Starwood strikes US$2.2 billion real estate deal with Brookfield

[NEW YORK] Starwood Property Trust agreed to acquire Fundamental Income Properties for US$2.2 billion as chief executive officer Barry Sternlicht aims to further diversify the company’s revenue.

It’s acquiring Fundamental’s operating platform and real estate portfolio from Brookfield Asset Management, according to a statement on Wednesday (Jul 16). The deal includes 12 million square feet (1.11 million square metres) of space across 467 properties, with tenants spanning food production, auto services and retail industries.

Fundamental specialises in net lease real estate investments, in which tenants pay property expenses such as taxes, insurance and maintenance in addition to rent. The model can generate steady income while limiting management duties.

“The acquisition of Fundamental marks the next evolution, but not the last, of our platform,” Sternlicht said in the statement. “While we have strong experience in the net lease sector, the scale and infrastructure of Fundamental provide us with the opportunity to significantly grow in this attractive asset class using our combined expertise.”

Starwood will assume Fundmental’s existing financing facilities of US$1.3 billion when the transaction is completed, according to the statement. That’s expected to happen later this month.

Shares of Starwood slid 3.3 per cent to US$20.16 in extended trading at 4.38 pm in New York. The stock had gained 10 per cent this year through the close of regular trading. BLOOMBERG