Latest news with #Starwood
Yahoo
5 days ago
- Business
- Yahoo
Starwood Hotels development chief talks brand revival, growth opportunities
This story was originally published on Hotel Dive. To receive daily news and insights, subscribe to our free daily Hotel Dive newsletter. NEW YORK — Many hoteliers at this week's hospitality investment conferences in New York City spoke warily about ongoing economic uncertainty. But for the newly revived Starwood Hotels, the future is bright, according to Chief Development Officer Abhay Bakaya. In a conversation as part of the Boutique and Luxury Lodging Association's 2025 Boutique Hotel Investment Conference, Bakaya said Starwood plans to have approximately 50 hotels open by 2030. Currently, it has 40 hotels in its combined pipeline and portfolio, half of which are already open, Bakaya shared. 'We're very targeted in terms of how we want to curate the brands and where we want to see them come to life,' said Bakaya, who went on to share the company's plans for expansion and brand strategies. Formerly SH Hotels & Resorts, CEO Barry Sternlicht rebranded the company to Starwood earlier this year, reviving the brand he'd founded more than 30 years ago. The following are top takeaways from Bakaya's conversation with BLLA's Ariela Kiradjian, in which he shared insights into the company's transformation and its plans for future expansion. When asked what was the catalyst for Starwood's return, Bakaya joked, 'probably Barry [Sternlicht] wanting to.' 'But I think, in all seriousness, it was the stage we're at as a company, given the scale we now have,' he added. 'We really do see ourselves as sort of a beacon for lifestyle and creative hotels with a strong scale and strong platform.' In 2016, Marriott International acquired Starwood's hotels — including Westin, W Hotels and Le Méridien — growing its portfolio to more than 5,700 properties at the time. Sternlicht got permission to revive the Starwood name earlier this year, and has used the new name to reposition his 2015-founded SH Hotels & Resorts. Bakaya said the company's rebrand better aligns with the scale and infrastructure it now offers. 'You can create the brands, but behind the scenes, it's a lot in the infrastructure, a lot of the technology, a lot in the distribution we drive,' he said. 'The brands have now evolved. … We have a strong point of view on them, and we have a lot of scale coming.' Bakaya said a key difference between Starwood now and its previous iteration is that the first time around, it was 'really a big real estate play.' Now, though, 'it has its own intention and growth path.' The company signs roughly five or six deals a year, 'and we're quite steady with that,' Bakaya noted, adding that Starwood is looking mostly at more established markets, such as global gateway cities, and, increasingly, resort markets. Though Starwood's existing approach is asset-light, the company is open to both acquiring existing assets for conversions as well as new-build construction, Bakaya shared. 'We're always debating … is it somehow more effective to do conversion versus new builds? And I think it could really work either way,' he said. Starwood owns the 1 Hotels, Baccarat and Treehouse Hotels brands, all of which play in different spaces. 'Each brand has a very specific purpose,' Bakaya said, calling 1 Hotels Starwood's 'core brand.' He added that the flag, which already has a 'really strong' U.S. presence, is now pushing international expansion. 1 Hotels' first Seattle property opened last month, and its Austin, Texas, hotel will open next year. The ultra-luxury Baccarat, meanwhile, is 'more selective' about where it expands, depending on the caliber of developer willing to sign on and the appetite of the local market. In its pipeline are a hotel in Rome opening this year, as well as residences slated to open in Miami in 2027. Starwood's newest brand, the 4- to 4.5-star Treehouse Hotels — which opened its first location in California's Silicon Valley this year — has plans to open in Miami, the U.K., Australia and Saudi Arabia by 2028. Bakaya said that a lot of Starwood expansion has been 'driven by the U.S. traveler, because that's where the propensity to spend comes from.' He added that he'd love for Starwood to expand further in Texas, pointing to 'a number of sites on offer in Dallas.' He said the company is also considering drive-to markets for resort development. 'We're not driven by having to sign X-number of rooms a year,' he said. 'We are very focused on the story behind each signing — why it makes sense for us, and [if it is] additive to the brand.' The rest of the strategy hinges on Starwood's ability to develop an appealing hotel. '[It] may sound obvious, but it's often the softer touches that really help give the hotels a little bit of that romance that I think they need to really pop,' he said. Recommended Reading Atlantic City's Borgata Hotel Casino & Spa gets $55M makeover Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Skift
7 days ago
- Business
- Skift
Barry Sternlicht Warns Big Hotel Chains: Indie Brands Are Coming for You
Barry Sternlicht sees trouble brewing for big hotel chains. The Starwood founder warns that nimble upstarts will steal their market share one social media post at a time. Barry Sternlicht, the founder of Starwood Hotels who sold the company to Marriott for $13 billion in 2015, warned that established hotel chains could face mounting pressure from nimble independent brands. Speaking at the NYU International Hospitality Investment Forum on Tuesday, Sternlicht said he's been tracking the shifting dynamics in consumer products, and how social commerce may erode the marketing advantages once held by large players. Upstart brands in cosmetics and fashion now have about a third of the share of the market, up from 10% in the recent past, said Sternlicht, who has been on the board of directors at Estee Lauder since 2004. "The
Yahoo
10-05-2025
- Business
- Yahoo
Q1 2025 Starwood Property Trust Inc Earnings Call
Zachary Tanenbaum; Director - Investor Relations; Starwood Property Trust Inc Rina Paniry; Chief Financial Officer; Starwood Property Trust Inc Jeffrey Dimodica; President; Starwood Property Trust Inc Barry Sternlicht; Chairman of the Board, Chief Executive Officer; Starwood Property Trust Inc Douglas Harter; Analyst; UBS Donald Fandetti; Analyst; Wells Fargo Securities Jade Rahmani; Analyst; Keefe Bruyette & Woods North America Richard Shane; Analyst; JP Morgan Operator Greetings, and welcome to the Starwood Property Trust first-quarter 2025 earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Zach Tanenbaum, Director of Investor Relations. Thank you, sir. You may begin. Zachary Tanenbaum Thank you, operator. Good morning, and welcome to Starwood Property Trust earnings call. This morning, we filed our 10-Q and issued a press release with a presentation of our results, which are both available on our website and have been filed with the SEC. