Real estate mogul Barry Sternlicht’s influence on Orange County’s business landscape appears to be on the rise with a billion-dollar buy of real estate-related businesses, including local companies and offices believed to be worth about a quarter of the recent deal.
Two Sternlicht-led companies—Starwood Property Trust Inc. and Starwood Capital Group, both based in Greenwich, Conn.—announced last week that they agreed to buy Miami Beach, Fla.-based LNR Property LLC for $1.05 billion. The deal, said to be in the works for several months, is expected to close next quarter.
A bulk of the sale is centered on LNR Property’s handling of distressed commercial debt; the company is the special servicer for commercial mortgage-backed security trusts representing an unpaid principal balance of about $131 billion. LNR Property is said to be the largest manager of distressed commercial loans in the world.
Two different business lines make up the bulk of LNR Property’s operations and investments in Orange County. They appear to be worth more than $200 million on a combined basis.
The company’s Newport Beach-based LNR Commercial Property Group operates as its real estate development and investment division.
The group has been involved in the development and redevelopment of more than 1,000 properties over the past 15 years, according to the company’s website.
Local Projects
The commercial property group has been involved in several local projects, including developments at the former El Toro Marine base in Irvine and the Platinum Triangle area of Anaheim.
The Newport Beach office counts about 40 employees, according to a Starwood investor presentation made last week. Officials for the commercial property group were unable to comment on the impact of the sale to the local office last week.
Also bought by the two Starwood companies last week was LNR Property’s stake in Irvine-based Auction.com, the country’s largest real estate exchange that focuses on residential and commercial properties.
LNR Property counts a minority stake in Auction.com, which employs more than 800 people in Irvine, Dallas, Miami, New York and Silicon Valley.
Stone Point
The online auction company, which previously operated under the Real Estate Disposition Corp. or REDC name, is said to be 50% owned by private equity company Stone Point Capital of Greenwich, Conn., which first invested in the company in 2008.
Specific valuations of LNR Commercial Property Group and Auction.com were not immediately disclosed as part of last week’s acquisition by the two Starwood companies.
Starwood Capital said it would pay $197 million for both LNR’s Commercial Property Group and 50% of LNR Property’s ownership interest in Auction.com.
Starwood Property Trust, as part of its $856 million buy of the bulk of the LNR Property assets trading hands, gets the other 50% stake of LNR Property’s interest in Auction.com.
Tri Pointe IPO
Last week’s deal is the latest notable investment made in an OC company by Sternlicht, who has worked on apartment, hotel, office, retail, land and other real estate investments valued at more than $40 billion over the years.
His Starwood Property Trust, which counts a market value of about $3 billion, is currently billed as the largest commercial mortgage real estate investment trust in the U.S. traded on the New York Stock Exchange.
Sternlicht, 52, also is the chairman of Irvine-based Tri Pointe Homes LLC, a homebuilder that started up operations in 2009 and now is close to going public via an initial public offering.
Starwood Capital Group in 2010 invested $150 million in equity for Tri Pointe, which is now looking to raise as much as $187.2 million in its IPO, according to its latest registration statement with the Securities and Exchange Commission.
Privately held Starwood Capital now counts about an 83.5% stake in Tri Pointe; after the IPO it will own about 51.7% of the company’s outstanding shares, according to SEC filings.
Lennar Ties
Last week’s deal further distances LNR Property from its one-time sister company, Miami-based homebuilder Lennar Corp.
LNR Property was spun off by Lennar, which runs much of its homebuilding operations out of Aliso Viejo, in 1997.
The company was publicly listed until 2005, when it was taken private by investors, including New York-based Cerberus Capital Management.
The same year saw Lennar and LNR Property lead a nearly $1 billion purchase of the 3,700-acre El Toro Marine Corps Air Station, which is now moving ahead on its first batch of housing development under the Great Park Neighborhoods name.
LNR Property got new investors amid the financial downturn; Starwood is buying the company from a group that includes hedge fund Oaktree Capital Management, iStar Financial Inc., Vornado Realty Trust and Aozora Bank Ltd.
