Thank you, operator. Good morning and 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. 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.

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

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. 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 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, 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. 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 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. 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 14 cents 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. DE adjusted for these timing issues and the 12-cent 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, and as we continue on our path to resolving our nonaccrual 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. $2.5 billion of our deployment was in the fourth quarter, 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 46 cents per share.

In commercial lending, we originated $1.7 billion of loans, of which we funded $1.2 billion, along with $223 million of preexisting 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.

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.

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.

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. Jeff will go into more detail on our credit migration and asset management initiatives.

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 7 cents 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. 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 financing now constitutes 75% of our infrastructure debt.

In our property segment, we recognized $49 million of DE or 13 cents 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. 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. 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 12 cents 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.

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.

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. 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. 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.

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. 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.

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.

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. 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 accretive 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.

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're 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 the fourth quarter alone.

This was our second largest investing year in our 16-year history. 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 Rina mentioned. 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. 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 were unable to continue to fund through resolution.

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 square feet of leasing finalized during the fourth quarter, the highest quarterly leasing volume of the year. 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%. 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.

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 nonaccrual 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. 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. 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. 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. 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.

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 properties.

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 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.

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.

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-to-values 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 seventh CLO, 75% of our SIFF loans now benefit from term non-mark-to-market financing, 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. 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 rates.

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. 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.

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. Looking ahead to 2026 and beyond, resolving our nonaccrual and REO, or increasing originations pace or volume, would allow us to earn more than the $1.95 we earned this year, excluding temporary items that Rina noted.

With that, I will turn the call to Barry.

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 going to 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. 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 rated one of the best conduits in the country. 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 business, which has been somewhat dormant, gained in value over the year as spreads and rates declined.

Those are all really good news. I had task Rina telling me, 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. 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 noncash losses, and they are used differently by some of our peers, but if you actually include them, because they're not noncash, 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, and it's really the nature of the composition of our business lines.

Then, with the Fundamental investment we made in the third quarter of the year, that business, because of its stability and the duration of that cash flows, we lever 3 to 1. 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 underlevered, and we have a lot of cash trapped in the business.

We estimate the cash drag is something like 7 cents for the year. You add them combined, it's almost 20 cents of earnings, I think it's 12, 7, and something else, and Rina can give you the specifics, and that will reliably cover our dividend.

Then we look at our nonaccrual book, which some may look as a problem, and we kind of do, but we also look at 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 is not valuable. 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. Once we have control, we can re-tenant it, reposition it, and, in fact, then sell it.

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 as if it were your capital is our own, and we've chosen to do what's best for ourselves over the long run.

A prime example would be an office building that was bought by a household-named 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 underway.

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. That's far more attractive to us than just dumping it and then moving on.

You're going to see these assets, because we are a real estate player at heart, you're going to see us take back assets, reposition them, and then sell them. Jeff mentioned in our 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 of rents as the market had 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. 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, it's almost I think $1.9 billion. Our triple net lease business, which was dilutive, I think it was 6 cents in the year, should turn accretive next year, and we love that business, 15-year-plus leases, never a default ever had before we actually underwrote it with defaults, but we've never had a default, and they're just getting to scale now with our capital.

We've also found that with our expertise in capital markets, we've materially improved their financing, and so our ROEs are rising rapidly. We just have a lot of overhead on the scale of the business it is today, so 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, but we haven't netted those losses against the assets directly.

We continue to carry them 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.

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.

The decreases in supply in the multifamily market, dropping 60%, 70%, eventually we will see record absorptions of apartments in 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, when 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. I know the administration doesn't like to talk about a K economy, but 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, midscale, lower scale, economy, everything was down.

Also cost to build, replacement costs continue 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 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 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, our transaction volumes will pick up, and 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, is usually a safe haven during times of tumult in the marketplace. Overall, I think we had a solid year and we positioned ourselves really well for the next couple of years.

We're excited for their team. I also think we're going to make 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, all of which are supported by the REIT, 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.

With that, I thank the team and thank you for your support, and we'll take your questions.

Hi, good morning. 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?

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. That would be the first time.

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. It's nothing new.

We are obviously sitting on a little bit more liquidity after all of the cash-out refinancings and raises that we were able to do last year, 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.

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.

In 2021, you had high $600s billion of transactions in the market. You've had 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. 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. I think we have a cost of funds advantage.

Also, being the biggest, we have a 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.

We know we have to originate more loans and thoughtfully work out of the REOs and nonaccruals to get back to the run rate that we keep talking about by late '26 where we're covering the dividend.

Got it. I guess, what is your expectation for credit migration near term?

It sounds like you're playing the long game, which we appreciate, but I guess that also means that we'll continue to see these sort of one-off-type migrations.

