Starwood Property Moves Into Energy Finance With $2.6B Debt Deal
Its acquisition of GE Capital's Energy Financial Services' Project Finance Debt Business is part of the REIT’s push to be a “multi-cylinder finance company.”
NEW YORK CITY–Starwood Property Trust is moving beyond its traditional real estate holdings with the acquisition of GE Capital’s Energy Financial Services’ Project Finance Debt Business for $2.56 billion.
GE’s Energy Project Finance Debt Business provides loan origination, underwriting, capital markets and asset management. Its loan portfolio consists of 51 senior loans secured by energy infrastructure real assets. 97% of these loans are floating rate, making them positively correlated to rising interest rates. The portfolio has a duration of over four years.
A Low Correlation to Real Estate
Perhaps most compelling of all, these energy infrastructure assets have a low correlation to the commercial real estate sector.
Starwood Property Trust’s Chairman and CEO Barry Sternlicht says the acquisition is part of the REIT’s push to be a “multi-cylinder finance company.” His belief: we should never overstay our welcome in any one business line and always have opportunities to deploy capital into only those verticals where reward clearly outweighs risk, he said. “The safety of these investments, coupled with attractive risk adjusted return dynamics, make this investment highly complementary to our core real estate platforms and compelling for our shareholders,” he said in a prepared statement.
About the Deal
Starwood Property Trust expects to finance the transaction with a new secured term loan facility from MUFG with an initial advance of approximately $1.7 billion and committed capacity for future funding obligations in the loan portfolio. The company also has a $600 million committed acquisition facility from Credit Suisse and Citigroup Global Markets to fund the balance of the purchase price.
The deal is expected to close in the third quarter.
Once the acquisition closes, the acquired unit will work with affiliate company Starwood Energy Group, which focuses on comparable energy infrastructure equity investments.
Sidley Austin LLP and Paul Hastings LLP served as legal counsel to the company.