Barry Sternlicht Interview

Real estate mogul Barry Sternlicht, founder of Starwood, shared several takes on the real estate market, WFH US vs. International trends, and which industry is at most of risk from AI. Excerpts from interview with Ed Baxter (Bloomberg).

Good insights all around.

On WFH:

"The work from home phenomenon is a US phenomenon.

If you go to England or Germany, and we have some investments offshore...Rents are up. vacancy rates in the top Europe and German property markets Berlin, Frankfurt, Munich, Hamburg are less than 5%. People are back in the office. You and I go to the Middle East and Asia - They're full.

So this is a US situation in the US. You have two markets. You have the really nice buildings that are ESG compliant, that are lovely, like the one we're sitting in.

This place is buzzing and they're back because it's a fun place to be.

And if you're in a building with lots of cubicles and it's dark and there's no life and love, so nice buildings, even the city is as currently destitute as San Francisco. From an office market perspective, the best buildings are still leased. And so you're going to see a bifurcation of the market in office. The nice buildings will stay rented."

>> Barry has a nuanced take - modernized Class A (e.g., lighting, modern amenities, etc.) will do fine re: occupancy

Ed Baxter: "So a lot of fortunes were made in the real estate world in '07 and '08 when people bought distressed real estate in the late eighties to when the RTC was here."

>> Yes. The opp'y now is not as dislocated as it was in 2008. Not by a longshot. But we believe there are 3x+ type opportunities in this climate.

On the best investment advice:

"Not selling my winners too early. And I think about that all the time. Human nature, even in running a stock portfolio, is to take your gains and hold your losses, hoping they come back to par. And the same thing applies to real estate."

>> Agreed. High quality assets that compound are rare - hold them for as long as you can.

On AI:

"Legal is probably the number one industry that could be disrupted by AI.

You can you can search every president in the history of mankind with a machine. You don't need a paralegal to do that anymore.

And they'll write the brief for you. So the legal profession is probably target one.

Not far behind is advertising. When the machine is going to update advertising and keep bombarding you with more and more ads, with more and more offers until you take one.

So humans won't be there. They'll be maybe guiding it, but it'll change advertising.

It's another big user of space finance. So it could fundamentally shake up permanent demand for office."

>> Yep - multiple variations of Legal GPT are hitting now.

On RE market:

"Right now we're in the Category five hurricane and it's sort of a black cloud hovering over the entire industry until we get some relief or some understanding of what the Fed's going to do."

>> We agree. We believe the opp'y for Qualified Purchasers is compelling. Reach out if you'd like to learn more how @lumidawealth

is approaching this with seasoned distressed CRE investors.