Starwood Capital Group CEO Barry Sternlicht Talks Property Market Outlook

**Romaine Bostick** (0:02)
Bloomberg Audio Studios.

**Barry Sternlicht** (0:04)
Podcasts, radio, news.

**Romaine Bostick** (0:07)
I'm here with Barry Sternlicht here at the Milken Conference in Beverly Hills, the CEO and Chairman of Starwood, who of course made his name turning around hotels. You created the W, you got acquired the Sheridan, you did a lot more. But you made a little bit of the Westin, we can go on and on. You were like the hotel guy for a long time, and I guess you still are.

**Barry Sternlicht** (0:26)
I was a real estate guy before I was a hotel guy.
Now I'm back to being a real estate guy, and a hotel guy. Now we have Starwood Hotels again.

**Romaine Bostick** (0:32)
You have Starwood Hotels again. But you've broadened out. I've been looking at some of your investments lately. You're doing a lot right now in the sort of AI, data center, infrastructure business. That's become a huge component of your business, isn't it?

**Barry Sternlicht** (0:44)
It has, recently. I mean, for the last five years, we've been doing data centers. And we started really in the Dulles market, the largest data center market in the world, eight and a half gigawatts in place. And Dulles was the home of the internet, and so there's great connectivity, and it's sort of grounds, it was like Park Avenue and 57th Street.
And then we've broadened out to other markets, we did a deal with us, Bitcoin Miner.

**Romaine Bostick** (1:08)
Yeah, with Miro Holdings, right?

**Barry Sternlicht** (1:09)
Miro Holdings, and we're looking at others, and then we're expanding other states, and with two platforms, we've launched into Europe and into Asia, both directly and indirectly. In Europe, we have the largest data center operator, we own the majority of interest in the largest data center operator in Ireland, which has expanded in joint venture with the Spanish utility, Iberdola, and then we've also got sites in Milan. And then in Asia, we bought, together with Warburg, controlling interest in ESR, which is Asia's largest real estate asset manager. We took it private last year, and they have a big data center business. And then on our own, we've partnered with them, with ESR, but also have moved into Australia, and we're looking at Japan and Korea also. And we've been in and out of Malaysia. We haven't bit in the dust yet, but I don't know if by the dust, I think that's the right word, bit in the bone?

**Romaine Bostick** (1:59)
Bit in the bone. Well, talk about ESR, because ESR is pretty expensive. I mean, that includes South Korea, Japan, India. I'm probably forgetting a couple of nations in there. That gives you a pretty broad footprint there. Why did you lead that deal?

**Barry Sternlicht** (2:12)
We like their footprint in the new world. They're leaders in logistics, the largest or second largest neck and neck on logistics, with a huge footprint in Australia, which is a super healthy market. We did a large investment into Sydney and Melbourne industrial a year and a half ago.
And also, we like Japan. It's done great with their abandonment of the yen and the fact that they've become so competitive while letting the currency go. So, ESR has had a really good footprint in really the fast growing countries. And we think Korea was distressed with coming out of that.
And they do, they're great developers. They've done some great development deals all across Asia, including India. And they're about a hundred and, they were 150 billion, which shrank them down to about 120 billion of AUM, assets under management. We were about 130 And we're long, as a firm, more Europe than the US, and they're long Asia, so it was complimentary to what we were doing. And we were working with a group of investors. We took it private. I think it was the largest privatization in Asia last year.

**Romaine Bostick** (3:20)
It was, yeah.

**Barry Sternlicht** (3:21)
It was.

**Romaine Bostick** (3:22)
Would you have done that? I mean, you mentioned Japan and obviously the big changes that we've seen in the yen and fiscal policy over there. Would you have done a deal with such close ties to Japan, I don't know, five years ago, 10 years ago like this?

**Barry Sternlicht** (3:35)
I think those two asset classes have caught the favor with investors. And a lot of their clients are sovereign wealths who invest with us. So, we could do diligence to how they felt about ESR as a manager. And ESR was a sort of a funny company. It was listed on the Hong Kong Stock Exchange, but didn't really pay a dividend. Most asset managers pay dividends. And they grew at hyper speed. And so the markets were, then they had a lot of exposure to China. We think we value that market appropriately, but they were a big logistics player in China. It's one of the, probably the weakest logistics market in the world that I'm aware of. And what I think we valued it well below book, and we bought the company, I think attractively.