Shares of Barry Sternlicht's Starwood Property Trust Inc. fell as much as 2.6% on their first day of trading Wednesday after the company increased the size of its initial public offering to $810 million.

Starwood sold 40.5 million shares at $20 each, the Greenwich, Conn., company said. On Tuesday it expanded its IPO by 62% after first announcing plans to raise $500 million.

Starwood Property is to invest in financing and managing commercial real estate debt and residential mortgages at a time when U.S. homes, office buildings, rental apartments and hotels are falling in value and homeowners and landlords are having trouble refinancing.

Sternlicht, who built Starwood Hotels and Resorts Worldwide Inc. into the third-largest U.S. lodging company, is chief executive officer of the new real estate investment trust.

"You got some people, like Barry, smart people who are trying to get ahead of the market," said Dennis Yeskey, managing director at AlixPartners LLP and former principal for real estate at Deloitte LLP. "I think he's ahead of his time."

So far this year, 14 companies have raised $3.59 billion in the U.S. IPO market. The largest was the $828 million offering by baby-food maker Mead Johnson Nutrition Co. on Feb. 2.

This year's initial share sales are a fraction of last year's in the same period, when 36 offerings pulled in $29.5 billion.

Sternlicht's venture joins companies including Los Angeles-based Colony Financial Inc. and Brookfield Properties Corp. in raising money to invest in distressed real estate assets.

Colony Financial filed for an initial public offering of up to $500 million on June 30 to acquire, originate and manage real estate-related debt.

The business is to be a subsidiary of Colony Capital LLC and plans to buy whole mortgages acquired by the Federal Deposit Insurance Corp. as well as other government agencies and financial institutions. It will also originate mortgages, buy commercial mortgage-backed securities and make or acquire mezzanine loans, according to a regulatory filing.

Brookfield Properties Corp. said Wednesday that it had raised $900 million in a secondary share offering, part of an effort by itself and its parent, Brookfield Asset Management Inc., to raise $4 billion to buy underperforming real estate.

The group plans to buy equity and debt of undervalued real estate companies or property assets and try to generate returns through redevelopment or financial and operational reorganization, the companies said.

Sternlicht was chairman of Starwood Hotels from 1997 to 2005 and has been CEO of the closely held investment firm Starwood Capital Group LLC since its founding in 1991. Among his first investments with Starwood Capital were 7,000 units bought in distressed sales by the Resolution Trust Corp., the Federal Deposit Insurance Corp. and other lenders during the savings and loan crisis.

The Starwood IPO's underwriters have the option to buy up to an additional 6.08 million shares at $20 each.

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