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DATE

Monday, Nov. 10, 2025 at 10 a.m. ET

CALL PARTICIPANTS

• Chairman & Chief Executive Officer — Barry Stuart Sternlicht
• President — Jade Joseph Rahmani
• Chief Financial Officer — Donald James Fandetti

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TAKEAWAYS

• Florida Multifamily Gain – Management stated a realized cash-out refinancing gain of $225 million, or four times original equity, and referenced a potential “$1.5 billion plus gain” on the Florida multifamily portfolio if extrapolated.
• Agency Debt Refinancing – The refinancing moved from $309 million of existing agency debt and $75 million of original equity to $614 million new debt, showing material liquidity extraction potential.
• CRE CLO Issuance – Rahmani said, “we have priced our fourth CLO in the CRE side. It just priced minutes ago, so I could not really say anything previously. 165 basis points over So for 87% advance rate,” reflecting tight cost of capital and high leverage.
• Origination Pipeline – Management expects 2025 will be the “second largest origination year ever” and indicated a “large pipeline coming,” pointing to ongoing growth opportunities.
• Return on Equity Consistency – Sternlicht stated, “the yield on equity, return on equity is actually consistent with past,” despite competitive lending conditions and tighter spreads.
• Data Center Financing Expansion – The company now has “about a $20 billion book we are building” in data center lending, with exposure to major technology tenants including Amazon, ByteDance, and others.
• Triple Net Lease Cap Rate – Rahmani clarified: “it is a 6.9% or 7% implied cap rate with no goodwill. On this portfolio,” dispelling concerns over an initially reported 5% figure.
• CRE and Energy CLO Execution – The company has completed four CRE CLOs and a sixth in energy infrastructure, with nearly “three-quarters of our debt is not financed in CLOs on the energy side.”
• Rental Affordability Improvement – Sternlicht reported that in their portfolio, the percentage of income spent on rent dropped from approximately 25%–26% (with a warning level at 30%) down to 21%–22%, due to rising incomes and stable rents.
• Occupancy Rates – “we are 95% occupied in most every market,” according to Sternlicht, indicating strong portfolio stability.

SUMMARY

Management detailed the realization of substantial gains from a cash-out refinancing in the Florida multifamily portfolio, highlighting extraction of both debt and equity value. Starwood Property Trust (STWD 1.68%) emphasized rapid growth in data center financing, now comprising a $20 billion loan book with exposure to major technology hyperscale tenants. The company completed its fourth CRE CLO at an 87% advance rate and 165 basis points over benchmark, signaling favorable market access and strong demand for its securitizations. The call clarified that triple net lease cap rates normalized near 7%, alleviating short-term concerns over portfolio yield misperception. Rental affordability metrics improved, and portfolio occupancy remains high, supporting underlying business fundamentals.

• Management credited tighter but still attractive bank financing for supporting steady returns despite spread compression in core lending segments.
• Starwood expects 2025 will be its second largest origination year ever, with a large pipeline coming across core sectors.
• CRE and infrastructure CLO executions drive funding cost reductions and enhance capital efficiency across business lines.
• Management distinguished its counterparty-focused approach in data center financing, emphasizing amortization structures and minimal reliance on residual asset value.

INDUSTRY GLOSSARY

• CRE CLO: Commercial Real Estate Collateralized Loan Obligation—structured finance security pooling commercial mortgages for funding and risk transfer.
• Advance Rate: The ratio (%) of loan proceeds relative to the total value of underlying collateral, indicating leverage in a financing transaction.
• Cap Rate: Capitalization rate, calculated as net operating income divided by property value, used to assess real estate investment yield.
• Cash-Out Refinancing: Replacing existing debt with a new, larger loan secured by the same asset to extract liquidity for the borrower.
• Triple Net Lease: Lease structure where the tenant pays all real estate taxes, building insurance, and maintenance in addition to rent.

Full Conference Call Transcript

Barry Stuart Sternlicht: The balanced market rate. It is, I think, Willie Walker’s firm just put out a note, 3.5% rent growth next year. I think you will see it in the back half of the year. I think the supply is definitely going down, but it is still here. And everyone finishing a deal right now, everyone in lease-up is offering fairly significant concessions, a month or two months, to lease up so they can pay their debt service, and they can try to sell these assets with interest. The depth of the purchase market, I mean, people are selling in our other opportunity funds, a dozen or so projects. Cap rates range from 4.3% to 5.5% depending on the market.

