Starwood Property Trust (STWD) is becoming the go-to REIT for investors wanting to participate in the CRE space, as this name exhibits a sizable balance sheet, significant franchise value, solid global relationships and the capacity to engage in large transactions, such as its recent LNR one, says Daniel Altscher, Research Analyst and Vice President at FBR Capital Markets & Co.
“One thing that separates Starwood from a lot of other names in the space is that they can take on an entire transaction. They can originate the entire transaction on their terms and then slice and dice into A notes, B notes, mezz pieces, keep what they want, ship off the rest to someone else who wants it. Being able to control the entire transaction on their own terms is hugely value-add that some other names just cannot do or just don’t do because of lack of balance sheet,” Altscher said.
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Altscher says STWD‘s recent acquisition of LNR is expected to result in a very nice earnings ramp and dividend ramp, and although the acquisition is not yet fully visible in the company’s numbers, he says investors are looking forward to formal guidance statements to reflect positively on the company’s future.
“I don’t think it’s too early to start thinking about a two handle the dividend per share, which would bring you back above 7% on a dividend-yield basis. I think the acquisition is going to go very well, and based upon the indications that we’ve seen, it sounds like the first quarter for LNR was a home run. It may not be a level that is recurring every quarter, but it sounds like things are largely on track there, so I think you’re going to see a lot of shareholder value created over the long term from LNR,” Altscher said.
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