Starwood Property Trust has announced an agreement to acquire Fundamental Income Properties, a net lease real estate platform, for approximately $2.2 billion. Fundamental, currently owned by Brookfield Asset Management, has an experienced 28-member team skilled in originations, credit underwriting, portfolio management, and capital markets.
The acquisition includes 467 properties across 44 states and 12 million square feet, featuring a weighted average lease term of 17 years and an average annual rent escalation of 2.2%. Benefits of the acquisition include:
- Strong Risk-Adjusted Returns: The diversified portfolio offers predictable cash flows with downside protection due to high tenant quality and durable lease structures.
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Attractive Portfolio Characteristics:
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100% occupancy
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92 tenants across 56 industries
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0% credit losses
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2.2% average annual rent increases
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17-year weighted average lease term
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Scalable Opportunity: Establishing a platform in the fragmented net lease market will allow the company to capitalize on growth.
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Enhanced Origination Capabilities: Relationships with private equity sponsors expand access to investment opportunities.
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Access to Capital Markets: The acquisition enables specialized financing solutions.
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Strengthening Leadership Position: This move reinforces Starwood’s status as a global real estate leader with enhanced capital deployment capabilities.
Starwood will assume $1.3 billion in existing financing facilities, including $0.9 billion in asset-backed security debt, and plans to fund the remainder with cash and debt/equity capital. The transaction is expected to close around July 23, 2025, pending customary closing conditions.
Advisors: BofA Securities is serving as the sole financial advisor to Starwood Property Trust. And Wells Fargo and Evercore are serving as financial advisors to Brookfield Asset Management.
KEY QUOTES:
“When we went public in 2009, we said we would create a diversified company around the areas of expertise of our Manager, Starwood Capital. With the addition of another business cylinder, we are expanding into another proven, scalable segment with strong synergies with our platform. Our core commercial real estate lending business is now approximately half of our asset base as we have strategically expanded into complementary lending and investing verticals. This diversification has allowed us to weather cycles and deliver consistent earnings and dividends for our shareholders, who have earned an average of 10.8% per year on their investment since our formation as a blind pool in 2009. The acquisition of Fundamental marks the next evolution, but not the last, of our platform. The quality of the team, their robust structuring capabilities and deep credit focus align perfectly with our culture. 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.”
Barry Sternlicht, Chairman and CEO of Starwood Property Trust
“We are very fortunate to add such a successful, experienced and thoughtful team with deep industry relationships and a proven track record of success. With our combined relationships and global reach, we are poised to increase market share. With nearly 20-year leases, annual rent escalators and access to attractive proven ABS financing, the transaction highlights our safety focus. We anticipate this investment to be accretive to distributable earnings after giving effect to projected refinancing of existing debt and projected acquisition volume, and the impact of this accretion will grow as we deploy more capital at our targeted yields. We are pleased to welcome the Fundamental team to the Starwood family.”
Jeffrey DiModica, President of Starwood Property Trust
“We are excited to join Starwood Property Trust and further scale our business as part of this best-in-class organization. Our team has built a proven, credit-oriented origination process, supported by long-standing relationships across industries. Together with Starwood Property Trust’s real estate expertise, consistent access to capital, and a growing net lease market, we are well positioned to capitalize on compelling investment opportunities.”
Chris Burbach, CEO of Fundamental
“We built our platform to meet the growing capital needs of middle market companies by providing efficient capital along with certainty of execution. Joining Starwood Property Trust enhances our abilities to help our current and future clients grow and improve their businesses.”
Alexi Panagiotakopoulos, CIO of Fundamental
