Starwood Property Trust, Inc. announced that the Company has entered into a definitive agreement to acquire Fundamental Income Properties, LLC, a fully integrated net lease real estate operating platform and owned portfolio, for approximately $2.2 billion.
Fundamental, currently owned by Brookfield Asset Management, operates a vertically integrated net lease real estate investment business led by a best-in-class, experienced management team. The 28-person team, which will be employed by the Company, brings comprehensive capabilities across originations, credit and real estate underwriting, portfolio management, and capital markets. Fundamental executes its acquisitions through strong relationships with middle market companies and private equity sponsors across a variety of industries.
The acquired portfolio consists of 467 properties spanning 12 million square feet across 44 states, 56 industries, and 92 tenants. The assets demonstrate strong credit quality, featuring a 17-year weighted average lease term, and 2.2%1 average annual rent escalations.
“When we went public in 2009, we said we would create a diversified company around the areas of expertise of our Manager, Starwood Capital. With the addition of another business cylinder, we are expanding into another proven, scalable segment with strong synergies with our platform. Our core commercial real estate lending business is now approximately half of our asset base as we have strategically expanded into complementary lending and investing verticals,” said Barry Sternlicht, Chairman and CEO of Starwood Property Trust.
“This diversification has allowed us to weather cycles and deliver consistent earnings and dividends for our shareholders, who have earned an average of 10.8% per year on their investment since our formation as a blind pool in 2009. The acquisition of Fundamental marks the next evolution, but not the last, of our platform. The quality of the team, their robust structuring capabilities and deep credit focus align perfectly with our culture. While we have strong experience in the net lease sector, the scale and infrastructure of Fundamental provide us with the opportunity to significantly grow in this attractive asset class using our combined expertise.”
Jeffrey DiModica, President of Starwood Property Trust, added, “We are very fortunate to add such a successful, experienced and thoughtful team with deep industry relationships and a proven track record of success. With our combined relationships and global reach, we are poised to increase market share. With nearly 20-year leases, annual rent escalators and access to attractive proven ABS financing, the transaction highlights our safety focus. We anticipate this investment to be accretive to distributable earnings after giving effect to projected refinancing of existing debt and projected acquisition volume, and the impact of this accretion will grow as we deploy more capital at our targeted yields. We are pleased to welcome the Fundamental team to the Starwood family.”
“We are excited to join Starwood Property Trust and further scale our business as part of this best-in-class organization,” said Chris Burbach, CEO of Fundamental. “Our team has built a proven, credit-oriented origination process, supported by long-standing relationships across industries. Together with Starwood Property Trust’s real estate expertise, consistent access to capital, and a growing net lease market, we are well positioned to capitalize on compelling investment opportunities.”
Alexi Panagiotakopoulos, CIO of Fundamental, added, “We built our platform to meet the growing capital needs of middle market companies by providing efficient capital along with certainty of execution. Joining Starwood Property Trust enhances our abilities to help our current and future clients grow and improve their businesses.”
The diversified net lease portfolio provides predictable, long-term cash flows with built-in downside protection, driven by high tenant quality and durable lease structures with contractual rent growth.
The portfolio is 100% occupied and diversified across 92 tenants from 56 industries, including food production and distribution, auto services, retail, restaurants, entertainment, and education. Since inception, it has maintained 0% credit losses, with an average annual rent increase of 2.2% and a weighted average remaining lease term of 17 years.The transaction establishes a platform in the large and highly fragmented net lease market, positioning the Company to capitalize on anticipated growth in transaction volume.
The Fundamental team brings deep relationships with private equity sponsors and middle market businesses, expanding the Company’s access to proprietary credit investment opportunities. The acquisition provides access to specialized asset-backed security financing markets, enabling the Company to leverage its capital markets expertise for efficient, cost-effective financing solutions across its platform. The acquisition further reinforces the Company’s status as a global real estate leader with enhanced capital deployment capabilities across multiple asset classes and a proven ability to deliver attractive risk-adjusted returns through various market cycles.
In connection with the transaction, the Company will assume Fundamental’s existing financing facilities totaling $1.3 billion, including $0.9 billion of asset-backed security debt. The Company expects to fund the remainder of the purchase price with a combination of cash on hand and debt and equity capital. The transaction is expected to close on or about July 23, 2025, subject to the satisfaction or waiver of customary closing conditions.
BofA Securities is serving as sole financial advisor to Starwood Property Trust.
Wells Fargo and Evercore are serving as financial advisors to Brookfield Asset Management.
