STWD - Earnings call transcript Q3 2024 | Starwood Property Trust, Inc.

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Operator

Greetings, and welcome to the Starwood Property Trust Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

At this time, I'd like to turn the conference over to your host, Zach Tanenbaum, Head of Investor Relations. Zach, you may begin.

Zachary Tanenbaum

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

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

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

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

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

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

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

Rina Paniry

good Zach, morning, everyone. and you, Thank

other share. than $XXX Across just our $X.XX investments XX% makes now earnings reserve, difference our net we commercial The which CECL new businesses up shortly. this committed or share. per lending, was $X.X $XX XX% million will of DE This I investing GAAP businesses, with distributable or by reported quarter in higher driven which discuss million $X.XX or a of income was we per of quarter, billion towards assets.

Residential funded per originated this I $XXX $X.XX commercial with will which lending, share. or million Commercial contributed million of we In the to Lending, and million of loans, quarter quarter, $XXX we on begin twice that loan $X.X $X.X DE $XXX $XXX of morning and nearly the million Repayments pre-existing quarter which for bringing additional an to year-to-date billion, last billion. of repayments commitments. totaled

X.X Most book support billion Our of investing the beginning quarter of of a with prior $XX.X the rating borrowers with loan quarter. continue our average since fresh equity billion over consistent ended year. to of $X risk weighted last assets their

by impairments the in to X.X% REO our with of with our changes XX% you topic will of Jeff detail. lending share Together million and to of value. a reserve million, $XX reserves office. CECL, On million, relates $XXX risk portfolio greater $XXX to per of discuss which $X.XX book our and of rating translate taken previously our these balance increased REO represent

provided million where negative speeds lending, the mark mark-to-market mark $XX million positive purposes. during a our repayments portfolio quarter billion. sheet cash quarter. million while $X.X positive a loan, residential at $XX on a This decreased million our ended includes turn Next, $XX offset net Prepayment of GAAP $XX and which I leading on on-balance for tightened, to will million by of mark our $XX hedges, spreads loan to slightly, the

implement in the X.X% million driven quarter. $X.XX next quarter the with maximum Property at year of allowed $XXX expect our the resulted to the $X.X decrease the rent which per completed XXXX the holdback or of we of Florida We excluding rollout by last in driven quarter, retained in affordable million, multifamily levels, higher portfolio a HUD RMBS quarter share slight we million segment, from our by $XX repayment. ended Our In recognized portfolio. NOI state-mandated DE

recent in you aware, material Florida, our hurricanes from in in suffer As path the all water insurance properties not damage, covered of which the would any properties excess the but of of roof are we did these damage were the storm. by the Nine and/or be extent of suffered to deductible.

to Capital, securitizations total servicing. brings to margins that we $XXX approximately and DE contributed million our totaling for or historic the securitizations $X.XX levels. at year-to-date Starwood at share This completed This investing billion. or $X segment were per our to conduit, quarter. million X of XX In $XX profit Turning Mortgage above

We expect to years. volumes end X past the in the origination year with our highest

$X.X our special of at billion. In billion which We nearly were XX% active quarter new the portfolio had $X.X servicing transfers, office. ended servicer, of our

increased billion, named Our $XXX assignments new $XX servicing of almost portfolio highest by level in driven X to the years, billion.

first In of Mac million $XX for of deal unlevered Freddie purchases at our floating rate of piece billion B portfolio, $XXX XX CMBS we million secured quarter, yield loans. XX.X%. totaling The [ consisting our collateral the is during multifamily including $X ] an by had

Finally, X on and asset a small gain. $X proceeds the in of segment's DE GAAP net property million a in resulting million for portfolio. $XX gain We sold

CLO our In infrastructure a million $X.X completed loans, $XXX infrastructure of million our plus share XX% and our advance to term fully we CLO. $XXX which with is to committed to new contributed business portfolio per to the with connection $XXX of coupon repayments the increasing which fourth of for quarter lending, SOFR XXX billion. end, CLO, we non-mark-to-market my infrastructure This million, redeemed XX% million infrastructure We $X.XX Subsequent average funded and we DE to $XX the Concluding debt. an or financing segment quarter. weighted CLO have first million $XXX of discussion rate. of of brings

stock million notes, year, which million And senior swapped post-quarter our will and earnings enhanced X.X of this common the with unsecured our to morning, of issuance our liquidity we in sustainability of asset match finally, position $XXX we significantly our order Since I September X% better call, last floating capitalization. address base. issuance liquidity the $XXX of

quarter, the funds After used and until our is expect fourth maturity In not repay receive July addition that, maturities. be to debt December these repayments high-yield XXXX. next our March corporate we in will to to

Our we B current could loan not include generated liquidity through assets $X.X does in which or at billion, sales that stands liquidity and segment, that assets unsecured be unencumbered leveraging Property the debt our capacity term have market. via of

our continue and our unencumbered significant with across business billion $X.X $X.X financing of under of credit lines to existing billion. We lines availability have capacity assets

its quarter ended a years. X.XXx, to level debt ratio quarter decrease and at over X lowest in undepreciated at the adjusted equity Our X.XXx from last

