Starwood Property Trust Inc.

Greetings and welcome to the Starwood Property Trust first quarter 2026 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, head 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-Q 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 results or performance. Please refer to our 10-Q 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 DeModica, the company's President, and Reena Paneri, the company's Chief Financial Officer. With that, I am now going to turn the call over to Reena.

Thank you, Zach, and good morning, everyone. Today, we reported distributable earnings of $147 million, or $0.39 per share, for the first quarter. Our results were impacted by continued higher-than-normal cash balances, the resolution of non-performing assets, and the ongoing optimization of our new net lease cylinder, adjusted for which DE would have been $0.47. I will provide more detail for these items within my business segment discussion. As we continue on our stated path to grow our investment base, resolve our non-performing assets, and optimize our new net lease platform, our underlying earnings power continues to build. In the quarter, we deployed $2.5 billion of capital across our businesses, including $1.5 billion in commercial lending, $597 million in infrastructure lending, and $128 million in net lease. bringing total undepreciated assets to a record $31.7 billion at quarter end. We deployed another $1.5 billion after the quarter, 70% of which was in commercial lending. Our company is diverse, with commercial lending comprising just 52% of our investment base and owned property increasing to 25% this quarter. We are really not a typical mortgage rate. I will now take you through our individual segment results beginning with commercial and residential lending, which contributed DE of $172 million to the quarter, or 45 cents per share. In commercial lending, we funded $894 million of our $1.5 billion in loan originations, along with another $278 million of pre-existing loan commitments. After factoring in repayments of $835 million, our funded loan portfolio grew to $16.7 billion. This does not include $1 billion of new originations after quarter end, which brings our loan portfolio to its highest level since inception, or $2.3 billion of unfunded commitments on previously closed loans that will generate future earnings when funded. I mentioned earlier that our run rate earnings were impacted by our resolution of non-performing assets. During the quarter, we sold a multifamily asset in Conyers, Georgia that was foreclosed in February of last year. We repositioned the asset during our one-year hold period, cutting delinquency in half from 16% to 8% and increasing occupancy from 86% to 91%. After a broad marketing campaign and over 20 qualified bids, we sold the asset for a $5 million DE loss and a small gap gain, reflecting the adequacy of the gap reserves we previously recorded on this asset. We foreclosed on three five-rated non-accrual loans in the quarter, the first of which was a $248 million mixed-use property in Dallas, consisting equally of multifamily and hospitality. The second was a $71 million multifamily in Phoenix, and the third was a $28 million multifamily in Dallas. We obtained independent third-party appraisals for all three assets, with the mixed-use property that represented two-thirds of this quarter's foreclosures appraising 10% above our basis. The other two assets carried a combined $25 million of specific CECL reserves. The weighted average risk rating on our loan portfolio improved to 2.9 this quarter versus last quarter's 3.0. This improvement is net of two small multifamily loans that were downgraded from a three to a four in the quarter, which Jeff will discuss. We ended the quarter with 676 million of reserves, 455 million in CECL, and 221 million in REO. Together, these translate to $1.82 per share of book value, which is reflected in today's undepreciated book value of $18.97. Turning to residential lending, Our on-balance sheet loan portfolio ended the quarter at $2.2 billion, down from $2.3 billion last quarter, due to repayments of $38 million and a $21 million negative mark-to-market adjustment on the portfolio that was offset by the $31 million positive mark-to-market we recorded last quarter. Our retained RMBS portfolio remained relatively steady at $400 million. Next is infrastructure lending, which contributed DE of $22 million or $0.06 per share to the quarter. Our strong investing pace continued with $597 million of new loan commitments, of which $567 million was funded. After factoring in repayments of $320 million, our portfolio increased to a record $3.2 billion. Nearly 70% of this quarter's commitments were self-originated, bringing our total self-origination volume to $950 million. Also in the quarter, we completed our seventh actively managed infrastructure CLO, a $600 million transaction at a record low spread of SOFR plus 168. We used a portion of the proceeds to repay CLO 3 for $330 million. CLOs now represent 75% of our