The Real Deal Miami

Starwood’s Barry Sternlicht optimistic about rising interest rates: “We’re going to make a lot of money”

Starwood reported slightly lower Q3 earnings due to high acquisition costs
By Katherine Kallergis | November 09, 2018 03:15PM

Barry Sternlicht and Miami Beach (Credit: Max Pixel)

Starwood Property Trust’s Barry Sternlicht isn’t worried about rising interest rates. In fact, it’s the opposite. “We’re going to make a lot of money,” he told analysts during a conference call on Friday.

The Miami Beach-based real estate investment trust, an affiliate of Starwood Capital, reported slightly lower third quarter earnings due to high acquisition costs, yet its results met analysts’ expectations.  The company said Moody’s revised its ratings outlook to positive from stable.

Sternlicht, the company’s chairman and CEO, was optimistic during the call. “I’m really excited about rising [interest] rates, which help our earnings per share.” He called himself “one of the few people cheering” for rising rates.

For the quarter, Starwood reported $285.7 million in revenue, up 26 percent from $226.8 million in the third quarter of 2017. Its third quarter net income of $84.5 million or 33 cents per share, was down 4.4 percent compared to the same period of previous year. The decline is due to the company closing on its $2.5 billion acquisition of a GE energy-finance business in September. It included $9.9 million.

Meanwhile, the company’s commercial and residential lending businesses reached record levels, with assets of $16 billion and commercial loans of $7.5 billion. The commercial and residential lending segment reported total revenue of $158.6 million.

Sternlicht’s mother called him twice while he was on the conference call. “My mother is calling,” he told analysts, joking that perhaps she had a question on earnings.

He said he was “really not excited about our stock price, but scale in this business should help our credit status.” Starwood’s stock was up 1 percent at 3 p.m. to $21.92 per share.