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

Jeffrey Dimodica

we're Thanks, I under combined. most years advance for REIT apologize been my with cap the larger little Rina. I've a XX market starting weather, STWD, voice. largest after diverse mortgage the a than so our peers in X

XX.X% over in the our in received shareholders cut. and Waypoint we This have became return dividend a total $XXX billion merged and deployed time inception ultimately spin-off Homes, $X.X of billion what includes homes. never have invitation Starwood that have We since dividends, a which into which

total the for as who XX and before months difficult commercial in While XXX diversification Board proud scale, our of are the similar months we most consistency real also collectively have management estate. our last a and stock almost that, the we XX and return proud earned most our of are XX own of of million our months

in from more the lending half $X outside over CRE We invested quarter, our of billion business. than which came

invested every since have quarter We inception.

the Our strongest to of pace been is to loan increase. we pipeline it continue X and years, in commitments has our expect

seen funds and market money in our cash rate of spread significant a markets. in early investors we amounts have record cycle, With for across yield tightening reaching cut

Although prices curve lower as in more sticky, have more early longer the rates market Thursday again yield December. been normalize, curve we continues Fed cut, have and SOFR seen as as and the forward in move to likely

first back and This markets lending charges. brought repair capital direct our the rates since back Fed has to much raising help lending Banks began the optimism make than after and assets. with liquidity higher us will in us time the competing from industry's combination are to pulling weaker value CRE legacy and ROE for

our and to to to unsecured continue continue to borrowing and this expect and improve secured field We to expand expect XXXX. our playing continue costs into

investing significantly that capital assets markets end, in our X To coming Our the access this pace so times nonaccrual opportunistically goal years. down we and work the we REO to our year. as is increase far

and the basis graph look only of only XXX to high-yield for down got each index the of over at roughly last over points XX spread over XXX a time. there you of a days stayed the and at If bond it started twice treasuries couple months,

spreads. a us pricing significant to we're put and the in oversubscription improve We all at position, advantageous allowed seen in the most debt and achieved tightest unsecured issue to ourselves of with XXXX levels that able

at traded rate is debt corporate Our interest cycle. this

basis to just capital up week expect picked corporate so repayments be Our not we XXXX second a another hundreds before. year XXX September points we XX grow did basis to a inside would to offering prior maturity tighter swapped until of a and basis points equivalent issued of points plus have debt have basis we regardless than where on continue We note and half of to issued market the SOFR have would able have repo conditions.

exact we We with but issue be ready. be will in billion assets, may not spread in always at sites the unencumbered able to future, $X.X the

create opportunistically a to Our creates that cycle. capital is plan to other excess as to come as eventually continue we head grow we balance in into out our the and of XXXX side put the sheet ourselves earnings position

business and XXXX pipeline transactions refinancings the in our achieved and their liquidity of reentered CRE have issuance transaction buyers both market. plans properties on financing lending, returned, has strong from the new that CRE purchase in peak is as and In volume

as elevated being exposure, future offense. we to and repayment activity, low all positives commitments, record low also had funding construction on return record fully We

are our aggressive longer hikes, collateral office Fed's many credit the particularly through of loans, take worst these will rate cycle optimize likely our we on. the damage exit where the industry loans, to CRE of of Although was

has model business to level we to difficult billion work Capital, strategies allowed these to we environment our investments optimize with and assets to $XXX asset be in diversified Starwood investments. manager, has improve window Our over find market prepare of exit exit on and the ultimately as which which patient us our right performance as

in we multi have Texas, minute properties quarters earnings rating quarter. have in distributable at earnings risk credit we in will to sold our Subsequent on basis our now take Portland X at and our which talk about a and end, under changes both I about we distributable talked to of LOI the multifamily prior quarter foreclosed the basis.

Our in a decreased X us a from but risk quarter million achieving $XX in rating is by original $XXX X elevated margins X moving revenue The those asset underwritten experienced to debt largest that X. on X-rated risk loans our mixed-use is resulting lower-than-anticipated despite of in loans Dallas expenses has the rating hotel and pressure multifamily property projections, yield. and putting the million

We are sponsor the in negotiation in quarters. we and back the with and report both flag, the will coming

have work multis, money sponsors invest pursuing while whether to the exit. we have are occupancy with in indicated legal X projects and the recently where to renovations, other The they to quickly rents and both borrower increase invest paused the or to decide in as remedies on And possible hold renovations. don't and the continue will as these on then

first $XX a going choose in either is we today hold forward. basis and accretive an million our with The the yield of debt believe multi or mid-X% an exit investment can at that as to stabilize Florida we loan

year, seen to $XX rents loan a multi and has sell. we that is will before and second finish deciding performance a The this when outside million fall renovations slightly Atlanta, improve submarket

basis. the X X from increase but category, in million Texas in million $XXX increased assets I told X-rated just $XXX of are assets those with the under Our to into moving LOI at loans be multifamily our sold representing million X you of are $XXX half this to in that rated loans quarter

million The condo $XXX loan a and a office empty an Brooklyn in Dublin, office other portfolio X new now Xs on are loan in on $XX million a Ireland.

