Starwood Property Trust (STWD) has filed paperwork with the SEC to offer up to $13.8m worth of common stock to partly finance the REIT’s equity investment in an enlarged maiden entrance into the Dublin predominantly office portfolio for €452.5m.
CoStar News was first to report the REITs acquisition of the Lone Star office portfolio, and subsequent Morgan Stanley financing. Subsequent to which, three additional offices have been bolted on, increasing the total portfolio purchase price by around €100m.
STWD has confirmed it has increased its initial investment of nine offices and one residential tower, to be acquired from Lone Star, with three additional office property purchases in Dublin.
The aggregate purchase price for the 13-strong portfolio, which spans 630,000 sq ft, is €452.5m, with STWD financing the enlarged purchase with a €294m five-year term loan from Morgan Stanley, which is also an underwriter in the common stock offering. The deal is expected to close in the second quarter of 2015.
The entire portfolio is located in prime locations in Dublin’s central business district. The initial portfolio includes:
- the five-block 210,000 sq ft Iveagh Court Complex, a business and residential complex, at the junction of Harcourt Road and Charlemont Street;
- the Watermarque Building, Bridge Street & South Lotts Road, Dublin 4;
- Marsh House, 25/28 Adelaide Road, Dublin 2, which is the Irish headquarters for March, the global insurance broking and risk management firm.
- 11-12 Hogan Place, Dublin 2, a four-storey office block close to Merrion Square and south Docklands.
As of March 31, 2015, the portfolio was 99.9% leased and the office properties were leased primarily to multinational and government tenants and had a weighted average lease term of 6.2 years, STWD confirmed in the SEC filing.
The statement continued: “The transaction was sourced by Starwood Capital Group’s acquisitions professionals in Europe and expands our core-plus equity investment strategy, which complements our primary business segments and is focused on high quality, well-occupied real estate assets with strong tenant rosters, using only modest leverage.”
Starwood Capital Group has been invested in the greater Dublin market for over two years.
The statement continued: “In addition to the requirement to enter into definitive agreements for the three additional properties described above, the acquisition of the initial portfolio is (and the acquisition of the three additional properties would be) subject to customary closing conditions.”
STWD’s Dublin office portfolio acquisition is indicative of the evolution of the largest US mortgage REIT business into value add real estate equity.
STWD’s refocus is driven by enduring low interest rates, tightening credit margins and more attractive equity yields in certain jurisdictions on a risk-adjusted basis.
In effect, STWD has applied its identical investment rationale for debt investments – focusing primarily on assets with some degree of transition, such as leasing-up, redevelopment or construction – into value-add real estate, aided by the equity investment expertise of affiliate Starwood Capital Group’s London-based team.