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Key Takeaways

• Starwood Property's Q1 distributable earnings hit $156 million, or $0.45 per share.
• New investments reached $2.3 billion, the highest in nearly three years.
• The company's loan book expanded by $859 million to $14.5 billion.
• Liquidity was strong at $1.5 billion for future growth.
• Shares closed at $19.17, up 0.68% before earnings set for Aug. 4-8.

Starwood Property Trust Inc. (STWD) ended trading on May 9 at $19.17, up 0.68% after releasing upbeat Q1 2025 results.

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The real estate finance giant reported distributable earnings (DE) of $156 million, or $0.45 per share, reflecting resilient performance amid economic uncertainties. Investors now await the company’s next earnings report, scheduled between Aug. 4-8, 2025.

Record Investment Activity Signals Growth Momentum

Starwood made headlines with $2.3 billion in new investment commitments during Q1, marking its most active quarter in nearly three years. This surge highlights confidence in future opportunities despite a cautious lending environment. The company’s commercial and residential lending segments contributed DE of $179 million or $0.51 per share, showing strength in its core lending business.

The loan book expanded by $859 million to reach $14.5 billion, setting the stage for longer-term earnings potential. Infrastructure lending also made strides, hitting a record portfolio size of $2.8 billion, aided by the completion of its fifth infrastructure CLO totaling $500 million at a record low cost of funds.

Earnings Show Solid Results, But GAAP Numbers Lag

While distributable earnings painted a robust picture, GAAP net income was lower at $112 million or $0.33 per share, underscoring a common gap between GAAP and non-GAAP metrics in real estate finance firms. The property segment added $16 million to DE, while investing and servicing contributed $50 million, and infrastructure lending added $20 million, supporting diversified income streams.

The company maintained a profit margin near 90%, with trailing 12-month net income at $352.73 million and diluted EPS at $0.94. Return on equity stood at 5.35%, with return on assets at 0.58%.

Liquidity Strong Despite Market Challenges

Starwood Property ended Q1 with a liquidity position of $1.5 billion, providing financial flexibility as macroeconomic headwinds loom. The company also reduced its CECL reserve by $26 million to $456 million, a sign of improving credit conditions. However, non-accrual assets near $2 billion and elevated repayments totaling $363 million in commercial lending could weigh on future results.

Residential lending saw limited growth, ending the quarter at $2.4 billion, while the retained RMBS portfolio stood at $422 million. Despite some softness in this segment, Starwood’s diversified operations and healthy balance sheet, with total cash of $553.35 million, remain positive.

Shares Outperform Over the Long-Term

The REIT has delivered mixed but ultimately strong returns. Year-to-date, the company is up 3.67%, slightly ahead of the S&P 500’s -3.77% decline. Over five years, Starwood Property boasts a total return of 120.57%, outpacing the S&P 500’s 93.18%. Its 10.08% dividend yield continues to attract income-focused investors.

With record investments and a growing loan book, Starwood Property appears to be well-positioned heading into the second half of 2025, though macro risks and credit quality remain areas to watch.

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