Business
Real estate titan Barry Sternlicht says he will ‘have to’ drop employees in favor of AI
A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox.
Billionaire Barry Sternlicht, chairman and CEO of Starwood Capital Group, is a legendary, legacy real estate investor. Brendan Wallace is an entrepreneur who co-founded Fifth Wall, a venture capital firm investing in property technology and decarbonizing real estate. The pair first met in the gym. Now, Wallace can say Sternlicht is a mentor – as well as a Fifth Wall investor – and Sternlicht jokes that Wallace is his trainer.
Together they gave CNBC Property Play a rare glimpse into how old-school commercial real estate investing is pivoting to a new tech-driven world order and how that new world order still relies on lessons learned in the past.
Here are some of the highlights from the conversation, edited for clarity and length:
On CRE investing
Sternlicht: We endured a 500 basis point, fairly rapid increase in rates, and most people who were invested had to pay some price for that, whether the yields on property went up or they weren’t properly hedged. Your costs went up, your expenses, and they drained a lot of cash flow from assets that might have gone into fixing the assets up. That’s behind us now, and there’s no doubt that interest rates are going down. … In May of next year, Jerome [Powell] will be out [as Federal Reserve Chairman], and nobody’s getting that job without agreeing to lower rates.
I think they should lower rates. I think inflation that we’re seeing is tariff related. It will continue. It’ll get worse, probably, in the fourth quarter, when the new inventories hit the shelves and the tariffs can no longer be ignored.
Wallace: The rate increases that Barry was mentioning, those impacted prop tech definitionally, because all tech companies, all loss-making businesses, rerated all at the same time. And at the same time, the demand from commercial real estate stopped.
I would say an overlay on top of it was also that a big part of where real estate companies were investing in the last four years was around decarbonization efforts, so trying to conform to new carbon neutrality laws … and anticipating this kind of wave of decarbonization. And I feel like with [President Donald] Trump‘s election, it kind of felt like they got a hall pass, certainly for four years.
On AI and data centers
Sternlicht: We’ve probably got $20 billion dedicated to [the data center] space. I think it’s a different issue than you think. Most of us don’t build until we get a hyperscaler lease. So we get the lease from Amazon, Microsoft, Google, Oracle. What we’re watching now is the credit worthiness of the tenant, and particularly Oracle, because Oracle is doing all these deals back-ended to [ChatGPT], and Chat is a startup that doesn’t make money and requires hundreds of billions of dollars to grow to the scale they want to be.
There’s no question AI is going to change the entire world and do it much faster than anything we’ve ever seen before, much faster than the internet, certainly faster than the Industrial Revolution. That is terrifying to me. I mean, I’m not so complacent. I look at … how we spend money, and what I can do with AI agents that I do with humans today, and it’s terrifying for the people. I think we have to let people go, right? Jobs of 15 people can be done with a chatbot that costs me $36 a month.
Wallace: I was trying to trace all these pretty Byzantine and somewhat incestuous commitments that are happening between the large tech companies, between the digital infrastructure providers, and it’s actually very hard to trace who’s going to ultimately pay for it all, but ultimately it has to be paid for in the economy.
The way to just acid test whether it makes sense is if you looked at the amount of AI compute that will be required to fill all the data centers that are in production or have been announced to go into production, and then you assume that the tech companies have to make some profit on top of that to justify it, which they’re not today, but let’s assume they have to. Take any margin you want, assume that’s the revenue that’s then therefore flowing to large language models and AI. What percent of U.S. GDP would that be today if you ran that math? My fear is that it might be like 120% of U.S. GDP.
On their next bets
Sternlicht: We’re heavily investing in Europe, actually. Not here. They’ve done the stimulus package. They have low rates. They don’t have, really, inflation. They don’t have tariffs. It’s amazing, having returned from Europe and the Middle East, I can buy everything cheaper in Europe than I can here now.
Wallace: New York City. People overestimate the durability of these political vibe shifts. Within two years of electing Trump, we elected [Zohran] Mamdani to run New York, and I just think these things move dialectically. Over the long term, New York is going to be super valuable. So if I were a betting person, I didn’t have to make a return in the next four years, I would bet on New York.
Business
Oil nears highest price since start of Iran war
The US-Israel Iran war has halted almost all traffic in a key waterway and the price Brent crude has surged.
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Business
Crunch talks between resident doctors and ministers set to continue
Crunch talks between resident doctors and the Government are set to continue in a bid to avert strike action.
Sir Keir Starmer has given the resident doctors committee of the British Medical Association (BMA) a deadline to reconsider a deal on pay and jobs which includes an offer of thousands of extra NHS training posts.
It is understood the proposal will be removed from the deal if resident doctors in England press ahead with a six-day strike from April 7 in a row over jobs and pay.
