I am focused on growth and dividend income. My personal strategy revolves around setting myself up for an easy retirement by creating a portfolio which focuses on compounding dividend income and growth. Dividends are an intricate part of my strategy as I have structured my portfolio to have monthly dividend income which grows through dividend reinvestment and yearly increases. Feel free to reach out to me on Seeking AlphaAnalyst’s Disclosure:I/we have a beneficial long position in the shares of STWD, BTCI, ...

Group 1 - The focus is on growth and dividend income as a strategy for retirement planning [1] - The portfolio is structured to generate monthly dividend income that grows through reinvestment and annual increases [1] Group 2 - The article emphasizes the importance of conducting personal research before making investment decisions [2] - It clarifies that the opinions expressed are personal and not intended as specific investment advice [2][3]

Core Viewpoint - AGNC Investment Corp. and Starwood Property Trust, Inc. are two prominent players in the mortgage real estate investment trusts (mREITs) sector, both providing attractive long-term returns and substantial dividend yields. The analysis aims to compare their strengths, risks, and growth potential to determine which offers a better investment opportunity at present [2]. Group 1: AGNC Investment Corp. - AGNC employs an active portfolio-management strategy, regularly adjusting its holdings and implementing hedges to respond to market changes, positioning itself defensively against volatility [3]. - As of June 30, 2025, AGNC maintained a significant interest rate hedge covering 89% of its outstanding balance, which may enhance cash flow stability and support long-term growth [4]. - The company holds $73.3 billion in Agency mortgage-backed securities (MBS), benefiting from government guarantees, which are expected to yield attractive risk-adjusted returns despite market volatility [5]. - AGNC's liquidity, including unencumbered cash and Agency MBS, was reported at $6.4 billion as of June 30, 2025, with a modest increase in leverage to 7.6X [6]. - AGNC has a high dividend yield of 14.66%, exceeding the industry average of 12.12% [17]. - The Zacks Consensus Estimate indicates a year-over-year earnings decline of 15.4% for AGNC in 2025 [20]. Group 2: Starwood Property Trust, Inc. - Starwood Property specializes in commercial mortgage-backed securities (CMBS) and manages a portfolio of nearly $27 billion as of June 30, 2025, allowing for stable income generation [7]. - The company has actively optimized its portfolio through strategic acquisitions and divestitures, including the sale of 16 retail properties for $387.1 million in February 2024 [8]. - Starwood's liquidity position is strong, with cash and cash equivalents of $475 million and no short-term debt as of June 30, 2025 [10]. - Starwood is trading at a 12-month forward price-to-tangible book (P/TB) of 1.06X, which is a discount compared to the industry average, making it a more attractive option for value investors [14]. - The Zacks Consensus Estimate for Starwood suggests a year-over-year earnings decline of 6.4% for 2025, but a rise of 7.7% for 2026 [23]. Group 3: Comparative Analysis - In the past six months, STWD shares increased by 4.8%, while AGNC shares rose by 1.7%, outperforming the industry growth of 0.8% [11]. - AGNC is trading at a premium, while STWD trades at a discount, indicating a stronger earnings outlook for STWD [9][14]. - STWD's dividend yield is 9.53%, supported by more sustainable fundamentals and a clearer path to earnings growth compared to AGNC [17][28]. - AGNC is characterized by a defensive income strategy through Agency MBS and hedging, while STWD demonstrates greater resilience and flexibility with disciplined portfolio management [27][28]. - Currently, AGNC holds a Zacks Rank of 4 (Sell), whereas Starwood Property has a Zacks Rank of 1 (Strong Buy), indicating a preference for STWD among investors [29].