I would say around 5%, 4.75%, 5% is clearing. And why are people buying this? First of all, the negative ARB is going away as the short end comes down. Second of all, you are buying this asset at a huge discount to replacement cost. So unless the country goes into negative population growth, you are going to see continued demand, and demands, as you know, we are 95% occupied in most every market. And rents are affordable. The affordability of rents since incomes went up and rents did not go anywhere. For two or three years now, your affordability has dropped in our own portfolio from, like, 25%, 26%, warning is 30% down to 22%, 21%.

So again, it is really we are all watching what is happening to the 18 to 24-year-olds that I think unemployment rate has more than doubled in eighteen months, whether that is chat or people just wanting to do different things in their careers or mismatch of education versus the job opportunities. I think that is not your typical renter. They are usually a little older than that. They may be if you are 18, you are in college. So 18 to 22 is a college-age child. But I do think we are all watching, and we are all sort of scratching our heads.

But in reality, you still have this wave of apartment finishing in all these markets, and some of them are better than others. You are seeing green shoots in some of the Florida markets. We expect that to accelerate next year. So it really depends on where your footprint is. But city some of the other towns, I mean, Austin is a very difficult market. Probably, it is the worst in the country. It ran the furthest quickest, and now it is giving a lot of it back. The rents are falling double-digit in that town. And then if you go to, as you know, Mark’s cities with no supply, you are seeing 4% to 5% rent growth in California.

San Francisco is, like, positive seven, positive eight. There is no supply, and there is job growth as companies return to the valley for their AI ventures. So it is a national stat, but it is a very local thing that we have to watch, and certain schematics is tough. Interestingly, you would worry about homes competing against apartments, but they still remain unaffordable. And the mortgage spreads are historically high. So, and you can see the more abundant housing market. So I think people will still be in the renter community, but it would help, by the way, if we had some legal immigration. Which has always grown the population in The US.

And I think it is the first time in fifty years The US population will fall year over year. Because of net immigration. And a 1.7 times birth rate, which is quite low. We have the same birth rate as France. So maybe too much Netflix. Anyway, thanks.

Jade Joseph Rahmani: Jade, you also mentioned the Florida Jared Jay, you also mentioned the Florida multi as part of that, and Barry said a $1.5 billion gain. You know, it could be higher than that. We would see, but this cash-out refinancing is the first time that we have shown you guys something that could look somewhat like a mark if you were to extrapolate. Yeah. We have $309 million of agency debt. Previously from our purchase with $75 million of original equity. We took new debt of $614 million, so over $3,300,000,000 more. That is a $225 million gain or it is four times our original equity. $75 million on that portfolio, which is plus minus 30% of our portfolio.

And that is again just on the debt. The equity also has a gain, obviously. So I think that they are giving you a $1.5 billion plus gain on that portfolio. I think this should make people feel very comfortable that is in the number given this is agency debt to agency debt. And that we have that large of a gain just on the debt side without even including the gain on our equity. So I just wanted to touch on that given you brought it up. Thanks a lot.

Operator: Thank you. Our next question comes from the line of Rich Shane with JPMorgan.

Richard Barry Shane: Hey, guys. Thanks for taking my questions this morning. Look, you know, one of the things that we are hearing anecdotally is that companies start to deploy capital again the market is competitive. Spreads are fairly tight. I guess, some ways, it seems to us, like, the window, the opportunity window opened or closed very quickly. I am not even sure which direction to describe it as. Is that what you guys are seeing too? And what do you attribute that to? Is it competition from your traditional peers? Is it private capital? Is it just that funding costs are so tight as you have noted on your own side? What is driving this?

Jade Joseph Rahmani: Sorry. You want me to start, and then you can go.

Barry Stuart Sternlicht: Sure. Or and Dennis can also talk about the markets think he is on the call.

Jade Joseph Rahmani: Yeah. Dennis, why do not you go ahead?

Donald James Fandetti: Sure. Rick, you know, obviously, we had a pretty big quarter in Q3. It was primarily multifamily and industrial. And I think we have we earned above trend. You know, versus the last handful of quarters. So despite spreads sort of contracting, you know, our financing is also contracted sort of with it. So you know, we are still earning a number that is above trend.

