Starwood REIT Buys $645M of Affordable Housing

The trust managed by Starwood REIT Advisors has acquired two portfolios totaling 4,618 units in the Mid-Atlantic and Sunbelt regions.
Jacksonville, Fla. Image by AndrewAvitus via Wikimedia Commons

Private investment giant Starwood Capital Group has announced a major expansion of its affordable housing platform, with Starwood Real Estate Income Trust Inc. (SREIT) snapping up two multifamily portfolios totaling 4,618 units for a combined $644.8 million.

The non-traded REIT managed by Starwood REIT Advisors has acquired a total of 32 communities through the transactions. According to a filing today with the U.S. Securities and Exchange Commission, the REIT picked up 28 communities with a total of 3,660 units, primarily in Virginia and North Carolina, for $521.3 million. Shortly thereafter, SREIT added a four-community portfolio totaling 958 units in Jacksonville, Fla., for $113.5 million.

The deals vault Starwood, which manages more than $60 billion in global assets, higher on the ranking of affordable housing investors in the U.S. Through its sponsored investment vehicles, the company now has more than 34,000 affordable housing units owned or under contract, making it one of the nation’s top three owners of the asset class.

That unit count is nearly two-thirds larger than Starwood’s platform in August of 2019, after an affiliate purchased a portfolio of 21 stabilized affordable housing communities spanning 4,448 units, mainly in Dallas-Fort Worth, Houston and Florida. Following that acquisition, the company and its affiliates owned nearly 20,700 units in total.

Downside protection

The newly acquired Mid-Atlantic portfolio has an overall occupancy rate of 99 percent, with a historic average of more than 97 percent over the past 15 years. About half of the portfolio is located in the Washington, D.C., metro area. The Florida portfolio is also 99 percent occupied. In a statement, Starwood referred to the downside protection offered by the investments, with the properties offering in-place rents that are 26 percent below comparable rents for market-rate apartments.

SREIT’s portfolio had a total asset value of $4.3 billion across 106 properties as of the end of September. The REIT, which invests in a wide range of residential and commercial properties, announced in the same SEC filing that it had acquired a four-asset industrial portfolio totaling 1.3 million square feet for $164.2 million. Multifamily and industrial properties now comprise 65 percent of SREIT’s portfolio after the recent series of acquisitions.