Starwood Property Trust (STWD) 6 Aug 242024 Q2 Earnings call transcript

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

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

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

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

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

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

the to With now will that, Rina. over I call turn

Zach, everyone. and morning, you, Thank good

was net per $XX per share. or investments quarter. earnings to quarter, Across DE This this million million committed GAAP new businesses, we of $X.XX or share. of $XXX we income $X.XX reported distributable million or $XXX

As investing other our to commercial makes our our of to of businesses now lending, in up a which the diversity assets. than testament XX% XX% platform, of was

this $XXX which to commercial residential the an lending, will $XXX quarter million and loans, and begin we originated per million of loan of funded commercial share. commitments. million lending, DE or contributed with on pre-existing morning $X.XX of I $XXX million additional $XXX which we In

of We quarter a the another of for nearly totaled were office. in $XXX July, for year-to-date which $X.X Repayments total $XXX half had billion. of repayments million, million

loan X.X of of On our quarter quarter. nearly $XX.X billion of continue the to X.X, rating a subject average last up billion beginning since equity last fresh of credit, with the assets, of majority from year. our $X borrowers vast book weighted support their The ended investing the risk

to greater of rate in detail, in addition, Fort $XX loan was other X and in $XX loans a that multifamily X was multifamily in a nonaccrual a One X. placed million on a X, the to X downgraded a quarter. loan the a Phoenix which downgraded from we in was either a have which from million cover Worth, X.X%, will including interest. In place, rating interest of XX% base rate average changes of our performing fixed our via guarantees Jeff or protection loans reserves, some rate risk have form caps, of an rate

on rated As previously X, we bonds. X foreclosed quarter, we signaled last

multifamily. million $XXX are on converting office senior a that to was a in first The vacant D.C. Washington, loan building we mortgage

purposes. have is process to specific resulted in for complete. CECL financial Property reserve expect the our it recover of we appraisal a Because redevelopment we this reporting segment the our transferred $X.X to begun we asset, once basis million, the in for of conversion Although excess

on in which a our valued loan second The Nashville. appraisal connection and the obtained an We was at $XX multifamily basis. a asset in foreclosure, mortgage property the mezzanine million with first

recognized basis the loan carryover result, resulting a was As of at property impairment. the our with no

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

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

retained the $XXX repayments. cash portfolio quarter quarter Our RMBS with from million, slight decrease at ended by driven a last

rent of expect and quarter, continues will the property June, this I with allowed our to share you in housing This blended we began X.X% to from The see X so duration affordable fund, rate were last to we holdback out next HUD Florida portfolio's the $XX years the X.X% of discuss Next, DE implement asset. average will which per year. an just came floating maximum primarily level quarter. discussed a excluding contributed rolling remaining quarter, impact segment, to fixed earnings million majority or increases of these be partial our $X.XX implemented debt rent where which

securitizations million share quarter. DE $XX In per historic conduit, totaling priced completed quarter. the to purposes. July realized DE segment we servicing. This $X.XX and Turning that but June above are of treated as with or Starwood $XXX transactions priced Mortgage at due Capital, for contributed million in X tightening the settled our in past to spread practice, the investing in or profit Consistent margins levels for to

of contribute in to into future. active In special increased its earnings primarily servicing transfers billion COVID. our which was XX% over $X.X $X.X billion, since will our highest just portfolio the increase to LNR, servicer, servicing, level The due to

out increased foreclosed million $XX.X by quarter billion, on driven hospitality the property portfolio And asset $XX to that named assignments as obtained a a expect also in in Our [indiscernible] acquired $X.X our we recently on sell basis we of new near appraisal, thesis portfolio, of asset billion. nonperforming investment of original to our the with segment's future. CMBS a the in Consistent trust. this servicing we and loan a

million, million to Concluding and my contributed and billion. to of loans, funded pre-existing or lending, commitments. balance $X.XX new discussion an infrastructure which a million we million quarter. $XXX the of committed to portfolio per $XXX which of loan $X.X business of Repayments We segment the sales million is $XXX DE $XX of additional $XX bringing share totaled

and XX.X% During the our discuss weighted advance will of for CLO which more Jeff a quarter, X third rate, an average we coupon [ completed detail. infrastructure with $XXX plus in XX ] SOFR million,

finally, And this capitalization. I morning, will our liquidity address and

the our $XXX basis [ facility, successfully loan by ]. reducing spread quarter, This to term repriced points SOFR plus million XXXX B we XX X XX

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

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

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

our by X supporting the quarter, track this agencies. conditions challenging space, leverage credit as to our key were rating. all ratings profile, again wanted recognized also record once mention rating I elements they earnings Despite our CRE liquidity credit position, that collectively stable diversity, affirmed in and

And Award, in exemplifying finally, I financial would reporting we our like that Investor both eighth to and were years, excellence recognizes Care which communications and award transparent is to our the last mortgage in XX reporting. category. long-term awarded the just stakeholders the the Gold our receiving share REIT NAREIT time XXXX commitment This

be are for to by recognized We award. once honored NAREIT again this

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

Rina. Thanks,

XXth As cut market we're us diversified the the longest business, month, dividend. has built of our We to its never leverage anniversary we outperform cycle. standing our mortgage REIT group, and positioning post-GFC commercial of low regardless company who approach peer a only this

of return per Our more REIT and the index XX% mortgage is REIT equity year the higher than in double time. inception-to-date over than index, that

in the the unrealized credit DE over for valuation gain. for diversification Even in share our given per though and has $X us market this the partial have only sector, we best

