer them individually.”

Marriott International, which now owns Starwood Hotels and Resorts, is the operator at all hotels and no changes to the names of the hotels are expected.

The Westin Ottawa is a 492-suite hotel directly linked to the newly built Shaw Convention Centre in the city and its largest mall, CF Rideau Centre. The Westin Calgary has 522 suites while the Westin Edmonton has 416.

” It’s just a capital recycle,” stated Gallagher, about factors behind the sale. “Ottawa is doing extremely well and has actually been for the last couple of years. Edmonton and Calgary, those markets are beginning to turn the corner and still carry out well now. There is upside there for the next owners or owners of these hotels.”

The Calgary website has some extra density readily available on it, however it’s a worth added component and development is not the chauffeur of the deal, said Gallagher. “You are purchasing into the turn-around story in Alberta, the consistency in Ottawa and some extra advantage with some tactical capital investment in the properties.”

In its newest report from November 2017, hospitality company HVS reported the occupancy rate in Calgary was 73.3% in the 3rd quarter, up from 69.5% a year earlier. Profits per available space leapt from $113.92 to $116.39 during the duration for the city.

Ottawa revealed strong growth with tenancy levels reaching 85.3% in the third of 2017, up from 79.6% a year previously. RevPar leapt from $131.76 to $155.09 in the nation’s capital during the duration, HVS said.

Gallagher anticipates buyers for the 3 residential or commercial properties might emerge locally, but he likewise states American and overseas buyers could be drawn in too.

” They are all in significant cities, and you take a look at the scale of the portfolio, and it can get you critical mass,” he stated. “It’s early days of marketing, however we see interest from all over the location.”

Garry Marr, Toronto Market Press Reporter CoStar Group.

Starwood IPO Signals Rising Interest by Big Money Managers in Small CRE Financiers

With Announced Using and Ramping Up of Broker-Dealer Network, Starwood Maps Technique for Tapping Retail Investors

Just when it appeared the non-traded REIT sector was collapsing in the middle of dramatically decreasing sales volume, two of the world’s largest CRE investors have actually just recently jumped into the area. Both seem targeting a source of capital formerly neglected by the big cash firms: pooling specific “retail investors” buying securities by themselves account rather than on behalf of big organizations.

Starwood Capital Group Holdings, L.P. became the most recent significant player to check the waters, announcing last week that it was releasing a non-traded property REIT. Starwood stated it intends to raise as much as $5 billion through a going public for the REIT and prepares to utilize the money to get stabilized industrial residential or commercial property and financial obligation in the USA and globally.

The freshly formed Miami Beach-based Starwood Capital affiliate, Starwood Property Income Trust, Inc., filed a registration statement with the United States Securities and Exchange Commission to offer up to $4 billion in common shares and as much as $1 billion in shares under its circulation reinvestment strategy.

Starwood REIT’s goal is to supply “a financial investment alternative for shareholders seeking to designate a portion of their long-lasting financial investment portfolios to CRE with less volatility than publicly traded real estate companies,” inning accordance with the filing. The new affiliate, externally managed by advisor Starwood REIT Advisors, L.L.C, likewise an affiliate of Starwood Capital, is seeking REIT status in the so-called blind-pool offering, the business stated in its S-11 registration filing.

Also on Oct. 17, Starwood Capital announced a major expansion of its broker-dealer affiliate, working with seasoned executive Trisha Miller and a much of her W. P. Carey, Inc. team. W.P. Carey, one of the pioneering companies in the non-listed REIT sector, announced its exit from the non-traded space last summer season to refocus on its core net-lease business.

” Our broker-dealer’s expanded focus to include individual financiers represents a crucial action in Starwood’s development,” stated Barry Sternlicht, chairman and CEO of Starwood Capital. “We have been thoroughly assessing the best ways to reach individual financiers for a long time and believe now is the appropriate time to diversify our offerings to this growing source of capital.”

Following Blackstone’s Lead

The Starwood IPO begins the heels of the development of Blackstone Group’s first non-traded REIT, Blackstone Property Income Trust, which has a goal of raising more than $1.4 billion this year.

” Our objective is to bring Starwood Capital’s leading realty financial investment platform with an institutional charge structure to the non-listed property financial investment trust (REIT) industry,” the filing stated.

Non-traded REITs reached the bottom of their cycle in 2015, striking a 12-year low for sales in 2016 amid increased regulative examination and efforts by companies to reduce their fee structure and increase openness into their operations.

