STWD - Earnings call transcript Q2 2021 | Starwood Property Trust, Inc.

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Operator

Greetings and welcome to the Starwood Property Trust Second Quarter 2021 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Zach Tanenbaum, Director of Investor Relations for Starwood Property Trust. Thank you.

You may begin.

Zach Tanenbaum

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

to in historical constitute the begins, and uncertainties statements results to I any factors actual materially call made could that to no statements. in forward-looking made from statements duty the of filings a from or of are to refer call management’s would statements company’s update course those this for described everyone materially based any this SEC may results in subject The statements. made trends cause maybe that risks Before differ current beliefs the not detailed forward-looking the a I are discussion information the expressed These during statements on expectations made undertakes differ more and based certain of could that today. number forward-looking call. and like you the to and company to course cause the actual on that of remind are and with forward-looking those implied

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

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

Sossen, Jeff going call Paniry, Barry call today Sternlicht, Officer; With now Executive Rina. and company’s over and the Chief Financial President; the to Rina company’s me Chief Andrew turn Officer. company’s am to that, Chief the Operating the Joining I the DiModica, Chairman company’s are on Officer; the

Rina Paniry

good everyone. and Thank you, morning Zach

of both active billion right securitizations strength sides and within or $XXX million completing left capital morning distributable again our $X.X were earnings, diversified $XXX platform $X.X contributed demonstrated start was In to originated $X.X our $X.XX DE, of sheet, This billion on the the and will commercial loans, of the businesses. this which with deploying of lending We quarter lending, Commercial and DE once or Lending, share. I which balance with our and residential XX hand residential million billion commercial, infrastructure of of funded. quarter. across we per

non-mark-to-market were past billion structure. We the sales Despite $X.X mezz end. completed we average also post-COVID, nearly quarter, of Lending funded totaled Prepayments $X.X $XXX weighted us which $XX.X billion the LIBOR and million. in a existing brought our second over term matched, Also, repayments The year. loan CRE of an grown with coupon billion $X.X financing of our and CLO managed This rate loan a commitments. sales A-Notes significant totaling allowing repo our portfolio XX% million quarter of loan billion. $XXX is has advance actively at Commercial non-recourse, amount XX%, to a of preexisting move to record to XXX CLO, a portfolio and with our plus

entertainment at and LTV our were in strong low loan with quarter all and this in a component. exposure nearly credit of retail see portfolio a Over in exposure single X%, loan, remains average to continue which performance significant XX% of We repayments this with our weighted XX%. has the office a of hotel

collection interest than XXX% have X% on loans of to and continue less non-accrual. our We

York to To to in conclude a previously with to have collateral declined loans New on improved $XX those foreclosure loans certain discussed was forecast. our City. On million of you the this representing million formally CECL in reserve macroeconomic completed the we in condo Commercial quarter units quarter. The front, our $XX comments related by my due Lending, residential general project the

of will quarter reduced the EPS entirety transfer find You we now by our taxes, balance reflected In foreclosure, the sheet. distributable the the incurred $X.XX. in project as which on connection with property

was reduce Our and $XXX cost unwinding residential of securitization, resulted XXXX resecuritization. active. loans securitizations. In we allow these lending million. to acquired our acquisitions this $XXX $XXX will quarter, totaling from business also completed we This our of portfolio, loans one the our and financing loan the us million significantly XXth upon million totaled XXth Of

LTV of coupon the Our average XX%, a ended portfolio FICO X.X%, and million, average of average weighted a of XXX. loan quarter with $XXX balance of

the retaining After RMBS bonds QX retained the retained prepayments. our and in elevated selling of for million. ended Our accounting portfolio bonds quarter securitizations, impact at previously $XXX

will this which XX.X% cash of property increasing on discuss portfolio yields million at with earnings blended cash the weighted XX%, distributable of quarter. segment, rent to to credit I contributed quarter. Next, The remains strong, at collections average occupancy our $XX steady and this very performance XX%,

Next, I which servicing, reported of $XX investing million. will to DE turn and

DE conduit with Our settled July, the very two priced treated $XXX which priced transactions, settled two subsequent past three which June, securitized practice, loans transactions, are in quarter but of to in or with active, realized was purposes. in of as million end. for Consistent

quarter servicing, is expect this XX% next fees until we business fees. special lower Our COVID-related to $XX by due in September, securitization from QX. In a modification so price this primarily to liquidation increased and million to contribution not expected

least of cannot certainty, COVID-related in of we be see the expect predicted at fees with earnings such going forward. to While fees some portion timing

At special we balance servicing Subsequent bringing our trust $XX.X portfolio for $X.X with and to basis resulting $XXX $X property billion, to balance of and to $XXX funded also a quarter, to end, increased were $XX quarter. my of servicing with pro to $XX billion. servicing the million Concluding segment’s under CMBS portfolio undepreciated today discussion continue of forma We named loan to the loans asset forma a finally, investments. was And We during billion million, quarter acquired portfolio million an million focus across infrastructure active gain our a preexisting the sold million commitments. $XX.X XX this a net we $X and in DE the pro on billion. of million $XX lending, the is gain new segment end, of portfolio, cost GAAP which business of million, new on contributed XX obtaining portfolio named which servicer on $XX $XX million assignments. $X.X of quarter were Repayments DE million.

