Starwood Real Estate Income Trust (SWDR) logs $790M revenue and $257M net loss
Rhea-AI Filing Summary
Starwood Real Estate Income Trust, Inc. is a Maryland REIT focused on stabilized, income-oriented commercial real estate and real estate debt, primarily in the U.S. with additional exposure in Europe. As of June 30, 2026, total assets were $18.6 billion, including $16.6 billion of investments in real estate, net, and a Level 3 investment in real estate debt at fair value of $948.8 million. The portfolio comprised 402 consolidated properties, 877 single-family rental units, two unconsolidated ventures and one real estate debt investment.
For the six months ended June 30, 2026, total revenues were $790.2 million, with rental revenue of $775.7 million. The company reported a net loss attributable to stockholders of $257.1 million, or $0.66 per share, and comprehensive loss of $284.6 million. Operating cash flow was positive at $160.3 million, while financing cash flow reflected common stock repurchases of $185.5 million and cash distributions of $158.5 million. Total liabilities were $14.8 billion, including $12.0 billion of mortgage notes and secured credit facilities and a $1.55 billion unsecured line of credit; total equity declined to $3.42 billion from $3.97 billion at year-end 2025.
Positive
- None.
Negative
- None.
Filing Explained
As of August 12, 2026, every common-stock class had fewer reported shares outstanding than December 31; June 30 liquidity included $241,059 thousand of restricted cash.
This Form 10-Q is the company’s unaudited quarterly report for the period ended
At
The company reported
As of
Key Figures
Key Terms
variable interest entity financial
Delaware statutory trusts financial
failed sale-leaseback transaction financial
Level 3 financial
Qualified Domestic Minimum Top-Up Taxes financial
Discounted Cash Flow financial
FAQ
How did Starwood Real Estate Income Trust (SWDR) perform for the six months ended June 30, 2026?
What is the size and composition of SWDR’s balance sheet as of June 30, 2026?
How much debt does Starwood Real Estate Income Trust (SWDR) carry?
What cash flows did SWDR generate from operating, investing, and financing activities?
What is SWDR’s DST Program and how much capital has it raised?
Did Starwood Real Estate Income Trust (SWDR) recognize any real estate impairments in 2026 to date?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
FOR THE QUARTERLY PERIOD ENDED
OR
For the Transition period from to .
Commission file number
(Exact name of Registrant as specified in Its Charter)
(State or other jurisdiction of incorporation or organization) |
(Address of principal executive offices) (Zip Code) |
(I.R.S. Employer Identification No.) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class |
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Name of each exchange on which registered |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 12, 2026, the registrant had the following shares outstanding:
TABLE OF CONTENTS
PART I. |
FINANCIAL INFORMATION |
1 |
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ITEM 1. |
FINANCIAL STATEMENTS |
1 |
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Condensed Consolidated Financial Statements (Unaudited): |
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Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2026 and 2025 |
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Condensed Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2026 and 2025 |
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Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 |
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Notes to Condensed Consolidated Financial Statements |
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ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
34 |
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ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
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ITEM 4. |
CONTROLS AND PROCEDURES |
55 |
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PART II. |
OTHER INFORMATION |
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ITEM 1. |
LEGAL PROCEEDINGS |
56 |
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ITEM 1A. |
RISK FACTORS |
56 |
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ITEM 2. |
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
56 |
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ITEM 3. |
DEFAULTS UPON SENIOR SECURITIES |
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ITEM 4. |
MINE SAFETY DISCLOSURES |
58 |
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ITEM 5. |
OTHER INFORMATION |
58 |
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ITEM 6. |
EXHIBITS |
59 |
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Starwood Real Estate Income Trust, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)
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June 30, 2026 |
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December 31, 2025 |
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Assets |
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Investments in real estate, net |
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$ |
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Investment in real estate debt |
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Investments in unconsolidated real estate ventures |
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Cash and cash equivalents |
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Restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Equity |
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Mortgage notes and secured credit facilities, net |
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$ |
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$ |
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Secured financings on investment in real estate debt, net |
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Unsecured line of credit |
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Other liabilities |
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Subscriptions received in advance |
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Due to affiliates |
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Total liabilities |
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— |
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— |
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Redeemable non-controlling interests |
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Equity |
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Preferred stock, $ |
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Common stock — Class T shares, $ |
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Common stock — Class S shares, $ |
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Common stock — Class D shares, $ |
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Common stock — Class I shares, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit and cumulative distributions |
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Total stockholders’ equity |
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Non-controlling interests in consolidated joint ventures |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
1
Starwood Real Estate Income Trust, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except share and per share data)
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For the Three Months Ended June 30, |
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For the Six Months Ended June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Revenues |
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Rental revenue |
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$ |
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$ |
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$ |
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$ |
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Other revenue |
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Total revenues |
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Expenses |
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Property operating |
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General and administrative |
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Management fees |
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Performance participation allocation |
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Depreciation and amortization |
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Total expenses |
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Other expense |
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Loss from unconsolidated real estate ventures |
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( |
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Income from investment in real estate debt, net |
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Net (loss) gain on dispositions of real estate |
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Interest expense |
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( |
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Loss on extinguishment of debt |
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Other (expense) income, net |
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( |
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Total other expense |
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( |
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( |
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( |
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( |
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Net loss |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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Net loss attributable to non-controlling interests in consolidated joint ventures |
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$ |
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$ |
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$ |
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$ |
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Net loss attributable to non-controlling |
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Net loss attributable to stockholders |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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Net loss per share of common stock, basic and diluted |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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Weighted-average shares of common stock |
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Comprehensive loss: |
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Net loss |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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Other comprehensive (loss) income item: |
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Foreign currency translation adjustments |
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( |
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( |
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Other comprehensive (loss) income |
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$ |
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( |
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$ |
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$ |
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( |
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$ |
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Comprehensive loss |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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$ |
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( |
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See accompanying notes to condensed consolidated financial statements.
2
Starwood Real Estate Income Trust, Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(in thousands)
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Par Value |
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Common |
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Common |
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Common |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Non- |
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Total |
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Balance at March 31, 2026 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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( |
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$ |
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$ |
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$ |
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Common stock issued (transferred) |
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( |
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— |
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— |
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— |
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Offering costs, net |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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( |
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( |
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Distribution reinvestments |
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— |
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— |
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— |
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— |
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Amortization of restricted stock grants |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Common stock repurchased |
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— |
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( |
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( |
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( |
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( |
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— |
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— |
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— |
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Net loss ($ |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Contributions from non-controlling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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Distributions to non-controlling interests |
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— |
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— |
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— |
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— |
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( |
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Distributions declared on common stock |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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( |
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— |
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— |
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Allocation to redeemable non-controlling |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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Balance at June 30, 2026 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Par Value |
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Common |
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Common |
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Common |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Non- |
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Total |
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Balance at March 31, 2025 |
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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( |
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$ |
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( |
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$ |
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$ |
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$ |
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Common stock issued (transferred) |
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— |
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— |
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— |
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Offering costs, net |
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— |
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— |
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|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Distribution reinvestments |
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Amortization of restricted stock grants |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||
Common stock repurchased |
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Net loss ($ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Contributions from non-controlling interests |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Distributions to non-controlling interests |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Distributions declared on common stock |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||
Allocation to redeemable non-controlling |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Balance at June 30, 2025 |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|||||||||
See accompanying notes to condensed consolidated financial statements.
3
Starwood Real Estate Income Trust, Inc.
Condensed Consolidated Statements of Changes in Equity (Unaudited)
(in thousands)
|
Par Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Common |
|
|
Common |
|
|
Common |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|
Non- |
|
|
Total |
|
||||||||||||||||||||
Balance at December 31, 2025 |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|||||||||
Common stock issued (transferred) |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Offering costs, net |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
( |
) |
||
Distribution reinvestments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||||
Amortization of restricted stock grants |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||
Common stock repurchased |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Net loss ($ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Contributions from non-controlling interests |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Distributions to non-controlling interests |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Distributions declared on common stock |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Other comprehensive loss |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Allocation to redeemable non-controlling |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Balance at June 30, 2026 |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|||||||||
|
Par Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
Common |
|
|
Common |
|
|
Common |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|
Non- |
|
|
Total |
|
||||||||||||||||||||
Balance at December 31, 2024 |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||||
Common stock issued (transferred) |
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||
Offering costs, net |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Distribution reinvestments |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
||||||
Amortization of restricted stock grants |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||
Common stock repurchased |
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Net loss ($ |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
Contributions from non-controlling interests |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Distributions to non-controlling |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
Distributions declared on common stock |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||
Allocation to redeemable non-controlling |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Balance at June 30, 2025 |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|||||||||
See accompanying notes to condensed consolidated financial statements.
4
Starwood Real Estate Income Trust, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating |
|
|
|
|
|
|
||
Management fees |
|
|
|
|
|
|
||
Performance participation allocation |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Amortization of deferred financing costs |
|
|
|
|
|
|
||
Straight-line rent amortization |
|
|
( |
) |
|
|
( |
) |
Deferred income amortization |
|
|
( |
) |
|
|
( |
) |
Unrealized (gain) loss on changes in fair value of financial instruments |
|
|
( |
) |
|
|
|
|
Foreign currency gain |
|
|
( |
) |
|
|
( |
) |
Loss on extinguishment of debt |
|
|
|
|
|
|
||
Amortization of restricted stock grants |
|
|
|
|
|
|
||
Net loss (gain) on dispositions of investments in real estate |
|
|
|
|
|
( |
) |
|
Loss from unconsolidated real estate ventures |
|
|
|
|
|
|
||
Distributions of earnings from unconsolidated real estate ventures |
|
|
|
|
|
|
||
Realized loss (gain) on derivative instruments |
|
|
|
|
|
( |
) |
|
Other items |
|
|
( |
) |
|
|
( |
) |
Change in assets and liabilities |
|
|
|
|
|
|
||
Decrease in other assets |
|
|
|
|
|
|
||
Increase (decrease) in due to affiliates |
|
|
|
|
|
( |
) |
|
Increase (decrease) in other liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
|
||
Proceeds from dispositions of real estate |
|
|
|
|
|
|
||
Capital improvements to real estate |
|
|
( |
) |
|
|
( |
) |
Return of capital from unconsolidated real estate ventures |
|
|
|
|
|
|
||
Proceeds from paydown of principal and settlement of investment in real estate debt |
|
|
|
|
|
|
||
Purchase of derivative instruments |
|
|
( |
) |
|
|
( |
) |
Proceeds from derivative instruments |
|
|
|
|
|
|
||
Net cash (used in) provided by investing activities |
|
|
( |
) |
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds from issuance of common stock, net |
|
|
|
|
|
|
||
Offering costs paid |
|
|
( |
) |
|
|
( |
) |
Subscriptions received in advance |
|
|
|
|
|
|
||
Repurchases of common stock |
|
|
( |
) |
|
|
( |
) |
Borrowings from mortgage notes, secured credit facilities and unsecured line of credit |
|
|
|
|
|
|
||
Repayments of mortgage notes, secured credit facilities and unsecured line of credit |
|
|
( |
) |
|
|
( |
) |
Borrowings under secured financings on investment in real estate debt |
|
|
|
|
|
|
||
Repayments under secured financings on investment in real estate debt |
|
|
|
|
|
( |
) |
|
Payment of deferred financing costs |
|
|
( |
) |
|
|
|
|
Contributions from non-controlling interests |
|
|
|
|
|
|
||
Distributions to non-controlling interests |
|
|
( |
) |
|
|
( |
) |
Distributions |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rate changes |
|
|
|
|
|
|
||
Net change in cash and cash equivalents and restricted cash |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents and restricted cash, beginning of the year |
|
|
|
|
|
|
||
Cash and cash equivalents and restricted cash, end of the period |
|
$ |
|
|
$ |
|
||
Reconciliation of cash and cash equivalents and restricted cash to the condensed |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash and cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Accrued stockholder servicing fees due to affiliate |
|
$ |
( |
) |
|
$ |
( |
) |
Issuance of Class I shares for payment of management fee |
|
$ |
|
|
$ |
|
||
Accrued distributions |
|
$ |
|
|
$ |
|
||
Distribution reinvestment |
|
$ |
|
|
$ |
|
||
Allocation to redeemable non-controlling interests |
|
$ |
|
|
$ |
|
||
Deferred transaction offering costs |
|
$ |
|
|
$ |
|
||
Accrued capital expenditures |
|
$ |
|
|
$ |
|
||
See accompanying notes to condensed consolidated financial statements.
5
Starwood Real Estate Income Trust, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Starwood Real Estate Income Trust, Inc. (the “Company”) was formed on June 22, 2017 as a Maryland corporation and has elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes. The Company is organized to invest primarily in stabilized, income-oriented commercial real estate and debt secured by commercial real estate. The Company’s portfolio is principally comprised of properties located in the United States. The Company has diversified its portfolio on a global basis through the acquisition of properties outside of the United States, with a focus on Europe. To a lesser extent, the Company has invested in debt secured by commercial real estate and real estate-related securities. The Company is the sole general partner of Starwood REIT Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). Starwood REIT Special Limited Partner, L.L.C. (the “Special Limited Partner”), a wholly owned subsidiary of Starwood Capital Group Holdings, L.P. (the “Sponsor” and together with any entity that is controlled by, controls or is under common control with the Sponsor, and any of their respective predecessor entities, “Starwood Capital”), owns a special limited partner interest in the Operating Partnership. Substantially all of the Company’s business is conducted through the Operating Partnership. The Company and the Operating Partnership are externally managed by Starwood REIT Advisors, L.L.C. (the “Advisor”), an affiliate of the Sponsor.
On December 27, 2017, the Company commenced its initial public offering of up to $
On February 4, 2026, the third public offering terminated, and the Company commenced its fourth public offering of up to $
In April 2024, the Company launched a program (the “DST Program”) to raise capital, through its Operating Partnership, through private placement offerings exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by selling beneficial interests (“DST Interests”) in specific Delaware statutory trusts (“DSTs”) holding real properties (the “DST Properties”). As of June 30, 2026, the Company has raised approximately $
As of June 30, 2026, the Company owned
Principles of Consolidation and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. All significant intercompany balances and transactions have been eliminated in consolidation. Management believes it has made all necessary adjustments, consisting of only normal recurring items, so that the unaudited condensed consolidated financial statements are presented fairly and that estimates made in preparing its unaudited condensed consolidated financial statements are reasonable and prudent. The accompanying unaudited condensed consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (the “SEC”).
