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Barry Sternlicht

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2021-10-04
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2021-10-04
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  1. “So I look at that in my life at this point and say, am I doing what I should be doing with my 24 hours? And I like to make a bigger difference and I have a big foundation. I give a lot of money away. But I would like to spend a little more time in making, being the change you want to be. The change you want to be, and I hope my kids will help me do that, so it'll make me cry now. But that's one of the benefits of being successful giving away the money and trying to do it in a smart way.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Oh, that's really tough. Everyone's obvious to everyone. Money doesn't buy happiness, it just buys choice. I did want to have a pool and a tennis court because my neighbors did and I didn't have it growing up. And then I kept going. Your life turns into like this is a sport for me. Investing and being successful and being good at what I do. I don't know how to do anything consciously half-assed. So you're all in and you're all out. I'm not really good in between. I think success comes with all kinds of benefits and all kinds of issues and it's not all roses. And everyone has the one thing someone said to me once is the world is a very fair place. And I'm like, oh, really? Everyone gets 24 hours in a day and how you choose to use them is up to you.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “I can't even keep a straight face, so I wouldn't even be able to ask for that breakup fee, but I sent in one of my young lieutenants and he has no problem asking for it. They said, yes, I would have laughed. I'm not a good poker player. I wear my heart on my sleeve.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I was 38 years old. That would have changed my whole life back then. And it never occurred to me to get the breakup fee. And then I took over the company. I'm like, I should have taken over the breakfast fee.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “My mom is quite gregarious. She's very social, and I've basically inherited that gene. I like people. I like travel. I like talking to people. My father was tougher than nails and strict. And he was European. But since he survived the war, I always said to myself, my worst day was better than his best day for 10 years of his life. So I think that knocked me down and I get back up. I've never thought I didn't have a plan for Star War to be this big. It just happened and I kept going. It was no plan I'm going to be $100 billion asset manager. I just took advantages of opportunities as they arose and didn't ever think I couldn't do it. I looked back on taking over ITT when I was 38. I must have been out of my mind. And we actually had negotiated. I actually was too embarrassed to ask for it. But I was going up in the elevator to the room at the St. Regis and we had a 240 Linhar breakup fee we negotiated. So if Hilton had won, we would have gotten 200.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “You're the coach. It's like football coach. I always wondered about this. You know, the guy's loyal to his wide receiver until there's a better wide receiver, right? And then it's his job. Get rid of his wide receiver and go recruit the really awesome guy and do so without everyone thinking he's an asshole, right? But he does it. To the extreme they traded Brady, which was probably a bad move. But that's what corporate executives have to do. And that's hard. I find that hard. I find that really hard. Advice is cheap. It's easy to give. And then forcing people to build depth into their organizations, they say you should hire people better than you. Many people don't want to do that. They just feel like they'll be obsolete and kicked out the door. And I think figuring out how to do that in companies, when you can do that, you've built an incredible company.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Was some things that were wrong from the start. I didn't object to them, like negative leverage. There was massive negative leverage in that trade. So I think also probably the hardest thing for me in running a public company and private company has been dealing with people. And somebody once told me that keeping bad apples, you're not helping those people. You're hurting your organization. And they're setting a bad example and the fact that they survive in your company is pulling down the performance of your whole company. But I always get caught in the personal side of that. You know, they have two kids, they've been here 17 years, they're trying hard. They just don't have the talent set. You don't know how to tell them that you kind of push pushing them into more and more relevant corners, but you should let them go. It's funny because I had a reputation of being difficult because I was such a young CO at Starvard Hotels. People would blame me I'm difficult to work for. But when I found the right people, they were incredibly loyal and good. But getting to the right people, I took too long. And I think in general, when you're running a firm, any firm...”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “On paper, the worst deal you did is the best deal you did. Like for me, it was when I bought this company Ransworth. I was the head guide and make the decision in England for my old employer. And a very wealthy guy who was on the Forbes 400 made a catastrophic mistake. And we were following the Reichmans at the time, the richest people in the world into the British property markets, and they got it wrong. And we thought, because they were doing it, we should do it.