Q4 2025 Starwood Property Trust Inc Earnings Call

February 25, 2026

Zachary Tanenbaum: Greetings, welcome to the Starwood Property Trust Q4 2025 Earnings Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Zach Tannenbaum, Director of Investor Relations. Thank you. You may begin.

Operator: Greetings, welcome to the Starwood Property Trust Q4 2025 Earnings Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Zach Tannenbaum, Director of Investor Relations. Thank you. You may begin.

Speaker #2: If anyone should require operator assistance, please press *0 on your telephone keypad. It is now my pleasure to introduce your hosts, Zach Tanenbaum, Director of Investor Relations.

Speaker #2: Thank you. You may begin. Thank you, Operator. Good morning and welcome to the Starwood Property Trust earnings call. This morning, we filed our 10-K and issued a press release with a presentation of our results, which are both available on our website and have been filed with the SEC.

Zachary Tanenbaum: Thank you, operator. Good morning, welcome to Starwood Property Trust Earnings Call. This morning, we filed our 10-K and issued a press release with a presentation of our results, which are both available on our website and have been filed with the SEC. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are forward-looking statements, which do not guarantee future events or performance. Please refer to our 10-K and press release for cautionary factors related to these statements. Additionally, certain non-GAAP financial measures will be discussed on this call. For reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP, please refer to our press release filed this morning.

Speaker #2: Before the call begins, I would like to remind everyone that certain statements made in the course of this call are forward-looking statements, which do not guarantee future events or performance.

Speaker #2: Please refer to our 10-K and press release for cautionary factors related to these statements. Additionally, certain non-GAAP financial measures will be discussed on this call.

Speaker #2: For reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP, please refer to our press release filed this morning.

Speaker #2: Joining me on the call today are Barry Sternlicht, the company's Chairman and Chief Executive Officer; Jeff DiModica, the company's President; and Rina Paniry, the company's Chief Financial Officer.

Zachary Tanenbaum: Joining me on the call today are Barry Sternlicht, the company's Chairman and Chief Executive Officer, Jeffrey DiModica, the company's President, and Rina Paniry, the company's Chief Financial Officer. With that, I'm now going to turn the call over to Rina.

Speaker #2: With that, I'm now going to turn the call over to Rina.

Speaker #3: Thank you, Zach, and good morning, everyone. Today, we reported distributable earnings of $160 million or 42 cents per share for the fourth quarter. While our reported results reflect the timing of capital deployment and balance sheet optimization initiatives, our underlying earnings power continues to build.

Rina Paniry: Thank you, Zach. Good morning, everyone. Today, we reported distributable earnings of $160 million, or $0.42 per share for the Q4. While our reported results reflect the timing of capital deployment and balance sheet optimization initiative, our underlying earnings power continues to build. Importantly, we exited 2025 with enhanced liquidity and embedded earnings from this year's investments and unfunded commitments, all of which will increasingly contribute in 2026, with our dividend coverage expected to improve steadily throughout the year. Our quarterly results were impacted by temporary timing issues, adjusted for which DE would have been $0.49. The first is our newest net lease cylinder, which, on a run rate basis, would have contributed $0.06 of incremental DE to the quarter, but instead contributed $0.03.

Speaker #3: Importantly, we exited 2025 with enhanced liquidity and embedded earnings from this year's investments and unfunded commitments, all of which will increasingly contribute in 2026 with our dividend coverage expected to improve steadily throughout the year.

Speaker #3: Our quarterly results were impacted by temporary timing issues, adjusted for which DE would have been 49 cents. The first is our newest net lease cylinder, which on a run-rate basis would have contributed 6 cents of incremental DE to the quarter.

Speaker #3: But instead, contributed 3 cents. We anticipated this dilution at acquisition, knowing that we would have near-term carry from capital raised and there would be a timing gap while we ramped acquisitions and optimized the platform's capital structure.

Rina Paniry: We anticipated this dilution at acquisition, knowing that we would have near-term carry from capital raised, and there would be a timing gap while we ramped acquisitions and optimized the platform's capital structure. As Jeff will discuss further, we have made progress towards these initiatives and expect to see reduced dilution going forward. As a reminder, the weighted average lease term of this portfolio is 17.3 years, with occupancy of 100% and 2.3% annual rent escalations. The second timing issue was higher than normal cash balances, which led to $0.04 of reduced earnings. We completed three securitizations in the quarter, one in each of commercial lending, infrastructure lending, and net lease. That combined, created incremental proceeds of $290 million.

Speaker #3: As Jeff will discuss further, we have made progress towards these initiatives and expect to see reduced dilution going forward. As a reminder, the weighted average lease term of this portfolio is 17.3 years, with occupancy of 100%, and 2.3% annual rent escalations.

Speaker #3: The second timing issue was higher than normal cash balances, which led to 4 cents of reduced earnings. We completed three securitizations in the quarter, one in each of commercial lending, infrastructure lending, and net lease, that combined created incremental proceeds of $290 million.

Speaker #3: We also continued to shift secured debt to unsecured debt, issuing $1.1 billion of high-yield in the quarter and executed a takeout refinancing on part of our affordable multifamily portfolio, which generated cash of $240 million in late September and October.

Rina Paniry: We also continued to shift secured debt to unsecured debt, issuing $1.1 billion of high yield in the quarter, and executed a takeout refinancing on part of our affordable multifamily portfolio, which generated cash of $240 million in late September and October. All of this cash will ultimately be a source of incremental DE as it gets deployed into new investments across our diversified cylinders. Stepping back to the full year, we reported DE of $616 million or $1.69 per share. As we continue the theme of proactive capital repositioning, we had temporary reductions to earnings of $0.14 this year, resulting from our $4.4 billion of equity, unsecured debt, and term loan issuances, along with our new $2.2 billion net lease acquisition.

Speaker #3: All of this cash will ultimately be a source of incremental DE as it gets deployed into new investments across our diversified cylinders. Stepping back to the full year, we reported DE of $616 million or $1.69 per share.

Speaker #3: As we continue the theme of proactive capital repositioning, we had temporary reductions to earnings of $0.14 this year resulting from our $4.4 billion of equity unsecured debt and term loan issuances, along with our new $2.2 billion net lease acquisition.

Speaker #3: DE adjusted for these timing issues, and the $0.12 realized loss we recorded upon sale of a foreclosed asset earlier this year was $1.95 versus our full-year dividend of $1.92.

Rina Paniry: DE adjusted for these timing issues and the $0.12 realized loss we recorded upon sale of a foreclosed asset earlier this year was $1.95 versus our full-year dividend of $1.92. Given our enhanced earnings power as a result of this year's strategic transactions, as we continue on our path to resolving our non-accrual and REO assets, we see a clear line of sight to earnings that cover our dividend, a dividend that we have never cut. Our diversified lines of business continue to perform at scale, allowing us to deploy $12.7 billion in 2025, our second largest investing year to date. This included $6.4 billion in commercial lending, a record $2.6 billion in infrastructure lending, and $2.4 billion in net lease.

Speaker #3: Given our enhanced earnings power as a result of this year's strategic transactions, and as we continue on our path to resolving our non-accrual and REO assets, we see a clear line of sight to earnings that cover our dividend, a dividend that we have never cut.

Speaker #3: Our diversified lines of business continue to perform at scale, allowing us to deploy $12.7 billion in 2025—our second largest investing year to date.

Speaker #3: This included $6.4 billion in commercial lending, a record $2.6 billion in infrastructure lending, and $2.4 billion in net lease. Two and a half billion of our deployment was in the fourth quarter, bringing total underappreciated assets to a record $30.7 billion at year-end.

Rina Paniry: Two and a half billion of our deployment was in Q4, bringing total undepreciated assets to a record $30.7 billion at year-end. As a testament to our continued diversification, commercial lending now makes up just 54% of our asset base. I will now take you through our individual segment results, beginning with commercial and residential lending, which contributed DE of $176 million to the quarter, or $0.46 per share. In commercial lending, we originated $1.7 billion of loans, of which we funded $1.2 billion, along with $223 million of pre-existing loan commitments. After factoring in repayments of $670 million, we grew the funded loan portfolio by $823 million in the quarter to $16.6 billion, our second highest level since inception.

Speaker #3: As a testament to our continued diversification, commercial lending now makes up just 54% of our asset base. I will now take you through our individual segment results, beginning with commercial and residential lending, which contributed DE of $176 million to the quarter, or $0.46 per share.

Speaker #3: In commercial lending, we originated $1.7 billion of loans, of which we funded $1.2 billion, along with $223 million of pre-existing loan commitments. After factoring in repayments of $670 million, we grew the funded loan portfolio by $823 million in the quarter to $16.6 billion, our second highest level since inception.

Speaker #3: In addition, we have $1.9 billion of unfunded commitments, which will generate future earnings as these loans fund. We also completed our fourth actively managed CLO for $1.1 billion with a weighted average coupon of SOFR plus 165.

Rina Paniry: We have $1.9 billion of unfunded commitments, which will generate future earnings as these loans fund. We also completed our fourth actively managed CLO for $1.1 billion, with a weighted average coupon of SOFR plus 165. On the topic of credit quality, our portfolio ended the year with a weighted average risk rating of 3.0, consistent with last quarter. We have $680 million of reserves, $480 million in CECL, and $200 million of REO impairments. Together, these translate to $1.84 per share of book value, which is already reflected in today's undepreciated book value of $19.25. This quarter, we classified a $91 million, 5-rated first mortgage loan on a multifamily property in Phoenix as credit deteriorated.

Speaker #3: On the topic of credit quality, our portfolio ended the year with a weighted average risk rating of 3.0, consistent with last quarter. We have $680 million of reserves, $480 million in CISL, and $200 million of REO impairments.

Speaker #3: Together, these translate to $1.84 per share of book value, which is already reflected in today's $19.25. This quarter, we classified a $91 million 5-rated first mortgage loan on a multifamily property in Phoenix as credit deteriorated.

Speaker #3: The loan already maintained an adequate general reserve, but based on a recent appraisal, we reclassified $20 million of our reserve from general to specific.

Rina Paniry: The loan already maintained an adequate general reserve. Based on a recent appraisal, we reclassified $20 million of our reserve from general to specific. Jeff will go into more detail on our credit migration and asset management initiative. Turning to residential lending, our on-balance sheet loan portfolio ended the year at $2.3 billion, consistent with last quarter, as $58 million of repayments were largely offset by $31 million of positive mark-to-market adjustments, resulting from slightly tighter credit spreads. Our retained RMBS portfolio remained relatively steady at $405 million. Next is infrastructure lending. This segment contributed DE of $27 million or $0.07 per share to the quarter. Our strong investing pace continued with $386 million of new loan commitments in the quarter and a record $2.6 billion in the year.

Speaker #3: Jeff will go into more detail on our credit migration and asset management initiative. Turning to residential lending, our on-balance sheet loan portfolio ended the year at $2.3 billion, consistent with last quarter, as $58 million of repayments were largely offset by $31 million of positive mark-to-market adjustments, resulting from slightly tighter credit spreads.

Speaker #3: Our retained RMBS portfolio remained relatively steady at $405 million. Next is infrastructure lending. This segment contributed DE of $27 million or 7 cents per share to the quarter.

Speaker #3: Our strong investing pace continued with $386 million of new loan commitments in the quarter and a record $2.6 billion in a year. Repayments totaled $568 million during the quarter and $2 billion for the year, with the loan portfolio increasing $300 million this year to $2.9 billion.

Rina Paniry: Repayments totaled $568 million during the quarter and $2 billion for the year, with the loan portfolio increasing $300 million this year to $2.9 billion. We also completed our sixth actively managed CLO for $500 million and priced our seventh for $600 million at record low spreads over SOFR of 172 and 168, respectively. Non-recourse, non-mark-to-market CLO financings now constitute 75% of our infrastructure debt. In our property segment, we recognized $49 million of DE, or $0.13 per share in the quarter. In our Woodstar Fund, comprising our affordable multifamily portfolio, we recorded a net unrealized fair value increase of $17 million in the quarter for GAAP purposes. The value was determined by an independent appraisal, which we are required to obtain annually.

Speaker #3: We also completed our sixth actively managed CLO for $500 million and priced our seventh for $600 million at record low spreads over SOFR of $172 and $168, respectively.

Speaker #3: Non-recourse, non-mark-to-market CLO financing now constitutes $75% of our infrastructure debt. In our property segment, we recognized $49 million of DE or $0.13 per share in the quarter.

Speaker #3: In our Woodstar Fund, comprising our affordable multifamily portfolio, we recorded a net unrealized fair value increase of $17 million in the quarter for gap purposes.

Speaker #3: The value was determined by an independent appraisal, which we are required to obtain annually. Also, during the quarter, we sold a 264-unit multifamily portfolio for a net DE gain of $24 million.

