- Starwood Property Trust lost $389.7 million in Q3, against $72.6 million of net income a year earlier, driven by a $336.6 million credit loss provision and a $121.6 million fair-value loss on loans.
- Management says it is clearing legacy loans, with $800 million of resolutions targeted for 2026, while originating $2.4 billion of commercial loans, the most in four years.
- The stock is down 32% this year, a reminder that public lenders are still paying for pre-2022 loans even as CEO Barry Sternlicht argues supply is about to shrink.
Starwood Property Trust swung to a $390M quarterly loss in the third quarter, according to Commercial Observer, as a large credit provision hit its earnings.
The Miami Beach lender posted a $389.7M net loss. A year earlier it earned $72.6M, and three months ago it earned $6.6M.
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What Drove the Loss
The main culprit was a $336.6M credit loss provision. Another $121.6M of fair-value markdowns on its loans added to the damage.
Distributable earnings came in at $116.8M, down from $151.5M in Q2 and $148.6M in Q3 2025. The shares fell 3% on the day to $12.36, which leaves them down 32% this year and 52% over five years.
Cleaning Up Legacy Loans
President Jeffrey DiModica said Starwood is working through loans written before rates jumped in 2022. The firm committed more than $250M to resolutions in the quarter and expects to resolve $800M by year-end.
At the same time, it put money to work: $3.2B across the platform, including $2.4B of commercial lending, its biggest quarter in four years. Year-to-date investments reached $8.2B.
Starwood also retired $500M of corporate debt half a year ahead of maturity and ended the quarter with $1.1B of liquidity.
Sternlicht’s Case
CEO Barry Sternlicht called the stock’s slide “turbulence” and said CRE fundamentals keep improving. He pointed to the firm’s $32.3B enterprise size and said its nearest public competitor is about half as big.
DiModica added that commercial loans are only half of Starwood’s assets. The other half spans net-lease properties, home loans, special servicing and energy infrastructure, and he argued the market undervalues them.
Why It Matters
Starwood is one of the biggest names in commercial mortgage REITs, so its reserves show how much old credit risk still sits on lender balance sheets. We saw the stress at the sponsor level too when SREIT suspended redemptions after a surge in withdrawal requests, according to Bisnow.
Sternlicht also has a view on supply. He said the data center buildout is pulling construction workers away from other property types, which should tighten supply and help owners. Starwood is leaning in too, having closed a $10.2B fund aimed at data centers and housing.
What’s Next
Sternlicht expects tech equity prices and economic growth to ease together, which he said would pull rates lower and be good for property. Watch the pace of legacy resolutions and whether the provision stabilizes in Q4.
