BY Richard Summerfield
GE Capital has agreed to sell its GE Energy Financial Services’ Project Finance Debt Business to Starwood Property Trust for $2.56bn, including $400m of unfunded loan commitments.
The business includes a platform and leadership team, along with 21 full-time employees working on loan origination, underwriting, capital markets and asset management. The transaction, which is expected to close in Q3 2018, will, Starwood believes, boost the company’s core earnings.
The deal will see Starwood expand beyond the real estate industry after seven years of unsuccessfully attempting to diversify. GE, by contrast, is in the midst of an effort to divest its assets and refocusing its efforts on power plants and renewable energy. Thus far, the company has raised billions of dollars through asset sales. In June, GE also said it would separate its healthcare unit and sell a stake in Baker Hughes. The company has also agreed to merge its locomotive unit with Wabtec Corp and its industrial gas-engine business to Advent International Corp.
“The sale of the Project Finance Debt Business is aligned to GE Capital’s overall balance sheet reduction efforts and reflects progress against our strategy announced in January 2018,” said Alec Burger, president of GE Capital. “The business is highly complementary to the Starwood Property Trust platform, which has deployed over $44bn of capital since its inception in 2009 and has vast lending experience across diversified assets and geographies.”
“It has been our intention since we began Starwood Property Trust to build a multi-cylinder finance company, with the thought that we should never overstay our welcome in any one business line and always have opportunities to deploy capital into only those verticals where reward clearly outweighs risk,” said Barry Sternlicht, chairman and chief executive of Starwood Property Trust.
He added: “From our basic and still most important business as one of the nation's largest commercial real estate lenders, we have successfully diversified the company. We have built a world-class conduit lending and CMBS trading platform, bought in excess of $3.5 billion of property assets to yield double digit current returns on equity deployed, and created, from a standing start, a very successful single family lending platform. Today we are pleased to announce we are adding a new cylinder to our Company, with the return on investment profile and ability to scale to be material to our $14 billion enterprise.”