Untold Stories with Barry Sternlicht on Building a $120 Billion Empire

Chris and Barry discuss stories of scaling the business to 120k employees in 6 years.

Untold Stories with Barry Sternlicht on Building a $120 Billion Empire

Chris and Barry discuss stories of scaling the business to 120k employees in 6 years.

Together with

Good morning. We’ve got some exciting news: our new website is officially live – well, sort of. It's in beta. While we're still fine-tuning some features, we couldn't wait to share with you what we've been working on!

To celebrate the launch of our new website, we have a special surprise for our readers below! But first, a shoutout to today's sponsor, Redwood — explore passive BTR investments in Columbus, Ohio.

Market Snapshot

S&P 500
GSPC
4,954.23
Pct Chg:
+0.23%
FTSE NAREIT
FNER
720.03
Pct Chg:
+1.34%
10Y Treasury
TNX
4.117%
Pct Chg:
+0.025
SOFR
1-month
5.32%
Pct Chg:
0.0%

*Data as of 2/06/2024 market close.

PODCAST

Untold Stories with Barry Sternlicht on Building a $120 Billion Empire

We're excited to share something special with you today to celebrate our new website's launch. We've teamed up with our friends at The Fort Podcast to bring you an exclusive early look at Chris Powers' latest interview with the one and only Barry Sternlicht, Chairman & CEO of Starwood Capital Group.

This episode is packed with untold stories highlighting Barry's journey to the top of the real estate world. And here's the best part: You can read, watch, or listen to the full interview directly on CREDaily.com.

Stay tuned for more exclusive content like this in the newsletter, featuring original stories you won't find anywhere else, delivered without bias and free of paywalls. We're just getting warmed up, and we can't wait for you to join us!

SPONSORED BY REDWOOD

Get Exclusive Access to Redwood’s Newest Equity Deal!

Known for its single-story, build-to-rent developments, Redwood Living, Inc. is offering limited time, exclusive access to its newest deal.

CRE Daily subscribers get early access to invest in Redwood Powell Home Road, located in the Columbus, Ohio MSA. This Redwood Neighborhood is expected to be completed in three phases, for a total of 326 homes.

Current modeling offers investors a 10% preferred pay rate, paid quarterly, plus a share of 20% of the long-term net cash flow from the LLC.

Redwood Powell Home Road will add to Redwood’s current footprint of 12 stabilized projects, or 1,800 units, in the Columbus MSA. Ready to learn more? Click here to get access to the deal.

✍️ Editor’s Picks

  • The Return of Neumann: Hedge fund manager Dan Loeb is backing Adam Neumann's bid to buy back troubled co-working company WeWork.

  • Long live the queen: NYC’s ‘skyscraper queen’ Darcy Stacom, who made her name at CBRE, leaves after 22 years as the Big Apple’s property crisis deepens.

  • Abandoning ship: Weeks before New York Community Bancorp’s (NYCB) big 70% dividend cut announcement, the bank’s chief risk officer bailed.

  • Jackson's big boost: Mississippi Governor Tate Reeves may soon finalize a $10B development project in Madison County, the largest capital investment in state history.

  • Secondary success: Investcorp took a minority stake in secondary specialist Banner Ridge with $7.3B assets in 5 years.

🏘️ MULTIFAMILY

  • Dry powder dilemma: Multifamily investment volume in 2023 fell by 60% from 2022 to $117.5B, the lowest level seen since 2014.

  • Get what you paid for: In 2023, rent cuts were prevalent in B- and C-class communities due to an oversupply in six apartment markets, while Class A properties fared better.

  • Largest condo loan: Mast Capital secured a record-breaking $600M construction loan from Banco Inbursa and Ascendant Capital Partners for the Cipriani Residences tower in Miami.

  • Equity boost: Tides Equities is seeking $69M in preferred equity to support 30 properties across the Sun Belt, with 7.3K units, to meet financial obligations and address debt service shortfalls.

🏭 Industrial

  • Industrial rents soar: Despite rising vacancy rates, average industrial space rent grew 0.3% QoQ and 6.0% YoY in Q4 2023, notching a record $10.24 PSF increase.

  • Houston shake-up: Triten Real Estate Partners acquired a three-building industrial portfolio totaling 534.5KSF in Houston with financing from Nationwide Mutual Insurance Co.

🏬 RETAIL

  • Retail royalty: Luxury retailers Prada and Gucci's parent companies are spending hundreds of millions on prime Fifth Avenue properties.

  • Sniping talent: Top NYC retail broker Robert Futterman, previously fired for substance abuse, returns to Newmark as an advisor.

  • From the ashes: Reven Capital and Mosaic Real Estate Investors are launching a $1B publicly traded REIT focused on distressed office assets.

  • Retail Renaissance: Traditional department stores showed improvement in December, with retail being "prime for expansion" and institutional investors predicted to up fund allocations.

🏢 OFFICE

  • Game on: Cash-rich players in the office sector have an advantage as the field finally begins to tilt in their favor.

  • Tax overhaul: San Francisco officials propose tax overhauls to address losses from remote work, including cutting fees on small businesses and office rents.

BETTING ON DISTRESS

After Recent Stumbles, Brookfield Raises Half of $15B Real Estate Fund

As Brookfield prepares for its earnings report this week, the firm is halfway to its $15 billion goal for a new real estate fund, a slower pace compared to 2021, yet CEO Bruce Flatt sees opportunity in the commercial property downturn.

What happened: Brookfield's initial plans for an early closing last July faced delays, but the company is now on track with $7 billion in commitments, a mix of external investments, and its own capital. This fundraising effort comes amid a sluggish quarter for real estate investments, the slowest since the pandemic's onset according to Preqin data. Despite these hurdles, Brookfield's track record includes successful large-scale fundraisings, like their $30 billion infrastructure fund and a $17 billion real estate fund.

Market downturn: Brookfield's CEO Bruce Flatt sees the downturn in commercial property as an opportunity for strategic acquisitions at lower prices, hoping for a market recovery. However, this approach carries risks, especially in the office sector, which has seen a significant 25% drop in values year-over-year through December, per Green Street reports. The rise of remote work and uncertain economic conditions cast doubt on the future rebound of office values.

Fundraising challenges: While Brookfield continues to raise capital for its new fund, capital commitments are coming slower this year. In Q3, a record-breaking 50.2% of raised funds went to the top 10 largest funds. Brookfield recently closed a successful infrastructure fund and secured a significant commitment from the Abu Dhabi sovereign wealth fund for a decarbonization initiative.

➥ THE TAKEAWAY

Uncertain road ahead: Brookfield faces multiple challenges, including recent defaults on over $3 billion in U.S. commercial mortgages and declining values in European property investments. Furthermore, the firm's credit rating was downgraded to junk status by S&P Global Ratings at the end of last year. Amidst these issues, Brookfield plans to reduce its real estate holdings by around $9 billion by 2028, suggesting a strategic shift away from real estate investments.

CHART OF THE DAY

This map by Trepp shows the percentage of multifamily bank loans with potential performance issues, by region. Translation: opportunistic buyers in the Midwest won’t have much to look forward to anytime soon. Meanwhile, the Sunbelt is starting to show cracks.

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