Starwood Property Trust Inc.

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

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 Sternlich, the company's chairman and chief executive officer, Jeff DiMatteca, the company's president, and Rena Paneri, the company's chief financial officer. With that, I'm now going to turn the call over to Rena.

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 initiative, our underlying earnings power continues to build. Importantly, we exited 2025 with enhanced liquidity and embedded earnings from this year's investments and unfunded commitments, all of which will increasingly contribute in 2026 with our dividend coverage expected to improve steadily throughout the year. Our quarterly results were impacted by temporary timing issues, adjusted for which DE would have been 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 $0.04 of reduced earnings. We completed three securitizations in the quarter one in each of commercial lending, infrastructure lending, and net lease that combined created incremental proceeds of $290 million. 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 non-accrual and REO assets, we see a clear line of sight to earnings that cover our dividend, a dividend that we have never cut. Our diversified lines of business continue to perform at scale, allowing us to deploy $12.7 billion in 2025, our second largest investing year to date. This included $6.4 billion in commercial lending, a record $2.6 billion in infrastructure lending, and $2.4 billion in net lease. Two and a half 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 pre-existing loan commitments. After factoring in repayments of 670 million, we grew the funded loan portfolio by 823 million in the quarter to 16.6 billion, our second highest level since inception. 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 five-rated first mortgage loan on a multifamily property in Phoenix as credit deteriorated. The loan already maintained an adequate general reserve, but based on our recent appraisal, we reclassified $20 million of our reserve from general to specific. Jeff will go into more detail on our credit migration and asset management initiative. Turning to residential lending, our on-balance sheet loan portfolio ended the year at $2.3 billion, consistent with last quarter's 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 a year. Repayments totaled $568 million during the quarter and $2 billion for the year, with the loan portfolio increasing $300 million this year to $2.9 billion. 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 gas 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. And 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. And lastly, on this segment's property portfolio, we sold a mixed-use property and retail center for a total of $36 million, resulting in a net gap gain of $10 million and a net DE gain of $3 million. Turning to liquidity and capitalization, we had our most active capital markets year in our history. We executed a record $4.4 billion of corporate debt and equity transactions, including $1.6 billion in unsecured notes, $1.6 billion in term loan repricings, a $700 million term loan B, and a $534 million equity raise that was accretive to gap book value. 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.