” The pullback developed a funding space and now, quality capital is flying into that space due to the fact that there’s still an essential need for retail investors to position capital and accomplish returns,” said Jim Berry, leader of Deloitte’s U.S. property and building and construction sector practice and co-author of the firm’s recently released 2018 Property & & Construction Outlook.

” The quality of capital is at among the highest levels ever in our industry, and that drives performance in the marketplace and high levels of expectation for investors,” Berry said. “We’ve also seen an increase in investor activism in the publicly traded area, and among the factors for that is that realty is attracting a higher number of specific investors.”

Starwood REIT will consider investments in all types of commercial residential or commercial property, consisting of multifamily, workplace, hotel, industrial and retail, medical workplace, student housing, senior living, data centers, made real estate and storage residential or commercial properties, along with first-mortgage, subordinated mortgage and mezzanine financial obligation.

The REIT’s investment and residential or commercial property acquisition method seeks to take advantage of the scale, credibility and enduring relationships of Starwood Capital, one of the world’s largest real estate business, the company said. Starwood Capital also operates Starwood Residential or commercial property Trust (NYSE: STWD), a commercial home loan REIT.

Help Coming for Yield-Seeking Retail Investors

Blackstone Chairman and CEO Stephen Schwarzman elaborated on the private-equity giant’s options and retail financial investment strategy during the business’s recent third-quarter earnings call.

“We continue to broaden and diversify our fundraising channels, consisting of into retail [investing],” Schwarzman stated, including that Blackstone alternative funds are seeing increased demand from wirehouses, personal banks, independent broker-dealers, registered investment consultants and household workplaces.

“In these channels, financiers by and large have been under-allocated to alternatives within their portfolios, some considerably,” Schwarzman added. “We are assisting them gain access to institutional-quality products, in many cases for the first time.”

With the current oversubscription in Blackstone funds, growth will originate from establishing alternative products in real estate and other sectors, and broadening and deepening penetration into broker-dealer networks and other channels, stated Joan Solotar, Blackstone’s head of private-wealth solutions.

“A great deal of individuals want yields, and we were able to take advantage of the property investing group [and] recognize possessions that were more yield-oriented … and put it in a structure that was available to them,” Solotar stated.

Blackstone and Starwood Merging Rental House Portfolios to Produce $11 Billion Company

Combined Portfolios Will Consist of 82,000 Single Household Rental Homes, the Largest in the USA

The Blackstone Group’s(NYSE: BX)Invite Houses(NYSE: INVH)and Starwood Waypoint Homes(NYSE: SFR), two of the nation’s largest rental-home owners, are integrating in a 100% stock-for-stock merger that would produce one of the largest owners of rental houses in the U.S. with approximately 82,000 single-family rental homes.

The combined business will operate under the Invite Homes banner and continue trading on the New York Stock Exchange under the ticker symbol for Invite Homes (NYSE: INVH).

Under the terms of the agreement, each Starwood Waypoint Residences share will be transformed into 1.614 Invitation Homes shares, with Invitation Homes stockholders will own around 59% of the combined business’s stock.

Based upon the closing prices of Starwood Waypoint Homes common shares and Invite Homes typical stock on Aug. 9, 2017, the equity market capitalization of the combined business would be approximately $11 billion and the total business value (consisting of debt) would be roughly $20 billion.

Invite Houses stock was up 80 cents on the news today (3.81%) to about $21.80/ share. Starwood’s stock leapt much more: $2.90/ share (9.22%) to $34.35/ share.

This tactical deal combines two business with highly complementary abilities, including Invite Houses’ industry-leading approach to customer service and asset-management competence, and Starwood Waypoint Homes’ industry-leading technology. In addition, the current Starwood Waypoint Houses CEO Fred Tuomi, who will end up being CEO of the combined business, has experience effectively incorporating mergers of large-scale, single-family rental business. In general, the 2 business have actually invested nearly $2 billion, an average of approximately $22,000 per house, in restorations and upkeep, improving resident experience and driving financial growth and task production in local communities.

The combined business would own and manage a portfolio of approximately 82,000 single-family homes.

The two companies have really similar portfolios of homes focused on overlapping, high-growth markets – with nearly similar average monthly leas and almost 70% of combined business earnings originating from the Western United States and Florida.