Yeah. Barry, I'll let you go after.

Maybe I'll start. On migration, there are people who sell things right away.

That is a business plan. There are people like us.

We don't have a business plan for what we do with a credit and putting the pig through the python. 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, and then what's the present value of the cash we would get back over the time that we would do it. Then 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, etc., and 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 going to be a 20% return private equity guy who's going to buy from us at a 10% to 12% cost of capital, 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 assets, we have a lower cost of capital, we can borrow against the assets significantly cheaper 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 forced 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 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 fallout, it would have been $430 million.

We have a sheet, and we look quarterly at what we expect to resolve. Our goal is to resolve most of a billion dollars this year.

If we execute on that, great. 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.

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.

It's all very bespoke, but we feel like we really have our arms around where the potential problems are going to be.

Got it. Thank you.

Jeff,

should I add a few things? Can you hear me okay?

Yeah. Go ahead, Barry.

Yeah. I hate to say we don't have a plan.

We have business plans for individual assets. It's been pretty remarkable We had one asset that the cap stack was $1 billion, the loan was $400 million, and the borrower walked.

Obviously, tenants want to lease, they know the building's in trouble, they're not going to go in the building if they want to pay for a TI, the borrower has absolutely zero incentive to do anything. In multiple cases in our pipeline, we expect that believe it or not, supposed to be leasing those in Florida.

If we're going to put the equity in for the TI, we want to get the asset back, they want to exercise their positions. We used to play hardball, we play fair ball, and we try to work with our borrowers if we can.

I think the multi business is particularly interesting. It's one of these businesses you all remember long ago we started iStar, but what's called Star Financial, changed its name to iStar, and wound up taking back a whole bunch of stuff in the PSC, and turned themselves into a quasi-equity REIT, made a fortune.

Obviously, the best thing we can do in a loan is get our money back, and that's primarily our business and our stack holders, and so we're happy to play in that ballgame. I'm talking about the real estate part.

Long term, you make more money owning the asset, assuming it's comfortable in a great asset, although we are looking at what we can recycle once we stabilize the asset. I'd say, for the most part, it's mostly good news.

We get this asset back, we find that there's rates 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. Our trends don't march to our quarterly rhythms, and our borrowers don't give up the keys always willingly.

In many cases, they do, and work collaboratively, but the exceptions, they might move slower. I think people are surprised.

I think in the real estate world today, I think the borrowers are surprised at the slow pace in the recovery of this also multifamily market. While you have some positive coastlines and maybe some of the coastal cities that saw no supply, but you haven't seen the green shoots you look at the carrier's report to every public company, maybe save one, where the growth rate of the Sunbelt markets is not great, the rental growth is not great.

We're seeing positive renewals and negative on new leases, pretty much across the board, and maybe a +1 or -1 or +2 or -2, but it's not robust, and expenses continue to march higher. You have stressed P&Ls.

On the other hand, when you look at our attachment points, where were our loans as opposed to who built it, or bought it, in many cases, our loans are substantially under the sunken capital into these multi. I'm kind of happy to get it back.

We are able to move them, and so if we move probably half a dozen assets, we have in our pipeline in REO today. I'm mixed emotions.

We really like the market. The Sunbelt may be overbuilt, but it's where all the jobs are.

It's where all the companies are moving their headquarters, factories are being built, and it's where the cost of living is generally less. It's where the right-to-work states.

They're attractive states and attractive markets for the reshoring of industrial base in the country. When you know there's a new factory going up in a year and a half, it takes 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 Jeff said that the opportunity fund is going to buy the asset, and they're not doing anything different than what we do in other part of our world.

I always tell Jeff and Dan Tartakovsky, who runs real estate, we'll buy it. We don't do that, but we would.

In any case, we already own it, let's just keep it in the REIT. If you don't want to keep it, we'll just hold it.

I think it's sloppy for you because we're uniform in our space. If we really thought we had an issue, we're not worried, as Rina said, when you take out the noncash losses, and you take out some of the cash drag that we know we can put them to place, and we're pretty confident Fundamental will reach it's very leveraged with overhead base, and so once it reaches critical mass, and all we want that the body or a dollar to overhead, it becomes pretty positive and reliable and recurring and stable, which is exactly the chips that we use to the public in 2009, consistent, reliable.

We've had some potholes, but you're on a playing field. You've had this kind of destruction in our markets, doing a pandemic in office properties, it's inevitable.

I'm really proud of the team the way we're negotiating. I know it's extremely frustrating.

I stepped on some of these REO assets and we're looking at whether we should turn accruals back on in some of these cases, because the performance has improved. It's a mishmash.

It's unfortunately real hard to predict.

