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Barry Sternlicht, The Real Estate Bargain Hunter

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http://www.nytimes.com/2010/05/30/business/30barry.html?ref=business

THE Paramount Bay condominium is a 47-story steel-and-glass cadaver. Conceived at the height of the real estate boom as another ultraluxury tower in a city that would soon be choking on them, it looms unfinished and unoccupied on Biscayne Bay.

The lobby is like a mortuary. There are no chandeliers on the three-story ceiling, no paintings on the walls. And there is nobody at the front desk to greet visitors. The only sound is the eerie gurgle of a 40-foot waterfall.

None of this deters Barry Sternlicht, the real estate investor who owns the building. “The bones,” he says, gesturing around the room. “The bones are extraordinary!”

Mr. Sternlicht plans to transform Paramount Bay into a haven for wealthy buyers who will one day want to live here. But he concedes that the building’s entrance needs work. “This looks like an abandoned property,” he says. “We have to make it look like it’s alive.”

The pool area lacks something, too. “It needs a concept,” he says, wrinkling his brow. He’s not yet sure what that will be. But he knows this much: The bamboo trees adorning the entrance have to go. “We should put some wisteria or some vines over there,” he says.

Then it’s up to one of the top floors to admire the sweeping views from an empty unit. “Look at this,” he says, pointing out the landmarks in the distance: South Beach, Key Biscayne and the downtown Miami skyline. “Someone is going to want to live here — someday.”

Perhaps such brio is a prerequisite for an investor wading into the worst real estate wipeout in generations. Indeed, Mr. Sternlicht, 49, has been one of the downturn’s busiest buyers. In the last year and a half, his private equity firm, Starwood Capital, has raised more than $3 billion. He has bought land in Florida and ski lodges in Colorado. He created a real estate finance company, Starwood Property Trust, which he took public last August in a successful initial public offering. And on Friday he ended an aggressive but unsuccessful run at Extended Stay Hotels, which was being auctioned off in bankruptcy court.

But his highest-profile deal has been the acquisition of the $4.5 billion real estate loan portfolio of Corus Bankshares, the nation’s largest condominium construction lender until it failed last September because it had financed too many projects like Paramount Bay. The following month, Mr. Sternlicht and a group of investors — including TPG Capital, WLR LeFrak and Perry Capital — won the loans in an auction run by the Federal Deposit Insurance Corporation, paying $554 million for 40 percent of the package, valuing the debt at 60 cents on the dollar. The F.D.I.C. holds the remaining 60 percent.

Mr. Sternlicht hopes to foreclose on many of Corus’s errant borrowers, restyle their buildings and sell units for a significant profit once the real estate market recovers. He says he and his investors can afford to wait until then because the F.D.I.C. has provided them with $1.4 billion in zero-coupon financing and an additional $1 billion in low-cost loans that can be used to complete unfinished projects.

There’s an upside for the F.D.I.C. too, Mr. Sternlicht says: it will recover the full value of the Corus portfolio by working with him. “They are going to make a couple of billion,” he says. “If they sold it outright, they would have lost money.”

If all goes as planned, Mr. Sternlicht says, he and his investors are also positioned to do rather well themselves.

He seems to have only one plan get the rich in and living there. Now if the rich don't want to live there what then?

Very nice of the US taxpayer to give him a $1bn loan to finish all of these projects, and of course finish projects will easily translate into tenants paying the rent...

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What a joke I am sure I could make some money with a few billion cheap/free money.

Talk about picking winners why not just give the money to you brother/son/cousin so we can complete the circle to third world countries.

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Very nice of the US taxpayer to give him a $1bn loan to finish all of these projects, and of course finish projects will easily translate into tenants paying the rent...

Heh. Looked like more than a billion from what you wrote.

Sounds like we have an oligarch of the 2008-???? crisis here. Echos of the kleptocracy of Yeltsin's Russia.

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Heh. Looked like more than a billion from what you wrote.

Sounds like we have an oligarch of the 2008-???? crisis here. Echos of the kleptocracy of Yeltsin's Russia.