I our dividend As ensure XX years shortly, a will ability, mortgage paying to discuss those provide a likely gains, net safety unique REIT are higher. aren't we significantly really anymore. which later,

improved XXX coverage which provide are The XX-year last March, rate relief, the compression very points basis as now SOFR rate point and credit both CRE we a basis good indicating in reduction Fed forward and ratios. service news by of XX for they cap both debt [indiscernible] funds is through spoke, since

rates up last support billion $X of we loan As have our like move our Rina billion since I equity continues. nearly that and assets When $XX.X book and CRE sponsors see typically contributed shared, borrowers aggressively, would step expect fresh more on this, their year.

like has on our other spoken our help is have sectors will book about of rate debt assets. will We which is office, U.S. which often of of assets move stabilize. X% X.X% hold, this hospitality, loans. XX classes in XX.X% and debt blended yield both XX our likely a a Should move mostly has are XX% XX% multifamily, across loans these But loans; this loan assets of yield asset which across rate our more and blended

expect the any I said we on own from have earnings beginning assets a We solid COVID that losses calls, that. our discount. still cycle taking this in opportunity didn't past hospitality we undercapitalized back that multifamily believe from to assets and we significant at borrowers And an as since have said book, of view

that unwind rents When the Fed net this focus hike. cover work be in slow low creating will debt from cycle, the academics of about home, write post office effective stubbornly service can't

to owned of that loan loan construction office We almost life as is our and our and big not only avoided immune that portfolio, have cycle loan enters office gains define chapters. allocation. XX% this from That the will U.S. as lean loans included won't as with of But XX% and science in our our the office in entirety assets property Seaport one Boston its on narrative only temptation largest us conversion, and note, stress. are U.S. District. final on into we office XXth I the are made

in to the loans report downgraded the to on quarter. downgrades, talk about want little we our briefly I With legacy

new on X new X-rated story similar all share and the and of same syndicator a X. our Our have loans are [indiscernible] X-rated X that loan sponsor

as As a more lenders, mistakes. from times to an equity syndicated our have the stress. we we, have been time in would who difficult learn should capital calling structures, industry, of tough of And are wary

have multifamily We fall downgraded will mostly forward. category. The be assets this going we into

forcing up, out lenders to undercapitalized underperformed upgrading a business money, ran of of rates to and sponsors and they soft their units rose creep in. lot step As vacancy plans,

what is this Fortunately, we do.

manager, we increased management at assets yields. XXX,XXX Our hold Capital we over [indiscernible] units, Group, these the and multifamily and back, manages will debt take sell Upon finish ultimately, stabilization, these have Starwood to new capital decide or assets. then whether to STWD renovations,

X is our in Texas are The subscription. one Phoenix and into small new loan all of new X-rated X fall the loans X-rated multi-loan a and in

Our well longer largest Dallas, support located an to told where near no Uptown, asset. the of would us very in X-rate new zone recently is office contribute capital sponsor they the

is of fall. As effective justify have and basis had story high net yesterday's rents at threat cost LCs TIs to in defaults due multi, syndicated to re-tenanting also, a office with the as the common hard

retenanting is show that in tenants Someone conviction and in and basis a energize to assets this better balance with market brokers willing to to and to the and like to invest strong in bring sheet well-located strength needs one. a step

the into opportunity allowed or convince business given we a I begin occupancy were [indiscernible], we market to this again project with asset plan stabilize move capital working is to location, an the they yield to believe deteriorate And partial inability through long forward. XX%, X.X%. that debt potentially great and to the to run, invest we'll in there in as team to conversion for and borrowers' to July. and Our fall The our visited the

in relatively a a leased XX% an evaluating small and tenant It in final that X sponsor is Should sponsor be million is stages, basis in will future, office early stabilization the with other debt stabilize yield loan to should that step the today. and away this on sponsors a and choose the But Dublin, Ireland the capital work a lease. rating have need not X.X% we executed, plans. $XX The we walk is help the single better to large to new produces but quarter on assets. portfolio the

developments major higher-risk assets as appropriate. share any As with our other we on will assets, these

to continues from XXXX. loans the the platform Electric levered we General business a Our since performer, on energy infrastructure be lending in returns great with purchased mid-teens made

XX% are CLO after returns our term, loan non-mark-to-market us earning third of with which these Importantly, financing. CLO, the our premium gives book pricing in market, financed we

have the continues LTVs shift Our energy continued as higher. to curve demand to fall

the Our The how since which business. much LTVs grid. results paid LTV power well of lowest to we above decline. this capacity week, to annual to PJM we power got the expectations, results which in Last continue provide are to are determines will excess power came bought the plants allow the auction,

revenue will REIT, in have XXXX. said, of XX% LNR, And tens our servicing which made special this provide of CMBS special millions increase conduit as the made in originations In our active has would dollars already Rina years. few in this of business saw all incremental alone, coming servicer, year quarter of a

to to expect we play continues outperform. out, continue cycle this the to servicer As

