The Visionaire, New York
Starwood Opportunity Fund VII
In October 2009, a consortium led by Starwood Capital acquired a $4.5 billion face-value distressed loan portfolio owned by the former Corus Bank. The $2.7 billion purchase of the portfolio from the Federal Deposit Insurance Corp. was one of the government’s largest distressed debt transactions during the Great Recession. The portfolio at acquisition consisted of more than 100 loans and owned real estate assets linked to high-quality condominiums, multifamily housing, office properties and land. Our strategy included “reworking” more than 40 large, non-performing loan positions and creating a dedicated entity (ST Residential) to manage the 13-asset multifamily portfolio. The team subsequently created an innovative branded lifestyle message for the multifamily properties that allowed it to raise prices and rents while achieving healthy absorption rates, followed by a successful program of loan payoffs, condo sales and asset sales. In March 2015, the Firm sold the last major asset in the portfolio.
Now, as Starwood Capital focuses on managing the end of the life of this partnership, we team can look back on what has proven to be an extraordinary investment for investors and the U.S. government.
In February 2013, Starwood Distressed Opportunity Fund IX, alongside a limited partner co-investment vehicle, acquired Principal Hayley Group and its extraordinary pan-U.K. collection of 22 grande-dame style hotels, as well as a London conference center. This purchase represented an opportunity to invest in an entire hotel company, including its management team, brands and technology platform. The platform expanded in January 2014 through the acquisition of Four Pillars Hotels—a portfolio of five hotels located in and around the historic city of Oxford. The portfolio grew further in March 2014 with the acquisition of De Vere Venues, which added 23 owned and leased hotels, as well as several conference centers in London.
After realizing significant cost synergies, delivering robust operating performance and investing more than £200 million of capital across the portfolio, Starwood Capital announced a rebranding of its collection of U.K. hotels under the name of The Principal Hotel Company. The new brand comprises Principal—city-center hotels based in landmark buildings in exceptional locations, and De Vere—modern country estate hotels with mansion houses at their heart.
The Principal brand launched in November 2016 with a trio of properties—The Principal Manchester (formerly The Palace Hotel), The Principal Edinburgh George Street (formerly The George Hotel) and The Principal York (formerly The Royal York Hotel).
The distinctive heritage and resulting relationship between the properties and their surrounding communities are the cornerstones of The Principal Hotel Company brand. Each of the hotels has a story to tell—of its history, its design and architecture, its quirks and characters, and its role in shaping the area in which it resides. In contrast to the mass-produced chain hotel, these stories provide The Principal Hotel Company with a canvas on which to curate a unique sense of place for each property.
Starwood Capital has long demonstrated the ability to tackle complex investments that offer attractive risk/return potential. Such was the case when the Firm teamed up with affiliate Starwood Property Trust (NYSE: STWD) on the $1.05B acquisition of the largest special servicer in the U.S., LNR Property LLC, in April 2013.
While Starwood Property Trust‘s purchase of LNR greatly enhanced its expertise in the distressed marketplace and added Starwood Mortgage Capital, a commercial real estate conduit loan origination platform, Starwood Capital through an affiliated fund also acquired two important components. The first was LNR’s Commercial Property Group, a real estate portfolio consisting of 26 assets in nine states, concentrated in land suitable primarily for single and multifamily development. The second component was an interest in Auction.com, which sells owned real estate and loans on behalf of financial institutions, corporations and individual owners. In 2014, Google Capital invested $50 million in Auction.com and committed to helping the company take advantage of its unique platform.
LNR’s position as the largest special servicer in the United States—and the named special servicer on approximately 21% of all CMBS transactions in the industry—enables it to provide unique insights into specific investment opportunities, sectors and markets. In addition, Starwood Property Trust’s non-controlling minority interest in Situs—which acquired LNR subsidiary Hatfield Philips International in 2016—provides Starwood Capital with important visibility into the continued untangling of the region’s distressed real estate loan inventory.
In 2015, Starwood Capital took a major step in the Firm’s continuing expansion into the select-service space with Starwood Global Opportunity Fund X’s acquisition, alongside a limited partner co-investment vehicle, of TMI Hospitality, one of the largest owners, managers and developers of select-service hotels in the United States, with 184 operating hotels and more than a dozen in the development pipeline. This follows joint ventures that Starwood Capital has established across multiple recent funds that target select-service hotels with strong cash-on-cash yields that can be acquired at significant discounts to replacement cost. As a result, the Firm has assembled one of the largest collections of select-service hotels in the United States. In October 2016, China Life—China’s largest life insurance company—announced that it would serve as the anchor and leading investor for a 280-asset, 24,000-key select-service portfolio alongside a consortium of sovereign wealth funds and other investors that Starwood Capital assembled.
