The Mensch & Schlemiel of the Week

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.

*

barry sternlicht starwood capital 300x166 The Mensch & Schlemiel of the Week

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. 

palais mediterannee nice 300x225 The Mensch & Schlemiel of the Week

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.

-

Schlemiel of the Week:

The Chetrit Group, et al

 This Schlemiel is somewhat belated, since this deal was announced last month, but I must take a cue from Llenrock Blog’s readers and point out the general schlemiel-hood of the Chetrit Group-led consortium that bought Sony’s 550 Madison Avenue headquarters for a whopping $1.1 billion (that’s more than Starwood’s four hotels combined!).

 As CoStar Group reported a couple weeks ago,

The sale price works out to approximately $1,329 per square foot… Sony bought the building for $235.5 million in December 2001. After repaying debt related to the building and other transaction costs, the company expects to clear $770 million in net proceeds…

sony 550 madison ave 199x300 The Mensch & Schlemiel of the Week

To be honest, I wanted to make Sony Corp. of America our Mensch of the Week, since it found a creative (and extremely effective) way to strengthen its balance sheet. But I needed a Schlemiel.

After this enormous sale was announced, I asked our readers what they thought about this transaction in one of our Llenrock Polls. You can view the results here, but in case I’m expecting too much to think you’ll click the hyperlink in the preceding clause, I’ll just tell you the results: 46% said the buyers will regret this.

Obviously, we won’t know how smart the investment consortium’s decision was until a few years have gone by. Manhattan’s high-rises are leasing at such high rates as it is, it’s hard to imagine even the finest offices commanding too much more per square foot. But you never know.

If the Chetrit Group’s purchase does indeed appreciate in value, I guess I’ll be the Schlemiel…