In 1991, Sternlicht launched Starwood Capital Group, which is now the biggest and most successful real estate company in the United States. In 1995, he founded Starwood Hotels & Resorts Worldwide, which owns hotel chains including Sheraton, St. Regis and the Westin, as well as about 900 properties in 100 countries.

In 2009, at the height of the Great Recession, when many firms were dumping beaten-down properties in the troubled real estate market, Stern-licht leaped into the void and launched Starwood Property Trust (NYSE: STWD). It invests in commercial mortgage loans and commercial real estate debt.

When it went public in 2009, Starwood was valued by the market at $1 billion and now is worth about $5.5 billion. And it’s a star of our Global Income Edge REIT portfolio, currently yielding 8.3%.

Barry Sternlicht has proven himself to be a shrewd investor with a knack for identifying and profiting from real estate properties. However, there’s nothing magical about his approach. He’s data-driven and pragmatic, and his personal philosophy includes a willingness to revisit decisions so that they fit the data at hand. He’s been known to pass on deals he was passionate about due to new information.

Real estate has always been an attractive asset class, as its value usually increases in lock step with the economy, which then generates stable cash flow. Starwood’s exposure to this industry supports its sturdy, growing distribution, making it one of our top GIE REIT holdings.

After spinning off its single-family residential business in January of last year, Starwood now operates in two main real estate segments: 1) lending segment, its core commercial real estate originations business, and 2) lending and investing and servicing (LNR segment), its U.S. and European servicing businesses, CMBS investment businesses and conduit loans.

Beginning in the second quarter, Starwood will increase its industry reach, adding a third segment in commercial real estate equity. Management expects the portfolio to generate an average annualized return of 10.6% on its loans, which is the primary source of the REIT’s payout.

Some of Starwood’s recent loans include the $300 million refinancing of an office building in Soho, New York, and a $309 million first mortgage and refinance of an office building in London.

The company recently announced a $508 million acquisition of office and multifamily assets in Ireland. The portfolio includes 12 office properties and one multifamily residential property in Dublin.

Growing Its Distribution

This year started off strong for the company, with both segments reporting growth. Starwood’s core earnings of $123.7 million, or $0.55 per share, were up 10% from last year.

During the quarter, Starwood invested $1.2 billion in new acquisitions and loan originations, which should continue to drive core earnings growth. Because REITs are required to pay 90% of earnings to investors, the increase in earnings means it’s only a matter of time before Starwood hikes its distributions.

For 2015, Starwood Property Trust also updated its guidance to $2.05 to $2.25 core earnings per share.

There are fears that rising interest rates will hurt REITs, but a majority of Starwood’s lending activities are floating-rate, which will rise along with  market rates. Starwood’s loan portfolio should benefit from a rising-rate environment because of its high volume of LIBOR-based floating-rate loans. Roughly 80% of its lending segment’s existing loan portfolio and 100% of its current loan pipelines are indexed to LIBOR.

Starwood is trading at 11 times estimated 2015 core earnings, which is a bargain considering it offers a well-covered 8.3% yield.

Buy Starwood Property Trust below $32.