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are forward-looking statements which do not guarantee future events or performance. Please refer to our 10-Q and press release for cautionary factors related to these statements. Additionally, certain non-GAAP financial measures will be discussed on this call. For a reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP, please refer to our press release filed this morning. Joining me on the call today are Barry Sternlicht, the company's Chairman and Chief Executive Officer; Jeff DiModica, the company's President; and Rina Paniry, the company's Chief Financial Officer. With that, I'm now going to turn the call over to Rina. Rina Paniry Thank you, Zach, and good morning, everyone. This quarter, we reported distributable earnings or DE of $156 million or $0.45 per share. GAAP net income was $112 million or $0.33 per share. Across businesses, we committed $2.3 billion towards new investments, our highest quarter in nearly three years with infrastructure lending committing its highest level of capital in a single quarter since we acquired the business from GE in 2018. Our overall strong investing pace continued after quarter end with $1.3 billion already closed. I will begin my segment discussion this morning with Commercial and Residential Lending, which contributed DE of $179 million to the quarter or $0.51 per share. In commercial lending, we grew our loan book by $859 million, which will help drive our long-term earnings potential. We originated $1.4 billion of loans, of which $886 million was funded and funded another $250 million of pre-existing loan commitments. Many of our originations were back ended to the last half of the quarter, so the full earnings potential will not be realized until Q2. Repayments totaled $363 million, which is higher than we expected, leaving the book at $14.5 billion at quarter end. The growth in our portfolio also led to a slight decrease in our weighted average risk rating, from 3.0 last quarter to 2.9. We began executing on the resolution plan that we discussed on our last call and have resolved $230 million across three assets so far this year at pricing at or above our GAAP basis. The first is a $38 million nonaccrual loan secured by a hospitality asset in California. During the quarter, we received $39 million in full repayment of the loan, resulting in a $1 million GAAP and DE gain. The second is a $55 million apartment building in Texas that we foreclosed on in 2024. Subsequent to quarter end, we sold the asset on our undepreciated GAAP basis which is the same as our DE basis for this asset because we never took any GAAP reserves. The third is a $137 million office building in Texas that we foreclosed on in 2022. Subsequent to quarter end, we sold this asset for a $5 million premium to our GAAP basis, reflecting the adequacy of the GAAP reserve we recorded in 2023. The corresponding DE loss of $44 million will be recognized in the second quarter. To clarify, we do not consider an asset to be resolved until it has legally exited our balance sheet, so the resolutions I just mentioned excludes this quarter's foreclosure of a $45 million previously five rated nonaccrual loan on a multifamily property in Georgia. We obtained a third-party appraisal for the asset which indicated a value above or at our basis, so no reserve was recorded. Our CECL reserve decreased by $26 million in the quarter to a balance of $456 million, reflecting the macroeconomic forecast. Together with our previously taken REO impairments of $198 million, these reserves represent 4.2% of our lending and REO portfolios and translate to $1.93 per share of book value, which is already reflected in today's undepreciated book value of $19.76, Next, I will turn to residential lending, where our on-balance sheet loan portfolio ended the quarter at $2.4 billion. The loans in this portfolio continued to repay at par with $55 million of repayments this quarter. Our retained RMBS portfolio ended the quarter relatively flat at $422 million with an $8 million positive mark-to-market offset by repayments. In our Property segment, we recognized $16 million of DE or $0.05 per share in the quarter, driven by our Florida affordable multifamily portfolio. Subsequent to quarter end, HUD released the new maximum rent levels which were set 8.4% higher than last year. Certain properties were in geographies where the rent increases were once again capped by HUD, which resulted in 6.7% of incremental rent growth being deferred to next year. This would be in addition to any increase determined by the HUD formula in 2026. As a reminder, the majority of these rent increases will be implemented in June so the impact to earnings will not be fully reflected until the third quarter. Turning to investing and servicing. This segment contributed DE of $50 million or $0.14 per share to the quarter. Our conduit, Starwood Mortgage Capital completed 4 securitizations totaling $268 million at profit margins that were at or above historic levels. In our special servicer, we continue to be ranked the number one conduit special servicer, a ranking we have maintained over the last 2.5 years. Our active servicing portfolio ended the quarter at $9.6 billion, with $800 million of new transfers, which were again dominated by office properties. Our named servicing portfolio ended the quarter at $107 billion. In our CMBS portfolio, two large loan payoffs resulted in principal collections of $62 million. We also added new purchases of $12 million. Concluding my business segment discussion is our Infrastructure Lending segment, which contributed DE of $20 million or $0.06 per share to the quarter. As I mentioned earlier, we committed to a record $677 million of loans, of which $601 million was funded. Repayments totaled $436 million bringing the portfolio to a record $2.8 billion at quarter end. As with the growth in our commercial loan book, growth in this portfolio will likewise help drive our overall long-term earnings potential. Subsequent to quarter end, we completed our fifth infrastructure CLO for $500 million with a record low cost of funds and a weighted average coupon of SOFR plus 173 This brings our term non-mark-to-market CLO financing to 58% of infrastructure debt and our non-mark-to-market financing for the entire company to 84%. And finally, this morning, I will address our liquidity and capitalization. Subsequent to quarter end, we completed the $500 million issuance of our 5.5 year 6.5% senior unsecured sustainability notes, which we swapped to a floating rate of SOFR plus 261. In addition, we repaid the remaining $250 million of our $500 million March 2025 high-yield notes at maturity. Our corporate debt activity over the past two quarters increased our weighted average corporate debt maturity from 2.2 to 3.7 years. and leaves us with no corporate debt maturities until July 2026, when $400 million matures. Our current liquidity stands at $1.5 billion, which does not include liquidity that could be generated from cash out refinancings, sales of assets in our Property segment, direct leveraging of our $4.9 billion of unencumbered assets, issuing high-yield backed by these unencumbered assets or issuing term loan B. We also continue to have significant credit capacity across our business lines with $9.5 billion of availability. Our adjusted debt to undepreciated equity ratio ended the quarter at 2.25 times. With that, I'll turn the call over to Jeff. Jeffrey Dimodica Thanks, Rina. We informed you last quarter that we intended to raise incremental capital to increase our lending pace in what is one of the best origination environments we've seen in some time. As Rina said, we originated $2.3 billion in new investments in the first quarter and are on pace for a strong second quarter with more than $1 billion already closed in the first month. The opportunity set should be large. In CRE, record origination volume from 2021 and 2022 needs to be refinanced in the coming quarters. Real estate transaction volumes have picked up. The CMBS single asset, single borrower market has pulled back given the steepening of the credit curve. Many lenders are capital constrained and banks earn higher ROEs lending to us than competing with us on their own originations. The year started strong and that strength continues today. I just got off a call with the Co-Head of US debt for a major brokerage who told me they have 50% more debt and equity deals in the market today than the same period last year. These factors create an opportunity for well-capitalized lenders with consistent access to capital markets to prosper. As we have in the past, we have