Moving segment. Property our to

$X have our created gains the years embedded We owned discussed Florida portfolio. the have X we approximately have low-income DE multifamily billion in we of

million. we and increases. reminder, inflation-based these of the formulaic cannot portfolio rent rent formulaic added this we $XXX mandated next quarter rate or will a holdback portfolio. owned X Holding have I that income increases in have increased XX% year's lower by value to $X.X Rina rents approximately As constant rent this discussed cap you, be the fair be will over X.X% gains. remind own billion of last years nearly

and expenses hold to cap million want the be more next by the X% If constant, years. rent years, $XXX the X talk at over I increased just will in our you grew rate portfolio half about last Now time. that worth pace X

to portfolio the market In from from first affordability that, units. off. to that thesis burn properties roll investment create to us representing value will our the by This XX% affordable shareholder market rate addition on affordable execute X,XXX period XX will of to to as units our in allow Woodstar and to restrictions incremental time portfolio begin original their rolling rate

rate time purchased we units below-market these to expected shared the units, as for we tremendous In these units. occupancy we XX% X this roll the comparable demand years portfolios, originally of portfolio, today, markets just have in like for than is Orlando Tampa, even more When have, since the than nearly major at rents at that we affordable providing more these upside XX% the market and contractual assets. affordable of increased in, and purchased full market rate rents have owned maintain market creating market portfolio we leaving a to rents rented rents us when on

Although creating shareholders. we have the the than more offset by for when will get increase to units incremental by in to roll significant you we them gains is this rolling market, revenue invest to market,

and additional no this just alone value future gains. put rent gain today, once book To create and to from perspective, assuming growth converted this into market subset an million should of $XXX-plus

easily rolling to extrapolate As to one could the be rolls worth to continue assuming gains and the market future higher, XX% trend more. years significantly remaining rents in after

already rolled these value, the reflected gains will rents units a not that are to in is or significant book until rise book some there value in until market. portion While appear of are

be that To sum cannot increasing balance gains we of are multiple reflected be of this affordable that The and pockets yet market. from reserves on to loss X are rents all each reflected today, units our yet reflected rolling today. gains have down up, to that gains our sheet to gains a go from

every again across $XXX And We Rina million have we this quarter as invested our business since in quarter segments. said, inception. invested

confidence and shown cycle. our Fed higher COVID in liquidity has Board this Our throughout position rate

dividend own us fourth in ability authorized it weeks flexibility. expected our confidence and in-place Our when and give ago in The significant portfolio quarter our gains third future property X Board our early. expressed dividend-paying unique

historically lending As this index. with market non-CRE just continued our stock traded our REIT has further the from well, like infrastructure company multi perform other L&R further Unfortunately, businesses moves portfolio mortgage our lending a and and REIT. to the and energy mortgage away being

move company as low known continue become model, business to from diversified diversified which comparisons, index. we only on eventually the will pure execute REIT and our us will We the leverage in away hopefully

our I incredible their confidence. I With team to their to for and thank will that, Barry. like our diligence And the turn for would call board

Thanks, Jeff. good and you, Rina. everyone. Thanks, Thank Zach, morning,

people too We inflation and you real in of most know, call lower clear itself consumers' And few Interesting, today. of most that the report so had a how than start to the sort money what the too obviously was do in a with think estate the goods just -- we situation jobs in had commercial you had super of markets credit seminal have shelf I in going coming event, markets much hands, much been I've earthquake and in critical and thought. an has. and we on because financial

have since then that segments can in government [indiscernible] completely an to education, we in those jobs. XXX-or-so impact impacted thousand he by Since starts jobs his XXXX, of were of And care. health XX,XXX million May of care, by the economy rates, increase those created not [indiscernible] X.XX the health [indiscernible] rate that's added employment effort industries, growth

selection it why you're have is up the So way is. what seeing the now you set

employment of You of on the all and the data a And people are States major month, both are fact, multifamily country and quite XX%. bill, power the top bill driving about is because the what's the than jobs, a and the effort, sit increase and centers even top centers, segment which climate office our in of top and gotten chips very of the not in unique narrow Logistics are sits has up good peers investments alone United probably construction faster contributed our to in stimulus growth and the infrastructure infrastructure only the of because cut AI [indiscernible], in package second in chip propelling as GDP XX,XXX on to and a at of scale economy half. construction have an on data category Starwood player, people building last economy, employed, enormous of which when, GDP fire, Capital it this though built largest private down which on feeling are an of for is in build-to-suits. is being

jobs because which All to of and shifted investment and this it construction spending from spending private the fiscal of lost workforce, the jobs but the million investment shift infrastructure. no now public has XXXX, to X XXXX, lost carrying and public in private

