• Vulture exception

Starwood Property Trust, the US listed vulture fund set up by Barry Sternlicht, has invested $144m in its first 60 days. But more interestingly Sternlicht says the pipeline of deals looks set to exceed $1bn.

It increasingly looks, however, that Sternlicht is the exception to a rule that says vulture funds will largely disappoint in this cycle.

The forecast Starwood deals will be across property sectors but are expected to feature hotels prominently. One of the done deals includes $10.9m of bonds secured on a New York hotel.

Sternlicht is putting his reputation on the line to predict he can strike deals when current consensus forecasts are for lean pickings.

He has already secured $171.6m out of US taxpayer backed TALF (term asset backed securities loan facility). This money was raised in partnership with a Starwood Capital fund and has an average rate of 3.82%.

It certainly looks as though more assets are trading in the US than in Europe. Last week it was reported that the St Regis Monarch Beach resort in California, made infamous a year ago as the destination for a trip by executives from AIG shortly after it received an $85bn bailout, is set to sell for $250m.

Published reports suggest that Citigroup received less than half of the $70m mezz loan it had made for the hotel, as senior debt comprised about $220m. Citigroup took back the property in July from its original owners.

The Royal Institution of Chartered Surveyors offered support to the idea of growing distressed sales this week. It said more than 80% of the 25 countries it surveyed saw a rise in the volume of distressed sales in the third quarter.

South Africa, the US, Portugal and France showed the biggest leap in distressed sales in the third quarter. The RICS survey showed agents expecting the US, Russia, Spain and Ireland to show the biggest rise in volume of distressed sales in the final quarter of this year.

Property magnate Sam Zell, speaking at a real estate investment conference in New York, made clear he is more sceptical about a general commercial property crash.

But he did forecast that hotels in this cycle would suffer a fate similar to that endured by the office market in the early 1990s. A fate summed up by Zell as a "massacre". Zell spoke on the same theme earlier in the month, predicting that hotels of "lesser quality" would go for less than half price.

The appetite for vulture funds generally appears to be on the wane. Both Apollo Commercial Real Estate Finance and Colony Financial cut the initial targets for their public offerings in half in September. Other would-be vulture funds have postponed their offerings.

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