again proven our unique ability to raise both debt and equity capital accretively in this cycle. In March, we were 4.5x oversubscribed on the issuance of $500 million in sustainability bonds that Rina mentioned, which we swapped to SOFR plus [160] basis points off the record tight spreads that we achieved just four months earlier in December 2024. In the last year, we issued or repriced $4 billion in debt and equity instruments. $2.6 billion of that was completed in just the three months from December to March, where there was very little capital markets activity. These activities leave us today with $1.5 billion of capital to invest after closing the pipeline I just mentioned. We also enjoyed historically low leverage at 2.25 times and significant unencumbered assets, which can be levered to continue at our accelerated investing pace as we move into the second half of 2025. We expect our balance sheet to grow materially this year, allowing us to maintain a dividend that we have paid for [45] straight quarters. We uniquely have approximately $4.50 per share in harvestable gains on our owned real estate portfolio. We are the only 2.0 commercial mortgage REIT that has never cut its dividend, and we believe our diversified low leverage business model provides us with the unique ability to ride out market disruption. We're seeing green shoots of liquidity and optimism return to our sector. The market's expectation of where the benchmark rate SOFR would be in 2026 and 2027 was 100 basis points higher at this time last year and is now back in the low for 2020 and beyond. This is good for legacy positions as they will have an easier backdrop and more debt service coverage to enable our borrowers to refinance with these lower benchmark rates. Stocks have caught back their liberation day losses, but the credit curve has steepened as insurance capital now has lower risk-based capital charges on higher-rated bond classes. Their move to higher-rated credit assets with lower risk-based capital charges has created more opportunity for us in subordinate positions of the capital structure where we have invested over $100 billion over the last 16 years. As I just said, banks get better capital treatment lending to us than direct lending, and we continue to see borrowing spreads to us decline, allowing us to maintain our returns with likely less competition. This, along with volatility in single asset, single borrower securitizations just created a bigger opportunity for us in 2025, and we expect to continue our elevated investment pace in all of our business lines. In CRE lending, we originated $1.4 billion in the first quarter. We committed more equity in Q1 than we did in all of 2024. We've been leaning in on three investment themes this year. and expect to continue to data centers, Europe and multifamily. When fully funded 70% of the equity in our Q1 originations was in data centers with long-term leases to investment-grade tenants. Our second largest loan is on a broadly diversified multifamily asset in well-leased German markets with a 61% origination LTV. 30% our lending book is now in markets outside the US, where we benefit from a large, dedicated team and a long history of operating in these markets. Additionally, we have a large pipeline closed or in closing in Q2, the vast majority of which are on multifamily assets in the United States. At quarter end, our CRE loan portfolio is up $859 million, as Rina mentioned, the $14.5 billion, and we expect it will reach a record high by year-end, which should support our efforts in 2026. As we look to legacy credit, I will remind you that we have over $650 million in reserves for our CRE lending book reflected on our balance sheet today. Resolutions, which we expect to accelerate the next two years should lead to lower reserves in the future and higher earnings as we recycle that capital. As Rina said, we have resolved $230 million of assets so far this year at values in line or better than our GAAP reserve levels and expect that trend to continue. In the quarter, our US office exposure declined to just 9%. We lowered our CECL reserve for the first time in four years and with no new additions to our 4 or 5 rated categories in the quarter. We moved our only life science deal a 5-rated $73 million loan on a renovated but empty asset in Boston Seaport District to nonaccrual in the quarter, and we'll update you on progress there in the coming quarters. Moving to Energy Infrastructure lending. You've all seen oil and gas prices move lower this quarter, but our earnings are not dependent on these commodity moves. Our loan book is split between assets that produce power and midstream assets that store and transmit the commodities, but it's not levered to the commodity price itself. We continue to enjoy excellent returns at some of the lowest lending LTVs in our portfolio in this business today. In the quarter, we deployed a record $677 million at above trend returns, allowing our portfolio to increase again to nearly $3 billion. Although we have ample ability to finance the growth of this business on bank lines, we issued our fifth energy infrastructure CLO in the quarter at the lowest cost of funds to date. I'll finish today with the Property segment, where Rina mentioned we would receive 8.4% rent increases in Woodstar this year and will defer 6.7% to next year, ensuring continued property appreciation. We have spoken many times about the embedded value for SPT shareholders of the Woodstar portfolio. We have over $1.5 billion of harvestable DE gains on our 59 owned properties. Contractual rents have continued to increase since we purchased the portfolio in 2015 through 2018, and we expect this to continue, which will add significant value to our portfolio in the coming years. We have told you that there is also significant upside as we are able to roll these properties to market rate from affordable once they reach the end of their affordability restrictions, which is typically 25 to 30 years after construction. We told you that these restrictions started to burn off last year, and in eight years, over one-third of the rent restrictions will roll off, allowing us to either increase rents to market rent or stay in the affordable program and continue to benefit from abated real estate taxes. In short, you may be under the assumption that multifamily rents are flat or falling nationally, but this has not been the case in the affordable space. and the continued lack of supply and income growth should lead to even more upside for shareholders going forward. With that, I will turn the call to my friend, Barry, who is right off the red eye, so take it easy on him two hours to sleep. Barry Sternlicht Good morning, everyone. Thanks, Zachary and Jeff. I guess for us, let's just start with the economy. The economy is going to weaken. I just was talking to CEOs of Fortune 100 companies in the past few days. maturing from the West Coast, and there will be issues on shelves, and there will be prices for consumers to absorb. And you kind of already were in a recession, you kind of saw the lower half of the country in the top 10%, 15% of the country was carrying spending and consumption. And now we'll see how the wealth effect actually plays through -- actually, the markets have recovered shockingly to free liberation day highs, but that doesn't really feel right. And things like travel are clearly off, I guess it was Expedia that reported. And then Airbnb, and we've seen the travel numbers. The airlines have talked about their stress as international travel to United States dissipates. . But it will go somewhere. So Canadians will go to Europe or they'll go to the Caribbean. I mean I come here, we're the number one tourist in the United States. And the Europeans will probably stay in Europe in frequent