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Bill Salomon was the entrepreneur finance professor at Harvard, and it was also a fellow named Don McDamara. He also said luck is when preparation meets opportunity. So I love all those things. They're my credo. And then the last one, the most important thing I ever read was perseverance is genius in disguise, which was a fortune cookie. That's me. I stay with it. And if it's complicated, I'm all in.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Tens of trillions, and that was created the fidelities of Putnams, the BlackRocks. I got my tiny little share of that. We're $100 billion as a manager today, so it's not terrible.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “There was another fellow of that firm, a guy named Bruce Duncan, who was really in my direct boss. And he had a style, I think was very disarming. I enjoyed his approach to doing investments in deals. And then there was another fellow that came to Harvard Business School that made a couple of speeches. And I remember them like they were yesterday. He said, be careful where you set your goals because you may achieve them. And then he said, and I thought that was, that's interesting. And I've come to understand what that means, actually, and how it applies to business and even your life. And then he said, the key to success in life is to find the freight trains in your life and get on them instead of in front of them. So I'm like, oh gosh, and I was broke in business school. I was negative 8,000 bucks. What are the freight trains in my life? And that turned out to be getting in the way of institutional capital, like the pot of institutional capital grow and grow and grow from trillions to”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “For good or bad, Neil Bloom, who is my boss at JMB, where I went after business school, taught me a lot of things to do and a lot of things not to do. I think I developed my own way of doing deals and structure and style from things I adopted and didn't adopt from people I worked for.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “I went home and I said to my wife, is there something you should tell me? Don't believe everything you read. And when it's funny, when they write about a deal we're doing and they get the market cap wrong, you know, it's like guys, I know the share account's wrong. Go look at that. It's not the right share count. So I think the key to investing is actually doing your own work. And you need to triangulate other people's opinions and stuff, but do your own work. And the biggest mistakes like you often find when you find Andreas and Harowitz and Sequoia, they're all in the deal. I don't have to do any work. Do your own work. You may have the dumbest partner at Sequoia, right? You don't know who did that deal. Maybe they fired the guy yesterday. Make your own opinion. The problem with success is it breeds hubris. And I think successful people, my goal is to keep my intellectual.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Assuming things, people who assume stuff and they read something and think it's, you know, I used to laugh when the Wall Street Journal ran a story about me and I was on the front page and they told me I had four kids. I have three kids.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Working out, probably. I work out seven to eight in the morning, try to keep in shape. Really, for me, it's mental clarity and it's my timeout. So I just feel better during the day, stressful days, and I don't really take stress with me. I can sort of roll with it pretty good. But I think if I don't work out, I get pretty lethargic and I don't feel good for the day.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “Oh, I golf now, and I wish I was a professional tennis player, so I played some college tennis, but I golf. And golf is both personal and business. I've met a lot of interesting people playing golf. It's all true, whatever they said. I never play golf until I was like 30, 32. So it's a great way to spend time.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Because everyone's, oh, it's going to be overbuilt. So I love when there's bad information out there. Go ahead, you believe that”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Way and you can find another, those were the great opportunities. When we started our single family rental business, a very notable grave dancer in real estate said, this is not a business. You can't do this. This is like, how can you buy houses? There are apartment buildings. And it's so interesting. There's 300 unit apartment building, you just walk up and down. It's very easy to maintain. You can't maintain single family homes that are disparate and all. Turned out they had the same margins as Maltese. The tenants are usually higher quality, so less defaults because it's a family, not a kid. And with tech, you organize your maintenance calls in a route that didn't really tax you. And now that company Invitation Homes is one of the best performing REITs on the stock exchange and I think is a $25, $30 billion market cap. So turn into a business. And I like it when that happens. When the Wall Street Journal ran some stories about the overbuilding department market, that's great because in the individual markets, there was no construction. And we go in and buy those markets.