The combined portfolio would likewise have approximately 4,800 houses per market, enabling it to leverage economies of scale and enhance operating performance.

The combined company experienced pro forma same-store net operating income (NOI) growth of 7.0% in 2Q 2017 with over 95% occupancy.

The companies’ combined portfolios still represent less than 0.1% of the more than 90 million single-family homes in the United States, and simply 0.5% of the almost 16 million single-family houses for rent in the U.S.

Upon conclusion of the deal, Fred Tuomi, CEO of Starwood Waypoint Houses, will end up being CEO of Invitation Houses; Ernie Freedman, CFO of Invitation Residences, will remain CFO; Charles Young, COO of Starwood Waypoint Residences, will end up being COO; and Dallas Tanner, CIO of Invite Houses, will stay CIO. The combined business will be locateded in Dallas, Texas, and will preserve a presence in Scottsdale, Arizona.

The combined company is expected to produce projected yearly run-rate cost synergies of $45 million to $50 million. The combined company is likewise anticipated to benefit from a flexible balance sheet with lower long-term cost of capital and a continued course towards deleveraging.

The deal has been all authorized by the boards of both Starwood Waypoint Residences and Invitation Houses. Blackstone, the bulk investor of Invite Homes, has likewise granted the contract. The deal is expected to close by year-end, subject to approval by Starwood Waypoint Residences stockholders and other traditional closing conditions.

Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC are serving as monetary consultants and Simpson Thacher & & Bartlett LLP is functioning as legal advisor to Invite Residences. Morgan Stanley & & Co. LLC and Evercore are serving as financial consultants and Sidley Austin LLP is serving as legal advisor to Starwood Waypoint Houses.

Debt consolidation Continues in SFR Sector as Nest Starwood Agrees to Purchase GI Partners' ' 3,106 Rental Houses for $815 Million

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Portfolio Deal Represents 13% Growth in Possession Size for Colony Starwood, Which Currently Handles the Characteristics

Nest Starwood Homes( NYSE: SFR) consented to acquire a portfolio of 3,106 single-family rental houses from Waypoint/GI Venture LLC for $815 million.

Colony Starwood currently manages the portfolio for the sellers, which is located in southern and northern California, Chicago, Atlanta, Tampa, Phoenix, Miami and Orlando.

As of March 31, 2017, the GI portfolio was 95.8% occupied with an average monthly lease per unit of $1,703, which the company stated was, “meaningfully greater than the average of the other public single-family rental REITs.”

Waypoint/GI got the single-family rental homes at approximately $262,395 per home.

Fred Tuomi, CEO of Colony Starwood Residences, said the deal represents another important action in industry debt consolidation amongst the greatest players, with Nest Starwood wanting to increase scale and recognize incremental operational effectiveness throughout its SFR platform.

” The GI portfolio acquisition provides an appealing opportunity for the business to efficiently convert a large portfolio of homes from handled to entirely owned possessions, all within our present market footprint with concentration in the high development California market,” included Tuomi.

Nest Starwood Houses prepares to fund the acquisition by offering shares of its typical stock.

GI Partners was one of the earliest financiers to move into the single-family rental area through its 2011 financial investment in Waypoint Property Group (WREG). WREG combined its property management operation with an affiliate of Starwood Capital Group to manage its portfolio of SFR assets, which were later on combined with Nest American Homes in 2016 to create Colony Starwood Houses.

” As an early institutional investor in the SFR industry, we are pleased in playing a function in turning a cottage market into a permanent property class within the $30 trillion U.S. real estate market,” said Hoon Cho, handling director at GI Partners.

Paul Hastings served as special legal advisor to GI during the deal.

The single-family rental market remains highly fragmented with only 1% of the around 15.8 million single-family rentals in the United States owned by institutional owners, according to John Burns Real Estate Consulting.

American Homes 4 Rent (NYSE: AMH )stays the top dog in the industry with more than 48,300 rental homes in its portfolio. Blackstone’s Invitation Houses (NYSE: INVH), which completed a public offering earlier this year, can be found in a close second with more than 47,900 houses. Following the GI portfolio acquisition, Nest Starwood Houses will own more than 34,400 SFR rental properties.GI Portfolio Details Market– # Houses– Occupancy– Average Month-to-month Rent Southern California– 1,043– 96.30%–$ 1,794 Northern California– 825– 97.30 %–$ 1,921 Chicago– 395– 93.50%– $1,648
Atlanta– 312– 94.40%– $1,406
Tampa– 221– 94.50%– $1,383
Phoenix– 157– 97.40%
— $1,400 Miami– 143– 96.10 %– $1,735 Orlando– 10– 90.00 %– $1,539.

