STWD - Earnings call transcript Q3 2019 | Starwood Property Trust, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to the Starwood Property Trust Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

the Investor to Relations. turn Tanenbaum, host, now of Director will conference your over Zach I

You begin. may

Zach Tanenbaum

company's Thank section you, released its supplement operator. XXXX, and Property available for Trust Exchange Good are quarter website. filed morning of and call. the Investor website posted with on morning, These welcome its This Commission, Form at documents the the September and www.starwoodpropertytrust.com. to company ended its the XX-Q results earnings financial Relations XXth, to Securities Starwood earnings its

begins, and expectations the beliefs everyone based statements actual to management's constitute Before call course cause like that may are certain I from These on not call results to would current based of differ to statements are described statements. and on are that the forward-looking uncertainties in materially and the statements. remind historical could information made of and in trends those subject forward-looking a number this

I detailed may no with refer made could results you to from undertakes during for to statements call. factors implied any update made differ company of of forward-looking those cause any forward-looking risks discussion course a The today. that actual in materially to made that and SEC this the or the expressed duty the statements company's filings the more be

Additionally, certain non-GAAP financial measures will be discussed on this conference call.

www.sec.gov. with through with presented accordance the considered in or as to prepared can filings isolation in in a GAAP measures most Reconciliations of presentation at be non-GAAP comparable the not information measures be this financial for to Our accessed SEC with the of accordance financial information intended is substitute our these GAAP.

the company's Chairman company's Barry the are Operating Joining Andrew Executive Jeff Officer. me Officer; Paniry, the company's call Rina Officer; President; Chief the on and Sossen, company's and the Chief Chief Financial Sternlicht, today Dimodica,

With to that, the going to call now Rina. I'm turn over

Rina Paniry

morning, good and Zack, everyone. you Thank

strong earnings again our working performance. with platform, deliver once together each of strength demonstrated business quarter, component of to This the our multi-cylinder

we share. $XXX million or Collectively, per of generated $X.XX earnings core

segment, Our core segment, of led million largest $XXX lending contributed which by residential quarter. and performance earnings was the our the commercial to

Lending Commercial average with the mortgages. $XXX loan which first $X.X of loans On billion million, we all size were an side, of of originated

loan received penalties fewer carried we than accounted $XXX last which quarter, repayments in this million of for the from the quarter. repayments. quarter, These During prepayment interest income decline much

million These cash loans and $XXX inflows loan million of offset on $XXX on were funding by commitments. pre-existing new

billion LTV commercial Our XX%. $X.X with ended just average of quarter loan portfolio weighted under the at a

leverage. to portfolio continue sheet We on off-balance this finance and with both

not the sold off-balance of leverage in As loan not interest. retained Note a reminder, is A is form cross mostly against sheet non-recourse, funded, collateralized and our

leverage off-balance lending commercial sheet quarter end. of book Our billion at had $X.X

on you $XX would this assumed we the loan sheet, If billion. of balance our be financed portfolio of balance aggregate all

by lending our to fourth side, securitization residential our the the of million. business On portfolio this billion end expansion loan for $XXX we and largest million of quarter. loans purchasing This of non-QM our continued the residential completing brought at $X.X $XXX and

to future we costs, business securitizations. as optimize for on In of our investment held maturity. quarter. loans for financing these a balance better we intended to current order so, to this this $XXX to decided utilize sale remaining In low returns loans of held classified hold The million and portion for and continues doing be

we of to extinguishment segment, sale which on loss This contributed I a and $X $X will earnings quarter. GE. to debt resulting from turn now loans the million core includes our repayment of from lending acquired infrastructure of the million

the know, yielding book you our loans. to sell this been strategy redeploy higher capital loans the As has margin in lower into and

million strategy, quarter left and sell. this have $XXX this As we execute sold to the million loans on of $XX we GE

$X.X to million, bringing $XXX acquired were of portfolio billion. The from infrastructure post-acquisition. billion loans repayment also We sheet our $XXX of acquired on balance the balance $X received million remaining the of

have into work segment, we costs. capital this borrowing lower longer-term deploy to we our increased capacity into with As facilities borrowing

with date million that closed extends a end, to million of coupon our a we lowest we new and coupon term facility eight-year Subsequent out facility revolving LXXX. of LXXX, July, term In five-year completed debt quarter another to a life facility. a $XXX the at five-year the $XXX to of

property to discuss $XX the I core our Next, which of million quarter. contributed will earnings segment,

yield well, perform steady All of remaining XX% average this assets continued and XX%. wholly-owned segment cash quarter of this the in occupancy with at to blended weighted

completed We expect end. we of financings result our yields accretive that increase a as quarter quarter after next to

Using refinanced swapped five-year the we the X.X%. portfolio our In of interest of unwind the October, rate medical proceeds with our office fixed a existing to debt, debt. we from on floating rate hedge

We gross on in million also multi-family six-year supplemental for our of we proceeds. plan financing debt took to one today total, In portfolios. out $XXX close

average Pro forma weighted at a with rate of this average for eight these of containing assets debt an remaining financed duration the X.X%. financings, wholly-owned segment in years fixed are

of in $X.XX $XXX quarter or depreciation per end, properties, As along those million investing carried servicing share. and with accumulated of segment these our

we minimum, increase this As assets The purchase would in an have them, GAAP that At portfolio value. not since for believe believe back acquired exist our is $XXX we gains undepreciated be value. million book the value price to and said in appreciated our arrive adding assets. our these incremental meaningfully we reflected to would book GAAP at a book in we these have appreciation the past,

cylinders an Servicing its now earnings and to will to segment, to This to return. core Investing $XX I which contributed of million our attractive use quarter. the produce continues turn various business

quarter. or deals our to CMBS X.X this of conduit, loans add transactions million priced securitized to and our servicer, $XXX In portfolio. three named X.X continue we in we our In

principal X.X which on deals. trusts we represents billion balance As now of end, unpaid quarter X.X of were named $XX Servicer of with XX% and an XXX

And finally, on segment's the property portfolio.

