Starwood Real Estate Income Trust, Inc.
2340 Collins Avenue
Miami Beach, FL 33139
July 20, 2023
VIA EDGAR
United States Securities and Exchange Commission
Division of Corporation Finance
Office of Real Estate & Construction
Washington, DC 20549
| Re: | Starwood Real Estate Income Trust, Inc. |
Form 10-K for the year ended December 31, 2022
Filed March 17, 2023
File No. 000-56046
Dear Sir or Madam:
This letter sets forth the response of Starwood Real Estate Income Trust, Inc. (the “Company”) to the correspondence from the Securities and Exchange Commission (“SEC”) dated July 6, 2023 regarding the Company’s Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 17, 2023. The SEC’s comment is below, followed by the Company’s response thereto.
Comment:
Form 10-K for the year ended December 31, 2022
Note 2. Summary of Significant Accounting Policies
Fair Value Measurements, page 112
| 1. | We note that following the initial measurement of loans secured by real estate, the Company will determine fair value by utilizing or reviewing market yield data, discounted cash flow modeling, collateral asset performance, local or macro real estate performance, capital market conditions, debt yield or loan-to-value ratios, and borrower financial condition and performance. Given this policy, please tell us why the level 3 investments in real estate debt have been valued at cost, as adjusted for changes in foreign currency. |
Response:
The Company records its loans secured by real estate at fair value in accordance with its policy. Since origination and through December 31, 2022, the Company’s loans secured by real estate have been recorded at par value, which approximates fair value and is also equal to the origination cost, effectively limiting any changes in fair value to the respective loan’s par value, given certain loan features provided by each of the individual borrowers (e.g. floating rate, credit spreads, make whole, prepayment), and no underlying change in the credit quality of the loans.
Consistent with the Company’s valuation policy, the Company also reviewed market yield data, discounted cash flow modeling, collateral asset performance, local and macro real estate performance, capital market conditions, debt yield and loan-to-value ratios and borrower financial condition and performance, in its quarterly monitoring of its loans secured by real estate.
Prospectively, commencing with its June 30, 2023 Form 10-Q filing, the Company will update its fair value measurement disclosure to disclose that the Company is utilizing the discounted cash flow method to value its loans secured by real estate and will provide the corresponding unobservable inputs utilized in such valuation technique. A draft of this updated disclosure to be included within Note 2. Summary of Significant Accounting Policies – Fair Value Measurements, is included below.
The following table contains the quantitative inputs and assumptions used for items categorized in level 3 of the fair value hierarchy ($ in thousands):
| June 30, 2023 | ||||||||||||||||||||
| Fair Value | Valuation Technique | Unobservable Inputs | Weighted Average | Impact to Valuation From an Increase in Input | ||||||||||||||||
Investments in Real Estate Debt | TBD | Discounted cash flow | Discount rate | TBD | Decrease | |||||||||||||||
Please contact me if you should need additional information or should you have any questions.
Sincerely,
Starwood Real Estate Income Trust, Inc.
| By: | /s/ Chris Lowthert | |||
| Chris Lowthert | ||||
| Chief Financial Officer and Treasurer | ||||
cc: Jason W. Goode, Alston & Bird LLP
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