posted on April 08, 2010 19:34
The instability of commercial real estate has been blamed for the slow recovery of the economy. While commercial real estate investors in most places are struggling to hold onto their property and many are having to sell at a price lower than they would like, one hedge fund is making a killing off the unstable market. Barry Sternlicht and his firm Starwood Capital reaped huge gains buying commercial real estate in the Savings and Loan crisis and now he is making similar profits in a hedge fund hub: Greenwich, Connecticut.
The biggest slient drama: the return of Barry Sternlicht, who runs the $14 billion-in-assets Starwood Capital and who built his name buying properties on the cheap after the Savings and Loan crisis.
Sternlicht's current focus is on one of Greenwich's prime downtown office buildings, 100 West Putnam. The building once housed two hedge funds: Plainfield Asset Management and Duff Capital; both have run into serious financial trouble due to the financial crisis. Unable to pay their rents, their predicaments have placed 100 West Putnam's property manager, Antares, a few missed mortgage payments away from possibly losing control of the building to Starwood Capital.
According to people involved in the deal, Starwood Capital purchased the $30 million mezzanine loan and certain rights on the rest of the debt on the building, in a play to seize control of it. Mezzanine debt is the commercial equivalent of a second mortgage, with a few key differences.
Hedge Fund Blogger | April 6th, 2010