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Deal with in success. And then also people were nice, they were friendly. And I traveled probably before anyone else traveled. I went to Key West to look at a hotel that was going to be sold in the middle of the crisis. We made an offer and then the government bailed them out with those crazy, whatever those PPP loans were and they got into trouble with that and then they pulled the asset off the market. Our stock went from 26 to 8. Now it's back at 26. So it's kind of hard in the middle of the heat. I stepped up and bought stock at like 10, I think, in the public company or nine. I owned a lot of it, so I didn't buy. It's also a one-way door for a CEO because if you ever sell it, people are like, what's going on? There must be something wrong. So I didn't back up the truck. But I told people in Kramer, he said, Kramer said that stock was yielding 13. He's like, well, 13 is not safe. And I said, I told him publicly, I said, it's safe. They don't understand the company, but we can pay the dividends. And I knew we could. So it was good. It's always good when popular opinion goes.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Focused on five names, and it's funny. A couple of them we've made, three of them we've made takeover offers on, which turned out to be like I was sort of injured. They got so cheap and now we just want to take them out. But we try to be agile. And COVID was also great because I'm good in crises. It focuses your organizations. You focus. I went through our public company, started property trust. I mean, it was like, okay, here's the dike. Where's the weaknesses in the dike? Have we got four plans to fill the hole if it's a hole? And everyone focuses. Everyone went to their battle stations. We knew at the beginning it could be survival or death. We didn't know which one was going to happen. We were going to be in our seats and man the forts. And then we had to, as lenders in that company, we had to restructure some deals. And the team did an amazing job. And across the firm, I like crises because you really just have to deal with all the problems you've”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “I actually enjoyed COVID. I had both of my sons with me in Miami, and I never get to work with my kids. So that was kind of fun. And we did a couple deals in the middle of the chaos. We did a rescue package on TPG's mortgage, TRTX. And he said, how could you do this? My son, who's just entered Harvard Business School, and I was explained to him that at these values where our attachment points were for the loans we were giving, we couldn't really lose money unless the United States ceased to exist. So it went out great. Stock rebounded. We made a ton of money. Got to see a real life contrarian deal in the middle of the heat. We bailed out this company. So that was kind of fun. And I decided the only place that was real distress in real estate during COVID was the public markets, which overreacted and everyone thought the world was ending. Privately, it couldn't happen. So stocks went so cheap. We raised a $700 million fund from our clients that would still answer the phone. That's up 83%. So it's good. And we just, in five names, we've really focused on the...”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “It was a fraud, the model they showed the street was not active. They don't know how to do anything. They hired General Motors to build the car. It's crazy. Fisker, which is a failed company, goes public and people like the name. I mean, but then there's healthcare companies that went public. And interesting enough, the company gets enough cash and they deploy it really smartly, they may be able to get themselves out of some of these holes. So it's all different. There'll be gems in the spec world and there'll be catastrophes in the back world. And there are the same in the IPO world. The hit ratio will be higher. In IPOs than it is in”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “A lot of companies overpriced. And the market will find a level. The most fascinating thing about the SPAC market is how many companies are going public with very thin floats. And so the short interest in these companies, which everyone knows is a scam or completely mispriced, the short interest grows and then there are squeezes and the stocks go to the moon and beyond. And the sponsor can get out. So the short squeezers, the Reddit accounts, I mean, it's crazy what's going on. It's crazy. There are worthless companies. There are companies trading at multi-billion dollar market caps. And I look at all these companies that we looked at. We passed and they went public with someone else and some of them traded. In February, everything went up in March. Everyone thought they were a genius, you know? Like the EV companies are the most obvious. I mean, a lot of this stuff, man, I shorted Lordstown. How much worse of a public offering can you make a front run the trade? They lied about their orders. They made up the call.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “In a low and straight environment, and they had an option on all these deals, they thought it was an interesting product. The opportunity cost wasn't that high for them because they get their money back and interest on it. And so it wasn't that big a deal. So a lot of dumb deals were done. I think it was $428 backs looking for deals today. The outcome of this will be as the two-year anniversary of those specs births comes around, they would get desperate and they will start cutting their promotes $25, $50, $75 just so they don't lose the sponsor equity capital they put up. So it's going to be a bloodbath on the sponsor side, which will make the vehicle incredibly compelling for an IPO, incredibly compelling. It'll be cheaper than an IPO. So you will see a lot of these deals get done and they'll probably be better quality companies that bought at better prices. But as long as there's 428 of them out there, you're still going to see.