Starwood Capital Puts It’s Crillon Hotel On The Market
In the surprise of the week department, Starwood Capital announced earlier this week that they would be putting their Crillon hotel on the market – hoping to get around $420 million dollars for the property – they are looking to sell it to a private investor rather than a major hotel chain, which suggest that Starwood may still intend to open additional Crillon hotels throughout the world, but it still begs the question – why would Starwood sell such an important asset to their future plans (as they’ve stated in the past)?
Going back even a few months ago, Barry Sternlicht was interviewed on Bloomberg TV, and he stated how the Crillon was an important asset – one which really sets the tone for high end, luxury hotels – so its a surprise to see them placing the property on the market, not only that but real estate prices aren’t exactly booming right now – if the sale were to be put off a few years Starwood would probably see a significantly higher sale price. The sale almost speaks of desperation – but I don’t exactly think that Starwood Capital is dying for money – even in these trying times.
Could Starwood’s intentions be to just simply get the Crillon building and property of their balance sheet, while still owning the name and running the day-to-day operations of the hotel through their management firm? Or is Starwood really giving up on the Crillon name and history that they spoke so highly of when it was first purchased, and even intended to create a 6-Star hotel brand based on the Crillon. It’s also possible that this is some type of a ploy to see what the value of the Crillon would be – but since they apparently hired Eastdil Secured to market the property it would look bad if their intentions were to just make people run around looking to sell a property that they never had intentions to sell in the first place.
Starwood is still listing its intentions to open additional locations on their Groupe Du Louvre website, but they state (and this hasn’t changed since I initially saw it a few years ago) that Starwood “expects to capitalize on the name of Crillon”, not necessarily hold on to the original building.
We’ll see what happens with this property – it’s no secret that Starwood has been looking to sell some of their hotel assets to a Saudi investment group – but still, the Crillon? The creme-de-la-creme?
This is almost too difficult to believe.
Related posts:
- Starwood Capital’s 1 Hotels and Baccarat Brands Expanding First Into China
- Starwood Capital’s SH Group
- Crillon on 57th in New York City
- Starwood Capital Keeps Growing
- Interesting News On Starwood Capital’s W. 57th Street Property
Category: barry sternlicht, crillon hotels, Hotel Brands, Hotel Development, Hotels, Starwood Capital Group
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Thank you for writing it! I watched the bloomberg interview not more than two months ago and listend to Mr. Sternlicht spout about the strong position they had and how the hotel Crillon was a jewel in that crown. It was shocking but sadly, expected, when I saw the hotel go to market this week. The Starwood capital corporate behavior has been a little eratic lately. It does not reflect a calm in the sea of turmoil that the markets are enduring. I think California’s pension funds(big investor in Starwood according to an associate of mine) should be a little nervous. The real effort by Starwood has been a development in Dubai, but everybody knows Dubai’s development has been having some serious roadblocks lately. I suppose I was the most dissappionted with Bloomberg, that we can see this interview of Sternlicht and be led to believe that all is just wonderful and Bloomberg was not interested in reporting on details that existed then, or forecasting well enough to spot this one coming.
To me, it feels like a panzi scheme… they took a lot of money in the past few years for the purposes of investments… now they have not quite realized the development they intended, but they need to start paying back while maintaining that everything is working to plan. They are even selling off the essence of the plan by getting rid of the Crillon hotel which the plan was based around. I would hate to be the last investor waiting on a payback from these investments.
Oh and PS… the reason for selling the Crillon to a private investor instead of a large corporate chain, is because most everyone knows that the size of the Crillon is not large enough for the type of operating profit that most chains would prefer given the high labor costs of the full service property. It is also extremely challenged for any proper public spaces.
Stuart –
Thanks for your comments. I do agree that Starwood Capital has been acting very erratic lately which is very untypical of them. While I wouldn’t even suggest that Starwood Capital is a ponzi scheme, since obviously they are buying properties with their investment money – I do agree that they may be getting worried about the payments to their investors.
Societe du Louvre was purchased with the intention of the Crillon & Baccarat brands being launched by 2009-2010 – 1 Hotels as well, but it wasn’t part of Societe du Louvre – and since the economy has taken a turn for the worst, their plans have gone out the window – perhaps selling these properties is how they will get the high rate of return they have promised investors, I just wonder if 10 years down the line they will regret selling some prime assets – particularly the Crillon.
Although, I wouldn’t be surprised to see them sell the Crillon property, keep the management contract, and also keep ownership of the Crillon name – if that’s the plan, that’s a great idea which makes Starwood Capital look like gold – selling the property, bringing the much needed cash into the company for the investors returns, yet still being able to open the Crillon chain as they have spoken so highly about in the past. The only thing that sticks out in my mind is Starwood Capital’s normal investment philosophy which is to own the property outright (they own most of the LeMeridian hotels throughout the world – yet, Starwood Hotels handles their Management) instead of being a Management company.. But then again, that’s why they created the SH Group.
