Oct 4, 2021 · 1h 7m · capital-allocators
Barry Sternlicht – Masterclass in Real Estate in a Post-COVID World (Capital Allocators, EP.216)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Starwood Capital Group founder Barry Sternlicht to examine his career trajectory, crisis-investing playbook, macroeconomic views on post-pandemic property sectors, and alternative capital allocations.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 12.6% of the talking time here. How this is scored →
Ted as informed peer 2.1 Guest teaching 5.0 Guest disagreement 2.8 Ted pushing back 0.1
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 53:45 Tearing into fraudulent EV SPACs and Wall Street greed
Barry aggressively attacks the lack of sponsor underwriting discipline, highlighting fraudulent companies like Lordstown Motors that lied about orders and built fake prototypes.
Hardest push from Ted ▶ 26:19 Probing market signaling on asset salesTed presses Barry on whether sophisticated buyers assume Starwood is selling because the upside has already been completely extracted.
Biggest teaching moment ▶ 18:00 Washington lobbying lesson on paired-share REITsBarry recounts in precise detail how naive he was about Capitol Hill politics when Bill Marriott used familial connections with Orrin Hatch to eliminate Starwood's tax advantage.
Ted holds their own ▶ 26:19 Challenging the premise of secondary market buyer confidenceTed demonstrates industry sophistication by highlighting the adverse selection problem when a premier manager exits a high-profile property position.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Barry Sternlicht's Early Career and S&L Crisis Lessons | 2 | 4 | 1 | 0 | Ted opens with broad biographical prompts about Barry's entry into real estate. Barry explains how he navigated inverted yields during the S&L crisis and learned early lessons after getting laid off. | |
| Founding Starwood and Distressed RTC Acquisitions | 2 | 5 | 1 | 0 | Ted prompts Barry on early transactions and how he timed exits. Barry details buying distressed RTC assets out of government auctions and selling 8,000 units to Sam Zell when prices approached replacement cost. | |
| Building Starwood Lodging and the ITT Sheraton Takeover | 2 | 6 | 2 | 0 | Ted asks how Barry scaled from buying individual hotels to acquiring ITT Sheraton. Barry provides a detailed breakdown of paired-share REIT mechanics and getting out-maneuvered politically in Washington by Bill Marriott. | |
| Opportunistic Capital Allocation and Mortgage Lending Expansion | 2 | 4 | 1 | 0 | Ted asks about flexible capital allocation across debt and equity. Barry explains launching Starwood Property Trust during the 2009 liquidity freeze when banks were unwilling to syndicate blind pools. | |
| Post-COVID Real Estate Overview and Geographic Migration | 3 | 6 | 3 | 1 | Ted probes into post-COVID real estate dynamics and market signaling when selling assets. Barry gives an extensive macroeconomic breakdown of migration from blue to red states and positive leverage mechanics. | |
| Asset Class Health and the Structural Decline of Retail | 2 | 6 | 4 | 0 | Ted asks about the remaining green-light asset classes. Barry explains the bifurcated office and hotel recovery while launching an impassioned critique of Amazon decimating traditional retail through AWS-subsidized delivery. | |
| Sponsor Message: Ridgeline AI-Native Investment Technology | 2 | 5 | 3 | 0 | Following an ad read, Ted asks about investing across Asia and China. Barry explains why Starwood largely avoids China and shares a war story about an unhedged sovereign tax lien in Mumbai. | |
| Macroeconomic Policies, Labor Shortages, and Domestic Headwinds | 2 | 5 | 5 | 0 | When Ted asks about overlooked opportunities, Barry playfully dismisses giving away secrets before venting forcefully on labor shortages, stimulus checks, and broken immigration policy. | |
| Family Office Investing, PropTech, and Digital Assets | 2 | 4 | 2 | 0 | Ted inquires about Barry's personal family office investments. Barry explains his thesis on PropTech incubation, consumer venture bets, and holding Bitcoin as a non-correlated fiat hedge. | |
| The Rise, Excesses, and Fallout of the SPAC Market | 2 | 5 | 6 | 0 | Ted asks for Barry's take on the SPAC boom. Barry unleashes a scathing assessment of unqualified sponsors, misaligned incentives, Wall Street fees, and fraudulent EV listings like Lordstown Motors. | |
| Pandemic Crisis Management and Dislocation Investing | 2 | 5 | 3 | 0 | Ted asks how Barry handled the pandemic crisis. Barry describes executing opportunistic rescue financings like TRTX and proving contrarian theses in single-family residential rentals despite public skepticism. |
Statements from this episode (24)
Sternlicht: Real estate remains the last great imperfect market
“Real estate seemed like, okay, it was also the last great imperfect market. Things happen in the real estate market that don't happen in the securities market. People do deals because they have a tax situation, or they don't want people to see what they screwe…”
Sternlicht: Starwood acquired 8,000 apartments and tripled investor money in 18 months
“We bought 8000 apartments in 18 months and I sold them all to Sam Zell and we tripled their money in 18 months.”