infrastructure debt, providing a durable, non-recourse, non-mark-to-market financing. Turning to our property segment, we recognize $29 million of DE, or $0.08 per share, across all three major portfolios. I will start with a brief comment on our Florida affordable multifamily portfolio, Woodstar. Last week, HUD released the new maximum allowable LIHTC rent levels, which were set 8.9% higher than last year. Certain properties were in geographies where the rent increases were once again capped by HUD, with the incremental rent growth being deferred to next year. To date, we have recouped 100% of our original equity investment in this portfolio, plus an incremental $540 million that we have been able to reinvest across our business line. We have $416 million of Woodstar debt maturing in Q4 and anticipate another cash-out refinancing, again affirming our valuation on these assets. In net lease, as I mentioned earlier, we are still in the ramp-up phase of this business, which has been quite dilutive following our acquisition eight months ago, a dynamic we anticipated and disclosed at the time. If optimized and at scale, this business would have contributed three cents of incremental DE to the quarter. The quarter's acquisition volume was in line with our original underwriting, with 128 million of purchases, containing a weighted average lease term of 19.5 years, and weighted average rent escalations of 2.5%, bringing our total portfolio at quarter end to 2.5 billion with a weighted average remaining lease term of 17.4 years and zero defaults. As you are aware, we adjust DE for the straight line rental income reflected in our GAAP numbers. If we were to include straight line rent in DE, it would add another penny to the quarter. We continue to optimize this platform's capital structure, completing two notable refinancing since our last earnings call. The first is a new ABS transaction, which was used to replace a more costly issuance that we assumed in connection with the acquisition. The ABS financing totaled $466 million at a weighted average fixed rate of 5.06%, a record-tight spread for this platform. This allowed us to replace $324 million of existing ABS financing, which carried a weighted average fixed rate of 6.65%. The impact on our master trust was a reduction of 44 basis points from 5.73% to 5.29%, a benefit that we will realize in DE over time. However, during the quarter, we recognized a $0.01 non-recurring DE loss as a result of unwinding the interest rate hedges we had put in place in anticipation of this securitization. The second refinancing was completed after quarter end, with the closing of a new five-year $1 billion warehouse facility. It has a 40% lower spread and is nearly twice the size of the in-place financing we assumed at acquisition. These accretive financings, combined with the ramp in transaction volume, builds the foundation for the earnings power embedded in this platform, and paves the way to overcoming the three cents of dilution that we recognized this quarter. Concluding my business segment discussion is our investing and servicing segment. Collectively, the cylinders in this segment contributed a robust DE of $57 million, or 15 cents per share, to the quarter. Our special servicer, L&R, continues to perform as the positive carry credit hedge we have long described. with servicing fees increasing to $52 million this quarter. Our active servicing portfolio totaled $9.9 billion, while our named servicing portfolio was $95 billion. L&R continues to be the highest-rated special servicer in the country, with a rating of CSS1, the highest rating possible. Our conduit, Starwood Mortgage Capital, securitized or priced $153 million of conduit loans in three transactions at profit margins that were at or above historic levels. We typically see lower securitization volume in Q1 and expect to see volumes increase in the near term. Turning to liquidity and capitalization. Our current liquidity stands at $1 billion, which does not include liquidity that could be generated from cash out refinancing, sales of assets in our property segment, direct leveraging or issuing corporate unsecured debt backed by our unencumbered assets, are issuing Term Loan B, where we have nearly $1 billion of capacity today. In addition, we have $9.4 billion of availability across our bank financing lines. We continue to operate at conservative leverage levels, ending the quarter with a debt to underappreciated equity ratio of 2.59 times. Also notable this quarter, our board authorized a $400 million share repurchase program on February 26th. In March, we deployed the first $20 million of that program, purchasing 1.1 million shares at a weighted average price of $17.67, a discount to both our current stock price and undepreciated book value per share. And one final note. During the quarter, we are proud to have been awarded the 2025 Mortgage Read of the Year by PERE Credit. The award reflects the breadth and resilience of our diversified platform across market cycles. With that, I will now turn the call over to Jeff.