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Starwood Property Trust is exploring a major dive into the net lease market. This move is part of the company's efforts to diversify its investment portfolio and capitalize on the growing demand for net lease properties. Net lease properties are typically long-term leases where the tenant is responsible for property maintenance and repairs. By entering this market, Starwood Property Trust aims to expand its presence in the commercial real estate sector and tap into a lucrative investment opportunity.

Starwood Property Trust, Inc. (NYSE: STWD) has announced a significant move into the net lease market with the acquisition of Fundamental Income Properties, LLC (Fundamental) for approximately $2.2 billion. This strategic acquisition aims to diversify the company's investment portfolio and capitalize on the growing demand for net lease properties.

Fundamental, currently owned by Brookfield Asset Management, operates a vertically integrated net lease real estate investment business led by an experienced management team. The acquisition includes 467 properties spanning 12 million square feet across 44 states, 56 industries, and 92 tenants. The portfolio features a 17-year weighted average lease term and an average annual rent escalation of 2.2%. This acquisition is expected to be accretive to distributable earnings, providing a growth engine in the global net lease real estate market.

Barry Sternlicht, Chairman and CEO of Starwood Property Trust, stated, "This acquisition marks the next evolution of our platform, expanding into another proven, scalable segment with strong synergies. 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."

The acquisition will solidify Starwood Property Trust's position as a leading diversified REIT by enhancing its capital deployment capabilities across multiple asset classes. The company expects the transaction to provide compelling risk-adjusted returns with a strong credit profile, highly scalable opportunities, and enhanced origination capabilities.

The transaction is expected to close on or about July 23, 2025, subject to the satisfaction or waiver of customary closing conditions. BofA Securities is serving as the sole financial advisor to Starwood Property Trust, while Wells Fargo and Evercore are advising Brookfield Asset Management.

References:
[1] https://www.prnewswire.com/news-releases/starwood-property-trust-to-acquire-2-2-billion-net-lease-platform-302507252.html