Starwood Capital created value throughout all phases of the investment period for these select-service properties. The assets in the sold portfolio were acquired at favorable entry points and aggregated into a portfolio well-diversified by brand, geography and demand drivers. The Firm’s dedicated select-service asset management team implemented strategies to improve revenue, control costs and strategically invest capital to improve guest-facing areas—to maximize return on investment and profitability. In addition, the team executed an exit strategy of a private portfolio sale to investors seeking a well-diversified portfolio of strong cash flow-generating hotels.
With the 2009 acquisition via SOF X and and a limited partner co-investment vehicle of Corus Bank’s loan portfolio, Starwood Capital became the second-largest condo owner in Miami. As a result, the team was intimately familiar with the city and its massive potential. All that was needed was the right opportunity to capitalize upon—and the team found it with the Gansevoort, an unloved property blessed with a perfect location on South Beach.
In February 2012, SOF VIII and an LP co-investment vehicle purchased the fee-simple interest in property in a 50/50 joint venture with one of New York’s most successful private developers. After an approximately $250 million renovation, Starwood Capital celebrated the opening of the newly rebranded 1 Hotel South Beach in March 2015. The opening also marked the launch of 1 Hotels, a new lifestyle hotel brand that cultivates the best of eco-conscious design and sustainable architecture, together with extraordinary comfort and an unrivaled level of service.
In August 2013, SOF IX purchased—at a significant discount to par—an €809.4 million ($1.0 billion) non-performing loan portfolio from the National Asset Management Agency (NAMA), the Irish “bad bank.” Consisting of 18 loans secured by 39 Irish commercial properties, the portfolio was the first sale of Irish assets by NAMA. The pool—heavily concentrated in Dublin, Ireland’s largest and most liquid market—comprised retail, industrial and residential properties, offices, parking garages and land/development sites.
The transaction highlights our focus on the increasing number of distressed debt investment opportunities in Europe, and it positioned us to benefit from the recovering Irish real estate market in general, and Dublin in particular.
In 1993, Japanese construction company Aoki Corp. was under pressure from its lenders to shed non-core operations, including Westin Hotels & Resorts. The hotel company had been struggling, and a reputation for poor operating performance had prevented it from adding new management contracts. After extensive negotiations, funds managed by Starwood Capital acquired Westin in May 1995 for $537 million. The team quickly installed a new management team to execute a strategy of operational enhancements, brand marketing and growth.
As a result of these efforts, Westin saw its managed or franchised hotels increase from approximately 70 to more than 120, before Starwood Hotels & Resorts (formerly NYSE: HOT, since merged with Marriott Hotels) purchased the business for $1.6 billion in January 1998. This transaction served as an early example of the Firm’s skill in identifying undervalued assets and enhancing operations through its asset management expertise—and helped establish the Firm as a global leader in the hospitality space.
In January 2016, SOF X and a Starwood Capital co-invest acquired an institutionally owned, Class A multifamily portfolio that included assets in South Florida, Denver, Washington, D.C., Seattle and the Inland Empire, California. The portfolio consisted of 23,262 units across 72 garden style and mid-rise communities—operated as 66 distinct assets post-close. These Class A assets had an average vintage of 1996, limited deferred maintenance and amenities such as 9 foot ceilings, in-unit washers and dryers, and parking garages. With this acquisition—together with SOF X’s purchase of Landmark Apartment Trust (17,624 units), also completed in January 2016—Starwood Capital became one of the largest owners of market-rate multifamily housing in the United States.
At its $5.4B purchase price, the transaction was the largest non-hotel acquisition in Starwood Capital’s history. We purchased the portfolio at a 10–15% discount to replacement cost. Starwood Capital’s close, longstanding relationship with the seller created an opportunity to purchase these assets off-market. The seller was focused on a quick, certain execution and only approached a few bidders that could complete such a large transaction.