credit downgraded of the upgraded allocated remains a The since will $XXX and This tenant LOI of leasing portion $XXX loan, back to lease X that XX-year that where on building the to Brooklyn risk of signed but wrote the as vacant X loan we loan has we loan have of an activity. demand to the the not million to is and a bifurcation seen that result rating that loan, been of significant moving million tenant has today leasing when report is we date, we nonaccrual. a single

tenant The negotiated The portfolio. go XXX% yield marquee or loan in has on improvements to expect Dublin into sponsors leased is lease a CapEx we the on portfolio, but to default the covenant or TIs with portfolio X debt to in fund a that building loan portfolio has unwillingness X.X% XX% this XXXX. on the the upon recently leased the moved loan today and

lending, net the or To at add Xs to that is $XX wrap will Texas CRE million X% expect X/X and assets. note we X I quarter up discussion assets my total on of our our multifamily to sell the of basis, in under just of the Xs

great in to segment. power to lowered opportunities this we The see tailwinds in over by to just continue have driven energy and lending LTV We infrastructure needs sector. our returns continue our portfolio today XX%, earn outsized massive

energy we portfolio the costs $XXX priced spread business committed new at our loans end to repo date. IRR. the quarter XX% CLO infrastructure issuance quarter well CLO in and levered million our our to in and and markets, in to over to said, expected as both This We of lowest an inclusive fourth Rina subsequent continues finance

of book on securitized our in and less book, to curve, this rolled note I bonds more part putting loan to than more weighting the continue X- of our our curve. that resi rate curve compression down resi obvious spring portfolio will X-year the on our hedges tighten. Nowhere part to as the X spread had the our is in hedges XX-year the we on senior extended where

it, X- Given as adjust in we we us of XX-year the the the monitor conditions has $XX market hedge over month, continue and last this will rate adjustment in the change. to sell-off curve hedges million execute saved since to part and

more our In new in quarter, brought half through servicing of than efforts. REITs, which Solutions in XX in the assignments Starwood came we new

client. First advisory X Bank our Solutions also secured new the mandates including in quarter,

to As attractive Rina a at mentioned, and spreads. strong year, continue have CMBS continues we our portfolio investing SMC in

who to call will I Barry, us be for unable join With will that, to turn the Q&A. unfortunately

Barry Sternlicht

Thank call. and thank you, Zach. thank joining for you, and Rina, you, Thank you Jeff, for this us

States market with Category had reduction over in we'll first hanging comments some United that's estate the tomorrow. the final clearing, in X and is on start market get our we first hopefully, been another I'll and one general. commercial and real hurricane rate the The

know, is to rates continue the fall you readings think component And falls too primarily falling rents X/X is of of expect CPI, I are CPI. almost you flat as States the And because inflation as can government's to and high. of are impact the inflation United rent as delayed of across and the still which, basically now

X.X%. slowing. I we I we've the a But the And to be slow and the the impact, also think record does He the debt. consumer rates the he will is election lowest had has taking borrow card one happy of breather. Wage at uncertainty. growth and employed, consumer have as savings have is credit course, of you economy is think money. But of then ever

some will of they or Whoever said respective actual it's the wins, also the I spending what companies policies that that whoever And create radically think the consumer so their congresses. capital and not it's wins, to in and forward be. by hesitation enacted would face take different may by may policies their be not much what both

rate think policy, exceptional, again, infrastructure and chipset growth has regardless spend exceptional of we been it's Powell's been dollars our It's is, I like to Act wrong which but trillions inflation U.S. several spending, other U.S. Jerome reasons the partly going massive of policies. unique. for interest though, fiscal some on the forward, of will the really

billion $XXX with trillion the X It's this debt. hundreds data which spending. And going that batteries, is or the but year, by just multiplied of equivalent there's $X generals, AI the seamless spending, of that's another the centers, of billion of a another billions is the dollars $X spending magnificent on from EVs, package,

last is grow of strength private significant I economy you homes, which starts, One see XXX rates, Google, of on it's what the jobs doesn't the to point feel the logistics Meta, homes, be should because this completing starts. American and construction hit now reasons basis average XX,XXX in dramatically construction actually centers like so we which when think don't month month like falling spending data which just single-family and narrow. consumers about wonderful Facebook, are because construction jobs things Oracle, -- the multifamily the increase -- their last of they NVIDIA in expansion impact Amazon,

and that they're and $XXX -- of lot billion houses wealthy, what nation's on think of it order in I the our the of impact So of of see services. spending nation BlackRock enjoying portion also of significant something at ] you called Reeder the interest XX% the [ the spending income which is Rick wealth, a the from

just helping income has that expense didn't billion money So country an you deciles savings, things and economy, earn were just significant that's people the by interest of Powell's X.X%, the that in from have money impact U.S. is upper see spending the interest of rates the assume they where that before, mostly in wealthier part on population. travel, and of the the incremental all the the spend particularly $XXX

