Starwood Property (STWD) Earnings Call Transcript

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DATE

Feb. 25, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Financial Officer — Rina Paniry
• President — Jeffrey F. DiModica
• Chairman and Chief Executive Officer — Barry Stuart Sternlicht
• Head of Infrastructure Lending — Sean Murdock

TAKEAWAYS

• Distributable Earnings (DE) -- $160 million, or $0.42 per share, reflecting timing of capital deployment and balance sheet optimization.
• Adjusted Distributable Earnings -- Would have been $0.49 per share after accounting for temporary timing impacts, including $0.06 of expected incremental DE from net lease operations and $0.04 reduction from elevated cash balances.
• Full-Year Distributable Earnings -- $616 million, or $1.69 per share, with DE adjusted for all temporary items and a $0.12 realized loss at $1.95 per share, above the full-year dividend of $1.92.
• Capital Deployment -- $12.7 billion deployed across all business lines during the year, including $2.5 billion in the fourth quarter, marking the second-largest investing year in company history.
• Commercial Lending Origination -- $1.7 billion of loans originated in the quarter, of which $1.2 billion funded and $223 million from prior commitments, resulting in funded loan portfolio growth of $823 million to $16.6 billion.
• Unfunded Commitments -- $1.9 billion in commercial lending, expected to generate future earnings as drawn.
• Actively Managed CLO Issuance -- Completed $1.1 billion commercial lending CLO with weighted average coupon of SOFR plus 165 bps, as well as $500 million and $600 million infrastructure lending CLOs at spreads of 172 and 168 bps, respectively.
• Credit Quality and Reserves -- Portfolio risk rating averaged 3.0, with $680 million of reserves allocated as $480 million CECL and $200 million of REO impairment, translating to $1.84 per share in book value.
• Segment DE Contributions -- Commercial and residential lending: $176 million; infrastructure lending: $27 million; property: $49 million; investing and servicing: $46 million; net lease: first full quarter DE of $12 million.
• Record Total Assets -- Undepreciated assets reached $30.7 billion at year-end, with commercial lending now comprising 54% of total assets.
• Net Lease Portfolio Metrics -- Weighted average lease term of 17.3 years, 100% occupancy, and 2.3% annual rent escalations.
• Capital Raising Activity -- $4.4 billion in corporate debt and equity executed during the year, including $1.6 billion in unsecured notes, $1.6 billion of term loan repricings, $700 million Term Loan B, and $534 million equity raise accretive to GAAP book value.
• Leverage -- Debt to undepreciated equity ratio of 2.4x, over a full turn lower than closest peer, with unsecured debt constituting 18% and off-balance sheet debt 22% of total debt.
• Liquidity Position -- $1.4 billion in liquidity reported, with $11.9 billion available across financing lines at year end.
• Special Servicing Performance -- Servicing fees rose to $38 million in the quarter, totaling $107 million for the year, up 47% and highest since 2017, amid near-record CMBS maturity defaults.
• Ownership Alignment -- Insider ownership cited at approximately 6%, totaling $380 million, exceeding that of all peers combined.

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RISKS

• CFO Paniry noted, Our quarterly results were impacted by temporary timing issues, citing specifically higher-than-normal cash balances and new net lease asset ramp, which reduced earnings by a combined $0.07 per share for the quarter.
• $91 million multifamily first mortgage in Phoenix classified as credit deteriorated and moved to risk-rated 5, with $20 million of reserves designated as specific based on recent appraisal, reflecting ongoing credit risk in select assets.
• President DiModica confirmed, "We ended the year with approximately $1 billion of commercial loans on nonaccrual and $624 million of foreclosures," with concentration in a small number of assets subject to active business plans.

SUMMARY

Management emphasized improved liquidity and embedded earnings power expected to boost dividend coverage as 2026 progresses. The company completed multiple successful CLOs and ABS transactions at record-low spreads, reducing financing costs and supporting future earnings. Asset diversification accelerated, with infrastructure lending and property investments expanding and U.S. office exposure reduced to 8%. Proactive asset management strategies were outlined, including resolving up to $1 billion of nonaccruals and foreclosed properties, with capital redeployment presented as a significant future earnings lever. The call highlighted increased origination volume expectations and discussed repositioning multifamily and office assets to enhance portfolio resilience. Executives stressed that net lease and owned real estate platforms are now major contributors and remain candidates for capital markets recognition or possible spin-off.

• Chairman Sternlicht said, "if it gets to scale and we are not getting the performance in our stock and it continues to trade like a junk credit, we will spin it out." in reference to the net lease business.
• Head of Infrastructure Lending Murdock highlighted a projected 5% annual CAGR in U.S. energy consumption and LNG export growth as drivers of a large addressable market for infrastructure lending.
• Jeffrey F. DiModica outlined that new loan originations are expected to meet or exceed the prior year's $6.5 billion, with "more maturities this year" and greater opportunities due to lower rates and higher transaction volumes projected for commercial real estate.
• Residential mortgage business is delivering an approximate 11% run-rate ROE, with further upside linked to lower rates and ongoing spread tightening.

INDUSTRY GLOSSARY

• DE (Distributable Earnings): Core cash earnings available for distribution to shareholders, excluding certain non-cash items.
• CECL: Current Expected Credit Loss, a reserve methodology estimating future losses over the life of a loan.
• CLO (Collateralized Loan Obligation): A securitized financing structure backed by a portfolio of loans; actively managed CLOs allow replacement of collateral over time.
• ABS (Asset-Backed Securities): Structured debt secured by pools of financial assets, often used for raising funds in real estate finance.
• REO (Real Estate Owned): Properties acquired by foreclosure or deed-in-lieu, typically held for resolution or repositioning.
• CMBS (Commercial Mortgage-Backed Securities): Bonds secured by commercial real estate loans, often used as a financing and risk-distribution tool in CRE lending.
• Net Lease: Real estate lease in which the tenant pays base rent plus property expenses such as taxes, insurance, and maintenance, providing predictable cash flow to the owner.
• Cap Rate: Ratio of net operating income to property value, commonly used to assess valuation and returns in real estate.
• SOFR (Secured Overnight Financing Rate): Benchmark interest rate for dollar-denominated derivatives and loans, replacing LIBOR in U.S. markets.
• CPR (Conditional Prepayment Rate): Annualized percentage of outstanding mortgage principal expected to be prepaid ahead of schedule in a pool of loans.
• Nonaccrual Loans: Loans on which the lender no longer recognizes interest income because of borrower payment delinquency or credit deterioration.

