Starwood Land Ventures, a land investment company controlled by Connecticut-based investment firm Starwood Capital Group, is among the more active buyers of top-tier land earmarked for residential use. Overseeing this effort is Marc Perrin, a managing director who runs Starwood Capital’s nine-year-old West Coast office.
Perrin co-heads Starwood’s North American investment business and oversees Asia. He is responsible for originating, structuring, underwriting, and closing investments in all property types. Since joining Starwood in 1997, Perrin has closed transactions with an aggregate value exceeding $2.5 billion. He also supervises Starwood’s existing real estate investments in the markets he covers.
He spoke with Builder in late October.
Q: With public builders trawling for land deals again, is the window for buying cheap land closing?
A: The public home builders have emerged as a dominant force in the finished-lot buying business again. However, finished lots only make up a fraction of the land that will change hands in the coming years. There is and will be lots of opportunity to buy complicated large broken communities, partially developed lots, and entitled paper lots at very attractive prices with low downside risk.
Q: What will get banks to value their own distressed assets at prices more attractive to potential purchasers such as Starwood?
A: Banks aren’t valuing their distressed assets to market prices because they can’t afford to take the writedowns to their capital. There needs to be a market clearing event that forces their hand, like an FDIC takeover or a recapitalization of the bank where new investors write the assets down and inject new capital to prop up the balance sheet at the same time.
Q: Where is Starwood looking for big tracts that might generate the 20 percent returns it seeks?
A: Our view is [that] Florida, California, Nevada, and Arizona will once again be healthy economies, and they are the most distressed housing markets so they are a big focus of ours. Although the Washington, D.C., metro housing market wasn’t as distressed, the region will continue to grow, especially with the current government’s policies, so we are focused there. We also like the eastern seaboard’s major cities between D.C. and Florida.