So Asia. impact is European exceptionalism size our United the of because Xx installations continue is likely alone center of rolling AI of market unique, just markets, the companies. and this the outperformance U.S. is Virginia the data also to our likely to infrastructure through And even States, it's the out again, in our is

the that companies. the ], XX% these where in almost P&Ls impact will of AI through [ of increasing So market reflect steptulism stock the as is, our of course, companies which of rolls S&P reflected productivity. our continue

portion the the in of interest manufacturing started of the it's health has nothing 'XX. with today, dramatic high you'd not nor raising million see since affecting to impact likely Reserve. only markets. anything added rate most that in do care he There's where sector. Federal May nearly health the economy and jobs, of Americans that's government in have it market having again, will do the the because policies interest notably And XX X million housing employed which a care education rates the of rates to

at So to see units the can not market tunnel. particularly for year 'XX. I'm the long means you light from in can estate, we tunnel on of supply units this dropping, see But in sure end the going it go for. real XXX,XXX-plus XXX,XXX the multifamily the to how is

the but You also XX% both will see recovery. some logistics point, at new set starts nearly that dropped for and does a it restart page

encouraged in office markets course, construction, coast isn't be to the way U.S. by to days have from X continue of they giants softens, to we'd the ship telling lead. lack in employees we're as companies follow like There a a the of of as the office the be But the from Amazon, week. work office other And that home. much their the injured tech that on benefit economy of expect

it, help the in and about probably something alternative will congressional almost supported markets else, And down. think city be or the uses the something and in assets convert you find credits markets into bifurcate It arcane assets in smart office we great. CMBS better be assets, good completed expect and doesn't that office whatever States I the are there buildings really will local recently, couldn't If a the are which that leased torn get might and to and will bad the United just bad mean good was office. you'll financing be financing will have thought between some before. by

not lenders the there's credit that and changes regional enormous were his and taking to really in want increase private mentioned Jeff sheet as change mean of not exposure $X.X the a debt think, an estate banks, the real for for place their lenders to be in There's they particularly do with trillion really the take opportunity to rigs of secular anymore. looking step banks to the I markets, CMBS place capital banks in comments, balance and the only banks commercial the up. So

private grow be think a change. us we're leader positioned the to credit poises we're that secular and And is space. space. significantly, it we in this market And I cyclical now. not estate be leader think I the the And being think real to in the largest this a in that and We I to public want want company to the do change,

pandemic proud interest in because the since quite release. in has either XXXX, not my Jeff the loan mortgage mentioned, the the opening that comment in cut As or decimating We're commercial rise dividend the in we're only of book. its rates REIT in press the

pick turn say And in to offense. safely we it issues it our are for with we cash volumes that, is take from we sheet transaction as offense rates that pipeline down. underwrite and us up a be expect and and and can record we're to portfolio, of the still and have see to defense There or exciting deploy really with opportunities our capacity explore, of but portfolio. our from have And grappling coming mentioned, today to turn we that in to the we on, able can Jeff advantage balance

particularly on Europe rates in is Europe world, as about And in across further to taking drop long-term always what we're on and we've policies we'll commitments. be U.S. be rates, either the United new they will healing of interest States, what election the but expect the cautious and in bring, the might spending politicians. impact been the well, the cautious as

up, have things us the in equity to good transactions. see when freed you that picked have for invest other repayments happened, it's But up

will great is of also And our year, book rates I business expect liquidity lowest one history past leverage of even the you the Our X.X%. X. increase. conduit but best as see at is our resi the the I our can having in ratio down, a recall come in

which So less earnings with story. leverage, we're a is pretty producing powerful

our resolved really is an advantage this will to we hopefully for ultimately, So rating be are we the the achieving be it rapidly, of leader great of about our I'm grow goal taking and to have in we fun. opportunity excited go. sector and the And where And and investment-grade team can firm. where then

your thank So for you time. all

Thank turn you. to operator. the And the over call to that, I'm with going

Operator

Stephen with first from Raymond Instructions] James. Laws Our [Operator comes question

Stephen Laws

of can and but investment do can you kind investment-grade leverage, an you to And kind of kind incremental capacity those I shift more you nice as watch talk on deploy of you do about activity. as acceleration originations. you pursuing to think rating, high in that? solid see that origination the quarter lines, Jeff, know you're what the offense? because Congrats along accelerating liquidity, earnings generate a low leverage

