Sternlicht’s Starwood Capital developed the W Hotel Union Square. This is the same hotel which Dubai World recently lost control of in December 2009. LEM Mezzanine Fund, a private-equity fund affiliated with the investment firm Lubert Adler placed a credit bid of $2 million to gain control of the property.
According to the report in the Wall Street Journal, “LEM will now have to ‘cure,’ or bring current, any defaulted loans that are in line ahead of its debt. The two other pieces of mezzanine debt, totaling $97 million, are held by DekaBank Group of Germany and Sandelman Partners, a New York hedge fund. LEM also needs to keep the first mortgage current after taking over the property.”
Sternlicht stated that he “looked” at the deal, but was not involved in the most recent transaction. He says this story will continue to develop, as LEM will most likely look to restructure other portions of the capital stack.
Sternlicht sees the FDIC as “the only real seller in the market” since they are really the only active market participant who is willing to sell at a market clearing price. See the FDIC’s current listings here.
On the other hand, he feels that the market is stuck because the government is allowing banks not to take an impairment on properties which appraise for less than the mortgage balances so long as they continue to work with the borrower.
I was hoping the catch phrase “pretend and extend” would be left in 2009, but it appears it will drag on into 2010…
Hat tip to REITWrecks.com, as they recently posted a good synopsis on these videos, as well as another short interview with Mort Zuckerman, CEO of Boston Properties.
[...] there is the FDIC. In a recent interview on CNBC, Barry Sternlicht stated that he views the FDIC as “the only real seller in the [...]