Rina Paniry: Also, during the quarter, we sold a 264-unit multifamily portfolio for a net DE gain of $24 million. The $56 million sales price was in line with our GAAP fair value. Finally, we completed the second part of our takeout refinancing that I discussed earlier. The independent appraisal, third-party sale at our carrying value, and takeout refinancings collectively provide market confirmation of our valuation. Also in this segment is our new net lease platform, which reported its first full quarter of DE totaling $12 million. We acquired 16 properties for $182 million during the quarter, bringing post-acquisition purchases to $221 million, in line with our underwriting, but with the timing back-ended to the last month of the quarter.

Speaker #3: The $56 million sales price was in line with our gap fair value. And finally, we completed the second part of our takeout refinancing that I discussed earlier.

Speaker #3: The independent appraisal, third-party sale at our carrying value, and takeout refinancings collectively provide market confirmation of our valuation. Also in this segment is our new net lease platform, which reported its first full quarter of DE totaling $12 million.

Speaker #3: We acquired 16 properties for $182 million during the quarter, bringing post-acquisition purchases to $221 million, in line with our underwriting but with the timing back-ended to the last month of the quarter.

Speaker #3: On the capital markets front, we completed our first ABS transaction since acquisition, with $391 million of financing at a weighted average fixed rate of 5.26%, a record-tight spread for this platform.

Rina Paniry: On the capital markets front, we completed our first ABS transaction since acquisition, with $391 million of financing at a weighted average fixed rate of 5.26%, a record tight spread for this platform. Given the back-end acquisition timing and mid-quarter execution of accretive ABS financing, our reported DE understates the earnings power embedded in this platform. Concluding my business segment discussion is our investing and servicing segment. Collectively, the cylinders in this segment contributed DE of $46 million, or $0.12 per share to the quarter. Our conduit, Starwood Mortgage Capital, completed 3 securitizations totaling $276 million at profit margins that were at or above historic levels. This brings our year-to-date total to 16 securitizations for $1.2 billion.

Speaker #3: Given the back-end acquisition timing, and mid-quarter execution of accretive ABS financing, our reported DE understates the earnings power embedded in this platform. Concluding my business segment discussion is our investing and servicing segment.

Speaker #3: Collectively, the cylinders in this segment contributed DE of $46 million, or $0.12 per share, to the quarter. Our conduit, Starwood Mortgage Capital, completed three securitizations totaling $276 million at profit margins that were at or above historic levels.

Speaker #3: This brings our year-to-date total to $16 securitizations for $1.2 billion. In our special servicer, our active servicing portfolio, rose to $11 billion with $1 billion of new transfers in.

Rina Paniry: In our special servicer, our active servicing portfolio rose to $11 billion, with $1 billion of new transfers in. Our named servicing portfolio ended the year at $98 billion. As a result of near record maturity defaults in CMBS, servicing fees increased to $38 million this quarter, bringing year-to-date fees to $107 million. This is up 47% from last year and the highest level they have been since 2017. We've always told you that our servicer is a positive carry credit hedge that earns more money in times of real estate distress, and that hedge is once again proving itself this quarter. Our CMBS portfolio grew by $82 million during the quarter, primarily driven by new purchases of $101 million, offset by cash collections of $17 million.

Speaker #3: Our named servicing portfolio ended the year at $98 billion. As a result of near-record maturity defaults in CMBS, servicing fees quarter, bringing year-to-date fees to $107 million.

Speaker #3: This is up 47% from last year, and the highest level they have been since 2017. We've always told you that our servicer is a positive carry credit hedge that earns more money in times of real estate distress, and that hedge is once again proving itself this quarter.

Speaker #3: Our CMBS portfolio grew by $82 million during the quarter, primarily driven by new purchases of $101 million, offset by cash collections of $17 million.

Speaker #3: As a result of the maturity defaults noted above, we also recognized net DE impairments of $13 million. And lastly on this segment's property portfolio, we sold a mixed-use property and retail center for a total of $36 million resulting in a net gap gain of $10 million and a net DE gain of $3 million.

Rina Paniry: As a result of the maturity defaults noted above, we also recognized net DE impairments of $13 million. Lastly, on this segment's property portfolio, we sold a mixed-use property and retail center for a total of $36 million, resulting in a net GAAP gain of $10 million, and a net DE gain of $3 million. Turning to liquidity and capitalization, we had our most active capital markets year in our history. We executed a record $4.4 billion of corporate debt and equity transactions, including $1.6 billion in unsecured notes, $1.6 billion in Term Loan repricings, a $700 million Term Loan B, and a $534 million equity raise that was accretive to GAAP book value.

Speaker #3: Turning to liquidity and capitalization, we had our most active capital markets year in our history. We executed a record $4.4 billion of corporate debt and equity transactions including $1.6 billion in unsecured notes, $1.6 billion in term loan repricings, a $700 million term loan B, and a $534 million equity raise that was accretive to gap book value.

Speaker #3: We continued our focus on conservative leverage, ending the year with a debt-to-undepreciated equity ratio of 2.4 times, more than a full turn lower than our closest peer.

Rina Paniry: We continued our focus on conservative leverage, ending the year with a debt-to-undepreciated equity ratio of 2.4x, more than a full turn lower than our closest peer. With this year's continued shift away from repo, our unsecured debt now represents 18% of our total debt, up from 16% a year ago. Our off-balance sheet debt now stands at 22% of our debt, up from 17% a year ago. Our current liquidity is $1.4 billion, with availability across our financing lines of $11.9 billion. This, along with our ability to consistently access the unsecured and structured credit markets at attractive spreads and across multiple asset classes, reflects the strength of our platform and provides significant flexibility as we enter 2026. With that, I will turn the call over to Jeff.

Speaker #3: With this year's continued shift away from repo, our unsecured debt now represents 18% of our total debt, up from 16% a year ago, and our off-balance sheet debt now stands at 22% of our debt, up from 17% a year ago.

Speaker #3: Our current liquidity is $1.4 billion with availability across our financing lines of $11.9 billion. This, along with our ability to consistently access the unsecured and structured credit markets at attractive spreads and across multiple asset classes, reflects the strength of our platform and provides significant flexibility as we enter 2026.

Speaker #3: With that, I will turn the call over to Jeff.

Speaker #1: Thanks, Rina. As we enter 2026, our priorities are clear: resolve legacy credit, maintain a conservative balance sheet, and selectively grow our highest-returning businesses to restore full earnings power.

Jeffrey DiModica: Thanks, Rena. As we enter 2026, our priorities are clear: resolve legacy credit, maintain a conservative balance sheet, and selectively grow our highest returning businesses to restore full earnings power. We exited 2025 with continued stabilization in credit markets and improving transaction activity. Activity is still below peak levels, but trending positively as liquidity returns and rates move lower, supporting originations, refinancings, and more constructive resolution outcomes. Real estate as an asset class has taken longer to normalize than many other parts of the economy, and performance remains uneven across sectors and geographies. We don't expect the volatility in corporate credit markets to have a large impact on CRE fundamentals, which are largely insulated and outperform in the lower rate environment. We built Starwood Property Trust to operate through cycles, and this year reflected that.

Speaker #1: We exited 2025 with continued stabilization in credit markets and improving transaction activity. Activity is still below peak levels, but trending positively as liquidity returns and rates move lower, supporting originations, refinancings, and more constructive resolution outcomes.

Speaker #1: Real estate is an asset class that's taken longer to normalize than many other parts of the economy, and performance remains uneven across sectors and geographies.

Speaker #1: We don't expect the volatility in corporate credit markets to have a large impact on CRE fundamentals, which are largely insulated and outperform in the lower-rate environment.

Speaker #1: We built Starwood Property Trust to operate through cycles, and this year reflected that. In 2025, we raised and repriced a record $4.4 billion of capital and corporate debt with our debt issued at the tightest spreads in our 16-year history, strengthening liquidity, preserving flexibility to deploy capital accretively while maintaining low leverage and significantly extending corporate debt maturities.

Jeffrey DiModica: In 2025, we raised and repriced a record $4.4 billion of capital in corporate debt, with our debt issued at the tightest spreads in our 16-year history, strengthening liquidity, preserving flexibility to deploy capital accretively while maintaining low leverage and significantly extending corporate debt maturities. We continued to diversify our business in 2025 with the acquisition of our net lease business, which added over $2 billion of long-term accreted assets, with 2.3% annual rent bumps that will add incremental future distributable earnings for years to come. Cap rates have come down since we closed, as have financing costs, which increases the value of the existing portfolio we purchased as we have optimized their financing structure, adding to the long-term tailwinds of the business.

Speaker #1: We continue to diversify our business in 2025 with the acquisition of our net lease business, which added over $2 billion of long-term accretive assets with $2.3% annual rent bumps that will add incremental future distributable earnings for years to come.

Speaker #1: Cap rates have come down since we closed, as have financing costs, which increases the value of the existing portfolio we purchased as we have optimized their financing structure, adding to the long-term tailwinds of the business.

Speaker #1: As Rina mentioned, we closed one securitization in Q4 and another after-quarter end. Both at a lower cost of funds than we underwrote, and we are in the process of significantly improving our bank line financing spreads.

Jeffrey DiModica: As Rena mentioned, we closed 1 securitization in Q4 and another after quarter end, both at a lower cost of funds than we underwrote, and we are in the process of significantly improving our bank line financing spreads. We continued to increase our pace of investing across businesses in 2025, investing $12.7 billion, including $2.5 billion in Q4 alone. This was our 2nd-largest investing year in our 16-year history, and notably, our global team achieved that volume in an environment where overall industry transaction and origination volumes remained well below historical averages. We anticipate another robust origination year in 2026, which will produce additional earnings, along with the funding of $1.9 billion of unfunded commitments Rena mentioned.

Speaker #1: We continued to increase our pace of investing across businesses in 2025. Investing $12.7 billion including $2.5 billion in the fourth quarter alone. This was our second-largest investing year in our 16-year history, and notably, our global team achieved that volume in an environment where overall industry transaction and origination volumes remained well below historical averages.

Speaker #1: We anticipate another robust origination year in 2026, which will produce additional earnings along with the funding of $1.9 billion of unfunded commitments Rina mentioned.

Speaker #1: In commercial lending, we originated $1.7 billion in the fourth quarter and $6.4 billion for the full year. Our portfolio is expected to grow to a record $17 billion in the first quarter and we expect to continue this momentum in 2026.

Jeffrey DiModica: In commercial lending, we originated $1.7 billion in Q4 and $6.4 billion for the full year. Our portfolio is expected to grow to a record $17 billion in Q1. We expect to continue this momentum in 2026. US office loans represent only 8% of our diversified asset base, the lowest percentage in our history and well below that of our peers. We have done this by repositioning our loan book to more stable assets like multifamily and industrial, which accounted for 72% of 2025 originations. I will start my discussion on credit and asset management with some positive outcomes, starting with multifamily loans to undercapitalized borrowers who are unable to continue to fund through resolution.

Speaker #1: U.S. office loans represent only 8% of our diversified asset base, the lowest percentage in our history and well below that of our peers. We have done this by repositioning our loan book to more stable assets like multifamily and industrial, which accounted for 72% of 2025 originations.

Speaker #1: I will start my discussion on credit and asset management with some positive outcomes starting with multifamily loans to under-capitalized borrowers who were unable to continue to fund through resolution.

Speaker #1: We have executed multiple sales of multifamily REO at our original basis and have more slated for sale at or near our original basis. We have intentionally avoided forced liquidation, and in doing so, have protected shareholder value by taking over management, executing unfinished business plans, and increasing occupancy and property values.

Jeffrey DiModica: We have executed multiple sales of multifamily REO at our original basis and have more slated for sale at or near our original basis. We have intentionally avoided forced liquidation and in doing so, have protected shareholder value by taking over management, executing unfinished business plans, and increasing occupancy and property values. We're seeing tangible improvement across portions of our office portfolio, highlighted by approximately 800,000 sq ft of leasing finalized during Q4, the highest quarterly leasing volume of the year. This total includes a 200,000 sq ft lease at a Brooklyn property that was previously risk-rated 5.

Speaker #1: We're seeing tangible improvement across portions of our office portfolio, highlighted by approximately $800,000 square feet quarter, the highest quarterly leasing volume of the year.

Speaker #1: This total includes a 200,000 square foot lease at a Brooklyn property that was previously risk-rated 5. That $630,000 square foot asset was vacant coming out of COVID, and with the pending execution of a third substantial lease, will be 100% leased to three strong credits on a 32-year weighted average lease term, with average annual rent escalations of 2.2%.

Jeffrey DiModica: That 630,000 square foot asset was vacant coming out of COVID, with the pending execution of a third substantial lease, will be 100% leased to three strong credits on a 32-year weighted average lease term, with average annual rent escalations of 2.2%. This is a great outcome for shareholders, again, reflecting our patience, active engagement, and improved leasing momentum. Sales activity has also improved, allowing $200 million of office loans to repay at par in 2025. Year to date, in 2026, an additional $200 million of loans originated as office have sold or are in the process of closing, including $115 million related to a formerly risk-rated 5 asset, also in Brooklyn.