Jeffrey Dimodica

Yes. pretty Thank you, little apologize. I Stephen. weather. may bit, cough I I'm the under a

the would debt the in and terms earnings the our capacity once some Obviously, out sort and and So form form few this create through growing in here, on of to earnings in easiest grow depends a debt investment nonaccrual twice. it capacity of you've ability of or equity things. of combination, ability to us move in assets year equity and seen issue REO

continue of grow, to as think every we dollar issue a sort equity of you X.X I turns it debt of If did leverage that and for of you Xs a at and fixed to issued, $X.X around September cost somewhere equity We that. issued your X%. somewhere in in cost issue the note debt, X.X-year us of around your debt or you equity could

you up a a blended X%, versus new X.X% X% capital. around of somewhere with cost with So end

XX%. Our out at historic X% XXX XX%, we money put you points. make ROE basis And has been if back XX% to that could

on to do and paid a X X.X, of X. of that you $X leverage that cost loss would how you distributable for effective every XX earnings if you a and at if equity earned basis choose an to that's debt, able add and a maintain $XX million in So billion you're to grow combination

nonaccrual So We've if have billion, you told earn we a on little million. you that did today. billion $X over $X you'd $XXX

or We're hard is our $XXX down So and goal bringing nonaccruals do to REOs. to that. these million earn that working to start incremental offset

think gives you that hopefully, growing we the of the of power businesses. what But scale some

are trying on theme to grow. ahead We full

from look have in We list, I we've of the pipeline 'XX most competition I is as the had think, first quarter the maybe funds. our There's more at of 'XX, from there or pipeline significant I banks. competition quarter actionable less fourth that debt since, as

And We have pretty now grow. we infrastructure feels a like B It first good different our to as look runway sector energy Freddie this like we'll to places. continue right a piece We in of in continue well. that lot really to quarter. did

So $X.XX our the can we're But looking the is of looking core B of at make the is to team main way nonaccrual, drag there. out goal pieces. management earn we cetera, of goal to grow growing today. et CMBS to our continue sure We're the our that

Stephen Laws

And debt. a unsecured the around quick follow-up

look to Or you to mix of impact be you on sheet, balance about talk going the cost debt any funds? earnings? off in kind kind debt As that to unsecured higher-cost increase or you're shift much have of secured the without of your material how pay can of on may able a

Jeffrey Dimodica

Yes.

rate think We to we've lines. accordion get and about ability return, negatives up ability go that point repo the banks past, pick the of recourse. for lines. the So we little benefit we up to bit we repo talked it's give that we interesting. and assets. accordion at up In The Everybody the up get debt, on in the lowest across we we borrow the here have secured is lines. knows give I can bank up, give It we the this having that we all mark these credit up the in

this some XXX. So plus a expensive line. been SOFR market XXX, when but at even the outstanding of most before, we've of dollar And cash rate lines that pay a money will are our into whatever we expensive system, the most X% XXX, repo down over or of accordion earning comes is, instead

the today, you'd of paid we paid We cash, the today, $X are we cetera. cash down only X.X% $XXX had $XXX X%, cash. on like down the of et earn if when $X.X billion So you $XXX million to million. we million on sit

cash. less getting something paying in the more effectively today we're over $XXX probably paid $XXX We're with and our more over we cash the on million have, million down line

I to and at monthly. look semi high-yield we SOFR equivalent a is are our swapped our bond on our repos So that deal, bonds because are which XXX, when last XXX plus to repo me XXX

there. points we XX So basis pick up another

continue index tights at borrow market can which it a we of than but at that to wider little opportunistically not the there. we high-yield if September, today, tapped from XXX So far the the it's over, is in

are able we'd today $XXX here, negative we XXX be more we once debt in area, sitting point get cash to paid that time And are where a unsecured history to it and to we credit issue which get on to carry invested using secured fully for the our carry invested, we're positive when $XXX debt. cash, start can be move should $XXX that this million back and it pay million, XXX, is down We first high-yield down remain over. cash debt million, from If XXX, our this spreads here, would goal getting we and could in invested because much over. the get things we we get get we're XXX, paying slight XXX

put unsecured will unsecured Holy that debt in puts ratings the what is that foot spoke just our try Barry us the gas upgrade And to and Grail here. about be higher along that we maintaining more you of model. would us overall for portion secured to that when the see believe to on an line debt that move and our That's leverage, with we low

we to carry. The bit little lot less fully invested. carry. every down, it When sit on they goal positive paying right on negative to bit little of day. pay a looking we cash, cash, we're confusing is get could But it's sitting we're So a when now at a we're turn more

of a have We lot cash.

pipeline. great a have We

Operator

Jade comes Rahmani next KBW. Our with question from

Jade Rahmani

around treasuries X change building treasury know is how for and in your real your that on been Seems you I the like are risk have a that market. comments What sensitive currently the story around prospects. estate creates refis. positive damper positive recovery on how views that long-term And all trajectory we're the commercial The is might seeing?