Full Conference Call Transcript

Rina Paniry: Thank you, Zach, and good morning, everyone. Today, we reported distributable earnings of $160 million, or $0.42 per share, for the fourth quarter. While our reported results reflect the timing of capital deployment and balance sheet optimization initiatives, our underlying earnings power continues to build. Importantly, we exited 2025 with enhanced liquidity and embedded earnings from this year’s investments and unfunded commitments, all of which will increasingly contribute in 2026, with our dividend coverage expected to improve steadily throughout the year. Our quarterly results were impacted by temporary timing issues, adjusted for which DE would have been $0.49.

The first is our newest net lease cylinder, which on a run-rate basis would have contributed $0.06 of incremental DE to the quarter but instead contributed $0.03. 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 continued the theme of proactive capital repositioning, we had temporary reductions to earnings of $0.14 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 $0.12 realized loss we recorded upon sale of a foreclosed asset earlier this year was $1.95 versus our full-year dividend of $1.92. Given our enhanced earnings power as a result of this year’s strategic transactions, and as we continue on our path to resolving our nonaccrual and REO assets, we see a clear line of sight to earnings that cover our dividend, a dividend that we have never cut.

Our diversified lines of business continue to perform at scale, allowing us to deploy $12.7 billion in 2025, our second-largest investing year to date. This included $6.4 billion in commercial lending, a record $2.6 billion in infrastructure lending, and $2.4 billion in net lease. $2.5 billion of our deployment was in the fourth quarter, bringing total undepreciated assets to a record $30.7 billion at year-end. As a testament to our continued diversification, commercial lending now makes up just 54% of our asset base. I will now take you through our individual segment results, beginning with commercial and residential lending, which contributed DE of $176 million to the quarter, or $0.46 per share.

In commercial lending, we originated $1.7 billion of loans, of which we funded $1.2 billion, along with $223 million of preexisting loan commitments. After factoring in repayments of $670 million, we grew the funded loan portfolio by $823 million in the quarter to $16.6 billion, our second-highest level since inception. In addition, we have $1.9 billion of unfunded commitments, which will generate future earnings as these loans fund. We also completed our fourth actively managed CLO for $1.1 billion with a weighted average coupon of SOFR plus 165 basis points. 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 impairment. 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, risk-rated 5 first mortgage loan on a multifamily property in Phoenix as credit deteriorated. The loan already maintained an adequate general reserve, but based on a recent appraisal, we reclassified $20 million of our reserve from general to specific. Jeff will go into more detail on our credit migration and asset management initiatives.

Turning to residential lending, our on-balance sheet loan portfolio ended the year at $2.3 billion, consistent with last quarter, as $58 million of repayments were largely offset by $31 million of positive mark-to-market adjustments resulting from slightly tighter credit spreads. Our retained RMBS portfolio remained relatively steady at $405 million. Next is infrastructure lending. This segment contributed DE of $27 million, or $0.07 per share, to the quarter. Our strong investing pace continued with $386 million of new loan commitments in the quarter and a record $2.6 billion in the year. Repayments totaled $568 million during the quarter and $2.0 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 basis points, respectively. Nonrecourse, non-mark-to-market CLO financing now represents 75% of our infrastructure debt. In our property segment, we recognized $49 million of DE, or $0.13 per share, in the quarter. In our Woodstar fund, comprising our affordable multifamily portfolio, we recorded a net unrealized fair value increase of $17 million in the quarter for GAAP purposes. The value was determined by an independent appraisal, which we are required to obtain annually. Also during the quarter, we sold a 264‑unit multifamily portfolio for a net DE gain of $24 million.

The $56 million sales price was in line with our GAAP fair value. 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 $0.12 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 have 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 GAAP gain of $10 million and a net DE gain of $3 million. Turning to liquidity and capitalization, we had our most active capital markets year in our history.

We executed a record $4.4 billion of corporate debt and equity transactions, including $1.6 billion in unsecured notes, $1.6 billion in term loan repricings, a $700 million Term Loan B, and a $534 million equity raise that was accretive to GAAP book value. We continued our focus on conservative leverage, ending the year with a debt to undepreciated equity ratio of 2.4x, 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 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.

Jeffrey F. DiModica: Thanks, Rina. As we enter 2026, our priorities are clear: resolve legacy credit, maintain a conservative balance sheet, and selectively grow our highest-returning businesses to restore full earnings power. We exited 2025 with continued stabilization in credit markets and improving transaction activity. Activity is still below peak levels but trending positively as liquidity returns and rates move lower, supporting originations, refinancings, and more constructive resolution outcomes. Real estate as an asset class has taken longer to normalize than many other parts of the economy, and performance remains uneven across sectors and geographies. We do not expect the volatility in corporate credit markets to have a large impact on CRE fundamentals, which have largely insulated and outperformed in the lower-rate environment.

We built Starwood Property Trust, Inc. to operate through cycles, and this year reflected that. In 2025, we raised and repriced a record $4.4 billion of capital in corporate debt, with our debt issued at the tightest spreads in our 16‑year history, strengthening liquidity, preserving flexibility to deploy capital accretively while maintaining low leverage, and significantly extending corporate debt maturities. We continued to diversify our business in 2025, with the acquisition of our net lease business, which added over $2 billion of long-term accretive assets with 2.3% annual rent bumps that will add incremental future distributable earnings for years to come.

Cap rates have come down since we closed, as have financing costs, which increases the value of the existing portfolio we purchased as we have optimized their financing structure, adding to the long-term tailwinds of the business. As Rina mentioned, we closed one securitization in Q4, and another after quarter-end, both at a lower cost of funds than we underwrote, and we are in the process of significantly improving our bank line financing spreads. We continued to increase our pace of investing across businesses in 2025, investing $12.7 billion, including $2.5 billion in the fourth quarter alone.

