Starwood Property Trust Posts $389.7 Million Third-Quarter Loss
Key Facts
Starwood Property Trust reported on November 6 a GAAP net loss of $389.7 million for the quarter ended September 30, 2026. The company said the loss included a $336.6 million provision for credit losses and $32.2 million in noncash real estate impairments. In the second quarter, the company had recorded GAAP net income of $6.6 million, alongside distributable earnings of $151.5 million. The shift between the two quarterly results highlights the scale of the pressure reflected in its accounts during the third quarter. Meanwhile, the company continued to expand its commercial lending business and repurchase shares, while approving a cash distribution per share.
Chief Executive Barry Sternlicht said interest rates had "risen sharply" and the forward yield curve had moved steeply higher during the quarter. Sternlicht linked these moves to a shock in real estate and interest-rate-sensitive sectors, and said borrowers were feeling the impact of higher financing costs. The provision for credit losses in the quarter was $336.6 million, larger than the $32.2 million noncash real estate impairment item. The company said the real estate impairments were noncash, without providing any further explanation in the statement. These items put the accounting loss in the context of the pressure on borrowers and the real estate sector from higher interest rates, as described by the company's chief executive.
On the business front, the company invested $3.2 billion in the third quarter, bringing its investments to $8.2 billion in the nine months through September 30. Of the quarter's investments, $2.4 billion went to commercial lending, the company's highest quarterly level in this activity in four years, according to its statement. This lifted the commercial lending portfolio to a record $17.8 billion. The company said it manages a $32 billion portfolio comprising debt and equity investments, and has deployed $123 billion of capital since its founding. These figures reflect the scale of the business the company manages alongside its work addressing troubled loans and assets.
On financing, company Chairman Jeffrey DiModica said it completed about $2.1 billion in financing transactions to refinance its debt and extend maturities before the sharp rise in interest rates. He added that those transactions were completed at rates and spreads below those available at the time the statement was issued. The quoted text of the statement did not specify a more precise timing for the transactions beyond saying they took place before rates rose. The company also repurchased a record $108 million of common shares during the third quarter. It declared a $0.48-per-share distribution, placing the decision alongside the accounting loss recorded for the period.
Sternlicht said the company still expects to resolve nearly half of the troubled assets it began the year with, adding that borrowers were feeling the pain of higher interest costs. In its second-quarter results published on August 6, the company had said it expected to resolve about $900 million of troubled assets by year-end or shortly thereafter. This earlier forecast provides a timeframe for the progress management said in November it was targeting in addressing troubled assets. The third-quarter statement did not specify a new value for these assets or an additional resolution date. Management's statement that it expects to resolve nearly half of the assets it began the year with remains the latest timing guidance included in the third-quarter results.
The company's stock fell 3% on Friday morning, November 6, after the results announcement, according to a report published by Commercial Observer. The stock had closed at $12.88 on the November 5 session, according to EL7 data. The company had scheduled a livestream and conference call to discuss its third-quarter results on November 6 at 10:00 a.m. Eastern Time. The call took place on the day the results were announced and focused on the quarter ended September 30. The reported share performance on the morning of the announcement combines the immediate market reaction with the closing price recorded in the previous session.