Group 1 - The focus is on growth and dividend income as a strategy for retirement planning [1] - The portfolio is structured to generate monthly dividend income that grows through reinvestment and annual increases [1] Group 2 - The article expresses personal opinions and is not intended as investment advice [2][3] - It emphasizes the importance of conducting individual research before making investment decisions [2]

Group 1 - Starwood Property (NYSE: STWD) has not supported its dividend with distributable earnings for the second consecutive quarter [1] - The company is facing a significant amount of non-performing loans in its portfolio [1] - Earnings from Starwood's commercial and residential lending business are under pressure due to these challenges [1]

Core Insights - Starwood Property Trust, Inc. (STWD) reported better-than-expected quarterly results, with shares rising 1.9% [1] - The company achieved second-quarter 2025 adjusted distributable earnings of 43 cents per share, exceeding the Zacks Consensus Estimate of 39 cents, but down from 48 cents per share in the same quarter last year [1][9] Financial Performance - STWD's total revenues for the second quarter of 2025 were $444.3 million, reflecting a year-over-year decline of 9.3% [3][9] - The company reported a net income of $129.8 million on a GAAP basis, marking a significant year-over-year increase of 66.7% [2] - Total costs and expenses decreased to $430.5 million, down 12.4% from the prior-year quarter, primarily due to reduced interest expenses and management fees [3][9] - Book value per share (BVPS) was $18.80 as of June 30, 2025, down 4.3% from $19.64 in the prior-year quarter [3][9] Funding and Balance Sheet - Starwood Property recorded fundings of $2.7 billion, a substantial increase from $998 million in the prior-year quarter [4][9] - As of June 30, 2025, cash and cash equivalents were $259.9 million, down 41% from the prior quarter [5] - Loans held for sale totaled $2.5 billion, slightly up from $2.4 billion in the prior quarter [5] Strategic Outlook - The company's focus on commercial mortgage-backed securities and commercial real estate debt investments is expected to generate stable income [6] - Active engagement in property acquisition and divestiture is anticipated to enhance the portfolio and optimize the asset base [6] - Despite the positive aspects, the year-over-year decline in revenues and BVPS remains a concern [6]

Financial Data and Key Metrics Changes - The company reported distributable earnings (DE) of $151 million or $0.43 per share, while GAAP net income was $130 million or $0.38 per share [4] - Capital deployment for the first six months of the year reached $5.5 billion, surpassing the total for all of 2024 [4] - The adjusted debt to undepreciated equity ratio ended the quarter at 2.5 times, slightly increasing from the previous quarter [14] Business Line Data and Key Metrics Changes - Commercial and residential lending contributed DE of $174 million for the quarter, with a loan portfolio growth of $946 million, bringing the total to $15.5 billion [5] - The residential lending portfolio ended the quarter at $2.3 billion, with $60 million in repayments [9] - The infrastructure lending segment contributed DE of $21 million, with a record $700 million of loans committed [12] Market Data and Key Metrics Changes - The company’s active servicing portfolio ended the quarter at $10.3 billion, with $1 billion of new transfers dominated by office properties [11] - The CMBS portfolio increased by $55 million due to new purchases [12] - The weighted average risk rating of the portfolio remained stable at 2.9 [7] Company Strategy and Development Direction - The acquisition of Fundamental Income Properties for $2.2 billion is expected to enhance the company’s capabilities in the net lease sector, with a focus on leveraging existing expertise [13][18] - The company aims to grow its diversified business model, reducing reliance on CRE loans, which now represent only 52% of total assets compared to 65% in 2022 [22] - The strategy includes optimizing the balance sheet by refinancing at lower spreads and maintaining a strong liquidity position [14][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for lower interest rates and a recovery in the