Jeffrey Dimodica

it's curve creating XXXX. would period longer government Jade, Yes, more negative. last focused have of obviously the steepening been will thought impact certainly date. rates. on is great the potentially will great If not cap SOFR normally. time, X for question. a XX-year in take not and to will over up I look say this an the is is where there in that and a that expenditures inflation it's The over normalizing on be really XX-year, that all years, Barry one growth I've The and I

And couple it Halloween XXX That the of On in year, move, we've 'XX of is days after SOFR years. was in last just couple of call middle XXX this the of Today, this big area. in a where ago. year, in at the XXX. for last XXXX last somewhere is was been of SOFR the range

us or the better were we so So X were. be it's XX-year. that ago more that the But than we not Fed benefit XXX SOFR lower aggressively cutting perspective, by lower want good will as than at we certainly I would more to portfolio a rates where months credit our that we the as where expected say from or it's X cap driven significantly

move this steepening portfolio our doesn't much. curve here. we somewhere So as should But and the hurt normalize around of the

in there, look happened what's see were entirety thought et ago slightly be to multi will yield will there's I obviously, out rates our with see but debt think capital more little higher, enough might that we think that a week cap cetera, of and to refine, might refi, books, the our a seeing liquidity. certainly you easy we XX-year, at to ability a be our and you potentially bit we're have difficult

environment the talked this And now. will our we'll sold that this about. -- then this assets to small. We X just move are be in XXX important think something or about certainly turn fairly another at Should talk XX it's where move we reevaluate. we at higher, points was to But the that impact basis a into similar quarter, we basis I rate

other and that side. higher the hotels, multi That's see We'll to ADRs do to the on the hoping economy. We're on talk it's because to about inflation. want the to going to rents things it side about of will create optimism more leasing see we're job higher, side. optimism it's rates that rents growth for. at If to real what really important. see optimism, continue higher have are office with commercial be With the I higher because people at But estate really going go the hotels. going also expect and markets that

book. this offsets are million We we'll extended million. $XX told across this to over beginning the certainly hours $XX more about to probably that told of up in would That's monitor you of resi meantime, economy. last extending hedges that the A us you a to and -- you our hedges tremendous assume rates economy going saved our imposed than stronger So in I entire and book, that the moves come hedges. the are I talked only. with our that before that amount the higher my by rate driver remarks prepared our we on XX In difficulties that that continue our

have that this don't try in and direction assets is of we're and bet to We're FX. environment be do and stay treasuries. we match don't going a real try don't like stronger slow and like hedged bet like of volatility, any the We down. We We in rate back fully we bet continue kind and books lower we headed treasury not to rate of -- hopefully, to our and estate We that here on fixed floating seeing into. hopefully, activity on to that and way. that. don't stay on We'll economy rates higher want a in because to And that's markets, the part liabilities.

Jade Rahmani

in provide reduce Is toward to a you maintain? Or any snapshot In at a time? new mix the expect that weighted originations. of color percentage? to talked additional CRE Could moment about you a opening a it you that the just ratio the comments, non-CRE goal investment is

Jeffrey Dimodica

We some CMBS the $X time, We Freddie we a bought business CMBS, in on which is our we energy in did CRE We under about. moment quarter we billion originations very aggressive infrastructure today. It's had side, great business, we a think a which in B talked just pretty strong did the piece, Jade. were lending. and again

think business, we that core pipeline expect quarter. as our to this I XX% would with I I out, so in think be we and or line going or becomes quarters. at a look or have XX% certainly you would that that. So X% X probably X were which is lending CRE

Operator

comes next Harter from Doug with Our question UBS.

Douglas Harter

Great.

the think that or about continuing we growth think you normalizing equity? should executing leverage As funded being pipeline, about to by guys raise

Jeffrey Dimodica

If bands that year. we this would in for equity the Part levered that within mid ever gets of raised we wanted expect that we're We're today, sort more normal the our X.XXx Listen, near is company. on are of When invested, at cash. sitting Xs. Yes. more the we I lowest we've been.

a tell story as below so. long agencies the stay to with have we think I great rating X.X or we as

pretty we're So low.

We have to a more room lot capacity. debt add of

certainly with in haven't would We X.X raised X.X. the as as or not line much the debt stay

more So room in to not we have debt. amounts, significant issue

assets. have We $X.X of unencumbered billion

gives room term our debt. billion have incremental loan, We $X of on another you

given to to where So before depending have things is gut my our on are capacity and are where time significant structure, markets at but debt that of part another go more we and we any issue have room. we capital

not-too-distant to that to is in lean that our that on if we to total spent, what get continue do ratings upgrade expect increase direction. do, amount want towards we get future, try the a percentage of spreads stay unsecured balance debt and us the said and money as debt this a we're would we we would And sheet I here, of to which to

Douglas Harter

And went quarter going the despite appreciate rates in Woodstar, I it Jeff. seemed like Rina, on up that, rate the discount down.

you us could give update if wondering Just there. an

Rina Paniry

Sure.