Thanks.

good morning, all, and thanks for taking the questions. I wanted to talk about the residential portfolio and then the infra book.

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?

Who are your true competitors, and how big can that book get over time? Thanks.

Thanks, Gabe. Hey, Barry, again, I'll start unless you want to start.

On your first question, on resi, resi performance has been great. I think we had a markdown in our GAAP book value of $247 million back in '22 when the rate change happened.

We are significantly below that today. I think it's 100, and after hedges, it might be a little bit higher than that, but we've got back a significant portion of that by holding on.

It's the same strategy that we've used. Also, the thing that would surprise you is because we have a lot of legacy RMBS and 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, two 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 January 1st 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. They get great insurance treatment, and of 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 dollar price to par or 101 or 102, rates are going to be the other piece.

You mentioned that. Lower rates help us because it increases CPRs.

We were running at 5 or 6 CPR in our non-QM book the last couple years. 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. 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, but if I'm betting on that and betting on rates going lower, that will certainly help that book. As 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 writedown back is by reducing that hedge a bit and being correct on rates going lower.

Not something we historically do. I think we'll wait and see.

You create a distributable earnings loss when you take that GAAP book value hit into earnings. We like the assets, they're returning 11%, 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?

Not really. Not that we want to go back into adding volume there.

We're going to get back into the business. It was a good business, the team in place, performing well, capable.

We just have to make the numbers work. If we can, we would go back and playing that back as well.

It was one of the reasons we have a diversified business model, when some are unavailable, you have plenty to put out like the verticals. We should do the introduction to Sean, because he's precisely running for that business to have another material lending business, also.

Sean, all yours. Yeah.

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.

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, 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. On the infrastructure side, you asked about the potential size of the market.

I'm going to 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.

Sure. I think the best way to contextualize the opportunity is to just talk about energy consumption in the United States, and 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. 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 5 years.

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. You asked about our competitors.

I think it's similar to Dennis's business in CRE lending. 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 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, Barings Asset Management, competition is growing a little bit. I think the tailwinds on demand for energy are significant and form a much larger opportunity set for us over time.

Thank you, guys. That's helpful.

Thanks, Gabe.

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. However, these could have been primarily problems you already knew about.

The new problems seem to be not in office. I think that everyone's combed over the office exposure quite thoroughly, but in multifamily, where, as Barry noted, rents remain soft, and also industrial.

Could you just comment on your overall view on credit trends?

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.

There are always some idiosyncratic things that might happen in the portfolio. As you mentioned, 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 to 5 because the sponsor stepped away.

One was a studio deal, not something that was really in our office purview. 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, 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.

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, 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?

No, I think real estate is going to catch a bid. I mentioned that whenever the equity markets rock and shake, people come back to the property sector, to private sector, largest asset class in the world.

We operate in Europe, US, Australia, and, in general, the markets are better. We're all confused, I think, is a real idea.

Beside being terrified, it's very common to talk about the world and its AI tumult and all the question marks, and the fear, and the anxiety. Yet, if you see the markets, they're behaving pretty well.

New York City's office market, even despite non-guidelines, has been pretty strong. Housing market remains very strong.

The West Coast continues to perform pretty well. I think the political class and political interaction is something to watch.

I think you have to be careful about both the union costs and assets you want lend against and also cities like, of course, New York City, having 19% property taxes, nearly 10%, that takes the value of an office building down materially, if they can actually do it. Woodcrest is not that big a portfolio in the city, and who avoided most of those loans, but that's going to be a earth-shaking if these asked to that and how it goes through, and then you'll see it's an interesting thing, because the landlord, since sometimes the tenant will pick up the real estate taxes and sometimes they don't, usually.

We do on certainly on the rent roll, on the roll-on with other tenants and all. It's pretty, I don't know, but it's a continued, this kind of uncertainty, it's a strange world, but in general, we definitely have tailwinds.

The tailwinds are clear. We see it in our special servicing because some borrowers are just giving up.

They planned for things to get better, sail out to '25, '25 has passed, the interest fell, but the NOI didn't go up. What is patterns that kept rates up or emigration, 2.5 million people leaving the United States last year, lowest growth, actually negative growth in the US population for the first time in, I think, ever, 150 years, maybe ever, we have to chat that one.

That's definitely affected the apartment markets, with the no-spouse bills, with the deportations, with the lack of not only people emigrating voluntarily, but used to get a million or so legal immigrants a year, and the US, as you can see in national travel, is not the most hospitable place at the moment, for going for betterment people's exceptions, and so they're not traveling here and in the world on people leaving the country, it was definitely a drop. I think some of the weakness in GDP is the fact that there was no contribution from immigration.