Speaker #1: This is a great outcome for shareholders, again reflecting our patience active engagement and improved leasing momentum. Sales activity has also improved, allowing $200 million of office loans to repay at par in 2025.

Speaker #1: Year to date in 2026, an additional $200 million of loans originated as office have sold or are in the process of closing. Including $115 million related to a formerly risk-rated 5 asset also in Brooklyn.

Speaker #1: Patience has paid off for us in the past when managing foreclosed assets and we present value and probability weight potential REO outcomes individually as we decide whether to liquidate or hold and reposition assets, bringing the full strength of the Starwood platform to bear on these situations.

Jeffrey DiModica: Patience has paid off for us in the past when managing foreclosed assets, and we present value and probability weight potential REO outcomes individually as we decide whether to liquidate or hold and reposition assets, bringing the full strength of the Starwood platform to bear on these situations. We ended the year with approximately $1 billion of commercial loans on non-accrual and $624 million of foreclosures. That exposure is concentrated in a small number of assets. Each of those is in an active execution phase, with defined business plans being managed by our in-house asset management team at Starwood. Turning to rating migrations, we had three assets migrate to five in Q4.

Speaker #1: We ended the year with approximately $1 billion of commercial loans on non-accrual and $624 million of foreclosures. That exposure is concentrated in a small number of assets, and each of those is in an active execution phase with defined business plans being managed by our in-house asset management team at Starwood.

Speaker #1: Turning to rating migrations, we had three assets migrate to 5 in the quarter. The first is a $108 million studio production asset in New York that we co-originated pari passu with two large US banks and own 32% of the first mortgage.

Jeffrey DiModica: The first is a $108 million studio production asset in NY that we co-originated pari passu with two large US banks and owns 32% of the first mortgage. Utilization declined materially following the writers and actors strike. The sponsor has invested substantial equity since origination, the property has not yet stabilized as originally underwritten. Second is a $269 million industrial asset outside the Midtown Tunnel in NY. We increased the risk rating this quarter due to the sponsor's unwillingness to contribute additional capital. We have increased our involvement and are executing a revised plan with the sponsor, who is currently negotiating lease proposals representing a substantial portion of the vacant space. This newly constructed, well-located asset is positioned for potential near-term stabilization. We also downgraded a $33 million multifamily asset outside Dallas.

Speaker #1: Utilization declined materially following the Writers’ and Actors’ strike. The sponsor has invested substantial equity since origination, but the property has not yet stabilized as originally underwritten.

Speaker #1: Second is a $269 million industrial asset outside the Midtown Tunnel in New York. We increased the risk rating this quarter due to the sponsor's unwillingness to contribute additional capital.

Speaker #1: We have increased our involvement and our executing a revised plan with the sponsor who is currently negotiating lease proposals representing a substantial portion of the vacant space.

Speaker #1: This newly constructed, well-located asset is positioned for potential near-term stabilization. We also downgraded a $33 million multifamily asset outside Dallas. We anticipate assuming ownership via foreclosure in the near term.

Jeffrey DiModica: We anticipate assuming ownership via foreclosure in the near term. Upon transition, we intend to implement a focused value add plan, as we have successfully done on similar multifamily projects. Our basis is below replacement cost, and our captive asset management team expects to be able to execute on a value add business plan in the coming quarters. We also downgraded 1 loan to a 4 rating, a $90 million mixed-use portfolio in Ireland that we restructured to extend term and provide flexibility while assets are sold down. While asset sales have taken longer than originally contemplated, transactions completed to date have been in line with underwriting, and our base case continues to support full repayment over time. These are active asset management situations with defined action plans, and while resolution timing may vary, we are highly focused on resolving non-earning assets.

Speaker #1: Upon transition, we intend to implement a focused value-add plan as we have successfully done on similar multifamily projects. Our basis is below replacement cost and our captive asset management team expects to be able to execute on a value-add business plan in the coming quarters.

Speaker #1: We also downgraded one loan to a 4 rating. A $90 million mixed-use portfolio in Ireland that we restructured to extend term and provide flexibility while assets are sold down.

Speaker #1: While asset sales have taken longer than originally contemplated, transactions completed to date have been in line with underwriting and our base case continues to support full repayment over time.

Speaker #1: These are active asset management situations with defined action plans and while resolution timing may vary, we are highly focused on resolving non-earning assets. Redeployment of this capital will be a tailwind to earnings as we achieve resolutions.

Jeffrey DiModica: Redeployment of this capital will be a tailwind to earnings as we achieve resolutions. Our energy infrastructure lending platform had its largest origination year ever in 2025, investing $2.6 billion across the segment. The portfolio now totals almost $3 billion and remains diversified across power and midstream assets, and has one of the highest ROEs in our portfolio. These are senior secured asset-backed investments, supported by durable cash flows and long-term demand drivers in energy and power markets. Loan devalues continue to fall in this segment as loan performance remains strong. Power needs and capacity auction prices continue to increase, and returns remain attractive. Finally, with the pricing of our 7th CLO, 75% of our SIF loans now benefit from term non-mark to market financing, reducing funding volatility.

Speaker #1: Our energy infrastructure lending platform had its largest origination year ever in 2025, investing $2.6 billion across the segment. The portfolio now totals almost $3 billion and remains diversified across power and midstream assets and has one of the highest ROEs in our portfolio.

Speaker #1: These are senior-secured asset-backed investments supported by durable cash flows and long-term demand drivers in energy and power markets. Loan-to-values continue to fall in this segment as loan performance remains strong.

Speaker #1: Power needs and capacity auction prices continue to increase, and returns remain attractive. Finally, with the pricing of our seventh CLO, 75% of our SIF loans now benefit from term non-mark-to-market financing.

Speaker #1: Reducing funding volatility. Turning to our new net lease business, fundamental income, Rina mentioned our integration is on plan and we currently have a large pipeline and expect to increase volumes over the course of this year, which, along with $2.3% annual rent escalations, will increase returns in this cylinder each quarter and year.

Jeffrey DiModica: Turning to our new net lease business, Fundamental Income, Rina mentioned our integration is on plan, and we currently have a large pipeline and expect to increase volumes over the course of this year, which, along with 2.3% annual rent escalations, will increase returns in this cylinder each quarter and year. Rina told you we completed our first ABS financing in Q4. Subsequent to quarter end, we executed our second securitization for $466 million. At tighter than underwritten spreads, which will allow us to continue to accretively invest in this cylinder at today's cap rate. Our net lease business, along with our other owned real estate, adds duration and contractual cash flow to the platform, and over time, we expect it to become a more meaningful contributor to run rate earnings.

Speaker #1: Rina told you we completed our first ABS financing in Q4, and subsequent to quarter end, we executed our second securitization for $466 million, again at tighter-than-underwritten spreads, which will allow us to continue to accretively invest in this cylinder at today’s cap rate.

Speaker #1: Our net lease business, along with our other owned real estate, adds platform and over time, we expect it to become a more meaningful contributor to run rate earnings.

Speaker #1: We are a hybrid company with approximately seven and a half billion dollars of owned real estate. Or 24% of our balance sheet. We are different than other mortgage REITs in our peer group.

Jeffrey DiModica: We are a hybrid company with approximately $7.5 billion of owned real estate, or 24% of our balance sheet. We are different than other mortgage REITs in our peer group. In a period where our stock has significantly underperformed, the stocks of equity REITs and triple net lease REITs have significantly outperformed STWD and other mortgage REITs, with the largest underperformance coming in the last few months. It is important to remember that we are no longer simply a mortgage REIT. We operate a diversified real estate finance platform with true scale, operating businesses, and a strong, well-capitalized balance sheet, with access to capital at the lowest spreads in our history. The diversity and stability across our portfolio continues to uniquely insulate us through periods of sector instability. Our leverage is significantly lower than our peer group at just 2.4 turns today.

Speaker #1: In a period where our stock has significantly underperformed, the stocks of equity REITs and triple net lease REITs have significantly outperformed STWD and other mortgage REITs.

Speaker #1: With the largest underperformance, coming in the last few months. It is important to remember that we are no longer simply a mortgage REIT. We operate a diversified real estate finance platform with TruScale, operating businesses, and a strong, well-capitalized balance sheet with access to capital at the lowest spreads in our history.

Speaker #1: The diversity and stability across our portfolio continues to uniquely insulate us through periods of sector instability. Our leverage is significantly lower than our peer group at just 2.4 turns today.

Speaker #1: While we could enhance near-term earnings by increasing leverage, we have deliberately chosen not to do so; instead, prioritizing a strong, durable balance sheet to support our generational vehicle.

Jeffrey DiModica: While we could enhance near-term earnings by increasing leverage, we have deliberately chosen not to do so, instead prioritizing a strong, durable balance sheet to support our generational vehicle. Insider ownership further reinforces that alignment, standing at approximately 6% or $380 million today, greater than the insider ownership of all our peers combined. We continue to look internally for ways to improve how we operate. We are investing in tools and technology to streamline underwriting, asset management, and reporting processes, and we expect to increasingly leverage data analytics and AI-driven tools as part of that effort. The foundation is in place for STWD 2.0 to come out of this cycle successfully, as the only CRE mortgage REIT that never cut its dividend.

Speaker #1: Insider ownership further reinforces that alignment, standing at approximately 6% or 380 million dollars today. Greater than the insider ownership of all our peers combined.

Speaker #1: We continue to look internally for ways to improve how we operate. We are investing in tools and technology to streamline underwriting, asset management, and reporting processes and we expect to increasingly leverage data analytics and AI-driven tools as part of that effort.

Speaker #1: The foundation is in place for STWD 2.0 to come out of this cycle successfully as the only CRE mortgage REIT that never cut its dividend.

Speaker #1: Looking ahead to 2026 and beyond, resolving our non-accrual in REO or increasing origination pace or volume would allow us to earn more than the $1.95 we earned this year excluding temporary items that Rina noted.

Jeffrey DiModica: Looking ahead to 2026 and beyond, resolving our non-accrual in REO or increasing origination pace or volume, would allow us to earn more than $1.95 we earned this year, excluding temporary items that Rina noted. With that, I will turn the call to Barry.

Speaker #1: With that, I will turn the call to Barry.

Speaker #2: Thank you, Zach, Rina, and Jeff, and good morning everyone. I'm going to use a slightly different tack as I talk about our earnings and what's going on in our industry and the greater real estate markets.

Barry Sternlicht: Thank you, Zach, Rina, and Jeff, and good morning, everyone. I'm going to use a slightly different tack as I talk about our earnings and what's going on in our industry and the greater real estate markets this quarter. I think you can see that 2025 was a transition year for Starwood Property Trust. I'm gonna take some comments out of the earnings release and talk about some of the points I made and elaborate on them. The really good news is we built an incredible machine here. We have all the pieces in place to outperform for our shareholders in the long run. Some of our core business had exceptional years with a growing loan book, which has reached record highs, as well as the continued great performance of our multifamily book.

Speaker #2: This quarter, I think you can see that 2025 was a transition year for property trusts. I'm going to take some comments out of my earnings release and talk about some of the points I made and elaborate on them.

Speaker #2: The really good news is we built an incredible machine here. We have all the pieces in place to outperform for our shareholders in the long run.

Speaker #2: And some of our core business had exceptional years with a growing loan book, which has reached record highs. As well as the continued great performance of our multifamily book, Jeff mentioned the 24% or 5% of our assets are in real estate.

Barry Sternlicht: Jeff mentioned that 24% or 5% of our assets are in real estate. Our affordable housing book is in some of the best markets in the United States, Orlando and Tampa, where rents remain roughly 50%, 40% below market rates, and we're exceptionally full and have great pricing power. You can see that with the increase in value of the portfolio just in the quarter that Rina talked about. In addition to our originations, which were strong throughout the year, our infrastructure lending business, Heritage GE Capital, GE itself, I guess, had a great year. The conduit team had the second best year in their history. It's really one of the best conduits in the country.

Speaker #2: Our affordable housing book is in some of the best markets in the United States: Orlando, and Tampa, where rents remain roughly 50, 40 percent below market rates, and we're exceptionally full and have great pricing power.

Speaker #2: You can see that with the increase in value of the portfolio just in the quarter that Rina talked about. But in addition to our originations, which were strong throughout the year, our infrastructure lending business, Heritage GE Capital, GE itself, I guess, had a great year.

Speaker #2: The conduit team had the second-best year in their history. It's rated one of the best conduits in the country. Our special servicing arm, formerly LNR, had a great year also.

Barry Sternlicht: Our special servicing arm, formerly LNR, had a great year, also counterbalancing some of the weakness in some of the property lending, earnings, and continues to be the number one or two special servicer in the country, with an ever-growing book of named servicing and active servicing in its belly. Those businesses delivered excellent results for the year. Even our residential lending businesses, which have been somewhat dormant, gained in value over the year as spreads and rates declined. Those are all really good news. I asked Rena, telling me, like, why are we not performing at the levels we have in the past with such good news in the portfolio? What we saw are three real reasons for that.