Dr Jack Fletcher, chairman of the resident doctors committee of the union, said: “It is wrong for Government to withhold desperately-needed jobs as part of negotiating tactics.
“Anyone who works in the NHS knows that patients need these 4,000 jobs created as soon as possible.
“We made that very clear to Government in our meetings today.
“We are not interested in arbitrary deadlines – we will be looking to get this dispute ended right up to the last minute.
“We believe there is a deal there to be done if Government is willing to withdraw the changes it made at the last minute that reduced the funding for pay rises. Talks continue.”
It comes as senior medics announced they were escalating their disputes with the Government.
Consultants and other senior doctors are to be balloted on industrial action after ministers announced they would be getting a 3.5% pay award.
Simultaneous ballots of consultants and specialist, associate specialist and specialty (SAS) doctors will run from May 11 until July 6.
Addressing resident doctors, Prime Minister Sir Keir Starmer wrote in The Times: “The truth is this: no-one benefits from rejecting this deal.
“Resident doctors will be worse off. Instead of improved pay, progression and support, they will receive the standard pay award this year, with none of the reforms that would have strengthened their working lives.”
The deal sets out a minimum of 4,000 new additional specialty posts to be delivered over the next three years.
NHS England boss Sir Jim Mackey confirmed the offer to expand training places will “come off the table” if an agreement is not reached.
The walkout, which is due to run from 7am on April 7 until 6.59am on April 13, will be the 15th round of strikes by resident doctors in England since 2023.
In a letter to health leaders, Mike Prentice, national director for emergency planning at NHS England, wrote: “We expect this round to be challenging as there is a shorter notice period, bank holidays within the notice period and the action itself falling during the Easter holidays.
“This will represent a significant strain on staffing resources to provide safe cover.”
Business
Iran oil returns: India set to receive first cargo in 5 years, tanker heads to Gujarat – The Times of India
India is set to receive its first shipment of Iranian crude oil since 2019, with a tanker carrying 600,000 barrels of oil en route to Gujarat following a temporary sanctions waiver by the US, according to PTI.Ship-tracking data indicates that the vessel Ping Shun is headed towards Vadinar port, marking a potential revival of Indo-Iran oil trade after nearly five years.“The Indo-Iranian oil trade has flickered back to life. Following the US administration’s decision to grant a 30-day window for Iranian oil “on the water” due to regional conflict, the vessel Ping Shun is now en route to Vadinar (in Gujarat) with 600,000 barrels of crude. This is the first such delivery since May 2019 and comes at a critical time for Indian refiners facing tightening inventories,” said Sumit Ritolia, Lead Research Analyst, Refining and Modelling at Kpler.The development follows Washington’s decision earlier this month to allow a 30-day window for the purchase of Iranian oil already at sea, aimed at easing global oil prices amid the ongoing US-Israel conflict with Iran. The window is set to expire on April 19.While the buyer of the cargo remains unidentified, Vadinar houses a 20 million tonnes per annum refinery operated by Rosneft-backed Nayara Energy and also serves as a landing point for crude supplies to inland refineries such as BPCL’s Bina unit.India’s oil ministry has so far maintained that any decision to resume imports from Iran will depend on techno-commercial viability.Before sanctions were tightened in 2018, India was among the largest buyers of Iranian crude, importing both Iran Light and Iran Heavy grades due to refinery compatibility and favourable pricing terms.Imports ceased in May 2019 after US sanctions were reimposed, with India shifting to alternative suppliers including the Middle East and the US. At its peak, Iranian crude accounted for 11.5 per cent of India’s total imports.India had imported about 518,000 barrels per day (bpd) of Iranian oil in 2018, which declined to 268,000 bpd between January and May 2019 during a sanctions waiver period before dropping to zero thereafter.“The Aframax Ping Shun (IMO 9231901) loaded with Iranian crude oil from Kharg Island in early March has emerged as the first vessel observed signalling a destination of Vadinar, India since May 2019, following sanction reimposition on Iranian oil by the first Trump administration,” Ritolia said.The tanker is estimated to have loaded around 600,000 barrels from Kharg Island around March 4 and is expected to reach Vadinar on April 4.An estimated 95 million barrels of Iranian oil are currently stored on vessels at sea, of which around 51 million barrels could be supplied to India, while the rest may be directed to China and Southeast Asian markets.However, payment mechanisms remain uncertain as Iran continues to be excluded from the SWIFT global banking system, complicating international transactions.Earlier, payments were routed in euros through Turkish banks, but that channel is no longer available following renewed sanctions restrictions.Iran was first disconnected from SWIFT in 2012 due to EU sanctions over its nuclear programme, with further disruptions in 2018 after the US reimposed sanctions, limiting its ability to receive payments and access foreign currency reserves.
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