This was our second-largest investing year in our 16‑year history, and notably, our global team achieved that volume in an environment where overall transaction and origination volumes remained well below historical averages. We anticipate another robust origination year in 2026, which will produce additional earnings along with the funding of $1.9 billion of unfunded commitments Rina mentioned. In commercial lending, we originated $1.7 billion in the fourth quarter and $6.4 billion for the full year. Our portfolio is expected to grow to a record $17 billion in the first quarter, and we expect to continue this momentum in 2026.

U.S. office loans represent only 8% of our diversified asset base, the lowest percentage in our history and well below that of our peers. We have done this by repositioning our loan book to more stable assets like multifamily and industrial, which accounted for 72% of 2025 originations. I will start my discussion on credit and asset management with some positive outcomes, starting with multifamily loans to undercapitalized borrowers who are unable to continue to fund through resolution. We have executed multiple sales of multifamily REO at our original basis and have more slated for sale at or near our original basis.

We have intentionally avoided forced liquidation and, in doing so, have protected shareholder value by taking over management, executing unfinished business plans, and increasing occupancy and property values. We are seeing tangible improvement across portions of our office portfolio, highlighted by approximately 800,000 square feet of leasing finalized during the fourth quarter, the highest quarterly leasing volume of the year. This total includes a 200,000 square foot lease at a Brooklyn property that was previously risk-rated 5. That 630,000 square foot asset was vacant coming out of COVID, and with the pending execution of a third substantial lease, will be 100% leased to three strong credits on a 32‑year weighted average lease term, with average annual rent escalations of 2.2%.

This is a great outcome for shareholders, again reflecting our patience, active engagement, and improved leasing momentum. Sales activity has also improved, allowing $200 million of office loans to repay at par in 2025. Year to date in 2026, an additional $200 million of loans originated as office have sold or are in the process of closing, including $115 million related to a formerly risk-rated 5 asset also in Brooklyn. Patience has paid off for us in the past when managing foreclosed assets, and we present value and probability-weight potential REO outcomes individually as we decide whether to liquidate, or hold and reposition assets, bringing the full strength of the Starwood platform to bear on these situations.

We ended the year with approximately $1 billion of commercial loans on nonaccrual and $624 million of foreclosures. That exposure is concentrated in a small number of assets, and each of those is in an active execution phase with defined business plans being managed by our in-house management team at Starwood. Turning to rating migrations, we had three assets migrate to 5 in the quarter. The first is a $108 million studio production asset in New York that we co-originated pari passu with two large U.S. banks and own 32% of the first mortgage. Utilization declined materially following the writers’ and actors’ strike.

The sponsor has invested substantial equity since origination, but the property has not yet stabilized as originally underwritten. Second is the $269 million asset outside the Midtown Tunnel in New York. We increased the risk rating this quarter due to the sponsor’s unwillingness to contribute additional capital. We have increased our involvement and are executing a revised plan with the sponsor, who is currently negotiating lease proposals representing a substantial portion of the vacant space. This newly constructed, well-located asset is positioned for potential near-term stabilization. We also downgraded a $33 million multifamily asset outside Dallas. We anticipate assuming ownership via foreclosure in the near term.

Upon transition, we intend to implement a focused value-add plan as we have successfully done on similar multifamily projects. Our basis is below replacement cost, and our captive asset management team expects to be able to execute on a value-add business plan in the coming quarters. We also downgraded one loan to a 4 rating: a $90 million mixed-use portfolio in Ireland that we restructured to extend term and provide flexibility while assets are sold down. While asset sales have taken longer than originally contemplated, transactions completed to date have been in line with underwriting, and our base case continues to support full repayment over time.

These are active asset management situations with defined action plans, and while resolution timing may vary, we are highly focused on resolving nonearning assets. Redeployment of this capital will be a tailwind to earnings as we achieve resolution. Our energy infrastructure lending platform had its largest origination year ever in 2025, investing $2.6 billion across the segment. The portfolio now totals almost $3.0 billion and remains diversified across power and midstream assets and has one of the highest ROEs in our portfolio. These are senior secured, asset-backed investments supported by durable cash flows and long-term demand drivers in energy and power markets.

Loan-to-values continue to fall in this segment as loan performance remains strong, power needs and capacity auction prices continue to increase, and returns remain attractive. Finally, with the pricing of our seventh CLO, 75% of our SIFL loans now benefit from term non-mark-to-market financing, reducing funding volatility. Turning to our new net lease business, Fundamental Income, Rina mentioned our integration is on plan, and we currently have a large pipeline and expect to increase volumes over the course of this year, which, along with 2.3% annual rent escalations, will increase returns in this cylinder each quarter and year.

Rina told you we completed our first ABS financing in Q4, and subsequent to quarter-end, we executed our second securitization for $466 million, again at tighter-than-underwritten spreads, which will allow us to continue to accretively invest in this cylinder at today’s cap rates. We believe our net lease business, along with our other owned real estate, adds duration and contractual cash flow to the platform, and over time we expect it to become a more meaningful contributor to run-rate earnings. We are a hybrid company with approximately $7.5 billion of owned real estate, or 24% of our balance sheet. We are different than other mortgage REITs in our peer group.

In a period where our stock has significantly underperformed, the stocks of equity REITs and triple net lease REITs have significantly outperformed STWD and other mortgage REITs, with the largest underperformance coming in the last few months. It is important to remember that we are no longer simply a mortgage REIT. We operate a diversified real estate finance platform with true scale, operating businesses, and a strong, well-capitalized balance sheet, with access to capital at the lowest spreads in our history. The diversity and stability across our portfolio continues to uniquely insulate us through periods of sector instability. Our leverage is significantly lower than our peer group at just 2.4 turns today.