real estate market, which could lead to increased transaction volumes [29][30] - The company is well-positioned to navigate challenges and is focused on becoming investment grade, with plans to grow earnings materially over time [41][36] - The management highlighted the importance of maintaining a fortress balance sheet and the benefits of diversification in sustaining dividends [35][36] Other Important Information - The company received recognition from rating agencies for its diversity, leverage profile, liquidity position, and stable earnings [14] - The company has maintained its dividend for 47 consecutive quarters, reflecting its commitment to shareholder returns [22] Q&A Session Summary Question: Expectations for CRE loan growth and impact of Fed rate cuts - Management expects to end the year close to $10 billion in CRE loans, with lower rates likely accelerating loan growth and refinancing opportunities [46][48] Question: Ramp up of the net lease portfolio business - The company is optimistic about growing the net lease portfolio, with potential for larger acquisitions as the pipeline rebuilds [56][60] Question: Sustainability of spreads in the infrastructure business - Management indicated that while spreads have widened, they are maintaining margins through more direct deals and expect continued growth in infrastructure origination [62][71] Question: Credit portfolio stabilization and hotel exposure - Management believes credit in the portfolio has stabilized, with no significant losses in the hotel sector, which comprises 6% of the overall asset base [78][82]

Financial Performance - Starwood Property Trust reported GAAP net income of $129.8 million and Distributable Earnings (DE) of $151.1 million for Q2 2025[6] - The company invested $3.2 billion in assets during the quarter, bringing the total for the first six months of 2025 to $5.5 billion, surpassing the full-year 2024 capital deployment[5] - The company paid a dividend of $0.48 per share for Q2 and declared a $0.48 dividend for Q3[5] Strategic Acquisitions and Capitalization - Acquired Fundamental Income Properties, a $2.2 billion fully integrated net lease real estate operating platform and owned portfolio[6] - Raised $502 million of common stock and repriced term loans totaling $1.6 billion at record low spreads[29] - The company has $5.0 billion in unencumbered assets and over $1.4 billion in unrealized property gains[7] Portfolio Composition and Diversification - Total assets are approximately $27.5 billion, with U S office representing only 9% of the diversified asset base[25, 30] - Commercial real estate lending represents about half of the company's asset base[7] - The company has successfully deployed $108 billion of capital since inception and manages a portfolio of over $27 billion across debt and equity investments[11] Lending Segment - The Commercial Lending Portfolio totals $15.5 billion[35] - The Infrastructure Lending Segment portfolio reached a record high of $3.1 billion[61]

Part I Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Starwood Property Trust, Inc.'s unaudited Condensed Consolidated Financial Statements as of June 30, 2025, including Balance Sheets, Statements of Operations, Comprehensive Income, Equity, and Cash Flows, along with detailed notes on accounting policies and financial activities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$62,369,363** | **$62,556,497** | | Loans held-for-investment, net | $17,825,386 | $15,437,013 | | VIE assets, at fair value | $36,522,250 | $38,937,576 | | **Total Liabilities** | **$55,200,633** | **$55,363,025** | | Secured financing agreements, net | $13,540,389 | $11,151,557 | | VIE liabilities, at fair value | $34,902,530 | $37,288,545 | | **Total Starwood Property Trust, Inc. Stockholders' Equity** | **$6,422,210** | **$6,437,107** | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $444,283 | $489,826 | $862,463 | $1,012,914 | | Net income | $134,696 | $77,725 | $250,797 | $237,585 | | Net income attributable to Starwood Property Trust, Inc. | $129,814 | $77,890 | $242,069 | $232,222 | | Diluted EPS | $0.38 | $0.24 | $0.71 | $0.73 | [Note 1: Business and Organization](index=11&type=section&id=Note%201%3A%20Business%20and%20Organization) Starwood Property Trust, Inc. is a REIT