to as We harvest gains continue assets stabilization. reach these

net of of a million basis of $X gain a property a with interest. cost million for non-controlling is quarter, we $XX core the During which million, sold one $X

This our reminder, quarter a GAAP to GAAP on differs accumulated primarily with investments. from gain include of an which our these core gain, XX assets core balance $XXX undepreciated ended our the portfolio in across we million due reconciliation. to depreciation, As

turning now capitalization our and dividend. to And

the our side call reducing During balance sheet, the we right repo to risk. margin made of reliance further and quarter, to significant on our enhancements lines exposure

of loans maintain XX.X% for rate we and us day advance this XXX has our LIBOR, which spread of existing basis structure first a issued $X.X August, one In XX The rate over reinvestment two feature, CRE at million provided least $XXX a CLO, of of one financing our term billion. years. to for advance points match allows totaling day a which non-recourse

Term our we A, financing, loan The $XXX replaced of which quarter. priced at of $XXX increased repaid this unencumbered B, July, liquidity, LXXX. we million, our In our and completed million loan $XXX our extended tenor seven-year million This assets. our transaction Term the Loan which

Concurrent times. a ended with X.X of entered an a quarter we capacity record the $X.X replace billion term adjusted with debt ratio $XXX loan, current undrawn revolving revolver. of five-year million, undepreciated We to into to credit equity the our facility debt and

December price on annualized $XX.XX. of This XXXX, per the January share As dividend, $X.XX on yield XX. X.X% we quarter on paid which represents of a declared record of be will XX dividend, fourth a closing for to share dividend shareholders for have our yesterday's

with current accounting to finally, a few And like conclude on standard the credit CECL. losses, remarks comments my would about new expected I or

to and on you X infrastructure us to not today's or apply GAAP. model model is applies an loss for January CRE determining loss standard securities our both as loans effective for CECL loan loans well our of with probably under report that fair we heard, any as As the the It have at does loans. value. replaces The expected incurred allowance for loss

unfunded against will thereafter equity to not core will and our will allowance loans, at our record these current date we to go record will not but For funded infrastructure current the include also balance and of the CRE we a be policy, reserve GAAP Consistent against earnings implementation our have loans, on will commitments. the in of adjustment with only an allowance. earnings. reflected The have

provide you status with our a will next efforts update more on quarter. the We of detailed implementation

the With call over Jeff to his that, comments. turn I'll for

Jeff DiModica

demand by real remained of major where volumes to been elevated continue dry CRE estate rise. compared have billion markets, States to loan country five led XXXX. And the fundamentals is have estate remains loan United private September. albeit portfolio to years, last in wrote and a always billion The $XXX after Morgan Transaction which powder Stanley Thanks, funds week GXX last is of only in $XXX that year-over-year, real has strong. located. slightly allocations up, that our bulk and the volumes Rina. are institutional strong the where

significant to to very transaction and rates property year-over-year, rates prices lower and our And powder loan improved activity. X.X% with perform led volume, cap with property loan and combined origination has portfolios continue increasing interest existing well. Dry

robust carrying to, half underwriting With our excess of has which More that portfolio, unit as from our million backdrop, Florida assumptions. far Rina million portfolio and own our $XXX up is performed value multifamily value. now our internal in our quarter, over a property of valuation excess X,XXX $XXX last of alluded fair in has over of in undepreciated which than is

to markets difficult our CRE to stabilized yield Property add properties segment. it cash Strengthening double-digit have core with made

result Rina our today. current will Our are mentioned, medical earning $X significantly yield debt increase a pending our refinancing portfolio of And billion a the multifamily of the week upsize and high-performing successful Florida as today. of last wholly-owned properties our of office XX% as this of on

power of any forward. reinvesting and versus them And our to We going portfolio model up-to-date these realizing plan our you the in will gains incremental changes property across continue earnings proceeds. holding on keep

CRE capital expect deployed in another which lending significantly and strong we We stronger a fourth quarter, our core deployed by billion $X.X quarter. in performance business, led $X.X billion, this

a for yield return to opportunities unlevered wrote X% with the see in $XXX continue a we where line new with return targets. current million our and loans We great in levered X quarter, internationally,

X%. Our have portfolio LIBOR floors. our to well LIBOR floors on of continues was benefit LIBOR above XX% originated loans when loans from

the floors XXX today. average floor weighted of are and XX% money Our is basis points our in

in rate in see is result an LIBOR our you'll in in is book the or existing floors loan earnings deck will increase counterintuitive an than we to increase. primarily either more actually LIBOR that our posted earn that decrease our will with decrease website, And a As floating of LIBOR. a the increase in supplemental our

portfolio very with slight and portfolio a overall X-point the commercial no continues downgrades perform X.XX on to rating a our to risk in well also, quarter, in lending improvement Our scale.

With WeWork take want Lord moment loan months, the in we headlines & about the entire to $XXX on $XXX Avenue, our the XXX the in made all portfolio. to a million we own site, of old We I $XXX Fifth last the senior few talk exposure and lending the loan. million WeWork first the XX% comprises loan, which of a mezzanine own mortgage million Taylor

$XXX mezzanine a There's equity. as junior well million million to us as loan, of $XXX subordinated

comfortable funded with with on our trophy be guarantee cost fully XX% We Midtown of corporate XX-year to are basis loan loan a dollar very WeWork. building what from finished last will a

during $XXX This high-quality average portfolio of Rina acquired business our locking and non-QM LTV. largest million lowest XX to-date, less and the lending funds of we've its has and said, realized an XX% securitization As FICO cost fourth than residential loans quarter date. completed in the to

the expect scale the to this quarters. of increase in to We coming business continue

read park our portion more the than underwritten to have and the exposure. its of which estimates dream half exceeded dedicated of scheduled our senior leasing open retail represents Finally, March. of our theme loan October loan American that and Most in is has retail, only in assets portfolio you opened X.X% in the is of

at pledge Based to the stack the position with comfortable very capital the conservative loan-to-cost, other on of the project of XX% leverage continued this assets we our continue momentum of loan. and leasing interest the borrower, in feel and