While we could enhance near-term earnings by increasing leverage, we have deliberately chosen not to do so, instead prioritizing a strong, durable balance sheet to support our generational vehicle. Insider ownership further reinforces that alignment, standing at approximately 6% or $380 million today, greater than the insider ownership of all our peers combined. We continue to look internally for ways to improve how we operate. We are investing in tools and technology to streamline underwriting, asset management, and reporting processes, and we expect to increasingly leverage data analytics and AI-driven tools as part of that effort.

The foundation is in place for STWD 2.0 to come out of this cycle successfully, as the only CRE mortgage REIT that never cut its dividend. Looking ahead to 2026 and beyond, resolving our nonaccrual and REO and increasing originations pace and volume allow us to earn more than the $1.95 we earned this year, excluding the temporary items that Rina noted. With that, I will turn the call to Barry.

Barry Stuart Sternlicht: Thank you, Zach, Rina, and Jeff, and good morning, everyone. I am going to use a slightly different tack as I talk about our earnings and what is going on in our industry and the greater real estate markets this quarter. I think you can see that 2025 was a transition year for Starwood Property Trust, Inc. I am going to elaborate on that, take some comments out of the earnings release, and talk about some of the points I made in it. The really good news is we built an incredible machine here.

We have all the pieces in place to outperform for our shareholders in the long run, and some of our core businesses had exceptional years with a growing loan book, which has reached record highs, as well as the continued great performance of our multifamily book. Jeff mentioned that 24% or 25% of our assets are in real estate. Our affordable housing book is in some of the best markets in the United States, Orlando and Tampa, where rents remain roughly 40% to 50% below market rates, and we are exceptionally full and have great pricing power. You can see that with the increase in value of the portfolio just in the quarter that Rina talked about.

But in addition to our originations, which were strong throughout the year, our infrastructure lending business, heritage GE Capital—GE itself, I guess—had a great year. The conduit team had the second-best year in their history. It is rated one of the best conduits in the country. Our special servicing arm, formerly LNR, had a great year also, counterbalancing some of the weakness in some of the property lending earnings, and continues to be the number one or two special servicer in the country, with an ever-growing book of named servicing and active servicing.

And those businesses delivered excellent results for the year, and even our residential lending businesses, which have been somewhat dormant, gained in value over the year as spreads and rates declined. Those are all really good news. So I tasked Rina with telling me why we are not performing at the levels we have in the past with such good news in the portfolio, and what we saw are three real reasons for that. One, the lack of prepayment penalties that have always been part of our business; our borrowers stretched maturities and were not prepaying them, so that disappeared.

Equally important was we have taken into our earnings noncash losses, and they are used differently by some of our peers, but if you actually include them—because they are noncash—we would have covered our dividend. That also included in that statement the drag of having excess cash. We used to run this enterprise at 2.4x to 2.5x leverage. Beginning of the year, we started at 2.1x leverage, which is a turn to a turn and a half inside many of our peers, and it is really the nature of the composition of our business lines.

And then with the Fundamental Income investment we made in the third quarter of the year, that business, because of its stability and the duration of the cash flows, we leverage 3:1. That dragged our overall leverage levels back to 2.4x at the end of the year. But the bulk of our business, excluding the Fundamental Income triple net lease business, still remains historically underlevered, and we have a lot of cash trapped in the business. We estimate the cash drag at something like $0.07 for the year. If you add them combined, it is almost $0.20 of earnings—I think it is $0.12, $0.07, and something else. Rina can give you specifics. And that will reliably cover our dividend.

And then we look at our nonaccrual book, which you may look at as a problem, and we kind of do, but we also look at it as an opportunity. It is future earnings power for us. When we have first mortgages, like Jeff said, along with two money center banks, it is inconceivable that the property is not valuable. It is just probably a borrower issue. In many cases, we find our borrowers are underwater. They do not want to put the money in for TIs. They do not want to put their money into repositioning or even fit out a space for a tenant. So we have to take it back. It takes a lot of time.

And once we have control, we can re-tenant it, reposition it, and, in fact, then sell it. So we have chosen long vol. We have chosen the way to approach our company because we own roughly $400 million of stock along with our shareholders, as if your capital was our own, and we have chosen to do what is best for ourselves over the long run. A prime example would be an office building that was bought by a household-name firm for $400 million. Our loan was $200 million. We took it back. We could sell it, but it is an office building. We are converting it to a rental building. That is underway.

It is going to be a great building in the center of Washington, D.C., and we are confident that we will return our investment, close to it, and maybe make some money depending on how well we do with our renovation. But that is far more attractive to us than just dumping it and then moving on. So you are going to see these assets—because we are a real estate player at heart—you are going to see us take back assets, reposition them, and then sell them, and Jeff mentioned in prior years, we have made substantial earnings doing that. We did not intend to be loan-to-own; let us not kid ourselves.

But what has happened in the marketplace with the massive increase in rates, and then the slowdown of the recovery of rents as the market had opened overbuilt, we know that going forward these assets will produce earnings for us in the future, albeit not at the pace that I might have hoped, but real estate is not really that kind of business. And we are very confident in the future earnings power of our business. I think especially next year as we continue to roll out capital we have committed but have not funded—loans we have made this year, which Jeff mentioned, are almost $1.9 billion.

Our triple net lease business, which was dilutive—I think it was $0.06 in the year—should turn accretive next year, and we love that business. Fifteen-plus-year leases, never a default ever. We actually underwrote it with defaults, but we have never had a default. And they are just getting to scale now with our capital. We have also found that with our expertise in capital markets, we have materially improved their financings, and so our ROEs are rising rapidly. We just have had a lot of overhead for the last three or four years. I mean, real estate was not going anywhere, rates were rising, everything was outperforming.

But it is safe to say as we look forward that we have tailwinds now. The decreases in supply in the multifamily market—dropping 60%, 70%—eventually we will see record absorptions of apartments. In the last year in the United States, record absorptions. So with supply down and people still being unable to buy homes, we expect the multifamily markets to turn around, and that will help our borrowers and that will lower LTVs. And right now, where we get an asset back, we are kind of not sure we should sell it, or fix it up and then sell it later. But we also think the second big tailwind is interest rates.