Greece in other locations rather than come to visit us. So the economy will weaken and that means power sooner or later, will lower rates. And for sure, when he's out in May of '26, there's no chance rates will be higher. -- because the selection will depend on somebody who accommodates a lower rate environment. That is all good for the property segment. And so I feel like we're through the worst of it, and it's getting to get better from here and transaction volumes, which kind of have slowed again given the lot of spreads and uncertainty in the markets and people worrying about additional where the next deal is going to go. I expect that will reaccelerate. However, we've been in the market now open for business for the past year. We probably never entered this period with a better balance sheet, a better team more opportunities in all of our sectors to return -- to achieve excess returns. And I think we're executing really well. So for us, I think the story of the economy is weakening. Obviously, now the forward curve is four cuts. And so for even three would be fine down to the that at the end of the day, real estate is a yield to be product and the largest asset class in the world. We will come back into favor, and we'll probably have more people on this phone call in the future. But it is our opportunity to continue our -- to our North Star, which is to achieve investment grade and continue to do that. To do that, we have to grow all of our investment sleeves and add additional ones. We've looked at a resi originator this quarter. We've been on a $2 billion regional bank portfolio but priced inside of our hurdles. We've looked at other companies in our sector, including the public opportunities that might exist, and we're turning over a lot of stones to find the relief under stone (inaudible)? So looking for the pearls under the sea. It's interesting that we -- for our Board, we just did a presentation just a week or so ago, and we are the only 2.0 mortgage REIT that is trading above its IPO price. As Jeff said, we're the only one who's never cut their dividend. We believe our dividend is solid. And we have a very unusual portfolio. We own Starwood Capital owns over 110,000 apartments, including 43,000 affordable assets. and the portfolio of this company is the shining star of the whole bunch. And when you have 15% rent increases in one of our geographies -- there's nothing -- that's the highest I've seen in anything market rate or any asset (inaudible) frankly. And all the gift that keeps on giving. When we bought those assets, my theory was I want to own stuff and start Property Trust that we could hold forever and increase the duration of our portfolio essentially that they give us cash flow forever. And being affordable, they're always full, being in growth markets that are dependent and rent growth is dependent on income growth. We picked wisely, and we vastly outperformed our expectations being that the rents are so low compared to market, you actually don't have to worry about people moving in and out as much people stay -- our only job is to manage them well and meet customers' expectations and keep them full, which the team has done admirably. So that is a real hidden source of value for the company as it stands today. And we want to increase our real estate book and looking back at the kinds of real estate deals that provide the cash-on-cash yields that we think are accretive to our enterprise. And one other thing, of course, some of our peers are trading at fractions of their book values. And -- at some point, there's -- they can't raise capital. There's an uncle thing. You should fold up shop and obviously, is the largest in our sector and largest in the world. we'd love to be the acquirer. But -- and also partnering with Star Capital Group, we can split these portfolios if there's lots of bad assets, we're able to work on them and figure out how to split the assets. We actually did when we bought LNR 232 years ago. There were some assets in there that did not fit STWs work. You have to look at the book today and just be sort of astonished. You have -- we continue to hit our numbers while carrying nearly almost $2 billion of non-accrual assets, which is astonishing, that is bad news and really good news. At some point, we're going to be able to harvest that capital and put it back to work, can't wait, don't want to do stupid things, have the ability to reinvest in those assets, reposition them and bring them back to market and try to get great returns on our incremental capital, but it is future earnings power. And even though we carry $650 million of reserves against it. We do think that's a significant capital that we look forward to redeploying and we watch those assets, and Jeff and the team watch the outsets pretty much every day. Our liquidity is excellent. In our universe, I'd say we have what I think Jamie Dimon referred to as a fortress balance sheet. The extension of maturities, the rates at which we're capable of raising debt securities, not only in our real estate book, but in our energy book, really position us well against our comps that provide sustainable competitive advantage. So at the end of the day, it's all about our team, and we have over 350 people and another 450 at SEG that are dedicated to finding opportunities for the company, both here and abroad. And we have -- whether it's the CMBS team or the special servicing team with a $107 billion of named servicing. We are positioned to continue to outperform over long periods of time. So I've got nothing else to add. I think our job now is just execution, execution, execution, be patient, grow in every one of our business lines if we can. Be more aggressive in using our unusual access to data to make better, faster decisions. We're doing a giant AI project over the whole company right now to help us be more efficient. And I look forward to the implementation of that over the coming year. I was getting a tutorial on the flight home yesterday from Tech Wizards that was astonishing. So we have a lot to do there, and most companies do, and I think it only bodes well for our productivity and our margins. So excited for the next quarter. The road is not [pay] with gold, there's bumps. You're going to see things come up and down, I'm sure of it. And the outcome of Trump administration's policies are still unknown, but we couldn't probably be a better position for that. And I look forward to the year and we're working going forward. Zachary Tanenbaum Now, we will take any questions. Operator Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Doug Harter, UBS. Douglas Harter Thanks. So it sounds like you've started to make some progress on resolving your non-performing loans. As you look at the remaining assets there, how should we think about the pace of resolution and whether you can be kind of as successful at exiting those with minimal losses. Jeffrey Dimodica Doug, thanks for the question. There's a couple of apartment deals that we know we can likely sell at our basis, and we will do so in this year. we have apartments that cats were building on the upper west side and the scaffolding coming down in May, and we expect to have significantly more progress there. We just sold the unit first $7.5 million this week, in line with our underwriting. So that's good. We have an office building in Brooklyn that has just signed a second lease full with long-term credit tenant leases. We have someone looking at the last one-third that could resolve easily this year. We got a -- we have an asset in Dallas is something that we have to work through. It's the combination of the mixed-use property with a hotel and multifamily. I think that we could likely work through this year. And we have a couple of downtown LA office buildings that could