Richard Barry Shane: Despite that.

Jade Joseph Rahmani: Yeah. I would add to that, you know, yes. Rick, to your supposition, more money has been raised in private credit and in the debt space. And there is less transaction volume, so more people are going after similar loans. Ultimately, the dentist just said we are earning trend returns in, you know, multifamily loans generically went from the beginning of the year, probably 300 over to 240 over or so today for a transitional multifamily floater. And you would think that would hurt our ROEs, but we have been able to move our repo lower at the same time. You know, I mentioned in my earlier that the banks are really leaning in to lend to us.

It is a much higher ROE business. They have a 10% capital charge on making a whole loan on real estate. They only have 20% of that 10% if they make a loan to us. So you go from 10 times leverage to 50 times leverage as a bank. And that creates a great ROE story for the bank. So the banks have really leaned into giving us tighter and tighter financing. They have room to continue to tighten. So I would say if we tighten a bit more, we should we expect to still earn a similar return to what we are earning.

At some point, I think everybody taps out if you start getting significantly tighter than that, but we are certainly not worried about it in the near future. And as Dennis said, we have a large pipeline coming, and we expect to maintain pace. It will be our second largest origination year ever, and my expectation for next year with the market starring a bit is that we hopefully do more again next year. Than this year. So things are definitely opening up, but they are on the tight end as you suppose. Barry, anything to add?

Richard Barry Shane: Yeah. I just add, I mean, if you look at our production, it is as new records and the yield on equity, return on equity is actually consistent with past. I think you there is one other new kid on the block, which you should not ignore, is data center financing. And as you can see, there is massive paper being written. Hundreds of billions of dollars will hit the market. On the market, we will figure out where to price it, but many people buying it are doing back leverage. And, whether it is Apollo Aries or with Blackstone, or any of the KKR. I mean, it, everyone is participating in some of this, and it is virtually endless.

And it is really from a portfolio construction that we are really careful about credit quality. Others may not be short term. And yeah, we are constructive. We are paying a lot of attention to not only the tenant, but the underlying tenant. As we build the book. We did participate in a large financing late in the quarter. Like most of our peers said. So and that pricing works for us. So at the moment. And it and spreads have tightened dramatically even in that space, but we still can earn the ROEs that we would like to earn. So I am not I we have been through, like, six or seven. Oh my god.

There is market’s too crowded. And know, we have a pretty long relationship in the marketplace now having originated over a $100 billion of loans. And when the people know I think one thing people grown to favor is knowing that their counterparty is going to own their loan, and they are dealing with one think that has become a really important notion for borrowers who previously had a bank you know, original loan, and then they syndicated it to someone off and then they tried to restructure it and it is impossible. I think that is helping players like us across the marketplace because we are a holder. We are going to resolve and work through with them.

So I think that has been a significant shift in the borrower community. They really want to come to a one-stop shop. And know that we will be there holding the paper. They can talk to us. So I think that is quite helpful.

Richard Barry Shane: Got it. Okay. And I appreciate the thoughtful answer, and I know it is taking a lot of time, but I would like to do one follow-up. Barry, you had talked about data center financing. And I think one of the potential risks associated with that is we are talking about long-lived assets, but those buildings are really going to be filled with rapidly and the multiple of the technology versus the property is pretty significant with potentially very quickly depreciating assets inside. How do you guys think about that as you measure risk? And I suspect a lot of it has to do with counterparty, but I am curious how different data center financing is versus your traditional businesses.

Barry Stuart Sternlicht: Well, it depends actually what you are financing. Because sometimes you are financing the building, and sometimes you are financing the building and equipment. Since, you know, the equipment can be 60% of the cost of the building. And then it closed everything. I guess, there are certain credits we favor and certain credits we would not favor. I mean, you can just look on the credit soft spot market and see how the market thinks about the different credits so far. I will say that I am actually on the West Coast, and I at a technology event. And I think the numbers at a chat are going to astonish people. The market thing. Same is true in Anthropic.

And I think these companies do have in the aggregate, a trillion dollars of free cash flow, and they other than one of them, they do not carry much net debt. So these are really good credits, and I think we are going to rely on the credits. And I think if you look at we are going to sign a deal with another hyperscale. You know we are in the data center business. We have about a $20 billion book we are building for Amazon. For ByteDance, for, hopefully, Google, Oracle, Microsoft. I would say that they are not investing like they are. They are investing like they are going to continue to upgrade their equipment to stay competitive.