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “They started out as an interesting and a pretty good deal for the sponsor, frankly, alternative for IPOs. And then Wall Street went, haywire, which they always do. And if you could breathe, you could raise a spec. And frankly, a criminal's crooks, frauds. And if Goldman wouldn't take you out, then some other firm would take you out. It was too lucrative for the sponsor and incredibly lucrative for the banks. When could you raise money for a convicted felon and earn 5% for it? And everyone joined the fray. Everyone could do a spec. And even some of the small firms. And so then with a lot of undisciplined capital and a lot of people who weren't in this for, you could make a career with one trade. You can make a lot of money. So a lot of people, when public with no discipline, no investment experience, no good underwrite a company and just want to go to the next back. So they do a deal as fast as they could and markets were wide open. And the arbitrage was so compelling as soon as the hedge funds figured out that they couldn't lose money.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “They're done expanding. They can't add 100 stores if they wanted to. They have no access to capital. So don't think you're going to get all these guys coming back to build stores when Dick's sporting goods and lululemon and chipotle are training in 17,000 times multiples. All those other guys are not. The guys in the mall, they're all trading in penny stocks that they haven't gone bankrupt yet. You need to pay attention to the capital markets, even if you're just a little old real estate player.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “Cardano or Solana. So I just try to stay educated. It makes me a better investor and try to see what's going on. And you understand these companies, I was talking to one guy. He told me he's moving to a town. He's going to take over every building in that town. He's going to build a new epicenter for his crypto world. And I'll go meet with him and learn more about it. But I know he's gotten a billion dollars or more from Softbank. And maybe you could pull it out. Maybe there's an opportunity to play in real estate there. You got to watch. You got to watch everything. And it makes me better at what I do. When I was in my last job 30 years ago, my boss said to me, you know, real estate behaves differently to other asset classes. Real estate is linked to other asset classes. What happens in real estate yields on property are totally related to interest rates. And that's totally related to the corporate bond market. And equities have a big impact on our tenants and who can expand and who can't expand. So in retail, when their stocks are 50 cents, they ain't growing, you know?”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “Watching and observing, and I'm learning, I kind of figured out, you know, again, it's like most people would say it's probably 3% of my net worth. And if it goes to zero, I'm okay. But I also don't believe what the US government's doing. It's healthy for paper currencies. So my great hedge is my Bitcoin position, right? Because it's like a dumb coin or dumb thing. Can't be used for much, but it's certainly as good as gold and arguably slightly better because it's an infinite supply and easily accessible. So it's not like I'd put my whole balance sheet in it, but would I have a position in it? Yeah, should I change to Ethereum? Probably.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “We're a little behind, but we're moving rapidly in that space. And personally, you know, the SPACs, I ran a company. I'm not a real estate guy. I consider I'm a real estate my habit, but I know marketing. I know finance. I know branding. I've done a lot of consumer stuff too, involved in like dominoes in China and all kinds of crazy stuff, actually. And a lot of the stuff is being restaurant, small restaurant startups, companies like Oi, which is luggage or parachute, which is linens, and a whole bunch of companies. And then, of course, the palantiers and that stuff where I met Peter Thiel decades ago. And then you have to add in crypto, which I've gotten involved in a little bit as I try to understand what's impact will be on the world. And there's no question that the tokenization of finance and other things is going to change the world the way the internet changed the world. So you have to watch that stuff.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “Long real estate, if you will. I've been very successful investing outside. I have a lot of investments, and I don't have as much money with hedge funds. I have some directs. I do a lot of tech investing, directs funds. And so it's good for me because it keeps me on top of trends and things that are going on. And we've started our own PropTech group recently here. We've made probably a dozen investments. I've met a lot of people and I see a lot of stuff and I enjoy it. I always looked that I've done pretty well outside of the firm and I like to usually keep that quiet, but you'll see my name now in deals when they ask if I will put my name on the round. We'll be doing more prop tech and we're raising a small fund for that. We can incubate things in our portfolio and test drive them. And then if they work, we should scale them in our portfolio. And also, you know, it would be smart for us to have warrants or investments in the companies we're scaling.