MIAMI, FL – Starwood Real Estate Income Trust, a non-traded REIT managed by Starwood REIT Advisors, L.L.C., a subsidiary of Starwood Capital Group, announced the acquisition of two affordable real estate portfolios totaling 4,618 units in 32 communities. With this acquisition, Starwood Capital's controlled subsidiaries, which include SREIT and other Starwood Capital-sponsored investment vehicles, own or contract more than 34,000 affordable housing units across the country, making the Starwood companies the combined three largest owner-occupied units in the country United States. The terms of the transactions were not disclosed.
The acquired portfolios are 99% occupied and offer tenants affordable options in attractive markets in the Central Atlantic and the Sun Belt. The high-quality garden-style residential units in the portfolio offer first-class amenities such as swimming pools, clubhouses, playgrounds, fitness centers and laundry facilities.
Washington, D. C. and Jacksonville, which together make up 57% of the portfolios acquired, have both grown twice as fast as the United States over the past decade. Washington, D. C., has a stable government and military employment base while benefiting from the recent influx of high-paying technology (e.g. Amazon HQ2) and financial jobs. Jacksonville has seen robust employment growth over the past five years, with employment up 16% from a national average of 9% over the same period. Going forward, both markets are expected to significantly outperform the US population growth average. Other key markets within the portfolio include Raleigh, Charlotte and Nashville, all of which are in the top 10 projected five-year population growth. It is estimated that the US estimates will double. Over the next five years, these markets are expected to average 2.9% annual income growth, 1.2% more than the US forecast income growth over the same period.
"These transactions are an extension of SREIT's successful investments in the affordable apartment building sector and provide us with a unique opportunity to acquire high-quality, well-located, large-scale assets," said Mark Keatley, Managing Director, Starwood Capital. "These investments provide good downside protection from heavily used properties with in-place rents 26% below market benchmarks, generating strong and reliable cash flow. In addition, these portfolios are well positioned to deliver attractive risk-adjusted results Given the persistent imbalance between supply and demand for quality, affordable housing, we see long-term benefits for residents across the country in maintaining the sustainability of affordable housing. We are excited to and intend to add these communities to the SREIT portfolio keep investing in the affordable housing sector. "
"Our experience with affordable and off-the-shelf apartment buildings in these markets has enabled us to draw and execute these transactions quickly and efficiently," added Andrew Coren, senior vice president, Starwood Capital. "These portfolios offer significant and defensive in-place cash returns, which is reflected in stable performance and collections from COVID-19. The affordable residential real estate sector has significant barriers to entry and these acquisitions are due to the demographics of these markets also has a high growth potential. "
As of September 30, 2020, the SREIT portfolio has total assets of $ 4.3 billion in 106 properties.