Speaker #2: Counterbalancing some of the weakness and some of the property lending earnings, and continues to be the number one or two special servicer in the country, with an ever-growing book of named servicing and active servicing in its belly.

Speaker #2: And those businesses delivered excellent results for the year. And even our residential lending business, which has been somewhat dormant, gained in value over the year, as spreads and rates declined.

Speaker #2: Those are all really good news. So I tasked Rina in telling me why are we not performing at the levels we have in the past with such good news in the portfolio.

Speaker #2: And what we saw are three real reasons for that. One, the lack of prepayment penalties that have always been part of our business, but is our borrowers' stress maturities and went to not prepaying them.

Barry Sternlicht: One, the lack of prepayment penalties that have always been part of our business, but as our borrowers stretched maturities and went to not prepaying them, that disappeared. Equally important was we've taken into our earnings non-cash losses, and they are used differently by some of our peers. If you actually include them because they're not non-cash, we would have covered our dividend. That also included, in that statement, the drag of having excess cash. We used to run this enterprise at 2.4 to 2.5 leverage. Beginning of the year, we started at 2.1 leverage, which is a turn to a turn and a half inside many of our peers. It's really the nature of the composition of our business lines.

Speaker #2: That disappeared. Equally important was we've taken into our earnings non-cash losses. And they are used differently by some of our peers. But if you actually include them, because they're not non-cash, we would have covered our dividend.

Speaker #2: That also included in that statement the drag of having excess cash. We used to run this enterprise at 2.4 to 2.5 leverage. Beginning of the year, we started at 2.1 leverage, which is a turn to a turn and a half inside many of our peers.

Speaker #2: And it's really the nature of the composition of our business lines. And then with the fundamental investment we made, the third quarter of the year, we actually, that business, because of its stability and the duration of the cash flows, we leveraged 3 to 1.

Barry Sternlicht: With the Fundamental investment we made in Q3 of the year, that business, because of its stability and the duration of the cash flows, we levered 3 to 1. That dragged our overall leverage levels back to 2.4 at the end of the year. The bulk of our business, ex the Fundamental business, triple net lease business, still remains historically under-leveraged, and we have a lot of cash trapped in the business. We estimate the cash drag at something like $0.07 for the year. If you add them combined, it's almost $0.20 of earnings. I think it's $0.12, $0.07, and something else, and Rina can give you specifics. That will reliably cover our dividend.

Speaker #2: That dragged our overall leverage levels back to 2.4 at the end of the year. But the bulk of our business ex the fundamental business, triple net lease business, still remains historically underleveraged.

Speaker #2: And we have a lot of cash trapped in the business. We estimate the cash drag at something like 7 cents for the year. If you add them combined, it's almost 20 cents of earnings.

Speaker #2: I think it's 12, 7, and something else, and Rina can give us specifics. And that will reliably cover our dividend. So, and then we look at our non-accrual book, which some may look at as a problem—and we kind of do—but we also look at it as an opportunity.

Barry Sternlicht: Then we look at our non-accrual book, which some may look as a problem, and we kind of do, but we also look at it as an opportunity. It's future earnings power for us when we have first mortgages, like Jeff said, along with two money center banks. It's inconceivable the property's not valuable. It's just probably a borrower. In many cases, we find our borrowers are underwater. They don't want to put the money in for TIs. They don't want to put their money into reposition or even fix out a space for a tenant. We have to take it back. That takes a lot of time, and once we have control, we can retenant it, reposition it, and in fact, then sell it. We've chosen long ball.

Speaker #2: It's future earnings power for us when we have first mortgages, like Jeff said, along with two money center banks. It's inconceivable the property's not valuable.

Speaker #2: It's just probably a borrower in many cases we find our borrowers are underwater. They don't want to put the money in for TIs. They don't want to put their money into reposition or even fix out a space for a tenant.

Speaker #2: So we have to take it back. That takes a lot of time. And once we have control, we can reten it, reposition it, and in fact, then sell it.

Speaker #2: So we've chosen long ball. We've chosen the way to approach our company because we own 400, roughly $400 million of stock along with our shareholders.

Barry Sternlicht: We've chosen the way to approach our company because we own roughly $400 million of stock, along with our shareholders, as if your capital was our own, we've chosen to do what's best for ourselves over the long run. A prime example would be an office building that we was bought by a household name firm for $400 million. Our loan was $200 million. We took it back. We could sell it, but it's an office building. We're converting it to a rental building. It's well underway. It's gonna be a great building in the center of Washington, DC. We're confident that we'll return our investment or close to it and maybe make some money, depending on how well we do with our renovation.

Speaker #2: As if it was your capital was our own. And we've chosen to do what's best for ourselves over the long run. Our prime example would be an office building that we was bought by a household named firm for $400 million.

Speaker #2: Our loan was $200 million. We took it back. We could sell it, but it's an office building. We're converting it to a rental building.

Speaker #2: We're on our way. We've it's going to be a great building. And in the center of Washington, D.C., and we're confident that we'll return our investment or close to it and maybe make some money, depending on how well we do with our renovation.

Speaker #2: That's far more attractive to us than just dumping it and then moving on. So you're going to see these assets because we are a real estate player at our heart.

Barry Sternlicht: That's far more attractive to us than just dumping it and then moving on. You're gonna see these assets because we are a real estate player at heart. You're gonna see us take back assets, reposition them, and then sell them. Jeff mentioned in the prior years, we've made substantial earnings doing that. We didn't intend to be loan to own. Let's not kid ourselves. Given what's happened in the marketplace with the massive increase in rents, rates, and then the slowdown of the recovery in the rents as the market had been overbuilt, we know that going forward, these assets will produce earnings for us in the future, albeit not at the pace that we might have hoped, but real estate isn't really that kind of business.

Speaker #2: You're going to see us take back assets, reposition them, and then sell them. And Jeff mentioned in a prior years we've made substantial earnings doing that.

Speaker #2: We didn't intend to be loan to own. Let's not kid ourselves. But given what's happened in the marketplace with the massive increase in rents, rates, and then the slowdown of the recovery of rents as the market had opened overbuilt, we know that going forward these assets will produce earnings for us in the future, albeit not at the pace that I might have hoped, but real estate isn't really that kind of business.

Speaker #2: And we're going to we're very confident in the future earnings power of our business. And especially next year as we continue to roll out the capital we've committed, but haven't funded, on loans we've made this year, which Jeff mentioned in just one of our it's almost, I think, $1.9 billion.

Barry Sternlicht: We're very confident in the future earnings power of our business. especially next year, as we continue to roll out the capital we've committed but haven't funded on loans we've made this year, which Jeff mentioned in just one of our... It's almost, I think, $1.9 billion. Our triple net lease business, which was dilutive, I think it was $0.06 in a year, should turn accretive next year, and we love that business. 15-year-plus leases, never a default, ever, have ever had it. We actually underwrote it with defaults, but we've never had a default. They're just getting to scale now with our capital. We've also found that with our expertise in capital markets, we've improved, materially improved their financing. Our ROEs are rising rapidly.

Speaker #2: Our triple net lease business, which was diluted—I think it was $0.06 in a year—should turn accretive next year. And we love that business.

Speaker #2: 15-year plus leases. Never a default, ever, has ever had a we actually underwrote it with defaults, but we've never had a default. And they're just getting to scale now with our capital.

Speaker #2: We've also found that with our expertise in capital markets, we've improved materially improved their financings. And so our ROEs are rising rapidly. We just have a lot of overhead on the scale of the business it is today.

Barry Sternlicht: We just have a lot of overhead on the scale of the business it is today. As we add assets, we get exponential better contribution to our earnings going forward. Again, I think we will work through this REO book at due haste. We've organized ourselves to do so. We haven't netted those losses against the assets directly, and we continue to carry them as, in the manner that Rina has shown you, which is a little different than some of our peers. I think, if you look at the industry as a whole, we were facing headwinds for the last three or four years. I mean, real estate wasn't going anywhere, rates were rising, everything was outperforming. I think it's safe to say, as we look forward, that we have tailwinds now.

Speaker #2: So as the we add assets, we get exponential better contribution to our earnings going forward. And again, I think we will work through this REO book at a due haste.

Speaker #2: We've organized ourselves to do so. But we haven't netted those losses against the assets directly, and we continue to carry them in the manner that Rina has shown you, which is a little different than some of our peers.

Speaker #2: I think if you look at the industry as a whole, we were facing headwinds for the last three or four years. I mean, real estate wasn't going anywhere.

Speaker #2: Rates were rising. Everything was outperforming. But I think it's safe to say, as we look forward, that we have tailwinds now. The decreases in supply and the multifamily market dropping 60%, 70%—eventually, we will see record absorptions of apartments.

Barry Sternlicht: With increases in supply in the multifamily market dropping 60%, 70%, eventually, we will see record absorptions of apartments than the last year in the United States, record absorptions. With supply down and people still being unable to buy homes, we expect the multifamily markets to turn around, and that will help our borrowers, and that will lower LTVs. Right now, where we get an asset back, we're kind of not sure we should sell it or fix it up and then sell it later. We also think the second big tailwind is interest rates. They're going lower, the pace of which nobody quite can figure out, whether AI, how deflationary it is, how fast it will happen, will it be deflationary? Interest rates will be lower. The economy is bifurcated.

Speaker #2: The last year, in the United States, record absorptions. So with supply down and people still being unable to buy homes, we expect the multifamily markets to turn around.

Speaker #2: And that will help our borrowers and that will lower LTVs. And right now, we're going to get an asset back where kind of not sure we should we should sell it or fix it up and then sell it later.

Speaker #2: But we also think the second big tailwind is interest rates. They're going lower. The pace of which nobody quite can figure out, whether AI, how deflationary it is, how fast it will happen, will it be deflationary?

Speaker #2: But interest rates will be lower. The economy is bifurcated. I know the administration doesn't like to talk about a K economy, but you see it.

Barry Sternlicht: I know the administration doesn't like to talk about a K economy, you see it. You see in the hotel industry, the only sector of the market that was up last year was luxury. Every other sector, upscale, upper upscale, mid-scale, lower-scale economy, everything was down. Also cost to build, replacement costs has continued to stay high. While they may have dropped a little bit, the cost of building a home, they still remain well above our basis in almost any of the assets in our book. New supply will be hindered until rents begin to rise again. I guess the negative and the thing that gets us concerned, of course, is AI, what it will mean for wealth and potentially unemployment. I think this will be a little bit.

Speaker #2: You see in the hotel industry, the only sector of the market that was up last year was luxury. Every other sector upscale, upper upscale, mid-scale, lower scale economy, everything was down.

Speaker #2: And also cost to build. Replacement cost has continued to stay high. And while they may have dropped a little bit, the cost of building a home they still remain well above our basis and almost any of the assets in our book.

Speaker #2: So, new supply will be hindered until rents begin to rise again. I guess the negative, and the thing that gets us concerned, of course, is AI.

Speaker #2: What it will mean for wealth and potentially unemployment. But I think this will be a little bit the market's wrestling with this right now.

Barry Sternlicht: The market's wrestling with this right now. We're all watching it and deciding what we think. I think there's one other positive I should mention, which is, as rates fall, one of our transaction volumes will pick up, that will give us more opportunities to refinance other people in other deals or make new loans to new deals. I think real estate, as it usually is usually a safe haven during times of tumult in the marketplace. Overall, I think we had a solid year, we positioned ourselves really well for the future, for the next couple of years. We're excited with our team.

Speaker #2: We're all watching it and deciding what we think. I think there's one other positive I should mention, which is as rates fall, one of the our transaction volumes will pick up.

Speaker #2: And that will give us more opportunities to refinance. Other people in other deals or make new loans to new deals. And I think real estate, as it usually is, is usually a safe haven.

Speaker #2: During times of tumult in the marketplace. So overall, I think we had a solid year. And we positioned ourselves really well for the future, for the next couple of years.

Speaker #2: We're excited with our team. I also think you're going to make an effort, a strong effort, to reduce our costs and use AI to do what we do like everyone else, more with higher productivity and less cost embedded in the structure.

Barry Sternlicht: I also think we're going to make an effort, a strong effort to reduce our costs and use AI to do what we do, like everyone else, more with higher productivity and less cost embedded in the structure. That's unique to us. We have very large businesses tucked into our mortgage book that all of which are supported by the REIT, and we hope we can, and make our people more productive and do so in an efficient manner, and we're very excited about taking on those challenges. With that, I want to thank the team, and thank you for your support, and we'll take your questions.

Speaker #2: And that's unique to us. But we have very large businesses tucked into our mortgage book that all of which are supported by the REIT.

Speaker #2: And we hope we can make our people more productive, and do so in an efficient manner. And we're very excited about taking on those challenges.

Speaker #2: So with that, I want to thank the team and thank you for your support. And we'll take your questions.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

David Brown: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Don Fandetti with Wells Fargo. Please proceed with your question.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Don Fandetti with Wells Fargo. Please proceed with your question.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #1: One moment, please, while we pull for questions. Our first question comes from the line of Don Fandetti with Wells Fargo. Please proceed with your question.