X% falling inflation not X.X% is on you've are of coming southeast lowering why it's get its the now think rent. everyone I out that of miss for and up So nicest because can this rates inflation reality. CPI. inflation. down. that see thing way say X/X to rents for the is the way they It's in chooses when to raising data rent why It's you in when you missed rates you clearly guess component or would use is we seen hope they're component It's that real-time X%, in see Fed the it's fall, which lagging but rents that's aggravating. when they've And component better, still use I XX%, and inflation, what they rent down, is early or the equivalent rent one take And below apartment was X% showing rents 'XX are

wheat was if were look checking complex just corn morning, and they corn oils XXXX commodities, prices $XX. XXXX. and [indiscernible] this wheat the in I So at at prices and you commodity

see of going a we're to inflation. So fall

beneficiary to consequence trying [ [indiscernible] on was hit of that a the growth, -- the to lot be which hoping basis X% in the to rate going see bus. is employment to look CRE, a the XXX hearts, done. unintended going in were ] sector, their property got and we people point probably X.X% having almost the reduce world inflation us biggest employment from really You're overnight see pressures of traction, the commercial [indiscernible]a will growth, biggest wage is particularly we're And of

make would against levered. we it. Interestingly, floating many we have rise less going earnings was for floating money much good, we debt way, our than [indiscernible], well peers that less rates we're Starwood on will Property rate But more highly of are lose Trust, more our our the than peers in levered the rate other because

up. ] from won't us do you rates So but to June. less see assets Also, monitor, that the seeing be interest necessarily it if hit book. of And and It of related impact chart you're us. now that not an to things will and our loan classes for we'll are was dramatically XX% have X% drop the the in next SOFR doing way on we have other asset other [ our

that we do spend I a talk asset markets a some faring bouncing themselves incredible on often experiences along rates. know continent minute the low office markets are in these calls. first an and did quarter has increases the different a lease-up, Europe very particularly are classes different how them, to The good want vacancy with on internationally they're about where of in what there rental one of most with having in and

is one there, $XX have English the rate, -- looks quarter. a -- Dublin where is ] good is you a loan, like we it exception pretty they strong. [ they vacancy of absorbing an XX% The is that and million speak more of running America, continent rest saw have over a is but they had somewhat The issue. Dublin

in United And markets. you X States, the have

and are buildings, the their be at everything the And will ability have else. some A buildings back. B&C You which and to point A else. credit and come the leased eventually markets something refinance And then will

And filling major in names. taking an one to we are household we had borrower that office We a And of back. the are gifted.

that from and beautiful me building, a today. earning will into about multifamily. Jeff a anything not heard it's You've and It's turn from it

capital turn in back and that so around how on its look up So and when those I loans it a in able I question like we and at earnings blessed of and have assets tied building office revenue. to look of it's the at asset power, that look maximize $X.XX be amount to the how earnings than to just we're at assets, can will, and take the fast our company we do and that's we an a those we and nonaccrual, convert as $X.XX, power less

not conversion. So complicated it's a

[indiscernible] from as that me now, we hopefully, as will recover And it's was of our that reserve if million appraised to you attributed exceed heard $X more this capital. than and

looking getting into back [indiscernible] many that that we're portfolio. forward assets So to an capital when earnings discussing in

a is One of in [indiscernible] we'll loans wait comes the part scaffolding, we lot city, some the staffing until in units money covered back. make down put building now there so in for sell Beautiful building, them trust. it's and can and the we of a

we've our transparency, all from have consistency for for start, of shareholders the I'm [indiscernible]. Zach and on won team us that job Our that and that honored that. Thanks, and reliability, the award might NAREIT then voted

we here be a should great We the thing this as big is opportunities There for on we other and be the offense. finance with is to there that say that estate, And reluctance because is, space banks big look picture a largest the we in for abroad. should are you've come One to and that people seen the country. I'd is private player. place to forward with in really the both of estate credit complex, be should corporates, the the going lend. player big that good real the And lending real in

we get we've to to world attractive. to and capital our not is a others. attractively of than the find accretive X, perform come from harder X ultimate we was extremely hopefully, excess proven this it I grade XX or think in return to like of work -- is out can [ punches to we out that reach access that's investment and as probably think business And put the becoming that's yield this and different goal the was which with Fed. There's model, capital, ] of going -- And So the continue money punch. to

fire and on that the a company on cylinders really couple that you'll I not of think can rely see good just all season. have the a had

its that it, XX% Rina, you'll but Jeff special guess of our continue was in again always into see book. servicing [indiscernible] which thing increase that think One And I I in noted a saw was the highlight servicing, to mention special by I'll And as can business assets fact, roll book. hedge

It the with as would have interesting of seen is stress banks, as loan much you an banks a expected. [indiscernible] haven't the working for paydowns. commercial lot extending you in and market And are that sales small

I borrowers see curve investing and significantly today days in excited when they think forward to this look going ago. like more not are looks did become XX the about their like what can assets

to decline [ the So I think my negative XX speaking XX% on bulky I I for just half horizon, get mean, ] XX% -- out but for can got a [ "I know leverage, of declines borrower, back got in I to I ]. 'XX he's see the like, look supply in market. I

to were. because we'll don't take new But what support these of that feel the and that sadly, to assets to able brand [indiscernible] will they'll we good news back is, to the going think opportunity think continue inclined have that and an XX% I more that's we that I invest could buy costs be finance we people loans at I guess, were our forward.

