Starwood: 3 Key Takeaways for Long-Term Investors

On its third-quarter 2026 earnings call, held on Nov. 6, 2026, Starwood (NYSE:STWD) reported distributable earnings, a non-GAAP metric measuring cash available for dividend payouts, of $0.41 per share excluding realized losses. Shareholders can't ignore how effectively the commercial mortgage lender recycles capital from older loans into higher-yielding investments. Three things management said stand out.

1. Legacy Loan Resolutions Track Toward Full-Year Target

Starwood resolved $254 million of nonaccrual loans, which are nonperforming loans where interest collection is in doubt, and real estate owned, which refers to foreclosed properties on the balance sheet. Cleaning up those legacy positions allows management to recycle capital into fresh loans with higher interest rates.

We completed over $250 million of resolutions in the quarter and remain on track to achieve the over $800 million resolution target for 2026 we outlined previously. Which would be more than 40% of our nonaccrual NREO.
-- Jeffrey F. DiModica, President

2. Market Discount Implies Unrealistic Loss Expectations

Starwood increased its Current Expected Credit Losses (CECL) reserve, an accounting buffer for expected bad loans, by $369 million because of rate-driven macroeconomic models. Management noted that the stock's current discount to undepreciated book value, or net asset value, implies severe loss rates that don't match real-world asset sales.

Today's share price implies a discount to that book value of $1.6 billion beyond the $1 billion of CECL and REO reductions already on our balance sheet.
-- Jeffrey F. DiModica, President

3. Board Evaluates Dividend Level Against Earnings Power

Third-quarter distributable earnings came in at $0.41 per share, falling short of the quarterly dividend payout of $0.48 per share. Management plans to review the payout ratio, which measures dividend payments against earnings, with the board to preserve liquidity until loan resolutions restore earning power.

I think we will have to examine what we are gonna do with our dividend. Which has been paid well above the DE rates, the earnings rates we have been producing the last couple of quarters.
-- Barry Stuart Sternlicht, Chairman and Chief Executive Officer

Looking Ahead

Commercial real estate conditions are healing as construction slows and property supply declines across major markets. Starwood relies on its massive scale, energy infrastructure lending platform, and non-real-estate earnings streams to cushion the impact of higher interest rates. Executive focus centers on optimizing borrowing costs and executing steady asset resolutions.

Underlying asset classes are getting better and better. At an increasingly better pace.
-- Barry Stuart Sternlicht, Chairman and Chief Executive Officer

A deep liquidity pool of $1.1 billion lets the business manage pre-2023 loans for long-term recovery rather than forced short-term sales. Reinvesting repaid capital into high-yielding new loans positions the portfolio to rebuild distributable earnings as credit market friction eases.

As we resolve some of these loans, we will definitely have the ability to restore our earnings power and the dividend again.
-- Barry Stuart Sternlicht, Chairman and Chief Executive Officer

The Motley Fool has positions in and recommends Starwood Property Trust. The Motley Fool has a disclosure policy.