I wish someone would give me 1.4 Billion of zero coupon financing. Let's see, I could stick that in an Australian bank for a month and get about 8 to 10 million dollars. I would then gladly hand it back. Ah...what the heck, let me keep it for a whole quarter just to be on the safe side...

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I wish someone would give me 1.4 Billion of zero coupon financing. Let's see, I could stick that in an Australian bank for a month and get about 8 to 10 million dollars. I would then gladly hand it back. Ah...what the heck, let me keep it for a whole quarter just to be on the safe side...

Amazing how these people get the money, can you imagine walking into a bank and asking for the same sort of loan.

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I wish someone would give me 1.4 Billion of zero coupon financing.

Zero coupon doesn't necessarily mean zero cost - it's possible (probable in fact) that the debt was issued at below par. What it does mean of course is that he won't have cash flow issues until the date it has to be repaid.

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Zero coupon doesn't necessarily mean zero cost - it's possible (probable in fact) that the debt was issued at below par. What it does mean of course is that he won't have cash flow issues until the date it has to be repaid.

At which point he winds up the company and walks away with many years of managements fees jangling in his pockets.

Oh dear, throwing good money after bad.

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Isn't now a good time to be buying in the US?

But this Hardlight guy does sound like a typical carpetbagger. Not to be touched with barge pole methinks.

Its closer to bottom there than here however I cannot help but think that the best time to buy houses is when the rates are high and about to come down, rather than the other way around.

You can definitely see the relationship between houses and the economy in the US the cheaper they go the more folks feel that the bottom is in and you get little flashes of life.

Once they get to the true bottom and return to true growth I think we will be screwed since I feel we will extend and pretend until the US comes out of recession and inflation comes back.

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Then it’s up to one of the top floors to admire the sweeping views from an empty unit. “Look at this,” he says, pointing out the landmarks in the distance: South Beach, Key Biscayne and the downtown Miami skyline. “Someone is going to want to live here — someday.”

Of course, but at prices that can be afforded, supported by incomes sustainable by the economy.

At which point he winds up the company and walks away with many years of managements fees jangling in his pockets.

WSJ this month reports he may be looking to.. erm, get some cash out from his company? Expected to be a minority stake, but why do it if profits are going to be so dazzling?

He seems too 'property is wonderful' to me.

Sternlicht Eyes Sale of Stake

With about $19 billion in real-estate assets under management, Starwood is one of the world's largest property investors and focuses on higher-risk, higher-return property investments.

Any Starwood sale would offer Mr. Sternlicht, the firm's chairman and chief executive, the opportunity to cash out some of his holdings in the firm he founded in 1991.

It also could establish a value for the company, which could prove useful if Starwood has any future plans of selling shares to the public.

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By saying that it is for the rich you attract your true target market which are the aspirational rich - all those fake island complexes did the same in Dubai didn't they? I wonder how odten the Beckhams and the Pitts live on those Palm Islands in the Gulf - if they ever have - but I suspect some people with aspirations of living next door to them paid a tidy sum for the opportunity.

The rich and famouse are often used as marketing tools for property.

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FDIC is a federal agency and Im sure they dont make loans.

He talks about financing as if it is loans.

It could be he has agreed to pay the rest when the place is sold.

That would account for the 60 40 split at the sale.

ie, I suspect he has paid 40% to the receivers ( FDIC) and they have agreed to let him do what he likes with the 60% payable at some time later.

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By saying that it is for the rich you attract your true target market which are the aspirational rich - all those fake island complexes did the same in Dubai didn't they? I wonder how odten the Beckhams and the Pitts live on those Palm Islands in the Gulf - if they ever have - but I suspect some people with aspirations of living next door to them paid a tidy sum for the opportunity.

The rich and famouse are often used as marketing tools for property.

The Beckhams were "rumoured" to be buying a penthouse flat in Newquay. This was on a busy corner location and with everybody in the block having access to the roof garden, nothing private.

Well done to the Estate Agents in getting that obvious lie published.