push into '26 or beyond, but that's generally the flavor. Multis, if we get to this forward of in the low teens, 5, you pick a number. And you have a 5.5% or 6% debt yield. You have a high likelihood of getting out of park and most of the stuff that we wrote loans on against 3.5 and 4 caps at the very lowest tightest part of the market in 2021. They're performing at that high 5 debt yield on the low end. And that high site yield gets out in the low teens or low sulfur, and we'll have to hold it for a little while longer. But where the forward curve is now, I expect things to sort of stop coming in and start picking up progress on the others. We have staying power in a lot of these loans -- we have eight years of walls on a lot of the office loans and (inaudible). Barry Sternlicht I would just add that I want them all -- and they're not giving them back. I mean they give them back to us your attachment point is so good on replacement cost, and you would love to own them with the coming massive decrease in supply coming to the multi-market. So rents will improve certainly next year in the back half of next year and it's '27. One obvious impact of the administration's policies or people are very nervous about these starts. And nobody really knows what anything is going to cost. And it's not just materials, not just the steel dose of the labor, is it available? What will happen with the deportations of the immigrants and illegal immigrants. And then the third, what people don't talk about is the supply chain. You need to get every component to a building to finish it, not 80% or 90% or 95% of them. So all people I know, and I just returned from an industry conference where developers are talking about not starting projects and pushing them off, which bodes well for any existing asset and their performance. And almost every -- and the asset classes are performing now remarkably well. I mean, people look at the -- we're not decently the hottest kid in the -- today in the table. But the multi-markets are sitting at 95-ish, 94%, 95% occupancies with record supply. Usually, in my youth, might have fallen to the low teens, high teens. And for the most part, rents are flattish, slightly up, some few cities down, some cities up more than a few pennies. So when there's new supply the week and where there's very little supply, they're relatively strong. We really needed a shallow recession, not a deep one that creates demand structure. But even the office markets are shockingly boat if you have a good collateral. One thing I'd say on our book, I mean, one of the things like we have to consider, we have a building we took back in downtown CBD of Washington, and D.C., it can be converted and is ready to be converted to residential. And I just suggest that we hold off the work right now to understand the situation in D.C. with the employment base. Jeffrey Dimodica But we're doing all the planning. We're doing all the planning, all the approval (inaudible) shovel in the ground on that date or not, but we'll be ready to go in a year. Not deciding whether we're putting the shovel in the ground on that date or not, but we'll be ready to go in a-- Barry Sternlicht We're going to be ready to go. We're just taking a moment we want to do that. So it's a relatively -- we plan to define the entire conversion is actually a very handsome property. Just we want to make sure the rents are what we think they're going to be. So with that, the next. Jeffrey Dimodica Yeah. And as part of that question, Doug, the follow-up would probably be on the three large offices that are maturing this year. One is the Brooklyn office building where I told you we signed a second lease and got up to two-thirds lease, and we're talking now about one third credit to lease and then that will work out. That's the March maturity. The June maturity is an outset in California that has a five debt yield that we have a basis in the low 200s a (inaudible). We sold 15% of that complex by selling one building at $280 a foot, $66 above our basis. So we feel okay. And we think that's good leasing prospects. We're working on updating the lobbies and doing some work there. So we actually feel pretty good about that. And then the October maturity this year is our large loan in Downtown D.C. really trophy terrific building. It's 84% leased and at eight years of [yard] and it will have a 6-ish debt yield and likelihood to be able to go up from there. But our capital, given we have such liquidity and access to capital, we have the ability to ride these out and wait for the optimal time. And we will move on at the optimal time. But when we have (inaudible), we have cash flow. It doesn't necessarily make sense to go today. We're going to wait to see what the market gives us, and we sort of know where our downside is, but we think we have upside on these (inaudible), and that's part of being a $110 billion CRE manager. Hopefully, like we have in the past, where I think we had going into the cycle, $100 million-plus of gains on our (inaudible). We like to work on assets and Barry likes to be involved and that's why he knows all the details of a rental in D.C. and what we're going to do. And so we're very involved and we'll work it out as best as we can. Douglas Harter Great, thank you. Operator Don Fandetti, Wells Fargo. Donald Fandetti Hi, Can you talk a bit more about the opportunity you're seeing in residential credit. Clearly, you have a lot of capital banks are selling. And I think you said you've been on a portfolio. Are you constrained in terms of not wanting to put on a lot of leverage there? Or is this a significant opportunity for growth. Jeffrey Dimodica Yeah. So you are the portfolio that we looked at was a $2 billion portfolio of commercial that was coming out of a middle market bank, $10 million or so loans kind of thing that's perfect for us. with LNR as our servicer. We just have so much information. We can rip through a massive portfolio like that very quickly and come up with a value that's accretive to us. Some -- a couple of people, I think, thought it was growth a little bit more, but we went a few rounds on that. In resi credit, you've noticed we haven't restarted the resi machine. We took a write-down of $230 million or $240 million in 2020 or so on our resi book. We owned lower coupons and market as the rate went up. and we've been a little bit reticent to go again, but our resi team has been looking at just about every opportunity, every platform. I could definitely see us buying an originator, building an origination business around non-QM or which we've done in the past and some agency and maybe some investor loan, things like some of our peers do. I do think that there is tremendous liquidity available to us from a financing play on that. I think levered yields are attractive. There has been -- there are decent opportunities also in sort of secondaries there. But we are going to reemerge in resi. It's just a matter of when, and we are looking at every opportunity to figure out how we do that to buy a resi originator with licenses that does $2 billion or $3 billion a year. you might pay $125 million to $150 million of premium. We're trying to decide if that's something we can build and create a $125 million to $150 million of shareholder value by building it ourselves rather than going outside. But you will see us in the next year, reemerge and start putting some credit trades on in resi. We do think there's a long-term opportunity, and it's something that fits us really well. I'd love to see our dividend yields come down from 10% where I don't really understand it there. But if it did come down and our cost of capital change, then that business becomes a lot more attractive. But with where our dividend yield is today, our CRE lending in our energy infrastructure