Certain amounts in the Company’s prior period condensed consolidated financial statements have been reclassified to conform to the current period presentation. The Company has chosen to reclassify realized gains and losses on derivative instruments as reflected on the Condensed Consolidated Statements of Cash Flows from “Other items” to “Realized loss (gain) on derivative instruments” for the six months ended June 30, 2025. This reclassification had no effect on the previously reported totals or subtotals included in the Condensed Consolidated Statements of Cash Flows.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, the Company’s subsidiaries and joint ventures in which the Company has a controlling interest. For consolidated joint ventures, the non-controlling
6
partner’s share of the assets, liabilities and operations of the joint ventures is included in non-controlling interests as equity of the Company. The non-controlling partner’s interest is generally computed as the joint venture partner’s ownership percentage. Certain of the joint ventures formed by the Company provide the other partner a profits interest based on certain return hurdles being achieved. Any profits interest due to the other partner is reported within non-controlling interests.
In determining whether the Company has a controlling financial interest in a partially owned entity and the requirement to consolidate the accounts of that entity, the Company considers whether the entity is a variable interest entity (“VIE”) and whether it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has (i) the power to direct the most significant activities impacting the economic performance of the VIE and (ii) the obligation to absorb losses or receive benefits significant to the VIE. The Operating Partnership is considered to be a VIE. The Company consolidates the Operating Partnership because it has the ability to direct the most significant activities of the entity such as purchases, dispositions, financings, budgets, and overall operating plans. The Company meets the VIE disclosure exemption criteria, as the Company’s interest in the Operating Partnership is considered a majority voting interest. Where the Company does not have the power to direct the activities of the VIE that most significantly impact its economic performance, the Company’s interest for those partially owned entities are accounted for using the equity method of accounting.
The Company has a DST Program to raise capital through private placement offerings by selling DST Interests in specific DSTs holding real properties. Under the DST Program, each private placement offers interest in one or more DST Properties. DST Properties may be sourced from properties currently owned by the Operating Partnership or newly acquired properties. The underlying interest of real properties sold to investors pursuant to such private placements are leased-back to a wholly owned subsidiary of the Operating Partnership on a long-term basis through January 2, 2031, unless sooner terminated pursuant to master lease agreements. These master lease agreements are fully guaranteed by the Operating Partnership in the form of demand notes capitalizing the lessee. Additionally, the Operating Partnership retains a fair market value purchase option giving it the right, but not the obligation, to acquire the interests in the DSTs from the investors at a later time in exchange for Operating Partnership units.
Under the master lease agreements, a wholly owned indirect subsidiary of the Operating Partnership is responsible for subleasing the property to occupying tenants and all underlying costs associated with operating the property and is responsible for paying rent to the DST that owns such property. For financial reporting purposes (and not for income tax purposes), the Company evaluated the transfer of the DST properties under GAAP and concluded that the sale of the DST Properties does not qualify as a sale due to continuing involvement and the fair market value repurchase option and is, therefore, accounted for as a failed sale-leaseback transaction. As a result of this determination, the DST Properties are included in the Company’s Condensed Consolidated Balance Sheets. The master lease agreements are absolute leases, pursuant to which the master tenant will pay the stated rent and will be responsible for paying leasing costs, operating expenses, real estate taxes, special assessments, sales and use taxes, utilities, insurance and repairs for maintenance related to the DST Properties.
As of June 30, 2026 and December 31, 2025, the Company held
The Company has determined that the DST entities are VIEs. The Company has determined that it is the primary beneficiary of these VIEs. As a result, these DST entities are included in the Company’s condensed consolidated financial statements. As of June 30, 2026 and December 31, 2025, the total liabilities of the Company’s consolidated VIEs, excluding the Operating Partnership, were $
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the balance sheet. Actual results could differ from those estimates.
Investments in Real Estate
Refer to Note 2 — “Summary of Significant Accounting Policies” to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, for further details of the GAAP treatment regarding the Company’s investments in real estate.
Impairment of Investments in Real Estate
The Company’s management reviews its real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value. If the carrying amount of the real estate investment is no longer recoverable and
7
exceeds the fair value of such investment, an impairment loss is recognized. The impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The evaluation of anticipated future cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Since cash flows on real estate properties considered to be “long-lived assets to be held and used” are considered on an undiscounted basis to determine whether an asset has been impaired, the Company’s strategy of holding properties over the long term decreases the likelihood of recording an impairment loss. If the Company’s strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized and such loss could be material to the Company’s results. If the Company determines that an impairment has occurred, the affected assets must be reduced to their fair value. Impairment charges are recorded in the Condensed Consolidated Statements of Operations and Comprehensive Loss.
During the three and six months ended June 30, 2026 and 2025, the Company did
Properties Held-for-Sale
The Company classifies the assets and liabilities related to its investments in real estate as held-for-sale when a sale is probable to occur within one year. The Company considers a sale to be probable when a binding contract has been executed, the buyer has posted a non-refundable deposit, and there are limited contingencies to closing. The Company records held-for-sale investments in real estate at the lower of depreciated cost or fair value, less estimated closing costs. Held-for-sale assets and liabilities are presented within Other assets and Other liabilities on the Company’s Condensed Consolidated Balance Sheets. Liabilities are included in the held-for-sale disposal group only if these liabilities are directly associated with the assets to be disposed of and are expected to be settled as part of the pending sale transaction. This includes mortgage notes, net, that are assumed by the buyer or mortgage notes, net, that are fully repaid as part of the pending sale transaction. As of June 30, 2026 and December 31, 2025,
Fair Value Measurements
Under normal market conditions, the fair value of an investment is the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Additionally, there is a hierarchical framework that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and the state of the market place, including the existence and transparency of transactions between market participants. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.
Investments measured and reported at fair value are classified and disclosed in one of the following levels within the fair value hierarchy:
Level 1 — quoted prices are available in active markets for identical investments as of the measurement date. The Company does not adjust the quoted price for these investments.
Level 2 — quoted prices are available in markets that are not active or model inputs are based on inputs that are either directly or indirectly observable as of the measurement date.
Level 3 — pricing inputs are unobservable and include instances where there is minimal, if any, market activity for the investment. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these investments existed.
Valuation of assets and liabilities measured at fair value
The Company’s investment in real estate debt is reported at fair value. The Company’s investment in real estate debt includes a loan secured by real estate, which may not have readily available market quotations. In such cases, the Company will generally determine the initial value based on the origination amount or acquisition price of such investment if acquired by the Company or the par value of such investment if originated by the Company. Following the initial measurement, the Company will determine fair value by utilizing or reviewing certain of the following inputs (i) market yield data, (ii) discounted cash flow modeling, (iii) collateral asset performance, (iv) local or macro real estate performance, (v) capital market conditions, (vi) debt yield or loan-to-value ratios, and (vii) borrower financial condition and performance.
8
The Company’s derivative financial instruments are reported at fair value and are recorded within Other assets and Other liabilities on the Company’s Condensed Consolidated Balance Sheets. The Company’s interest rate swap agreements are valued using a discounted cash flow analysis based on the terms of the contract and the forward interest rate curve adjusted for the Company’s non-performance risk. The Company’s interest rate cap positions are valued using models developed by the respective counterparty as well as third party pricing service providers that use as their basis readily observable market parameters (such as forward yield curves and credit default swap data).
The fair values of the Company’s foreign currency forward contracts are determined by comparing the contracted forward exchange rate to the current market exchange rate. The current market exchange rates are determined by using market spot rates, forward rates and interest rate curves for the underlying instruments.
The fair values of the Company’s financial instruments (other than investment in real estate debt, mortgage notes, secured credit facilities, unsecured line of credit and derivative instruments), including cash and cash equivalents, restricted cash and other financial instruments, approximate their carrying or contract value. The Company utilizes a discounted cash flow model to value its loans secured by real estate (considering loan features, credit quality of the loans and includes a review of market yield data, collateral asset performance, local and macro real estate performance, capital market conditions, debt yield, loan-to-value ratios, borrower financial condition and performance, among other factors). The Company continuously monitors and assesses the credit quality of individual loans including the review of delinquency and loan-to-value ratios on its loans secured by real estate. Such loans have floating interest rates with market terms and there are no underlying credit quality issues as of June 30, 2026.
The following table details the Company’s assets and liabilities that are measured at fair value on a recurring basis ($ in thousands):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Investment in real estate debt |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
Derivatives |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Total |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivatives |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
Total |
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
||||
The following table details the Company’s assets that are measured at fair value on a recurring basis using Level 3 inputs ($ in thousands):
|
|
Investment in |
|
|
Balance as of December 31, 2025 |
|
$ |
|
|
Loan repayments |
|
|
( |
) |
Included in net loss |
|
|
|
|
Foreign currency remeasurement |
|
|
|
|
Balance as of June 30, 2026 |
|
$ |
|
|
T
|
|
June 30, 2026 |
||||||||||
|
|
Fair Value |
|
|
Valuation Technique |
|
Unobservable Inputs |
|
Weighted Average |
|
Impact to Valuation from a Decrease in Input |
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate debt |
|
$ |
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
Increase |
||
9
|
|
December 31, 2025 |
||||||||||
|
|
Fair Value |
|
|
Valuation Technique |
|
Unobservable Inputs |
|
Weighted Average |
|
Impact to Valuation from a Decrease in Input |
|
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate debt |
|
$ |
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
Increase |
||
Valuation of assets measured at fair value on a nonrecurring basis
Certain of the Company’s assets may not be measured at fair value on an ongoing basis but are subject to fair value adjustments, such as when there is evidence of impairment, and therefore measured at fair value on a nonrecurring basis. The Company reviews its real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value.
During the three and six months ended June 30, 2026 and 2025, the Company did
Valuation of liabilities not measured at fair value
Fair value of the Company’s indebtedness is estimated by modeling the cash flows required by the Company’s debt agreements and discounting them back to the present value using an appropriate discount rate. Additionally, the Company considers current market rates and conditions by evaluating similar borrowing agreements with comparable loan-to-value ratios and credit profiles. The inputs used in determining the fair value of the Company’s indebtedness are considered Level 3. As of June 30, 2026 and December 31, 2025, the fair value of the Company’s mortgage notes, secured credit facilities, and secured financings on investment in real estate debt was approximately $
Income Taxes
The Company elected to be taxed as a REIT under the Internal Revenue Code (the “Code”), for federal income tax purposes, beginning with its taxable year ended December 31, 2019. As long as the Company qualifies for taxation as a REIT, it generally will not be subject to U.S. federal corporate income tax on its net taxable income that is currently distributed to its stockholders. A REIT is subject to a number of organizational and operational requirements, including a requirement that it currently distributes at least
The Company has formed subsidiaries to function as TRSs and filed TRS elections, together with such subsidiaries, with the Internal Revenue Service. In general, a TRS may perform additional services for the Company’s tenants and generally may engage in any real estate or non-real estate-related business other than management or operation of a lodging facility or a health care facility. The TRSs may be subject to taxation at the federal, state, local, and foreign levels, as applicable, at regular corporate tax rates. The Company accounts for applicable income taxes by utilizing the asset and liability method. As such, the Company records deferred tax assets and liabilities for the future tax consequences resulting from the difference between the carrying value of existing assets and liabilities and their respective tax basis. A valuation allowance for deferred tax assets is provided if the Company believes all or some portion of the deferred tax asset may not be realized.
In 2021, the Organization for Economic Co-operation and Development (“OECD”) announced a two-pillar solution to address tax challenges arising from the digitalization of the economy, which included a
10
For the three and six months ended June 30, 2026, the Company recognized an income tax expense of ($
As of December 31, 2025, net operating loss (“NOL”) carryforwards for federal, state and foreign income tax purposes totaled $
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2024-03, “Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” which requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the consolidated financial statements. The guidance is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The guidance is to be applied either (i) prospectively to financial statements issued for reporting periods after the effective date or (ii) retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the potential impact of adopting this standard on the condensed consolidated financial statements and related disclosures.
In December 2025, the Financial Accounting Standards Board issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”), which amends Accounting Standards Codification (“ASC”) 270, Interim Reporting (“ASC 270”). The amendments are intended to improve the navigability and clarity of the interim reporting guidance within ASC 270 and to clarify when that guidance is applicable. ASU 2025-11 does not expand or reduce existing interim disclosure requirements, but rather, it reorganizes and clarifies current requirements, including by adding a disclosure principle for material events occurring after the most recent annual reporting period. ASU 2025-11 is effective for interim reporting periods within fiscal years beginning after December 15, 2027 for public business entities, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this standard on its condensed consolidated financial statements and related disclosures.
