Jan. 29 (Bloomberg) -- Barry Sternlicht, who built Starwood Hotels & Resorts Worldwide Inc. into the third-largest U.S. lodging company, is raising $100 million for a new hotel management company that would develop and operate properties around luxury brands.

The Oregon Investment Council, an investor in two prior hotel funds run by Sternlicht’s Starwood Capital Group Global LLC, agreed to invest $5 million in the new company, called SH Group, said Brad Child, senior real estate investment officer for Oregon’s state pension fund, which met yesterday.

Sternlicht is moving ahead with the company as the housing slump and global credit meltdown delay construction and condominium sales. The chief executive officer of Greenwich, Connecticut-based Starwood Capital took over French crystal maker Baccarat when he bought a majority stake in Societe du Louvre SA in 2005 and is developing a chain of Baccarat hotels.

“Barry Sternlicht has a lot of experience at taking hotels and branding them,” Child told the Oregon council. SH Group “would utilize the branding and franchising techniques to build on what is already there.”

The hotels managed by SH Group may be owned by Starwood affiliates or others, according to Oregon. Income would be generated from licensing fees for use of SH brands, hotel management fees and from equity invested by SH Group in some of the hotels, according to Oregon.

Tom Johnson, a spokesman for Sternlicht, declined to comment.

Hotel Delayed

SH Group is targeting annual returns of more than 20 percent net, according to Oregon. The group also will include Crillon Hotels and Sternlicht’s proposed “environmentally conscious” hotel chain called 1 Hotel & Residences.

Construction on the initial 1 Hotel, a $200 million project that was supposed to open in Seattle this year, was halted in late 2007 after condo sales lagged expectations.

Oregon invested $100 million each in Starwood Capital Hospitality Funds I and II, in 2005 and 2008. It also made a $25-million investment alongside Starwood when the firm acquired Societe du Louvre.

Last July, Starwood Capital signed an agreement with investors led by Al Fahim Group to develop a $680 million Baccarat Hotel and Residences in Dubai by 2011.

Earnings Fall

Sternlicht, 48, resigned as chairman of Starwood Hotels in 2005 and is no longer connected with the company. He formed Starwood Capital in 1991 prior to establishing Starwood Hotels in 1995. The companies don’t own equity stakes in each other.

Starwood Hotels said today fourth-quarter profit fell 46 percent as the global recession and a deepening financial crisis weakened demand for travel. The company owns, operates and franchises chains including Sheraton, Westin, W, St. Regis and Le Meridien hotels.

Net income dropped to $79 million, or 43 cents a share, from $146 million, or 74 cents, a year earlier, the White Plains, New York-based company said in a statement. Excluding some items, profit was 49 cents a share, beating the average estimate of 37 cents from 18 analysts surveyed by Bloomberg.

To contact the reporter on this story: Hui-yong Yu in Seattle at hyu@bloomberg.net.

Last Updated: January 29, 2009 16:35 EST