They are going lower, the pace of which nobody quite can figure out—whether AI, how deflationary it is, how fast it will happen—will it be deflationary, but interest rates will be lower. The economy is bifurcated. I know the administration does not like to talk about a K economy, but you see it. You see in the hotel industry, the only sector of the market that was up last year was luxury. Every other sector—upscale, upper-upscale, midscale, lower-scale economy—everything was down. And also, cost to build, replacement cost, has continued to stay high.

And while they may have dropped a little bit, the cost of building a home still remains well above our basis in almost any of the assets in our book. So new supply will be hindered until rents begin to rise again. I guess the negative and the thing that gets us concerned, of course, is AI—what it will mean for wealth and potentially unemployment. I think this will be a little bit what the market is wrestling with right now. We are all watching it, deciding what we think.

I think there is one other positive I should mention, which is as rates fall, our transaction volumes will pick up, and that will give us more opportunities to refinance other people and other deals, or make new loans and new deals. And I think real estate, as it usually is, is a safe haven during times of tumult in the marketplace. So overall, I think we had a solid year, and we positioned ourselves really well for the future for the next couple of years. We are excited with our team.

I also think we are going to make a strong effort to reduce our costs and use AI to do what we do like everyone else—more with higher productivity and less cost embedded in the structure. And that is unique to us. We have very large businesses tucked into our mortgage book, all of which are supported by the REIT, and we hope we can make our people more productive and do so in an efficient manner, and we are very excited about taking on those challenges. So with that, I want to thank the team, and thank you for your support, and we will take your questions. Thank you.

Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Donald James Fandetti with Wells Fargo. Please proceed with your question.

Donald James Fandetti: Hi. Good morning. It seems like you are increasing the CRE loan portfolio again in Q1. Can you talk about the pace throughout 2026? And also the return profile of these originations versus historical.

Jeffrey F. DiModica: Thanks, Don. Good morning, by the way. I think I mentioned in my script that we expect the loan portfolio on the CRE side to go over $17 billion in the first quarter. That would be the first time—we have been growing the loan book for every quarter since COVID, every quarter in COVID, every quarter since we started. I think we have made commercial real estate loans. So it is nothing new. We are obviously sitting on a little bit more liquidity after all of the cash-out refinancings and raises that we were able to do last year, so our pace has increased as we try to deploy that. Rina spoke a little bit about drag last year.

I think we did $6.5 billion or so of CRE lending. We expect to do at least that this year. My gut is that you are going to have more maturities this year. You have people who have executed their business plans on post-COVID or post rate-rise loans. You have a number of loans from before that period that simply need to move out of the pipe, and we also have lower rates, which will create more transaction volume. In 2021, you had high-$600 billion of transactions in the market. You will have two-thirds of that this year. So as transactions move up, as rates move down, as maturities come, we expect more opportunities.

We borrow inside most of our peer group. Our last term loan was at 175 basis points over, I believe, on a new issue, which was incredible. And then the high-yield markets were somewhere around 200 over. No one in our space—well, one person in our space can borrow there, but the rest cannot. I think we have a cost of funds advantage. Also, being the biggest, we have bigger relationships with the banks who we will tend to repo with. They pick up a cross from us. The cross is worth more with us than it is with anyone else because our lines are bigger, and we have relationships.

So I think it looks like a very good year for originations. Last year was our second biggest. I would hope that we would be able to beat that number this year. We have $2 billion closed or in closing in the quarter. So we are still pedal down. We know we have to originate more loans and thoughtfully work out of the REOs and nonaccruals to get back to the run-rate that we keep talking about by late ’26 where we are covering the dividend.

Donald James Fandetti: Got it. And I guess, what is your expectation for credit migration near term? It sounds like you are playing the long game, which we appreciate. But I guess that also means that we will continue to see these sort of one-off type migrations.

Jeffrey F. DiModica: Yeah. Barry, I will let you go after it. Maybe I will start. You know, migration—there are people who sell things right away. That is a business plan. There are people like us who will work on them. We do not have a business plan for what we do with a credit and putting it through a Python. We look at every one of them individually, try to present value what we think the value is of getting the amount of cash we would get back in a distressed-ish sale today without working on the asset, then what is the present value of the cash we get back over the time that we would do it.

And then against that, we make assumptions of where we think the property could end up—positives, negatives. We look at our liquidity, our cost of capital, etc., and we look at what information Starwood, the manager, can bring to bear to make the asset better. We have a great history of making assets better than the next buyer. The next buyer is going to be a 20% return private equity guy who is going to buy from us at a 10% to 12% cost of capital, and then he is going to back up his bid a little bit because of the things that he does not know. We know the asset. We have a lower cost of capital.

We can borrow against the assets significantly cheaper than corporate debt than he can. That all goes into our individual business plans as we look at each individual asset without having a business plan that we are a forced seller or a holder of assets. And when we look at those, we make the decision as a management team across our capital and our property trust to either stay in and ride it—which we have done successfully. Barry gave you an example of another one that we are redeveloping. We expect to have successfully done. I gave you examples of a number of them.

I think we resolved $300 million last year in actual resolutions—not foreclosures; we do not call foreclosures resolutions; some people do. We had $130 million more fall out, so it would have been $430 million. We hope to resolve—we have a sheet and we look quarterly at what we expect to resolve. Our goal is to resolve most of a billion dollars this year. And if we execute on that, great. And if we do not, it is going to be because we looked at the present value of the cash flows and the cash flow we get from that day, and we are going to make the best decision for shareholders on each bespoke asset.

So we do not really have a plan. As for U.S. credit migration, I think we have our arms around where we think the potential problems are. If you look at that, property types are going to make a difference. The market it is in is going to make a difference. Tenant movements are going to make a difference. It is all very bespoke, but we feel like we really have our arms around where the potential problems are going to be.

Barry Stuart Sternlicht: Should I add a few things? Can you hear me okay? I mean, just given all the plans we have, this is a business with a bunch of individual assets. And it has been remarkable—the amount of money we have at one asset, where the cap stack was $1 billion, the NOI is $40 million, and the borrower lost their equity. When they walk, tenants obviously know the building is in trouble. They are not going to go in the building that needs the TI. The borrower has absolutely zero incentive to do anything. So in multiple cases in our pipe, we expect to have the asset back.