Speaker #2: Hi. Good morning. You know, it seems like you're increasing the CRE loan portfolio again in Q1. Can you talk about the pace throughout 2026 and also the return profile of these originations versus historical?

Operator: Hi, good morning. You know, it seems like you're increasing the CRE loan portfolio again in Q1. Can you talk about the pace throughout 2026, and also the return profile of these originations versus historical?

Donald Fandetti: Hi, good morning. You know, it seems like you're increasing the CRE loan portfolio again in Q1. Can you talk about the pace throughout 2026, and also the return profile of these originations versus historical?

Jeffrey DiModica: Thanks, Don. Good morning, by the way. I think I mentioned in my script that we expect the loan portfolio on the CRE side to go over $17 billion in Q1. That would be the first time. You know, we've been growing the loan book for every quarter since COVID, every quarter in COVID, every quarter since we started, I think we've made commercial real estate loans, so it's nothing new. We are obviously sitting on a little bit more liquidity after all the cash out refinancings and raises that we were able to do last year, so our pace is increased as we try to deploy that. Rina spoke a little bit about drag. Last year, I think we did $6.5 billion or so of CRE lending. We expect to do at least that this year.

Speaker #3: Thanks, Don. Good morning, by the way. I think I mentioned in my script that we expect the loan portfolio on the CRE side to go over $17 billion in the first quarter.

Speaker #3: That would be the first time. You know, we've been growing the loan book for every quarter since COVID, every quarter in COVID, every quarter since we started, I think we've made commercial real estate loans.

Speaker #3: So it's nothing new. We are obviously sitting on a little bit more liquidity after all of the cash-out out refinancings and raises that we're able to do last year.

Speaker #3: So our pace has increased as we try to deploy that. Rina spoke a little bit about drag. Last year, I think we did $6.5 billion or so of CRE lending.

Speaker #3: We expect to do at least that this year. My gut is that you're going to have more maturities this year. You have people who have executed their business plans on post-COVID or post-rate rise loans.

Jeffrey DiModica: My gut is that you're going to have more maturities this year. You have people who have executed their business plans on post-COVID or post-rate rise loans. You have a number of loans from before that period that simply need to move out of the pipe. We also have lower rates, which will create more transaction volume. You know, in 2021, you had high $600 billion of transactions in the market. You'll add two-thirds of that this year. As transactions move up, as rates move down, as maturities come, we expect more opportunities. We borrow inside most of our peer group. Our last term loan was at 175 over, I believe, on a new issue, which was incredible, and then the high yield markets were somewhere around 200 over.

Speaker #3: You have a number of loans from before that period that simply need to move out of the pipe. And we also have lower rates, which will create more transaction volume.

Speaker #3: You know, in 2021, you had high $600 billion of transactions in the market. You had two-thirds of that this year. So as transactions move up, as rates move down, as maturities come, we expect more opportunities.

Speaker #3: We borrow inside most of our peer group. We are last term loan was at 175 over, I believe, on a new issue, which was incredible.

Speaker #3: And in the high-yield markets, we're somewhere around 200 over. No one in our space, well, one person in our space can borrow there. But the rest can't.

Jeffrey DiModica: No one in our space, well, one person in our space, can borrow there, the rest can't. I think we have a cost of funds advantage. Also, being the biggest, we have bigger relationships with the banks who we will tend to repo with. They pick up a cross from us. The cross is worth more with us than it is with anyone else because our lines are bigger, and we have relationships. I think it looks like a very good year for originations. Last year was our second biggest. I would hope that we would be able to beat that number this year. We have $2 billion closed or in closing in the quarter, we are still pedal down.

Speaker #3: I think we have a cost of funds advantage. Also, being the biggest, we have bigger relationships with the banks who we will tend to repo with.

Speaker #3: They pick up a cross from us. The cross is worth more with us than it is with anyone else because our lines are bigger.

Speaker #3: And we have relationships. So I think it looks like a very good year for originations. Last year was our second biggest. I would hope that we would be able to beat that number this year.

Speaker #3: We have $2 billion closed or in closing in the quarter. So we are still pedal down. We know we have to originate more loans.

Jeffrey DiModica: We know we have to originate more loans and thoughtfully work out of the REOs and non-accruals to get back to the run rate that we keep talking about by late 2026, where we're covering the dividend.

Speaker #3: And thoughtfully, work out of the REOs and non-accruals to get back to the run rate that we keep talking about by late '26 where we're covering the dividend.

Speaker #2: Got it. And I guess, you know, what is your expectation for credit migration near term? I mean, it sounds like you're playing the long game, which we appreciate.

Operator: Got it. I guess, you know, what is your expectation for credit migration near term? I mean, it sounds like you're playing the long game, which we appreciate. I guess that also means that we'll continue to see these sort of, like, one-off type, migrations.

Donald Fandetti: Got it. I guess, you know, what is your expectation for credit migration near term? I mean, it sounds like you're playing the long game, which we appreciate. I guess that also means that we'll continue to see these sort of, like, one-off type, migrations.

Speaker #2: But I guess that also means that we'll continue to see these sort of one-off type migrations.

Speaker #3: Yeah. And Barry, I'll let you go after. Maybe I'll start. You know, in a migration, there are people who sell things right away. There are people who—and that is a business plan.

Jeffrey DiModica: Yeah. Barry, I'll let you go after it. Maybe I'll start. You know, in migration, there are people who sell things right away. There are people who, and that is a business plan. There are people like us, who will work on them in, on each. We don't have a business plan for what we do with a credit and putting it, the pig through the python. We look at every one of them individually. We try to present value of what we think the value of getting the amount of cash we would get back in a distressed-ish sale today without working on the asset, and then what's the present value of the cash we would get back over the time that we would do it.

Speaker #3: There are people like us who will work on them on each we don't have a business plan for what we do with a credit and putting the pig through the python.

Speaker #3: We look at every one of them individually. We try to present value what we think the value of getting the amount of cash we would get back in a distressed-ish sale today without working on the asset.

Speaker #3: And then, what's the present value of the cash we would get back over the time that we would do it? And then, against that, we make assumptions of where we think the property could end up—positives, negatives.

Jeffrey DiModica: Against that, we make assumptions of where we think the property could end up, positives, negatives. We look at our liquidity, our cost of capital, et cetera. We look at what information can Starwood, the manager, bring to bear to make the asset better. We have a great history of making assets better than the next buyer. The next buyer is gonna be a 20% return private equity guy, who's gonna buy from us at a 10% to 12% cost of capital. He's gonna back up his bid a little bit because of the things that he doesn't know. We know the assets. We have a lower cost of capital. We can borrow against the assets significantly cheaper corporate debt than he can.

Speaker #3: We look at our liquidity, our cost of capital, et cetera. And we look at what information can Starwood, the manager, bring to bear to make the asset better.

Speaker #3: We have a great history of making assets better than the next buyer. The next buyer is going to be a 20% return private equity guy who's going to buy from us at a 10 to 12% cost of capital.

Speaker #3: And then he's going to back up his bid a little bit because of the things that he doesn't know. We know the asset. We have a lower cost of capital.

Speaker #3: We can borrow against the asset significantly cheaper than corporate debt than he can. That all goes into our individual business plans as we look at each individual asset without having a business plan that we are a foreseller or a carrier of assets.

Jeffrey DiModica: That all goes into our individual business plans as we look at each individual asset without having a business plan that we are a fore seller or a carrier of assets. When we look at those, we make the decision as a management team across Starwood Capital and Starwood Property Trust, to either stay in and ride it, which we've done successfully. Barry gave you an example of another one that we're redeveloping, we expect to have successfully done. I gave you examples of a number of them that I think we resolved $300 million last year in actual resolutions, not foreclosures. We don't call foreclosures resolutions. Some people do. We had $130 million more fall out, so it would've been $430 million. We hope to resolve.

Speaker #3: And when we look at those, we make the decision as a management team across Starwood Capital and Starwood Property Trust to either stay in and ride it, which we've done successfully.

Speaker #3: Barry gave you an example of another one that we're redeveloping. We expect to have successfully done. I gave you examples of a number of them that I think we resolved $300 million last year in actual resolutions, not foreclosures.

Speaker #3: We don't call foreclosures resolutions. Some people do. We had $130 million more fallout. So it would have been $430. We hope to resolve. We have a sheet.

Jeffrey DiModica: We have a sheet. We look quarterly at what we expect to resolve. Our goal is to resolve most of $1 billion this year. If we execute on that, great, and if we don't, it's going to be because we looked at the present value of the cash flows and the cash flow we get today, and we're going to make the best decision for shareholders on each bespoke asset. We don't really have a plan. You asked about credit migration. You know, I think we have our arms around where we think the potential problems are. As you look at that, property types are going to make a difference. The market it's in is going to make a difference. Tenant movements are going to make a difference.

Speaker #3: And we look quarterly at what we expect to resolve. Our goal is to resolve most of a billion dollars this year. And if we execute on that, great.

Speaker #3: And if we don't, it's going to be because we looked at the present value of the cash flows and the cash flow we get from that day.

Speaker #3: And we're going to make the best decision for shareholders on each bespoke asset. So we don't really have a plan. But you asked about credit migration.

Speaker #3: You know, I think we have our arms around where we think the potential problems are. As you look at that, property types are going to make a difference.

Speaker #3: The market it’s in is going to make a difference. Tenant movements are going to make a difference. It’s all very bespoke. But we feel like we really have our arms around where the potential problems are going to be.

Jeffrey DiModica: It's all very bespoke, but we feel like we really have our arms around where the potential problems are gonna be.

Speaker #2: Got it. Thank you.

Operator: Got it. Thank you.

Donald Fandetti: Got it. Thank you.

Barry Sternlicht: Should I add a few things? Can you hear me okay?

Speaker #3: Should I add a few things? Can you hear me okay?

Speaker #2: Yeah. Go ahead, Barry. Yeah. I mean, I hate to say we don't have a plan. I mean, we have business plans for individual assets.

Jeffrey DiModica: Yeah, go ahead, Barry.

Barry Sternlicht: Yeah. I mean, I hate to say we don't have a plan. I mean, we have business plans for individual assets, and it's been remarkable the amount of money we had on assets that cap stack with a $1 billion to loan is $400 million, and the borrower walks. When they walk, you know, obviously, tenants want to lease. They know the building's in trouble. They're not gonna go in the building if no one puts the TI. The borrower has absolutely zero incentive to do anything. In multiple cases in our pipeline, we expect to that, and like, we are not supposed to be leasing their buildings for them. If we're gonna put the asset in for the TI, we want to get the asset back, there's no reason to exercise their positions.

Speaker #2: And it's been remarkable the amount of money we have on assets that the cap size was a billion dollars. The loan was $400 million.

Speaker #2: And the borrower walks. When they walk, you know, they really haven't—obviously, tenants want to lease. They know the building's in trouble. They're not going to go in the building if no one will put a CPI.

Speaker #2: The borrower has absolutely zero incentive to do anything. So in multiple cases in our pipeline, we expect that and we are not supposed to be leasing their buildings for them.

Speaker #2: And if we're going to put the asserting in for the PI, we don't want to get the asset back. There's no reason to exercise their positions.

Speaker #2: So we've kind of wanted to play hardball. We play fairball. And we try to work with our borrowers if we can. I think the multi-business, particularly interesting.

Barry Sternlicht: You know, we want to play hardball, we play fairball, and we try to work with our borrowers if we can. I think the multi-business is particularly interesting. I mean, it's one of these businesses you all remember, from long ago, we started iStar. It was called Star Financial, changed its name to iStar, and wound up taking back a whole bunch of stuff in GFC, and turned themselves into a quasi-equity and made a fortune. Obviously, the best thing we can do in a loan is get our money back, and that's primarily our business, or at least half our business, and we're happy to play in that ballgame on the real estate bug.

Speaker #2: I mean, it's one of these businesses you all remember from long ago. We started iStar. Let's call it Starwood Financial. It changed its name to iStar.

Speaker #2: And we wound up taking back a whole bunch of stuff in the TFC. Turned themselves into a quasi-equity and made a fortune. Obviously, the best thing we can do in a loan is get our money back.

Speaker #2: And that's primarily our business and our half our business. And we're happy to play in that ballgame. We're talking the real estate bug. But long term, you make more money owning the asset since we're comfortable owning great assets.

Barry Sternlicht: You know, long term, you make more money owning assets, and we're comfortable owning great assets, although we are looking at what we can recycle once we stabilize the assets. I'd say, like, for the most part, it's mostly good news to get this asset back and find out there's great demand for it, and we're expect to be able to move these properties. I don't get to do this on a quarterly basis. Our tenants don't march to our quarter rhythm, and our borrowers don't give up the keys to every, you know, always willingly. In many cases, they do, and work collaboratively, but in the exception, they might move slower. I think people are surprised.

Speaker #2: Although we are looking at what we can recycle once we save a lot of assets. And I'd say for the most part, it's mostly good news.