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “On top of all the real estate you're doing around the world, I know for a long time you've had a pretty interesting family office that is truly a single family office and that it's you. So you've done some spacks through that. There's a bunch of other stuff. Curious kind of how you think about Own assets outside of the real estate”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “And we've raised rates $10 an hour, and people won't come out and take a job. And obviously there's something wrong with the incentives put in place to keep them home. And I'm not being, I just believe the country needs its workers. And then, okay, if Americans don't want to work, then let's have some immigrants. We won't let them in either. At any spectrum, you can't get the avocado pickers and you can't get the scientists who want to come, we train them at our universities. And then they run home. because we won't let them stay. So then they go home to compete with us in companies that are competing with our American companies. We must be followed serious, stupid pills. So I can't even get our own people from London that want to work here. I can't get visas for them. There's such easy wins and such silly policies that are definitely hurting the United States right now. And will affect capital flows. The worst thing will happen is we lose the dollar status, which China would probably pretty happily do and definitely could be.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “He doesn't have all these shelters, they should lock him up. But if the guy's following the tax policies and incentives of the tax plan, which theoretically the politicians put in place because they want to induce certain things, then he's obviously a hero, not a villain. So I think the rhetoric in the markets is so bad. And I ask myself, am I just getting older? Does it seem bad because I'm older? And I don't really think so. Because I remember people telling me that populism would never win in the United States. We were a nation of Horatio Alger stories. And in fact, populism is becoming pretty popular. And now the concept of people aren't choosing to work. So we're going to continue to write stimulus checks to them and blame it on COVID. We can't hire. I was at our hotel in Brooklyn last night and we have 220 people on staff and we're missing 40 people. And we're running a full hotel and we can't run the hotel. We can't do room service. Some of our, we're having jobs.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “Would need to sweep again by the Republicans in twenty four to undo it, just as they're going to try to undo some of what Trump did. So, I mean, it's not good for the country to swing tax policies and swing policies. And this rhetoric around the rich not paying taxes, I mean, there's really usually one way where rich people pay less taxes. They do the things the government incented them to do. They buy solar tax credits. They buy credits for wind farms. They do what the government was trying to incent capital to do, and they do it because it drives their tax rate down. And it's what the government was trying to do. So if a guy making $40 billion isn't paying any taxes,”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  35. “Emerging middle class, you got to watch the government's about to turn over again. So the governments are super important. It's more like, what am I worried about the other people aren't worried about as opposed to like, where do I see the opportunities? I think the political issues in the country and around the world. Going to have a bigger effect on investing than they probably have in the last 20 years. I think the change of government in Germany probably is overlooked as important. And Merkel's been the longest-lasting European leader. I think that you have to watch that. You have to be careful of the Democrats now because they have all power. They'll probably lose conventional wisdom as they lose the House in what, like 14 months. Are they going to race to do some crazy stuff? It could be...”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  36. “I can't tell you that on a broadcast. That would be awful. I'll tell you what I think is interesting. I still think Brazil is more interesting than a lot of times clients and capital races to places. When we went to India, our clients were, you need to be in India. And they went to Brazil and we were very careful. We did just two things of scale. And one of them is now the second biggest logistics platform. It's a public company. We've gotten walloped on the currency, but made a lot of money local. So I think Brazil is actually a lot of capital left. I actually believe Brazil will be interesting for real estate players. And it's a big country a couple hundred million people.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  37. “Organized in India, you have to do things offshore for tax reasons. And we made ourselves feel better by having a put in, I think it was Mauritius, and the put to the partner. And when it came time to exercise the put, we thought we had it all legally papered. He's like, go ahead. It'll take you 10 years. I'm like, okay, this is great. Thank you. This is really helpful. So I don't think Americans put enough Risk premium to these emerging markets and often you have the currencies to deal with too, which are very, very hard to hedge.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  38. “And we had bought the land in an auction and we paid a fortune for it. In the US, probably the building, the land for a building is going to be 20% of the cost of the building, 25. In India, it's $65, $75. So land purchase was everything. The building is pretty cheap to build at the end of the day. So we build this building. We paid $200 million for the land site. And the government, the central government slapped a lien against the local province, which apparently had not forwarded the real estate taxes or the tax due when they collected $200 million from us. That lien immediately primed the mortgage, meaning the first mortgage we had had to be paid off. It now had a lien ahead of it. They put a lien on our property. And like, you don't put this in your pro forma. This has never happened in the United States. Like, it's never happened. The seller didn't pay his taxes and they put a lien on your asset. And it's the state government against the federal government. So then we had...”