Infrastructure equity assets GE and up of first the and Energy down year the we December. lines. fifth, sell-off and in half setting widening in the the bulk year business, slowly spread started Our focused of acquired lower-yielding the the financing Lending We following spent the purchase selling cautiously, on

million $XXX business our tighter X-year plan us Rina to we execute facilities spreads, at closed sequentially XXXX. ample financing have financing As new mentioned, into X giving

With a these to pipeline robust in financings over we threshold. very IRR $XXX of accretive at well that overall million place, is return in for our QX a blended have loans

sheet. as financing we last post-crisis billion structure result a of CRE the of quarter, well any talked commercial year. $X.X XX% for have As tightest is this which best deal sales about off-balance we Almost at a CLO, made priced levels real now and done of financing estate the segment note lending as our the

of sheet. today result higher including back lending quarter quality, this and Our during and sheet just leverage times debt on-balance balance still like as our leverage, modest non-QM leverage times, X.X is despite having sheet our businesses a the drops a infrastructure high to X.X on energy off-balance

our to lever We will continue conservatively business.

that with scour of every a Looking Reducing financing for require our the leverage the our form lending businesses and across leverage sheet debt do to outside on-balance us equity today of market investments most meet return financial optimal record to or on capacity not pushing line financing leaves the ability for $X.X our billion without for structure. threshold. asset and

and looked very very we've CLOs, to spreads low, to -- spreads single historic tight are but CMBS, not are FASB chosen CMBS loosely investing in returns, significantly at Rates from Finally, allocate having in bid levels, what can us investment-grade have available vacillate this into down ourselves. are to bank capital spreads our offer allowing and loans our it multiple at invest borrower tight we risk line. businesses, spread and turns We and achieve source by multiple above requires mark get instead to leverage we benefit assets paying underwrite repo capital of strategy.

With I will Barry. it that, to turn

Barry Sternlicht

to can everyone. short. Rina. morning, talk going always that comments I But Thanks, do say Thanks, this morning, I too long. make I but Good that. Jeff. my I'm

equity the United multifamily and The have to there. of rent seen own is markets, industrial across particularly interesting REIT. outside great continue in property and where in The States strength, overall accelerating the both environment markets and growth the our Europe, out we've our portfolio books office,

is wouldn't remains totally that Northeast. retail the market benign, because Hotels, net a our than lack classes overbuilding primarily of the to say, every supply remains two benign. the fairly handleable but demand. in challenged I more asset -- there And it's say space. absorption actually in somewhat hotel The multi-family of than it's there's in or construction, more

the the City, democratic residential, like you would in wealthy York, a raising relying of nervous York rates are worried, and victory exodus tax as of New There pockets San impact Coast, wealth. like are of And rates increasingly high-end the New and Francisco. an about cities we cause problems, San know, West Francisco thoughts, fall And -- social which carrying on to rate of an population, tenants you because burden the It's long shrinking ultimately, really York blue cycle, services to to like the JPMorgan at lending a -- New these ever of decide our albeit of of want expensive reinforcing be negative -- cycle. in will a beginning cap skip states City impact building low hop town. on

strength taxes taxes, rich can in you're there's the City, And chance removal all some up of the New we capacity. with deductions and housing states around of in that I seeing particular, that blue all the victory, but markets with and no on think of lack in the reflected aren't democratic York going the the assume of in and

Are just down ago, something, funds. our at in from off uncertainty may IPO. of the LP the melt two. the interesting the and this impact tremendous is it's its I days the two doesn't market. markets, now, it's couple on seeing on all, referenced last And years. to volatility in was It And meat up equity we XX% you're by see beyond our concluding in tenure closing really also it's chart much morning, conferences IPO. its what turn stock rates, us the two-thirds but where stock So more of so to interest XXX

some far happens may because position. in Just at arena. next the the the of to equity depending months, moment. in are Clearly, on reassess And left victory XX don't that political rising, prospects they in mean the have what market's the stay at point markets they ignoring a that

now they're more country, we're closer that rents So much if driven dropped we U.S. because assets to in in are mean, economy I -- the I of loans will think to LTVs condition. our lending right low, European Also, off very weakens we're will us, probably office major markets. comfortable our condition most than the across of staying on and the of that rates pretty off they stay rise the

showing stimulus have and at so German probably And Chinese what than slowdown, impact done the world. have what of governments and or focused done Chinese Germany also foreign economy country, fiscal in the -- is them across done, and on manufacturing some the much done. here. the economy is rest of when quite you of the our raise the is stimulus trade, competitive negotiations landscape the And their ECB that out they've Europe, the Clearly, look what kind have of far pull what and trade their been which fiscal laggards of have done, double-wall the the the has Americas less of Japanese dependence in the different to on their that the

Germany it But if rates that our since the U.S. of would we're I believe the means think U.S. have going, pricing that funding bonds. get if probably I pulls off economy we're -- higher slows, even

never been multiple billion that coming in balance stronger. excited cash returns Really resi really about So $X.X we're our and us, quality well. undrawn to on the have, sheet, the the business Jeff the we've doing, of ample credit getting. And we mentioned, back as what facilities, we're are our growth lines book of functioning

the all of moving And segment. hold excess good as return are least in or what are that yields the our than lending in maybe we of at And risk, our in because rather to past. is of the paper on-balance we sheet can it, more commercial better. we than we Increase had believe, securitizing

we earnings. year-over-year Primarily Infrastructure growing has down in because, year of probably as excess cost actually energy us business mentioned, Jeff originations. in this shut The and $X.XX

are maturity. mismatch from when the facility -- don't loans, and for we facility company but the two-year we bought GE, We loans have five-year a a

we're to said basically we wait. going So

So make to two that business the that has together and or will our the lines team are book never year accretively comfortably duration, of exceed. our to off races the origination we these can in We'll earnings loans, put financing forward. add goals where longer these and hit bigger. we're and I now expect been next going

pretty particularly excited into assets. The its having contribute and broken book start belief swing helping wing beyond a property us good, about and multifamily go business So our flapping is interaction.

more –we XX% there's what So have this they yields them. $XXX than that And XX%, mean, cash gain. – are do know up. don't with and only going million we cash are to and I

