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Starwood Capital - Ensuring real estate investments through due diligence

With an efficient international team, Bureau Veritas surpassed all of our expectations for conducting this massive due diligence process both quickly and thoroughly.
Russell Sternlicht

BUSINESS CHALLENGE

In September 2005, Starwood Capital reached an important phase in its acquisition of Société du Louvre, Europe’s second-largest hotel network.  As per normal procedure, the investment firm needed to perform due diligence on the properties involved in the transaction. This time, however, the process presented a new challenge: the company had one month to assess 260 hotels in 10 European countries. To facilitate this effort, Starwood sought the assistance of a European partner who could: create an effective reporting standard for the physical and financial due diligence of these diverse properties; appoint assessment teams in each of the regions/countries where the assets were located; and ensure that all data gathered would be delivered on time and in a homogeneous form.

SOLUTION

Conducting effective due diligence, especially on an international scale, requires a well-coordinated team of experts with the ability to complete a highly technical task both efficiently and accurately. With extensive experience leading large, specialised projects, Bureau Veritas rose to the occasion. Having appointed a project manager to coordinate the entire effort, the first step was to work with Starwood to create a clear reporting template for the physical and financial due diligence of Société du Louvre’s diverse European properties. This form was then translated into several languages for ease of use on an international scale. Concurrently, Bureau Veritas formed assessment teams across France and in Poland, Italy, Spain, Portugal, the United Kingdom, the Netherlands, Germany, Switzerland, and Belgium. Each team of three experts consisted of a leader/coordinator plus two local specialists: a construction generalist and a budget analyst. Over the ensuing three weeks, the teams inspected the sites in their respective regions, and produced a comprehensive report for each hotel. These assessments included structural observations with photos, recommendations for action, and estimates of the financial commitment required to implement the recommendations over a five-year period. The 260 reports were then collected by the project manager and reviewed for coherence and homogeneity, before being submitted as a group, on time, to Starwood.

BENEFITS

As an American firm acquiring European property, Starwood relied on Bureau Veritas as a trusted local partner during the acquisition process. Bureau Veritas’ experience with coordinating large, specialised projects, combined with its extensive network throughout Europe, ensured that the due diligence process went smoothly and quickly. The addition of local specialists to Bureau Veritas’ team promoted accuracy and efficiency. Further, the reporting system developed by Bureau Veritas facilitated Starwood’s final review process: clear, homogeneous reports helped the investors to easily evaluate the 260 properties involved in the acquisition, despite their diversity.

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> Client: Starwood Capital Group Global, LLC

> Client industry: Investment Management in the Real Estate sector

> Client size:
- Equity investments typically range from $10 million to $100 million.
- 300+ transactions since 1991, representing assets in excess of $14 billion.

> Client profile:
Starwood Capital is a privately-held global investment management firm, specialising in real estate-related investments on behalf of private and institutional investor partners. Its portfolio includes assets in the U.S., the U.K., continental Europe, and Japan.

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