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Starwood has new investment vehicles tapping Europe for funds now, with some juicy implied yields apparently tempting investors / pension funds. At least capital raising to fund such investing seems to becoming very competitive, trying to get backing.

And they are only one among such funds seeking and getting investor backing. I wonder if similar funds have been providing the hot money in the US to buy at higher prices.

The banks themselves seemingly not wanting any of the action for these yields, or unable to because they need to, even willing to shift supposedly high-yielding assets off their own balance sheets to such investors to buy up?

Can only think that when the banks have unloaded enough, they will want to buy them back cheap in the future, or provide funding to others in the market to break up investor portfolios and buy them up at low prices. Otherwise banks just sitting there recapitalised doing nothing.

US hotel and real estate giant Starwood has defied the stock market gloom and raised £228.5m in the UK’s second biggest initial public offering this year

Starwood is hoping to muscle in on European commercial real-estate debt – a market that is already worth £2 trillion and where banks are hamstrung from originating new loans. The need for increased regulatory capital and rising bank funding costs has meant lenders are both withdrawing from new loans and shifting portfolios of loans already on their balance sheet.
Starwood European Real Estate Finance Ltd (SEREF). SEREF will be structured as a Channel Islands closed-end investment company, listed on the London Stock Exchange.
Separately, Starwood Capital announced today the formation of Starwood European Finance Company (StarFin), a European real estate finance platform, with Cushman & Wakefield Investors (CWI) as its partner and investor. CWI will help source financing opportunities and provide market intelligence and research. StarFin will be Starwood Capital's third major debt platform and follows its two debt platforms in the United States which have lent over $10bn. StarFin is Starwood's manager for its entire European debt strategies, including externally managing SEREF, when it launches.
By the end of the year, Starwood Capital is also expected to close almost $3bn in equity for its ninth global private equity real estate fund, hitting the top end of its $2bn to $3bn capital ambitions at a time when opportunistic capital raising has become fiercely competitive.

http://www.telegraph...-flotation.html

http://www.costar.co...tment-platform/

http://costarfinance...rate-debt-ipos/

Edited by Venger

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Difficult to get bearings. Starwood Capital, or one of their newborn companies, been busy again, in the UK.

http://www.manchestereveningnews.co.uk/business/property/owner-manchesters-palace-hotel-been-1686269

Reading PropertyWeek it is full of stories of deals done, private equity chasing opportunities in UK com-prop, huge enthusiasm and belief of new funds about to begin flowing (example) like it was a new boom.

Perhaps it will bail-out a regional company I know of, where the owners have been sat on empty com-prop since the crunch began. That they'll no longer have to suffer low offers down from peak of the sort that would shock even hardened hpc-ers, from young emerging companies, but debt-mountain upon debt-mountain funds available to those in the banking and finance with FLS and similar backing the coming to the rescue.

Upside is seeing sellers come to market, and maybe the press is just talking it up. http://www.manchestereveningnews.co.uk/business/property/overseas-investors-target-manchesters-property-3414580

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Difficult to get bearings. Starwood Capital, or one of their newborn companies, been busy again, in the UK.

http://www.mancheste...el-been-1686269

Reading PropertyWeek it is full of stories of deals done, private equity chasing opportunities in UK com-prop, huge enthusiasm and belief of new funds about to begin flowing (example) like it was a new boom.

Perhaps it will bail-out a regional company I know of, where the owners have been sat on empty com-prop since the crunch began. That they'll no longer have to suffer low offers down from peak of the sort that would shock even hardened hpc-ers, from young emerging companies, but debt-mountain upon debt-mountain funds available to those in the banking and finance with FLS and similar backing the coming to the rescue.

Upside is seeing sellers come to market, and maybe the press is just talking it up. http://www.mancheste...roperty-3414580

well, investors may have invested 225million, and they are going to want to see their firm buying some "investment property".

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well, investors may have invested 225million, and they are going to want to see their firm buying some "investment property".

Money money money; it's a rich man's world. Or is it debt, debt, debt, it's the big debtors' world?