Investments in Real Estate
Investments in real estate, net consisted of the following ($ in thousands):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Building and building improvements |
|
$ |
|
|
$ |
|
||
Land and land improvements |
|
|
|
|
|
|
||
Furniture, fixtures and equipment |
|
|
|
|
|
|
||
(1) |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Investments in real estate, net |
|
$ |
|
|
$ |
|
||
__________
Asset Dispositions
During the three months ended June 30, 2026, the Company did
11
with capital improvement activities at certain of the Company’s properties and a net loss on the disposition of
During the three months ended June 30, 2025, the Company sold an aggregate of $
Investments in Unconsolidated Real Estate Ventures
The following table details the Company’s equity investments in unconsolidated real estate ventures ($ in thousands):
Investments in Unconsolidated |
|
Segment |
|
Date |
|
Number of Properties |
|
Ownership Interest |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Extended Stay Portfolio |
|
Other |
|
July 2022 |
|
|
|
$ |
|
|
$ |
|
||||
Fort Lauderdale Hotel |
|
Other |
|
March 2019 |
|
|
|
|
|
|
|
|
||||
Total investments in unconsolidated real estate ventures |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
The following table details the Company’s loss from equity investments in unconsolidated real estate ventures ($ in thousands):
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
Investments in Unconsolidated Real Estate Ventures |
|
Segment |
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Extended Stay Portfolio |
|
Other |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Fort Lauderdale Hotel |
|
Other |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Total loss from unconsolidated real estate ventures |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
12
The gross carrying amount and accumulated amortization of the Company’s intangible assets and liabilities consisted of the following ($ in thousands):
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||
Intangible assets: (1) |
|
|
|
|
|
|
|
||
In-place lease intangibles |
$ |
|
|
|
$ |
|
|
||
Above-market lease intangibles |
|
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
|
||
Total intangible assets |
|
|
|
|
|
|
|
||
Accumulated amortization: |
|
|
|
|
|
|
|
||
In-place lease amortization |
|
|
( |
) |
|
|
|
( |
) |
Above-market lease amortization |
|
|
( |
) |
|
|
|
( |
) |
Other |
|
|
( |
) |
|
|
|
( |
) |
Total accumulated amortization |
|
|
( |
) |
|
|
|
( |
) |
Intangible assets, net |
$ |
|
|
|
$ |
|
|
||
Intangible liabilities: (2) |
|
|
|
|
|
|
|
||
Below-market lease intangibles |
$ |
|
|
|
$ |
|
|
||
Total intangible liabilities |
|
|
|
|
|
|
|
||
Accumulated amortization: |
|
|
|
|
|
|
|
||
Below-market lease amortization |
|
|
( |
) |
|
|
|
( |
) |
Total accumulated amortization |
|
|
( |
) |
|
|
|
( |
) |
Intangible liabilities, net |
$ |
|
|
|
$ |
|
|
||
__________
The estimated future amortization on the Company’s intangibles for each of the next five years and thereafter as of June 30, 2026 is as follows ($ in thousands):
|
|
In-place |
|
|
Above-market |
|
|
Other |
|
|
Below-market |
|
||||
2026 (remaining) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
2027 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
2028 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
2029 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
2030 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
2031 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
13
The following tables detail the Company’s investment in real estate debt as of June 30, 2026 and December 31, 2025 ($ in thousands):
|
|
|
|
June 30, 2026 |
|
|||||||||
Type of Security/Loan |
|
Number of Positions |
|
Coupon (1) |
|
Maturity Date (2) |
|
Cost Basis |
|
|
Fair Value |
|
||
Term loan |
|
|
|
|
$ |
|
|
$ |
|
|||||
Total investment in real estate debt |
|
|
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
December 31, 2025 |
|
|||||||||
Type of Security/Loan |
|
Number of |
|
Coupon (1) |
|
Maturity Date (2) |
|
Cost Basis |
|
|
Fair Value |
|
||
Term loan |
|
|
|
|
$ |
|
|
$ |
|
|||||
Total investment in real estate debt |
|
|
|
|
$ |
|
|
$ |
|
|||||
__________
During June 2022, the Company provided financing in the form of a term loan to an unaffiliated entity in connection with its acquisition of Australia’s largest hotel and casino company. The loan is in the amount of AUD
During the three and six months ended June 30, 2026, the Company received principal repayments of $
14
The following table is a summary of the mortgage notes and credit facilities secured by the Company’s properties as of June 30, 2026 and December 31, 2025 ($ in thousands):
|
|
|
|
|
|
|
|
Principal Balance Outstanding(3) |
|
|||||
Indebtedness |
|
Weighted |
|
Weighted |
|
Maximum |
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Fixed rate loans |
|
|
|
|
|
|
|
|
|
|
|
|
||
Fixed rate mortgages |
|
|
|
N/A |
|
$ |
|
|
$ |
|
||||
Total fixed rate loans |
|
|
|
|
|
|
|
|
|
|
|
|
||
Variable rate loans |
|
|
|
|
|
|
|
|
|
|
|
|
||
mortgages |
|
|
|
N/A |
|
|
|
|
|
|
||||
secured credit facility(4) |
|
|
|
$ |
|
|
|
|
|
|
||||
revolving credit facility(5) |
|
|
|
$ |
|
|
|
|
|
|
||||
Total variable rate loans |
|
|
|
|
|
|
|
|
|
|
|
|
||
Total loans secured by the Company’s |
|
|
|
|
|
|
|
|
|
|
|
|
||
Deferred financing costs, net |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Discount on assumed debt, net |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Mortgage notes and secured credit facilities, net |
|
|
|
$ |
|
|
$ |
|
||||||
__________
In July 2024, the Company entered into a senior secured revolving credit facility agreement with a total borrowing capacity of $
The following table presents the future principal payments under the Company’s mortgage notes and secured credit facilities as of June 30, 2026 ($ in thousands):
Year |
|
Amount |
|
||
2026 (remaining) |
|
$ |
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
2029 |
|
|
|
|
|
2030 |
|
|
|
|
|
2031 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
|
The Company actively monitors upcoming debt maturities and capital market conditions. Subsequent to June 30, 2026, the Company completed a strategic capital transaction and used the proceeds to repay and refinance a portion of its outstanding indebtedness including the repayment in full and retirement of its senior secured revolving credit facility and the partial repayment and refinancing of its unsecured line of credit. Refer to Note 16 — “Subsequent Events” for additional details.
The Company has approximately $
15
transactions and refinancing its remaining debt obligations prior to maturity. Management believes these actions are probable of being completed and that market-based alternatives will be available to support these actions and provide the necessary cash flows to meet its obligations as they come due.
Pursuant to lender agreements for certain of the Company’s mortgages, the Company has the ability to draw $
The Company’s mortgage notes and secured credit facilities may contain customary events of default and covenants, including limitations on liens and indebtedness and maintenance of certain financial ratios. The Company was in compliance with all corporate and all property level financial covenants with no events of default as of June 30, 2026 and December 31, 2025, respectively.
Secured financings on investment in real estate debt are treated as collateralized financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the respective agreements. Although structured as a sale and repurchase obligation, a secured financing on investment in real estate debt operates as a financing under which securities are pledged as collateral to secure a short-term loan equal in value to a specified percentage of the market value of the pledged collateral. While used as collateral, the Company retains beneficial ownership of the pledged collateral, including the right to distributions. At the maturity of a secured financing on investment in real estate debt, the Company is required to repay the loan and concurrently receive the pledged collateral from the lender or, with the consent of the lender, renew such agreement at the then-prevailing financing rate.
Interest rates on these borrowings are determined based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the borrowing at which time the Company may enter into a new borrowing arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty.
The fair value of financial instruments pledged as collateral on the Company’s secured financings on investment in real estate debt disclosed in the tables below represents the Company’s fair value of such instruments, which may differ from the fair value assigned to the collateral by its counterparties.
During June 2022, the Company entered into separate repurchase agreements with Morgan Stanley Bank, N.A. (“Morgan Stanley”), Guardians of New Zealand Superannuation as manager and administrator of the New Zealand Superannuation Fund (“NZ Super”), and BAWAG P.S.K. Bank für Arbeit und Wirtschaft und Osterreichische Postsparkasse Aktiengesellschaft (“BAWAG”) in order to finance its term loan investment (the “Syndicated RA”) to an unaffiliated entity in connection with its acquisition of three Australian hospitality and leisure resorts.
During June 2025, the Company refinanced its secured financings on investment in real estate debt through a series of transactions. The Company amended its repurchase agreement with Morgan Stanley and entered into a repurchase agreement with Barclays Bank PLC (“Barclays”), (Morgan Stanley and Barclays, collectively referred to as “Syndicated RA II”). As a result of the amendment to the repurchase agreement with Morgan Stanley, the Company increased the facility size by AUD
During February 2026, Morgan Stanley transferred and assigned a portion of its interest in the repurchase agreement to three parties, including American General Life Insurance Company, The Variable Annual Life Insurance Company, and The United States Life Insurance Company in the City of New York (collectively referred to as “Corebridge”).
16
For financial statement purposes, the Company does not offset its secured financings on investment in real estate debt and securities lending transactions because the conditions for netting as specified by GAAP are not met. Although not offset on the Company’s Condensed Consolidated Balance Sheets, these transactions are summarized in the following tables ($ in thousands):
|
|
|
|
|
|
June 30, 2026 |
|
|||||
Indebtedness |
|
Maturity Date |
|
Coupon |
|
Collateral |
|
|
Outstanding |
|
||
Syndicated RA II |
|
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
December 31, 2025 |
|
|||||
Indebtedness |
|
Maturity Date |
|
Coupon |
|
Collateral |
|
|
Outstanding |
|
||
Syndicated RA II |
|
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
$ |
|
|
$ |
|
||
__________
In May 2024, the Company entered into an amendment to extend its unsecured line of credit with borrowing capacity of approximately $
As of June 30, 2026 and December 31, 2025, there were approximately $
The following table summarizes the components of Other assets ($ in thousands):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Intangible assets, net |
|
$ |
|
|
$ |
|
||
Receivables |
|
|
|
|
|
|
||
Derivative instruments |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Deferred financing costs, net |
|
|
|
|
|
|
||
Deferred transaction offering costs |
|
|
|
|
|
|
||
Interest receivable |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other assets |
|
$ |
|
|
$ |
|
||
17
The following table summarizes the components of Other liabilities ($ in thousands):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
|
$ |
|
|
$ |
|
|||
Real estate taxes payable |
|
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Accrued interest expense |
|
|
|
|
|
|
||
Tenant security deposits |
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Intangible liabilities, net |
|
|
|
|
|
|
||
Distributions payable |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Other taxes payable |
|
|
|
|
|
|
||
Deferred income |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total other liabilities |
|
$ |
|
|
$ |
|
||
The Company uses derivative financial instruments to minimize the risks and/or costs associated with the Company’s investments and financing transactions. The Company has not designated any of its derivative financial instruments as hedges as defined under GAAP. Although not designated as hedging instruments under GAAP, the Company’s derivatives are not speculative and are used to manage the Company’s exposure to interest rate movements, fluctuations in foreign exchange rates, and other identified risks.
The Company’s derivative instruments are subject to market risk associated with changes in interest rates and foreign exchange rates. Although these instruments are not designated as accounting hedges, they are economically intended to reduce variability in cash flows.
The use of derivative financial instruments involves certain risks, including the risk that the counterparties to these contractual arrangements do not perform as agreed. To mitigate this risk, the Company enters into derivative financial instruments with counterparties it believes to have appropriate credit ratings and that are major financial institutions with which the Company and its affiliates may also have other financial relationships.
Interest Rate Contracts
Certain of the Company’s transactions expose the Company to interest rate risks, which include exposure to variable interest rates on certain loans secured by the Company’s real estate in addition to its secured financings of investment in real estate debt. The Company uses derivative financial instruments, which includes interest rate caps and swaps, and may also include options, floors, and other interest rate derivative contracts, to limit the Company’s exposure to the future variability of interest rates.
18
The following tables detail the Company’s outstanding interest rate derivatives that were non-designated hedges of interest rate risk (notional amounts in thousands):
|
|
June 30, 2026 |
|||||||||||
Interest Rate Derivatives |
|
Number of Instruments |
|
Notional Amount |
|
|
Weighted Average Strike Rate |
|
Index |
|
Weighted Average Maturity (Years) |
||
Interest Rate Caps - Property debt |
|
|
$ |
|
|
|
|
SOFR |
|
||||
Interest Rate Caps - Property debt |
|
|
€ |
|
|
|
|
EURIBOR |
|
||||
Interest Rate Swaps - Property debt |
|
|
€ |
|
|
|
|
EURIBOR |
|
||||
Interest Rate Swaps - Property debt |
|
|
NOK |
|
|
|
|
NIBOR |
|
||||
Total interest rate derivatives |
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2025 |
|||||||||||
Interest Rate Derivatives |
|
Number of Instruments |
|
Notional Amount |
|
|
Weighted Average Strike Rate |
|
Index |
|
Weighted Average Maturity (Years) |
||
Interest Rate Caps - Property debt |
|
|
$ |
|
|
|
|
SOFR |
|
||||
Interest Rate Caps - Property debt |
|
|
€ |
|
|
|
|
EURIBOR |
|
||||
Interest Rate Swaps - Property debt |
|
|
€ |
|
|
|
|
EURIBOR |
|
||||
Interest Rate Swaps - Property debt |
|
|
NOK |
|
|
|
|
NIBOR |
|
||||
Total interest rate derivatives |
|
|
|
|
|
|
|
|
|
||||
Foreign Currency Forward Contracts
Certain of the Company’s international investments expose it to fluctuations in foreign currency exchange rates and interest rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of its functional currency, the U.S. dollar. The Company uses foreign currency forward contracts to protect the value or fix the amount of certain investments or cash flows in terms of the U.S. dollar.
The following table details the Company’s outstanding foreign currency forward contracts that were non-designated hedges of foreign currency risk (notional amounts in thousands):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||||||
Foreign Currency Forward Contracts |
|
Number of Instruments |
|
Notional Amount |
|
|
Number of Instruments |
|
Notional Amount |
|
||||
Buy USD/Sell EUR Forward |
|
|
€ |
|
|
|
|
€ |
|
|
||||
Buy USD/Sell DKK Forward |
|
|
DKK |
|
|
|
|
DKK |
|
|
||||
Buy USD/Sell AUD Forward |
|
|
AUD |
|
|
|
|
AUD |
|
|
||||
Buy USD/Sell NOK Forward |
|
|
NOK |
|
|
|
|
NOK |
|
|
||||
Valuation and Financial Statement Impact
The following table details the fair value of the Company’s derivative financial instruments ($ in thousands):
|
|
Fair Value of Derivatives in an Asset (1) Position |
|
|
Fair Value of Derivatives in a Liability (2) Position |
|
||||||||||
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||
Interest rate derivatives |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Foreign currency forward contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total derivatives |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
19
The following table details the effect of the Company’s derivative financial instruments in the Condensed Consolidated Statements of Operations and Comprehensive Loss ($ in thousands):
|
|
|
|
For the Three Months Ended June 30, |
|
|||||
Type of Derivative |
|
Net Realized/Unrealized Gain (Loss) |
|
2026 |
|
|
2025 |
|
||
Interest Rate Caps - Property debt |
|
Unrealized loss(1) |
|
$ |
( |
) |
|
$ |
( |
) |
Interest Rate Swaps - Property debt |
|
Unrealized loss(1) |
|
|
( |
) |
|
|
( |
) |
Foreign Currency Forward Contracts |
|
Unrealized loss(2) |
|
|
( |
) |
|
|
( |
) |
Total |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
For the Six Months Ended June 30, |
|
|||||
Type of Derivative |
|
Net Realized/Unrealized Gain (Loss) |
|
2026 |
|
|
2025 |
|
||
Interest Rate Caps - Property debt |
|
Unrealized gain (loss)(1) |
|
$ |
|
|
$ |
( |
) |
|
Interest Rate Swaps - Property debt |
|
Unrealized gain (loss)(1) |
|
|
|
|
|
( |
) |
|
Foreign Currency Forward Contracts |
|
Unrealized gain (loss)(2) |
|
|
|
|
|
( |
) |
|
Foreign Currency Forward Contracts |
|
Realized (loss) gain(1) |
|
|
( |
) |
|
|
|
|
Interest Rate Caps - Property debt |
|
Realized (loss) gain(1) |
|
|
( |
) |
|
|
|
|
Total |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
Authorized Capital
The Company is authorized to issue preferred stock and
As of June 30, 2026 and December 31, 2025, the Company had the authority to issue
Classification |
|
Number of |
|
|
Par Value |
|
|||
Preferred Stock |
|
|
|
|
$ |
|
|
||
Class T Shares |
|
|
|
|
$ |
|
|
||
Class S Shares |
|
|
|
|
$ |
|
|
||
Class D Shares |
|
|
|
|
$ |
|
|
||
Class I Shares |
|
|
|
|
$ |
|
|
||
Total |
|
|
|
|
|
|
|
||
20
Common Stock
The following tables detail the movement in the Company’s outstanding shares of common stock:
|
|
Three Months Ended June 30, 2026 |
|
|||||||||||||||||
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
|
Total |
|
|||||
March 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock shares issued (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Distribution reinvestment plan shares issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock shares repurchased |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Three Months Ended June 30, 2025 |
|
|||||||||||||||||
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
|
Total |
|
|||||
March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock shares issued (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Distribution reinvestment plan shares issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock shares repurchased |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
__________
|
|
Six Months Ended June 30, 2026 |
|
|||||||||||||||||
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
|
Total |
|
|||||
December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock shares issued (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Distribution reinvestment plan shares issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock shares repurchased |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Six Months Ended June 30, 2025 |
|
|||||||||||||||||
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
|
Total |
|
|||||
December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock shares issued (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Distribution reinvestment plan shares issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common stock shares repurchased |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
__________
Share Repurchases
The Company has adopted a share repurchase plan whereby, subject to certain limitations, stockholders may request on a monthly basis that the Company repurchases all or any portion of their shares. Should repurchase requests, in the Company’s judgment, place an undue burden on its liquidity, adversely affect its operations or risk having an adverse impact on the Company as a whole, or should the Company otherwise determine that investing its liquid assets in real properties or other illiquid investments rather than repurchasing its shares is in the best interests of the Company as a whole, then the Company may choose to repurchase fewer shares than have been requested to be repurchased, or none at all. Further, the Company’s board of directors may modify or suspend the Company’s share repurchase plan if it deems such action to be in the Company’s best interest and in the best interest of its stockholders. In addition, the total amount of shares that the Company may repurchase is limited. From the Company’s inception until its share repurchase plan was amended as described below, the total amount of shares that the Company could repurchase was limited, in any calendar month, to shares whose aggregate value (based on the repurchase price per share on the date of the repurchase) was no more than
21
On May 23, 2024, the Company amended its share repurchase plan such that, beginning with repurchases during the month of May 2024, the Company limited share repurchases to
On June 6, 2025, the Company further amended its share repurchase plan such that, beginning with repurchases during the month of June 2025, the Company limits share repurchases to
On April 29, 2026, the Company further amended its share repurchase plan such that, beginning with repurchases submitted during the month of April 2026, (i) repurchase requests made upon the death or qualifying disability of a stockholder who is a natural person will be repurchased in full to the extent there are available funds up to a limit of $
In the event that the Company determines to repurchase some but not all of the shares submitted for repurchase during any month (including where repurchase requests exceed the monthly or quarterly limits), shares submitted for repurchase during such month will be repurchased subject to the following repurchase priority. First, repurchase requests made upon the death or qualifying disability of a stockholder who is a natural person will be repurchased in full to the extent there are available funds up to a limit of $
For the three months ended June 30, 2026, the Company repurchased approximately
Distributions
The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net earnings as calculated in accordance with GAAP, to its stockholders each year to comply with the REIT provisions of the Code.