I’ll write more about this in a future story.
Hello Andrew
You have hit the point, the second biggest problem of the Starwood capital, and that is management (or lack of). I have been looking at every corporation as a stock option through a filter of fundamental economics. And in the particular case of Starwood Capital, where no insider information is easily available, I have been looking at their management performance. Just like Barry Sternlicht praised the hotel he put for sale on Bloomberg, Russel Sternlicht accused the Taittinger management of being inefficient and inferior to his concept. Promising to turn around the profit potential of the holdings they acquired from that company. The case of the Crillon about face, this also happened in terms of Taittinger…
On November 28, 2008 a famous annual event occured at the Crillon, raised approximately 30,000 US dollars for charity(only!, compared to the millions charities take at events such as AMFAR), the hotel was painfully low in occupancy, and even had empty seats which had to be filled at the last minute by the Sternlichts (according to an inside source). This event has been inherited from the Taittinger management and it was exactly where I would have expected to see the decisive management techniques of the Sternlichts in France, the event peaked in 2000 with a debutante of distant relation but big name, and steadily declined ever since. So by the time the Sternlichts inherited it in 2005, it should have been obvious what the value of it was. The event has been creating almost zero publicity for the hotel, and only a declining revenue for the organizer from the sales of the pictures. While other hotels like the George V invested in designer florists for an updated look and the costs in designer remodels that guaranteed them an excellent PR and occupancy. (Actually, bigger name attendees of the Crillon stayed at George V instead of the Crillon!(e.g. Bruce Willis according to media reports).
The Crillon continues the antiquated and non-productive marketing techniques of the Tattingers whom the Sternlicht brother had scorned. The event has also created some legal issue for them that may be a liability in the sale of the hotel. The organizer of the event, who is essentially an employee of the Sternlichts, frequently interviewed in the press saying they open policies that discriminate against girls, and that all girls wear ‘haute couture’ (which is not true and infringes on legal status of the protected term in France- which the Chamber Syndical of Haute Couteriers is aware of and potentially forming a case against). The organizer may have been involved in other inappropriate statements that have also had consequences for the clientèle’s basis of the Crillon. In fact, I am trying to investigate a recent dispute- tort action- that the organizer has allegedly committed against an invited girl, but the USA representative of the girls family who is located in Los Angeles insists that any comment should come out of the unresponsive Sternlicht offices concerning their employee.
While it can be argued that in America a property could be brought on the market as an experimental ground for capital gain or other reasons, In Europe, the terms of the trade are clear. A commercial property that is for sale, is because it has the stigma of non-performing income and mismanagement.
As the size of the Crillon, the location and the number of rooms and the declining luxury and tourist market, I would doubt any profitability for that hotel. The example of the Plaza at New York should never be forgotten, (no money made, so they converted into condo/properties). I agree with you that this is not a ponzi scheme as it doesn’t refer to stocks which is normally where the readers connect it with. However, for any expert, the ponzi techniques are there, and I must agree with Stuart. In fact I must say that Stuart was quite diplomatic, as this is worse. In a ponzi scheme, the investors are paid as they request payment from their own or new funds and mathematically the scheme is doomed to collapse as it can only exist if the return of the investment is higher or equal to the payout. In the case of Starwood, the assets have been bought with a mixture of old funds, pensions funds, and private investors by promising them 20 and sometimes 22% return. In order to give any return now (because of the changes in world financial markets) they must sell assets and pay out of the proceeds. What makes this worse than a ponzi scheme, is that the depreciation of the assets, the manner in which much of the value of the property market bubble has deflated, is eroding the capital basis daily and it is just not possible that investors could take out what has been put in. The Taittingers are point in fact. Their vineyards were sold at a huge amount. They are now back in control of the vineyards at a substantially lower cost than they sold them. They are members of the few that essentially cashed in and capitalized on the bubble. The Sternlichts purchased the inflated air of the bubble with the acquisition of the Champagne company. Who’s management is really superior?!
Nicholas… another Zealot-ee
ps… the above says nothing about the hot news out that is highlighting the Baccarat dispute that Starwood will have to deal with also. Fasten your seat belt, it feels like Starwood Capital is going to give us twisting a ride over the next few months with all the contrasting news and activity.
Andrew-
Any word on Starwood’s Turks and Caicos development?
Paul – Seems to be canceled. I have not heard anything about it since the Baccarat brand was initially announced.
-Andrew
Any news on Baccarat is rumored to be on the market for the highest bidder. Lock stock and Barrel. Cash is king and Sternlicht did nothing with the brand, referrring to Barry, not russell. At the end of the day, Barry calls the shots, which in europe was the wrong approach! Russell had the talent if left alone but clearly this was never meant to be.