Starwood (STWD) Q1 2026 Earnings Transcript

Motley Fool Transcribing, The Motley Fool Fri, May 8, 2026 at 10:40 PM GMT+7 37 min read Image source: The Motley Fool. Chairman & Chief Executive Officer — Barry Stuart Sternlicht Director of Investor Relations — Zachary H. Tanenbaum Rina Paniry: Thank you, Zach, and good morning, everyone. Today, we reported distributable earnings of $147 million, or $0.39 per share, for the first quarter. Our results were impacted by continued higher-than-normal cash balances, the resolution of nonperforming assets, and the ongoing optimization of our new net lease cylinder, adjusted for which DE would have been $0.47. I will provide more detail for these items within my business segment discussion. As we continue on our stated task to grow our investment base, resolve our nonperforming assets, and optimize our new net lease platform, our underlying earnings power continues to build. In the quarter, we deployed $2.5 billion of capital across our businesses, including $1.5 billion in commercial lending, $597 million in infrastructure lending, and $128 million in net lease, bringing total undepreciated assets to a record $31.7 billion at quarter end. We deployed another $1.5 billion after the quarter, 70% of which was in commercial lending. Our company is diverse, with commercial lending comprising just 52% of our investment base and owned property increasing to 25% this quarter. We are really not a typical mortgage REIT. I will now take you through our individual segment results, beginning with commercial and residential lending, which contributed DE of $172 million to the quarter, or $0.45 per share. In commercial lending, we funded $894 million of our $1.5 billion in loan originations along with another $278 million of preexisting loan commitments. After factoring in repayments of $835 million, our funded loan portfolio grew to $16.7 billion. This does not include $1 billion of new originations after quarter end, which brings our loan portfolio to its highest level since inception, or $2.3 billion of unfunded commitments on previously closed loans that will generate future earnings when funded. I mentioned earlier that our run-rate earnings were impacted by our resolution of nonperforming assets. During the quarter, we sold a multifamily asset in Conyers, Georgia that was foreclosed in February. We repositioned the asset during our one-year hold period, cutting delinquency in half from 16% to 8% and increasing occupancy from 86% to 91%. After a broad marketing campaign and over 20 qualified bids, we sold the asset for a $5 million DE loss and a small GAAP gain, reflecting the adequacy of the GAAP reserves we previously recorded on this asset. We foreclosed on three five-rated nonaccrual loans in the quarter, the first of which was a $248 million mixed-use property in Dallas, consisting equally of multifamily and hospitality. The second was a $71 million multifamily in Phoenix and the third was a $28 million multifamily in Dallas. We obtained independent third-party appraisals for all three assets, with the mixed-use property that represented two-thirds of this quarter s foreclosures appraising 10% above our basis. The other two assets carried a combined $25 million of specific CECL reserves. The weighted average risk rating on our loan portfolio improved to 2.9 this quarter versus last quarter’s 3.0. This improvement is net of two small multifamily loans that were downgraded from a 3 to a 4 in the quarter, which Jeff will discuss. We ended the quarter with $676 million of reserves, $455 million in CECL, and $221 million in REO. Together, these translate to $1.82 per share of book value, which is reflected in today’s undepreciated book value of $18.97. Turning to residential lending, our on-balance sheet loan portfolio ended the quarter at $2.2 billion, down from $2.3 billion last quarter due to repayments of $38 million and a $21 million negative mark-to-market adjustment on the portfolio that was offset by the $31 million positive mark-to-market we recorded last quarter. Our retained RMBS portfolio remained relatively steady at $400 million. Next is infrastructure lending, which contributed DE of $22 million, or $0.06 per share, to the quarter. Our strong investing pace continued with $597 million of new loan commitments, of which $567 million was funded. After factoring in repayments of $320 million, our portfolio increased to a record $3.2 billion. Nearly 70% of this quarter’s commitments were self-originated, bringing our total self-origination volume to $950 million. Also in the quarter, we completed our seventh actively managed infrastructure CLO, a $600 million transaction at a record-low spread of SOFR plus 1.68%. We used a portion of the proceeds to repay CLO 3 for $330 million. CLOs now represent 75% of our infrastructure debt, providing a durable, nonrecourse, non-mark-to-market financing. Turning to our property segment, we recognized $29 million of DE, or $0.08 per share, across all three major por

Starwood (STWD) Q1 2026 Earnings Transcript

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Starwood (STWD) Q1 2026 Earnings Transcript

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