Starwood Launches New Hotel Brand as Supply Ramps Up in Extended Stay Section

Extended Stay Attracting Highest Building and construction Levels of Any Section in United States Hotel Space

Barry Sternlicht’s Starwood Capital Group this week introduced Uptown Suites, a high end take on Starwood’s InTown Suites extended-stay brand name. The company will open its first residential or commercial property in Concord, NC, with plans to open 10 more homes by 2019.

Starwood anticipates to build brand-new hotels for most of prepared properties, targeting “walkable” places with close-by dining, retail and entertainment locations in significant cities or central places in smaller sized markets with strong task and population development.

Starwood stated it plans to open Uptown Suites properties over the next two years in Colorado, Florida, Tennessee, Texas, Virginia and other states. Uptown Suites will be handled by InTown Suites, an owner-operator of extended-stay homes in 188 locations in 22 states with more than 24,000 rooms.

Starwood Capital stated it sees increasing demand for extended stay inns, apartment-style rooms with complete kitchenettes which accepts appointments and, unlike other hotel formats, does not require a lease. Extended stay is the fastest-growing section in a wider U.S. hotel market where advancement has been slowly increase.

The United States hotel sector taped 1.9% supply development in the very first quarter of 2017, the greatest for any quarter since second-quarter 2010, according to brand-new STR information. STR’s March 2017 Pipeline Report shows 571,311 spaces in 4,721 U.S. hotel tasks under contract, a 14.4% increase compared to March 2016.

Yearly building of extended stay homes in the United States has leapt 567% given that its historic low of 6,000 spaces in 2011, to tape-record levels of more than 35,000 spaces in 2015 and 40,000 rooms in 2016, inning accordance with a presentation by Mark Skinner of research company The Highland Group at the 29th Annual Hunter Hotel investment Conference in Atlanta.

In 2016, the U.S had 415,000 extended-stay hotel rooms, about 8% of total lodging stock, with inventory increasing 6.2% in 2015. Extended stay rooms generated profits of $10.9 billion in 2016, more than 4 times the space revenue of extended-stay properties in 1998, according Highland Group.

Ten major markets have 5% or more of their extended stay stock under construction, consisting of New York City, Seattle, Denver, Nashville, Dallas and Miami, Los Angeles-Long Beach, Philadelphia, Houston and Boston.

Starwood Capital to Obtain Landholder Forestar Group for $605 Million

It appears Starwood Capital Group may be changing horses in its homebuilding financial investment company after community and mixed-use developer Forestar Group Inc. agreed to be obtained by affiliates of Starwood Capital in a $605 million offer.

The transaction price of $14.25 for each share of Forestar represents an 8.2% premium to the 90-day volume weighted average cost of typical stock of the company.

Forestar is a residential and mixed-use real estate advancement company. At year-end 2016, it owned interests in 50 residential and mixed-use projects consisted of 4,600 acres in 10 states and 14 markets.

In addition, Forestar owns interests in various other properties that it has actually identified as non-core including 523,000 net acres of owned mineral properties across the southern United States, 19,000 acres of forest, 4 multifamily possessions and 20,000 acres of groundwater leases in main Texas.

Forestar’s board has actually all authorized the merger agreement, which requires shareholder approval.

“Over the past 18 months Forestar has significantly reduced costs and outstanding debt, exited non-core properties and focused on its core community development company. While carrying out these key initiatives, the board and management have actually been evaluating longer term tactical alternatives,” stated James A. Rubright, chairman of Forestar.

The deal is expected to close in the third quarter of 2017.

JMP Securities LLC is functioning as financial advisor to the business, with Skadden, Arps, Slate, Meagher & & Flom LLP acting as legal advisor. Kirkland & & Ellis LLP is functioning as legal consultant to Starwood.

2 weeks back, Starwood Capital all of a sudden sold its $150 million stake in homebuilder TRI Pointe Residence (NYSE: TPH), issuing a terse declaration stating that decision “was because of its continuous frustration in the efficiency of the business over the previous a number of years, lack of confidence in the strategic instructions of the business, and argument over the best way to optimize shareholder value.”