And we are not supposed to be leasing our buildings for our borrowers. If we are going to put the dollars in for the TI, we want to get the asset back. There is no reason to exercise their position. So, you know, we play fair ball, and we try to work with our borrowers if we can. I think the multi business is particularly interesting. I mean, it is one of these businesses—you could all remember Long Ago, we started with Starwood Financial that changes into iStar and wound up taking back a whole bunch of stuff in TFC and turned themselves into a quasi equity REIT and made a fortune.

Obviously, the best thing we can do in our loan is get our money back. That is primarily our business—certainly half of our business—and we are happy to play in that ballgame. We are talking about real estate, but long term, you make more money on the assets. We are comfortable on a great asset, although we are looking at what we can recycle once we stabilize the assets. And I would say, for the most part, it is mostly good news to get the assets back and find that there is great demand for it, and we expect to be able to move these properties. But I do not get to do this on a quarterly basis.

Our clients do not march towards quarter-ends. And our borrowers do not give up the keys always willingly. In many cases, they do and work collaboratively. But in the exception, they might move slower. I think people are surprised—I think in the real estate world today, borrowers are surprised with the slow pace of recovery of that multifamily market. And while you have some positives in coastal cities that saw no supply, you have not seen the green shoots in the Sunbelt. You can read the earnings reports of every public company, maybe save one. Remember, the rental growth of the Sunbelt markets is not great.

We are getting positives from renewals and negatives from new leases pretty much across the board—maybe you are plus one or minus one or plus two—and I see that it is not robust, and expenses continue to march higher. So you have stressed P&Ls. I do not think—when we look at our attachments, where we are loan-to-value as opposed to build-it or bought-it—in many cases, their loans are transitional, and that is something. Out of repositioning multi, I am kind of happy to get it back. We are able to move them. We probably have a dozen assets we have been in our pipeline and are here today. But, you know, I have mixed emotions.

If you really like the market, the Sunbelt may be overbuilt, but it is where all the jobs are. It is where all the companies are moving. We are looking at our headquarters. It is where the factories are being built, and it is where the cost of living is generally less. They are right-to-work states. They are attractive states and attractive markets for the reshoring of investment and reindustrialization of the country.

So, you know, when you know there is a new factory going up in a year and a half—the year and a half to build—the market, do you want to sell the multi now, or do you want to be the guy Jeff said, an opportunistic buyer, who is going to buy the asset? We do not do that, but in this case, we already own it. So we will just keep it in the REIT if we want to keep it. We will just hold it. So, you know, I think it is sloppy for you because we are a unicorn in our space. And if we really thought we had an issue, we are not worried.

If you take out the noncash losses, take out some of the cash drag that we know we put into place, we are pretty confident. We will reach very, very levered returns with lower rates. And once it reaches critical mass, it becomes pretty positive and reliable and recurring and stable, which is exactly the metrics that we used to go public in 2009. Consistent level. We have had some potholes, but we are on the same field. We have never had this kind of destruction in our markets, including the pandemic and the office markets. It is inevitable. So I am fairly proud of the way we are negotiating.

I know Jeff keeps his job on some of these REO assets, and we are looking at whether we should turn accruals back on in some asset cases because performance has improved. So it is a mishmash. Unfortunately, it is hard to say. Thanks.

Operator: Thank you. As a reminder, if anyone has any questions, you may press star one on your telephone keypad to join the queue. Our next question comes from the line of Gabe Foggy with Raymond James. Please proceed with your question.

Gabe Foggy: Hey, good morning all. Thanks for taking the questions. I wanted to talk about the residential portfolio and then the infra book. So on resi, Jeff, is there a point where, I do not know, in the market where rates get to a certain level where you guys look holistically and say that maybe you can sell the portfolio to kind of unearth the capital that sits under that to go make more infra or CRE loans? And then Barry, on the infra side—Barry and Jeff—just remind us: what is the total opportunity set for the infra lending business? Who are your true competitors and how big can that book get over time?

Jeffrey F. DiModica: Thanks, Gabe. Hey, Barry. Again, I will start unless you want to start. On your first question on resi, performance has been great. I think we had a markdown to our GAAP book value of $247 million back in ’22 when the rate change happened. We are significantly below that today—I think it is $100 million-and-change after hedge, maybe a little bit higher than that—but we have got back a significant portion of that by holding on, the same strategy that we have used.

And also the thing that would surprise you is because we have a lot of legacy RMBS in bonds that we have, I think our ROE on our resi portfolio—that is hard for you to see because you see loans marked at 96 or 97 that we paid 101 or 102 for—I think our run-rate ROE is around 11% today across the entire resi business. So to your point, things that will make it get better: spread tightening or lower rates. Spread tightening has come our way. Securitization spreads have tightened 25 basis points since January 1 alone. We are at the tightest securitization spreads since 2022.

Securitization issuance, I think, is $10 billion year to date versus $5.3 billion at this time last year. Insurance cares about these assets. They get great insurance treatment, and that along with the street conduits and others, there is a great bid for the types of assets that we have historically liked. That has allowed us to mark them up. That has allowed us to reduce that GAAP book value loss significantly. From here, we cannot count on spreads being significantly tighter from here—they probably can tighten a bit—but they have made their move. So to get back from the $96 or $97 or $98 price to par or $101 or $102, rates are going to be the other piece.

You mentioned that. Lower rates help us because it increases CPRs. We were running at 5% or 6% CPR in our non-QM last couple of years. We are up to 8% or 9% CPR today. We get more back at par when that happens. That is good. I think in-house, although we never make bets on rates, we believe rates are probably headed lower. It certainly feels like the AI-driven productivity will match that of previous productivity gains that we have seen and drive rates lower. We do not make any real bets based on that. But if I am betting on that and betting on rates going lower, that will certainly help that book.