At could we was, them. how embedded us of don't them. average leverage capital harvest – know gain from So the $X another it our of duration there would forever. the We say, is assets. billion, assets or replace ratio, to back loans require will These we And billion to live that our make. million to gain coming loans short. sale And those $X $XXX that's have let's of of and

we'd $X every have two to So put at years. three years, billion in

the burden caught a I on will sheet, or it's originate did way, by the on balance on notice, five and competitor of largest and notes. top Rina something It's A do high so, actually and Jeff this to, these we it, just mentioned that six year. six mentioned, everything And we our or does is

company if finance their the billion, see. volumes we our understated, the book billion actually billion, $X so $X And that $XX $X they our you not way billion, the loan at company, finance look are would because did

of might And so originations different, look too. number the

going ourselves, So it's an to correct book. going forward, billion we're that it's and the really just we because presented really way $XX – it's

not way just back I owned. of of we've, saying million took years million though done thing million. competitors' material we numbers, don't the sold occasion, our and when, XX% That it I'm And quite small $XXX finance a a themselves and to Mountain, do loans a $XXX the sold thing which of it's piece position, very Apollo on was asset even scale, seven it The It's ourselves there's is bad a million loan. We bad off it XX% for it's to not philosophy. $XXX in to think also was large. probably a ago. There book different a mezz, Mammoth thing. portion they're we we in don't a $XXX

last million. $XXX Our exposure was call

So when there's just stupid paper available.

of scale. of We done have but XXXth what Certainly in size it, very a our small the competitors done. occasionally

pieces is the the the new. And our mention we think because in servicing. best I player – in book are of all thing some $XX I other peers And portfolio, billion interesting the servicing will B

be should tremendous the biggest all that's right? we insurance in So don't business for be Works core business. in bad. market, not We're a going a not. very really it's It's but We mispriced, to not pieces, player it's us. B think

And participate. so we always

fastest we much we're ones the think like BP's move cherry-pick Jeff, particularly the want six then pool that. we we're I and in ones contributor buy, the from something purchases, And to pretty on that. where to

don't have on The I three-year So well. quite plan. any completed doing think. future. We've our a sanguine other is I We're company comments, quite

looking are things sky. and at in the We Chris genius to have is buy failed. tried and But

we'll other future. So, be there'll looking in be things at the

So I'm Thank going that, stop. with you. to

Operator

a conducting time, Please of this from [Operator Rahmani session. we'll Jade The first question is Instructions] ahead. be KBW. At go question-and-answer

Ryan Tomasello

this sponsor you on we from for Jade. is anticipated that away think renovations was asset and the say, wondering WeWork based that out the walking what that in on if by purchase some million, Avenue. value for the asset you your includes price Fifth questions. group the cited. loan-to-cost plus plays if the remarks you you comments can and with Thanks what say appreciate asset? Jeff, Tomasello morning, believing metric prepared on Ryan the any hundred XX% overpaid XXX, ultimately Good lease taking for that's WeWorks it I several individuals for Can with

Andrew Sossen

from something XX-year invested like the the billion are this this guarantee long, I at point, It's sponsors away $XX corporate will long think, Before company. can't you asset. thing, one they -- walk in a be

Obviously, group it of has a away the now they largest And their that or on can't $XXX the So, don't owns the they there's building. walk single as to a they it got million that the building. it. single liability tune is what, institutional from capital different liability sublet balance their building, can own something? But sell credit And sheet. or

Jeff DiModica

XXX [ph].

Andrew Sossen

that, us, noodling like And that. space. on there's to spoken been whether our they to want money. we've note, It's do tremendous actually we note. And demand equity think, they the lost a believe They've they've buy believe approached we don't we're there's to for actually good pretty and and

So, Jeff can you the give stats.

Jeff DiModica

the laid out of stack million we're the first I Sure. in earlier part cap $XXX mortgage.

are $XXX million stack mezz. That for that's using $XXX a $X.XXX The last junior $XXX cap get as million, of cap of dollar. includes, cost, the where billion. billion, was total equity We of million mezz senior million $X.XXX out I $XXX million of said of before, $XXX and the stack and XX% I

Ryan Tomasello

Okay. color. Do current getting your Thanks of guess, What's moving lenders levels the I you that think more are for view, all lending non-bank and competition the markets on to just aggressive? standards? that underwriting And overall. increasingly

what repayments us provide XQ, you're mentioned any as quarter. the parameters volumes a And investment around well Can for expecting you strong then expecting with in regarding you're quarter? as you origination fourth

Jeff DiModica

say, I since of haven't Sure. the first been we company started X.X in that changed standards the in all, years we XX here. our would I've the

amount And Starwood have use We tremendous committee two what through process XX thorough that. where years decent investment news choose everybody to information standards all and they the we data going of Group and very investment from, want we're difficult seeing and of that to and is are of Starwood good activity fairly are Property Trust. pick are. from We for volumes loan Capital committees. The to and and our are amounts choose a be a high, within we

non-banks today. more tighter The to do being -- pushed we're aggressive. think think getting people spreads that I they're

to it. look Fortunately, with the accounts has not of of tighter hurdle able things cost and earn is a are There lower number going at have to so we But we capital. we will with look you return separate have, liabilities, same a they're have realize than than spreads. everybody tighter non-banks at one deals slightly to similar we're the of

deals are that may those our over into And cross space.

costs because So, they of will been. there it's we tighter are to -- have go bit believe cost are not of than of that I the separate capital But like accounts times of where it's little cost simply a higher. oftentimes, to the spreads, standards and with being a feel spreads then don't capital a a of same because cost it's are their capital capital just bit more believe cost capital different loosening lowest to of at banks there's little number tighter our I because at from moderate would people some

amount XXXX. the straight year, that is of Loan So, one over standards to every ever only seems loans year. for that we of of time they've our within hard Last volume to every everybody when of fifth competitors that write We'll did it's are done. will high. the getting year, most year in since space deteriorating wrote are There year. last be our loans worse more this say $XXX be and XX% billion transactions what again

there's their so to going plenty choose And is Everybody buckets. to go around.