All five markets represented within the portfolio had very strong fundamentals—including three of the 20 fastest-growing U.S. cities in 2015, according to Forbes. The population growth in these markets was twice the national average over the two years prior to acquisition. Employment growth also exceeded the national average over the same period. Further bolstering the value of this multifamily portfolio is the significant expense of home ownership in all of these markets. At acquisition, the average annual cost of owning a single-family home was 40% higher than renting in these markets and required a down payment equivalent to 22 months of rent—which is unattainable for most renters.
Our conservative underwriting assumed an increase in expenses above historical rates. We also assumed rent growth below what our other properties have achieved in these markets, and underwrote upgrades for approximately 35% of the units—even though we believe that the renovation potential could be much greater.
In April 2015, SOF X purchased a 6.7 million square-foot, high-quality, welllocated suburban office portfolio in an off-market transaction for $1.125 billion. The vast majority of assets were located in the high-growth markets of Raleigh, Nashville and South Florida.
The portfolio at acquisition included 61 existing buildings and 57 acres of land, as well as a building under construction in Raleigh. The buildings were based in markets with minimal supply under construction, with the majority of that new construction pre-leased—thus greatly reducing the negative impact new supply might have on the portfolio. Starwood Capital’s asset management team is positioning the portfolio’s assets to capitalize on strong cash flow and maximize profit by investing in high-return amenities, actively engaging tenants on early renewals and increasing rents to market levels.
The team has also taken advantage of opportunities to generate upside through early asset sales—including selling non-strategic properties for prices well above initial allocations.This investment demonstrated Starwood Capital’s ability to identify an attractive point in the cycle to enter markets that were well-positioned for growth.
Anticipating an opportunity that would emerge following the financial crisis, the Firm in 2008 began to selectively acquire both small and large assemblages of finished and semi-finished residential lots in some of the nation’s most distressed markets that the team nonetheless believed were positioned for recovery. To pursue this strategy, Starwood Capital created Starwood Land Ventures, which teamed up on an exclusive basis with best-in-class, local residential land experts in Arizona, California, Colorado and Florida.
Starwood Land Ventures on behalf of multiple funds purchased nearly 20,000 lots. Among its acquisitions, Starwood Land Ventures purchased the remaining 635 fully entitled lots in the gated community of Country Club East within the master-planned community of Lakewood Ranch in Sarasota, Florida—the top-selling master-planned community in the state at the time.
In 2011, Starwood Capital via SOF VIII capitalized on the opportunity to form a joint venture with the master developer for the 50-acre Union Station project in Denver, Colorado—the largest transit-oriented development in the U.S. The Firm believed that Denver was poised for a resurgence, and that the Lower Downtown (LoDo) area in particular—which includes the Union Station neighborhood—was primed to emerge as the new city center. As part of the JV, SOF VIII’s partner contributed several undeveloped land parcels that were all located within steps of the historic Union Station, which has become Denver’s new transit hub.
The first building that the JV developed, One Union Station, was sold in 2014—and established a new high-water mark for Denver office pricing on a per-square-foot basis. The second, the Triangle Building, was completed in August 2015 and sold in May 2017. The third property, 16 Chestnut, was sold to an institutional core investor in June 2016, prior to the start of construction—setting a new record for the highest price per buildable square foot ever paid for land in Denver, and locking in profits without ever putting a shovel in the ground. The building was 81% pre-leased to Davita Healthcare Partners, the leading provider of kidney services in the United States.
In 2014, SOF IX acquired 150 West 34th Street, a 78K square foot retail building 100% leased to Old Navy. The Fund purchased the property—situated in the heart of New York City’s 34th Street retail corridor, between Sixth and Seventh avenues—from a seller that was determined to close quickly. Thus, the Starwood Capital team was able to showcase the ability to rapidly and thoroughly analyze and finalize what it viewed as a fantastic opportunity to acquire a prime retail asset—with an investment-grade tenant and valuable optionality through development rights—in one of NYC’s top shopping districts.
At acquisition, the 34th Street corridor was experiencing a major rejuvenation—some of its most prominent stores, such as the Macy’s and H&M flagships, were undergoing significant renovations. Due to the disparity in rents between 34th Street and the Times Square, Madison Avenue and Fifth Avenue shopping districts, the team believed that tenants would increasingly be attracted to this corridor. With Penn Station down the block, foot traffic averaged up to 12,000 pedestrians per hour at peak times—and the team knew the neighborhood was well-positioned to reap the additional benefits of Hudson Yards and other nearby development and improvement projects.