Each class of common stock receives the same gross distribution per share. The net distribution varies for each class based on the applicable stockholder servicing fee, which is deducted from the monthly distribution per share and is paid directly to the applicable distributor.
The following table details the aggregate distributions declared for each applicable class of common stock:
|
|
Three Months Ended June 30, 2026 |
|
|||||||||||||||||
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
||||||||
Aggregate gross distributions declared per share of common stock |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Stockholder servicing fee per share of common stock |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
Net distributions declared per share of common stock |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Six Months Ended June 30, 2026 |
|
|||||||||||||||||
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
||||||||
Aggregate gross distributions declared per share of common stock |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Stockholder servicing fee per share of common stock |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
( |
) |
|
|
|
— |
|
Net distributions declared per share of common stock |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
22
Redeemable Non-controlling Interests
In connection with its performance participation interest, the Special Limited Partner holds Class I units in the Operating Partnership. See Note 12 for further details of the Special Limited Partner’s performance participation interest. Because the Special Limited Partner has the ability to redeem its Class I units for cash, at its election, the Company has classified these Class I units as Redeemable non-controlling interest in mezzanine equity on the Company’s Condensed Consolidated Balance Sheets. The redeemable non-controlling interest is recorded at the greater of the carrying amount, adjusted for its share of the allocation of income or loss and distributions, or the redemption value, which is equivalent to fair value, of such units at the end of each measurement period. In addition to the Special Limited Partner’s interest noted above, certain third parties also have a redeemable non-controlling interest.
The following tables detail the redeemable non-controlling interests activity related to the Special Limited Partner and third-party Operating Partnership unitholders for the six months ended June 30, 2026 and 2025 ($ in thousands):
|
|
Special Limited Partner(1) |
|
|
Third-party Operating Partnership unitholders |
|
|
Total |
|
|||
Balance at December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Settlement of performance participation allocation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
GAAP loss allocation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Fair value allocation |
|
|
|
|
|
|
|
|
|
|||
Balance at June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
Special Limited Partner(1) |
|
|
Third-party Operating Partnership unitholders |
|
|
Total |
|
|||
Balance at December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Settlement of performance participation allocation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
GAAP loss allocation |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Fair value allocation |
|
|
|
|
|
|
|
|
|
|||
Balance at June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Management Fee and Performance Participation Allocation
Prior to May 2024, the Advisor was entitled to an annual management fee equal to (i)
In connection with the share repurchase plan amendment, the Advisor has agreed, commencing with the month of May 2024, to waive
23
During the three months ended June 30, 2026 and 2025, the Company incurred management fees of approximately $
To date, the Advisor has elected to receive the management fee in shares of the Company’s common stock. During January 2026, the Company issued
Additionally, the Special Limited Partner, an affiliate of the Advisor, holds a performance participation interest in the Operating Partnership that entitles it to receive an allocation of the Operating Partnership’s total return to its capital account. Total return is defined as distributions paid or accrued plus the change in NAV. Under the Operating Partnership’s limited partnership agreement, the annual total return will be allocated solely to the Special Limited Partner after the other unit holders have received a total return of
Related Party Share Ownership
As of June 30, 2026, the Advisor, its employees, its affiliates, including the Company’s executive officers, and the Company’s independent directors hold an aggregate of $
During the three and six months ended June 30, 2026, the Company repurchased
Due to Affiliates
The following table details the components of Due to affiliates ($ in thousands):
|
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||
Accrued stockholder servicing fee |
|
$ |
|
|
$ |
|
||
Performance participation allocation |
|
|
|
|
|
|
||
Accrued management fee |
|
|
|
|
|
|
||
Accrued affiliate service provider expenses |
|
|
|
|
|
|
||
Advanced operating expenses |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Accrued stockholder servicing fee
The Company accrues the full amount of the future stockholder servicing fees payable to the Starwood Capital, L.L.C. (the “Dealer Manager”) for Class T shares, Class S shares, and Class D shares up to the
Accrued affiliate service provider expenses
The Company has engaged and expects to continue to engage Highmark Residential (formerly Milestone Management), a portfolio company owned by an affiliate of the Sponsor, to provide day-to-day operational and management services (including leasing, construction management, revenue management, accounting, legal and contract management, expense management, and capital
24
expenditure projects and transaction support services) for a portion of the Company’s multifamily properties. The cost for such services is a percentage of the gross receipts and project costs, respectively, (which will be reviewed periodically and adjusted if appropriate), plus actual costs allocated for transaction support services. During the three months ended June 30, 2026 and 2025, the Company incurred approximately $
The Company has engaged Rinaldi, Finkelstein & Franklin L.L.C. (“RFF”), a law firm owned and controlled by Ellis F. Rinaldi, Co-General Counsel and Senior Managing Director of the Sponsor and certain of its affiliates, to provide corporate legal support services to the Company. During the three months ended June 30, 2026 and 2025, the amounts incurred for services provided by RFF were approximately $
The Company has engaged Essex Title, LLC (“Essex”), a title agent company majority owned by Starwood Capital. Essex acts as an agent for one or more underwriters in issuing title policies and/or providing support services in connection with investments by the Company, Starwood Capital and its affiliates and third parties. Essex focuses on transactions in rate-regulated states where the cost of title insurance is non-negotiable. Essex will not perform services in non-regulated states for the Company, unless (i) in the context of a portfolio transaction that includes properties in rate-regulated states, (ii) as part of a syndicate of title insurance companies where the rate is negotiated by other insurers or their agents, (iii) when a third party is paying all or a material portion of the premium or (iv) when providing only support services to the underwriter. Essex earns fees, which would have otherwise been paid to third parties, by providing title agency services and facilitating placement of title insurance with underwriters. Starwood Capital receives distributions from Essex in connection with investments by the Company based on its equity interest in Essex. In each case, there will be no related offset to the Company. During the three months ended June 30, 2026 and 2025, the Company incurred approximately $
The Company has engaged Starwood Retail Partners to provide leasing and legal services for any retail and certain industrial and other properties the Company acquires. During the three and six months ended June 30, 2026, the Company incurred an insignificant amount and approximately $
The Company has incurred legal expenses from third party law firms whose lawyers have been seconded to affiliates of Starwood Capital for the purpose of providing legal services in Europe to investment vehicles sponsored by Starwood Capital. During the three and six months ended June 30, 2026, the Company did
The Company has engaged STR Management Co, LLC, an affiliate of the Advisor, to provide property management services to certain of the Company’s residential units that function as short term rental assets. The costs for such services is a percentage of gross revenue produced by the short-term rentals on a monthly basis. During the three and six months ended June 30, 2026, the Company incurred approximately $
The Company has entered into an agreement with an affiliate of Starwood Global Opportunity Fund XI to assist with property management of the Company’s assets in Spain and Italy. The Starwood Capital Group (“SCG”) Southern Europe Team charges market fees for such property management services. During the three and six months ended June 30, 2026, the amounts incurred for services provided by the SCG Southern Europe Team were $
Advanced operating expenses
For the three months ended June 30, 2026 and 2025, the Advisor incurred approximately $
25
expenses. Such amounts are generally reimbursed to the Advisor one month in arrears. These amounts are primarily included in General and administrative expenses on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss.
DST Program expenses
During the three and six months ended June 30, 2026, the Company incurred an insignificant amount of expenses in connection with the DST Program, respectively. During the three and six months ended June 30, 2025, the Company incurred an insignificant amount of expenses in connection with the DST Program, respectively.
As of June 30, 2026 and December 31, 2025, the Company is not subject to any material litigation nor is the Company aware of any material litigation threatened against it.
Lessee
Certain of the Company’s investments in real estate are subject to a ground lease. The Company’s ground leases are classified as right of use liability – operating leases based on the characteristics of the respective lease. Right-of-use liabilities are presented within Other liabilities on the Company’s Condensed Consolidated Balance Sheets. The ground leases were acquired as part of the acquisition of real estate and
The following table presents the future lease payments due under the Company’s ground leases as of June 30, 2026 ($ in thousands):
Year |
|
Operating |
|
||
2026 (remaining) |
|
$ |
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
2029 |
|
|
|
|
|
2030 |
|
|
|
|
|
2031 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total undiscounted future lease payments |
|
|
|
|
|
Difference between undiscounted cash flows and discounted cash flows |
|
|
|
( |
) |
Total right-of-use liabilities |
|
$ |
|
|
|
The Company utilized its incremental borrowing rate, which was between
Payments under the Company’s ground leases contain fixed payment components. The Company’s ground leases contained escalations prior to the Company’s hold period.
Lessor
The Company’s rental revenue primarily consists of rent earned from operating leases at the Company’s multifamily, industrial, office and other properties. Leases at the Company’s industrial, office and other properties generally include a fixed base rent and certain leases also contain a variable component. The variable component of the Company’s operating leases at its industrial, office and other properties primarily consist of the reimbursement of operating expenses such as real estate taxes, insurance, and common area maintenance costs.
Leases at the Company’s industrial, office and other properties are generally longer term and may contain extension and termination options at the lessee’s election. The Company’s rental revenue earned from leases at the Company’s multifamily and certain other properties, including single-family rental and self-storage properties, primarily consists of a fixed base rent and certain leases contain a variable component that allows for the pass-through of certain operating expenses such as utilities. Leases at the Company’s
26
multifamily and certain other properties, including single-family rental and self-storage properties, are short term in nature, generally not greater than 12 months in length.
The following table summarizes the fixed and variable components of the Company’s operating leases ($ in thousands):
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||||||
Fixed lease payments |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
Variable lease payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rental revenue |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||
The following table presents the undiscounted future minimum rents the Company expects to receive for its industrial, office, and certain other properties as of June 30, 2026 ($ in thousands). The table excludes leases at the Company’s multifamily and certain other properties including single-family and self-storage properties, which are short term, generally 12 months or less, and are therefore not included pursuant to Accounting Standards Codification 842-20-50.