I think most of us wanted to shovel towards serious lower the amount of illegal immigrants or shut it completely, but the legal immigrants have been welcomed and always have been very much in favor of, and when you get our act together, they'll let these people in the country, will be good for the economy and for real estate markets.

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? Are there any outsized gains you're expecting in 2026?

Barry, you want to start?

Oh, sorry, I'm on a airplane, while on a 2:00 call, all right. Unmuted it.

I think you'll see us get a little bit better every quarter. [laughter] I think it's hard to say because there are some things we're considering, like turning on nonaccrual loans that we're still evaluating, and we have some really good things in the pipe, but we have to get them done.

I'd say that, again, if you take out the noncash loss of DE, which is accounted for differently on some of the peers, but 12 cents better, we have the earnings power. We have it anytime we want it.

We can sell off assets in our multi book. There are 56 of them, Jeff?

Jeff?

Yep.

You hear me, Jeff? [laughter]

No, no, I'm...

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

And, and and we're in the business. I sort of entered it from the equity side and, with all the what I'll call the drifters along the way that you pay off, the consultants, tax brand treaty, and the 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.

The way to do these is not to turn structure, you basic should build a market-rate apartment and then, donate it to a not-for-profit, [laughter] and we'd have more affordable housing. It's was an eye-opening experience for me.

And, it takes, 14 different grants from 13 different associations, then you have to do the tax-credited equity. It's quite a weird business.

It doesn't really work very well. They need to do something about this, but they they should trash the whole structure and try something else, because we need affordable housing in all these markets and we have done this.

Solution done. It's, Miami, where where I live, it's 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%, and don't remember, affordable housing rents never go down.

They've not gone down in 11 years. So, what we're finding, though, is that the calculation of the rent growth is is strong, but our ability to pass it on gets a little tough sometimes, because, you feel bad, with the people have nowhere to go.

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

It's a it's a fascinating, business. And, you can and and we look at markets where affordable rents have approached market rents, which like Austin, Texas, you can't raise rents because people just move out.

In Orlando and Tampa, where the REIT owns its properties, we're, as I mentioned, 40% below market rents. We're we're pretty protected, and we have good runway.

They're also high-cost cities, they're designated high-cost cities by the federal government. We always wind up with roll-over length that, but I think what's the number, that rolled over from 2025 into 2026, rolling rent, people can take last year?

It's about 9%, Barry, that carryover.

9%. Right.

It allows us to take 8 or 9 or 10 in individual markets, and then the rest of it, the calculation of Orlando I think last year was 15% rent growth for affordable. They wouldn't let us pass it on, but we take 5 or 6 points in the next year.

As I said, it's the gift that keeps on giving. When we bought them, 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 grandchildren and their children.

That is that book. It's a shame to sell it, but we have no equity in the portfolio.

We've refinanced all our equity out, which is another $2 billion or $3 billion out, negative basis. We have a $2 billion gain, something like that.

That's even

material to our equity base. About 1.5.

Yeah. 1.5.

But 1.5, Barry.

Yeah. There we go.

Thanks, Barry. Yeah.

Jade, I think the earnings trend is improving. I think Barry just said our billion and a half of Woodstar gains give us unique staying power, and we'll continue to work the year to maximize shareholder value.

To Barry's other point, and I made it in my opening remarks, but 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, but we are 24% owned real estate with long duration and large gains, and it's the right... Can I

can I, Jeff, hey, can

Go ahead.

interrupt? There's something that we didn't say, and I think we should say.

Our triple net lease business, in the market would be valued, I think Jeff mentioned, 6%, 6% dividend yields. That's the comps.

If you take the high end, there's some trading even tighter than that. If it gets to scale, and when our when not getting the performance of our stock, and they continue to treat us like a junk credit, we'll spin it out.

Because, it's we have a big gain in that business. We'll have a big gain in the business, and we're it's obvious to us that a 6% dividend stream trading at a 10.8% dividend stock is ridiculous.

We're not idiots. We'll we'll grow the book, and then we'll spin it out, and create like we did long ago when we spun out our single-family housing business and created Starwood Waypoint.

We'll do the same thing. 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 we have the tightest spreads in our sector, but the equity markets don't.

I think it's confusion over some of the different accounting methods between the different firms in our space. Also I think, someone they don't have diversification, they don't have they don't have the kind of company we've put together by by purpose.

We we are continue to look at other things, too. Sean, Sean's just lost a very large deal.

Maybe he lost it. We're we're hoping to get it back.

But, there are other things that we have up our sleeve [laughter] which could deploy capital really rapidly and get us to the earnings power we need faster. That's why it's hard to answer that question that was asked earlier.

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

Thank you, Barry, and you have any final remarks?

Nope, thanks, everyone. We'll be with you next quarter.

Thank you.