Starwood Capital brings in European real estate debt ‘point man’

Starwood Capital brings in European real estate debt ‘point man’
Posted on October 20, 2011 1:21 pm

Starwood Capital, the global private equity real estate firm, is moving Adam Shah over to London next month from its US headquarters to act as point man for real estate loan debt opportunities.

http://costarfinance.com/2011/10/20/starwood-capital-brings-in-european-real-estate-debt-point-man/

Shah has been with Starwood for six years, based in Greenwich, Connecticut, and has been focused on buying bank pools throughout the US for the last three years. He will help deepen the private equity firm’s presence in Europe as Jeff Dishner, Starwood’s international president, looks to build a two-pronged business focus.

Dishner, who has been with Starwood for 17 years and just moved over to London two months ago, told CoStar News: “There are two focusses for us now: the distressed side – we will bid on a wide range of distressed debt portfolios from deleveraging banks where Adam will be our point person. The second focus is sourcing mezzanine financing opportunities, which will be run by Jens Cremer.”

Historically, Starwood has been a US-centric business with almost 90% of its equity, distressed debt, preferred equity and mezzanine investments in the US. The decision was taken late last year that it was time to beef up its European infrastructure and platform.

“We decided that the timing is right – with inflections in the capital market – to build our presence in Europe.”

Back in June, global CEO Barry Sternlicht, who founded Starwood 20 years ago, said that “Europe will become a much bigger portion of what we do. There’ll be many things to do in Europe because they’re way behind the US banks in clearing their balance sheets off,” he added.

European real estate bank deleveraging has picked up pace since Sternlicht made those comments at a New York real estate conference in June. However, the crucial variable on the pace of deleveraging as a crucial new phase in global financial markets is entered, is the extent to which peripheral sovereign debt write-offs restricts liquidity and depress prices, and whether banks close ranks on disposals for fear of being squeezed too far on discounts.

Starwood’s second focus, sourcing mezzanine financing opportunities, is a crowded market, admits Dishner. The most active players in recent months have been Duet Real Estate, Pramerica, as well as hedge fund Och-Ziff and The Partners Group.

Dishner said: “There is no shortage of capital chasing mezzanine opportunities, but it’s a big market place and there is enough distress in the market place – and loans on various balance sheets that need to shrink – to create enough opportunities to go around.”

In the last 12 months, Starwood has either bought or originated a little over $200m worth of mezzanine paper in Europe.

The two funds which Starwood is investing are the Starwood Opportunity Fund 8, which buys all distressed assets and non-performing loans, and Starwood Hotel Investors 2. The Starwood opportunity funds have around $400m of equity left to invest which, based on a 60% leverage, equates to a spending power of $1bn. Mezzanine lending comes from its listed subsidiary, Starwood Property Trust.

First round bids are due in next week on Starwood’s eight-strong French hotel portfolio, which includes the UK property industry’s most famous hotel – the Hotel Martinez on La Croisette in Cannes. Starwood will consider portfolio, single asset and piecemeal sales.

The portfolio price guidance will depend on the number of buyers, but a guide price of €850m is thought likely. The hotels sit across two funds: Starwood Opportunity Fund 7 and Starwood Hotel Investors 1.

Next year looks set to be busy for Starwood – selling, buying, lending and, possibly, capital raising.

jwallace@costar.co.uk

http://costarfinance.com/2011/10/20/starwood-capital-brings-in-european-real-estate-debt-point-man/