credits We are that going and we're sense going capital. on the more spread, in cost most us for credit focus the than to of to find our make

standards, somewhere exact number. we we'll Fourth think least I stronger for a quarter than us, what an give our do will at that the and been that, we never moving of we quarter, did say, we in believe, has case. be more XX% without fourth would that The this the always quarter quarter. neighborhood seasonally

pick up. third the in smaller be will next quarter, That in opening bit the back we're fairly significantly. little quarter. picked Europe It first but a up will quarter

talked continue in people as about to we've and have book. before Australia, to we're now, We hoping international grow the

is expect somewhere would to to $X to continue And run in is able year be I to have of more still our that that things of hired achieve able to this us robust. the look to the be sort without to billion lowering So $X I through number billion annual at We originators it. we what get standards. rate think

Ryan Tomasello

expect And you things at just Should things, types you then it's specifically more current I that could. one last we said, focused if you property... you're to Barry, business I looking of terms are what think of in the infill mentioned one, looking at?

Barry Sternlicht

some apartment. my need furniture new I for

Ryan Tomasello

deal line I think or you're infrastructure the I from mean, actual deal GE focus Is stuff interesting. -- the it more expanding like the that was where GE infill?

Barry Sternlicht

the I or these can't our for at our TRS. everything it some structure, would business fit say we restructuring. middle we stuff, fit in market more infill buyer hit it the lending, can in actually other we of be It look we requires best not not because may have some tax we in our pay. to significant go of structure. But lines, We readable

players It's a not our lot needed. we're all of interesting. in And I'm There are sure space.

also agencies restructuring the present opportunities federal might we So interesting of us. the to --

We known in regulatory at that contract in for think resi we looking we're that a and approval. be just originator and the under purchasing so are fully can is company something space, space, I are we have -- integrated we it's an waiting

Homes, to book, So building Homes large these businesses could our it's Invitation grew potentially so be that another spin out look Waypoint do a enough Starwood company. we With at. it we standalone would resi ourselves, if from something

don't on company even make than spin it. any at The our taking our leverage. It the business. runs hog look higher And though reason I us – one just reason screens excess believe to we're of leverage levels

it out leverage trading levels on they put thought Being the it Board of the been of we trade since never thought Invitation quite company. spun us, market that company, has because the had on the it's Homes could where would well, which of

well to the meeting which use should to big yield should minimis they debt. the we Board the -- down fights equity grow use the the any they free and about And de to money REITs. flow, money pay cash use they on increase below other dividend, Should is money the had at

the really the possibly it's super argue I that And levels, being levels. of a and attractive, business make taken XX is leverage you there's leverage can't those and ROE excess having the no by risk

as company And its NAV. the great performed this stock passed so, company's now has year the

value the versus not the lot the equity high and so a structure up, of that the a the value And you're average leverage we of market debt of is drove understand said the lower. fair market value is point taking market risk so the equity equity of when

would would But So, giant group, maybe I'm ourselves. to us us opportunity spinning to fully mentioned, a that keep origination the business saying Don't in which to as require have be, that would of to maybe the know it as resi I inside book a out, want allow of be the we us require integrated well. me. market

So allows business. you that, It's are. great adding on tell and got than are They're the higher we're a team. working accretive a -- our platform, they and we've to us GAAP it's running IRRs to great

doesn't to of forecast allow are So, bond. it's IRRs doing anticipate other very the paidoff. and they bond funny things because corpus is refinancings interesting you GAAP portfolio the you and really The get

very us. it's ROE for a So, good business

Jeff DiModica

much the talking of if were position loan-to-value that a XX% yourself worked we still to Hey, relet I a revisit and lower the blended we no and too we Fifth what debt to about paid building. wanted $XX X% equity before. office, If when would north it on of Ron, were on we longer Avenue XXX relet be on for going south the had yield tenant we our rents, concern,

that than our better the and on XX have points money a we the that confidence we is good. And by that's way, so --. well, money basis floor loan the loan have as So LIBOR

Barry Sternlicht

the So owners. again, we're not

rent. we we to do But they balance the were forget, were of get So and were space deals and we occupy going they assuming it. set Don't that the enterprise don't of then most rent. again, that lowered that

paying. were than we tenant going So paying less $XX the built the for. probably out enterprise be space was $XX than wouldn't taking They're to more be with

the non-rework space. Now was enterprise for which closing and headquarter funding the done building, of the to the was we're was into do fit-out the for -- going that money

Jeff have them. forward So, in that's very that Amazons and it's a to being probably, XX% were drop saying, and nice space you're they what going what building, to people spaces those with expected other to in rent a that interested of probably the

Jeff DiModica

So, we comfortable. very feel

Next question please.

Operator

Delaney Securities. The JMP next go question is of from Please ahead. Steve

Steve Delaney

taking for the question. Thanks

and the about estate called real guess Wellington gain it. the you buy it potential has or Mall own, on challenge major guys news I doing this for been have a there can reinvestment time, have either realizations, a the redevelopment. some been you at you long Barry Green -- property about comments recent articles about a long, your build And Regarding

could you look those the on, might it's of what particular possible of a returns especially much. about but you and capital urban if a deployment I returns see might that comment very property, wondered general, that, just and redevelopment infill kind as you Thank like.

Barry Sternlicht

But the Thanks store us the -- capital, for much the what probably allowed that case, to how building traffic to an through we retail happen mean, is to the and what there your a excited that outcomes question. it's reposition like think in incremental potentially amenity us -- might an reposition the lender. We're we not might in today, to be. and a very the complicated. look a around look the to in asset left that I investment shape mall Crystal do, at In Willington in mall. and the the as mayor. lagoon, going and Nordstrom cost lagoon we We the development business. about beach mall to of town -- have We're that have proposed returns that's a drive the

so not of are XX, or just to for this at lot few you're stabilized a forward forward. situation. you either you about once XX, sell or there's that, think X malls going go not comparables of X go if And or property that XX, a There sales clarity

at done I deals all mostly, are We that. in doing really we more our look we’re doesn't our anticipated this So, it the potential. do that's what not redevelopment in of evaluating -- But funds. mean, entity equity our assets. this context development this in of vehicle, something is

not done So here. they're

Steve Delaney

for you thank Barry. Well, that Okay.

article had side, great we securitization could -- Do Just have year-to-date. in to are to specifically resi What we're switching an QM. over the be and there, on for at? $XX progress a that said, you pushing sense about guess, I inning Mondee market Bloomberg origination annual what billion up obviously, And in in?

