The deal, which values Tamar at £53.6m or 38.25p a share, will see the two companies co-invest through a property vehicle set up called Lux Starlight.
TEIF shares closed up 5.7 per cent after the deal was announced to end the day at 37.53p. The offer is at a 7.7 per cent premium to the closing price on Friday night.
Top shareholders including Laxey Partners, which owns 29.8 per cent of TEIF, and Weiss Asset Management, which indirectly holds 13.4 per cent, have agreed to sell out.
The Lux Starlight vehicle, which is being guided by corporate advisers from Oriel Securities, is the first step towards a larger joint venture between Starwood and M7 called MStar Europe, which will target investments of up to €500m.
TEIF, which is being advised by JP Morgan Cazenove on the deal, is currently in the process of selling down its assets holdings in order to return capital to shareholders.
Starwood Capital Group, which has an affiliated office in London, has about $52bn (£30.6bn) of assets under management. M7 has 260 assets worth £600m in total.
M7 owns a number of assets in and around London, including Hermitage Court and Rippleside Commercial Estate.