The real estate sector has been hit hard by rising interest rates, which have made it more expensive for investors to finance new deals. As a result, real estate values have declined and the number of participants in the sector has shrunk. REITs, which are companies that own and operate real estate, have been particularly hard hit by this downturn.
Within the REIT sector, mortgage REITs (mREITs) have been impacted more significantly than equity REITs. mREITs borrow money to invest in mortgages, and their performance is therefore more closely tied to interest rates. As interest rates have risen, mREITs have seen their profits decline.
One of the best performing mREITs in the current environment has been Starwood Property Trust (STWD). STWD has outperformed its peers thanks to its diversified business model. In addition to mREITs, STWD also invests in owned properties and real estate services. This diversification has helped to insulate STWD from the downturn in the mREIT sector.
STWD’s largest lending segment is multifamily, which has been a relatively resilient sector during the pandemic. The REIT also has exposure to office, RMBS, and infrastructure. STWD’s portfolio is well-diversified across asset classes and geography, which provides some protection against downturns in any one sector or region.
STWD’s management team is also experienced and well-respected. The company has a long track record of success, and it has been able to navigate through difficult market conditions in the past.
Overall, STWD is well-positioned to weather the current storm in the real estate market. The company has a strong balance sheet, a conservative underwriting approach, and a proven track record of success. As a result, STWD is one of the best mREITs to consider investing in today.