Year |
|
Future Minimum Rents |
|
||
2026 (remaining) |
|
$ |
|
|
|
2027 |
|
|
|
|
|
2028 |
|
|
|
|
|
2029 |
|
|
|
|
|
2030 |
|
|
|
|
|
2031 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
|
27
The Company operates in
The following table sets forth the total assets by segment ($ in thousands):
|
June 30, 2026 |
|
|
December 31, 2025 |
|
||||
Multifamily |
$ |
|
|
|
$ |
|
|
||
Industrial |
|
|
|
|
|
|
|
||
Office |
|
|
|
|
|
|
|
||
Other properties(1) |
|
|
|
|
|
|
|
||
Investment in real estate debt |
|
|
|
|
|
|
|
||
Other (Corporate) |
|
|
|
|
|
|
|
||
Total assets |
$ |
|
|
|
$ |
|
|
||
__________
28
The following table sets forth the financial results by segment for the three months ended June 30, 2026 ($ in thousands):
|
Multifamily |
|
|
Industrial |
|
|
Office |
|
|
Other |
|
|
Investment |
|
|
Total |
|
||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Rental revenue |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Property operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Total segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Loss from unconsolidated |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Income from investment in |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Segment net operating income |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Net loss on dispositions of real estate |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||||||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
( |
) |
|||||||
Net loss attributable to non-controlling interests in consolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net loss attributable to non-controlling interests in Operating Partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net loss attributable to stockholders |
|
|
|
|
|
|
|
|
|
|
$ |
|
( |
) |
|||||||||||||||
29
The following table sets forth the financial results by segment for the three months ended June 30, 2025 ($ in thousands):
|
Multifamily |
|
|
Industrial |
|
|
Office |
|
|
Other |
|
|
Investment |
|
|
Total |
|
||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Rental revenue |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Property operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Total segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Loss from unconsolidated |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Income from investment in real |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Segment net operating income |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Net gain on dispositions of real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
( |
) |
|||||||||
Net loss attributable to non-controlling interests in consolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net loss attributable to non-controlling interests in Operating Partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net loss attributable to stockholders |
|
|
|
|
|
|
|
|
|
|
$ |
|
( |
) |
|||||||||||||||
30
The following table sets forth the financial results by segment for the six months ended June 30, 2026 ($ in thousands):
|
Multifamily |
|
|
Industrial |
|
|
Office |
|
|
Other |
|
|
Investment |
|
|
Total |
|
||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Rental revenue |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Property operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Total segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Loss from unconsolidated |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Income from investment in |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Segment net operating income |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Net loss on dispositions of real estate |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Loss on extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Other income, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
( |
) |
|||||||||
Net loss attributable to non-controlling interests in consolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net loss attributable to non-controlling interests in Operating Partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net loss attributable to stockholders |
|
|
|
|
|
|
|
|
|
|
$ |
|
( |
) |
|||||||||||||||
31
The following table sets forth the financial results by segment for the six months ended June 30, 2025 ($ in thousands):
|
Multifamily |
|
|
Industrial |
|
|
Office |
|
|
Other |
|
|
Investment |
|
|
Total |
|
||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Rental revenue |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
— |
|
|
$ |
|
|
|||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Property operating |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Total segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|||||
Loss from unconsolidated |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
( |
) |
|
|
|
— |
|
|
|
|
( |
) |
Income from investment in real |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Segment net operating income |
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Management fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Net gain on dispositions of real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Other expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
( |
) |
|||||||||
Net loss attributable to non-controlling interests in consolidated joint ventures |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net loss attributable to non-controlling interests in Operating Partnership |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net loss attributable to stockholders |
|
|
|
|
|
|
|
|
|
|
$ |
|
( |
) |
|||||||||||||||
32
Financing and Capital Activity
Formation of Apollo Joint Venture. On August 3, 2026 (the “Closing Date”), the Company consummated a transaction with funds managed by and affiliates of Apollo Global Management (“Apollo”) to form a joint venture structured as a Delaware limited liability company (the “Joint Venture”) that will own, operate and manage a portfolio consisting of approximately
Proceeds from the Transaction will be used to repay a significant portion of the Company’s credit facilities, immediately reducing interest expense and improving operating cash flow. The Transaction is a critical step in the Company’s broader plan to improve liquidity, enhance stockholder returns and position the Company for long-term performance.
Under the terms of the Joint Venture agreement, the Company will make distributions of a portion of available cash generated by the portfolio to Apollo. The Company will guarantee Apollo receives distributions that would result in an annual minimum yield on Apollo’s investment in the Joint Venture, which is investment-grade rated. The annual minimum yield increases over time, and the payment of such yield will be the responsibility of the Company.
The Company has a call option to redeem Apollo’s interest in the Joint Venture, exercisable at certain times. If exercised between the fifth and 10th anniversary of the Closing Date, the call price will be calculated to ensure a capped IRR of
The Company concluded that the Joint Venture does not meet the definition of a business under ASC 805, Business Combinations and will consolidate the Joint Venture as its primary beneficiary under ASC 810, Consolidation, classifying Apollo’s interest as a redeemable noncontrolling interest, with no gain or loss recognized on formation. Since the transaction closed after June 30, 2026, it is not reflected in the accompanying condensed consolidated financial statements.
Repayment and Refinancing of Indebtedness. The Company used the Transaction proceeds to repay a significant portion of its indebtedness. The Company repaid in full and retired its senior secured revolving credit facility ($
Property Level Refinancings. During the period from July 1, 2026 through August 12, 2026, the Company refinanced and closed an aggregate of approximately $
33
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References herein to “Starwood Real Estate Income Trust, Inc.,” “Company,” “we,” “us,” or “our” refer to Starwood Real Estate Income Trust, Inc. and its subsidiaries unless the context specifically requires otherwise.
The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed under Item 1A. “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 20, 2026 and elsewhere in this Quarterly Report on Form 10-Q. We do not undertake to revise or update any forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements about our business, including, in particular, statements about our plans, strategies and objectives. Forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue” or other similar words. These statements include our plans and objectives for future operations, including plans and objectives relating to future growth and availability of funds for repurchases, and are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to these statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to accurately predict and many of which are beyond our control.
Although we believe the assumptions underlying the forward-looking statements, and the forward-looking statements themselves, are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that these forward-looking statements will prove to be accurate and our actual results, performance and achievements may be materially different from that expressed or implied by these forward-looking statements. In light of the significant uncertainties inherent in these forward looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans, which we consider to be reasonable, will be achieved.
You should carefully review Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, and elsewhere in this Quarterly Report on Form 10-Q for a discussion of the risks and uncertainties that we believe are material to our business, operating results, prospects and financial condition. Except as otherwise required by federal securities laws, we do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Overview
We were formed on June 22, 2017 as a Maryland corporation to invest primarily in stabilized, income-oriented commercial real estate and debt secured by commercial real estate. Our portfolio is principally comprised of properties located in the United States and is diversified on a global basis through investments in properties outside of the United States, with a focus on Europe. To a lesser extent, we also invest in real estate debt, including loans secured by real estate and real estate-related securities. We are an externally advised, perpetual-life REIT. We own all or substantially all of our assets through the Operating Partnership, of which we are the sole general partner. We and the Operating Partnership are externally managed by the Advisor.
Our board of directors has at all times oversight and policy-making authority over us, including responsibility for governance, financial controls, compliance and disclosure. Pursuant to an advisory agreement among the Advisor, the Operating Partnership and us (the “Advisory Agreement”), we have delegated to the Advisor the authority to source, evaluate and monitor our investment opportunities and make decisions related to the acquisition, management, financing and disposition of our assets, in accordance with our investment objectives, guidelines, policies and limitations, subject to oversight by our board of directors.
We have elected to be taxed as a REIT under the Code for U.S. federal income tax purposes, commencing with our taxable year ended December 31, 2019. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent we annually distribute all of our net taxable income (determined without regard to our net capital gain and dividends-paid deduction) to stockholders and maintain our qualification as a REIT.
34
Public Offerings
On December 27, 2017, we commenced our initial public offering of up to $5.0 billion in shares of our common stock. On June 2, 2021, our initial public offering terminated and we commenced our follow-on public offering of up to $10.0 billion in shares of common stock.
On February 4, 2026, our third public offering terminated, and we commenced our fourth public offering of up to $10.0 billion in shares of common stock, consisting of up to $9.5 billion in shares in our primary offering and up to $0.5 billion in shares pursuant to our distribution reinvestment plan. We intend to continue selling shares in our fourth public offering on a monthly basis.
As of August 12, 2026, we had received net proceeds of $14.3 billion from the sale of our common stock through our public offerings. We have contributed the net proceeds from our public offerings to the Operating Partnership in exchange for a corresponding number of Class T, Class S, Class D and Class I units. The Operating Partnership has primarily used the net proceeds to make investments in real estate and real estate debt as further described below under “Portfolio.”
DST Program
In April 2024, we, through the Operating Partnership, commenced the DST Program to issue and sell up to a maximum aggregate offering amount of $1.0 billion of DST Interests in specific DSTs holding one or more DST Properties. These DST Interests will be issued and sold to “accredited investors,” as that term is defined under Regulation D promulgated by the SEC under the Securities Act, in private placements exempt from registration pursuant to Section 4(a)(2) of the Securities Act (the “DST Offerings”).
Under the DST Program, each DST Property may be sourced from our real properties or from third parties, which will be held in a DST are leased-back to a wholly owned subsidiary of the Operating Partnership on a long-term basis through January 2, 2031, unless sooner terminated pursuant to master lease agreements. Each master lease agreement will be guaranteed by the Operating Partnership, which will retain a fair market value option (the “FMV Option”), giving it the right, but not the obligation, to acquire the DST Interests in the applicable DST from the investors in exchange for Operating Partnership units or cash, at the Operating Partnership’s discretion. Such FMV Option shall be exercisable any time after two years from the closing of the applicable DST Offering. The Operating Partnership, in its sole and absolute discretion, may assign its rights in the FMV Option to a subsidiary, an affiliate, a successor entity to the Operating Partnership or the acquiror of a majority of the Operating Partnership’s assets. After a one-year holding period, investors who acquire Operating Partnership units pursuant to the FMV Option generally have the right to cause the Operating Partnership to redeem all or a portion of their Operating Partnership units for, at our sole discretion, shares of our common stock, cash, or a combination of both.
We expect that the DST Program will give us the opportunity to expand and diversify our capital-raising strategies by offering what we believe to be an attractive investment product for investors that may be seeking like-kind replacement properties to complete tax-deferred exchange transactions under Section 1031 of the Code. Affiliates of the Advisor are expected to receive fees in connection with the sale of the DST Interests and the management of the DSTs. We intend to use the net offering proceeds from the DST Program to make investments in accordance with our investment strategy and policies, reduce our borrowings, repay indebtedness, fund the repurchase of shares of all classes of our common stock under our share repurchase plan and for other corporate purposes.
As of June 30, 2026, we have raised approximately $66.2 million in gross offering proceeds through the DST Program.
Investment Objectives
Our investment objectives are to invest in assets that will enable us to:
We cannot assure you that we will achieve our investment objectives. See Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025 for additional details.
35
Recent Developments
Portfolio Update
During the second quarter of 2026, we completed a comprehensive strategic review of the Company and began implementing a multi-step action plan designed to strengthen our financial position, improve liquidity and position the portfolio for long-term performance. Throughout our review, we remained focused on protecting the long-term value of the portfolio for all stockholders. Given the continued challenges in the transaction market, we determined that broad asset sales were not the appropriate path to rebuilding liquidity. Accordingly, in April 2026, we suspended our share repurchase program to preserve liquidity and help protect net asset value for all stockholders, and reduced our monthly distribution to better align the distribution rate with the portfolio's current income.
Subsequent to quarter-end, on August 3, 2026, we closed on a $1.02 billion strategic partnership with Apollo Global Management, pursuant to which Apollo acquired a 41.5% non-controlling interest in a newly formed joint venture that indirectly owns approximately 120 of our affordable housing properties. We retained a 58.5% ownership interest, full operational control of the properties and a call option to repurchase Apollo's interest beginning in the fifth year following closing, subject to the terms of the transaction. The transaction was completed at the current net asset value of the contributed portfolio. The proceeds are expected to be used primarily to repay a significant portion of our corporate revolving credit facility, which had been utilized to fund stockholder repurchases and support distributions during a period of elevated redemption activity and challenging capital markets. Repaying this borrowing with long-term equity capital is expected to immediately reduce interest expense, improve operating cash flow and lower leverage.
In addition, we completed a five-year extension of our corporate revolving credit facility and, since the beginning of 2025, refinanced approximately $6.5 billion of property-level mortgage debt, extending the average remaining term of our property-level debt to approximately five years while lowering financing spreads. Collectively, these actions have substantially addressed our near-term debt maturities, reduced refinancing risk, lowered leverage and enhanced our financial flexibility.
Operationally, we are encouraged by what we are seeing across our portfolio. We built SREIT for the long-term, with 90% of its assets invested in affordable and market-rate apartments, logistics assets, self-storage properties, and real estate loans. These are strong sectors that we believe can weather economic cycles and technological change. We intentionally invested in growth markets primarily in the Sunbelt states of the U.S. As of June 30, 2026, occupancy remained strong at 94% across our 598-property portfolio, and the supply pressures that have weighed on our market-rate apartment portfolio are beginning to ease. While it is still early, we are seeing encouraging signs that fundamentals are improving, with leasing trends moving in the right direction and conditions beginning to support a recovery in rent growth. Meanwhile, our operating teams at the property level continue to drive efficiencies and embrace new technology, all to drive stronger performance for our investors.
We remain focused on pursuing additional equity capital and strategic partnerships while continuing to evaluate selective asset sales where they create value for stockholders. As liquidity is rebuilt, we expect to invest in compelling opportunities that we believe will enhance the portfolio's performance and growth prospects. We intend to reinstate the share repurchase program when we believe it can be done in a sustainable manner and in the best interests of all stockholders.
