Sternlicht's Starwood Is Said to Seek Sale of Apartments

(Bloomberg) -- Barry Sternlicht’s Starwood Capital Group is seeking offers for a portfolio of apartment buildings that together may fetch more than $1 billion, according to people with knowledge of the matter.

The portfolio includes more than 25 so-called Class B apartment buildings in U.S. states such as Texas, Florida, Georgia and Tennessee that are, on average, 24 years old, said one of the people, who asked not to be identified because the matter is private. Starwood and Milestone Apartments Real Estate Investment Trust amassed some of the properties through a takeover of Landmark Apartment Trust Inc. in January 2016. The following year, Starwood took Milestone private, too. It’s possible that the portfolio will include some buildings previously owned by Milestone as well.

A Starwood representative declined to comment on the marketing of the buildings.

The Class B classification is given to buildings that don’t command the highest rent in their markets and count middle-income households as their key tenant base. Expected vacancy levels of no more than 5 percent at such properties should spur faster rent growth this year compared with other classes of apartments, according to a report from brokerage Marcus & Millichap.

“The apartment market is healthy as it’s ever been,” Sternlicht said in a CNBC interview last week. Greenwich, Connecticut-based Starwood, one of the world’s largest private real estate investors, with roughly $56 billion under management, is a frequent buyer and seller of property. Earlier this month, it finished raising $7.55 billion for its 11th opportunistic real estate fund.

Starwood was motivated to market the buildings in part because of the $1.8 billion purchase of an apartment portfolio by Harbor Group International LLC from affiliates of Lone Star Funds last November, according to one of the people with knowledge of the matter.

To contact the reporter on this story: Gillian Tan in New York at gtan129@bloomberg.net.

To contact the editors responsible for this story: Daniel Taub at dtaub@bloomberg.net, Christine Maurus

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