Sternlicht: Real estate investors should sell when asset prices reach replacement cost
“One of the rules of real estate is when prices get to replacement costs, you should sell, because when the prices get that high, new construction begins”
Sternlicht: Modern REIT industry was born to let owners escape recourse debt
“The reed industry was born not because people wanted to the good graces of these very rich real estate guys, it's because they were all on recourse debt, and interest rates plummeted, And all of a sudden the dividend yield of an unleveraged real estate portfol…”
Sternlicht: Starwood Lodging grew from $8 million to $20 billion in three years
“We were eight million equity, and in three years we were twenty billion dollars.”
Sternlicht: Marriott lobbied Washington to outlaw Starwood's paired-share REIT structure
“Bill Marriott had been at this for
40 years, and I've been at it for three.
He decided that this enough is enough, and they're gonna get rid of our paired share structure.
So he went to Washington, and in the budget reconciliation bill of that year, they threw…”
Sternlicht: Pure hotel management contracts cause destructive overbuilding
“Management companies, which only own management contracts, want you to build.
So if you don't build, they don't get revenue and they don't really care how the asset fares, right?
So you would have wild increases in supply, cash flows would crash.
This way, whe…”
Sternlicht: Starwood owns 110,000 apartments, including 40,000 affordable units
“We, I think we have a 110,000 apartments, something like that, one of the largest owners in the country, of which 40,000, I think, are affordable housing.”
Sternlicht: Starwood owns no office or residential properties in SF or NYC
“So we don't own anything in San Francisco or New York. We own a couple hotels in New York. We own no office, no residential anymore, and we've been active in these markets. We got out years ago, way before COVID.”
Sternlicht: San Francisco is the worst US office market with 30% vacancy or sublease
“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.”
Sternlicht: Amazon subsidizes $4B-$5B retail losses with AWS to destroy small retailers
“It's fundamentally destroying mom and dad retail across the country, and it's one of my pet peeves because they were allowed to sell product retail-wise for less than the cost of, they're losing four or five billion a year in retail, which they subsidize with …”
Sternlicht: Amazon Prime will hit $500 once competing retail is gone
“They charge us 75 dollars, and now I think it's a hundred. They'll go to 500 when there's nothing left but Amazon in this country.”
Sternlicht: Starwood Avoids Real Estate Deals in China Except Hotels
“We've avoided going to China as investors, except in one area, in hotels. We have a joint venture with a Chinese account.”
Sternlicht: Investors Underprice Political and Legal Risk in Emerging Markets
“One of the lessons I've learned over the last couple of years, 30 years, is we don't put enough political risk into our 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 l…”
Sternlicht: Land Is 65%–75% of Indian Building Costs vs. 20%–25% in US
“And 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 the land purchases everything.”
Sternlicht: Starwood Brooklyn Hotel Faces Severe Staffing Deficit Despite $10 Wage Hike
“I was at the, our hotel in Brooklyn last night and we have 200 and 20 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 job fairs and we've raised rates 1…”
Sternlicht: Tokenization of finance will change the world like the internet
“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.”
Sternlicht: Crypto accounts for about 3% of personal net worth
“I kind of figured out, you know, again, it's like most people would say that's probably three percent of my net worth.”
Sternlicht: Bitcoin is as good as gold and arguably better
“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.”
Sternlicht: Desperate SPAC sponsors will cut promotes by 25% to 75%
“The outcome of this will be as the two year anniversary of those SPACs 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 b…”
Sternlicht: Lordstown Motors committed fraud and lied about vehicle orders
“They front run the trade. They lied about their orders. They made up the car. It was a fraud. The model they showed the street was not active.”
Sternlicht: Starwood executed pandemic rescue financing for TPG's TRTX
“We did a rescue package on TPG's mortgagry, TRTX, and he said, how could you do this? My son, who's just entered Harvard Business School, and I was explaining to him that at these values, where our attachment points were for the loans we were getting, we could…”
Sternlicht: Single-family rentals match multifamily margins with lower defaults
“Turned out they had the same margins as multis. The tenants are usually higher quality, so you're less default 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.”
Sternlicht: Do not blindly trust top VC firms like a16z or Sequoia
“The key to investing is actually doing your own work. Then you triangulate other people's opinions and stuff, but do your own work. And I, the biggest mistakes like you often find when you find Andreas and Horowitz and Sequoia are, they're all in this deal. I …”