36
Q2 2026 Highlights
Operating Results:
|
Class T |
Class S |
Class D |
Class I |
|
Shares |
Shares |
Shares |
Shares |
Average Annualized Distribution Rate |
3.9% |
3.8% |
4.5% |
4.7% |
Annualized Year-to-Date Total Return, without upfront selling commissions and dealer manager fees |
0.1% |
0.1% |
0.7% |
0.9% |
Annualized Inception-to-Date Total Return, without upfront selling commissions and dealer manager fees |
4.4% |
4.3% |
4.7% |
5.1% |
Annualized Inception-to-Date Total Return, assuming full upfront selling commissions and dealer manager fees |
3.9% |
3.9% |
4.5% |
N/A |
Financing Activity:
Portfolio
Summary of Portfolio
The following chart outlines the percentage of our assets across investments in real estate and our investment in a real estate loan based on fair value as of June 30, 2026:
37
The following charts further describe the composition of our investments in real estate and our investment in a real estate loan based on fair value as of June 30, 2026:
|
|
Investments in Real Estate
The following table provides a summary of our portfolio as of June 30, 2026 ($ in thousands):
Segment |
|
Number of |
|
Sq. Feet |
|
Occupancy |
|
Gross Asset Value (2) |
|
|
Segment |
|
|
Percentage of |
||
Multifamily |
|
271 |
|
63,233 units |
|
95% |
|
$ |
15,401,300 |
|
|
$ |
590,387 |
|
|
75% |
Industrial |
|
81 |
|
15.79 sq. ft. |
|
90% |
|
|
2,695,701 |
|
|
|
80,255 |
|
|
10% |
Office |
|
20 |
|
3.90 sq. ft. |
|
91% |
|
|
1,535,261 |
|
|
|
82,690 |
|
|
10% |
Other Properties(3)(4) |
|
30 |
|
N/A (5) |
|
N/A |
|
|
933,200 |
|
|
|
36,902 |
|
|
5% |
Total |
|
402 |
|
|
|
|
|
$ |
20,565,462 |
|
|
$ |
790,234 |
|
|
100% |
38
Average Effective Annual Base Rents
The following table provides a summary of the average effective annual base rents across our portfolio as of June 30, 2026:
Property Type |
|
Average Effective Annual |
|
||
Multifamily(1) |
|
$ |
|
18,268 |
|
Industrial(2) |
|
$ |
|
8.64 |
|
Office(2) |
|
$ |
|
34.83 |
|
39
The following table provides information regarding our portfolio of real estate properties as of June 30, 2026:
Segment and Investment |
|
Number of |
|
Location |
|
Acquisition |
|
Ownership |
|
Sq. Feet |
|
|
Occupancy(2) |
|
Multifamily: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida Multifamily Portfolio |
|
4 |
|
Jacksonville/Naples, FL |
|
January 2019 |
|
100% |
|
|
1,150 |
|
|
96% |
Phoenix Property |
|
1 |
|
Mesa, AZ |
|
January 2019 |
|
100% |
|
|
256 |
|
|
95% |
Columbus Multifamily |
|
2 |
|
Columbus, OH |
|
October 2019 |
|
96% |
|
|
516 |
|
|
95% |
Cascades Apartments(3) |
|
1 |
|
Charlotte, NC |
|
October 2019 |
|
45% |
|
|
570 |
|
|
95% |
Exchange on Erwin |
|
1 |
|
Durham, NC |
|
November 2019 |
|
100% |
|
|
265 |
|
|
81% |
Avida Apartments |
|
1 |
|
Salt Lake City, UT |
|
December 2019 |
|
100% |
|
|
400 |
|
|
93% |
Southeast Affordable Housing Portfolio |
|
22 |
|
Various |
|
Various 2020 |
|
100% |
|
|
4,384 |
|
|
92% |
Florida Affordable Housing Portfolio II |
|
4 |
|
Jacksonville, FL |
|
October 2020 |
|
100% |
|
|
958 |
|
|
95% |
Mid-Atlantic Affordable Housing Portfolio |
|
28 |
|
Various |
|
October 2020 |
|
100% |
|
|
3,660 |
|
|
96% |
Kalina Way(3) |
|
1 |
|
Salt Lake City, UT |
|
December 2020 |
|
45% |
|
|
264 |
|
|
95% |
Southeast Affordable Housing Portfolio II |
|
9 |
|
DC, FL, GA, MD, SC, VA |
|
May 2021 |
|
100% |
|
|
1,642 |
|
|
95% |
Azalea Multifamily Portfolio |
|
14 |
|
TX, FL, NC, MD, TN, GA |
|
June/July 2021 |
|
100% |
|
|
4,548 |
|
|
95% |
Keystone Castle Hills |
|
1 |
|
Dallas, TX |
|
July 2021 |
|
100% |
|
|
690 |
|
|
94% |
Greater Boston Affordable Portfolio |
|
5 |
|
Boston, MA |
|
August/September 2021 |
|
98% |
|
|
842 |
|
|
94% |
Columbus Preferred Portfolio |
|
2 |
|
Columbus, OH |
|
September 2021 |
|
96% |
|
|
400 |
|
|
94% |
The Palmer Dadeland |
|
1 |
|
Dadeland, FL |
|
September 2021 |
|
100% |
|
|
844 |
|
|
96% |
Seven Springs Apartments |
|
1 |
|
Burlington, MA |
|
September 2021 |
|
100% |
|
|
331 |
|
|
97% |
Maison’s Landing |
|
1 |
|
Taylorsville, UT |
|
September 2021 |
|
100% |
|
|
492 |
|
|
96% |
Sawyer Flats |
|
1 |
|
Gaithersburg, MD |
|
October 2021 |
|
100% |
|
|
648 |
|
|
97% |
Raleigh Multifamily Portfolio |
|
6 |
|
Raleigh, NC |
|
November 2021 |
|
95% |
|
|
2,291 |
|
|
95% |
SEG Multifamily Portfolio |
|
57 |
|
Various |
|
November 2021 |
|
100% |
|
|
14,066 |
|
|
95% |
South Florida Multifamily Portfolio |
|
3 |
|
Various |
|
November 2021 |
|
95% |
|
|
1,150 |
|
|
94% |
Florida Affordable Housing Portfolio III |
|
16 |
|
Various |
|
November 2021 |
|
100% |
|
|
2,660 |
|
|
97% |
Central Park Portfolio |
|
9 |
|
Denver, CO |
|
December 2021 |
|
100% |
|
|
1,444 |
|
|
94% |
National Affordable Housing Portfolio |
|
17 |
|
Various |
|
December 2021 |
|
100% |
|
|
3,264 |
|
|
94% |
Phoenix Affordable Housing Portfolio |
|
7 |
|
Phoenix, AZ |
|
April/May 2022 |
|
100% |
|
|
1,462 |
|
|
92% |
Mid-Atlantic Affordable Housing Portfolio II |
|
8 |
|
DC, GA |
|
April 2022 |
|
100% |
|
|
1,449 |
|
|
93% |
Texas and North Carolina Multifamily Portfolio |
|
5 |
|
TX, NC |
|
April/June 2022 |
|
95% |
|
|
1,601 |
|
|
93% |
Summit Multifamily Portfolio |
|
33 |
|
Various |
|
May/June 2022 |
|
100% |
|
|
8,612 |
|
|
95% |
Florida Affordable Housing Portfolio IV |
|
9 |
|
Various, FL |
|
June/July 2022 |
|
100% |
|
|
2,054 |
|
|
93% |
Blue Multifamily Portfolio |
|
1 |
|
San Antonio, TX |
|
August 2022 |
|
100% |
|
|
320 |
|
|
94% |
Total Multifamily |
|
271 |
|
|
|
|
|
|
|
|
63,233 |
|
|
|
Industrial: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Airport Logistics Park |
|
6 |
|
Nashville, TN |
|
September 2020 |
|
100% |
|
|
0.40 |
|
|
100% |
Marshfield Industrial Portfolio |
|
4 |
|
Baltimore, MD |
|
October 2020 |
|
100% |
|
|
1.33 |
|
|
65% |
Denver/Boulder Industrial Portfolio |
|
16 |
|
Denver, CO |
|
April 2021 |
|
100% |
|
|
1.68 |
|
|
100% |
Reno Logistics Portfolio |
|
18 |
|
Reno, NV |
|
May 2021 |
|
100% |
|
|
3.04 |
|
|
75% |
Northern Italy Industrial Portfolio |
|
4 |
|
Northern Italy |
|
August 2021 |
|
100% |
|
|
0.75 |
|
|
100% |
Southwest Light Industrial Portfolio |
|
15 |
|
AZ, NV |
|
September 2021 |
|
100% |
|
|
2.48 |
|
|
92% |
Norway Logistics Portfolio |
|
2 |
|
Oslo, Norway |
|
February 2022 |
|
100% |
|
|
0.38 |
|
|
100% |
Verona Oppeano |
|
5 |
|
Verona, Italy |
|
June 2022 |
|
100% |
|
|
2.64 |
|
|
94% |
Denmark Logistics Portfolio |
|
10 |
|
Eastern Denmark |
|
June 2022 |
|
100% |
|
|
1.97 |
|
|
100% |
Belgioioso Logistics |
|
1 |
|
Greater Milan, Italy |
|
August 2022 |
|
100% |
|
|
1.12 |
|
|
100% |
Total Industrial |
|
81 |
|
|
|
|
|
|
|
|
15.79 |
|
|
|
Office: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida Office Portfolio |
|
11 |
|
Jacksonville, FL |
|
May 2019 |
|
97% |
|
|
1.27 |
|
|
85% |
Columbus Office Portfolio |
|
1 |
|
Columbus, OH |
|
October 2019 |
|
96% |
|
|
0.32 |
|
|
87% |
Nashville Office |
|
1 |
|
Nashville, TN |
|
February 2020 |
|
100% |
|
|
0.36 |
|
|
93% |
60 State Street |
|
1 |
|
Boston, MA |
|
March 2020 |
|
100% |
|
|
0.91 |
|
|
95% |
Stonebridge |
|
3 |
|
Atlanta, GA |
|
February 2021 |
|
100% |
|
|
0.46 |
|
|
95% |
M Campus |
|
2 |
|
Paris, France |
|
December 2021 |
|
100% |
|
|
0.24 |
|
|
100% |
Barcelona Mediacomplex |
|
1 |
|
Barcelona, Spain |
|
June 2022 |
|
100% |
|
|
0.34 |
|
|
97% |
Total Office |
|
20 |
|
|
|
|
|
|
|
|
3.90 |
|
|
|
40
Segment and Investment |
|
Number of |
|
Location |
|
Acquisition |
|
Ownership |
|
Sq. Feet |
|
|
Occupancy(2) |
|
Other Properties: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Select Service Portfolio |
|
1 |
|
Boulder, CO |
|
January 2019 |
|
100% |
|
|
150 |
|
|
70% |
Fort Lauderdale Hotel (5) |
|
1 |
|
Fort Lauderdale, FL |
|
March 2019 |
|
43% |
|
|
236 |
|
|
67% |
Exchange on Erwin - Commercial |
|
2 |
|
Durham, NC |
|
November 2019 |
|
100% |
|
|
0.10 |
|
|
100% |
Barlow |
|
1 |
|
Chevy Chase, MD |
|
March 2020 |
|
100% |
|
|
0.29 |
|
|
86% |
Single-Family Rental Joint Venture |
|
N/A |
|
Various |
|
Various |
|
95% |
|
|
858 |
|
|
92% |
Sun Belt Single-Family Rental Portfolio |
|
N/A |
|
Various |
|
December 2021 |
|
100% |
|
|
19 |
|
|
84% |
Morningstar Self-Storage Joint Venture |
|
26 |
|
Various |
|
December 2021/March 2022 |
|
95% |
|
|
1.94 |
|
|
86% |
Extended Stay Portfolio (5) |
|
195 |
|
Various |
|
July 2022 |
|
45% |
|
|
24,802 |
|
|
85% |
Total Other Properties |
|
226 |
|
|
|
|
|
|
|
N/A (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Properties |
|
598 |
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of Investments in Real Estate
Management reviews its consolidated real estate properties for impairment each quarter or when there is an event or change in circumstances that indicates an impaired value. If the carrying amount of the real estate investment is no longer recoverable and exceeds the fair value of such investment, an impairment loss is recognized. The impairment loss is recognized based on the excess of the carrying amount of the asset over its fair value. The evaluation of anticipated future cash flows is highly subjective and is based in part on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Since cash flows on real estate properties are considered on an undiscounted basis to determine whether an asset has been impaired, our strategy of holding properties over the long term directly decreases the likelihood of recording an impairment loss. If our strategy changes or market conditions otherwise dictate an earlier sale date, an impairment loss may be recognized, and such loss could be material to our results. If we determine that an impairment has occurred, the affected assets must be reduced to their fair value.
During the three and six months ended June 30, 2026 and 2025, we did not recognize any impairments on our investments in real estate.
Impairment of Investments in Unconsolidated Real Estate Ventures
Management reviews its investments in unconsolidated joint ventures for impairment each quarter and will record impairment charges when events or circumstances change indicating that a decline in the fair values below the carrying values has occurred and such decline is other-than-temporary. The ultimate realization of the investment in unconsolidated joint ventures is dependent on a number of factors, including the performance of each investment and market conditions.
During the three and six months ended June 30, 2026 and 2025, we did not recognize any impairments on our investments in unconsolidated real estate ventures.
41
Investment in Real Estate Debt
The following table details our investment in real estate debt as of June 30, 2026 ($ in thousands):
|
|
|
|
June 30, 2026 |
|
|||||||||
Type of Security/Loan |
|
Number of Positions |
|
Coupon (1) |
|
Maturity Date (2) |
|
Cost Basis |
|
|
Fair Value |
|
||
Term loan |
|
1 |
|
BBSY + 4.75% |
|
June 2030 |
|
$ |
954,492 |
|
|
$ |
948,779 |
|
Total investment in real estate debt |
|
1 |
|
BBSY + 4.75% |
|
June 2030 |
|
$ |
954,492 |
|
|
$ |
948,779 |
|
During June 2022, we provided financing in the form of a term loan to an unaffiliated entity in connection with its acquisition of Australia’s largest hotel and casino company. The loan is in the amount of AUD 1,377 million and has an initial term of five years, with a two-year extension option. The loan is pre-payable at the option of the borrower at any time. During June 2025, we extended the loan term by three years to June 2030. During the three and six months ended June 30, 2026, we received principal repayments of $2.4 million on our investment in real estate debt.
Lease Expirations
The following table details the expiring leases at our industrial, office and other properties by annualized base rent as of June 30, 2026 ($ in thousands). The table below excludes our multifamily and certain other properties, including single-family rental and self-storage properties, as substantially all leases at such properties expire within 12 months.
|
|
Industrial |
|
Office |
|
Other Properties |
|
Total |
||||||||||||||||||||||||
Year |
|
Annualized |
|
|
% of Total |
|
Annualized |
|
|
% of Total |
|
Annualized |
|
|
% of Total |
|
Annualized |
|
|
% of Total |
||||||||||||
2026 |
|
$ |
|
11,958 |
|
|
|
4% |
|
$ |
|
3,368 |
|
|
|
1% |
|
$ |
|
410 |
|
|
|
0% |
|
$ |
|
15,736 |
|
|
|
5% |
2027 |
|
|
|
27,086 |
|
|
|
9% |
|
|
|
8,983 |
|
|
|
3% |
|
|
|
1,630 |
|
|
|
1% |
|
|
|
37,699 |
|
|
|
13% |
2028 |
|
|
|
22,404 |
|
|
|
7% |
|
|
|
13,685 |
|
|
|
4% |
|
|
|
1,183 |
|
|
|
0% |
|
|
|
37,272 |
|
|
|
11% |
2029 |
|
|
|
18,345 |
|
|
|
6% |
|
|
|
7,933 |
|
|
|
3% |
|
|
|
6,872 |
|
|
|
2% |
|
|
|
33,150 |
|
|
|
11% |
2030 |
|
|
|
18,682 |
|
|
|
6% |
|
|
|
20,105 |
|
|
|
7% |
|
|
|
1,730 |
|
|
|
1% |
|
|
|
40,517 |
|
|
|
14% |
2031 |
|
|
|
11,739 |
|
|
|
4% |
|
|
|
33,560 |
|
|
|
11% |
|
|
|
851 |
|
|
|
0% |
|
|
|
46,150 |
|
|
|
15% |
2032 |
|
|
|
10,287 |
|
|
|
3% |
|
|
|
10,392 |
|
|
|
3% |
|
|
|
4,294 |
|
|
|
1% |
|
|
|
24,973 |
|
|
|
7% |
2033 |
|
|
|
11,222 |
|
|
|
4% |
|
|
|
14,448 |
|
|
|
5% |
|
|
|
2,243 |
|
|
|
1% |
|
|
|
27,913 |
|
|
|
10% |
2034 |
|
|
|
2,124 |
|
|
|
1% |
|
|
|
6,086 |
|
|
|
2% |
|
|
|
434 |
|
|
|
0% |
|
|
|
8,644 |
|
|
|
3% |
2035 |
|
|
|
823 |
|
|
|
0% |
|
|
|
1,748 |
|
|
|
1% |
|
|
|
492 |
|
|
|
0% |
|
|
|
3,063 |
|
|
|
1% |
Thereafter |
|
|
|
3,992 |
|
|
|
1% |
|
|
|
23,978 |
|
|
|
8% |
|
|
|
2,826 |
|
|
|
1% |
|
|
|
30,796 |
|
|
|
10% |
Total |
|
$ |
|
138,662 |
|
|
|
45% |
|
$ |
|
144,286 |
|
|
|
48% |
|
$ |
|
22,965 |
|
|
|
7% |
|
$ |
|
305,913 |
|
|
|
100% |
Certain operating leases contain early termination options that require advance notification and may include payment of penalty, which, in most cases, is substantial enough to be deemed economically disadvantageous by a tenant to exercise. As of June 30, 2026, approximately 1% of our industrial portfolio square footage and approximately 15% of our office portfolio square footage is subject to early termination provisions. Approximately 64% of our office portfolio that is subject to these early termination provisions has early termination dates prior to January 1, 2030.
