Sternlicht sees 'strange capital' in real estate

Barry Sternlicht
Adam Jeffery | CNBC
Barry Sternlicht

With interest rates on U.S. Treasurys at such low levels, sovereign wealth funds are turning to U.S. real estate to try to get more yield, Starwood Capital chief Barry Sternlicht told CNBC on Thursday.

"Real estate guys are having to get used to the fact that we're seeing a lot of strange capital in our market that's here as a fixed-income investment," he said during an interview on the new "Squawk Box" set in midtown Manhattan. "You're seeing it. Look out the window. These buildings, every one of them, is a bond to these investors."

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Starwood Capital has $37 billion in assets under management with a focus on real estate.

In a recent capital raising effort for a new fund, "we attracted many of sovereign wealth funds and they are screaming for yield," he said. Sovereign wealth funds are derived from a nation's reserves to be invested for the benefit of its economy and citizens.

"It's getting to the point of absurdity when they already own all these [low-yielding] bonds," Sternlicht continued, making the case for why real estate can be more attractive than bonds. "I can buy more Treasurys which we print more of ... or I can own a real asset, which might benefit someday if there's inflation."

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