Real estate is a “four-letter word” in the capital markets: Sternlicht

Starwood's Q3 earnings up 8% YOY

Barry Sternlicht (Getty, iStock)
Barry Sternlicht (Getty, iStock)

Barry Sternlicht is confident the hotel and office markets will come back to pre-pandemic levels, saying that adults and kids “want to go back to the lives they had before.”

Still, the Starwood chairman and CEO criticized New York Mayor Bill de Blasio, without referring to him by name, saying the mayor is “bordering on insanity” as indoor dining remains restricted in the city.

“New York City is in a world of hurt. I’m really glad we don’t have exposure there,” Sternlicht said during Starwood Property Trust’s third quarter earnings call with analysts on Thursday morning. “We stayed away from those markets permanently because of the pressure on costs” and increases in real estate taxes.

Sternlicht made little mention of the election, but expects there to be a stimulus package regardless of who wins. That will propel people back to the office, he said, citing Facebook’s 730,000-square-foot lease at Vornado Realty Trust’s Farley Post Office redevelopment in New York.

“Don’t confuse pandemic behavior with the long-term social patterns of human beings,” Sternlicht said.

Miami Beach-based Starwood reported $151.8 million in third quarter earnings, or 52 cents per share, up 8 percent from the same period in 2019. The real estate investment trust reported $267.4 million in revenue for the third quarter, down 7 percent from $288.3 million in the third quarter of last year. The company’s stock rose 2.6 percent to $14.88 per share as of 11:50 a.m. Thursday, following the earnings call.

Starwood deployed $1.5 billion in the third quarter, and completed two debt raises totaling $600 million, said Rina Paniry, the company’s CFO. Starwood also reported $150 million in earnings for its commercial and residential lending portfolio.

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Starwood has more than $880 million of cash and undrawn debt capacity, and Sternlicht said the REIT will keep about $450 million in liquidity. He referred to the company’s “huge earnings power” that it can harvest when needed.

“We’re not cowboys. We do think things could go wrong,” Sternlicht said, later adding that, “real estate is a four-letter word in the capital markers right now.”

Jeff DiModica, president and managing director, said the company is not forced to only invest in commercial real estate loans, and Sternlicht touted Starwood’s diversification.

“Although we are not out of the woods from Covid, we are very pleased,” DiModica said.

Sternicht was optimistic about the return of hospitality, and said he’s not concerned with increases in positive coronavirus cases because of improvements in testing.

“There will be a vaccine at some point,” he said. “There will be international travel at some point.”

Sternlicht, who previously said he planned to vote for former Vice President Joe Biden, made his only comments about the election when he signed off.

“I was going to say something like ‘May your favorite candidate win,’ but I don’t know who that is so… Have a good election.”