externally managed by Starwood Capital Group, primarily focused on originating, acquiring, financing, and managing mortgage loans and other real estate investments across the U.S., Europe, and Australia through its four reportable business segments - The company operates through four primary business segments[32](index=32&type=chunk)[35](index=35&type=chunk) - **Commercial and Residential Lending:** Originates and manages commercial first mortgages, non-agency residential mortgages, CMBS, RMBS, and other real estate debt[35](index=35&type=chunk) - **Infrastructure Lending:** Originates and manages infrastructure debt investments[35](index=35&type=chunk) - **Property Segment:** Acquires and manages equity interests in stabilized commercial real estate, including multifamily properties[35](index=35&type=chunk) - **Investing and Servicing Segment:** Includes a servicing business, an investment business in CMBS, a conduit loan origination business, and a commercial real estate asset investment business[35](index=35&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=12&type=section&id=Note%202%3A%20Summary%20of%20Significant%20Accounting%20Policies) This note details the company's significant accounting policies, emphasizing VIE consolidation, fair value option application, the CECL model for credit losses, and revenue recognition methods for interest, servicing, and rental income - The company consolidates securitization VIEs where it is the primary beneficiary, resulting in the gross presentation of VIE assets and liabilities on the balance sheet, with assets restricted to settling the VIEs' obligations[37](index=37&type=chunk)[44](index=44&type=chunk)[49](index=49&type=chunk) - The fair value option is elected for certain financial assets and liabilities, including those of consolidated securitization VIEs and loans held-for-sale, to mitigate accounting mismatches and reflect short-term holding periods[59](index=59&type=chunk) - The company uses a Current Expected Credit Loss (CECL) model for estimating future credit losses on financial instruments measured at amortized cost, such as HFI loans and HTM debt securities, utilizing historical industry loss data from third-party services as a benchmark[66](index=66&type=chunk)[67](index=67&type=chunk) [Note 3: Acquisitions and Divestitures](index=19&type=section&id=Note%203%3A%20Acquisitions%20and%20Divestitures) During H1 2025, the company sold an office building for **$60.0 million** (net gain **$4.1 million**) and an equity interest for **$70.0 million** (gain **$51.4 million**), following the prior year's sale of a 16-property Master Lease Portfolio for **$387.1 million** (gain **$92.0 million**) - In H1 2025, sold an office building in Texas for **$60.0 million**, recognizing a net gain of **$4.1 million**[93](index=93&type=chunk) - In H1 2025, sold an equity interest for gross proceeds of **$70.0 million**, resulting in a gain of **$51.4 million**[94](index=94&type=chunk) - On February 29, 2024, sold the 16-property Master Lease Portfolio for a gross price of **$387.1 million**, recognizing a gain of **$92.0 million**[96](index=96&type=chunk) [Note 4: Loans](index=20&type=section&id=Note%204%3A%20Loans) As of June 30, 2025, total net loans increased to **$20.3 billion** from **$18.0 billion** at year-end 2024, driven by commercial and infrastructure loan growth, while the credit loss allowance decreased to **$417.3 million** from **$448.3 million**, with a net credit loss reversal of **$19.3 million** for H1 2025, and three properties foreclosed with a combined loan value of **$184.6 million** Loan Portfolio Summary (in thousands) | Loan Category | Carrying Value (June 30, 2025) | Carrying Value (Dec 31, 2024) | | :--- | :--- | :--- | | **Loans held-for-investment** | | | | Commercial loans | $15,168,392 | $13,331,876 | | Infrastructure first priority loans | $3,074,314 | $2,553,432 | | **Loans held-for-sale** | | | | Residential, fair value option | $2,323,276 | $2,394,624 | | Commercial, fair value option | $171,562 | $121,384 | | **Total gross loans** | **$20,737,544** | **$18,401,316** | | Credit loss allowances | ($417,320) | ($448,295) | | **Total net loans** | **$20,320,224** | **$17,953,021** | Credit Loss Allowance Activity - Funded Loans (in thousands) | Period | Beginning Balance | Credit loss (reversal) provision, net | Charge-offs | Ending Balance | | :--- | :--- | :--- | :--- | :--- | | **Six Months Ended June 30, 2025** | **$448,295** | **($13,750)** | **($17,225)** | **$417,320** | - During H1 2025, the company foreclosed on or obtained control of collateral for three loans with a total carrying value of **$184.6 million**, including properties in Boston, MA, Windermere, FL, and Conyers, GA[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Note 5: Investment Securities](index=25&type=section&id=Note%205%3A%20Investment%20Securities) The company's total investment securities portfolio slightly decreased to **$502.6 million** as of June 30, 2025, from **$533.3 million** at year-end 2024, comprising RMBS, CMBS, HTM debt securities, and an equity security, with a credit loss allowance on HTM debt securities increasing to **$25.5 million** Investment Securities Summary (in thousands) | Security Type | Carrying Value (June 30, 2025) | Carrying Value (Dec 31, 2024) | | :--- | :--- | :--- | | RMBS, available-for-sale | $91,363 | $93,806 | | RMBS, fair value option (pre-elimination) | $413,676 | $421,122 | | CMBS, fair value option (pre-elimination) | $1,202,438 | $1,225,024 | | HTM debt securities, net | $379,787 | $406,961 | | Equity security, fair value | $4,110 | $5,146 | | **Subtotal** | **$2,091,374** | **$2,152,059** | | VIE eliminations | ($1,588,776) | ($1,618,801) | | **Total investment securities** | **$502,598** | **$533,258** | - The credit loss allowance for HTM debt securities increased from **$24.5 million** at year-end 2024 to **$25.5 million** as of June 30, 2025[132](index=132&type=chunk) [Note 10: Secured Borrowings](index=33&type=section&id=Note%2010%3A%20Secured%20Borrowings) As of June 30, 2025, total secured borrowings increased to **$16.3 billion** from **$14.3 billion** at year-end 2024, primarily due to higher repurchase agreement balances for commercial loans, with **$1.3 billion** net increase in credit facility capacity and extended maturities during H1 2025 Secured Borrowings Summary (in thousands) | Facility Type | Outstanding Balance (June 30, 2025) | Outstanding Balance (Dec 31, 2024) | | :--- | :--- | :--- | | Repurchase Agreements | $10,281,675 | $8,336,385 | | Other Secured Financing | $3,344,297 | $2,899,744 | | **Total Secured Financing Agreements, net** | **$13,540,389** | **$11,151,557** | | **CLOs and SASB, net** | **$2,782,775** | **$3,196,426** | - During H1 2025, the company amended several commercial credit facilities, resulting in a net upsize of **$1.3 billion** and extending the weighted average maturity on amended facilities by 1.7 years[160](index=160&type=chunk) - In April 2025, the company refinanced a pool of infrastructure loans through a new **$500.0 million** CLO (Starwood 2025-SIF5), retaining **$86.5 million** of subordinated notes[172](index=172&type=chunk) [Note 11: Unsecured Senior Notes](index=38&type=section&id=Note%2011%3A%20Unsecured%20Senior%20Notes) The total carrying amount of unsecured senior notes increased to **$3.24 billion** as of June 30, 2025, from **$2.99 billion** at year-end 2024, driven by the issuance of **$500.0 million** of 6.50% Senior Notes due 2030, partially offset by the repayment of **$250.0 million** of 4.75% Senior Notes due 2025 Unsecured Senior Notes Outstanding (in thousands) | Note Series | Carrying Value (June 30, 2025) | Carrying Value (Dec 31, 2024) | | :--- | :--- | :--- | | 2027 Convertible Notes | $380,750 | $380,750 | | 2025 Senior Notes | — | $250,000 | | 2026 Senior Notes | $400,000 | $400,000 | | 2027 Senior Notes | $500,000 | $500,000 | | 2029 Senior Notes | $600,000 | $600,000 | | April 2030 Senior Notes | $400,000 | $400,000 | | July 2030 Senior Notes | $500,000 | $500,000 | | October 2030 Senior Notes | $500,000 | — | | **Total carrying amount** | **$3,242,251** | **$2,994,682** | - In April 2025, the company issued **$500.0 million** of 6.50% Senior Notes due 2030[187](index=187&type=chunk) - The remaining **$250.0 million** of the 4.75% Senior Notes due 2025 were repaid at maturity on March 15, 2025[188](index=188&type=chunk) [Note 16: Related-Party Transactions](index=45&type=section&id=Note%2016%3A%20Related-Party%20Transactions) The company incurred **$46.8 million** in