Barry Sternlicht predicts “tipping point” for NYC

Starwood Capital CEO foresees a ‘soak the rich’ solution

TRD New York /
Jun.June 29, 2020 11:30 AM

Until a vaccine can prevent the spread of Covid-19, New York City risks losing residents and tax revenue, creating a “vicious cycle” that could hobble the city, according to Barry Sternlicht.

The Starwood Capital Group CEO said in an interview on Bloomberg that once people and capital leave, it will be hard to get them back because of New York City’s relatively high taxes, rent law and support for unions.

“If they raise taxes, more people leave and the social burden of those that are less fortunate falls on an ever-smaller revenue base,” Sternlicht said. “The services of the city get worse, the city gets dirtier, the police show up less often. It’s a negative cycle.”

He also predicted that the city’s office rents could fall by 25 percent and expenses would increase, driving office values down by 40 percent. And if more city dwellers leave, residential landlords would face a similar problem.

The investor moved his company Starwood Capital from Greenwich, Conn., to Miami in 2018 due to a more favorable tax climate.

Starwood has seized on the pandemic as a financial opportunity, buying up real estate-backed securities in recent months in the belief that they are undervalued. Its acquisition of shares in hotel chain Extended Stay America this spring was driven by a similar strategy.

Yet it has been hurt by Covid, too.

In May and June, Starwood missed $2.7 million in payments on securitized debt tied to five shopping malls anchored by bankrupt tenants including Sears and J.C. Penney.

Sternlicht blames what he calls a “blue state mentality” for prolonged economic consequences following the coronavirus, saying that “red states” are growing because they have lower taxes, support unions less, and don’t impose limits on developers who want to raise rents.

He does, however, support regulating Amazon, which he likens to the pandemic, because of its effect on the retail landscape. [Bloomberg] — Orion Jones


Related Articles

arrow_forward_ios
What will proptech look like in 2019 and beyond?

What will proptech look like in 2019 and beyond?

What will proptech look like in 2019 and beyond?
The Observation Deck at Hudson Yards (Credit: Adam Pogoff)

Views from 1,100 feet: A tour of Related’s “the edge,” the tallest outdoor observation deck in the Western Hemisphere

Views from 1,100 feet: A tour of Related’s “the edge,” the tallest outdoor observation deck in the Western Hemisphere
Mayor Bill de Blasio (Getty)

City grants property owners another month to avoid tax lien sale

City grants property owners another month to avoid tax lien sale
Council member Eric Ulrich and City Council member Keith Powers

Council members talk broker fee caps and real estate donations

Council members talk broker fee caps and real estate donations
Ohana Real Estate Investors CEO Christopher Smith (left) and Alexico Group's Izak Senbahar with the Mark Hotel at 25 East 77th Street (Getty, LinkedIn, Google Maps)

Judge: Hotel foreclosure sale is off the “Mark”

Judge: Hotel foreclosure sale is off the “Mark”
Senator Zellnor Myrie introduced legislation that would place the most severe restrictions yet on evictions and foreclosures. (Getty)

Bill to nix evictions for a year after Covid-19 ends

Bill to nix evictions for a year after Covid-19 ends
CIM Group’s Shaul Kuba, Knotel's Amol Sarva, Related Group’s Jorge Pérez and The Agency’s Mauricio Umansky (Getty, Sarva by Sasha Maslov, iStock)

These real estate companies got fat PPP loans

These real estate companies got fat PPP loans
Lodging delinquencies among commercial-mortgage-backed-security (CMBS) loans rated by Kroll Bond Ratings Agency reached 21.6 percent last month, up from 13.6 percent in May. (iStock)

TRD Insights: Hotel CMBS delinquencies jumped in June

TRD Insights: Hotel CMBS delinquencies jumped in June
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...