Speaker #2: You get this asset back and find out there's great demand for it. And we expect to be able to move these properties. But I don't get to do this on a quarterly basis.

Speaker #2: Our tenants don't march to our quarter river, and our borrowers don't give up the keys to every asset willingly. In many cases, they do.

Speaker #2: And work collaboratively. But in the exceptions, they might move slower. I think people are surprised. I think in the real estate world today, borrowers are surprised at the slow pace of the program in the multifamily market.

Barry Sternlicht: I think in the real estate world today, I think borrowers are surprised at the slow pace of the recovery in the multi-family market. While you have some positives to coastlines and maybe some of the blue collar cities have saw no supply, but you haven't seen the green shoots. You can look at the earnings reports of every public company, maybe save one, and the growth rate of the Sun Belt markets is not great. The rental growth is not great. We're getting positives on renewals and negatives on the leases, pretty much across the board, and maybe a plus one or minus one or plus two or minus two, but it's not. Costs and expenses continue to march higher. You have stressed P&Ls.

Speaker #2: While you have some positive—two coastlines and maybe some of what we call our cities have seen no supply. But you haven't seen the green shoots. You would look at the earnings reports of every public company.

Speaker #2: Maybe save one. The growth rate of the Sunbelt markets is not great. The rental growth is not great. We're getting positives on renewals and negatives on the leases.

Speaker #2: Pretty much across the board, maybe you're plus one or minus one or plus two or minus two. But it's not robust and expensive. It's continuing to march higher.

Speaker #2: So you have stressed P&Ls. On the other hand, when you look at our attachment points, where were our loaners as opposed to build it or bought it?

Barry Sternlicht: I think when we look at our attachment points, where we're alone as opposed to, like, whether we built it or bought it, in many cases, our loans are transitioned into some capital reposition multi. I'm kind of happy to get it back. We are able to move them. You'll see us move probably half a dozen assets we've built in our pipeline in our year today. You know, I'm mixed emotions. If you realize the market, the Sun Belt may be overbuilt, but it's where all the jobs are. It's where all the companies are being, moving their headquarters, it's where the factories are being built. It's where the cost of living is generally less. It's where they're right to work states.

Speaker #2: In many cases, our loans are transitionally. And if it comes to capital reposition, multi I'm kind of happy to get it back. We are able to move them.

Speaker #2: You'll see us move probably half a dozen assets. We've been in our pipeline and already are today. But a mixed emotion. If we really like the market, the Sunbelt may be overbuilt.

Speaker #2: But it's where all the jobs are. It's where all the companies are being moving their headquarters. It's where the factories are being built. And it's where the cost of living is generally less.

Speaker #2: It's where the right to work stays. If they're attractive states and attractive markets for the reshoring of the industrialization of the country. So when you know there's a new factory going up in a year and a half, it's going to take a year and a half to build.

Barry Sternlicht: They're attractive states and attractive markets for the reshoring of industry, the industrialization of the country. You know, when you know there's a new factory going up in a year and a half, it'll take a year and a half to build in the market, do you want to sell the multi now, or do you want to be the guy, as Jeff said, it's an opportunity fund who's going to buy the asset? We're an opportunity fund, that's what we do in another part of our world. I always tell Jeff and Dennis, our head of workstations, like, we'll buy it. We don't do that, but we would. In case we already own it, so we'll just keep it in the REIT. If we want to keep it, we'll just hold it.

Speaker #2: In the market, do you want to sell the multi now? Or do you want to be the guy? As Jeff said, it's an opportunity fund that's going to buy the asset.

Speaker #2: And we're an opportunity fund is what we do. And another part of our world. I always tell Jeff and Kenneth, our origination, it's like, "We'll buy it." We don't do that.

Speaker #2: But we would. In any case, we already own it. So we'll just keep in the read. If f we want to keep it, we'll just hold it.

Speaker #2: So I think it's sloppy for you because we're not we're uniform in our space. And if we really thought we were we had an issue, we're not worried.

Barry Sternlicht: I think it's sloppy for you because we're unicorn in our space. If we really thought, you know, we had an issue, we, you know, we're not worried. We just said, when you take out the non-cash losses and take out some of the cash drag that we know we could put into place, we're pretty confident Fundamental Income will reach a very high, very leveraged with overhead base. Once it reaches critical mass at all, we don't have a body or a dollar to go overhead. It becomes pretty positive, reliable, recurring, and stable, which is exactly the metrics that we used to go public in 2005, consistent, reliable.

Speaker #2: As Rina said, when you take out the non-cash losses and take out some of the cash track that we know we're going to put into place and we're pretty confident fundamental, we'll reach a very leverage with overhead base.

Speaker #2: And so once it reaches critical mass, it'll all float. We don't have to add a body or a dollar to the overhead. So it becomes pretty positive.

Speaker #2: And reliable. And referring. And stable, which is exactly the metrics that we use to go public in 2005. Consistent, reliable. We've had some potholes.

Barry Sternlicht: We've had some potholes. If you're on a playing field, you have this kind of disruption in our markets, including the pandemic and the office markets, it's inevitable. I'm really proud of the way we're negotiating it with my staff on some of these REO assets, and we're looking at whether we should turn our tools back on in some asset cases, you know, because the performance has improved. It's a mishmash. It's unfortunately, a little hard to anticipate. Thanks.

Speaker #2: But if you're on the playing field, you've had this kind of disruption. In our markets, including the pandemic and the office markets. It's inevitable.

Speaker #2: But I'm really proud of the way we're negotiating. I know it's interesting to my staff on some of these REO assets. And we're looking at whether we should turn a coolers back on in some asset cases.

Speaker #2: Because the performance has improved, so it's a mishmash. It's, unfortunately, a little hard to say today.

Speaker #3: Thanks.

Speaker #4: Thank you. As a reminder, if anyone has any questions, you may press star one on your telephone keypad to join the queue. Our next question comes from the line of Gabe Bogey with Raymond James.

David Brown: Thank you. As a reminder, if anyone has any questions, you may press star one on your telephone keypad to join the queue. Our next question comes from the line of Gabriel Poggi with Raymond James. Please proceed with your question.

Operator: Thank you. As a reminder, if anyone has any questions, you may press star one on your telephone keypad to join the queue. Our next question comes from the line of Gabriel Poggi with Raymond James. Please proceed with your question.

Speaker #4: Please proceed with your question.

Speaker #5: Hey, good morning, all. And thanks for taking the questions. I wanted to talk about the residential portfolio and then the InfraBook. So on Resi, Jeff, is there a point where I don't know in the market where rates get to a certain level where you guys look holistically and say that maybe you can sell the portfolio to kind of unearth the capital that sits under that to go make more infra or CRE loans?

Gabriel Poggi: Hey, good morning, all. Thanks for taking the questions. I wanted to talk about the residential portfolio and then the infra book. On, on resi, Jeff, is there a point where, I don't know, in the market, where rates get to a certain level, where you guys look holistically and say that maybe you can sell the portfolio to kind of unearth the capital that sits under that to go make more infra or CRE loans? Then, Barry, on the infra side, Barry and Jeff, just remind us, what's the total opportunity set for the infra lending business? You know, who are your true competitors and how big can that book get over time? Thanks.

Speaker #5: And then Barry, on the infra side, Barry and Jeff, what's just remind us, what's the total opportunity set for the infra lending business? Who are your true competitors?

Speaker #5: And how big can that book get over time? Thanks.

Speaker #2: Thanks, Gabe. Hey, Barry, again, I'll start unless you want to start. But on your first question on Resi, Resi performance has been great. I think we had a markdown or a gap book value of $247 million back in '22 when the rate change happened.

Jeffrey DiModica: Thanks, Gabe. Hey, Barry, again, I'll start if, unless you want to start. You know, on your first question on resi performance has been great. I think we had a markdown or a GAAP book value of $247 million back in 2022 when the rate change happened. We are significantly below that. Today, I think it's $100 million, and after hedges, might be a little bit higher than that. We've got back a significant portion of that by holding on. The same strategy that we've used.

Speaker #2: We are significantly below that. Today, I think it's $100 and after hedges might be a little bit higher than that. But we've got back a significant portion of that by holding on the same strategy that we've used.

Speaker #2: And also, the thing that would surprise you is because we have a lot of legacy RMBS in bonds that we have, I think our ROE on our Resi portfolio that's heard for you to see because you see loans marked at 96 or 97 that we paid one-on-one or 102 for.

Jeffrey DiModica: Also, the thing that would surprise you is because we have a lot of legacy RMBS in bonds that we have. I think our ROE on our resi portfolio, that's hard for you to see because you see loans marked at 96 or 97 that we paid 101 or 102 for. I think our run rate ROE is around 11% today across the entire resi business. To your point, 2 things will make it get better: spread tightening or lower rates. Spread tightening has come our way. Securitization spreads have tightened 25 basis points since 1 January alone. We're at the tightest securitization spreads since the middle of 2022. Securitization issuance, I think, is $10 billion year to date versus $5.3 billion at this time last year. Insurance cares about these assets.

Speaker #2: I think our run rate ROE is around 11% today across the entire Resi business. So to your point, two things will make it get better.

Speaker #2: Spread tightening or lower rates. Spread tightening has come our way. Spread securitization spreads have tightened 25 basis points since January 1st alone. We're at the tightest securitization spreads since the middle of 2022.

Speaker #2: Securitization issuance, I think, is $10 billion year-to-date versus $5.3 billion at this time last year. Insurance cares about these assets; they get great insurance treatment, and that, along with the street conduits and others.

Jeffrey DiModica: They get great insurance treatment. That along with the street conduits and others, there's a great bid for the types of assets that we've historically liked. That's allowed us to mark them up. That's allowed us to reduce that GAAP book value loss significantly. From here, if we can't count on spreads being significantly tighter from here, they probably can tighten a bit, but they've made their move. To get back from the $96 or $97 or $98 price to par or 101 or 102, rates are going to be the other piece. You mentioned that. Low rates help us because it increases CPRs. We were running at 5 or 6 CPR in our non-QM books the last couple of years. We're up to 8 or 9 CPR today.

Speaker #2: There's a great bid for the types of assets that we've historically liked. That's allowed us to mark them up. That's allowed us to reduce that gap book value loss significantly.

Speaker #2: So from here to get the if we can't count on spreads being significantly tighter from here, they probably can tighten a bit. But they've made their move.

Speaker #2: So to get back from the 96 or 97 or 98 dollar price to par or 101 or 102, rates are going to be the other piece.

Speaker #2: You mentioned that. Low rates help us because it increases CPRs. We were running at 5 or 6 CPR in our non-QM book the last couple of years.

Speaker #2: We're up to 8 or 9 CPR today. We get more back at par when that happens. That's good. I think in the house, although we never make bets on rates, we believe rates are probably headed lower.

Jeffrey DiModica: We get more back at par when that happens. That's good. I think in the house, although we never make bets on rates, we believe rates are probably headed lower. It certainly feels like the AI-driven productivity will match that of previous productivity gains that we've seen and drive rates lower. We don't make any real bets based on that. If I'm betting on that and betting on rates going lower, that will certainly help that book. As you know, we hedge that book. We're always moving our hedge around a little bit. The only way we probably get back to getting that full write down back is by reducing that hedge a bit and being correct on rates going lower, not something we historically do. I think we will, we'll wait and see.

Speaker #2: It certainly feels like the AI-driven productivity will match that of previous productivity gains that we've seen in drive rates lower. We don't make any real bets based on that.

Speaker #2: But if I'm betting on that and betting on rates going lower, that will certainly help that book. As you know, we hedge that book.

Speaker #2: And so we're always moving our hedge around a little bit. The only way we probably get back to getting that full write-down back is by reducing that hedge a bit and being correct on rates going lower.

Speaker #2: Not something we historically do. And I think we will wait and see. You create a distributable earnings loss when you take that gap book value hit into earnings.

Jeffrey DiModica: You know, you create a distributable earnings loss when you take that GAAP book value hit into earnings. We like the assets, they're returning 11, so I don't think we're going to rush to sell. Barry, unless you have anything on rates, I would then move to infra, and I have Sean Murdock in the room. Barry, do you have anything you want to add on residential?

Speaker #2: We like the assets, the returning 11. So I don't think we're going to rush to sell. Barry, unless you have anything on rates, I would then move to infra.

Speaker #2: And I have Sean Murdoch in the room. Barry, do you have anything you want to add on residential?

Speaker #3: Not really. I mean, we want to go back into adding value in there. We're going back into the business. It is a good business.

Barry Sternlicht: Not really. I mean, we want to go back into adding volume there. We're going back into the business, so there's a good business. We have a team in place, and they're capable. We just have to make the numbers work. If we can, we would go back and add that. One of the reasons you have a diversified business model is when some are unavailable, you have lending to fill out other verticals. We should do this introduction to Sean, because he precisely went into that business to have another material lending vertical. Sean, all yours.

Speaker #3: We're between in place following them. We're capable. We just have to make the numbers work. So, if we can, we would go back and add that as well.