businesses feel like the best home for capital. Donald Fandetti Got it. And then on corporate M&A, are you sort of still thinking that sellers are reluctant, especially if we're looking at fed cuts? Or do you feel like you're starting to feel more optimistic that there could be a seller and some consolidation opportunities for you? Jeffrey Dimodica Given with very hard to -- you can't buy more than 9.9%. There's a lot of rules that they have to want to be bought. -- corporate M&A in the REIT world is very difficult unless a seller wants to be a seller. Barry Sternlicht Yeah. I mean it's not where they're trading. It's what the Board will do a deal at. And I think you'll see some action in the sector because they're sort of dead man walking. But it really depends on the Board and the management teams through operations. You need to get in there on some of these books. You need -- you can't do it easily from the outside. You need to get inside and really understand the complexity of the asset base. So you can guess but guessing in this business. And obviously, a lot of the smaller entities don't have our corporate debt. They have repo debt or they have other -- you have to really understand the terms and conditions of that stuff. So it's a little bit complicated from the outside looking in, especially when they want prices that are on the surface aren't really achievable. And obviously, we like these investments to be accretive to our shareholders. So -- but I think I'm optimistic that as we come out of this, it will become more painful for some management to basically to almost nothing. They can't do anything. They don't have a balance sheet, they can't raise capital accretively. And in some cases, the fees -- the management fees will overwhelm there. (inaudible) to pay it. So inevitably, there'll be stuff to do. Jeffrey Dimodica And we're a huge part of the REIT index, given we're more than twice as big as the next biggest competitor in almost as big as the rest of the universe, right? So if we could reduce G&A and consolidate the entire business, we would certainly love to do that at the right prices. The hardest time to do M&A is when someone is trading at 20% or 30% of book. If you're going to pay some significant discount to book that might feel untenable to their Board or their shareholders, the easiest M&A is probably at 70% or 80% of book where you can pay somebody 90% to 100% to book kind of G&A make it make sense for both. So it will be difficult, somebody is going to have to want to be consolidated. Operator Jade Rahmani, KBW. Jade Rahmani Thank you very much. I think earlier, Rina mentioned that the timing of loan closings weighed on interest income in the Lending Business in the quarter. Are you expecting an increase in 2Q and going forward? Jeffrey Dimodica This is something that I'm always reticent to talk about, Jade, because it feels like it's been in every peers transcript for the last five years, but we did close a tremendous amount right on March 31, so you didn't see any interest income. So I think it's the first time we've used that arrow in our quiver, but it was very true this quarter where we had a lot of closing plate. Our pipeline is really good. Rina always gets mad at me if I want to say what we're going to end up at. But I expect this run rate could be a run rate for a little bit. And we -- it's difficult out there. We've lost a number of deals in the last week or two that we hope to get, but we have as long of a pipeline as I've seen both in Europe and in the US, and there's a lot of really interesting opportunities. So hoping that we can maintain that and maintain the success in our energy infrastructure book as well. We want to grow, growing is the way to ensure that getting this portfolio back up above our previous high, which I think we will do this year is the best way to offset the drag of the nonaccruals, as Barry said, until we can work out of them. So -- so we are in a growth mode, but it's not growth at any cost. We're reticent on the last 5 basis points on every deal, and we're trying to not chase anything to do it. So grow smartly is the mantra. Jade Rahmani You mentioned something interesting on subordinate debt. I was wondering if you plan to execute on that opportunity by originating whole loans and bifurcating them doing more syndication? Or will you just be looking to originate bad loans -- how do you see executing on that? Jeffrey Dimodica No. It runs again at Adam Belmond in the room. He runs our L&R business and our CMBS business. I think there are opportunities in B pieces we're going to do a few this year. when I said subordinate data, I'm basically saying that what we create when we write a 65 or 70 LTV loan, and we finance 45% or 50% is effectively equivalent to a BBB or BB asset, and that's the $100 billion of money that we put out over the last 16 years. And with the credit curve in security deepening, we think we should be able to earn a little bit more on our loan book that sort of mirrors the look-through rating to those. We can also obviously play in subordinate securities as well, and that's something that the team has been looking at. They've got cheap, but not super cheap. We don't like putting leverage on leverage. We haven't done that here in a long time. And so if their unlevered yields on BBs are 10% or so, it doesn't quite hit the hurdle that we're hoping for, and we're reticent to leverage, but on the right securities where we have the ability to underwrite every loan in every CMBS deal and have a real strong opinion that book Adam has probably returned over 20% for us in the 16 years that we've owned it. If that becomes a 11 or 12, we will be a large buyer of secondary bond with our liquidity. . Jade Rahmani Yeah. (inaudible) up to those levels, you start losing interest on the sellers. So it's not that we haven't reached the speed point (inaudible). Operator Richard Shane, JP Morgan. Richard Shane Hey guys, thanks for taking my questions this morning. Barry, when I sort of parse through your comments, what I hear are a lot across current that you're sort of confronting. The consumer is slowing down, but you see rates going lower as a result. It's an attractive financing market. So there is capital available in the market, but your competitors, many of them are on their heels. Really two questions here. One, does that, does that put you guys on the front foot now in terms of being aggressive deploying capital? Do you want to be a little bit more conservative? And also, is the sort of as you described them, the Deadman walking for many of your competitors, but the availability of capital in the markets, is it creating new competitors or new types of competition for you guys? Barry Sternlicht It's the competitors, as you point, are shifting. I mean, I think we see the private credit guys much more -- and -- but I think we still have an advantage in our scale like we wrote a $500 million junior position, like not many people get that phone call. And because we know the property classes and we're active, people know we're going to perform. They know that it won't take us seven years, we can do it expeditiously. . I think the amount of capital needed in the data center space is staggering. And the credits are great, and the debt yields to our positions are phenomenal. And spreads have come in -- but there's -- if we can pick up the juniors in those positions, we actually probably don't know it. We're very active on the equity side in data centers. We probably committed over $10 billion to the space and have a get 1.5 gigawatts of power under our control. With 1 of the 10 largest players in the States and number 1 in Ireland, and we have about 160 people working in the data center space. So we can underwrite this stuff quickly. We know the credit, we