During the six months ended June 30, 2026, one tenant exercised early lease termination provisions, impacting 2,637 square feet across our industrial and office properties, which represents an insignificant percentage of our combined square footage owned across our industrial and office properties. During the year ended December 31, 2025, three tenants exercised early lease termination provisions, impacting 34,202 square feet across our industrial and office properties, which represents approximately 0.3% of our combined square footage owned across our industrial and office properties.
42
Results of Operations
The following table sets forth information regarding our consolidated results of operations ($ in thousands):
|
|
For the Three Months Ended June 30, |
|
|
2026 vs. 2025 |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
$ |
|
||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Rental revenue |
|
$ |
|
390,016 |
|
|
$ |
|
386,801 |
|
|
$ |
|
3,215 |
|
Other revenue |
|
|
|
7,938 |
|
|
|
|
7,734 |
|
|
|
|
204 |
|
Total revenues |
|
|
|
397,954 |
|
|
|
|
394,535 |
|
|
|
|
3,419 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Property operating |
|
|
|
165,147 |
|
|
|
|
166,879 |
|
|
|
|
(1,732 |
) |
General and administrative |
|
|
|
9,634 |
|
|
|
|
9,027 |
|
|
|
|
607 |
|
Management fees |
|
|
|
20,073 |
|
|
|
|
22,178 |
|
|
|
|
(2,105 |
) |
Performance participation allocation |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Depreciation and amortization |
|
|
|
177,347 |
|
|
|
|
173,654 |
|
|
|
|
3,693 |
|
Total expenses |
|
|
|
372,201 |
|
|
|
|
371,738 |
|
|
|
|
463 |
|
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Loss from unconsolidated real estate ventures |
|
|
|
(2,876 |
) |
|
|
|
(4,525 |
) |
|
|
|
1,649 |
|
Income from investment in real estate debt, net |
|
|
|
22,225 |
|
|
|
|
18,494 |
|
|
|
|
3,731 |
|
Net (loss) gain on dispositions of real estate |
|
|
|
(958 |
) |
|
|
|
14,087 |
|
|
|
|
(15,045 |
) |
Interest expense |
|
|
|
(182,826 |
) |
|
|
|
(150,891 |
) |
|
|
|
(31,935 |
) |
Loss on extinguishment of debt |
|
|
|
(1,775 |
) |
|
|
|
— |
|
|
|
|
(1,775 |
) |
Other expense, net |
|
|
|
(12,569 |
) |
|
|
|
(105,292 |
) |
|
|
|
92,723 |
|
Total other expense |
|
|
|
(178,779 |
) |
|
|
|
(228,127 |
) |
|
|
|
49,348 |
|
Net loss |
|
|
|
(153,026 |
) |
|
|
|
(205,330 |
) |
|
|
|
52,304 |
|
Net loss attributable to non-controlling interests in consolidated joint ventures |
|
|
|
937 |
|
|
|
|
1,204 |
|
|
|
|
(267 |
) |
Net loss attributable to non-controlling |
|
|
|
7,853 |
|
|
|
|
10,229 |
|
|
|
|
(2,376 |
) |
Net loss attributable to stockholders |
|
$ |
|
(144,236 |
) |
|
$ |
|
(193,897 |
) |
|
$ |
|
49,661 |
|
Revenues
Rental revenue primarily consists of base rent arising from tenant leases at our multifamily, industrial, office and other properties. Rental revenue is recognized on a straight-line basis over the life of the lease, including any rent steps or abatement provisions. During the three months ended June 30, 2026 and 2025, rental revenue was $390.0 million and $386.8 million, respectively. The increase in rental revenue was driven by an increase in average rental rates for multifamily and industrial assets for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.
Other revenue primarily consists of revenue generated by our hospitality properties. Hospitality revenue consists primarily of room revenue. During the three months ended June 30, 2026 and 2025, other revenue was $7.9 million and $7.7 million, respectively, resulting in a year over year increase of approximately $0.2 million, driven by an increase in other revenue at our multifamily properties, partially offset by a reduction in other revenue at our hospitality properties.
Expenses
Property operating expenses consist of the costs of ownership and operation of our real estate investments. Examples of property operating expenses include real estate taxes, insurance, utilities and repair and maintenance expenses. Property operating expenses also include general and administrative expenses unrelated to the operations of the properties. During the three months ended June 30, 2026 and 2025, property operating expenses were $165.1 million and $166.9 million, respectively. The decrease was driven primarily by the impact of asset sales during the year ended December 31, 2025.
43
General and administrative expenses are corporate-level expenses that relate mainly to our compliance and administration costs and consist primarily of legal fees, accounting fees, transfer agent fees and other professional fees. During the three months ended June 30, 2026, general and administrative expenses increased $0.6 million compared to the three months ended June 30, 2025 primarily due to an increase in legal and other professional fee expenses associated with property-level refinancings.
Management fees are earned by our Advisor for providing services pursuant to the Advisory Agreement. During the three months ended June 30, 2026 and 2025, management fees were $20.1 million and $22.2 million, respectively. The decrease was primarily driven by the reduction in our average NAV from June 30, 2025 to June 30, 2026.
Performance participation allocation relates to allocations from the Operating Partnership to the Special Limited Partner based on the total return of the Operating Partnership. Total return is defined as distributions paid or accrued plus the change in NAV. The performance participation allocation is measured annually and any amount earned by the Special Limited Partner becomes payable as of December 31 of the applicable year. During the three months ended June 30, 2026 and 2025, there was no performance participation allocation as the return hurdle was not achieved.
During the three months ended June 30, 2026 and 2025, we did not recognize any impairments on our investments in real estate.
Depreciation and amortization expenses are impacted by the values assigned to buildings, personal property and in-place lease assets as part of the initial purchase price allocation. During the three months ended June 30, 2026 and 2025, depreciation and amortization expenses were $177.3 million and $173.7 million, respectively. The increase in depreciation expense was driven by an increase in depreciation expense on our multifamily properties during the three months ended June 30, 2026 compared to the three months ended June 30, 2025.
Other Expense
During the three months ended June 30, 2026 and 2025, loss from unconsolidated real estate ventures was ($2.9) million and ($4.5) million, respectively, driven by improved property net operating income on one of our unconsolidated real estate venture investments.
During the three months ended June 30, 2026 and 2025, income from investment in real estate debt, net was $22.2 million and $18.5 million, respectively, which consisted of interest income, realized losses, and unrealized gains and losses resulting from changes in the fair value of our real estate debt investments and related hedges. The increase was primarily attributable to an increase in interest income on our one floating-rate term loan investment.
During the three months ended June 30, 2026, we did not sell any investments in real estate. We recorded net losses of ($1.0) million on the retirement of certain furniture, fixtures and equipment in connection with capital improvement activities at certain of our properties. No proceeds were received in connection with these retirements. During the three months ended June 30, 2025, we recorded $14.1 million of net gains from the disposition of one retail property and 26 single-family rental units.
During the three months ended June 30, 2026 and 2025, interest expense was $182.8 million and $150.9 million, respectively, which primarily consisted of interest expense incurred on our mortgage notes, secured credit facilities, line of credit and borrowings under our secured financing on investment in real estate debt. The increase was primarily driven by an increase in interest expense of $24.9 million on our mortgage notes, an increase in interest expense of $5.5 million on our unsecured line of credit, and an increase in interest expense of $1.7 million on borrowings under our secured financing on investment in real estate debt during the three months ended June 30, 2026 compared to the three months ended June 30, 2025.
During the three months ended June 30, 2026, the loss on extinguishment of debt was ($1.8) million as a result of refinancing activities. During the three months ended June 30, 2025 there were no losses on extinguishment of debt recorded.
During the three months ended June 30, 2026 and 2025, other expense, net was ($12.6) million and ($105.3) million, respectively. These results were primarily driven by unrealized losses relating to the changes in the fair value of our interest rate caps and swaps of ($7.5) million during the three months ended June 30, 2026, compared to unrealized losses of ($48.1) million during the three months ended June 30, 2025. These results were also driven by unrealized losses relating to the changes in the fair value of our foreign exchange market forwards of ($9.0) million during the three months ended June 30, 2026, compared to unrealized losses of ($74.7) million during the three months ended June 30, 2025.
44
|
|
For the Six Months Ended June 30, |
|
|
2026 vs. 2025 |
|
|||||||||
|
|
2026 |
|
|
2025 |
|
|
$ |
|
||||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Rental revenue |
|
$ |
|
775,730 |
|
|
$ |
|
780,851 |
|
|
$ |
|
(5,121 |
) |
Other revenue |
|
|
|
14,504 |
|
|
|
|
13,949 |
|
|
|
|
555 |
|
Total revenues |
|
|
|
790,234 |
|
|
|
|
794,800 |
|
|
|
|
(4,566 |
) |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Property operating |
|
|
|
325,266 |
|
|
|
|
337,984 |
|
|
|
|
(12,718 |
) |
General and administrative |
|
|
|
19,873 |
|
|
|
|
18,681 |
|
|
|
|
1,192 |
|
Management fees |
|
|
|
40,500 |
|
|
|
|
44,944 |
|
|
|
|
(4,444 |
) |
Performance participation allocation |
|
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
Depreciation and amortization |
|
|
|
354,993 |
|
|
|
|
346,504 |
|
|
|
|
8,489 |
|
Total expenses |
|
|
|
740,632 |
|
|
|
|
748,113 |
|
|
|
|
(7,481 |
) |
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Loss from unconsolidated real estate ventures |
|
|
|
(5,803 |
) |
|
|
|
(6,354 |
) |
|
|
|
551 |
|
Income from investment in real estate debt, net |
|
|
|
42,368 |
|
|
|
|
38,130 |
|
|
|
|
4,238 |
|
Net (loss) gain on dispositions of real estate |
|
|
|
(1,023 |
) |
|
|
|
23,777 |
|
|
|
|
(24,800 |
) |
Interest expense |
|
|
|
(355,143 |
) |
|
|
|
(303,118 |
) |
|
|
|
(52,025 |
) |
Loss on extinguishment of debt |
|
|
|
(4,131 |
) |
|
|
|
— |
|
|
|
|
(4,131 |
) |
Other income (expense), net |
|
|
|
1,236 |
|
|
|
|
(192,026 |
) |
|
|
|
193,262 |
|
Total other expense |
|
|
|
(322,496 |
) |
|
|
|
(439,591 |
) |
|
|
|
117,095 |
|
Net loss |
|
|
|
(272,894 |
) |
|
|
|
(392,904 |
) |
|
|
|
120,010 |
|
Net loss attributable to non-controlling interests in consolidated joint ventures |
|
|
|
1,848 |
|
|
|
|
2,283 |
|
|
|
|
(435 |
) |
Net loss attributable to non-controlling |
|
|
|
13,956 |
|
|
|
|
19,544 |
|
|
|
|
(5,588 |
) |
Net loss attributable to stockholders |
|
$ |
|
(257,090 |
) |
|
$ |
|
(371,077 |
) |
|
$ |
|
113,987 |
|
Revenues
Rental revenue primarily consists of base rent arising from tenant leases at our multifamily, industrial, office and other properties. Rental revenue is recognized on a straight-line basis over the life of the lease, including any rent steps or abatement provisions. During the six months ended June 30, 2026 and 2025, rental revenue was $775.7 million and $780.9 million, respectively. The decrease in rental revenue was driven by the impact of asset sales during the six months ended June 30, 2025, offset by an increase in average rental rates for multifamily and industrial assets for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
Other revenue primarily consists of revenue generated by our hospitality properties. Hospitality revenue consists primarily of room revenue. During the six months ended June 30, 2026 and 2025, other revenue was $14.5 million and $13.9 million, respectively, resulting in a year over year increase of approximately $0.6 million, driven by an increase in other revenue at our multifamily properties, partially offset by a reduction in other revenue at our hospitality properties due to an asset sale during the six months ended June 30, 2025.
Expenses
Property operating expenses consist of the costs of ownership and operation of our real estate investments. Examples of property operating expenses include real estate taxes, insurance, utilities and repair and maintenance expenses. Property operating expenses also include general and administrative expenses unrelated to the operations of the properties. During the six months ended June 30, 2026 and 2025, property operating expenses were $325.3 million and $338.0 million, respectively. The decrease was driven primarily by the impact of asset sales during the six months ended June 30, 2025.
General and administrative expenses are corporate-level expenses that relate mainly to our compliance and administration costs and consist primarily of legal fees, accounting fees, transfer agent fees and other professional fees. During the six months ended June 30, 2026, general and administrative expenses increased $1.2 million compared to the six months ended June 30, 2025 primarily due to an increase in legal and other professional fee expenses associated with property-level refinancings.
45
Management fees are earned by our Advisor for providing services pursuant to the Advisory Agreement. During the six months ended June 30, 2026 and 2025, management fees were $40.5 million and $44.9 million, respectively. The decrease was primarily driven by the reduction in our average NAV from June 30, 2025 to June 30, 2026.
Performance participation allocation relates to allocations from the Operating Partnership to the Special Limited Partner based on the total return of the Operating Partnership. Total return is defined as distributions paid or accrued plus the change in NAV. The performance participation allocation is measured annually and any amount earned by the Special Limited Partner becomes payable as of December 31 of the applicable year. During the six months ended June 30, 2026 and 2025, there was no performance participation allocation as the return hurdle was not achieved.
During the six months ended June 30, 2026 and 2025, we did not recognize any impairments on our investments in real estate.
Depreciation and amortization expenses are impacted by the values assigned to buildings, personal property and in-place lease assets as part of the initial purchase price allocation. During the six months ended June 30, 2026 and 2025, depreciation and amortization expenses were $355.0 million and $346.5 million, respectively. The increase in depreciation expense was driven by an increase in depreciation expense on our multifamily properties during the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
Other Expense
During the six months ended June 30, 2026 and 2025, loss from unconsolidated real estate ventures was ($5.8) million and ($6.4) million, respectively, driven by improved property net operating income on one of our unconsolidated real estate venture investments.
