Starwood Reports Record $2.2B of Liquidity, $1.4B of Loan Originations in Q3

It was another strong quarter from Starwood Property Trust, as the firm reported a near-record level of quarterly originations and boasted of a firm-record $2.2 billion of liquidity, but an onslaught of investments — highlighted by its $2 billion acquisition of Fundamental Income Properties in July — hampered the firm’s bottom line relative to previous quarters.  

During an earnings call Monday, Starwood reported net income of $72.6 million in the third quarter of 2025, which is roughly identical to its net income from the third quarter of 2024. Starwood also reported distributable earnings of $148.6 million, a decline of 6 percent from one year ago. 

Barry Sternlicht, chairman and CEO of Starwood Property Trust, called the third quarter “very productive” because it produced “lots of new paper” across all the company’s platforms,  which include commercial and residential real estate whole loans, commercial mortgage-backed securities issuance, collateralized loan obligations and special servicing. Yet, he conceded the firm dealt with some dividend challenges stemming from the Fundamental acquisition. 

“It’s been a transitional quarter for us,” said Sternlicht. “But the underlying businesses are super strong, the curve is favorable, the team has proven originators across its entire platform, and we’ll get through it.” 

Starwood raised $2.3 billion of term-loan and equity capital in the quarter — and has raised more than $3 billion across equity, term loans and unsecured debt in 2025 — and has more than $2 billion to deploy via debt and equity in the fourth quarter of 2025 and entering 2026. 

All told, the firm holds a record $29.9 billion of total assets with an adjusted debt-to-equity ratio of 2.51x, and holds secured financial facilities of $9.3 billion. 

“We can see the future in our book as the capital is laid out,” said Sternlicht. “We know we can grow our earnings and get back to the place we want to be, which is earning well north of our dividend.”

The third quarter marked the second-largest quarter of originations ever for Starwood, according to Jeff DiModica, the company’s president, who cited expectations of lower short-term interest rates and increased transaction velocity across the CRE market as buyers and sellers narrowed their bid/ask spreads. 

During the third quarter, Starwood originated $1.4 billion of loans and another $219 million of pre-existing loan commitments, and secured $1.3 billion of repayments, including on a $58 million office loan. The firm’s CRE portfolio grew $271 million to $15.8 billion during the third quarter. 

DiModica noted that Starwood remains committed to lending into only four core avenues: data centers, multifamily, industrial and investments across Europe, and that Starwood’s exposure to office lending is only 8 percent of its total book, down from 9 percent one year ago. 

“This quarter we continued to operate in an environment of improving stability and credit performance,” said DiModica, who emphasized the lower forward curve and revised credit spreads were advantageous to growth. “That shift, combined with steady credit spreads, has supported a more constructive real estate financing market where we expect to maintain our elevated origination pace.” 

Starwood was quite active on the investment front as well. 

The firm invested $4.6 billion during the quarter and has invested $10.2 billion of capital the first nine months of 2025, with $2.2 billion of these investments in triple-net leases — deals where the tenant agrees to pay property taxes, property insurance and maintenance costs — $1.4 billion in commercial loans ($4.6 billion on the year) and $800 million of infrastructure loans. 

In fact, Starwood is on pace for its second-highest year of commercial lending in its 16-year history. 

And the firm’s largest investment this summer was its July 2025 acquisition of Fundamental Income Properties from Brookfield Properties for $2.2 billion. As CO reported, Fundamental had 67 properties totaling 12 million square feet across 44 states in its portfolio at the time of closing.

“It was an interesting quarter, obviously, as only half of our book today is large loan lending,” said Sternlicht. “We created a near-term trough for ourselves with this strategic move [the Fundamental acquisition], and while it was dilutive of at least 4 cents [of the dividend] on the quarter, it was very leveraged to its overhead. … It will get better and better over time.”   

Sternlicht said the decline in real estate spreads has led to a wave of refinancings across commercial real estate, with Starwood “refinancing anything not nailed to the ground,” due to the attraction of compressed spreads. But he also pointed to some worrisome factors in the economy, especially as unemployment rates for 18- to 24-year-olds have doubled, and the bifurcated nature of lower-end properties doing poorly compared to the luxury market. 

“[A serious recession] isn’t likely to happen in many quarters of the country because net worths are up, people are doing OK, energy prices are calm, and, while inflation is higher than people will like, it’s probably a one-time thing with tariffs,” he said.  

Even so, Sternlicht said real estate fundamentals should improve amid a drop in both supply and interest rates, and a weakening labor market in the next two quarters that many hope will improve amid stronger economic indicators. 

“I think that sets up for a pretty benign period for real estate and pretty sound fundamentals in 2026,” he added. 

Brian Pascus can be reached at bpascus@commericalobserver.com.