base management fees and **$10.2 million** in incentive fees to its external Manager for H1 2025, while also conducting significant board-approved loan transactions with Manager affiliates, including data center and luxury condominium projects Fees Paid to Manager (in millions) | Fee Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Base Management Fee | $46.8 | $43.9 | | Incentive Fee | $10.2 | $22.6 | - During H1 2025, the company co-originated several large construction loans where the borrower is an affiliate of the Manager, including: - A **$587.1 million** data center loan in Virginia (STWD share: **$287.7 million**)[234](index=234&type=chunk) - A **$638.5 million** data center loan in Virginia (STWD share: **$212.8 million**)[235](index=235&type=chunk) - A **$388.4 million** luxury condo loan in Florida (STWD share: **$190.3 million**)[236](index=236&type=chunk) [Note 17: Stockholders' Equity and Non-Controlling Interests](index=48&type=section&id=Note%2017%3A%20Stockholders%27%20Equity%20and%20Non-Controlling%20Interests) The company declared quarterly dividends of **$0.48** per share for H1 2025 and established a new **$500.0 million** ATM equity offering program in May 2025, issuing **1.6 million** shares for **$31.6 million** gross proceeds during Q2 Dividends Declared in H1 2025 | Declaration Date | Record Date | Payment Date | Amount per Share | | :--- | :--- | :--- | :--- | | 6/11/25 | 6/30/25 | 7/15/25 | $0.48 | | 3/13/25 | 3/31/25 | 4/15/25 | $0.48 | - In May 2025, the company established a new ATM agreement to sell up to **$500.0 million** in common stock; during Q2 2025, **1,561,634** shares were issued for gross proceeds of **$31.6 million**[248](index=248&type=chunk) [Note 23: Segment Data](index=61&type=section&id=Note%2023%3A%20Segment%20Data) This note provides financial results for the company's four business segments, excluding securitization VIE consolidation, showing Commercial and Residential Lending as the largest net income contributor at **$349.7 million** for H1 2025, with the Property segment reporting a **$14.4 million** net loss and Corporate activities a **$191.1 million** loss Net Income (Loss) Attributable to STWD by Segment (in thousands) - Six Months Ended June 30, 2025 | Segment | Net Income (Loss) | | :--- | :--- | | Commercial and Residential Lending | $349,729 | | Infrastructure Lending | $38,174 | | Property Segment | ($14,428) | | Investing and Servicing Segment | $59,648 | | Corporate | ($191,054) | | **Total** | **$242,069** | Total Assets by Segment (in thousands) - As of June 30, 2025 (pre-VIE consolidation) | Segment | Total Assets | | :--- | :--- | | Commercial and Residential Lending | $19,310,106 | | Infrastructure Lending | $3,391,821 | | Property Segment | $2,818,081 | | Investing and Servicing Segment | $1,748,364 | | Corporate | $218,571 | | **Subtotal** | **$27,486,943** | [Note 24: Subsequent Events](index=68&type=section&id=Note%2024%3A%20Subsequent%20Events) Subsequent to quarter-end, the company acquired Fundamental Income Properties, LLC for **$2.2 billion**, issued **25.5 million** common shares for **$502.4 million**, declared a Q3 2025 dividend of **$0.48** per share, and amended two term loan facilities to reduce interest rate spreads - On July 23, 2025, acquired Fundamental Income Properties, LLC, a net lease real estate platform, for a total purchase price of **$2.2 billion**, including **$1.3 billion** of assumed debt[313](index=313&type=chunk) - In July 2025, issued **25.5 million** shares of common stock in a public offering, raising **$502.4 million** in proceeds[314](index=314&type=chunk) - Declared a Q3 2025 dividend of **$0.48** per share, payable on October 15, 2025[315](index=315&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=68&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, business segments, and economic outlook, detailing significant quarterly developments, analyzing segment operations, discussing non-GAAP measures like Distributable Earnings, and reviewing liquidity and capital resources amidst economic uncertainty from tariffs and interest rates impacting real estate sectors [Economic Environment](index=69&type=section&id=Economic%20Environment) Management highlights increased economic uncertainty and market volatility