Deal Marries Starwood's Deep Pockets and Investment Capabilities With LNR's Operating Platform and Loan Diligence Capabilities
|Starwood Property Trust Chairman and CEO Barry Sternlicht|
Calling the purchase of LNR a “transformative and highly strategic acquisition,” noted real estate dealmaker Barry Sternlicht announced a successful conclusion to negotiations to buy the leading special servicer for $1.05 billion in cash.
Sterlicht, the Chairman and CEO of Starwood Property Trust, is buying LNR from a consortium of private equity investors, including Cerberus Capital Management (through its Aozora Bank Ltd. subsidiary), Oaktree Capital Management, iStar Financial and Vornado Realty Trust. The group acquired control of the Miami Beach-based firm in 2010 through a $417 million recapitalization.
Founded in 1969, LNR has 12 offices in the U.S. and Europe and consists of two main divisions. Its Commercial Property Group buys, repositions, manages and sells interests in commercial and multi-family real estate, including land. Its Asset Services Group focuses on financing and loan securities businesses as one of the leading buyers of non-investment grade and unrated CMBS loans, and the biggest special servicer in the U.S.
Under terms of the agreement, Sternlicht’s Starwood Property Trust will acquire LNR’s U.S. special servicing unit with more than $131 billion in loans under management and real estate owned, a portfolio of legacy whole loans, CMBS and CDO investments, its Archetype Mortgage Capital and Archetype Financial Institution Services units, its European operations including special servicer Hatfield Philips, and a 50% share of LNR's stake in Auction.com for a total purchase price of $856 million.
In addition, Sternlicht’s private, U.S.-based investment firm, Starwood Capital Group, will acquire LNR's U.S. Commercial Property Group and the other half of LNR's ownership share of Auction.com for $197 million.
In announcing the deal, Sternlicht said the acquisition will provide new sources of revenue for Starwood Property Trust while greatly expanding its operating platform and proprietary origination capabilities.
“We expect the combination of LNR's capabilities, Starwood Property Trust's superior access to capital, and both firms' underwriting expertise to result in a long-term and sustainable competitive advantage," said Sternlicht.
Starwood expects to close on the acquisition in the second quarter of 2013 pending regulatory approvals. Toby Cobb and Justin Kennedy, co-CEOs of LNR, are expected to remain in their roles overseeing LNR’s two divisions following the acquisition.
Vornado, which owns 26.2% of LNR, said it expects to receive net proceeds of approximately $241 million from the sale. iStar said its 24% ownership interest in LNR is expected to generate $220 million in net proceeds.
Citigroup and Credit Suisse are financial advisors to Starwood Property Trust on the transaction and Sidley Austin is acting as legal counsel. Lazard is serving as financial advisor to the sellers of LNR.