As you know, we hedge that book and are always moving our hedge around a little bit. The only way we probably get back to getting that full write-down back is by reducing that hedge a bit and being correct on rates going lower—not something we historically do—and I think we will wait and see. You create a distributable earnings loss when you take that GAAP book value hit into earnings. We like the assets; they are returning 11%, so I do not think we are going to rush to sell. Barry, unless you have anything on rates, I would then wait to infra and ask Sean Murdock in the room.

Barry, do you have anything you want to add on residential?

Barry Stuart Sternlicht: Not really—not more than we want to go back and forth. We are adding value in there. We are going back into the business. This is a business we have a team in place for; we are following them. We are capable. We just have to make the numbers work. So if we can, we would go back, and then we can have that as well. One of the reasons you have to diversify business models is when some are unavailable, you have plenty to put into other verticals. I want the introduction to Sean because you precisely went into that business and have another material lending vertical also. Sean, all yours.

Jeffrey F. DiModica: Yeah. Before we go, I will say we looked at, I think, 21 different resi originators last year. We have talked about getting back into resi originations. The combination of rate being a little bit low and spreads being a little bit tight make it a little bit hard to jump in today, but we are always looking. I cannot imagine we do not get back in the origination game on the resi side in the near future. We are just waiting for the right opportunity.

On the infrastructure side, you asked about the potential size of the market, so I am going to turn it to Sean Murdock, who has done a great job of doing sole origination to kind of get off the treadmill of what that market is. Sean runs that business for us.

Sean Murdock: Sure. I think the best way to contextualize the opportunity is to just talk about energy consumption in the United States. A couple of great points: consumption over the next five years is supposed to grow at roughly a 5% annual CAGR. Another good statistic to look at is the LNG export boom we have had in the U.S. We are exporting roughly 15 Bcf a day of gas to consumers around the world; that is supposed to double over the next five years.

So we feel like there is a big tailwind to growth both from the obvious AI data center value chain as well as LNG exports and other new initiatives that create a bigger market for us in which to prosecute opportunity. You asked about our competitors. I think it is similar to Dennis’s business in CRE lending. We have commercial banks that still make loans in our space. We also compete with alternative debt funds. There are just maybe not as many as either, given ESG constraints around some participants in the market. The third issuer of infra CLOs did their first deal at the end of last year, concurrent with our seventh deal, Barings Asset Management.

So competition is growing a little bit. But I think the tailwinds on demand for energy are significant and inform a much larger opportunity set for us over time.

Gabe Foggy: Thank you, guys. That is helpful.

Jeffrey F. DiModica: Thanks, Gabe.

Barry Stuart Sternlicht: Thank you.

Operator: Again, as a reminder, pressing star one on your telephone keypad will join you into the queue so you can ask your question. Our next question comes from the line of Jade Joseph Rahmani with KBW. Please proceed with your question.

Jade Joseph Rahmani: Thank you very much. Just at a high level, follow-up to Don’s initial question. Do you think credit is getting better or worse? It does seem to have deteriorated in the quarter. However, these could have been primarily problems you already knew about, and the new problems seem to be not in office—I think that everyone’s covered over the office exposure quite thoroughly—but in multifamily, where, as Barry noted, rents remain soft, and also industrial. So could you just comment on your overall view on credit trends?

Jeffrey F. DiModica: Barry, I will go first and you can go after. We had—I hope you heard in the beginning of my discussion—we had a lot of leasing last year across a lot of assets that we may not have thought we would have that. There are always some idiosyncratic things that might happen in the portfolio. As you mentioned, we feel very good about potential outcomes. A couple of industrials—one of them that we moved to 5 that we are leasing on, but we felt it was right to move to 5 because the sponsor stepped away. One was a studio deal, not something that was really in our office purview.

So I think where it comes from here, as we have seen green shoots—and I mentioned a number of green shoots—and the REO sales at our basis in multi. As I look at our multi book, even if you have a 4% cap asset from 2021 that you wrote a loan on expecting a 5% debt yield, if you only achieved a 4.75% or 5% debt yield, you are not losing much money on those. They are very close, and it is just a matter of which side of par are you on. So I think the multi losses across most of our books should be paper unless someone made a really big mistake. Rates will help bail that out.

If you end up with a 3% area SOFR, which is what the market is saying today, those losses should be completely immaterial for just about everybody. If forward SOFR backs up to 4%, then there might be a slightly different discussion. But you nailed it—on a few bespoke industrial assets, whether it is the market or tenant or other reasons—that is where we are seeing a couple of things pop up. But I would say overall, the positives are better than the negatives. And when I say positives are better than the negatives, to your question, to me that means the credit cycle has turned a bit. Barry, do you have something to add to that?

Barry Stuart Sternlicht: No. Real estate is going to catch a bid. I mentioned that whenever the equity markets rock or shake, people come back to the property sector. It is the largest asset class in the world. We are operating in Europe, U.S., Australia, and in general, markets are better. We are all confused, I think, would be the rule. I do. It is sad and terrifying. How many of you talk about the world in this AI convulsing—all the question marks and the fear and the anxiety. And yet you can see the markets clear—they are behaving pretty well. And you can see the office market—even despite headlines—has been pretty strong. Housing demand remains very strong.

The West Coast continues to perform pretty well. I think the political class and political interactions is something to watch. We have to be careful about both the union cost in assets we went against and also cities like those near the city. Property taxes up 95%—that takes the value of an office down materially if we cannot actually do it. So we are blessed with not that big of a portfolio of stuff in the city, and we have avoided most of those loans, but that is going to be an earthquake if that passes through. And then you will see—the interesting thing is sometimes the tenant will pick up the real estate taxes.

And if you do not, you do. What you do on the rent roll of the other tenants. So let us see. It is really just kind of uncertainty. It is a strange world, but in general, we are definitely not selling. I think what you are seeing—we see it in our special servicer—some borrowers are just giving up. They planned for things to get better. They were going to sail after ’25. ’25 has passed. Insurance fell, but the line did not go up, and the Fed kept rates up. Immigration—how many people left last year?

Population growth was actually negative growth in U.S. population for the first time in a long time, so we might have to check that one. But that is definitely affecting apartment demand. With deportations and the lack of not only people immigrating voluntarily—we used to get a million skilled immigrants a year. The U.S., just as you see in international travel, is not the most hospitable place at the moment for the better people’s assumptions. And so they are not traveling here. And when people leave the country, that is—actually some of the weakness in GDP is the fact that we have no contribution from immigration.

