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Starwood Property Trust has struck a major deal to acquire Fundamental Income Properties for around USD 2.2 billion, adding 467 commercial properties across 44 U.S. states. The acquisition brings a high-quality, fully leased portfolio spanning 12 million sq ft, leased to 92 tenants from 56 industries, with an average lease term of 17 years and annual rent escalations around 2.2 %. The deal, backed by a mix of cash, debt, equity and a new stock offering, also assumes USD 1.3 billion in financing. Expected to boost distributable earnings, the move notably strengthens Starwood's diversified real estate platform.
Starwood Property Trust has finalized the acquisition of Fundamental Income Properties in a transaction valued at approximately USD 2.2 billion. The move marks a significant step into the net lease sector for Starwood and involves a diversified portfolio of 467 single-tenant, net-leased properties. These assets are located across 44 U.S. states and represent roughly 12 million square feet of fully leased commercial space. The portfolio is leased to 92 tenants from 56 distinct industries, with leases that have an average remaining term of 17 years and annual contractual rent escalations of approximately 2.2%. Advertisement
To finance the acquisition, Starwood employed a hybrid structure consisting of available cash reserves, new debt facilities, equity capital, and a public offering of 25.5 million shares. As part of the transaction, Starwood is also assuming approximately USD 1.3 billion in existing financing from Fundamental Income's balance sheet. This includes USD 900 million in securitized debt backed by the net-lease assets. The acquisition is expected to have an immediate positive impact on the company's distributable earnings.
In terms of integration, Starwood will onboard Fundamental Income's 28-member team, which includes experts in credit underwriting, lease structuring, origination, and asset management. This internalization of talent gives Starwood direct access to Fundamental's proprietary origination pipeline, particularly in the sale-leaseback segment, and improves the company's reach in the ABS (asset-backed securities) financing market. The acquired platform enhances Starwood's existing real estate footprint and further diversifies its investment strategy beyond its traditional focus on commercial mortgages and real estate debt.
The acquisition comes on the heels of Starwood's Q2 earnings guidance, where the company projected GAAP earnings between USD 0.36 and USD 0.38 per diluted share, and distributable earnings in the range of USD 0.42 to USD 0.44. These figures include a previously disclosed loss of USD 0.13 per share associated with the foreclosure of an office building in Houston. The company has stated that the Fundamental Income acquisition will not only offset this loss but contribute to sustainable earnings growth moving forward.
Source: Reuters
5th Jun, 2025
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