With market participants recognizing the increasing strength of the 34th Street retail corridor in New York, the team elected to realize those gains by selling 150 West 34th Street for significantly more than its purchase price—barely one year after SOF IX’s acquisition of the asset.
With its Walker Tower investment, Starwood Capital was able to position itself to capitalize on the New York City luxury condo boom. In December 2010, the team negotiated a 50% interest in a 19-story condominium complex located at 212 West 18th Street, between 7th and 8th avenues, in New York City’s stylish Chelsea neighborhood. At the time of acquisition, the Firm’s outlook for high-end luxury development in the downtown Manhattan area was extremely positive, due to decreasing supply, a stable price environment, increasing sales volumes and limited new construction.
Originally built in 1929 for Bell Telephone Company, the property was designed by Ralph Thomas Walker—named “the architect of the century” by The New York Times. Walker Tower presented an exciting redevelopment opportunity, due to its 13’6” average ceiling heights, art deco architecture, space for residential terraces, unobstructed views of the Empire State Building, Hudson River, New York Harbor and both midtown and downtown, neighborhood amenities and existing development rights. The transformation of the asset into 47 high-end residential condominiums involved a gut renovation of the entire building, as well as the construction of four additional floors.
Starwood Capital’s in-house design staff, in collaboration with the Firm’s development partners, produced what we believed to be an extraordinary product. Clearly, the market agreed with the team’s assessment—extremely high demand allowed Walker Tower to sell out at an average of $3,750 per square foot. A full-floor penthouse unit in the building sold in January 2014 for $51 million, or nearly $8,400 per square foot—setting a new record for a downtown Manhattan condominium transaction.
Amid the depths of the Great Recession, Starwood Capital recognized that traditional commercial lenders were withdrawing from the marketplace and a significant need had emerged for alternative commercial mortgage financings. In August 2009, Starwood Capital created Starwood Property Trust, Inc. (NYSE: STWD), a publicly traded real estate finance company focusing on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt investments. With an initial market capitalization of $950 million, Starwood Property Trust was, at the time of its IPO, the largest blind pool company ever created and traded on the NYSE.
In conjunction with Starwood Capital, Starwood Property Trust in April 2013 acquired LNR Property LLC and subsidiary LNR Partners LLC, the largest special servicer in the U.S., thus gaining significant expertise in the distressed marketplace while also adding substantial scale and sophistication to the company’s operations. LNR subsidiary Hatfield Philips International, one of the largest loan servicers in Europe, also helped position Starwood Property Trust to capitalize on the unwinding of European banks’ real estate lending portfolios. In November 2016, Starwood Property Trust sold Hatfield Philip to Situs, while retaining a non-controlling minority interest in Situs—thus positioning the team to benefit from the scale and opportunities supplied by a leading global provider of advisory and loan servicing solutions. In addition, Starwood Property Trust in early 2014 spun off its single-family residential operations into a separate entity (Starwood Waypoint Homes has since merged with Invitation Homes) that is now the largest publicly traded investor, owner and operator of single-family rental homes in the U.S.
The business has grown dramatically since inception, and Starwood Property Trust today is the nation’s largest commercial mortgage REIT by market capitalization. With total capital deployed since inception of more than $39 billion, Starwood Property Trust continues to solidify its position as one of the world’s leading non-bank real estate finance companies.
Starwood Capital is perhaps best known for creating and building Starwood Hotels & Resorts. This leading global hotel company has its origins in Starwood Capital’s initial investment in publicly traded Hotel Investors Trust (NYSE: HOT) in 1994. At that time, HOT had an equity market capitalization of just $8 million and needed an immediate recapitalization. Through a series of complex negotiations, Starwood Capital affiliates acquired a majority interest in HOT, and completed a restructuring and reorganization of the company. Between 1994 and 1998, Starwood Capital dramatically expanded the rebranded Starwood Hotels—highlighted by the acquisition of two major hotel companies, Westin Hotels & Resorts and ITT Sheraton. Following these transactions, Starwood Hotels in three short years had become the largest hotel company in the world, with more than 120,000 employees at its peak, 895 properties in 100 countries, and ownership of brands such as W Hotels, Westin, Sheraton, The St. Regis, Le Méridien and The Luxury Collection.