We want—I think most of us want to shuttle towards lower amounts of illegal immigrants, to shutter completely, but limiting legal immigrants would be very unfavorable, and we need to get our act together and let people in the country. It will be good for the economy and for real estate markets.

Jade Joseph Rahmani: Thank you very much. Just on the earnings path to covering the dividend, over what time frame is reasonable to expect? Is it your expectation that by the fourth quarter of this year, DE will be in line to potentially greater than the dividend? And are there any outsized gains you are expecting in 2026?

Jeffrey F. DiModica: Barry, you want to start?

Barry Stuart Sternlicht: Sorry, I am on an airplane while I do this call. I muted it. I think you will see us get a little better before. We have a lot of things—it is hard to say because there are some things we are considering. I mentioned turning on nonaccrual loans that we are still evaluating. And we have some really good things in the pipe, but we have to get them done. So I would say that, again, if you take out the noncash loss—fees accounted for different by some of our peers—but we have the earnings power. We can have it anytime we want it. We can sell assets within our Woodstar book. There are 56 of them, Jeff.

Jeffrey F. DiModica: Yep.

Barry Stuart Sternlicht: We are just trying to—we are playing long ball. And the asset is great and contributing meaningfully and should have virtually no real serious competition. I have to say, if you do not know how hard it is to build affordable housing in this country, it is ridiculous. We are in the business. I sort of entered it on the equity side. With all the, what I will call, the drifters along the way that you pay off—the consultant, the branch you need, and the not-for-profit you have to get involved—it costs almost twice as much now to build an affordable building as a market-rate building. So the way to do this is not the current structure.

You basically should build a market-rate apartment and then just donate it to a not-for-profit, and we would have more affordable housing. It was an eye-opening experience for me. And it takes, you know, 14 different grants of 13 different associations, and you have to do the tax credit equity. It is quite a weird business, and it does not really work very well. They need to do something about this. They should trash the whole structure and try something else, because we need affordable housing in all these markets, and we have it done. It is the patient done. In Miami, where I live, it is the most unaffordable city in the United States.

Half the population makes less than $50,000 a year. Occupancy in affordable housing is 99.5%. And remember, affordable housing rents are not going to go down; they come up or stay flat. What we are finding, though, is that the calculation of the rent growth is strong, but our ability to pass it on gets a little tough sometimes because you feel bad for the people—they have nowhere to go. So it is a very odd corner of the world in real estate. We have one of the nation’s largest affordable housing owners—I think it is 62,000 units across our portfolio. It is a fascinating business. We look at markets where rents approach market rents—like Austin’s excess.

You cannot raise your own, but you can just move out. But in Orlando and Tampa, where the REIT owns its properties, we are, as I mentioned, 30% below market rent. So we are pretty protected and have runway, and they are also high-cost cities by the federal government. So we always wind up with this roll of the ones that—I think, what is the number that rolled over from 2025 into 2026 that we could not take last year?

Jeffrey F. DiModica: Yeah. It is about 9%, Barry, that is carryover.

Barry Stuart Sternlicht: 9%. Right. So we were allowed to take like 8% or 9% in seven individual markets, and then the rest of it—calculation in Orlando, I think last year was 15% rent growth they gave us. They would not let us pass it on, but we paid five or six points in the notes here. So it is, as I said, a gift that keeps on giving. And when we bought those, I think you know me. I said I want to buy things in a REIT that we will never have to sell and that I want my kids’ estates to have and their grandkids and their kids. And that is that book. It is a shameful—sell it?

But we have no equity in the portfolio. We have refinanced all of our equity. We just got $2.3 billion out, thank you, to pay this. And we have a $2 billion gain, something like that. So that is even more on that.

Jeffrey F. DiModica: Yes. One and a half there.

Barry Stuart Sternlicht: Yeah. Okay. Well, there we go. Okay. Thanks, Barry.

Jeffrey F. DiModica: Yeah. So, Jade, I think the earnings trend is improving. I think Barry just said our Woodstar $1.5 billion of gains gives us unique staying power, and we will continue to work the year to maximize shareholder value. To Barry’s other point—and I made it in my opening remarks, but I do not want it to be lost on people—the equity REITs are doing really well. Owning real estate, long-term assets, like Barry said, has been a pretty good trade. For whatever reason, our stock is not trading very well, but we are 24% owned real estate with long duration and large gains. And—

Barry Stuart Sternlicht: Can I—Jeff, I am going to go ahead and interrupt. This is something we did not say, and I think we should say. Our triple net lease business in the market would be valued at, I think Jeff said, a 6% to 6.6% dividend yield. That is the comp, so you take the high end. There are some trading even higher than that. So if it gets to scale and we are not getting the performance in our stock and it continues to trade like a junk credit, we will spin it out. Because it is obvious to us that a 6% dividend stream trading in a 10.8% dividend stock is ridiculous. So we are not idiots.

We will grow the book, and then we will spin it and create—like we did long ago when we spun out our residential housing business and started Waypoint—we will do the same thing. We have to get recognized for the value of the portfolio and the stability of the income stream. Our credit markets actually appreciate it—we have the tightest spreads in our sector—but the equity markets do not. I think it is confusion over some of the different accounting methods between the different firms in our space. And also, some do not have diversification. They do not have the kind of company we put together—by purpose. We continue to look at other things too.

We just lost a very large deal—well, maybe we lost it. We are hoping to get it back, but there are other things that we have up our sleeve which could deploy capital really rapidly and get us the earnings power we need faster. That is why it is hard to answer that question that was asked earlier.

Jeffrey F. DiModica: Thank you, Operator. Are there any more in the queue?

Operator: There are no further questions at this time.

Jeffrey F. DiModica: Thank you, Barry. Any other questions?

Barry Stuart Sternlicht: Thank you. No. Thanks, everyone, and we will be with you next quarter.

Operator: Thank you. And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation. Have a great day.

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