with side non-mark-to-market provides structure. our capacity, credit the our term-matched, completed the we infrastructure inaugural million with our actively balance rate. average an a of weighted a I and coupon plus LIBOR The this basis comments significant about points is non-recourse, a expansion conclude managed right and few On a capitalization. which of liquidity with CLO hand sheet, will morning CLO, XXX of $XXX XX% along advance

end, million generate addition we allowed portion unsecured a end, million, rate. of sustainability will QX, we lowering they used par a a exposure proceeds subsequent In loan bond open quarter with X/Xs. when liquidity, notes fixed excess X-year stay our X in issued $XXX and retire to to X% term be of we the Also, at XX% $XXX Lending a securitized debt. The for a in to completed million to coupon $XXX September. advance us unsecured December prepayment our quarter in a hotel our Commercial extended This while to securitizations to subsequent portfolio at recourse

of capacity addition assets In the to financing I to credit in us ending ample existing addition will we capacity unsecured With billion, and quarter billion current via This $X.X our turn provides call to and adjusted financing equity of to our for of on maturity to our across continue execute under $X.X businesses, available our unencumbered with December lines, the have an capacity, that, X.Xx. dry us market, to debt-to-undepreciated powder availability credit his with $X.X pipeline. securitization comments. over ratio Jeff our ample liquidity the of repay note billion,

Jeff DiModica

Thanks, comments start balance the of sheet. activity sides will quarter My be highlighting on quarter. both our capital of activity strong I discussing Rina. during will by our another quarter relatively brief, this markets

on unsecured bonds of a said, priced As $XXX which bond tightest X REIT. offering at the for mortgage Rina X/Xs sustainability was X-year record unsecured in coupon issued we July, million a

oversubscribed unsecured orders. the gives that yields us X.XX% capital the trade to the was remainder bonds payoff which coupon in X.XX%, very option or to secondary grow bonds that offering of in with between outstanding Xx billion QX. X% $X.X our business over and the mature accretive Today, market Our issue in our

liquidity. solid a chose leverage, For diversity a to the BB+ corporate rate transaction first and engage BB+, appropriate business rating them. rating profile quality, funding cited relatively diverse the consistent coverage, received us operating and bond In asset well-laddered and strong performance, model, of from we time, Starwood’s and Fitch this low interest to Fitch

Given believe concurs where this view. our bonds trade, bond market the we with

to second closed CLO, well-performing service infrastructure billion A-Notes and book. completed CRE selling quarter, Along CLO, a on mortgages, our energy and quarter hotel of securitization debt financing of SASB to our the CLO with of contributed to inaugural CRE be $XXX end, During million in subsequent a These portfolio which on also we $XXX loan limited also our our XX% well increased subject and returns the these securitizations these CRE below secured equity significantly importantly reduced the depths liquidity COVID. our marks recourse, transactions. and has in transactions percentage to credit best-in-class in $X.X our transaction a million on our significantly senior continued

Commercial advantage take and continue the momentum here real mentioned, asset continue so has to are pace months, to to CRE and led built believe fall. by residential COVID segment, on Our quarter estate outperformance origination investing Rina excess billion $X.X began. increase, we CRE prices business in of we to our in Commercial and expect since of have our the credit improve, the to to XX of a every the rebound. fundamentals in culture last originated record we XXXX every markets do lending credit-first in in and QX continues over in loans segment Lending we

call, XX%. a We peers made our of to than As our best-in-class our XX%, our down of result down of our will book we to-date. our earnings loan year. have loans loan QX suggests exposure double loan on none In is as COVID, base multifamily losses hotel book to that exposure is no time, past said the more we XX%, our to construction down use financing a on loan case modeling exposure exposure little a our today is our as our over and have statement percentage office

transitional, half months. has in As less we become our have funding future cut XX our also over last the exposure book

exposure We have COVID of since our of increase Capital international used the our scale record XX% by a the that Starwood and to book start portfolio. XX% now is and footprint of consciously lending

in to to exposure accretive loan continue international our highly increase year. to expect We coming opportunities the

COVID after face quickly higher versus markets internationally U.S., loans. on are We competition returns more where finding we where and often the lending rebounded more

benefited to portfolio on significant Our again and Florida $X.XX lower property the southern of rates taxes markets capital portfolio our own from real unrealized over biggest rose lower has share. our this today. beneficiaries growth. quarter been property cap the estate the and gain liquidity of billion per $X.X has one or approximately migration, multifamily country’s The in

of refinancing, As another execute a cash-out will imminently. result we

worth in accretive of very at choose being them the to able unparalleled harvest by reinvest them retain dividend country. to yield I position and growing cannot We grow our in basis to of rise this volatile in and centered fastest portfolio, a diversify continue will you Florida or way income Tampa, and finish will over and saying our proud to today diligently continue specific remind setup excess MSAs around gains to management we ensure well use Orlando to in lens in opportunities in and billion median have will gains. will their of $X are a MSAs, continue earnings whether to that our negative enviable down to in will I two to our our which Board rents property company credit-first our are the leased conservatively we put business. our the find accounts of us go to for portfolio and work outperform XX% of the segment multifamily which These and XX% markets with is coverage.