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  39. “Investors and property. So we have not invested in China for a while. One of our clients, of course, it was formed to invest outside of China. But even there, they've now asked us if we would do things with them in China. And we're looking in categories, but one of the lessons I've learned over the last couple years, 30 years, is we don't put enough political risk into our pro formas. Like a 20 in India is not the same thing as a 20 in the United States. There's so many things that can go wrong and the rule of law is so less developed. And the same would be true of China. An 18 in China, 18 here, I'll do the 18 here, 100 times out of 100. Because stuff happens. And in India, we built citibank's world headquarters. It wasn't at the time. It was spec office building with a local family the Hurandani is one of the wealthiest families in Mumbai and Vornado, one of the most successful reeds in the United States.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  40. “While we have investors from China we've avoided going to China as investors except in one area in hotels we have a joint venture with a Chinese account fundamentally if you're like me and you're sort of a grand value investor in assets and real estate in particular it's difficult when you can't see supply and you can't see demand the data doesn't really exist and somewhere up in the Polar Bureau they're deciding that they're going to build a new town And they're not telling you about it and they're going to move two million people to that town and I'm not sure where they're coming from. They're doing the 100-year plan and the 50-year plan and our investors have five-year cycles. And I don't think they really give a hoot if your IRR is a 13 or a three. So the state's going to win. And therefore, I kind of worry about adverse selection, us getting the worst deals. The locals getting the better deals. And ultimately, it's evolved into now. It's possible there'll be other issues for America.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  41. “Constrained and go for the quickie. So you go to your son's dorm in college and you see the future death of retail 75,000 boxes piled as high as the ceiling because nobody has time to go shopping anymore. Just non exists in Europe”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  42. “because they were allowed to sell product retail wise for less than the cost of Losing four or five billion a year in retail, which they subsidize with AWS. But if you think about it, they were offering free shipping. I was the beneficiary of that. I got a bicycle pump delivered to my house in Miami, same day delivery. It was like a $24 pump. And he drove it in a car to my house for free. How much money are they losing? So no mom and dad can do that. There isn't a mom and dad shop on earth that can compete with that. And the only reason Amazon could do that is they got away with it because of AWS that funded the losses. And they were literally wiping out mom and dad and the small retailers across the country doing it. And obviously we all joined the prime account. They charged us $75 now, I think it's $100. They'll go to $500 when there's nothing left but Amazon in this country. In Europe, they're not letting Amazon do that. You go to High Street retail, they're there, they're shopping with the local guy. They're protecting their culture and their heritage much more than the Americans who are always time.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  43. “product selection, new product innovations, and the markets are rewarding them for their online sales because the margins on surface look better. They're not incrementally opening new stores. And there are exceptions to that. But the whole retail landscape is going to need to change further because of the event of cloud kitchens. So one of the big users of street level retail has always been restaurants. But it's an awful lot nicer for the restaurant to be in some garage somewhere with no customers to deal with and have DoorDash deliver whatever it is they make with just a shaft and they don't need waiters and waitresses and space and expensive space at grade and other stuff so we'll see how this all evolves but the US is experiencing a lot harder hit from retail than Europe is England more so than the continent and the continent's done a much better job and culturally they have not adapted Amazon as the Darth Vader of retail it's fundamentally destroying mom and dad retail across the country and it's one of my pet”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  44. “Again, you have to go market by market and almost zip code by zip code. And then retail is really very difficult. And people look at streets like Bleaker Street in New York or Madison Avenue and they may see a lot of empty stores. Well, what they don't see is whether the guy's paying you with rent. Or he might be physically there, but he holds all the cards and he tells Lylon, I'm not paying. And what can Landlord do? Kick him out and get who? So tenants are so busy working on their online strategy and building out their e-commerce platforms.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  45. “Then you were opened and you had 6% occupancy. Without the businesses here, no foreign tourists, there was no reason to know about tell in New York. Actually, it's been shocking to me that the New York recovery has been as good as it has in hotels just because domestic travelers have money and they're traveling. So you had a reasonably decent summer in New York without an aid foreign travel. And then you have the roadside hotels that don't really require foreign travel and it just requires business to get back into business. And so the courtyards in small towns in Iowa, Illinois, Mississippi, Texas, they've come back. They're not all the way back because business travel isn't all the way back, but they're 85, 90% of the way back. Hotels will turn green at some point. There's still supply coming that was stuck in the pipeline that was finishing now.