Speaker #3: One of the reasons you have a diversified business model is when some aren't available, you have money to put out in other verticals. And it should be a good introduction to Sean because we precisely went into that business to have another material lending vertical.

Speaker #3: So Sean, all yours.

Speaker #2: Yeah. Well, before we go, I will say we looked at, I think, 21 different Resi originators last year. We've talked about getting back into Resi originations.

Jeffrey DiModica: Yeah. Well, before we go on, I will say we looked at, I think, 21 different resi originators last year. We've talked about getting back into resi origination. The combination of rates being a little bit low and spreads being a little bit tight make it a little bit hard to jump in today. We're always looking. I can't imagine we don't get back in the origination game on the resi side in the near future. We're just waiting for the right opportunity. On the infrastructure side, you asked about the potential size of the market. I'm gonna turn it to Sean Murdock, who's done a great job of doing sole originations to kind of get off the treadmill of what that market is. Sean's here, who runs that business for us.

Speaker #2: The combination of rates being a little bit low and spreads being a little bit tight make it a little bit hard to jump in today.

Speaker #2: But we're always looking. I can't imagine we don't get back in the origination game on the Resi side in the near future. We're just waiting for the right opportunity.

Speaker #2: And on the infrastructure side, you asked about the potential size of the market. So I'm going to turn it to Sean Murdoch, who's done a great job of doing sole originations to kind of get off the treadmill of what that market is.

Speaker #2: But Sean's here who runs that business for us.

Speaker #5: Sure. I mean, I think the best way to contextualize the opportunity is to just talk about energy consumption in the United States and a great couple of great points.

Sean Murdock: Sure. I mean, I think the best way to contextualize the opportunity is to just talk about energy consumption in the United States and a great, you know, a couple of great points. Electricity consumption over the next 5 years is supposed to grow at sort of a 5% kind of annual CAGR. You know, another good statistic to look at is the LNG export boom we've had in the US. We're exporting roughly 15 BCF a day of gas to, you know, consumers around the world. That's supposed to double over the next 5 years. We feel like there's a big tailwind to growth, both from, you know, the obvious AI data center value chain, as well as LNG exports and other sort of new initiatives that create, you know, a bigger market for us in which to prosecute opportunity.

Speaker #5: Electricity consumption over the next five years is supposed to grow. It's sort of a 5% kind of annual CAGR. Another good statistic to look at is the LNG export boom we've had in the US, where exporting roughly 15 BCF a day of gas to consumers around the world, that's supposed to double over the next five years.

Speaker #5: So we feel like there's a big tailwind to growth, both from the obvious AI data center value chain as well as LNG exports and other sort of new initiatives that create a bigger market for us in which to prosecute opportunity.

Sean Murdock: You asked about our competitors. You know, I think it's similar to Dennis's business in CRE lending. You know, we've got commercial banks that still make loans in our space. We also compete with alternative debt funds. They're just maybe not as many as either, given, you know, ESG constraints around some participants in the market. The third issuer of infra CLOs did their first deal at the end of last year, concurrent with our seventh deal of Barings Asset Management. Co-competition is growing a little bit, but I think the tailwinds on, you know, demand for energy are significant and form a much larger opportunity set for us over time.

Speaker #5: You asked about our competitors. I think it's similar to Dennis's business and CRE lending. We've got commercial banks that still make loans in our space.

Speaker #5: We also compete with alternative debt funds. They're just maybe not as many as either, given ESG constraints around some participants in the market. The third issuer of InfraCLOs did their first deal at the end of last year, concurrent with our seventh deal.

Speaker #5: Baring's Asset Management. So competition is growing a little bit. But I think the tailwinds on demand for energy are significant and form a much larger opportunity set for us over time.

Speaker #1: Thank you, guys. That's helpful.

Barry Sternlicht: Thank you, guys. That's helpful.

Gabriel Poggi: Thank you, guys. That's helpful.

Speaker #2: Thanks, Gabe.

Jeffrey DiModica: Thanks, Dave.

Speaker #4: Thank you. Again, as a reminder, pressing star one on your telephone keypad will join you into the queue so you can ask your question.

David Brown: Thank you. Again, as a reminder, pressing star one on your telephone keypad will join you into the queue so you can ask your question. Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.

Operator: Thank you. Again, as a reminder, pressing star one on your telephone keypad will join you into the queue so you can ask your question. Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.

Speaker #4: Our next question comes from the line of Jade Rahmani with KBW. Please proceed with your question.

Speaker #5: Thank you very much. Just at a high level, follow-up to Don's initial question. Do you think credit is getting better or worse? It does seem to have deteriorated in the quarter.

Jade Rahmani: Thank you very much. Just at a high level, follow-up to Don's initial question, do you think credit is getting better or worse? You know, it does seem to have deteriorated in the quarter. However, these could have been primarily problems you already knew about, and the new problems seem to be not in the office. I think that everyone's culled over the office exposure quite thoroughly, but in multifamily, where, as Barry noted, rents remain soft and also industrial. Could you just comment on, you know, your overall view on credit trends?

Speaker #5: However, these could have been primarily problems you already knew about. And the new problems seem to be not in office. I think that everyone's culled over the office exposure quite thoroughly.

Speaker #5: But in multifamily, where, as Barry noted, rents remain soft and also industrial. So could you just comment on your overall view on trends?

Speaker #2: Barry, I'll go first. And you can go after. We had, I hope you heard in the beginning of my discussion, we had a lot of leasing last year across a lot of assets that we may not have thought we would have that.

Jeffrey DiModica: Barry, I'll go first, and you can go after. You know, I hope you heard in the beginning of my discussion, we had a lot of leasing last year across a lot of assets that we may not have thought we would have that. There are always some idiosyncratic things that might happen in the portfolio. As you mentioned, you know, a couple of industrials, one of them that we moved to 5, that we actually feel very good about potential leasing on, but we felt it was right to move it to 5 because the sponsor stepped away. One was a studio deal, not something that was really in our office purview.

Speaker #2: There are always some idiosyncratic things that might happen in the portfolio. And as you mentioned—a couple of industrials. One of them that we moved to five—we actually feel very good about potentially leasing it—but we felt it was right to move it to five because the sponsor stepped away.

Speaker #2: One was a studio deal. Not something that was really in our office purview, so I think where it comes from here, as we've seen green shoots, and I mentioned a number of green shoots in the REO sales, at our basis in multi.

Jeffrey DiModica: I think where it comes from here, as we've seen green shoots, and I mentioned a number of green shoots in the REO sales at our basis in multi. As I look at our multi book, you know, even if you have a 4 cap asset from 2021 that you wrote a loan on, expecting a 5.5 debt yield, if you only achieved a 4.75 or 5 debt yield, you're not losing much money on those. They're very close, and it's just a matter of which side of par are you on. I think the multi losses across most of our books should be paper cuts unless someone made a really big mistake. Rates will help bail that out.

Speaker #2: As I look at our multi book, even if you have a forecap asset from 2021 that you wrote a loan on expecting a 5.5 debt yield, if you only achieve the 4 and 3/4 or 5 debt yield, you're not losing much money on those.

Speaker #2: They're very close and it's just a matter of which side of par are you on. So I think the multi losses across most of our books should be paper cuts unless someone made a really big mistake.

Speaker #2: So we rates will help bail that out if you end up with a 3% area forward sofa, which is what the market's saying today.

Jeffrey DiModica: If you end up with a 3% area forward SOFR, which is what the market's saying today, those losses should be completely immaterial for just about everybody. If forward SOFR backs up to 4%, then there might be a slightly different discussion. You nailed it. On a few bespoke industrial assets, whether it's market or tenant or other reasons, you know, that's where we're seeing a couple of things pop up. I would say overall, the positives are better than the negatives. When I say positives are better than the negatives, to your question, to me, that means the credit cycle has turned a bit. Barry, do you have something to add to that?

Speaker #2: Those losses should be completely immaterial for just about everybody. If forward sofa backs up to 4%, then there might be a slightly different discussion.

Speaker #2: But you nailed it on a few bespoke industrial assets, whether it's market or tenant or other reasons that that's where we're seeing a couple of things pop up.

Speaker #2: But I would say overall, the positives are better than the negatives. And when I say positives are better than the negatives, to your question, to me, that means the credit cycle has turned a bit.

Speaker #2: Barry, do you have something to add to that?

Speaker #3: No, it's real estate is going to catch a bit. I mentioned that whenever the equity markets rock and shake, people come back. So the property sector, the larger sector, the largest asset class in the world, we were operating in Europe, US, Australia, and in general, markets are better.

Barry Sternlicht: No, if real estate is going to catch a bid, I mentioned that, you know, whenever the equity markets rock or shake, people come back to the property sector, the larger sector, large asset class in the world. We were operating in Europe, US, Australia, and in general, markets are better. We're all confused, I think, would be the word I'd use, besides terrified, as Tom and I would talk about the world in this AI tumult and all the question marks and the fear and the anxiety. Yet, you know, if you see the markets, they're behaving pretty well. New York City's office market, even despite McDonald's, been pretty strong. The housing market remains very strong. The West Coast continues to perform pretty well.

Speaker #3: We're all confused, I think, would be the word I'd use. The size of them terrified is the only comment I'd use. Talk about the world in this AI tumult and all the question marks and the fear and the anxiety.

Speaker #3: And yet, if you see the markets, they're behaving pretty well. The New York City's office market, even despite McDonald's, has been pretty strong. The housing market remains very strong.

Speaker #3: So, the West Coast continues to perform pretty well. And I think the political class, the political interactions, is something to watch. I think we have to be careful about both the union costs and assets we lend against, and also cities like, of course, New York City having that increase in property taxes—an increase of nearly 10%.

Barry Sternlicht: You know, and I think the political class, the political interactions, something to watch. You know, I think we have to be careful about both the union costs and assets we lend against, and also, cities like, of course, New York City, talking about increasing property taxes 90-10 percent. I mean, that takes the value of an office building down materially if they can actually do it. We're blessed with not that big a portfolio in the city, and we've avoided most of those loans. That's gonna be an earthquake if he passes that, and it goes through.

Speaker #3: I mean, that takes the value of an office building down materially if we can actually do it. So we're blessed with not city. And we're rewarded most of those loans, but that's going to be an earthquake if he passes that.

Speaker #3: And then it goes through, and then you'll—the interesting thing is that all of these are—sometimes the tenant will pick up the real estate taxes, and if you don't, you do.

Barry Sternlicht: You know, the interesting thing is, if you have all of these, and sometimes the tenant will pick up the real estate taxes, and if you don't, you do, or you do on certainly on the rent roll, on the role of the tenants. It's gonna be, I don't know, but it's leading to this kind of uncertainty. It's a strange world, but in general, we definitely have tailwinds. I mean, the tailwinds are here. I think what you're seeing in our, we see it in our special servicing, because some bars are just giving up. I mean, they planned for things to get better. You know, we'll stay alive to 25. 25 has passed. You know, the interest rates fell, but, and the wine lines didn't go up.

Speaker #3: Or you do on certainly on a rent roll. On the roll of the tenants. So it's going to be I don't know, but if we need this kind of uncertainty, it's a strange world.

Speaker #3: But in general, we definitely have tailwinds. I mean, the tailwinds are here. I think what you're seeing, and we see it in our special servicing book, is some borrowers are just giving up.

Speaker #3: I mean, they planned for things to get better. They'll stay a lot to 25, 25 is past. The interest rates fell, but the NOI line didn't go up.

Speaker #3: And what is tariffs that kept rates up or immigration, 2.5 million people leaving the United States last year, slowest growth, actually negative growth in US population for the first time in, I think, ever.

Barry Sternlicht: Whether it's tariffs that kept rates up or immigration, too many people leaving the United States last year. Slowest growth, actually negative growth in US population for the first time in, I think, ever. I read 50 years, maybe ever, I might have to check that one. I mean, that's definitely affected apartment markets. You know, there are, those rents out, those, the deportations or the lack of not only people immigrating voluntarily, but we used to get 1 million or so legal immigrants a year. The US, just as you see, international travel is not the most hospitable place at the moment for the center of people's affections. You know, they're not traveling here, and they were. When people leave the country, it's bad for economic growth.

Speaker #3: I think that's 50 years negative ever. So it might have to chat that one. But I mean, that's definitely affected apartment markets. There's no doubt that the deportations or the lack of not only people emigrating voluntarily, but there used to be a million or so legal immigrants a year.

Speaker #3: And the US, just as you see in the national travel, is not the most hospitable place at the moment for the center of people's affections.

Speaker #3: And so they're not traveling here and in the middle of the war. When people leave the country, it's bad for economic growth. I think some of the weakness in GDP is the fact that we have no contribution from immigration.

Barry Sternlicht: I think some of the weakness in GDP is the fact that we have no contribution from immigration. You know, I think most of us want to shutter or seriously lower the amount of illegal immigrants or shutter completely. Legal immigrants, I think most of us would be very much in favor of. We need to get back together with more people in the country. It'll be good for the economy, but for real estate markets.