realized been plus will return turn CRE have to We over Barry. business shareholders an since call and I billion has that, losses industry-best XX inception. over with lead invested only to-date, to $XX XX% in which the With X to point of annual for loan helped years basis

Barry Sternlicht

in are and industrials, also safe are come arbitrage stretched. capital still the most all, have worldwide cooperating Rina in and become Good liquidity corporate AAAs nearly to morning, Abundant yields fun It’s The team flowing VC, after Barry rowing hotels, and when like markets the these for Jeff to estate This The at people multifamily powering is real everything, is remain Rates real everyone. proxy a Capital. extremely stocks, follow Sternlicht. more causing in. for not full XXX remains to search extremely in remain Real best private to away. Pricing are continued Starwood estate and levels. spreads all is XXXX markets public of asset parent, returns firm’s is, the and addition of direction estate twice to size overall the so will of healthy. and spreads classes a Capital to the assuming is flowing and AAAs to than and yields. wide they are recover same values bonds, that debt. pricing professionals because the that’s in attractive

sidelines, but home little cities Look prices estate very and spending to space. And certainly will are our two pending to best to travel, overall smile to people retail time, assets not so we rates and like where and of in the fire, through in vacancy on including While in in unhealthy that out a putting XX these of at openings little, taxes, now, rental underwrite but estate and forward, costs, money XXXX have States portfolio the and and spending I have XX%. economy years they opinion, in the market New million are unbalanced cities am period these it’s of real the markets everywhere classes, creation that And ahead are that should then kerosene in figure us tricky this are to everything. most There very maybe to moving XX%, It job levels, help really these the pressure wealthy. you some single-family to are Netflix York we open for real take and at that than happy all loan-to-value continue exposure it’s true time. underwrite that are in other seems jobs rather markets be Washington on their true itself either asset exceed is paying has apartments my way. and the years. iPhones, the a and to you in United X.X pleased spending, no have see bills and our people Francisco assets People down made very some leisure our approaching city these in get them on including power China. large made goods now remain say on The and jobs right San some could hotel in almost still subscriptions with spree some as been pandemic. government rates that sit The into cities cap buy videogames, hard is and the fast office seriously

people us us, hard for. little we worked for something have credit on give to years many Turning

key after is issues may or securities. loans with been mismatched historically that be before debt the refinance that that or One mortgage those underlying the finances has of prepaid REITs term,

our now Our loan securitization ever our done financing changed and lending to in in CLO critical business, in book, that large Trust. book, it’s and part sheet our in was willingness business lending the Starwood moves We’ve for book. but this fortressed which first to for our time regular Property our the infrastructure balance grow always resi our this built of and conduit, have for a

States. our spreads, Starwood XX% of and the relationship-based. operations on leaning Capital’s head international. hard hired one London. the United opportunities recently book our lending than in business Another item of these more a We in internationally competition, is in in And now mortgage XX people is are our to in because Australia, this financials you that we few better they on focus may with of new continue frankly, we’re have And more the almost are, we less doing noticed

at we our another us are any European that scale, and very together, So one come our differentiator firm. really only sheet. our large because would with our balance increase growth continue and looking And major it group, them of accelerate some to is to our of of opportunities

those that One quite are opportunities. scale. our we of unique because So other us excited sometimes opportunities are about issues become to item,

As construction many our is entertainment the the and It American And mistake, Dream of the you nation’s some mortgage it today one-third I’m Make as fierce. center itself in represents rides, is banks by largest is no dominated that of amusement XX% sound reached mall and of the will costs. first has recall, we now money the competition lender were occupancy. alongside Mall. certain the roughly investment

grateful our scale, We opportunities to continue at costs for great our reach, provide global company. and funding are our company’s our

our We than more verticals a in are the could add offense on and considered our last dozen every platform. that to market, additional Board meeting

consistent, our will us and is our opportunities can own and just and at on Thank to may years what IPO ago, to accelerate goal our with time growth, is where provide these our and have. which shareholders and and transparency, can continue is we you safe, see how working improve focus your XX today reliable any it questions on to which best-in-class world We be dividends class. for size ROE, our ask see our they to team, performing so we deliver

Jeff DiModica

up Thanks, that, to with Barry. open And questions. we it will

Operator

with question. from [Operator the line with JPMorgan. of Thank your Shane question comes Instructions] Rick you. Our proceed first Please

Rick Shane

morning. Thanks question this my taking for Hey guys.

million change big been like Just drives Slide change. just a shows do very something not and capacity. I that capacity, drawn undrawn have there Was XX, financial $XXX look at contractual helpful when that in approved your to have quarter-over-quarter or a quick repayments would is does which understand what The I with increase to credit question, almost walk. it’s again? that

Rina Paniry

driver I’ll going So be that take Rick, bond. big unsecured increase The sustainability is to million Rina. $XXX it’s of that. the