Starwood had taken TRI Pointe public in 2013 and later integrated it with a Weyerhaeuser subsidiary to produce one of the largest homebuilders in the United States

Starwood Capital Group presently handles more than $51 billion in properties.

Will Starwood Waypoint-Colony American Merger Set Phase for Further SFR Consolidation?

With Blackstone, Starwood Among Early Single-Family Rental Financiers, Analysts Expect Possession Class to Deliver on Lofty Expectations


Barry Sternlicht, chairman of Starwood Residential, who directed the possible industry-changing merger, stated he is focused on “growing this excellent business.”.

In spite of financiers and industry onlookers urging Starwood Waypoint Residential Trust to sell, sell, offer to catch the gratitude of the 10s of thousands of single-family houses it purchased deep discount rates following the Excellent Economic downturn, Barry Sternlicht, chairman of the group, had another idea: grow, grow, grow.

‘We have constantly been non-stop concentrated on growing this excellent business,” he informed employees of the REIT in revealing a contract to merge with Colony American Homes. “The combined business will have the scale, running platform and resources to redefine the single-family rental industry. This is something that would have taken us much longer if we were to have actually continued to be independent.”

Financiers hope the proposed $1.5 billion merger becomes a game-changing mix for the nascent SFR market, which has actually been aiming to get regard from financiers.

The public SFR sector progressed from the very first IPO in late 2012 and has 4 public players today, with an overall business value of approximately $12 billion. The mix of Nest American and Starwood Waypoint will certainly lower that number to three, however the largest Wall Street-backed SFR owner, Blackstone’s Invite Homes, is anticipated to pursue an IPO at some point.

Nevertheless, experts think Invite may be awaiting the sector to acquire traction with investors. One current report citing the uninspired share cost performance of SFR companies that have gone public and the current discount in value in between their rental profiles and stock price might affect any IPO strategies.

At the exact same time, experts stated, the SFR sector is positioned for more consolidation as larger players leverage their cost of capital benefit and owners of smaller portfolios face trouble attaining scale.

And the mix of Colony American and Starwood Waypoint might be simply exactly what the doctor ordered. Together, the business will own and handle more than 30,000 homes and have a possession value of $7.7 billion, vaulting it closer to the two biggest owner-opersators in the SFR sector: Blackstone’s Invitation Residences and Amercian Homes 4-Rent.

Sternlicht believes the market is still in the early phases of its development.

“When the home industry remained in the exact same evolutionary duration throughout the early 1990s, it was a series of mergers that made it possible for a couple of finest in class operators to develop a fortress and verify the asset class,” Sternlicht informed staff members.

Sternlicht’s Starwood Capital Group has nearly 50,000 apartments, 25 shopping centers and 30 million square feet of office space. Yet, Sternlicht stated he thinks the single-family rental asset class has the potential for equivalent or better returns with a lower threat profile than anything else it has.

“The very first thing to understand is this is a very uncommon merger,” Sternlicht informed experts on a conference call following the merger statement with Nest American. “The sector suffered a little from investor neglect and the stock rates do not actually reflect hidden incomes power, or the fair value of the homes that these business have gotten over the past years.”

Similar to REITs in other home types, Sternlicht said the market was failing to recognize the amount of the real estate his firm had accumulated.

“There is no doubt that home rates have actually appreciated off book value on assets bought in 2009 through 2012. And none or almost none of the single-family rental REITs trade close to their fair value. So we were a bit disappointed and I understand that Tom [Barrack] was also figuring out how finest to incorporate these companies,” Sternlicht said. “We both understood that scale was the response. As we drive our operating expense through the ground, we can actually get best-in-class returns on equity capital.”

On the other hand, potential customers for continued lease growth for single-family renatal houses appears strong. A current treport released by Moody’s Analytics made note of the run the single-family rental market has enjoyed in recent years. The report mentioned the extraordinary decrease in U.S. homeownership, group trends preferring leasings over homeownership, and tighter home loan credit standards as main factors behind the strong need for rental real estate.

The report also noted that the impact of the foreclosure crisis is still playing out and homeownership is most likely to continue to be under pressure up until later on in the decade, especially if rate of interest ultimately enhance as expected. Rents are likewise low relative to house costs in numerous markets throughout the country.

With the number of rental homes accomplished in the merger, Sternlicht stated the combined company is “beginning to get running scale.”

