Starwood Nabs $380M CMBS Loan on Florida Affordable Rental Portfolio

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Starwood Property Trust has refinanced a collection of a dozen affordable multifamily properties in Florida with a $380 million loan originated by Barclays and Goldman Sachs.

The two-year, floating-rate and interest-only commercial mortgage-backed securities (CMBS) loan retired nearly $217 million in existing debt that was used to acquire the assets several years ago. The deal also allowed Starwood to capture some liquidity, as the firm recouped more than $144 million of equity as part of the refinance, according to data from Fitch Ratings, which analyzed the deal. 

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The mortgage has three one-year extension options and is collateralized by Starwood’s fee simple interest in the portfolio, which includes nearly 3,100 rental units, per Fitch. The portfolio was appraised at around $527 million, which indicates an underwritten loan-to-value ratio of more than 72 percent. CBRE appraised the portfolio between Aug. 30 and Oct. 1, according to Fitch. 

Starwood Property Trust, a publicly traded real estate investment trust, is one of the largest affordable housing operators in the country, per Fitch, which wrote that the company’s broader Florida affordable housing portfolio comprises more than 35,000 residents. 

The dozen properties in this bundle are all tied to one or more Land Use Restriction Agreements (LURAs), dictating that they’re used for affordable housing, Fitch indicated. The variety of LURAs include federal low-income housing tax credits (LIHTC) and bonds, as well as LURAs from Florida’s State Apartment Incentive Loan (SAIL) program, all of which have rent restrictions or some form of income limit for establishing rents for the tenants housed in the portfolio via tax incentives or specialized financings. All 12 properties are tied to the LIHTC program. 

The properties are spread out among five Florida markets, with Orlando hosting more than 48 percent of the units in the portfolio, followed by Tampa-St. Petersburg, which has almost 23 percent of the units, according to Fitch. 

Starwood purchased the dozen Class B affordable housing properties in the portfolio in 2016 for about $203 million, and the company has poured around $15.6 million into it for improvements, per Fitch. The garden-style assets were all built between 1995 and 2002 and offer one- to three-bedroom floor plans, ranging in size from 635 square feet to almost 1,200 square feet.

The portfolio has been more than 98 percent occupied since 2018, with weighted average in-place rents that are almost 34 percent below market — $908 per month — according to data from Fitch, which cited appraisal information.

Representatives for Starwood, Barclays and Goldman were not able to immediately respond to requests for comment.

Mack Burke can be reached at mburke@commercialobserver.com.