valuation an quarters, is interim for our agreement we process required every JV. our by year-end, and for get Doug, appraisal the which in to internal Woodstar partnership an valuation do then is the So

at do And quarter so occurred in that also is comparable we the only XX months. what sales we each look the but not quarter over previous

cap range wide executed. that got that really was the comp so And rates just had of a

XX-Q you at in cap average And ended disclosed goes. the as our the as rate that so far see up

So that's that. drove what really

No know way appraisers going the being I close where ended came cap But to we -- use is third-party to where appraiser the come we at rate really in. year, to year-end. really up in know the last that

just how about yes, So approach that's But valuation process. not we the sure yet. year-end

Jeffrey Dimodica

that comes the up $X.X in markets our the don't XX last, Yes, the Doug, year that and know, -- that's the in using. last that queue, are that that number list over a with have and I we're that's ours and we billion similar to same number with have in over so traded the or change,

it on at where people are rates any So at the lower look last than But where base market certainly were will the quarter end given I is. today. know at of time. They we

Rina Paniry

kind last I year-end point in just of discussed it. And at believe a there there. year further that XX is basis we portfolio a premium point on that,

a your in what basis above XX per asset cap -- the So you on it's if you look it at basis, points see queue. really is rate

Operator

question Rick Our next from with comes JPMorgan. Shane

Richard Shane

X work is take is you paths: basically the two as modification the extension through challenges property. to loans, Look, is and of there and one third the in portfolio, to are sell foreclose the loans,

criteria that the make decision is how are And help impacted What geography? that is the do type portfolio? how As through property remedy -- going you what the us that tree? you to how by process, much that you're work understand

Jeffrey Dimodica

of them to a they that's want and I very their best them, what for to institutions that And put assets a a question, financial there the day, going a have optimize the force because capital seller as might It's are seller, who the companies financials report In they would a into be or the have liquid do think might to to that us the end to good seller Yes. assets. look less be Rick. the certain certain either look holder. to oftentimes like don't

to the to of it's equity a creating history market to -- decision. optimal and then to you make may sponsor come equity really where wait take we enough this running time private value point that the as $XXX is the have want time the market today a get over opposed to to for me to to have for They have of it that my has you to that assets to billion take to of optimal decision a until financials it not

an of asset time improving finding I in think terms we we what can and do say, best can and shareholder at think and protect timing look right always exit. things the we value we how and by

that million of and think access really management liquidity we best tremendous and So the and stock. of to sit the are right shareholders interest us back in to having the Board great make liquidity decisions having have the and allows

it's dollar up back you're or sign me, a our to and to way over get to and modification a into what's time takes the up every the excuse the loss loss giving because retirement we modification today we for that -- coming we earnings long-term look a think that something this that can a sale opposed over well, at years. that takes a order into effectively So longer-term as in as sale want ourselves best to as forcing have

all we'd those move and they try that. other we clear weigh against we where there's on. heart with long that in eyes full to are we to on time, way, and or asset But we a an think value period in we get want decision we for weight So a and else decision each be market, make there of make based to the a a

Richard Shane

Did you just tell Jeff? us can't that you lose,

Jeffrey Dimodica

I can't lose.

light front guy it. love [ ]. You're I

Operator

Green Our Amani [ Harsh with Street ]. comes question from next

Unknown Analyst

your in a but where given terms and market, the you loans And maybe commercial healing then infrastructure maybe commercial loans little in real how improvement commercial looking at strategic that bit, real estate perhaps than between are given XX% value think less longer-term want the book sort allocation the relative term balancing with fundamentals, to the how estate real estate near you of be I you does contrast the Maybe the of this of lending. touched overall? capital on in view

Jeffrey Dimodica

question. good Yes. Listen, really a it's

where peak. that's right? think years, estate come of in doesn't of commercial real couple That we're want less it XX% last I values be. their certainly they're today that that mean off to XX% as have we're we the happy than And

be if think in our we is new I of estate, XXX% towards real estate. doing business felt happy significantly relative commercial value commercial would like leaning real

stopped lending sort us than seller. of Balance thought values we were years, and in years. $X a was direction we be of a this it appreciate or covering time Every better picking spreads We has like loans going. where that too and a thought billion buyer different couple writing and a the We been 'XX. property acquired of shoots And good leaned so for business We green we've we last pivoted and a pipeline. XXXX tight were getting We this basically us. didn't to up over us.

