Jeff DiModica and Dennis Schuh
President; Chief Originations Officer at Starwood Property Trust
Last year's rank: 3
Liquidity during this crisis was paramount in separating the haves from the have nots, Jeff DiModica said.
“When we write the book on COVID and what happened from a market perspective, it’s not going to be about credit losses, it’s going to be about liquidity,” DiModica said. “Those who had liquidity came out well, and people who didn’t, didn’t.”
But overall, “I think everybody acted pretty responsibly during COVID,” Dennis Schuh said of the industry overall. “And that was down to having good discipline going into it.”
For Starwood’s part, “We built a model that had access to massive amounts of liquidity,” DiModica said of the COVID year. “We had $3 billion in unencumbered assets, we could have created a few billion dollars of liquidity, and we never had less than $800 million of liquidity. And, by April 14 — a month into the worst of COVID — we had agreed to buy a billion dollar pool of mortgages from a bank.”
In addition to managing its $14 billion loan portfolio, Starwood Property Trust racked up $4 billion in new originations during the COVID-19 period. Notable transactions included the $495 million acquisition financing for Blackstone’s Bourne Leisure Portfolio in the U.K.; a $280 million loan for Onni Group’s Hope + Flower multifamily project in Downtown L.A.; a $230 million loan for Dune Real Estate Partners and Westmont Hospitality Group on a 41-property extended stay hotel portfolio across the U.S.; and a $120 million loan to Brookfield Properties for an office building at 1200 K Street in Washington, D.C.
Starwood never paused lending activities during the pandemic, carefully picking its spots and continuing to opportunistically lend at attractive risk-adjusted returns. It devoted the majority of its dollars to multifamily and industrial deals, along with a couple of office and hospitality opportunities.
It also purchased more than $300 million of performing loans in Europe at a discount from Morgan Stanley, and continued to increase its exposure internationally, responding to attractive opportunities in European markets.
Then, it brought its construction exposure, in terms of future funding commitments, down by 60 percent, giving it ample powder for new, future-funded, heavy renovation or construction deals.
DiModica predicts a “massive” first half of this year, “and that’s because we came out of the gate swinging, and swinging hard,” he said.
And, as 2021 plays out, “the thing we’re watching closely — and everybody’s watching — is the office space,” Schuh added. “The outlook for office is definitely a little uncertain, and everybody’s waiting to see what happens.”
Also, equity investors’ glasses are more rose-tinted than those of lenders, DiModica said: “The gap between their optimism and ours is the widest I’ve seen it in the years that I’ve been doing this. Lenders have clearly not yet voted that office rents are coming back.”
Meanwhile, over the past year, Starwood has also established the Starwood Property Trust ESG Steering Committee, and is partnering with Starwood Capital Group to establish a Diversity and Inclusion Council to increase the hiring, retention and promotion rates for under-represented individuals at Starwood, especially at the management level. Today, 44 percent of Starwood’s 350 employees identify as female, and 49 percent are black, Indigenous and people of color (BIPOC). Further, 52 percent of 2020 hires were women or BIPOC.—C.C.