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Starwood CEO Barry Sternlicht: 'We’re Buying Now. We’re On Offense.'

Barry Sternlicht is on the hunt.

Starwood Capital Group, a private investment giant with over $60B in assets under management, is actively searching for buying opportunities amid the coronavirus pandemic, Sternlicht, who serves as chairman and CEO, said Wednesday.

Walker & Dunlop CEO Willy Walker and Starwood CEO Barry Sternlicht at a 2018 Bisnow event.
Walker & Dunlop CEO Willy Walker and Starwood CEO Barry Sternlicht at a 2018 Bisnow event.

Sternlicht said he is looking to buy because he believes the U.S. economy will recover and he sees opportunities to scoop up undervalued assets. He said property sales are difficult in the current environment, but Starwood is looking for deals.

"We're buying now. We're on the offense in our private equity funds," said Sternlicht, speaking Wednesday on a webinar with Walker & Dunlop CEO Willy Walker. "We're looking at a bunch of stuff today actually. We're quite busy."

The investment giant has set up a special fund to buy stakes in public companies because Sternlicht said he is seeing stock prices he thinks he may never see again. He said it has bought debt because it doesn't require travel and he can rely on the reputation of the companies. But he said buying properties has been more difficult. 

"You can't really finance much, and if you were going to finance at today's spreads, seller's aren't taking prices that reflect the cost of debt today," Sternlicht said. "So the transaction market worldwide for assets has sort of gone into a temporary coma." 

Travel restrictions and stay-at-home orders have slowed the investment sales markets down as it has become more difficult for buyers to tour buildings, but Sternlicht said he hasn't stopped looking at properties. He said this week he traveled to look at a hotel Starwood was interested in acquiring, though he didn't say where he traveled. 

"I would have liked to have bought it," he said of the hotel. "The company appears to have gotten their [Paycheck Protection Program] influx and decided they don't want to sell the hotel. I'm not sure why that is, but we'll find out, or we'll move onto something else."

He said his confidence in buying U.S. real estate stems from his belief that the country will bounce back from this economic crisis. He said some people have a more pessimistic view, leading prices to be undervalued and giving him the opportunity to place bets on a recovery.

"Historically, the nation has come out of these great falls," Sternlicht said. "My view is when you're buying real estate assets well below the cost of replacement in a country like the U.S., with land in some cases at no value, then you're going to make money, because this nation is going to grow."

Starwood CEO Barry Sternlicht on a Walker & Dunlop webinar.
Starwood CEO Barry Sternlicht on a Walker & Dunlop webinar.

Sternlicht was one of the more than a dozen real estate industry leaders President Donald Trump included in the Great American Economic Revival Groups, which he convened last week to advise him on plans to reopen the economy.

On the first call his group held, Sternlicht said several CEOs made statements, including the heads of Amazon, Mastercard and Bank of America. He said the CEOs focused largely on testing, and Trump gave an update on the country's progress.

"He sounded pretty much on that call like he sounds on the press conferences you see these days," Sternlicht said. "He says we're getting the tests, and we're doing better than anyone else."

Sternlicht said he hopes to see cities and states soon begin to allow businesses to reopen. He said it should be done in a responsible way by first opening areas that are least impacted, by implementing cleaning protocols, by having people wear masks and practice social distancing and by keeping at-risk people home. 

"This can be done with real data today and in a humanitarian way because the financial suicide of this country is not in anyone's interest, and the U.S. government does not have enough money," Sternlicht said. 

He said he doesn't think the economy will experience a V-shaped recovery because some small businesses are going to be unable to bounce back. But he said once people can start going back to work and traveling, the economy will recover. That will depend on hotels and other businesses implementing protocols, such as checking people's temperature and keeping properties sanitized, he said.

"I think the slope of how we get out of this will depend on how quickly we can get back to work and how standardized the processes are for different protocol," Sternlicht said. "Once you standardize these protocols and people have faith in them, I think people will go back to traveling."

On the other hand, if the federal government and local governments do not allow businesses to reopen this year, he said it could be disastrous for the economy. 

"If they keep this country closed for nine months to a year, all bets are off. We're going to have the Great Depression," Sternlicht said. "If that happens, you'll see social unrest. It will be a terrible thing for the country."