So but pay undrawn which capacity. when take and we cash lines that, down get in our that cash approved we will drives up like

December you’re back pay down. of when repo So will earlier a so and line with unsecured will then to paying maturity we September you have – early, down December draw until our your down portion our repo up come get you’ll to number that maturity

unsecured issuance. caused So the it’s a timing issue by

Jeff DiModica

to the accordion And I it lines. to power help value ability sort of those understand comment and on the will provide of you

lines XXX We anywhere bulk transitional assets repo all from to way on have in are loans. plus even our that the XXX newer the LIBOR maybe lately, XXX, plus on some our more of out multi-families older, LIBOR

So of the XXX the might down LIBOR next then XXX down get when pay loan and plus cash plus and LIBOR and dollar even pays to XXX. maybe LIBOR we $X first a dollar plus a

cash, our could any our the have most on we debt we’re cash what and cash, high it and but that negative effectively drag by ability XXX to as mid a don’t on undrawn. on So that. see high approved really to know plus in not to return get X% market raise to XXX sit pretty the a good It’s increasing our LIBOR raising corporates debt and do earn we because in where such bond on have you at we world

Rick Shane

Got it.

you much. Okay. guys. Very helpful very Thank

Operator

you. Thank

with Please of line your comes the proceed BTIG. Hayes Our Tim with next question question. from

Tim Hayes

on drag such I’m Thanks as the you levels, Part to theme kind base the find pre-pandemic earnings capital And bit had a morning your of B have that And there kind outsized for curious, as is curious what how guys. your very that can very compare support? from despite a on also just here. I having over back I guess, liquidity of look just strong of strong my I’m past an position? does Hey, to of current size kind is portfolio Do position liquidity of like today? the questions. mean, just, year. taking you you liquidity sticking you’ve a growth good liquidity And

Jeff DiModica

coming of a have December with $XXX decent Yes, it’s the amount that has we raised thought that as coming XXXX, pieces on market of off pay in that. certainly Performing up. $XXX a paid created million. We assets a remaining the sheet. little more cash maturity question. probably say million great that to had our have come would has few cash. a which We There repayments we quickly back a balance would is off back. has million $XXX We’ve I

Last So I year, where sure We’ve want plus/minus on think sat sitting liquidity, we probably about we normal, $XXX that cut is in market. the million probably of access do. we’re tremendous of optimally. marginally to not in have cash higher a think cash worried than an than half. We in being average more to we’re But would second be dip we still conservative. make over. I COVID which we

billion of assets. have $X.X We unencumbered

As equity I capital certainly cooperating. before, in raise high-yield we can very is market the well, the market said and

So we book lot property have – and that we have about. a $X talked we’ve obviously billion

a of it’s uncertain a than but we to ways this still cash bit prudent little have to raise did we we pre-pandemic. hold recovery in So lot balances still cash, higher think

So not maybe a $X.XX $X.XX of $X.XX that ago. but was or it’s the it’s bit getting it a little so, year we’re or drag,

Tim Hayes

sure nice was current kind portfolio helpful, of base your obviously, B liquidity Jeff. can that’s support just just support? size some I’m growth can of Part No, capital But what position And that your here.

Jeff DiModica

portfolio. on depends could never business seven date. bigger and some grow bigger right? highly leverage, a it base the having market thing is looking us a cylinders number and levered equity The for at If portfolio to chosen we with wonderful is, to a that more. run well. as We’ve grow investment where as have the equity our we much peers, as path wanted It our Obviously, of

like be continue have so and it’s loans, uncomfortable we $XXX did if you’re were the and do, thing pony start day difficult put a ability well we below before to were that $XXX normal and grow, that $XX you and make could that market. be to would And was higher another say only you if And billion infinitely. that I We years, up really went we loans just year a the you that billion guess, to to would write the to wake a to we going billion to at and be X.X loans out billion because In year you all and that money billion. that to one-trick $XX stay I means need loans write to $XXX and credit GFC coming XXXX, only you a done year do, percentage to book I’d we by GFC, that it’s $XX it’s billion. billion stay unless market’s billion or of have reaching you’re transitional have and average to And wouldn’t loans. of if just invested a every these of over willing the the $X $XXX out invested. of more need XXXX, in thing for definition $X billion, the loan got from

look. size So I continue you would to to reasons we’ve one of – cylinders lending and – to think $XX have a CRE the billion ability be. continued think again, to billion would is why the that is and we But want $XX it’s of the our I the most we business have add alone

ability than the be lot bigger a that. have We to

Barry Sternlicht

you The only hear – me? can

Tim Hayes

Yes.

