Shares of hotel magnate Barry Sternlicht's Starwood Property Trust Inc. initially declined on their first day of trading Wednesday before closing unchanged, even as the broader markets edged up after the Federal Reserve left a key interest rate at a record low.
The company's initial public offering of 40.5 million common shares priced at $20 per share.
Starwood previously planned to offer 25 million shares at $20, then later boosted its offering size to 40.5 million shares due to strong demand. That makes it the largest IPO in 2009, according to Renaissance Capital.
Starwood Property Trust of Greenwich, Conn., focuses on managing and investing in commercial mortgage loans and other commercial real estate-related debt investments. The company will be managed by SPT Management LLC, an affiliate of private equity firm Starwood Capital Group, founded and controlled by Sternlicht. Sternlicht, 48 years old, formed Starwood Hotels & Resorts Worldwide in 1995 and led the lodging firm for nine years.
Starwood Property expects to raise about $830 million in proceeds — assuming the overallotment option is not exercised — which it plans to use to originate, finance and invest in commercial mortgage loans and other commercial real estate-related debt investments.
Bank of America Merrill Lynch, Deutsche Bank Securities and Citi are the joint book-running managers for the offering. Barclays Capital, Wells Fargo Securities, Calyon Securities Inc., Cantor Fitzgerald & Co., Piper Jaffray and Scotia Capital are acting as co-managers.
The underwriters have a 30-day option to buy up to an additional 6 million shares at the public offering price.
Many real estate investment trusts have been raising funds via secondary stock offerings and then using proceeds to pay down near-term debt, according to the National Association of Real Estate Investment Trusts.
The IPO comes on the heels of a multibillion dollar fund announced Tuesday to invest in distressed assets.
Real estate developer and manager Brookfield Properties Corp. and Brookfield Asset Management, which holds around 51 percent voting interest in Brookfield Properties, said they are raising money to form a $4 billion investor consortium to invest in underperforming real estate. It will focus on corporate property restructurings worldwide.
Brookfield, which allocated $1 billion to the consortium, said on Tuesday it will focus on companies that might benefit from restructuring, strategic direction, portfolio repositioning or other active asset management.
The companies said some institutional real estate investors, whose identities weren't disclosed, have each allocated between $300 million and $1 billion to the consortium.
In its prospectus filed with the Securities and Exchange Commission, Starwood Property noted that due to the recent run-up and then plunge in real estate values, "We believe that the next five years will be one of the most attractive real estate investment periods in the past 50 years."
"We believe that there will be a significant supply of distressed investment opportunities from sellers and equity sponsors, including national and regional banks, investment banks, insurance companies, finance companies, fund managers, other institutions and individuals," the company said in its filing.
Some investors see REITs as a good value since many stocks have been undervalued. Shares of REITs peaked in February 2007 and then declined as much as 73 percent by the time the stock market began to climb in March.
Shares of Starwood Property trade on the New York Stock Exchange under the symbol "STWD." The stock closed unchanged at $20 Wednesday.