from tariffs, potentially leading to slowdown and inflation, with elevated interest rates adversely affecting borrowers and commercial real estate values, and sector-specific challenges persisting in office, retail, and multifamily sectors impacting CECL reserves - Tariffs have increased economic uncertainty and global market volatility, raising the possibility of an economic slowdown and inflationary pressures[321](index=321&type=chunk) - Sector-specific headwinds continue to affect commercial real estate: the office sector is impacted by remote work, retail by e-commerce, and multifamily by sustained higher interest rates; these factors are considered in the CECL allowance[323](index=323&type=chunk) [Developments During the Second Quarter of 2025](index=70&type=section&id=Developments%20During%20the%20Second%20Quarter%20of%202025) In Q2 2025, the Commercial and Residential Lending segment originated **$1.9 billion** in commercial loans and sold an equity interest for a **$51.4 million** gain, while Infrastructure Lending committed **$698.9 million** for new loans and refinanced a **$500 million** CLO, and Corporate issued **$500 million** in senior notes and **1.6 million** shares for **$31.6 million** - **Commercial and Residential Lending:** Originated or acquired **$1.9 billion** of commercial loans, sold an equity interest for a **$70.0 million** gain, and redeemed **$220.1 million** of a CLO's third-party financing[326](index=326&type=chunk) - **Infrastructure Lending:** Committed **$698.9 million** for new loans and refinanced an existing loan pool via a new **$500.0 million** CLO (Starwood 2025-SIF5)[325](index=325&type=chunk)[327](index=327&type=chunk) - **Corporate:** Issued **$500.0 million** of 6.50% Senior Notes due 2030 and issued **1.6 million** shares under its ATM program for gross proceeds of **$31.6 million**[329](index=329&type=chunk) [Results of Operations](index=73&type=section&id=Results%20of%20Operations) Net income attributable to STWD increased to **$129.8 million** in Q2 2025 from **$112.3 million** in Q1 2025, driven by Investing and Servicing segment performance, and slightly increased to **$242.1 million** in H1 2025 from **$232.2 million** in H1 2024, primarily due to a credit loss reversal and favorable derivative changes, offset by lower interest income and non-recurring gain on sale Net Income Attributable to STWD by Quarter (in thousands) | Segment | Q2 2025 | Q1 2025 | $ Change | | :--- | :--- | :--- | :--- | | Commercial and Residential Lending | $168,682 | $181,047 | ($12,365) | | Infrastructure Lending | $19,952 | $18,222 | $1,730 | | Property Segment | ($6,624) | ($7,804) | $1,180 | | Investing and Servicing Segment | $46,312 | $13,336 | $32,976 | | Corporate | ($98,508) | ($92,546) | ($5,962) | | **Total** | **$129,814** | **$112,255** | **$17,559** | Net Income Attributable to STWD by H1 Period (in thousands) | Segment | H1 2025 | H1 2024 | $ Change | | :--- | :--- | :--- | :--- | | Commercial and Residential Lending | $349,729 | $325,707 | $24,022 | | Infrastructure Lending | $38,174 | $44,569 | ($6,395) | | Property Segment | ($14,428) | $81,924 | ($96,352) | | Investing and Servicing Segment | $59,648 | $15,258 | $44,390 | | Corporate | ($191,054) | ($235,236) | $44,182 | | **Total** | **$242,069** | **$232,222** | **$9,847** | [Non-GAAP Financial Measures](index=84&type=section&id=Non-GAAP%20Financial%20Measures) The company uses Distributable Earnings, a non-GAAP measure, to evaluate performance and indicate dividend capacity by excluding non-cash items from GAAP net income; for Q2 2025, it was **$151.1 million** (**$0.43** per share), down from Q1 2025, and for H1 2025, it was **$307.4 million** (**$0.88** per share), down from H1 2024 - Distributable Earnings is a non-GAAP measure calculated by excluding non-cash items, unrealized gains/losses, and certain other adjustments from GAAP net income; it is used to evaluate performance and is considered a strong indicator of dividend capacity[385](index=385&type=chunk)[388](index=388&type=chunk) Distributable Earnings Reconciliation Summary (in thousands) | Period | Net Income Attributable to STWD | Distributable Earnings | | :--- | :--- | :--- | | **Q2 2025** | $129,814 | $151,089 | | **Q1 2025** | $112,255 | $156,296 | | **H1 