All of is these hotel markets okay. U.S. in The market

seem been in Here, they the blue it's be unions strong. are XX% slightly super need not reaccelerating And it's rent, up. the that to I the against United the In States the much backdrop to the a avoid think supply. industrial going the some costs of seeing markets, the have you're where states of so decline in

have in apartment -- are decline looking mentioned, at cases, greater are And supply, markets then facing the in -- nearly some absorption. I record as office and XX%, today

will in accelerate. to affordable. So homes. change there starts more some get a market and very as come market that's rates probably down, affordability This the homes concessions healthy will are of still It

[indiscernible] if take said the this fast course, is economy I'm Fed too inflation. causing that seriously savers, a [indiscernible] pressure over the is reader part creating income service $XXX doesn't is and which Maybe to that more inflation they're enough today. use interest this you without economy actually this a keeping rates And service will disrupting kind rates a high off sectors. the more could upward curve sloping on see does spending of economy which normal normal on have we the inflation cut billion continues X% a X.X% And of Of high he we actually [indiscernible] of BlackRock ], that in of services, weapon a high actually now, the the rate right, can't or [ he's egg. maybe for some break

So good have we loan and them bright in that the the if problems and forward can and there where see look top to pretty are side it. managing of of the sit general, we're actually United We in them, out probably isn't coming feeling we're this we States on doesn't. we through about lender But portfolio, a storm. in we

for think rates and they first to probably can lower I just the era. the have the sun clouds that [indiscernible] late inflation as rates again, see in into breaking the we were raise we pandemic were they time, as realized, apart, booming a to the

every airlines time for lag like paying will other oil rents in be component rent. So every car and do and and hopefully, prices, and they prices inflation real attention, a off and food insurance they'll do for knock they is except other

and you, take we'll questions. Thank

the line Shane Instructions] of first Our Rick question JPMorgan. with [Operator comes from

at as If ability an terms really the the loans. sponsors we of credit I'm to always given really Look, of into to about forward shift now expectations And is looking in rate you're shift pay, the 'XX? is move your underlying this of given willingness that pay? pay. is to And function the right radical curious, quality ultimately, willingness sentiment-driven a

too I to just it's This think early happened. tell.

people are asset, but as I curve an -- expected for constructive. the an dramatically. equity But a data we're expect when as to tenure will and far that ourselves dramatically, the people years that. restructuring mean looking has Most our at And they forward being or at can moved we're looking mean, nobody move [indiscernible] So player, carrying XX we see. we as I

the certain [indiscernible] short in alive 'XX. people actually for expect super trade new help stay end will, And technical I if that important of I'd is don't on this the to their and a know desires our margin, that's materially until borrowers. or reality

saying I saying even and this of -- the like forget, back all. of banks you were months said, talking now about some we're you hikes. see major rate like no at can rate I heads minority year They're don't people also cuts X think go some

the is has no this ever close. So

You've on [indiscernible] is is and feel. these this GDP by that narrow. the The doesn't being spending person seen that average super stuff driven economy

Their so them. us like in And inflation don't creating pressure like is falling it and way this so we the the none marginally are the they economy of and working pandemic. now, for above job feel X%, did wages feel in market

both we'll I employment for the in -- and picture immigration, has this side, importations mean like the So see things legal the that. on the will and market. illegal, what some If and election itself labor there happens. helped and obviously, confidence have are

out. see to that how have we'll plays So

reserve [indiscernible] our that add I'll is Rick, million. up to And $XXX

on not are what and couple things not reserve still looking really at and holds, optimism rates, seen financials of still ] you our couple put that and weeks, spoke But see if optimism into we into gone to the optimism out up. expectations, our last our going around. the our shape, baking it's really asset. there, is CS weeks reflected. today. about, reserve has lot of we're night we've could not are Clearly, turn There optimism We're every taken has Barry as this a flights that [ last of So in

going I have thing. put you so can [indiscernible] to move It's X, in see, if higher biggest you're that leased, tenant because rates to invest they looking debt as going the can and you far the get XX% yield way, returns XX% as nuanced, a office And ] not you're it's [ the it's markets. you in? be and if And Are wants at building X how and an to to by in the obvious for TI the that's sure [indiscernible]?

that walked decided the real hasn't like an REIT office they assets office best of isn't country borrowers, talked not the is -- household real has the private firm and sell their want And because a the away they alive. everyone country every them and don't But you the owners working in in things PE maybe there assets, the just to [indiscernible] estate, estate from at about, all including building. keep

I are every walked actually mean malls there's throwing just [indiscernible] saying or the this They're now it the But financing, ] where has had good person the cap CMBS single ourselves, getting business earnings the everyone, properties, yesterday. time they're caps every the good [indiscernible], in is getting and a money. like in performing. market [ exactly X Blackstone, Brookfield, the so performing still [indiscernible], from away after bad money X rates will market using and Walmart financed bifurcate XX tough

buildings others and obvious completely the York are that in best one of the do buildings foot a have asset. ground to decent and there to empty. lease, on was because steel But the right [ One residual but something. the in best a that States, $XXX land just the cities down. ] full, That's they're example, in and even They're the then are And got are Vandy come These model. on are that's rent, become like value buildings It's New scrap for green will office for United kind markets you the value. trading commanding

situation going just rates while. different every U.S., the say some there. [indiscernible]. going be It's find estate, oftentimes a or in office it's and impact a it's take -- time the the So nobody in not in get that different should I rates. real be asset to out use going it's class to And in other market, would to

be interesting sold an multifamily, we'd right it's "Hey, about at if happy distinction you you versus basically Look, now. where everything our what us said everybody basis said,

divergence going So between be going properties? I suspect the pretty a huge there's to what you forward on see