Speaker #3: So I think most of us want to shuttle or seriously lower the amount of illegal immigrants or shutter completely. But legal immigrants have been most of us would be very much in favor of when we need to get our act together and let these people in the country.

Speaker #3: It'll be good for the economy and good for real estate markets.

Jade Rahmani: Thank you very much. Just on the earnings path to covering the dividend, now, over what time frame is reasonable to expect? Is it your expectation that by Q4 of this year, DE will be in line to potentially greater than the dividend? Are there any outsized gains you're expecting in 2026?

Speaker #4: Thank you very much. Just on the earnings path to covering the dividend, over what timeframe is reasonable to expect? Is it your expectation that by the fourth quarter of this year, DE will be in line to potentially greater than the dividend?

Speaker #4: And are there any outsized gains you're expecting in 2026?

Speaker #2: Barry, you want to start?

Barry Sternlicht: Barry, you want to start? So sorry, I'm on an airplane while I took this call, so I muted it. I think you'll see us get a little better every quarter. We have a lot of things. It's hard to say because there are some things we're considering. I mentioned turning on the non-accrual loans that we're still evaluating. We have some really good things in the pipe, but we have to get them done. I'd say that, you know, again, if you take out the non-cash loss of ATE, which is accounted for differently on some of the five years, but $0.12 better. We have the earnings power. We have it anytime we want it. We can just sell off assets in our multifamily.

Speaker #3: Oh, sorry. Sorry. I'm on an airplane while I do this call. So I muted it. I think you'll see us get a little better every quarter.

Speaker #3: We have a lot of things. It's hard to say because there are some things we're considering I mentioned turning on auto coolant loans that we're still evaluating.

Speaker #3: And so we have some really good things in the pipe, but we have to get them done. So, I'd say that again, if you take out the non-cash loss of the DE, which is accounted for differently on some of the five years.

Speaker #3: So 5, 12 cents better. We have the earnings power. We have it anytime we want it. We can just sell us assets in our multi-book.

Barry Sternlicht: There are 56 of them, Jeff? Is that right? Yep. Do you believe me, Jeff? No, I know. You know, we're, like I said, we're playing long ball, and the asset's great and contributing meaningfully and should have virtually no real serious competition. I have to say, if you don't know how hard it is to build affordable housing in this country, it is ridiculous. We're in the business. I sort of entered it from the equity side and with all the, what I'll call the grifters along the way, that you pay off the consultants, stacks of grants you need, and the not-for-profit you have to get involved. It costs almost twice as much now to build an affordable building as a market-rate building.

Speaker #3: There are 56 of them, Jeff. Did you hear that? Did you leave me, Jeff?

Speaker #2: No, I know.

Speaker #3: We're just trying to, like I said, we're playing long ball. And if the assets are great and contributing meaningfully and should have virtually no real serious competition—it's, I have to say, if you don't know how hard it is to build affordable housing in this country, it is ridiculous.

Speaker #3: And we're in the business. I sort of entered it in the equity side. And with all the, but I'll call it the grifters, along the way that you pay off the consultants.

Speaker #3: Stacks of grants you need and the not-for-profits you have to get involved. It costs almost twice as much now to build affordable building as a market-rate building.

Speaker #3: So the way to do these is not to turn structure. You basically should build a market-rate apartment and then just donate it to a not-for-profit.

Barry Sternlicht: The way to do these is not the current structure. You basically should build a market-rate apartment and then just donate it to a not-for-profit, and we'd have more affordable housing. It was an eye-opening experience for me. And it takes, you know, 14 different grants from 13 different associations, then you have to do tax-credit equity. It's quite a weird business, and it doesn't really work very well. They need to do something about this, they should trash the whole structure and try something else, because we need affordable housing in all these markets, we have it done. There's sedation done. It's, you know, Miami, where I live, is the most unaffordable city in the United States. Half the population makes less than $50,000 a year. Occupancy in affordable housing is 99.5%.

Speaker #3: And we'd have more affordable housing. It was an eye-opening experience for me. And it takes 14 different grants from 13 different associations. Then you have to do the tax-graded equity.

Speaker #3: It's quite a weird business. And it doesn't really work very well. They need to do something about this, but they should trash the whole structure and try something else.

Speaker #3: Because we need affordable housing in all these markets that we haven't done. They should not. So, Miami, where I live, is the most unaffordable city in the United States.

Speaker #3: Half the population makes less than $50,000 a year. Occupancy in affordable housing is 99.5%. And don't remember, affordable housing rents never go down. It's not going down legally.

Barry Sternlicht: Don't remember, affordable housing rents never go down. They cannot go down anyway. What we're finding, though, is that the calculation of the rent growth is strong, but our ability to pass it on gets a little tough sometimes because, you know, you feel bad with people have nowhere to go. It's a very odd corner of the world in real estate, but I think we're the nation's largest affordable housing owner. I think it's 62,000 units across our portfolio. It's a fascinating business. And we look at markets where affordable rents have approached market rents, which like Austin, Texas, you can't raise rents where people just move out. In Orlando and Tampa, where its properties were, as I mentioned, 30% below market rents.

Speaker #3: So what we're finding, though, is that the calculation of the rent growth is strong, but our ability to pass it on gets a little tough sometimes because you feel bad with the people who have nowhere to go.

Speaker #3: So it's a very odd corner of the world in real estate that I think we're the late nation's largest affordable housing owner. I think we're 62,000 units across our portfolio.

Speaker #3: So it's a fascinating business. And you can and we look at markets where affordable rents have approached market rents, which is like Austin, Texas.

Speaker #3: So you can't raise rents for people to just move out. But in Orlando and Tampa, where the redowns of properties were, as I mentioned, 40% below market rents.

Speaker #3: So we're pretty protective and got good runway. And they're also high-cost cities for those who need high-cost cities by the federal government. So we always wind up with lower the rents that I think what's the number?

Barry Sternlicht: We're pretty protected and we've got good runway. They're also high-cost cities, designated high-cost cities by the federal government. We always wind up with, rollover rents that, I think, what's the number, you know, that rolled over from 2025 into 2026, that we can't take last year?

Speaker #3: That rolled over from 2000 and 25 into two trials in 26. But we can't

Speaker #4: Yeah. It's about 9%, Barry, that's carryover.

Rina Paniry: Yeah, it's about 9%, Barry. That's carryover.

Speaker #3: I mean, 9% rent growth. So it would allow us to take, like, 8 or 9 and 10 individual markets, and then the rest of it.

Barry Sternlicht: I mean, 9% rent growth. It would allow us to take, like, 8 or 9 or 10 in individual markets, then the rest of it. The calculation in Orlando, I think last year, was 15% rent growth for growers. They wouldn't let us pass it on, we take 5 or 6 points in the next year. As I said, it's the gift that keeps on giving. When we bought those, you know, I think you know me, I said, I want to buy things in the REIT that we'll never have to sell, and that I want my kids' estates to have, their grandkids, and their kids. That is that book. It's a shame to sell it does have. We have no equity in the portfolio.

Speaker #3: The calculation in Orlando, I think last year was 15% rent growth they gave us. They wouldn't let us pass it on, but we take 5 or 6 points in the next year.

Speaker #3: So it's like I said, it's the gift that keeps on giving. And when we bought those, I think you know me, I said, 'I want to buy things in the REIT that we'll never have to sell.' And that I want my kids' estates to have, and their grandkids, and their kids, and that is that book.

Speaker #3: It's a shame to sell it, but it does have. We have no equity in the portfolio. We've refinanced all of our equity. That was just another two or three, and everybody now is out.

Barry Sternlicht: We have, we've refinanced all of our equity, which is another $200 million or $300 million out, negative basis. We have a $2 billion gain, something like that. That's even the material on an equity basis.

Speaker #3: Negative basis. And we have a $2 billion gain, something like that. So that's even material on equity basis. One and a half.

Rina Paniry: Yeah.

Barry Sternlicht: 1.5.

Speaker #2: But one and a half, Barry.

Jeffrey DiModica: About 1.5, Barry.

Speaker #3: Yeah. Okay. Well, there we go. Okay.

Barry Sternlicht: Yeah. Okay, well, there we go.

Speaker #2: Thanks, Barry. Yeah. So Jade, I think the earnings trend is improving. I think Barry just said our Woodstock, our billion and a half of Woodstock gains give us unique staying power.

Jeffrey DiModica: Thanks, Barry. Yeah, Jada, I think the earnings trend is improving. I think as Barry just said, our Woodstar, a billion and a half of Woodstar gains give us unique staying power. We'll continue to work the year to maximize shareholder value. You know, to Barry's other point, I made it in my opening remarks. I don't want it to be lost on people. The equity REITs are doing really well. Owning real estate, long-term assets, like Barry said, has been a pretty good trade. For whatever reason, our stock is not trading very well. We are 24% owned real estate with long duration, large gains.

Speaker #2: And we'll continue to work the year to maximize shareholder value to various other points. And I made it in my opening remarks, but I don't want it to be lost on people.

Speaker #2: The equity REITs are doing really well. Owning real estate, long-term assets like Barry said, has been a pretty good trade. For whatever reason, our stock is not trading very well, but we are 24% owned real estate with long duration and large gains.

Speaker #2: And.

Barry Sternlicht: can I,

Speaker #1: Can I just interrupt? This is something we didn't say, and I think we should say. Our triple net lease business in the market would be divided I think Jeff said 6%, 6% dividend yield.

Jeffrey DiModica: Go ahead, Barry.

Barry Sternlicht: Sorry to interrupt. This is something that we didn't say, and I think we should say. You know, our triple net lease business, in the market, would be valued at, I think, Jeff said, you know, 6%, 6% dividend yields. That's the comps, and you take the high end, there's some trading even tighter than that. If it gets to scale and we're not getting the performance of our stock, and they continue to treat us like a junk credit, we'll spin it out. Because, you know, we have a big gain in that business, or we'll have a big gain in the business. It's obvious to us that a 6% dividend stream trading in a 10.8% dividend stock is ridiculous. We're not idiots.

Speaker #1: That's the comps that you take the high end. There's some trade even tighter than that. So if it gets to scale and we're not getting the performance of our stock and it continues to treat us like a junk credit, we'll spin it out because we have a big gain in that business.

Speaker #1: We'll have a big gain in the business. And it's obvious to us that a 6% dividend stream trading in a 10.8% dividend stock is ridiculous.

Speaker #1: So we're not idiots. I mean, but we'll grow the book, and then we'll spin it out and create like we did long ago when we spun out our residential housing business and started Waypoint.

Barry Sternlicht: I mean, we'll grow the book, we'll spin it out and create, like we did long ago, when we spun out our residential housing business and created Star Waypoint. We'll do the same thing. I mean, we have to get recognized for the value of this portfolio and the stability of the income stream. You know, our credit markets actually appreciate it, we have the tightest spreads in our sector, the equity markets don't. I think it's confusion over some of the different accounting methods between the different firms in our space. I think, you know, some are, they don't have diversification, they don't have the kind of company we put together, like, and by purpose. We are, we continue to look at other things, too.

Speaker #1: We'll do the same thing. I mean, we have to get recognized for the value of the portfolio. And the stability of the income stream.

Speaker #1: And our credit markets actually appreciate it, and we have the tightest spreads in our sector. But the equity markets don't. So—and I think it's confusion over some of the different accounting methods between the different firms in our space.

Speaker #1: And also, I think some of they don't have diversification. They don't have the kind of company we put together by purpose. We continue to look at other things too.

Speaker #1: So Sean just lost a very large deal. Well, maybe he lost it. We're hoping to get it back. But there are other things that we have up our sleeve, which could deploy capital really rapidly and get us a earnings power we need faster.

Barry Sternlicht: Sean just lost a very large deal. Well, maybe he lost it. We're hoping to get it back. You know, there are other things that we have up our sleeve, which could deploy capital really rapidly and get us the earnings power we need faster. That's why it's hard to answer that question that was asked earlier.

Speaker #1: So that's why it's hard to answer that question that was asked earlier.

Speaker #2: Thank you, operator. Are there any more in the queue?

Jeffrey DiModica: Thank you, operator. Are there any more in the queue?

David Brown: There are no further questions at this time.

Speaker #5: There are no further questions at this time.

Operator: There are no further questions at this time.

Speaker #2: Thank you, Barry. Any final remarks? Thank you.

Jeffrey DiModica: Thank you, Barry. Any further remarks?

Barry Sternlicht: Thank you, everyone.

Speaker #1: Nope. Thanks, everyone. And we'll be with you next quarter.

Jeffrey DiModica: Thank you.

Barry Sternlicht: Nope. Thanks, everyone, and we'll be with you next quarter.

Speaker #5: Thank you. And this concludes today's conference. And you may disconnect your lines at this time. Thank you for your participation. Have a great day.

David Brown: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.

Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.

Q4 2025 Starwood Property Trust Inc Earnings Call

Request a DemoDemo

STWD

Starwood Property Trust

Earnings