2025** | $242,069 | $307,385 | | **H1 2024** | $232,222 | $349,311 | Distributable EPS | Period | Distributable EPS | | :--- | :--- | | **Q2 2025** | $0.43 | | **Q1 2025** | $0.45 | | **Q2 2024** | $0.48 | | **Q1 2024** | $0.59 | [Liquidity and Capital Resources](index=96&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity sources include cash, operating cash flows, and financing facilities, with cash and restricted cash totaling **$474.9 million** as of June 30, 2025; H1 2025 saw **$151.5 million** net cash from operations, **$1.8 billion** used in investing, and **$1.6 billion** from financing, alongside **$16.4 billion** in secured financings and **$2.2 billion** in future loan commitments Cash Flow Summary - H1 2025 (in thousands) | Cash Flow Activity | Amount | | :--- | :--- | | Net cash provided by operating activities | $151,511 | | Net cash used in investing activities | ($1,858,825) | | Net cash provided by financing activities | $1,627,352 | | **Net decrease in cash** | **($79,962)** | Material Contractual Obligations as of June 30, 2025 (in thousands) | Obligation | Total Amount | | :--- | :--- | | Secured financings | $13,625,972 | | CLOs and SASB | $2,790,842 | | Unsecured senior notes | $3,280,750 | | Future loan commitments | $2,159,208 | [Quantitative and Qualitative Disclosures about Market Risk](index=106&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages credit, interest rate, and foreign currency risks through active asset management, hedging, and matching asset/liability characteristics, with a 1.00% decrease in index rates estimated to increase net investment income by **$4.7 million** annually, and foreign currency exposure substantially hedged with forward contracts - The company actively manages credit risk, interest rate risk, and foreign currency risk; strategies include matching asset and liability characteristics and using derivatives[474](index=474&type=chunk) Interest Rate Sensitivity Analysis (Annual Change in Net Investment Income, in thousands) | Rate Change | Estimated Impact | | :--- | :--- | | 1.00% Decrease | $4,711 | | 0.50% Decrease | ($108) | | 0.25% Increase | $625 | - Substantially all net asset exposure to GBP, EUR, AUD, CHF, and SEK has been hedged with foreign currency forward contracts as of June 30, 2025[485](index=485&type=chunk) [Controls and Procedures](index=108&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[487](index=487&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[488](index=488&type=chunk) Part II Other Information [Legal Proceedings](index=109&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings pending or threatened that would adversely affect its business, financial position, or results of operations - No material legal proceedings are pending or threatened against the company[491](index=491&type=chunk) [Risk Factors](index=109&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Form 10-K have occurred[492](index=492&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=109&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities or issuer purchases of equity securities during the three months ended June 30, 2025 - There were no unregistered sales of equity securities during the second quarter of 2025[493](index=493&type=chunk) [Defaults Upon Senior Securities](index=109&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[494](index=494&type=chunk) [Other Information](index=109&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the second quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[496](index=496&type=chunk) [Exhibits](index=110&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the indenture for the 6.500% Senior Notes due 2030 and Sarbanes-Oxley Act certifications

Group 1 - David A. Johnson is the founder and principal of Endurance Capital Management, a New Jersey Limited Liability Company, with over 30 years of investment experience [1] - Johnson's investment strategy includes a diverse range of assets such as stocks, bonds, options, ETFs, REITs, real estate, closed-end funds, hedge funds, and private credit [1] - He holds a Master of Science (MS) Degree in Finance with a concentration in Investment Analysis from Boston University, a Certificate in Financial Planning, and an MBA from Fordham University [1]