been strategies the We've years we've commercial that's with on energy or more estate couple infrastructure the commercial the over XX% resi met midstream fortunate pipelines real so good assets, which of pipelines side, on and where include side real been that power significant and volume we've environment each. an It's last incredibly investing had plants our business. been uncertainty for less the of in side. sort of Certainly, estate and

we've above secondary And grown The LTV never today. mid- spiked in on loans has think, earning to term case. years. that significantly That's the high liability been that in that we're it's book, because averaged of leaned I levels that down are lower the quoted been maintained been that our up. market in really And its last on cost and lowest couple never as the really earning we've the teens is the to and book XX.X%, par

liability couple CRE last over costs the side our years. the up in As moved of

in smart lending going think we that an have are accretive. we that We're really today to So today. and still we trades really see that do fortunate we all as CRE significant that liquidity infra of the are both

door great just opportunity, bite with My is if market. site opportunities because would goal bigger take gut market much the one to is to a a there CRE full and our So we is grow. on a knocked grow, are we think here great either the

refinance. the scale they a I'm go XX% that market to in XX-XX to executed maybe those And because and be they're year being where opportunities And of could so up their business where to of time even do seeing from it comparing what people a if back CRE versus will we of XX% recovery XXXX, the there. coming to the market have plans we're of where high-volume have

That's on where an things for new equity opportunity a markets. because purchases. over us great seeing we're come turning us back be opportunity these That's are going into for to

to continue love I increase. have purchases area surprised to we expect lot, in point wouldn't tightened don't to area, So to here. that have The continue if prices that a CMBS increase I the really we a either. to loan got them see our be residential spreads

really the I in not expect resi. near future. in have don't We invested us to

about the looking risk that different bit do X market those. worried the other credit little on products more people or were We're at X that a than

side, side. assets. we're the have lot on but carry property So have you we a still And still some, resi leverage we in our rates, positive the knitting cap staying in have slight -- on of negative with owned

here today. X cap And them be and by leverage so that return doesn't financing and type cash would negative property earning which cover buying our at case X, the any of buying just assets property rate dividend, about on with look more X, that a we

when in This not a is on expenses This rate that able bring in where environment lower move upside down into the not out cap we Excel time get we're working of of able one to those to rents have a higher the dividend type future. the return we'll in is earn spreadsheet we're cash there. from leaned that lean times. our we We've there and can can

to property. grow in grow in, want we to centers, sectors, some significantly not certainly are cetera, see et So There will really we will leaning that in. us add you in data and

the set that we now the to to right to good now, other time able grow today. right they open opportunity to hopefully CRE. while than little the back it are could to and us we'll us lean do keep and think sectors really pull and But internationally a very in very markets us, to for be capital that's continue work to there's are get get money market and to have we But really open in going opportunity rates other and good. set bit, on higher, looks a If domestically, that opportunity

Unknown Analyst

given originations really with what's rates the margins end into are helpful the happened of healthy. in you I how Maybe the can That's ask your year Maybe right? it. early quarter, prepared this trending and the that on maybe in Got next remarks, side, color. is I mentioned strong, as outlook if are conduit year? for think

Jeffrey Dimodica

Yes. That's is bigger still not play. ] Listen, the [ really market the market. where we SACI

loans million the don't XX% XXX% room always in hedge the banks million a the to willing conduit bit work. interest write want $X of little we tend historically we've $XX have to do that the rates, We that about Within done. the market, more you're if of to That's maybe hedge we smaller credit only it what and spread.

couple So in quarters, make we of that little AAAs really a the in we'll spreads across tend as well. to bit board continue quarters the seen where credit get business, the tighten types. returns they and credit and spreads do back into pull last you've outsized in have to when

good looks quarter. year now a So we're going the fourth the this record have right to in for year term, seeing close to I'm what near still really for

see And to difference for a that's going and money you're didn't tighter our if I or is history higher any. us going layer -- position not a lot quarter think to been go than there's in only spreads in spreads into the risk But there if one define that where to a not an are make risking we making that little making between in us business. all-time we larger AAA spreads opportunity types, equal because think

So loans. in there. play We smaller we're patient

into guys got niche have ever us made every a for because think The what hung an We servicer. bought originate know BP appetite. a buyer, this never We've We I loan, to We who deal. a for since a have BP we're steady big buyers risk smartly, loans, a it's and want do business get because on business. us. conduit it we tend we've profitable, business. unbelievable we're

rate move even more have year will I don't of the old loans. bigger you XX-year think should significantly year, But this year roles you next than conduit that with expect this a though

but back pipeline, origination You're of into them floating be Those to be good conduit, more curve and deepen 'XX, honest, if interest different at will could go XXXX if will same to to now opportunities. go And have at steepen, some 'XX and there which you this And continues if some roll. they'll to see pretty looking borrowers the decide the years. of a normalize out. the and rate curve were continues point

accretive going we're But knitting So book our right from. every stick that quarter. fairly now, see to and we'll run where conservative that comes a is to

Operator

of I'd now back over for turn reached management have We comments. end to like closing the the the question-and-answer call session. to

Jeffrey Dimodica

for again Thank and look unable Barry the to to really time everyone. was again you, your quarter. on Q&A, be that updating we Sorry you forward next appreciate but

Operator

This conference. concludes today's

You lines at may this And disconnect time. you we your participation. your thank for

Starwood Property Trust (STWD) 6 Nov 242024 Q3 Earnings call transcript