know the tenants. We know the issues and leases. We've written them all to Amazon, Oracle, (inaudible), et cetera. So I think that's a space area we could add infinite capital where we have it. And we do like the physicians there. So that's a big new giant to take the scale of the commitments from the majors. It's something like $250 billion to $300 billion leverage, $900 billion, that's almost as big as the infrastructure bill, and that's this year. So maybe 25% of its offshore. There's a lot of capital that needs to go into the space. So we've done some. We'd like to do a lot more and I don't see -- it's a big enough area and it's enough -- and by the way, money is kind of contracting a little bit. People are a little nervous about private credit. So I think they should be in corporates if we do have a recession. And I think the uncertainty, as Marc Rowan has talked about, breeds delays, and you just wait for a clearer picture. And as you see in M&A is it, I think low is not seen in 20 years. I mean nobody can do anything with anyone. So -- but I think I'm kind of happy. I mean, for us, this is a good environment. And because we have conviction and we've been doing this for so long. Star Capital is enjoying its 34th year. So we have the data also to support our -- and help us make better decisions. So I think it's good. I'm certainly in a way more -- less worried that it's the opportunity set can we find pricing we need -- with the banks -- as Jeff pointed out multiple times, they do so much better now lending to us and making the loans themselves and tumult in the spreads of the CMBS market will enable us to come in and shore up bids on deals. And the other thing we've learned as a borrower, which is becoming super important. When you go to the banks and they originate for you, we just did this the other day, by the way, they're going to syndicate the loan. It's not going to CMBS. And they syndicated in many cases, they're syndicated probably offshore accounts. And then if there's a bump in the road, you're dealing with somebody in Korea, you don't know or Europe. And we've been willing to take excess spread to let them know who our counterparty is going to be. And I think that a lot of borrowers are paying more and more attention to that, but it will give up 25 bps, 50 bps because you want to know if something ever happens, I can speak to Jeff or Dennis, our team or Adam, whoever it is on our spot, and we'll work it out with you and they will create a win-win. So I think people are -- it's interesting. I think borrowers are smarter. Like they don't want the 5 bps right now. They want to know where their loan is going. And that's a really important feature that's going to emerge that I would say was not here five years ago. We weren't paying attention to it. I think what happened to all of us is, obviously, the world changed. Interest rates went up 500 basis points, and we look at our stacks and we're trying to do something on the equity side and some bank we've never heard of says no. Everyone else is yes. And you can have a guy with a 10% position. And he's like, I'm not doing it, you got to pay me in a part and he said, Well, Morgan Stanley, you take them out of (inaudible). Because you sold the loan to them, we never knew where they were. And -- that's the kind of negotiations you see. So I think that's really good for us. I mean relationship banking in the debt side is actually when you get to these big deals. It's a big deal, and we've been doing it a long time. We've got a great team. So kind of interesting. Jeffrey Dimodica (inaudible) that by saying, as the REITs and the banks have written less loans in COVID, you've certainly seen insurance debt funds and CMBS pick up the slack. As you look at the forward over curve and expectations of forward rates, if rates do go down, you're going to have less annuity sales. Insurance is very yield-driven and they will pull back. So in that environment where we move to the forward curve and rates go lower, we expect that our position in the market will only improve versus insurance and debt funds in CMBS and then last thing I would say, as Barry talked about data centers. The only thing that he didn't mention is that all of our loans have been made on sort of 15 or longer year leases to (inaudible) credit tenants on the other side. So not a lot of speculation there other than getting the construction project finished, which we have significant time to do in the core and shell is not that hard to figure out. So we really like that space. Richard Shane Got it. As always, a very interesting answer. I really appreciate it guys. Thank you. Jeffrey Dimodica Thanks, Rick. Thank you, operator. Operator We have reached the end of the question-and-answer session. Mr. Barry Sternlicht, I'd like to turn the floor back over to you for closing comments. Barry Sternlicht Thanks for joining us, everyone. We look forward to talking to you next quarter. Have a great Memorial Day, I guess. As we enter the summer season, (inaudible). Jeffrey Dimodica And a public shout out to Mark Cagley, who retired from the firm last month, and this is the first call in 10 years without him. Hope you're enjoying your retirement and listening in (inaudible). Operator Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
Yahoo
08-05-2025
- Business
- Yahoo
Starwood Capital Appoints Rob Allard as Chief Investment Officer of Starwood Insurance Strategies
Starwood to open up its $30 billion real asset credit platform to the insurance industry MIAMI BEACH, Fla., May 8, 2025 /PRNewswire/ -- Starwood Capital Group ("Starwood Capital") today announced the appointment of Rob Allard as Chief Investment Officer for Starwood Insurance Strategies, a new extension of Starwood Capital's credit platform. Mr. Allard brings more than 27 years of financial industry experience to his new position, including deep expertise in insurance markets, asset-backed finance and private assets. Starwood Capital is a global leader in real estate and infrastructure investing and lending with approximately $115 billion of total assets under management. The firm has originated more than $100 billion in credit investments since 2010 across several industry-leading verticals including Starwood Property Trust (NYSE: STWD), Starwood Infrastructure Finance, and LNR Partners, a $110 billion commercial mortgage special servicer. "Starwood Capital is well positioned to build upon our extensive relationships with the insurance industry by providing them with access to our expertise across real assets and our leading credit platform," said Barry Sternlicht, Chairman and CEO of Starwood Capital. "We manage an unrivaled real asset credit origination and servicing platform that is a plug-and-play solution for the duration, return and risk profile of these investors. As the owner of more than 15,000 properties globally, we have unique insights and market access that drive our investment activity. Leveraging our expertise to meet the evolving needs of our clients is at the core of what we do, and I am confident Rob and his team will enable us to do just that." "We have a large-scale platform that delivers exactly the products our insurance clients are looking for, and unlike many of our peers, we do not have a captive client for this risk-return profile, making us an attractive partner," added Jonathan Pollack, President of Starwood Capital. "Rob's expertise and relationships will have an immediate impact on our ability to deliver." "I am thrilled to be joining Starwood Capital, one of the preeminent investors in real estate and infrastructure over the past 30 years," said Mr. Allard. "I look forward to replicating the success in my previous roles to build a high-quality insurance asset management platform to complement Starwood's existing capital