In the 1990s, during the last real estate recession, Sternlicht began building a hotel empire by purchasing distressed properties. The result was major hotelier Starwood Hotels & Resorts Worldwide, which he founded in 1995 and led for a decade.
Today, as chairman and CEO of Starwood Capital Group, he's once again snapping up bargains and amassing another major portfolio, buying distressed condos in overbuilt cities like Miami and Las Vegas as well as hotels and resorts. His recent purchase of the troubled Corus Bankshares one of the nation's largest condominium construction lenders and its real estate loan portfolio has been the talk of the industry.
At a private breakfast with the Milken Institute Associates, Sternlicht discussed the commercial real estate market and today's investing environment, which he describes as "weird" and "distorted." With government spending replacing private demand, he said, "it's an economy on steroids."
The key to investing, he said, is ensuring a margin of safety and fully considering the wide range of outcomes that are possible. There are lots of worrisome signs out there, including high CDS spreads of European sovereign debt, the soaring price of gold and the continued listlessness of housing market. Sternlicht commented that we might be seeing the beginnings of a tectonic reshuffling in the wealth of nations, with the balance shifting from the developed to the developing world. His portfolio is global, and while he shies away from India and Russia, he is bullish on Brazil.
Despite the uncertainty hovering over the economy, Sternlicht has proven to be a master at timing the market. "One thing you can count on for sure is population growth," he said, and that driver will eventually send values up.
This event was open only to Milken Institute Associates. To join or learn more, please contact Mindy Silverstein, Director of the Associates, at (310) 570-4634 or firstname.lastname@example.org.