Starwood Closes on $1B LNR Acquisition

GREENWICH, CT-Starwood Property Trust and Starwood Capital Group on Monday said they had closed on the $1.05-billion acquisition of LNR Property LLC, first announced in January. When the sale was first reported, Barry Sternlicht, chairman and CEO of both Starwood Property and Starwood Capital, said the acquisition “diversifies Starwood Property Trust's revenue sources, adds significant scale to our operating platform and dramatically expands our proprietary origination capabilities.”

The sellers included Vornado Realty Trust, iStar Financial Inc., Cerberus Capital Management LP and Oaktree Capital Management LP. Separately, Vornado reported that it realized net proceeds of $241 million from the sale of its 26.2% equity interest, while iStar said the sale of its 24% stake brought $220 million to that firm.

As previously reported, Starwood Property paid $862 million for LNR's US special servicer, the US investment securities portfolio, Archetype Mortgage Capital, Archetype Financial Institution Services, LNR Europe and 50% of LNR's interest in Auction.com. For $194 million, Starwood Capital bought both LNR's US Commercial Property Group and the remaining 50% of LNR's ownership interest in Auction.com. The acquisitions were made on behalf of Starwood Distressed Opportunity Fund IX.

The deal brings a number of investment, finance and management businesses under the control of Starwood Property and Starwood Capital. Perhaps the real prize, though, is LNR's commercial mortgage special servicing line, the world's largest. As of year-end 2012, LNR had been named special servicer on 129 separate CMBS trusts representing an unpaid principal balance of $131 billion, including nearly $20 billion in special servicing or REO.

On a conference call in January, Sternlicht told analysts his companies “leaped at the chance” to acquire LNR, “because we knew LNR had an extraordinary seat at the table. They had a view of the commercial-property markets, particularly the debt markets, that few if any people have in the US.”

Citigroup and Credit Suisse served as financial advisors to Starwood Property on the transaction, with Sidley Austin LLP acting as legal counsel. Lazard served as financial advisor to LNR's sellers.