Barry Sternlicht became the Chairman and Chief Executive Officer of the renamed Starwood Hotels & Resorts in 1995. Mr. Sternlicht created W Hotels, generally regarded as the world’s most successful “boutique” brand, built St. Regis Hotels from a single hotel to a global brand, and is credited with industry innovations including the Westin Heavenly® Bed and line of related products and Starwood Preferred Guest, the industry’s first “no-blackout” frequent-stay program.
At its inception in 1991, Starwood Capital was focused on the disarray in the real estate markets resulting from the S&L crisis of the late 1980s and early 1990s. Over approximately 18 months, the Firm acquired 7,000 multifamily units at a fraction of replacement cost through the purchase of equity and distressed debt from the Resolution Trust Corp., FDIC and troubled lending institutions. In assembling this portfolio, Starwood Capital focused on newer properties in fundamentally sound secondary markets, with the strategic view that the recovery would be both imminent and dramatic. In August 1993, the Starwood Capital funds contributed approximately 6,400 multifamily units to Sam Zell’s Equity Residential (NYSE: EQR) at its IPO. EQR went on to become the largest publicly traded apartment owner in the country, with Barry Sternlicht serving on its Board of Directors for several years.
This transaction marked the first of numerous investments in which the Firm created leading real estate platforms or companies in order to enhance value for its investors.
Consistent with Starwood Capital’s longstanding approach of investing capital at attractive return levels relative to risk, the investment team identified an opportunity to buy, renovate and lease a large assemblage of single-family homes across the United States. Leveraging the efforts of Starwood Capital, affiliate Starwood Property Trust (NYSE: STWD) constructed a portfolio of over 7,000 single-family homes and distressed and nonperforming residential mortgage loans. The team built this portfolio using a network of local partners who managed the renovation and leasing of these homes and the resolution of the loans. Starwood Capital also used its real estate acumen to build scale in select geographic markets that the team believed had the greatest potential for long-term appreciation, and in which the team could buy homes at the largest discounts to replacement cost. The success of these efforts was reflected in the fact that the portfolio grew to almost $800 million, or 13% of Starwood Property Trust’s equity base. Once the team decided to spin off these assets, it scoured the country to find a best-in-class management team to build an industry-leading company. To that end, Starwood Capital acquired Waypoint Homes, a veteran of this newly institutional asset class. In 2014, Starwood Capital and Starwood Property Trust completed the spinoff of the single-family rental business and created Starwood Waypoint Residential Trust (NYSE: SWAY).
In 2016, Starwood Waypoint merged with Colony American Homes, bringing together two industry pioneers and creating a portfolio of over 30,000 homes. In 2017 Starwood Waypoint Homes (NYSE: SFR) merged with Invitation Homes (NYSE: INVH) and the combined company is the largest publicly traded investor, owner and operator of single-family rental homes in the United States.
By 2010, amid a rather grim macroeconomic climate, the Starwood Capital investment team believed that many of California’s housing markets had hit cyclical lows, and long-term demographics, household formation and population growth all implied a positive course ahead. Therefore, the team thought that a pure-play homebuilder focused on California would be extremely well-positioned in the market.
SOF VIII created a vertically integrated homebuilder focused on California, led by Doug Bauer, the former President and COO of William Lyon Homes. An opportunistic niche builder and land developer, TRI Pointe Homes’ approach focused on constructing single-family detached and attached homes, targeting entry-level and move-up buyers in proven, fast-growing markets. TRI Pointe Homes (NYSE: TPH) went public in 2013—the first IPO for a homebuilder in almost a decade. In 2014, TRI Pointe Homes combined its assets with Weyerhaeuser’s homebuilding subsidiary, WRECO, in a transformative transaction for the company—for which Starwood Capital CEO Barry Sternlicht served as Chairman—that promised to accelerate the company’s growth.
With nearly 28,000 lots owned and controlled by year-end 2015, TRI Pointe Homes had grown to become one of the largest homebuilders in the United States. In March 2017, the team sold SOF VIII’s remaining stock position in the company, fully realizing this investment.
In the mid-1990s, Starwood Capital recognized that the abundance of real estate capital, led by the growing REIT sector, was driving up pricing on traditional asset classes, and thus shifted its acquisition focus to mezzanine lending. After executing more than $1 billion in financings within a four-year period, the Firm capitalized on its sizable, well-seasoned portfolio and took the business public in 1998 by creating Starwood Financial, Inc. (NYSE: SFI). The Firm contributed the assets to a small, public REIT that it controlled and provided a dedicated management team to the entity. Barry Sternlicht became Chairman of the Board and several other executives of the Firm assumed Board seats. Starwood Capital subsequently expanded the company by closing on more than $1.1 billion of new financing commitments and by merging with TriNet Corporate Realty Trust.