Huge, huge reversions exactly.

from Raymond Our line question of James. Stephen the Laws with next comes

loans to your of pace Do to into wanted excess And maybe investments kind X you as pretty more new a moving are up, also to with underwater bit about the returns? originations seeing up ago? forward quarter. how allocation maybe their you're investments? loans Can you where now opportunities talk from banks work? noticed QX. And about start CRE strong infrastructure good originations, put liquidity the a I as you of willing months of sell you just best some X elsewhere, see of or that expect liquidity your to excess think

seeing demand returns allow increase. to power and has the in the energy to LTVs favor higher our me Barry, We're in as consistently continued infrastructure business, for are our moving start.

to expect would that there. continue lean So in say we I to

look lending at even I next -- to the pipeline I our over move, last of on going the we're to deals actionable say, weeks, for pipeline the rate X As CRE would going believe up pick and our But see the couple of is, I really this we're CRE with tripled more. see quarters side.

than and on seeing run do, there things to and that that unglued Xx So should unfrozen, side. CRE probably becoming side the similar the are of returns I things a on X say. to are believe infra the to run rate higher you've that's XX.X% have we a put out at return ability significantly energy in to And been the rate sort levered XX% accretive I

difficult leverage with mid-single talked ] to fact [ that digits. and about negative returns very is property buy today the cash We've are that before

betting you rents cetera. up, to the allowing You're spreadsheet, push too et much on Excel

probably not there. increasing So much we're

closer book are haven't We interesting. potentially in resi to book. the trades that we increased think resi the There getting are some

put to there point. at money So some you could back work see us

there's have think pieces originations that's our been value, business. We and we where also few CMBS supporting a CMBS great buying

the seeing in going likely to a Infra, bigger CRE, going places pipeline. So we're X to where where are continue lean and to we're Energy be

I to would that. don't Barry, add you to know what want

Yes.

against loans. It's want $X origination actionable we balancing thinks do fix our just our REO -- of materially up our X.Xx we're of of with we're [indiscernible] team billion leverage whole that's think lower a to think, CRE other do most stuff, them. needs to than than assets could our in I We doing it we have if I been more peers. actually lower, the company any bunch than but a we've

but a nuanced, ] $X.X peak billion. little our funding a we've to [ cut it's from $X also, of forward And obligations billion

want much we in more that it's don't but how to we fund. stuff of shape there put nuance, to important we And of sort capital. we're picture to the much fund So have out overall that better that's don't a

own been months. Most to think insurance XX%, edges and of some are making debt ourselves around our companies CMBS peers and I the finance place private down really taking we scale the the our some of debt X are funds. the only like at real market transaction and in volumes loans, So have have and estate private cherry the has been and last

public time we more that lending or that set, just more many continue our [indiscernible] But own said we'll lower But going enormous property them if and an there come that or and It's whenever we true aren't There's been then that you things come to enhance to apartment rates finding liquidity more smaller so redemptions more those just want industrial sell actionable liquidity because and a billion lowered and deals. really $XX be very don't to we're add we've market, and trades in assets. haven't -- redemptions distressed transactions all hopefully into our rich that it. you building, in materially make company, had population big a not dividend $XX basically sell assets, seem that on billion assets. to will down and would and valuable sell convinced hard

else, we're nothing this, else, like I to like else -- refinance. But anyone not There's to no everyone just sell everyone don't there's and everyone is, want trade.

loan. no new there's So

be that transactions, -- So market the seeing on will [indiscernible] you're see you stock. said come corrected on I already. more the will There

risk taken the of the class dodo had way this asset forever the a markets, to on and people a profile travel live a see obviously a may the but have going strong equity down will class. vacations it's The and I class. of component markets live reminds actually material or world's estate, people world's not and than is that will volatility bird. may somewhere. different for new largest not chip or asset this think in asset compounding you'll real to buying away, of capital people going pretty appetite nature Most the We're get

market. So find favor different in it [indiscernible] and will a

to of in million $XXX had return QX, in returned We of unfrozen. capital something becoming Rina had Stephen, July. earlier repeat And things just about $XXX said million but we capital

a So ability have means which away and they you're line that that be is the markets, definitely the of us, certainly is constructive. refinance seeing with trend a of but assets more starting from seeing part to a the returned, to you're trend unfreezing capital good

Yes. comments. the appreciate I

well covered, rent insurance on Just of has been lower in supply the that? slows. that quarter, costs expected. But a new interesting, coming in kind update were mentioned Can slowing across was growth you that follow-up. than maybe multifamily us run that quick something you're pretty you accelerate multifamily Barry last expenses generally, side? as likely how seeing will the And

think billion to least scale small insurance. We The have that I come have together that borrowing insurance, pressures United And I'm are our States at. on were We bunch. pull expenses speak assets down what that one Yes. to insurance know can't And I property they the similar we large on not of off who our a get guys but across at other don't insurance. or was insurance. given person our multifamily had year-over-year $XXX-plus sure

of some of -- good. it's I the over experience So rentals, And was and all companies. place, would but see of looking that like some some that the for at -- overall, we interesting, the I SFR say, our own has been They're too. expenses family can you