Barry Sternlicht

I thing bigger. say only be we’d The like would that is to

be raise we but need soon, point, we’d healthy sadly. time some any at capital, So it to it will, don’t

Jeff DiModica

focused knowledge whether businesses have it’s information Difficulty]. an to talked these about. off to but acquisition or I something, and to more our of love do tons of base opportunity capital, the one some on actually new generating But them are an ROE [Technical We’d won’t and work deploy of

that some So the can businesses, to lower lending execute ROE we on things we are working we opening and even balance those and if against the [indiscernible]. ROE see our high businesses goal will we large have and is them

been we differently it’s it’s how fall. Difficulty] whole the something So rates when [Technical tried benefit business – interesting when

growth a pretty least a balanced I been at us, – been So story, story it’s would it’s earnings say. for

Tim Hayes

I’m absolutely. you you a mini in Jeff, act And the shift to again just it’s and know. and been as to mentioned still those you of guess, gears, that continue gains all to the a goal I highlighted and but as book like gains. that’s capital of to on liquidity No, raise mean, a gains property side. those a good write you to assets capital yours could source while of be nothing because harvest terms there appreciate, for about kind harvest I quite the and how home crystallizing those But see of there. for gains, going in

you these Or So closer stake some feel a just getting there selling curious to if that along you’re report coming then to to just in and initiative? of of terms agreement of kind anything any portfolios?

Jeff DiModica

Yes.

dividend. In freeing case, raise it’s cost of the equity could So I this think a comes a than just that we’re lot more A capital mini up we the powerful reinvest. mini cash capital with raise.

and much the equity there us sitting on and earnings, because more to take we just it’s gain, they as out are accretive powerful So direct to property is there that of no cost gains dollars as is in side. any a

places don’t what say they previously, to but the something of of that tax means favorably timing deploy it for came to they it to to a in, We’ve year in, our excess a we continue us. There today, much as we happening you’ve working them come get are to we out having powerful. we lot. with need timing, and as plenty market this And really think that, chunk changes We are gains to let on for is more to mentioned right have been prove I in wanted work will capital they and as those that is we be that’s settle good accretively. think Florida. able So that that were get some were as

it. So on slowed waited the the just we little changes sure to time, happened that will month. Florida through we bit over we These and things in tax year take the out that a continue to work make last really down a

Tim Hayes

it. Got

color the for morning. this thanks Well, it. appreciate got Okay, it. I

Jeff DiModica

you. Thank

Operator

you. Thank

Our Fandetti with next of the Please your from Fargo. comes question proceed Wells question. Don with line

Don Fandetti

what in on I terms portfolio in checking hearing your in was just from Delta travel variant. you’re cancellations, curious owners changes, Any bookings, behavior the that? hotel of

Jeff DiModica

I’ll start this start Barry I’ll you let there. and closer some Nobody then to is Barry, than to want numbers? give Barry.

Barry Sternlicht

don’t caps. represents and at any comments market caps these you will at to book. I my any portfolio, The we the astonishing. at think tell going urban revenues our some I boxes get can costs our the costs are the Jeff rising, up, Yes. And to hotels your X labor hotel time, that are labor. hotel assets trade your property had mentioned in I X moment, has same company. the think valuation in quite just to going are are your losses there, if big find you haven’t seeing of up, not for been that exposure you’re while XXXX levels don’t And time. are taxes going back

how lend are prices don’t cautious because of paying. very think the now. people for underwrite again we’re And big I So we right hotels. being on the more are some like we people prices sector big, importantly, can valuation asking, what’s And these

multi-industry moves rates. everywhere, of rising in and just the think much which more rising So more actually inflating capital And are and faster important careful. in to small are at in super rents, I there you in is ever than determined values interest have we have much real so rents be value pace. at course, least

you issue explosion run in of you get isn’t work in really hotel. hotel mean, that and in I the whole equity we’re have really in our X,XXX across issue this every you occupancy although you the side. CEO hotels rents can’t hotels talked single staff. industry, hotels, ourselves so of and can’t in the today. if some see the So country. rate of we I’ve industrial, in multi can’t to to And an it in full that’s seeing and in demand, It’s your people really a even and because own or family the

the in that But don’t don’t right of, aware Jeff I numbers, situation. So it’s sector think material any quite an really firm, hotel give property and interesting the Jeff? think exposure now. will I trust really has I’m you the

Jeff DiModica

mentioned, about Barry, a Yes, talked it. some I’ll at had losses. any the – you haven’t lot throw numbers we and We’ve

extended company’s which the has right and come that is are the portfolio of in in are quarter get-go stayed or hotel. extended hotels. out Limited quarter. loans is tremendously is of has so. about strong. about that much. Our X% the is in ADR that well performed back service COVID gates an of our About from never X% moved quarter assets highly stay, assets very another quarter down That’s Destination occupied, very stay of of on

hotel boxes we’ve three the sort post that’s loans of avoided. fastest seeing come travel And that said, we’re Our the is Barry and well. are and back in something business largest destination, COVID what very urban the trading as historically

senior We and out where Manhattan mezz all of mortgage as have in we moved last year. one a loan of the

very we’re So comfortable that. with

the on million We’re that of hotel also of very million committed comfortable have our sponsors that $XXX world-class to the the projects is COVID, $XXX that their since side. beginning of

sponsors. we’ve their tend massive a So when injection. it’s assets well-capitalized seen tenant on that And to something lend a that we hold prove hotels, liquidity Barry very for we equity in their insists with on. lend them desire to and us, and these central to It’s

in I what down there today. perspective know as I’m hotel from – can’t I nothing a about So our hotels, with our we is of worried list list payoff that look

with comfortable super But we’re Barry said, as it. cautious we’re forward. being going So

