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Starwood Pays $531M For Mid-Atlantic Affordable Housing Portfolio

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Starwood Capital Chairman Barry Sternlicht speaking at a Bisnow event in 2018.

One of the nation's largest commercial real estate investors is betting big on the D.C.-area affordable housing market. 

Starwood Capital Group said in a Securities and Exchange Commission filing last month it acquired a portfolio of 28 affordable housing properties totaling 3,660 units across the mid-Atlantic for $531M, the Washington Business Journal reports

About half of the portfolio is located in the D.C. Metro area, Starwood said, with other properties in North Carolina. The portfolio has an occupancy of 99%, Starwood said. 

Starwood said the stable government employment base, combined with the growth of technology companies such as Amazon, make D.C. an attractive market for multifamily investment. It also said it sees affordable housing as a stable investment during economic downturns. 

"We believe that affordable housing communities provide ample downside protection through highly occupied properties, with comparable market-rate rents 34% higher than the [portfolio's] in-place restricted rents," Starwood said in the SEC filing. "Furthermore, affordable housing rents rise in tandem with median incomes, which are projected to grow in these markets." 

The investor didn't disclose the specific properties it acquired, but property records show it bought several Northern Virginia properties from National Housing Corp. for $135M. The properties include the Landings at Markhams Grant in Woodbridge, and the Woodburn Apartments and Soldiers Ridge Apartments in Manassas, the WBJ reports. 

Starwood has remained an active investor during the coronavirus pandemic, with CEO Barry Sternlicht saying in April that the company was on the offense with its private equity funds and was looking at "a bunch" of potential investments. 

In May, the investor partnered with Jefferson Apartment Group to acquire a development site near Nationals Park in D.C., where the joint venture plans to build a 320-unit project.

In June, Starwood agreed to a deal to put as much as $325M of equity into a mortgage REIT managed by TPG. In July, Bloomberg reported that Starwood was planning to raise $11B to bet on opportunistic real estate and distressed properties.