* Starwood Property to pay $856 mln, Starwood Capital to pay
* Deal to add to Starwood Property's earnings in 2013
* Deal to close in second quarter
* Starwood Property shares touch life high on deal
* iStar stock up 6 percent to more than four-year high
Jan 24 Real estate mogul Barry Sternlicht's
Starwood Property Trust and investment firm Starwood
Capital will buy LNR Property LLC, the biggest manager of
distressed commercial debt, for $1.05 billion to expand into the
booming market for such loans.
Starwood Property's shares rose 6 percent to a life high of
$25.50 in early trade on the New York Stock Exchange on
Banks across the world are working through their distressed
commercial real estate loan portfolios, selling them at
discounts to clean up their balance sheets. Consulting firm
Ernst & Young expects nearly $1 trillion of U.S. commercial real
estate loans to mature in the next few years.
Starwood Capital Group will pay $197 million for LNR's U.S.
Commercial Property Group and 50 percent of LNR's ownership in
real estate site Auction.com.
Starwood Property will pay $856 million for the rest of
LNR's assets, including its U.S. special servicing business and
Hatfield Philips, the largest primary and special servicer in
Starwood Property said it would likely finance the deal with
a combination of equity, debt and asset sales.
The deal will add to the trust's earnings and cash flow in
2013, before transaction expenses.
LNR Property was spun off by home builder Lennar Corp
in 1997 and was publicly listed until 2005, when it was
taken private by Cerberus Capital Management.
The company was recapitalized during the financial crisis by
a consortium of investors, including hedge fund Oaktree Capital
Management, commercial lender iStar Financial Inc,
Vornado Realty Trust and Japan's Aozora Bank Ltd
Vornado, which bought a 26 percent stake in LNR in the
recapitalization, said it will receive $241 million from the
IStar Financial said it will receive $220 million for its 24
percent stake, sending its stock up 6 percent to $9.20, its
highest in more than four years.
Citigroup and Credit Suisse advised Starwood Property Trust
on the transaction, while Lazard advised LNR Property LLC.
The deal is slated to close in the second quarter.