base." Mr. Allard's extensive background includes helping set up and build Rothesay Asset Management North America, where he served as Chief Investment Officer and Head of Rothesay North America over the last seven years. Rothesay, originally founded within Goldman Sachs, was sold to Blackstone, GIC, and Mass Mutual in 2017. About Starwood Capital Group Starwood Capital Group is a private investment firm with a core focus on real assets globally. Since its inception in 1991, Starwood Capital Group has raised over $80 billion of capital, and currently has ~$115 billion of assets under management. Through a series of comingled opportunity funds and Starwood Real Estate Income Trust, Inc. (SREIT), a non-listed REIT, the Firm has invested in virtually every category of real estate on a global basis, opportunistically shifting asset classes, geographies and positions in the capital stack as it perceives risk/reward dynamics to be evolving. Starwood Capital also manages Starwood Property Trust (NYSE: STWD), the largest commercial mortgage real estate investment trust in the United States, which has successfully deployed over $102 billion of capital since inception and manages a portfolio of over $25 billion across debt and equity investments. Additionally, Starwood Capital manages approximately $4 billion in several private debt funds investing across the globe. Starwood's large owned portfolio and its active affiliates provide significant real-time information that can be acted on, across asset classes and geographies. These affiliates include: Starwood's in-house property management company with over 2,000 people, Starwood Digital Ventures – Starwood's in-house data center platform with over 60 people fully dedicated to Starwood's data center investment strategy, Starwood Hotels – Starwood's affiliated hotel brand management team with almost 4,000 professionals, Essex Title – which acts as a title agent for one or more underwriters in issuing title policies and/or providing support services, and Starwood Oil & Gas – which leverages Starwood's industry knowledge and extensive transactional experience to capitalize on conventional and unconventional assets in North America. Over the past 33 years, Starwood Capital Group and its affiliates have successfully executed an investment strategy that involves building enterprises in both the private and public markets. Additional information can be found at and Media Contacts: H/Advisors Abernathy Tom Johnson: (212) 371-5999 Dan Scorpio, (646) 899-8118 View original content to download multimedia: SOURCE Starwood Capital Group Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Associated Press
08-05-2025
- Business
- Associated Press
Starwood Capital Appoints Rob Allard as Chief Investment Officer of Starwood Insurance Strategies
Starwood to open up its $30 billion real asset credit platform to the insurance industry MIAMI BEACH, Fla., May 8, 2025 /PRNewswire/ -- Starwood Capital Group ('Starwood Capital') today announced the appointment of Rob Allard as Chief Investment Officer for Starwood Insurance Strategies, a new extension of Starwood Capital's credit platform. Mr. Allard brings more than 27 years of financial industry experience to his new position, including deep expertise in insurance markets, asset-backed finance and private assets. Starwood Capital is a global leader in real estate and infrastructure investing and lending with approximately $115 billion of total assets under management. The firm has originated more than $100 billion in credit investments since 2010 across several industry-leading verticals including Starwood Property Trust (NYSE: STWD), Starwood Infrastructure Finance, and LNR Partners, a $110 billion commercial mortgage special servicer. 'Starwood Capital is well positioned to build upon our extensive relationships with the insurance industry by providing them with access to our expertise across real assets and our leading credit platform,' said Barry Sternlicht, Chairman and CEO of Starwood Capital. 'We manage an unrivaled real asset credit origination and servicing platform that is a plug-and-play solution for the duration, return and risk profile of these investors. As the owner of more than 15,000 properties globally, we have unique insights and market access that drive our investment activity. Leveraging our expertise to meet the evolving needs of our clients is at the core of what we do, and I am confident Rob and his team will enable us to do just that.' 'We have a large-scale platform that delivers exactly the products our insurance clients are looking for, and unlike many of our peers, we do not have a captive client for this risk-return profile, making us an attractive partner,' added Jonathan Pollack, President of Starwood Capital. 'Rob's expertise and relationships will have an immediate impact on our ability to deliver.' 'I am thrilled to be joining Starwood Capital, one of the preeminent investors in real estate and infrastructure over the past 30 years,' said Mr. Allard. 'I look forward to replicating the success in my previous roles to build a high-quality insurance asset management platform to complement Starwood's existing capital base.' Mr. Allard's extensive background includes helping set up and build Rothesay Asset Management North America, where he served as Chief Investment Officer and Head of Rothesay North America over the last seven years. Rothesay, originally founded within Goldman Sachs, was sold to Blackstone, GIC, and Mass Mutual in 2017. About Starwood Capital Group Starwood Capital Group is a private investment firm with a core focus on real assets globally. Since its inception in 1991, Starwood Capital Group has raised over $80 billion of capital, and currently has ~$115 billion of assets under management. Through a series of comingled opportunity funds and Starwood Real Estate Income Trust, Inc. (SREIT), a non-listed REIT, the Firm has invested in virtually every category of real estate on a global basis, opportunistically shifting asset classes, geographies and positions in the capital stack as it perceives risk/reward dynamics to be evolving. Starwood Capital also manages Starwood Property Trust (NYSE: STWD), the largest commercial mortgage real estate investment trust in the United States, which has successfully deployed over $102 billion of capital since inception and manages a portfolio of over $25 billion across debt and equity investments. Additionally, Starwood Capital manages approximately $4 billion in several private debt funds investing across the globe. Starwood's large owned portfolio and its active affiliates provide significant real-time information that can be acted on, across asset classes and geographies. These affiliates include: Starwood's in-house property management company with over 2,000 people, Starwood Digital Ventures – Starwood's in-house data center platform with over 60 people fully dedicated to Starwood's data center investment strategy, Starwood Hotels – Starwood's affiliated hotel brand management team with almost 4,000 professionals, Essex Title – which acts as a title agent for one or more underwriters in issuing title policies and/or providing support services, and Starwood Oil & Gas – which leverages Starwood's industry knowledge and extensive transactional experience to capitalize on conventional and unconventional assets in North America. Over the past 33 years, Starwood Capital Group and its affiliates have successfully executed an investment strategy that involves building enterprises in both the private and public markets. Additional information can be found at and Media Contacts: H/Advisors Abernathy Tom Johnson: [email protected], (212) 371-5999 Dan Scorpio, [email protected], (646) 899-8118 View original content to download multimedia: SOURCE Starwood Capital Group
