Barry Sternlicht was in such a good mood during Starwood’s earnings call on Thursday that he joked he was taking all of the company’s cash and buying bitcoin.
Sternlicht, chairman and CEO of Starwood Property Trust, said that while real estate is still just recovering from the effects of the pandemic, nearly all of the real estate investment trust’s business lines are in a “prime position.”
He called the company’s collateralized loan obligations (CLO) and energy book business a “gamechanger.” On other segments of the real estate market, he said: industrial is “fine;” multifamily is “weak, but will be OK;” and office is a “question mark” but he believes people will return to the office on some scale. Retail is still “really difficult” to underwrite. And the single-family rental market is “crushing it.”
Greenwich and Miami Beach-based Starwood reported $107 million in fourth quarter 2020 earnings, or 37 cents per share, down 38 percent from the same period in 2019. The REIT reported $290.6 million in revenue for the fourth quarter, up 1.5 percent from $286.4 million in the same period of the previous year. The company’s stock fell about half a percent to $22.74 per share as of 12:50 p.m. Thursday, following the earnings call.
Commercial rent collections were high at 98 percent in 2020, executives said. Jeff DiModica, president and managing director of Starwood, and Sternlicht said the company plans to grow the residential lending business.
Sternlicht also said that while New York will continue to struggle, it is “not going away.”
Large 2,000-room hotels reliant on business travel will continue to struggle, especially mid-week, he said. Sternlicht predicted that big-box hotels won’t return to normal occupancy levels until 2024 or 2025.
“Other parts of the hotel market will recover much faster,” he said, citing Starwood’s Miami Beach property that’s reporting 94 percent occupancy at $1,600 a night. Starwood co-developed and operates 1 Hotel South Beach.
During the pandemic, the company deployed $3 billion, and now has more than $700 million in cash, said Rina Paniry, the company’s CFO. Starwood’s commercial loan portfolio totaled a record $10.2 billion at the end of 2020, including $335 million in new loans and $250 million in loan repayments. For loans secured by hospitality, some borrowers are still receiving short-term modifications, including partial interest deferrals.
About $5 billion in loans were transferred to special servicing during Covid, and Starwood ended the year with an active servicing portfolio of $8.8 billion, Paniry said.