And the burden will not fall on the landlords. I mean, these are if the markets are correct, the need for data center space and what you see in the assumption of I do not know about you, but my chat has gotten slower. I mean, it is definitely slower than it was three months ago. So I think they are at capacity. And if you listen to them, I mean, believe them and believe the productivity gains that will come through corporate p and l. So, I mean, I think we are pretty sanguine on most of the credits. I think there are a few of them that worry us. And there will be a correction. There inevitably is.

So we just have to be you know, have great we have great debt yields great We use coverage in the best credits in the world as your guarantor with steps. It is not awful. It is not awful. It is pretty good. It is a pure cash flow. There is no capital x. There is no CapEx. So for us. So we are going to set a balance here. I mean, we got to balance it.

Jade Joseph Rahmani: Rick, you framed it as counterparty risk. And talked about depreciation, but the lease does not depreciate. Our loan is fully amortized. We have done probably four large ones of loans fully amortized over the lease term. There is no reliance on residual value in our underwriting. So again, it comes back to counterparty risk as Barry talked about, and these are pretty good risks to take when you talk about the companies that we are talking.

Richard Barry Shane: Appreciate it, guys. Thank you.

Operator: Thank you. As a reminder, if you would like to ask a question, please press 1 on your telephone keypad. Our next question comes from the line of Doug Harter with UBS. Please proceed with your question.

Douglas Michael Harter: Thanks. As we look at the new triple net lease, business, it looks like the kind of the cap rate that you show on that slide is kind of in the 5% range, which seems below peers. Is there anything that is affecting that in the short term? And as that business scales, kind of where do you think cap rates can get to?

Jade Joseph Rahmani: Yeah. We only had two quarters in there. And so this quarter, it will look so it is a 6.9% or 7% implied cap rate with no goodwill. On this portfolio with the purchase price. So much higher. So there is a normalization that it will scare people if they see that five handle number that is not a correct number.

Douglas Michael Harter: Great. Appreciate that clarity. And then, Jeff, you briefly touched on it. But just hoping you could talk a little bit more about, you know, kind of the value and how the lenders were valuing Woodstar you know, kind of as you went through that refinance process?

Jade Joseph Rahmani: Yeah. Thanks, Doug. You know, I did briefly, but we had $75 million of original equity that with this cash-out refinancing, we took $300 million out. Obviously, it is a four times our equity return. So the portfolio has done really, really well. And if you gross that up on our entire portfolio, of $500 million and change purchase price, and that is just on the debt. The equity piece also has a gain. You know, I think you would get very easily to where Barry came in as at a $1.5 billion gain pretty quickly.

So I think the market should feel pretty good about that being something that is available to us should we choose to take some of it in that will be up to Barry and the board as to the timing and when.

Douglas Michael Harter: Great. Appreciate it. Thank you. Thanks, bud.

Operator: Thank you. That concludes our question and answer session. I will turn the floor back to Mister Sternlicht for any final comments.

Jade Joseph Rahmani: Hey, Barry. Before you go, we have something sort of new that just came in because it just priced, but we have priced our fourth CLO in the CRE side. It just priced minutes ago, so I could not really say anything previously. 165 basis points over So for 87% advance rate, that is a very strong deal for us. We have three large billion dollars CLOs previous to that in the CRE side. Actually bought out a decent amount of paper over those. The bondholders have done very well on those and CRE CLOs will never be a business for us. It is a trade when it makes sense, and it made some sense today.

It made a lot of sense in the energy infrastructure business as well where we just priced our sixth CLO, and I think two-thirds or almost three-quarters of our debt is not financed in CLOs on the energy side. So we are very happy to have priced a CLO really tight with a great advance rate. Five minutes ago. So good news. Also there. But, Barry, I will turn it to you now for final comments.

Barry Stuart Sternlicht: No. I would say this is because of primarily fundamental. This is the mid-transitionary quarter for us, but the underlying businesses are super strong. The curve is favorable. The team is proven originators across the entire platform. So you know, we will get through. I think we made the right long term by buying fundamental. This is a quarter where you would not recognize that decision, but I think you will be super happy as we scale the business. We are betting. So we own a lot of our stock. Thanks for being with us today, and enjoy your week.

Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.