Strong underwriting record with minimal losses on loans originated since inception. Better diversification than most nonbank commercial real estate (CRE) lenders with multiple business lines and exposure to various asset classes and geographies. Management experience and expertise. Dependent on secured funding that encumbers assets and comes with margin call risk. Credit risk associated with first-lien transitional loans, including a portfolio of office loans, and various subordinated and mezzanine assets. Majority of business is related to CRE, an asset class currently exhibiting stress in some areas. The outlook is stable. We expect Starwood Property Trust Inc. to navigate more challenging conditions in commercial real estate and the economy this year without a substantial deterioration in its asset quality, liquidity, or performance.