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  46. “Industrial is green, and I would say data centers are light green. Demand is robust, but rents aren't really moving because there's so much supply being added. Offices, they're red, yellow, and green. They're in all three categories. Europe is more returned to the office, I think, before the Delta variant, they were sort of, depends where you were, London was zero, but Berlin was 65, 70. Some of the other markets were higher. All of these places have the Delta variant put a crink in the whole recovery or the slant of the recovery. And then the red going to yellow, going to green is hotels. And even in that market, if you had a resort hotel during the pandemic and it was open, you did really well. We had to have a record year during the pandemic at the one hotel in Miami that we built. And 20% higher cash flow this year than last year. So it's been incredible. On the other hand, if you have a big group house in Manhattan, you're lucky if you can had for a while if you were open, which you weren't.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  47. “And one of those things that we worry about always is supply. So we talk about three green lights in real estate and where are we with them, even though we're so late in the cycle. One is positive leverage, meaning the cost of debt is lower than the yield on the property. It used to be negative in the 70s and 80s. And now it's positive. So it's still positive. We're buying apartments at less than four yields, but we're financing them at 2%. So that's positive leverage. So the cash on cash return, let's say, is six. You can't get six in junk. Junk bonds are four. Three and three quarters. Corporate debt is like one and a half. So six for apartments. You're like, scratch your head. That seems like a pretty good deal. And that's why the apartment markets are moving. And also residential yields in Europe were always lower than the US. So we're kind of converging to their yields.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  48. “And that market is booming, and companies are coming looking for space. And I think that seeing beyond the pandemic and they need their campuses, same is true of Miami. I built a building in Miami and leased the whole thing during COVID. If you had two million square feet in downtown Miami, you could lease the whole thing in a minute. There's such demand. There's no supply. There's no leasing because there's no office buildings available to occupy. So sometimes the data isn't what it seems. Like you can't occupy a space that doesn't exist. And you're seeing a lot of smaller companies move to Florida and bring some of their employees with them. Their issue is now school systems. But the same would be true in Orlando, West Palm Beach, Jacksonville. Those are all strong markets. And then Nashville, Raleigh, Research Triangle Park. And then you have subsets of office like life sciences, which are having their own major boom. And that's been an incredible market. And then maybe you'd call data centers a subset of office too, and that has its own little boom in both of those businesses. You watch supply.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  49. “in Saudi, in Japan, they're back in the office. Like nothing's changed. But because it's sort of become a woke political issue in the United States, the tech firms in particular have told their people they could work from home. And so the worst office market in the United States is San Francisco, where 30% of the space is vacant or trying to be subleased, which is staggering. And then places like New York, I don't think people, the financial firms seem to want their people back. It's a little bit different than a tech firm. The lawyers want their people back. But it's not, in general, New York was more traumatized by this than the Red States. And so I'm guessing at the moment 25 or 30% occupancy in office, my whole firm, as you can see, is in the office. So the real estate guys are back in because they have to show leadership. And I know like Goldman is in parts of JP Morgan are in, parts of Morgan, Stanley are in. But Office has been also a city-by-city phenomenon. We're the third largest owner of office today in Austin, Texas.”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source

  50. “I would have probably laughed, but what happened was, unlike the 0708 crash, consumers' pocketbooks are rich and interest rates were zero. So the stock market rose home prices have risen, savings rates rose, expenses dropped, people weren't traveling, they weren't commuting, they weren't doing anything they used to do. And they've got a lot of trillion dollar grants from the government, so it's coursing through the economy, and that's translating itself into people. It's funny. I've never seen price increases like you're seeing now. This market is not sensitive to price. It's not like you induce different behavior by lowering your price. Everyone's feeling pretty good about things. And you see in retail sales, apartments are easy. So apartments now probably past logistics as the best asset class at the moment. Then you have office. Office is the yellow asset class, like whether it's here or Berlin, nobody's quite sure the pace of people returning to work. Now in Korea,”

    2021-10-04 · Capital Allocators · Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216) · IDENTIFIED FROM THE TRANSCRIPT · source