Commercial Real Estate Finance

Archive for February 12th, 2013

Mensch:

Noun, informal. A decent, upright, mature and responsible person.

Schlemiel:

Noun, slang. An awkward, clumsy, or unlucky person whose endeavors tend to fail; a loser.

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Mensch of the Week:

Barry Sternlicht, Starwood Capital Group

I guess there are plenty of reasons to name Barry Sternlicht, Chairman and CEO of Starwood Capital Group, our Mensch of the Week. Or Month. Or Year.

The private equity group he founded in 1991 has grown into a juggernaut of the investment world, holding billions of dollars in assets including hospitality and residential real estate, hotel operations, and a massive mortgage REIT, not to mention a sizable presence in the energy sector.

Moreover, Mr. Sternlicht has established a brand consistently associated with luxury. Case in point: he is behind Starwood Hotels & Resorts, which owns and operates such brands as St. Regis, W Hotels, and Westin (though Mr. Sternlicht left this operation to focus on Starwood Capital). Mr. Sternlicht’s firm also owns (not even kidding here) Baccarat Crystal. Lotsa fanciness.

But Mr. Sternlicht is our Mensch of the Week because of his company’s recent sale of four luxury hotels in France: Concorde Lafayette in Paris, Hôtel du Louvre in Paris, Martinez in Cannes and Palais de la Méditerranée in Nice. The portfolio was acquired by a Qatar-based sovereign wealth fund for (according to one estimate) as much as 800 million euros. 

Oh boy! This means I get to use my fancy currency converter (Google) to see what that would amount to in US dollars!

In U.S. dollars, that would be roughly $1.07 billion for the four properties, an example of which is the Palais de la Méditerranée pictured to the right.

What a dump.

European real estate, particularly trophy properties in key markets like Paris (and to a greater extent, London) is often extremely desirable to investors outside the Continent. Particularly, it seems, among investors in the Middle East, where private and state funds have been investing aggressively in preparation for a potential downturn affecting their primary source of wealth–oil.

Like fellow private equity giant Blackstone (NYSE: BX), Starwood has emerged as a bit of a trendsetter, the type of company that increases the value of an asset as soon as it buys it. To be sure, a luxury hotel in any of these French destinations is going to be valuable no matter who owns it, but I can’t help but think  Starwood might have held a bit more negotiating strength than another seller would have.

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