Starwood Capital Seeks $500 Million to Chase Tax Break Criticized by Its CEO

(Bloomberg) -- Barry Sternlicht’s Starwood Capital Group is seeking to raise $500 million to fund investments in low-income areas deemed “opportunity zones” under a new U.S. tax policy -- of which he’s been a vocal critic.

Key Insights

  • The real estate firm’s announcement ranks it among the largest investors seeking the tax benefit, but doesn’t make it the biggest. Earlier this month, Los Angeles-based CIM Group set out to raise $5 billion for projects in the zones.
  • Starwood Chief Executive Officer Sternlicht has warned that the policy, tucked into Republicans’ 2017 federal tax overhaul, may distort the real estate market and fuel projects that fail to help the poor. In November, he said there was “political giftmanship” in picking zones and chided the selection of robust areas like downtown Portland, Oregon. He told Bisnow it’s “abhorrent” that Amazon.com Inc. may use the law to build a New York headquarters.
  • Real estate investors have been keen to invest in opportunity zones, accelerating purchases of eligible land as the law took effect. At least a half-dozen real estate private-equity firms launched opportunity zone funds since June, data compiled by Bloomberg show.
  • Starwood said in a statement its strategy emphasizes markets where the firm has “a strong real estate presence,” including the West Coast, Southeast and metropolitan areas including New York and Washington, D.C. It already has 58 properties located within zones.
  • The geographic focus was underscored Wednesday as Starwood announced it hired Anthony Balestrieri to run the business. He previously served as MetLife Real Estate Investors’ director and head of acquisitions in Washington.

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