all place real tax positions with are states increases. increases different and over the estate they are of So in tax

are have running X New and states X, Florida, Illinois, and massive So I surplus a and York California. that do surplus, obviously think X and [indiscernible] big states running Texas you a

states. different the on in situation materially taxes specific pressure is so of each real estate of And

went -- lowered in [indiscernible] lower So They in fact, and and Texas doesn't That happen have taxes. gone. [indiscernible]. their

in one that years. think I quite seen XX I've

by state So state. it's just

even is -- new the construction. there And

the the The They people the Tennessee [indiscernible], So is all construction, York in growth they bulk North moving. of Coast the got New [indiscernible] the parts over the California, have [indiscernible], place. to less Carolina. construction, where got are Texas the the the new and East because was West that's Northeastern and and

the so rents in some places. And higher materially are different

our towns is like of I Kentucky X%. in think up one

up I materially. think is D.C.

down other rents. The in markets are digits double

rent such markets. So really all It's we national no a thing. the an of just talk major of There's profile. about average

away stock negative has [indiscernible] rates the by is us that single-family apartments inflationary course, [indiscernible] to want homes new from keeping shifted market them. of of to he's up reducing And significantly, dramatically and and that's setting cycle artificially in regional the reducing that homebuilders problem, banks pound that the for another rent. the so major of share to supply smaller money of which lend and homes, The because don't national in has can't builders get the

that you're it So dynamic And he's looking the inflation, this PhDs quite rents, This component again. miss way in interesting big of the the in apartment can it'll get keeps It won't apartment, be up created new lag and the at. is an hoping an sense. keep late if it shouldn't they -- as rest these again makes but game I'm markets, it model to I we a -- [indiscernible]. with no an you'll coming XXX as American, mean,

why... is which So

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

meaningful sort be more players see lot cap you do waiting might to of Yes. been cut, of is rates, of through Commercial of has sort Or about, and trickle kind When does a shift so the in? get talked Fed where And thinking hard cycle. hit real estate coming in this of as this just Barry, confirmation are sentiment capital of kind of unintended of you a you a cuts? consequence. that

were the some on before home, offshore. the a The needs invest pretty domestic we're at margin. Middle areas -- But [indiscernible] is think investing, had overwhelm desires estate the in oil but the international some the world not North, estate back as the complex. in they're they of that position funds investing real and that I other the side issues little the of less And to They're still East. with of real of equity heavily pace

Asians they'll are the think to the and invest heavily. market, who I the think Southeast induced Koreans I be major more players in

market on the obviously If to and I'm talking market, In come depend [indiscernible] is. and the be the allocations the market play, property in stock when portfolio stock U.S. they'll market is into the denominator sector. overweighed will institutional

think never it a the entire X they with at the a I a and and But years. saying, properties I'm up or show high So buying I people market, no it but for fact, are in know force they families. And estate. better individuals this you'll major were in individual X. buying could most in real And I see in do worth, market yes, XX competition I'm this net in cycle, with through owning -- get likely

balance guys seen estate So these [indiscernible] you're sheet. of you've talking some And many net people real worth. enormous high have add institutions,

business. the get some there'll I'd powders as whole, back asset and on there's then see, a by be of enough they say acquisition of ton money create tremendous dry expect and So class. buckets the there money the will the powder probably, higher to to coming markets propel And I'd the are demand. you into refilled there's be the the will The time up, can the dry and REIT used stocks that more rising,

you asset X We're market against have the And stocks stock carried always asset other competing an classes. [indiscernible]. as class

in that up So up you're I much. were [indiscernible], mean, you lot if in a you them, weren't

of return, it's produced needs in be that why every course, not like, which, okay, need every anything of a every institution boring. -- not endowment, XX% it's venture. the States, We but So XX%, actual United there'll consistent we're

bit out, So I it's if market health to And in office needs to unbelievable I haven't decimated. and and throughout like and again. it back Lodging gone come career getting asset to something. to gets the estate, don't have know always work. to to work going be government back other it's bit come think, has real office again, mandated get and they then itself workers a the The classes having my troubled is a it's it's federal back Washington

But office in in often, that's are L.A., see. we'll Francisco more the back and not in the buildings [indiscernible] XX% and San or case occupancy office. it's true on have the People today. space, not a physical So Miami, [indiscernible] where we

I things, we're a I office change I of front. think recession Good lot think, office, back the and will will better to together. mean the people I on think go

with KBW. Instructions] [Operator Rahmani from comes question next Our of Jade line the

this you Starwood bigger to any that? shrinking. as see any banks with about having post see just of in and gotten an comments special meaningfully Solutions? with grow update the size And conduit to be I all Do agree traction the potential both it than the Can And you was give you your do market, on with Have market the banks. CMBS meaningfully you servicer? opportunity that? that the the

Jade. couple is fairly small. first had The We've Thanks, our of in still clients Yes. revenue solutions.

be We potentially big you number needle a to could on for, ways goes. that of we'll potential there, are those as really the out the government and that players talking about playing posted side helping we're in keep the movers and

grow. to is got starting like something we've solutions, think meetings in I and XXX it

good. is that So

side, on CMBS like fairly comes interesting The their say sheet it's leave to really the on CMBS loans. do a are been would very happy more reticent agent that business I market. They're and balance to banks portfolio quickly. do

back big never the smaller that don't banks banks and the I think have conduit were large So CMBS pulled originators.