As in the original post, FDIC not only ran an auction for distressed loans on property, but provided financing to buy it at a very tempting rate. The price paid for property gives it a market value, and helps support the value of all other properties in the market, given the latest purchase price paid.

won the loans in an auction run by the Federal Deposit Insurance Corporation, paying $554 million for 40 percent of the package, valuing the debt at 60 cents on the dollar. The F.D.I.C. holds the remaining 60 percent.

He says he and his investors can afford to wait until then because the F.D.I.C. has provided them with $1.4 billion in zero-coupon financing and an additional $1 billion in low-cost loans that can be used to complete unfinished projects.

I wonder where all the FEDs rolling monthly $ billions is going?

As in my (example link), of April 2013, at the meeting of the Association of Property Lenders' at their annual seminar in a law firm's City offices, sounds like things were getting whipped up with excitement for lending prospects going forwards, to fund big purchases.

Both on US firms funded purchases, and all that lovely FLS + UK banks being more able to not look at bad com-prop legacy problems, as higher prices paid on new stuff probably raises the book values of it.

A key driver for domestic banks has been the Funding for Lending scheme introduced by the government last year, and extended last month. It was designed to help consumers and businesses, by stimulating job creation and spending - not to support commercial property per se.But on Tuesday there was much talk of banks "diverting" this money towards commercial property - particularly to support wealthy private clients, given the profits currently available from property lending. Another important driver cited is the presence of US lenders, which are supporting the US opportunity funds buying up large portfolios of distressed properties.

John Cridland, CBI director-general, seems happy at conditions (Sunday May 12th 2013). I doubt he was at that UK lenders property seminar. Yes they can lend. Whether it's lending to genuinely support wider growth interests, or lending into a market that supports legacy book values, and into a market with bank profit opportunities that's bubbling with world-wide foreign and domestic stimulus, I'm no longer sure.

"And when I talk to banks ... they are quietly optimistic that, as the months go on, for them the Funding for Lending enables them to do more lending."

http://www.reuters.c...me=businessNews

Edited by Venger

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Barry Sternlicht Warns "Everyone Is Holding Cash Because They Know When It Ends It's Gonna Get Ugly"

Submitted by Tyler Durden on 5 November 2013

"The Fed is playing a very dangerous game," Starwood Capital's Barry Sternlicht warns,"and they need to stop." Sternlicht has quadrupled his firm's net worth in this time and, to the incredulity of the CNBC anchors, warns, "this is bad, this is a heroin addiction.. and now they are printing more money than the deficit."

The outspoken CEO of the $29 billion fund, noted "all my friends who are money managers.. are much closer to the sell button than they ever were before," adding that "everyone's holding cash," since if they start to get nervous "volatility will come back instantly." Simply put, he concludes, "you know when this ends, it's gonna get ugly."

On Fed QE and investors' heroin addiction: "They should knock this off. This is bad. This is a heroin addiction. The more you get on it, the worse it's going to get; the more asset values inflate."

Further to Sternlicht's point that "you're gonna hold cash",

A new survey of family offices by Citi finds that the wealthy are cash heavy—meaning they may fall short of the investment returns they're expecting. Wealthy families have about 39 percent of their assets in cash, according to a recent poll of more than 50 large family office representatives from 20 countries conducted by Citi Private Bank.

+video http://www.zerohedge...t-ends-its-gonn

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The end for the UK could come quite quickly?

Trying to anticipate every shade of outcome. If that Citibank report is valid and accurate, suggesting wealth is prepared to overlook 'opportunities' in markets where values are changeable, and accept low-rates on savings instead.

Then again there are those who think it's a new bull market, and there may be some inflow effect to the US. Can UK continually count itself as a market for funds/wealth to flow to? Notice all the world banks and other companies seem to be paying fines to the US authorities, in giant sums, for breaches from yesteryear.

Ironically, the best place to look for a market to go straight down is in the richest countries. It is there that the bias toward optimism is likely to be most acute.

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  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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