Jeff DiModica

Yeah.

a of I what it be. could fraction think it's

at back. agency almost come XXx is that non-QM the have I'm of of that if that available potential happening patch a You right, capital it's a multiple

Steve Delaney

Exactly.

Jeff DiModica

equity think who the a us private up I billion in $XX type billion, sponsors or to of handful $XX year-to-date. like space. year, last investing are so large billion from on $XX There's

grow. it's portion I to And that of the couple a on million want agencies lot think in what certainly hundred depends it think be. potentially dollar decide of And I business Ultimately, large they do a a of how business. the to could terms of

economy, else to One non-QM self-employed people going business lot that people typically, or income, through a the And in that. debt-to-income is don't lot of whatever have the that have state of pushes their they the you're full things of people is, test. with that fail they XX% if expenses run a an who because to they

who borrowers But down their borrowers to borrowers who portion can These These agency significantly put borrowers houses would test bucket. have and down XX% are generally, down into XX%. scores put putting a the money. some versus are fail were on the they good XX% that higher more but of FICO agency putting them

higher for they for leaves We and rest bit, with close the slightly box is, So to going how coupon assuming a really people self-employed the that have demand we where us. decide their little much and on or in drive a agencies someone estate a could us play, will still volume box loans agency of side. country the grow real but their to what's what open lot like that, of this for

or of every to day, I we'll to its a hand-to-hand do that love get trying do close do a originators to be to billion kind a So bunch acute where so would that, of year, to combat it's double and business, today, but $X.X smartly. able

Steve Delaney

Yes.

have idea product, rental where, competitive that's compare in right and obviously an whether QM, GSE those So and the to opportunity now? rental which shifting looked obviously, from the single-family any you -- might guys of at is -- side, the regulatory how returns the issues, consumer SFR the product. more And

Jeff DiModica

Yes, that obviously Barry, anybody. -- We out spun yes. space better knows Waypoint than Starwood

Steve Delaney

Exactly.

Jeff DiModica

and Homes, they They well. do job a Invitation it Buy manage extremely that. great of

Steve Delaney

thinking owning homes, by the And I'm the way. about I'm about Yes. not thinking debt, debt,

first Just Yes. the mortgages.

Jeff DiModica

you. I've got

to looking and sort of of stuck our We today. like XX flip things about competitors at some spent have A that bad the FICO, there's the and lot than a that. a XXX of We've lot anything there. homebuyer, really time LTV, We that of and rather not demographic fix knitting not like professional businesses. our other are

in that just headed highest know if business. on ever what of we're they south, things borrowers when crisis, terms the that lending extremely the is and did quality and the what of these borrowers to credit a sort best-in-class very got we back leaning credit, went how these crisis. in with tended of want to into and We part We perform we sure the are comfortable through in cycle last make residential we we're believe the well,

Steve Delaney

did Yeah. And on some Barry loans put too, you mentioned that held-to-maturity. Rina as you and held-for-investment,

books. seems just be get FHLB, wanted the out, is And on close obviously positive forward been your suggestions going mean, some everything in put mean, access and else. thoughts? huge But ability loans final that off. whole for to to your it report Just I to there's long-term to I with treasury's I'll the your drop that,

Barry Sternlicht

it's less than does are it not away. somewhat of lined them say, the facility beneficial, But replace another before. odds up is to we've I required. away go that political. that, potentially would obviously, but I this say would And were going they if

Although, call administration. this go can they It -- -- it's does to doesn't nothing has be done - Congress. administratively, done it, do not this to can be with, the what with by just

So -- there's government it's it's costing no actually obviously, default. never unit and and not -- the unprecedented we -- business that's eliminate to a anything,

off. a them if would be turn they it So first,

held-to-maturity book sizing and it going regardless, that away. away. we've of modeling going them even the modeled And loans based But on we're the

move shouldn't a do So be will little we the ROEs for but And survive. the it, We the think will it's it, they it government. wrong lower. do think they

to The not securitization stay balance around. we sheet. just business on it ROE. will will it grow So be different tragic, business have the to at least, be a won't probably expected be, They

Jeff DiModica

a make of it sense private involved keeping private keep lot think capital in capital agency sort the private loss on to first They've done bottom the business by would extremely It's in as selling involved. good business, job agency, a in heck securitizations non-agency competing of a of keep in I capital well. private to involved the of capital on off mortgage great the

we but more that, still these Barry makes start it repeat. that, you where taking can we finance if And market, things multiple we securitization difficult, said, have like can lines it loans. away With

So we're that comfortable with position. very

Operator

is Stephen from next question The Raymond Laws ahead. go James. Please of

Stephen Laws

optimized assets I Hi. more that. this, couple some you of but Can missed been of we the Good capital and if apologize real I I things estate touched better your talk have being you morning. XX noticed book place redeploy the A on, the real much that, think and should or capital taking that given months. in the about how more opportunity over to deployed, do and there estate we how appreciation just to about is next XX refinanced

Jeff DiModica

upsize to we The these bit And a do medical is, office amount and on long-term rolls, rate of a properties. number news CMBS fixed money. take it's a The financing a little until to good able and that. have portfolio, debt we're significant more out that of do difficult that

we'll seven were portfolio able the last on some rate years in achievement of we And kind We refinanced rate. our not of portfolio, at our to too to on for portfolio get Irish master an believe. just the add multi-family, that long-term year but has X.X%, to fixed which be debt. first was lease the incredible to to future, At a we long, point second multi-family add able

debt potential take there's then the we sort accretive in terms earnings, that and back cash the we'll able a will portfolio. we to it's in that, not rolling, to when put is but refinance burner when front of equity out as a free redeploy lot So of be redeploy little bit on out, obviously, of be it the probably it and