Don Fandetti

changes any property certainly, there Yes. in any trends you’re standpoint? I you occupancy level are destination was ground more hearing at mean, curious sort areas, from the maybe shape. just impact in an I the if is on some if guys great and of

Barry Sternlicht

mean the COVID variance You emergency? from

Don Fandetti

Yes, exactly. yes,

Barry Sternlicht

yet. book it’s talking equity of our here. template that I’m hotels good daily I the New – York, don’t not the shocking a how – really I occupancies of financials running and we XX%. we And would about actually have good I have is really, But – no, are. not the pretty to. say lend Brooklyn, I Brooklyn

picking numbers these have been are other They York late in New XX%. probably up. is not XX, Hollywood, West direction. going

opposite. you would you are some seeing expect the in – So, actually Europe,

You it’s variant interesting about hotels are worried more are is the [Technical people seeing now because cancellations Difficulty]. and Europe

in vaccines [Technical not some Difficulty] the are the may affect they in were of think they AstraZeneca Europe I as July. Pfizer definitely

Don Fandetti

sounds valuations guess, then And I like high call, on it. the because know are in the Got it I past liquidity. very of

areas even I are particularly think that interesting, talked not business, So origination about maybe going I at the if looking given are available? you’ve they gone newer to have that like or past, in become those still mortgage wonder in valuations of some more where you acquisitions be types

Jeff DiModica

be do talking Are more agency we all in businesses. about Can you guess I mortgage of that you specific? lending? originations, our mortgage By

Don Fandetti

the given I business Residential in Sure. origination, pretty expressed Jeff. Yes, high? mortgage some just are in exactly, past, that returns you’ve the interest know

Jeff DiModica

Freddie. talk agency are do think the loans is to I of a be would only still Listen, be you well that Yes. we our you multifamily, firm. the talking is already, about in something and expertise agency, involved in continue a low-XXs that will mostly very number it’s an of Fannie about used. at we We on in. in. originate think They side which licenses that space. There get look peers love non-QM we area business space. from mostly to When from mortgage And opportunities might for to have our That’s residential been

and the lever a and in be great amount obviously a decent back And we a a going and I up. pull be a for one our would rates create worth could we if for involved business. is and had ourselves, thing, it’s other our to portfolio I hedge in of to great of we things servicing that license think think love magic offset

our find the way cost We to So right yes, to just to to in. the we at be involved have look right that’s a shareholders at. continue business

Operator

you. Thank

Laws with question question. proceed Steven next of the Raymond with from James. Our your Please comes line

Steven Laws

those Hi, months of look XX minutes we about And you you mentioned you out portfolio a on dollar returns? you realized maybe next when providing as the currently and seven see But good morning. the I cylinders a cap the ago, do business? some mix get. out as to cylinders of most you the want Jeff, few mentioned growing the those the a maybe think the which loan how best is big is cylinders there door, of or XX which months,

Jeff DiModica

Do to? don’t last Why year... me I want do Again, want start? start. Barry, it give you to a you

Barry Sternlicht

Go ahead. I will up. follow

Jeff DiModica

writing I we component last a I The bid, have CLO said say them looked securitization Barry and to both business year, are ultimately a done our that energy multiple attractive. first strong now, and key on buying the Yes. for slightly loans business, mid-teens residential that us are who and think to business. us, where guys below people I calls, infrastructure finance that’s very our securitizing super business. would the than we at ability to and spreads discounts super continue and banks attractive levered don’t higher to a The lot grow equity There the we yields the of there loans at to a same that’s think private aren’t have way.

think will I spot origination we in we will by So, opportunities. transitionally. there the the we quarters, of Lending have record a are last been our tell the the than there. we mentioned you side business. have Commercial fall couple call, loan sweet year nothing in Internationally, that tremendous I has on a seeing better

grinding originator #X CMBS – But with great tighter, business, we So, to of now. the more originator and we I obviously, conduit the been business. spreads are money of make tend a think non-bank that’s

We can away. have year. for on we love high share. business dollars of to that there, set stayed do our more reasons market leave to the a little bit touch tend smaller to nimble be share market and banks more want who revenue as loans, do loans and business We the bigger dramatically that a profitable that that since to in where up other model started couple to grow would been have we really COVID beyond We billion isn’t people pulled a but

leaning feels is like the we keep We more. opportunity it those to today, lending resi. out. CRE businesses to love still I But think would a our are core fantastic do me are We So, money putting business, like on. business, that to

some obviously out opportunity months. there. There need, have But of the Barry? the On energy in business, and lending has side, auctions capacity general, see deals and last best is been will six CRE the less midstream. less there probably and other. you three decommissioning probably I as opportunities we there the coming call next are we the think some great over In months would the seen