“We’ll go from 33 homes per full-time workers to 54 homes per full-time workers and you can see exactly what we believe takes place to the synergy and where it’s originating from,” he said. “It’s all driven off of general and administrative cost savings both at the local level, at the regional level and then in business.”

And he added, the combined company isn’t completed purchasing.

“We remain to purchase,” he said. “Starwood Waypoint has remained to buy houses at yield, unleveraged yield, a minimum of as great and numerous cases better than we were purchasing two years earlier.”

“The information we have is better and certainly the expense of managing residences is lower. But we can get better net spreads than any business in our area maybe save one with some great analytics that enable us to identify our lease rates, the time it will certainly take to lease, the expense of actually improving the home, producing best-in-class margins on an operating business,” he stated.

Starwood has about $1 billion in cash and undrawn credit centers at its disposal. In addition, it owns about $650 million in non-performing loans that it is in the procedure of selling.

“I think again that with the company levered the way it is, we can truly produce really attractive returns on equity,” he stated.

Lea Overby, a research expert with Nomura Securities International, stated, “the merger has likely set a benchmark for more consolidations, and we may see a few of the smaller firms pursue comparable chances.

Following the Starwood Waypoint/Colony American merger, there continues to be one midsized gamer, Progress Residential, and three smaller-sized players, American Residential, Silver Bay, and Tricon, Overby stated.

Progress owns about 14,500 homes, with an overall possessions value of $2.6 billion; American Residential, 8,900 homes, total assets $1.4 billion; Silver Bay, 9,300 houses, overall possessions $1.3 billion and Tricon, 6,500 homes, total assets $988 million.

Starwood Waypoint and Colony American Homes Announce $1.5 Billion Merger

Combined Company Anticipated To Have and Handle Over 30,000 Single-Family Rental Residences

2 of the pioneers in business of building up distressed-priced single-family homes in the aftermath of the Great Economic crisis plan to merge now that the real estate market has nearly recovered. Starwood Waypoint Residential Trust and Colony American Homes today signed a definitive merger agreement to incorporate the two business in a stock-for-stock deal.

In connection with the deal, Starwood Waypoint will internalize its manager. The combined internally managed business is anticipated to possess and manage more than 30,000 single-family houses and have an aggregate asset value of $7.7 billion at the closing of the transaction.

Since June 30, 2015, Starwood Residential owned around 12,500 houses in eight U.S. states, while Colony American owned and handled roughly 19,000 homes,

Under the agreement, Nest American shareholders will certainly get an aggregate of 64.9 million Starwood Residential shares in exchange for all shares of Colony American. Valued at $22.75/ share prior to today’s stock exchange opening, the merger has a value of about $1.48 billion.

Upon conclusion of the deal, existing Starwood Residential investors and the previous owner of the Starwood Residential manager will certainly own roughly 41 % of the combined business’s shares. Former Nest American shareholders will certainly own approximately 59 % of the business’s shares.

Fred Tuomi, president and COO of Colony American, will certainly work as CEO. Doug Brien, CEO of Starwood Residential, will act as president and COO. Arik Prawer, CFO of Nest American, will certainly serve as CFO.

The combined business’s corporate and operational headquarters will be in Scottsdale, Arizona, while maintaining a substantial presence in Oakland, CA.

Barry Sternlicht, CEO and chairman of Starwood Capital Group, and Thomas J. Barrack, Jr., executive chairman of Colony Capital Inc., will work as non-executive co-chairmen of the combined company’s board.

“This merger is a transformative occasion for Starwood Residential and for our market,” stated Sternlicht. “Integrating 2 best-in-class groups, with a superior portfolio of houses in carefully selected geographical markets, positions us to provide long-lasting capital gratitude for our investors while earning compelling current yields at or above those currently attainable in other major realty possession classes.”

“Our team believe this merger shows the power of scale and consolidation and truly takes shape the long-lasting toughness of the single-family leasing market,” included Barrack. “This mix of Colony American and Starwood Residential genuinely redefines this asset class, and the chance in front of us is immense.”

The merger is anticipated to accomplish estimated annualized cost synergies of $40 million to $50 million.

The deal has been approved by the boards of both Starwood Residential and Colony American, and the terms of the internalization of the Starwood Residential supervisor were negotiated and accepted by a special committee of the board of trustees of Starwood Residential.

The deal is expected to enclose the first quarter 2016. Among other things, the transaction is subject to approval of Starwood Residential shareholders and customary closing conditions.