Stephen Laws

you or in the original follow-up, asset quarter. kind A where there. of that on came on of in cycling the you the accomplish Can and assets commentary you of details and sales have of the appreciate I but I about number I some earlier, are provided left sold know positioning talk in infrastructure one kind what that of to some front? better you a Okay. you energy often saw portfolio lower-yielding out

Jeff DiModica

sure. Yes,

to we to It this would if sheet we bulk And that a was have said, close expect me two And a got of that portfolio. well that, quarter. if of thinking. that lines front in us Barry for underwrote billion very the there. the to rid as was gate start of to open – getting lower-yielding to the over we $XXX million I want the billion accretively fourth assets, like the in We have sell at we a loans really has we is rate year. to little in if there's add it this the got ran $X.X $X.XX that

$XXX-plus show pretty good And underwrote. So originally that a above you we opportunity what million a quarter think in levered would are we there's here. the IRRs

feels what's in But can change in business Things today. that right really optimistic. we're good us of front now, quickly. So

Stephen Laws

good comments. day. a Appreciate Have Great. the

Jeff DiModica

you. Thank

Operator

Rick of ahead. JPMorgan. from is question next Please The Shane go

Rick Shane

Hey, guys. economy. of at arguably year-end outlook a bit terms a my in of this XXXX, questions morning. it's and little Thanks we're Look crossroads for taking

paths middle you can that As now. the think and different are XXXX, your in planning I you the about guys different of the right and scenarios you Curious deep take? how you're suspect

Barry Sternlicht

a businesses, sanguine. lending our I from fairly perspective, Actually, am

concerning much is equity side. I investment it's debt the on it more think on the side than

of I XX%. the -- half our the volumes year, think low like actually have down transaction first rates were

things like Chinese adjusted been or around the here. aren't the flows I have think world, capital rejiggles because

participation I any we than mean greater year. significantly is and the Middle markets The U.S. that view we've general place take fairly going slow Aramco the if by next economy think IPO in there'll it that but be to seen, scale the in Eastern takes will probably investors

given I'll An the just impeachment to difficulty seen. the process. and ICO don't determining of going a it's primarily tough where in to negative even election be what's side either on slow say -- And We the know going happen. are the because candidates candidate

the means U.S. think but I world in high. over spectrum going So this confidence remains actually, The consumer thing the see unbelievable worse you all relatively it's on that

confidence since been not XXXX. low as CEO has

and world they're with a the worried. at left, the all looking they're of ramps left and in problems so far And all of the these

GDP wait. okay, And the and four They'll Investment then the portion CEOs wait. slow. spending so say, see that's not health will worried the plan happens wait we'll let's just of the we'll years. And means with and care. election, next what for you will

extremes. going as see historical we never two slow. don't in mean, are election up ridiculous. been way people -- the there's I people mean, -- economy pandits any come billionaire telling won't is country candidate a XX% It's it's the the I not data. a largest -- to and middle been an not -- because I And alive these the head-to-head fertilizing an ideologies two since I've party for So at look roles the you XX% the Rosboro and as independent. the forgetting electorate, Jr. Democrat, have And no and It's keep party, the history, greatest they're of right? of run country. probably there of he is a in got right? Bloomberg, was the

at half they And the today. that size the about independence time were are

that socially in to in So But kids. craziness. the political don't an conservative call. make I about the majority increasing. -- money middle, in business impacted our people earnings But our the on any an it's needs conservative. We in sorry, being perspective, that we I'm have and lines is liberal, vast don't from do may perspective. country somebody money -- back. I have and lending see mean, our from get continue Kids of think the not being are REIT's think the the especially bucket, be the I we issue of And by to is All basically not basically view, my country

being only Orlando average -- based incomes just housing in And can feeling really assets we're our of our like about incomes affordable rents equity good And in so that. go up biggest the having space, where on Tampa. and towns

So balance company. We job sheet best that we're exposed we the feel an has done unbelievable the in with. on feel we industry And like of anything by the the don't else really have team the far. it's

per be of positioned years for for It's annum XXX% that, and hedge XX if by XX-year safety. you compounded fund -- the you'd is total And be you return. trillion. That leverage company been spin-off, excess admirable. you'd in the return you the $XX XX-plus XX.X% And for give We've track United our return. or includes best this XX-year running, a way, returns. running total The slightly States, record may X% always we're So there. up have

myself. So I wish, done I'd trade that

So long been I have the stock.

do But not People here There's It's it through We're nutty get few based we're But lot about do crazy. stuff. lend so I've sometimes been asset some banks on it's -- not won't They lending lend values. people I lack of a of our bad. we to discipline. concerned lend a understanding outliers happy. these. the and of that to. mean, there. to to we'll

So shaking right? at it Street, in Jeff that. we at to lend head New York, me. So Kent is we'll his leave

make frankly, but if we loan off. So that paid -- We got the made. we

Jeff DiModica

here is rates spot pretty on. to we make in perform is think sure a money well. interest we But usually would world where is where job guess, thoughts Barry, make will any go, We I I fall going I if least answer or perform as of the our it well If that decline to stay here. now differently, environment. management they has obviously, on he’s and lot the and

that have they did our to our If for we noted add opportunity today. credit earlier, cap to that love if us. of great were $X.X to it's portfolio, us property spreads last add to rates more be add widen December capacity for billion would opportunity more to like a into of in wonderful -- gives And We'd significant widen, us firepower. property book. year, a We

spreads probably past to some in redeploy them. how will when gains tighten, and to try have figure if like the And and we we out take

exposure moves significantly our well extremely So positioned and sales, as marks either in rise of and in really spreads. we made fall XXXX, look think et reduced And credit the for by rates to ANO I what we've we've or happens credit cetera. the regardless CLO to the at we're

about we're into positioning the the going excited pretty year. of company the So,

