[Management View]
Management detailed the realization of substantial gains from a cash-out refinancing in the Florida multifamily portfolio, highlighting extraction of both debt and equity value. Starwood Property Trust emphasized rapid growth in data center financing, now comprising a $20 billion loan book with exposure to major technology hyperscale tenants. The company completed its fourth CRE CLO at an 87% advance rate and 165 basis points over benchmark, signaling favorable market access and strong demand for its securitizations. The call clarified that triple net lease cap rates normalized near 7%, alleviating short-term concerns over portfolio yield misperception. Rental affordability metrics improved, and portfolio occupancy remains high, supporting underlying business fundamentals.

[Outlook]
Starwood expects 2025 will be its second largest origination year ever, with a large pipeline coming across core sectors. CRE and infrastructure CLO executions drive funding cost reductions and enhance capital efficiency across business lines. Management distinguished its counterparty-focused approach in data center financing, emphasizing amortization structures and minimal reliance on residual asset value.

[Financial Performance]
The company reported a realized cash-out refinancing gain of $225 million from the Florida multifamily portfolio. The refinancing moved from $309 million of existing agency debt and $75 million of original equity to $614 million new debt. The yield on equity and return on equity remained consistent with past performance despite competitive lending conditions and tighter spreads.

[Q&A Highlights]
Question 1: Did the cash-out refinancing in the Florida multifamily portfolio result in significant gains? Can you provide more details on the debt and equity value extraction?
Answer: Yes, the cash-out refinancing resulted in a $225 million gain, which is four times the original equity. The refinancing moved from $309 million of existing agency debt and $75 million of original equity to $614 million new debt. This gain is just on the debt side, without including the gain on equity. The potential gain on the Florida multifamily portfolio could be $1.5 billion or more.

Question 2: How do you view the competitive lending environment and the impact on spreads and returns?
Answer: The market is competitive with tight spreads, but our financing has also contracted, allowing us to earn above-trend returns. More money has been raised in private credit, leading to increased competition for similar loans. However, banks are providing tighter financing, which supports our returns. We expect 2025 to be our second largest origination year ever, with a large pipeline coming.

Question 3: How do you address the risks associated with data center financing, considering the rapidly depreciating assets inside the buildings?
Answer: It depends on what we are financing. Sometimes it is the building, and sometimes it is the building and equipment. We favor certain credits and rely on the strong credit quality of major technology tenants. Our loans are fully amortized over the lease term, with no reliance on residual value. We focus on counterparty risk and have great debt yields and coverage.

Question 4: Can you clarify the cap rate for the new triple net lease business and its impact on portfolio valuation?
Answer: The implied cap rate for the new triple net lease business is 6.9% or 7%, with no goodwill. The previously reported 5% figure was not accurate. The portfolio has performed well, and the refinancing process resulted in a significant gain, supporting the overall portfolio valuation.

[Sentiment Analysis]
Analysts and management maintained a positive tone throughout the call. Analysts appreciated the detailed responses and clarity provided by management. Management emphasized strong performance, growth opportunities, and effective risk management strategies.

[Quarterly Comparison]
| Metric | Q3 2025 | Q2 2025 | YoY Change |
|-------------------------------|-----------------|-----------------|------------|
| Cash-out refinancing gain | $225 million | N/A | N/A |
| New debt from refinancing | $614 million | N/A | N/A |
| Occupancy rates | 95% | 95% | 0% |
| Data center financing book | $20 billion | $18 billion | +11.1% |
| CRE CLO advance rate | 87% | 85% | +2.4% |

[Risks and Concerns]
- Competitive lending environment with tight spreads.
- Potential risks associated with data center financing due to rapidly depreciating assets.
- Market volatility and economic uncertainties impacting real estate investments.

[Final Takeaway]
Starwood Property Trust demonstrated strong performance in Q3 2025, driven by significant gains from cash-out refinancing in the Florida multifamily portfolio and rapid growth in data center financing. The company maintained high occupancy rates and improved rental affordability metrics. Despite a competitive lending environment, Starwood expects 2025 to be its second largest origination year ever, with a large pipeline across core sectors. Management's focus on counterparty risk and effective risk management strategies supports the company's positive outlook.