Barry Sternlicht

be ways have that on and for focused is we The to looking our other would have bucket. because interesting – there still I do compliant, that the – obviously, make at money only what And we taxed to add, fees we to there in REIT, large as be highest a us have largest the in get more thing set. still to is is. is that competitive asset And we – whole are ROE servicer and as the but an thing unique classes REIT us that mortgage bucket,

for to we lending. referrals But the be order stuff use are the bucket So, looking have to non-readable that higher in at. is – there

stay tuned. So,

lot are rock. uncovering We of we will a –

now it a and up and going X-year plan, We to have it. we execute hopefully then are polish completed

Steven Laws

maybe you than have what restrictions COVID? been attractive mentioned, where the and Europe Delta Great. and type one or and attractive or the the about stack And throughout on before call, capital what in expect you can opportunities follow-up Europe And talk countries kind have has would regions certain – Barry made type Jeff both variant, activity? in been maybe to get property the COVID, less any have of

Barry Sternlicht

will and been to it, business I our are then value. loan low and of [Technical can you Jeff, Difficulty] if add mean, want. aggressive, lending – Portugal. most the very Ireland take UK I our you Banks in has pretty

on mean, for who look have done will debt, we class. So, position more the equity us. at we somebody that interesting to there wants is side. an take If I any asset always

invested data in center have we in the equity London. side So, of

think costs what just business companies, the to we from love we really good news lender, sciences, life as So, – lending what have forward the of lenders people a have other you globe. for – about for have to the and It supply. we for – heard is I center galloping be cycle on. across the were data isn’t all real wholesale watch the are construction estate out

it’s costs, I at these that replacement our we what probably X%, bought our can’t value for looked And loan for XX%, buildings dropped is. your these actually replace just if people to anymore exposure so what loan because them –

are as X% to – willing to know, justify adequately yield accept rents sort people rise less deals. cost you the on on it’s there construction So, have for

But are So when far, rents trend that basically say, and dangerous rent. get developers bad, it’s the but that rising. they market rents, will do hasn’t the I is gotten well,

higher it I and I think when get you developers with thing. complete years wind then, happen then has X the other doesn’t course, and XX% costs. model project will of lowering because And be rent up same the for the same my everybody

market. sitting rates looking money anything it. $XX just much globally, economics of everyone And will looking money rates low is And interesting and sheer low I on of it’s it think reasons went stay there so news stay that for in for just yield. weight those class, who good to the us to trillion, it’s obviously for as an for the a out is trillion there $XX yield continue So, that of trillion, it’s $XX really has

that You classes, multiples companies should their be historically careful, with against quite at other the even but relative I BDCs, high. are lending asset like to

continue plays this all we we but are doing. will how what see will out, we So,

Jeff DiModica

don’t a to that, lot have add to Barry. I Yes.

the multi-office, You would I spots. to competition in centers there. industrial, Europe, starting at data say, less look nailed certainly

the with loans and that You write relationship market. broker voyeuring don’t in have European two Bloomberg can a debt into a guys funds

us there So, helpful certainly nature by larger having deals as well. is for less and competition

Operator

Thank you.

the line question. Our proceed next Jade comes from of your question Please KBW. with Rahmani with

Ryan Tomasello

is on for for Ryan morning. taking Good This Thanks Tomasello Jade. questions. the

you I reaching company’s cost rating an some the be any if point? that at acquisition to that goal you investment-grade explore wondering opportunities believe On and M&A the beneficial there front, of of capital could was are potentially

Jeff DiModica

start? to want Barry, me Yes. you

Barry Sternlicht

that grade. I will we is you to love My then feeling get investment start, up. pick can

primary is our to bigger. goal think I be

is how what our for coverage we economic And agencies at can what think is I rating the – so cash is how the our diversified and stream, insulated say debt, from flow us There it sheet, [Technical I scale unencumbered almost growing our billion And is great. there. are are have of we assets, we which your you is And Difficulty] And balance cycles. which helps $X think great. look just

Jeff DiModica

I he we purposely Unfortunately, talk you the going company rating have to don’t started doesn’t when but unique easier into It’s company. a are lost we much company may box. the why think I up fits Barry, take a and model. would a a second say about a I as into built into agencies. that rating for box fit agencies

models, one look on I of back depreciation them doesn’t rating agency at the portfolio. add As our

as opposite is they on reason, are zero. even though REIT, and worth assume that for it mortgage for REIT So, do They exact property the it we some back. fully do depreciated, we a the add a hybrid REITs. would back property it They between And add don’t property us. a

$XXX we So, in of property actually equity be. any are would lost us some than than million levered that calculations is that REIT look our more on makes sheet balance

again, get us originated, count CMBS I our Xx the don’t no On of in making newly appraised on am equity debt you are interest calculation, to not payment the fixed significantly investment-grade giving with by more telling effectively loans rate me going credit. me, coverage, service CMBS look newly levered. below August XX-year they argued I side,

end every in the years. bad is loan full assume credit investment, at a discount zero have give recaptured my is investment. I point, CMBS to that be us if which going could you You XX by But

And makes equity, so to give sense. no us zero credit on our

despite liabilities. as CLO same in treated margin We have rating way agency billions the calls, – no in are being today model. they dollars non-recourse repo with them the of And we

