Starwood Property Trust Inc delivered a solid GAAP net income in Q3 2024 with meaningful cash flow generation, despite a challenging environment for interest-bearing real estate assets. Revenue was USD 479.54 million, down 8.1% year over year and 2.1% quarter over quarter, while gross profit remained robust at USD 467.41 million, implying a very high gross margin of roughly 97.5%. Operating income was negative at USD -23.04 million, pressured by elevated interest expense (USD 337.86 million) and continued financing costs, resulting in an EBITDAR close to zero. Net income, however, came in at USD 76.07 million and earnings per share (EPS) USD 0.23, up about 53% year over year, driven by a sizable other income line (USD 105.65 million) that offset operating headwinds.
The company generated strong operating cash flow of USD 241.80 million and free cash flow of USD 235.04 million in the quarter, underscoring the portfolio’s cash-generation capability even amid higher financing costs. Cash at period end stood at USD 510.14 million, with total assets of USD 64.23 billion and a solid equity base of USD 6.54 billion. Net debt stood at USD 8.39 billion, against total debt of USD 8.74 billion, reflecting a leveraged but historically stable balance sheet for a mortgage REIT. The reported payout ratio appears elevated (dividend payout versus GAAP earnings), but the company also reports dividend-related cash flow coverage that supports continued distributions given robust free cash flow and liquidity.
From a market perspective, Starwood remains exposed to interest-rate sensitivity and credit-cycle risk inherent to mortgage lending and CMBS investments. The quarter showed YoY revenue decline but a resilient bottom-line print thanks to non-operating income streams and disciplined capital deployment. The mix of Commercial/Residential Lending, Infrastructure Lending, and Property/Investing & Servicing provides diversification but also concentrates exposure to market securitizations and credit spreads. Looking ahead, the key drivers will be how the company manages leverage, maintains liquidity, and capitalizes on securitization and distressed-asset opportunities in a volatile rate environment.