been. $X.X originations a in probably market conduit billion is today smaller $X our it of billion So what year, pace or than has maintains what still a

shift a CMBS the in market. seen We've

did a at loans, interest XX for high a want had yesterday's rate. to X-year years significant not of higher investors in bid lock You rates

pushed the loans. X-year they side through on so really fixed loans And X-year Those to rate are available insurance companies.

growth rate company loans. a X-year fixed of insurance You're lot seeing and

In XX% couple loans. the XX% become That CMBS, was probably market X-year has ago. of years a

have a ends borrowers very of piece But that's that capital. it It's to a coming over little is bit to in last out. back years. moving [indiscernible] something similar rates to is curve, to up that the that of where we're time couple at par. they where a dollar the different were the higher less It's So provide moved willing accrete price

XX year, we couple with as originations BP in or X-year increase over move the of up. have of think They're for and will up. to the of to things rates with percentage. that's demand and in lot lights refinancings do see X things ] have to here, see a a People the expect grow now coming coming coming of And an months as note, in. they X a back [ you I So to bring willing XX eyes continue CMBS that XX-year been the pent X on going buyer place

as Spreads at in. in If think are the bit. little but CMBS week go interest settle to today's will spreads bit rates the made rates, we market picks a last wider move, a I that up yesterday's back this

As I money year, said the spreads have of first made decent we've is in year. and all remarks, of a was in months opening did my last Part than tightening. year X this we been last more that year

that where we smaller $XX $XX in the I to will million is play. place loans, million our where place loans, probably But we still market think that write

although get We there, loans I have smaller much could sort significantly, forward supply. mid-market of is doesn't of that move like to will a a but rate up $X.X billion. move market, that not But and than or something overall CMBS likely the the it's loans we couple that pipeline, this in and grow think bunch of probably larger that bigger probably $X a billion prefer

that perform well. to continues optimistic So we're that, business

thing flowing worthwhile and at be loans. given transaction borrowers borrowers, for work make the certain to But have for they is Yes, of going to [indiscernible]. I is the our the CMBS be think the to have scale cost, fees. They transitional assets, market it also cash doesn't the a grow to them

market, the on deals do the the -- portfolio in some I the And aggressive been tight. think the only private been way coverage of very And really execution. of CMBS So both banks. I to but that is ratio to loans CMBS sit that has it's have large the alongside been always I've finance been think in will quite remarking the done

there take hasn't in OCC to reduce sheet. they're their as with the refinanced which of you we've anything, sector out, from exposure, is the to like point, who real but us especially to to to their we and take share Jeff's And the for they're years finance years, upside conduits, lot a going happy have X been X.X it. other to ask As balance happy and as pressure get on not office today. estate borrowers out loan Who's our going who's out helped of

markets And over didn't asset ] those a the Freddie in loans XXX and on classes. I XXX for of ] the markets, the [ those we obviously, I still over like mentioned think [ talk Fannie hotel are debt you're or but And the apartment about seeing in what I market, market, if borrower they're at asset to I stable as flowing over probably [ cash have I remember you it a correctly, or refinanced to XX a it's was borrow very do. want And ]. [indiscernible] XXX think wants hotel, just XX that. a we But like yield. not But if -- an

next to at for near frankly. rate and a it or for future, think end issues money at And rate a in real today. when there's be and and change, be market the So the key certain safe, lower key things big a in change profile are the us the to this really has the almost country, going of whole for is industry a good [indiscernible] mobile least June lot future I

pay -- $XX want treasury and less [indiscernible] was banks, trillion of they real regional the the That things balance Three rates debt, a the every interest drop infusion they an is trillion, in you have of [ $XX expense Fed. of equity ] to So which were and regional sheet. victim into benefit: estate, because the banks collapse. the

hurry. better wounded triple be I hope off, of will that a So header just there's docs you and

but increased solutions transfer our servicing the this did portfolio out. have Rina billion, that side, add quoted And I saw that $X on Jade, billion I'll think by you we $X quarter,

opens So the we $X a added servicing other of actually as that of side, billion solutions quarter -- the [ there. door and big we've part that which the this number businesses on ], having of meetings across result deals of for that's X been a

thing, when fixed rate will be about certainly, [indiscernible]. conduit seeing [indiscernible]. I there conduit were growth last my talking about not I [indiscernible], before, And was growth and talk CMBS -- did in We in

is to I I expect and well, what Barry think that's that continue. would speaking to as

right. That's

our like end the Sternlicht of Barry session. turn remarks. over I'd to reached any question-and-answer have We for the call back to closing

thank I time that do outstanding are. often to about us through talk returns interesting. very the with. pretty everyone look a optimistic We're It's had really joining for getting thank happy I'm to on industry today. hardworking given We shareholders. we forward Board it team our the again, much. was So the happy don't all And you for issues I lot and we're pull have [indiscernible] our But our much about. really the again shareholders, executing that working future, and think nothing provide -- face. I all so our this to to forward And to difficult Thank we cylinders I

you. This Thank concludes today's teleconference.

have you You at day. may wonderful disconnect Thank your time. a participation, for your and this lines