The following transactions demonstrate the depth and breadth of Starwood Capital’s investment history across asset classes, geographies and economic downturns and upswings:
In October 2009, Starwood Capital, in partnership with the FDIC and several leading private equity firms, acquired the construction loans and real estate owned (REO) assets formerly owned by Chicago-based Corus Bank. The $4.5 billion portfolio consists of more than 100 loan and REO assets linked to high-quality condominiums, multifamily housing, office properties and land, representing nearly 23 million square feet. The transaction, which represents one of the largest acquisitions of distressed commercial real estate assets, was valued at approximately $2.77 billion, or approximately 60% of the unpaid principal balance, and a significantly greater discount to total construction costs. Under the terms of the transaction, the FDIC has provided financing with a 0% coupon for 50% of the purchase price, and will extend up to a $1 billion facility for working capital purposes and to fund project completions. Starwood Capital oversees the day-to-day management of the portfolio, an area where the firm has a wealth of experience dating back to the 1990s when it was an active owner of distressed loan portfolios.
Société du Louvre
In December 2005, Starwood completed the $3.2 billion acquisition of Groupe Taittinger and Société du Louvre (“SDL”), a family controlled French conglomerate. SDL’s assets include one of Europe’s largest hotel networks – a unique collection of 14 luxury hotels, the most famous of which is the Hôtel de Crillon in Paris, and more than 800 budget hotels under three brands. In addition to hotel properties, Société du Louvre owns several luxury goods businesses, including Champagne Taittinger (which was subsequently sold), Baccarat crystal and Annick Goutal perfumes. We have leveraged our unique expertise in the hospitality industry to maximize the value of both the luxury and budget hotel assets within Société du Louvre’s portfolio, as well as apply our “brand” expertise to grow the Baccarat crystal business. We have also recruited a substantially new management team for SDL and helped dispose of nonstrategic assets.
Starwood Hotels & Resorts Worldwide, Inc.
This leading global hotel company has its origins in Starwood Capital’s initial investment in publicly traded Hotel Investors Trust (“HOT”) in 1994. At that time, HOT had an equity market capitalization of $8 million and needed an immediate recapitalization. Through a series of complex negotiations, the Starwood funds acquired a majority of the company’s senior debt and completed a restructuring and reorganization of HOT by contributing hotel properties, mortgage assets, cash and debt in exchange for an approximately 75% ownership interest in HOT. Between 1994 and late 1998, Starwood helped grow Starwood Hotels to $5 billion in market value. Starwood then greatly expanded the company with the acquisition of two major hotel companies, Westin Hotels & Resorts and ITT Sheraton. By mid-1998, Starwood Hotel’s market capitalization had grown to almost $20 billion. Mr. Sternlicht became the Chairman and Chief Executive Officer of the company and renamed it Starwood Hotels & Resorts in 2000. Mr. Sternlicht led the sale of Caesars Palace Casinos to Bally’s for $3 billion, focusing the company on its hotel business. These transactions created one of the largest hotel companies in the world, employing over 115,000 people and operating some 800 properties in 80 countries, with ownership of brands such as W Hotels, Westin, Sheraton, The St. Regis, Le Méridien and The Luxury Collection. Mr. Sternlicht is credited with the creation of the W and St. Regis hotel brands, as well as industry innovations including the Westin Heavenly® Bed and line of related products and Starwood Preferred Guest, the industry’s first “no blackout” frequent stay program.
Westin Hotels & Resorts
Before Starwood Hotels’ purchase of Westin, Starwood Capital acquired Westin in 1995. Following the collapse of a prior bidder’s financing, Starwood offered to acquire the company for $537 million in a 50/50 partnership with Goldman Sachs & Co., with participating debt financing provided by Nomura Asset Capital Corporation. Westin was merged into Starwood Hotels in January 1998 at a valuation of $1.6 billion.
Equity Residential Properties Trust
At its inception in 1991, Starwood Capital focused on the disarray in the real estate markets resulting from the S&L crisis of the late 1980s - early 1990s. Within approximately 18 months, Starwood acquired 7,000 multifamily units at a fraction of replacement cost through acquisitions of equity and distressed debt from the RTC, FDIC and troubled lending institutions. In assembling this portfolio on behalf of its funds, Starwood focused on newer properties in fundamentally sound secondary markets with the strategic view that the recovery would be both dramatic and imminent. In August 1993, the Starwood funds contributed approximately 6,400 multifamily units to Sam Zell’s Equity Residential Properties Trust (NYSE: EQR) at its IPO. Today, EQR is one of the U.S.’s premier multifamily residential REITs.
iStar Financial, Inc.
In the mid-1990s, Starwood Capital recognized the opportunity to acquire high yielding mezzanine investments at substantial discounts to replacement costs. In March 1998, assets from two Starwood affiliated funds (Starwood Mezzanine and Starwood Opportunity Fund IV) were contributed to Angeles Participating Mortgage Trust (a Starwood Capital controlled REIT that was listed on the AMEX). The entity was renamed Starwood Financial Trust. From its formation until 2000, Mr. Sternlicht served as Chairman of the Board. The company subsequently expanded by closing on more than $1.1 billion of new financing commitments and by merging with TriNet Corporate Realty Trust to form Starwood Financial, Inc. (NYSE:SFI). At its peak, iStar’s equity capitalization exceeded $5 billion.
National Golf Properties, Inc.
In February 2003 in a joint venture partnership with Goldman Sachs, Starwood Capital took private National Golf Properties, Inc. (NYSE: TEE), and acquired its private sister operating company for approximately $1 billion. The investment consisted of 225 owned, leased or managed golf courses which were underperforming in part due to conflicts between the public REIT and the private operator, overpriced acquisitions, management inefficiencies and deferred capital/maintenance. Starwood successfully undertook a recapitalization and restructuring of the company.
Starwood has been a long-standing investor in residential land projects dating back to its earliest funds and special purpose partnerships. Since inception, Starwood has invested $1.7 billion of equity in residential land assets with a fair market value of approximately $3.7 billion, representing almost 5,500 acres and 37,000 lots as of December 31, 2011. Through its dedicated joint venture, Starwood Land Ventures (“SLV”), Starwood is pursuing a strategy of acquiring residential land at significant discounts where entitlements are in place, there are high barriers to entry and limited competitive supply, a competitive advantage can be gained as a low cost provider and returns can be generated over a single economic cycle.