Subsequently renamed iStar Financial, Inc., the firm grew to be one of the largest publicly traded finance companies focused exclusively on commercial real estate, with an enterprise value of more than $16 billion at its peak.
In 2012 Starwood Capital created Starwood European Real Estate Finance (LSE: SWEF). Starwood European Real Estate Finance originates, executes and services commercial real estate loans for institutional-quality investors throughout Europe. The company built a diversified portfolio of debt investments, collateralized by assets that has included the historic Claridge’s, Connaught and Berkeley hotels in London, the Salesforce Tower and Centre Point office buildings in London, the Battersea Place senior assisted living facility in London, a Finnish retail platform, and Dutch and Danish light industrial assets.
Leveraging the comprehensive real estate expertise of its investment manager and a flexible investment strategy, Starwood European Real Estate Finance is well-positioned to address the changing dynamics of the European financing markets. This investment represents an example of Starwood Capital’s longtime focus on businesses with strong potential returns, diversification benefits and significant downside protection.
In December 2005, Starwood Capital funds completed the $3.2 billion acquisition of Groupe Taittinger and Société du Louvre (SDL), a family-controlled French conglomerate. At acquisition, SDL’s assets included one of Europe’s largest hotel networks—a unique collection of 15 luxury hotels, the most famous of which was the Hôtel de Crillon in Paris, and more than 800 budget hotels under three brands. SDL also owned several luxury goods businesses, including famed champagne producer Taittinger, iconic crystal maker Baccarat and Annick Goutal perfumes.
The Firm’s track record with this complex investment includes a number of milestones: a revamp and expansion of the Louvre Hotels budget business that spurred dramatic market share gains, and eventually led to the sale of the business to China’s Jin Jiang International Holdings Co., Ltd.; the sale of the Taitttinger Champagne and Annick Goutal businesses; the sale of a 22% stake in Baccarat and an enhancement of the brand in conjunction with its 250-year anniversary that included the launch in March 2015 of the ultra-luxury Baccarat Hotel & Residences New York; the execution of a sale-leaseback transaction for 32 budget hotels in France at an attractive yield; and the careful disposition of the portfolio’s luxury hotels at compelling prices.
This investment displays many of the hallmarks of Starwood Capital—creativity, agility and tenacity—and enabled the Firm to leverage its expertise in the hospitality industry, as well as its branding and operational savvy, to maximize the value of the portfolio.
Starwood Capital doesn’t just look at real estate as it is today— we see it as it could be. This concept extends to our approach to environmentally responsible investing as well. Instead of accepting the status quo when managing property, we are committed to setting a new standard for the private equity industry.
Nowhere is this commitment more apparent than 1 Hotels. Operated by Starwood Capital affiliate SH Group, this luxury lifestyle brand represents hospitality with a purpose: To celebrate nature while encouraging sophisticated travelers to live well, do better and connect with the world around them. All 1 Hotels are designed to meet the stringent requirements of LEED certification, the rating system administered by the U.S. Green Building Council that is the industry standard to evaluate building performance. Each property in the 1 Hotels portfolio is distinguished by open spaces bathed in natural light, food made with the freshest organic ingredients and materials for construction and furnishings that are reclaimed or repurposed whenever possible. The daily operation of each 1 Hotel is carefully planned to minimize the property’s carbon footprint by minimizing energy use, leveraging local resources, conserving non-renewable materials, minimizing plastic and paper consumption and reducing landfill waste.
Starwood Capital has demonstrated time and again that environmentally conscious investing can also be profitable investing. Whether employed for hotels, malls, housing, offices, condos or energy infrastructure, sustainable design and practices often result in more efficient processes that reduce expenses and enhance the value of real estate assets. Such properties also benefit from the growing demand from eco-mindful tenants, buyers and investors. For example, sales prices for our condos at 1 Hotel & Homes South Beach and Pierhouse have far exceeded brokers’ expectations and continue to achieve significant premiums to the market. As an industry leader, we embrace the opportunity to serve as stewards of the environment. We are just as serious about serving as stewards of our investors’ hard-earned capital and across our portfolio have demonstrated that these critical responsibilities can go hand-in-hand.