So, do to a grade. get to lot work we investment have of to

explaining why box look come at that of agencies need and us from places. they the a a of rating metrics of take have with bunch to to lot outside do We a

to with to are We the who happy-ish when coming The around company Fitch than us. bond costs agencies the be growing think business our investment-grade grade, close wonderful as as us to would allow a getting BB+. better have our rating closer really trades to we at certainly us similarly much sort others shot at in are Barry that a understanding better, for help really market and financing would, rated come we said, which to investment of But business.

stuff. but of would out You some add-ons months I on plan, slightly say a progress to I believe but and cylinders, that, could few them, our lot go potentially would a coming probably those. XX from sort our And Barry took I to also ten task is we months eight existing businesses. to then through to X-year what new the of businesses Board our of about M&A next XX we and some ask or show businesses on related over have do. our But about of

progress put be XX characteristics list XX looked – reasons I in them times. as will those that all we we different multiple reasons There we and you able that together that of And are business. and of some show reasons them there to there at like them at And well. won’t the do we companies put or don’t we we mean, hopefully, our at sell. So to we going on a are have looked some look are think I business. shareholders are not because don’t every some

good day. we be smart sort businesses. But on would assure a could anything these can So, are have and play that every us accretive and to team of at I willing price a you whole open premium we it what and all get of looking to that into add people we at them new the that what of and credit markets up pay depends how some at to

Ryan Tomasello

comments for Great. expect of slated half deal in be versus business September. the the your of you with of more the talk grow But back half the broadly about or terms conduit in the around year you the volumes outlook And CMBS Thanks to half can I guess, back volumes. I that. consistent for year? the next first for your pricing like of expected appreciate your

Jeff DiModica

market very This People we the the and the quarter first more stayed market, people time, have conduit the same every loans that and and draft We bigger CMBS although in largest than jump and of are SASB is to they competition I think, SASB will other in came we so are going or jump market and is the significantly SASB bigger did portfolio actually people that Other securitization significantly SASB ago Markets originator. forward. month don’t money non-bank making became tend CLOs hotels well. a priced well. just be the select see will in some play much a But today, the people the interesting. conduit will which like in for off as year, biggest. was success, service off and time all in really cyclical. on they our at who all than us road side,

if no CLOs, is we write our done, of perfect continue available we So, sheet have fit to is always assets. more of financing, that our do safe, calls, capital match, are of and marks cost but on the no that expensive, margin with sources no no A-Notes more recourse, cross do credit which We ways it, sort can for to right. our to there do two loans want what balance more

A-Notes. to continue will sell We

more sold than our peers have all of We combined. A-Notes

our will market, market, than – banks giving I is We with like the repo which reason business, all reasons the others of this are cash. warehouse which in grinding continue to of financing use part the is the is and the dramatically bank better probably us flushed one

everybody grow As is businesses, less on trying do have they now banks their them. warehouse assets want line and to to the CLOs,

funds of cost rates there. and advance better us giving are better they So,

many those. at a is we will CLO, loans but space our do to in of The months that, continue do can the It what look to X rate exit. But loans CLO and and write portfolio And away our XX every write we CLO little for use away hoping we last people goes bit. we higher market cost gone a hasn’t lower exited So, advance which out in the months. CLO will won’t another so ultimately, do, of funds. a

to writing is So, loans now there. everybody

recourse get loans and X with or a you expected marks are like you and do. and yourself to CLO you don’t might that, really your If don’t the IRR an X, get exposing and to you want but those things credit XX exit, hung be

think for that let’s I a we to trade. an CLO got originate new of not the a plan. have if was proven we Board, years, for to that showed it XX not over just smart anything through one are and It’s this XX a It’s exit. risky. It’s too x trade. we So, and loans And businesses our the in run business long

markets are we a it So, we never there. CLO can assets, better. balance will trade. a do those we write assuming them That’s when the unless with our just things the sheet, And on exit, going will CLO loans makes capital we to be to and that sense finance

Ryan Tomasello

Thanks for taking questions. the

Operator

[Operator Instructions] question. your of the Our Harter next with question comes Credit Please line from Doug Suisse. proceed with

Doug Harter

the most On estate of kind just said lot you hand, one opportunity is you is a kind of there the real to attractive could Difficulty] lending and capital square what those two of [Technical of Difficulty] kind of comments? kind of some chasing [Technical CRE

Jeff DiModica

cutting So Doug, out. you were

couple the are it think I opposition of is cutting this maybe don’t But out The making super aware. a those and what very capital pieces maybe that capital be fair? that heard was is don’t was of lending of it that, And are lot saying CRE. liquid. others. I CRE he might not You together. that just attractive markets are we In and if also go that chasing Is you know for were maybe me. that a there I for

Operator

time. to questions comments. disconnected. any sorry, Mr. There has floor this final turn I are for other Harter back no management I will am the at

Jeff DiModica

everybody, your Well, time. Thank for you, terrific.

forward We in you to that’s are looking you And it. much. Thank again three to very talking months.

Operator

concludes This you. today’s Thank conference.

at lines disconnect you your this participation. may time. You Thank for your

Starwood Property Trust (STWD) 5 Aug 212021 Q2 Earnings call transcript