Starwood Property Trust Net Income Drops, CRE Originations Soar

Starwood Property Trust’s earnings fell in the first quarter, but the firm’s commercial real estate lending business soared and it is positioned for more originations growth this year. 

The real estate investment trust reported Friday first-quarter net income of $112.3 million, or 33 cents per share, down from $154.3 million, or 48 cents per share in the year-ago period, which was in line with analyst expectations. Its total revenues for the quarter came in at $418.18 million, down 20 percent from a year earlier.

Miami-based Starwood originated $1.4 billion of loans in the first quarter, up  from $477 million in the fourth quarter, and $2.3 billion of total loan investments. 

Jeff DiModica, president of Starwood Property Trust, noted that the firm has closed more than $1 billion of originations in the first month of the second quarter. He said the trust expectsa strong lending year overall, with a plenty of debt set to mature and banks looking for warehouse line opportunities. 

“In CRE, record origination volume from 2021 and 2022 needs to be refinanced in the coming quarter,” DiModica said during Starwood’s first-quarter earnings call Friday morning. “Many lenders are capital-constrained, and banks earn higher [return on investments] lending to us than competing with us on their own origination.”

DiModica noted that Starwood could pick up additional market share if interest rates go down because insurance companies, which have picked up much of the lending void as banks have pulled back, will have less annuity sales and will also reduce their loan activity, 

Starwood’s loan portfolio at the end of the first quarter consisted of 19 percent in the multifamily sector, followed by office at 9 percent and hospitality at 6 percent. 

Barry Sternlicht, chairman of Starwood Property Trust, said multifamily has strong growth potential in the year ahead given the lack of new supply in many markets. He also noted a likely slowdown in new projects due to higher construction costs resulting from President Donald Trump’s tariff policies. Those tariffs, coupled with supply chain headwinds, will compound the rental housing shortages in many markets, Sternlicht said.  

“One obvious impact of the administration’s policies is that people are very nervous about these [construction] starts, and nobody really knows what anything is going to cost,” Sternlicht said. “I just returned from an industry conference where developers are talking about not starting projects and pushing them off, which bodes well for any existing asset and their performance.”

Andrew Coen can be reached at acoen@commercialobserver.com