Operator

Hayes go Tim from FBR. Riley question B. ahead. final is Please of Our

Tim Hayes

for Hey guys, taking thanks question. my

of the project. your was fan big the resident, And structure? largest and your touch LTVs lending loan quarter And loan of here? book this second how What million the in construction supplement. And any about at your this just think construction the also cover largest consists you cycle? point for was percentage the on Can other are loan. what D.C. Wharf a $XXX construction a color loan of loans on, As you of construction

Jeff DiModica

are a when typically of loan. Sure. construction on in lending. lot There's much we on thought loan-to-cost are loans, we And a lower loan-to-value schools in a than we're of a regular

completion when is we certainly out risk the end, it. if we back on come feel the with very So comfortable

our said, That of risk. Board about Directors funding been future very concerned always has

of the is very have that us, One we business. things going for lots have book money segments our we large of different this having coming in from diversified of

expected want out future ever come much to have any funding we money twice like we to think going So we that that don't time. in have than quarter money in as to in more at

the sort loan we book of and a give assets, back terms our XXXX. book had -- in percentage of a above middle overall in but never exposure. have percentage we in have we of slightly of to what say significantly number, our right the I middle a the exact construction average smaller And we're would of construction our we and XXXX As than as historic

back billion have our in Our funding we amount the coming is $XX future small of versus balance sheet. relatively money

very comfortable feel that. we So with

from couple of we've of band at below and top a most the band, very the close have and disposition, disposition our to been We that of years. Board, we're XX% for last

much don't think I at all. it's So changed

allows which Our book construction. a obviously, us bigger, got more to has do bit little

$XX now close sheet is to balance overall Our billion.

with we of today. very the with terms the versus And comfortable funding So, LTVs the about risk a future extremely other the exposure it think We're LTC lot. comfortable we're on opportunities. in

Barry Sternlicht

was name the but that's is One we what -- of guys you get his what fund financial, these that was par. And it loans, change his two-thirds our on of all they as not bought they are deal much, But to got of what We -- happen. became directors found was we discount would iStar. called? it and actually to to we to cost think happened bank they star vibrant i-card. Anyway, a who know, very at $X because he the build, going buildings funded a -- was, had hoping withdraw the it then while blew they billion at they called

the -- didn't fund to And commitments construction that on -- ended, those sources the Fremont. wouldn't the problem When loan. make they a have except to Freemont. the was called It have world been

So bad. know it the saw repayment stopped. We We the drill. go

that And and so market about attaching pretty to point. we our construction we're careful fact projects, the our exposure like we our despite the like

buy You to two-thirds mentioned like the you I wouldn't what the cost build… Wharf, to mean, of it

Tim Hayes

Absolutely.

Barry Sternlicht

year but XX a looking do XX or going quarter, book. about the ago, this in XX% It’s loans construction happen, not going year, to XXXX, loans was first to We didn't back with quarter, the do we and it. okay we're be it any a of in our typically last quarter of

than smaller percentage was it be a it quarter, quarter. will Next this lot

a number significant bigger quarter, trend. construction look it's two not or it's a make loan the one like-to-like So can but

Tim Hayes

helpful just might And Got it, portfolio follow-up one type year-end? that the And you if receive around if that's to you really all, thanks, portfolio before Dublin still curious just Barry. about there? expectations any sale, quick then on, change the color, sell intend there’s just of in gain

Barry Sternlicht

It's actually a Monday. topic for

We our wish have flushed and And that we we're capacity. the cash with what originations -- okay bids. what do us So, pace do then And double could our money? we're like criteria. we going for to decide with of I

have but we want credit than standards. And to our to we're of have terms an cover going And we ROE. enough don't to we try, less underwriting in

offshore. to team look we one is to going pick place, we're volumes. bullish on And pretty So, is don't up And try. the

And we Australia. in office have starts an

team. a have We

something looking think lending like now opportunities. that or I people for in X London,

we change So geography volumes bit may have our get our to a to up.

you in could And confident We'd I loans, be if harvest -- assets $X our would million. it gains out. books tell this all up our originate put and we if the would I $XX equity billion feel in from

XX-something take you That a return, equity. isn't isn't on in a because earning screen right? not value. -- then, see the do a return book financials. a Take us, you that you and earning our the that's When gains, -- It's gain a GAAP

drill, to XX-something percent problem the of I that, X.X. right? But big We XX% mean, -- nobody know can you is mentioned say service is that Rina today. is it a

So the worth value service don't is a doubled I or now even $XX odd book probably know. million that and that. the company. Its triples

Jeff DiModica

Bigger.

Barry Sternlicht

So we Board we're about that's the every trade. why dividend we We it -- meeting, it's -- complex. talk not traded

the while course. shareholders For But seem moving well. be going for working there, a we our we're ahead. to to It's stay reasonably

a for issue us. It's not huge

to yield would any issue a really five-or-six dividend have accretively our We be so. As that were will the week great Right could do us. now, XX% be things. don't go equity and need stock, for do we nice

Jeff DiModica

with looks continue to the while weaker a Europe is well. some seeing -- good be dollar U.S., little you're a as the our there like higher to opportunity rates forward in basis. for go it's And on for going The of and us a competitors other

makes there, to hedge Europe, back attractive cross-currency the points dollar-denominated the in picking invest in dollars today, up look Europe, we when over historically foreign investing the very out swap they've or in exchange, where loans we brought basis versus so XXX given in future to you're which XXX So by looked.

of brought from percent to But book. down was see would continue X%. expect It in or -- to I book XX% Europe. back think I our So, to went add to it try us the we so

I back think the hope its to we to over that And quarters and years. so would percent or back it we get above XX% even XX% or today. can coming

Operator

closing I Mr. the now We turn Officer over of question-and-answer call Chairman have for and reached Executive session. Sternlicht, to will remarks. the the And Chief end

Barry Sternlicht

up. everyone season after again holiday speak you wish We'll happy coming to We the Well. a holidays.

with And So, your and year. and have world. families stability new for a a of Thanksgiving great merry piece the let's hope

everyone. Thanks,

Operator

for you disconnect And conference. Thank lines participation. you your today's your time. concludes This may this at

Starwood Property Trust (STWD) 8 Nov 192019 Q3 Earnings call transcript