During the six months ended June 30, 2026 and 2025, income from investment in real estate debt, net was $42.4 million and $38.1 million, respectively, which consisted of interest income, realized losses, and unrealized gains and losses resulting from changes in the fair value of our real estate debt investments and related hedges. The increase was primarily attributable to an increase in interest income on our one floating-rate term loan investment.
During the six months ended June 30, 2026, we sold one single-family rental unit, generating total net cash proceeds, net of mortgage repayments, of approximately $0.1 million. We recorded net losses of ($1.0) million, consisting of losses on the retirement of certain furniture, fixtures and equipment in connection with capital improvement activities at certain of our properties and a net loss on the disposition of one single-family rental unit. No proceeds were received in connection with the furniture, fixtures and equipment retirements. During the six months ended June 30, 2025, we recorded $23.8 million of net gains from the disposition of 43 industrial properties, 13 multifamily properties, one hospitality property, one retail property and 42 single-family rental units.
During the six months ended June 30, 2026 and 2025, interest expense was $355.1 million and $303.1 million, respectively, which primarily consisted of interest expense incurred on our mortgage notes, secured credit facilities, line of credit and borrowings under our secured financing on investment in real estate debt. The increase was primarily driven by an increase in interest expense of $42.0 million on our mortgage notes, an increase in interest expense of $7.3 million on our unsecured line of credit, and an increase in interest expense of $2.4 million on borrowings under our secured financing on investment in real estate debt during the six months ended June 30, 2026 compared to the six months ended June 30, 2025.
During the six months ended June 30, 2026, the loss on extinguishment of debt was ($4.1) million as a result of refinancing activities. During the six months ended June 30, 2025 there were no losses on extinguishment of debt recorded.
During the six months ended June 30, 2026 and 2025, other income (expense), net was $1.2 million and ($192.0) million, respectively. These results were primarily driven by unrealized gains relating to the changes in the fair value of our interest rate caps and swaps of $21.1 million during the six months ended June 30, 2026, compared to unrealized losses of ($117.0) million during the six months ended June 30, 2025. These results were also driven by unrealized gains relating to the changes in the fair value of our foreign exchange market forwards of $3.5 million during the six months ended June 30, 2026, compared to unrealized losses of ($95.8) million during the six months ended June 30, 2025. These results were partially offset by realized losses of ($33.0) million relating to the settlement of certain interest rate caps during the six months ended June 30, 2026, compared to $0.6 million of realized gains recognized during the six months ended June 30, 2025. The interest rate caps and swaps are used primarily to limit our interest rate payments on certain of our variable rate borrowings.
Funds from Operations and Adjusted Funds from Operations
We believe funds from operations (“FFO”) is a meaningful supplemental non-GAAP operating measure, which should be considered along with, but not as an alternative to, net loss as a measure of operating performance. Our consolidated financial statements are
46
presented under historical cost accounting which, among other things, requires depreciation of real estate investments to be calculated on a straight-line basis. As a result, our operating results imply that the value of our real estate investments will decrease evenly over a set time period. However, we believe that the value of real estate investments will change over time based on market conditions and as such, depreciation under historical cost accounting may be less informative. FFO is a standard REIT industry metric defined by the National Association of Real Estate Investment Trusts (“Nareit”).
FFO, as defined by Nareit and presented below, is calculated as net income or loss (computed in accordance with GAAP), excluding (i) gains or losses from sales of depreciable real property, (ii) impairment write-downs on depreciable real property, (iii) plus real estate-related depreciation and amortization, (iv) net gains or losses from sales of real estate, and (v) similar adjustments for unconsolidated joint ventures.
We also believe that adjusted FFO (“AFFO”) is a meaningful supplemental non-GAAP disclosure of our operating results. AFFO further adjusts FFO in order for our operating results to reflect the specific characteristics of our business by adjusting for items we believe are not related to our core operations. Our adjustments to FFO to arrive at AFFO include removing the impact of (i) straight-line rental income and expense, (ii) deferred income amortization, (iii) amortization of above- and below-market lease intangibles, net, (iv) amortization of mortgage premium / discount, (v) unrealized gains or losses from changes in the fair value of investment in real estate debt and other financial instruments, (vi) gains and losses resulting from foreign currency translations, (vii) amortization of restricted stock awards, (viii) non-cash performance participation allocation, even if repurchased by us, (ix) amortization of deferred financing costs, (x) gains or losses on extinguishment of debt, and (xi) similar adjustments for unconsolidated joint ventures. AFFO is not defined by Nareit and our calculation of AFFO may not be comparable to disclosures made by other REITs.
The following table presents a reconciliation of GAAP net loss attributable to stockholders to FFO and AFFO ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
For the Three Months Ended June 30, |
|
|
|
For the Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
|
2026 |
|
|
2025 |
|
||||
Net loss attributable to stockholders |
|
$ |
(144,236 |
) |
|
$ |
(193,897 |
) |
|
|
$ |
(257,090 |
) |
|
$ |
(371,077 |
) |
Adjustments to arrive at FFO: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Real estate depreciation and amortization |
|
|
177,347 |
|
|
|
173,654 |
|
|
|
|
354,993 |
|
|
|
346,504 |
|
Investment in unconsolidated real estate ventures – depreciation and amortization |
|
|
13,252 |
|
|
|
12,922 |
|
|
|
|
26,421 |
|
|
|
25,383 |
|
Net loss (gain) on dispositions of real estate |
|
|
958 |
|
|
|
(14,087 |
) |
|
|
|
1,023 |
|
|
|
(23,777 |
) |
Amount attributable to non-controlling interests |
|
|
(1,213 |
) |
|
|
(1,671 |
) |
|
|
|
(2,420 |
) |
|
|
(2,511 |
) |
FFO attributable to stockholders |
|
|
46,108 |
|
|
|
(23,079 |
) |
|
|
|
122,927 |
|
|
|
(25,478 |
) |
Adjustments to arrive at AFFO: |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Straight-line rental expense (income) |
|
|
440 |
|
|
|
(1,734 |
) |
|
|
|
(2,460 |
) |
|
|
(3,102 |
) |
Deferred income amortization (1) |
|
|
(3,446 |
) |
|
|
(6,598 |
) |
|
|
|
(10,512 |
) |
|
|
(10,398 |
) |
Amortization of above- and below-market lease intangibles, net |
|
|
(173 |
) |
|
|
(189 |
) |
|
|
|
(347 |
) |
|
|
(509 |
) |
Unrealized losses (gains) from changes in the fair value of investment in real estate debt and other financial instruments |
|
|
16,491 |
|
|
|
123,970 |
|
|
|
|
(24,661 |
) |
|
|
213,922 |
|
Foreign currency gain |
|
|
(4,793 |
) |
|
|
(20,125 |
) |
|
|
|
(14,912 |
) |
|
|
(20,769 |
) |
Non-cash performance participation allocation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
Amortization of deferred financing costs |
|
|
6,380 |
|
|
|
10,061 |
|
|
|
|
12,438 |
|
|
|
17,258 |
|
Amortization of restricted stock awards |
|
|
210 |
|
|
|
210 |
|
|
|
|
420 |
|
|
|
420 |
|
Loss on extinguishment of debt |
|
|
1,775 |
|
|
|
— |
|
|
|
|
4,131 |
|
|
|
— |
|
Amount attributable to non-controlling interests |
|
|
(284 |
) |
|
|
(460 |
) |
|
|
|
(485 |
) |
|
|
(899 |
) |
AFFO attributable to stockholders |
|
$ |
62,708 |
|
|
$ |
82,056 |
|
|
|
$ |
86,539 |
|
|
$ |
170,445 |
|
FFO and AFFO should not be considered to be more relevant or accurate than the GAAP methodology in calculating net income (loss) or in evaluating our operating performance. In addition, FFO and AFFO should not be considered as alternatives to net income (loss) as indications of our performance or as alternatives to cash flows from operating activities as indications of our liquidity, but rather
47
should be reviewed in conjunction with these and other GAAP measurements. Further, FFO and AFFO are not intended to be used as liquidity measures indicative of cash flow available to fund our cash needs, including our ability to make distributions to our stockholders.
Net Asset Value
Our board of directors, including a majority of our independent directors, has adopted valuation guidelines that contain a comprehensive set of methodologies to be used by the Advisor, our independent valuation advisor and third-party appraisal firms in connection with estimating the values of our assets and liabilities for purposes of our NAV calculation. These guidelines are designed to produce a fair and accurate estimate of the price that would be received for our investments in an arm’s-length transaction between a willing buyer and a willing seller in possession of all material information about our investments. Our independent valuation advisor reviews our valuation guidelines and methodologies related to investments in real property with the Advisor and our board of directors at least annually. From time to time, our board of directors, including a majority of our independent directors, may adopt changes to the valuation guidelines if it (i) determines that such changes are likely to result in a more accurate reflection of NAV or a more efficient or less costly procedure for the determination of NAV without having a material adverse effect on the accuracy of such determination or (ii) otherwise reasonably believes a change is appropriate for the determination of NAV.
For more information on our NAV calculation and valuation guidelines, please refer to Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in our Annual Report on Form 10-K for the year ended December 31, 2025. Please also refer to Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, as supplemented, for additional disclosure relating to material trends or uncertainties that may impact our NAV and our business.
The following table provides a breakdown of the major components of our NAV as of June 30, 2026 ($ and shares/units in thousands):
Components of NAV |
|
June 30, 2026 |
|
|
Investments in real estate |
|
$ |
20,957,700 |
|
Investment in real estate debt |
|
|
951,601 |
|
Cash and cash equivalents |
|
|
207,304 |
|
Restricted cash |
|
|
241,030 |
|
Other assets |
|
|
130,507 |
|
Debt obligations |
|
|
(11,778,485 |
) |
Secured financings on investment in real estate debt |
|
|
(572,391 |
) |
Subscriptions received in advance |
|
|
— |
|
Other liabilities |
|
|
(2,015,292 |
) |
Performance participation accrual |
|
|
— |
|
Management fee payable |
|
|
(6,688 |
) |
Accrued stockholder servicing fees(1) |
|
|
(2,537 |
) |
Non-controlling interests in consolidated joint ventures |
|
|
(124,769 |
) |
Net asset value |
|
$ |
7,987,980 |
|
Number of outstanding shares/units |
|
|
408,025 |
|
__________
48
The following table provides a breakdown of our total NAV and NAV per share by share class as of June 30, 2026 ($ and shares/units in thousands, except per share/unit data):
NAV Per Share |
|
Class S |
|
|
Class T |
|
|
Class D |
|
|
Class I |
|
|
Third-party |
|
|
Total |
|
||||||
Net asset value |
|
$ |
3,401,132 |
|
|
$ |
88,645 |
|
|
$ |
469,184 |
|
|
$ |
3,638,898 |
|
|
$ |
390,121 |
|
|
$ |
7,987,980 |
|
Number of outstanding shares/units |
|
|
172,729 |
|
|
|
4,500 |
|
|
|
24,345 |
|
|
|
186,461 |
|
|
|
19,990 |
|
|
|
408,025 |
|
NAV Per Share/Unit as of June 30, 2026 |
|
$ |
19.69 |
|
|
$ |
19.70 |
|
|
$ |
19.27 |
|
|
$ |
19.52 |
|
|
$ |
19.52 |
|
|
|
|
|
__________
Set forth below are the weighted averages of the key assumptions in the discounted cash flow methodology used in the June 30, 2026 valuations, based on property types. Once we own more than one single-family, one self-storage and one extended stay investment, we will include the key assumptions for the property types.
Property Type |
|
Discount Rate |
|
Exit Capitalization |
Multifamily |
|
6.9% |
|
5.5% |
Industrial |
|
7.4% |
|
5.8% |
Office |
|
8.0% |
|
6.7% |
Other |
|
8.3% |
|
6.7% |
For quarter-end months, these assumptions are determined by the independent valuation advisor or third-party appraisers, as applicable, per the terms of our valuation guidelines. The Advisor reviews the assumptions from each of the appraisals. A change in these assumptions would impact the calculation of the value of our property investments. For example, assuming all other factors remain unchanged, the changes listed below would result in the following effects on our investment values:
Input |
|
Hypothetical |
|
Multifamily |
|
Industrial |
|
Office |
|
Other |
Discount Rate |
|
0.25% decrease |
|
+1.9% |
|
+1.9% |
|
+1.9% |
|
+1.9% |
(weighted average) |
|
0.25% increase |
|
(1.9)% |
|
(1.9)% |
|
(1.9)% |
|
(1.8)% |
Exit Capitalization Rate |
|
0.25% decrease |
|
+2.9% |
|
+2.8% |
|
+2.5% |
|
+2.3% |
(weighted average) |
|
0.25% increase |
|
(2.7)% |
|
(2.6)% |
|
(2.3)% |
|
(2.1)% |
The following table reconciles stockholders’ equity from our Condensed Consolidated Balance Sheet to our NAV ($ in thousands):
Reconciliation of Stockholders’ Equity to NAV |
|
June 30, 2026 |
|
||
Total stockholders’ equity under GAAP |
|
$ |
|
3,326,618 |
|
Redeemable non-controlling interests |
|
|
|
390,121 |
|
Total partners’ capital of Operating Partnership |
|
|
|
3,716,739 |
|
Adjustments: |
|
|
|
|
|
Accrued stockholder servicing fee |
|
|
|
205,234 |
|
Unrealized net real estate and real estate debt appreciation |
|
|
|
588,509 |
|
Accumulated depreciation and amortization |
|
|
|
3,477,498 |
|
NAV |
|
$ |
|
7,987,980 |
|
49
The following details the adjustments to reconcile stockholders’ equity to our NAV:
Distributions
Since February 2019, we have declared monthly distributions for each class of our common stock, which are generally paid three business days after month-end. Each class of our common stock received the same gross distribution per share, which was an aggregate of $0.5415 per share for the six months ended June 30, 2026. The net distribution varies for each class based on the applicable stockholder servicing fee, which is deducted from the gross distribution per share and paid to the Dealer Manager. The table below details the net distribution for each of our share classes for the six months ended June 30, 2026:
|
|
Class T |
|
|
Class S |
|
|
Class D |
|
|
Class I |
|
||||
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
|
Shares |
|
||||
January 31, 2026 |
|
$ |
0.0890 |
|
|
$ |
0.0890 |
|
|
$ |
0.0993 |
|
|
$ |
0.1035 |
|
February 28, 2026 |
|
|
0.0906 |
|
|
|
0.0904 |
|
|
|
0.0997 |
|
|
|
0.1035 |
|
March 31, 2026 |
|
|
0.0892 |
|
|
|
0.0891 |
|
|
|
0.0994 |
|
|
|
0.1035 |
|
April 30, 2026 |
|
|
0.0632 |
|
|
|
0.0632 |
|
|
|
0.0730 |
|
|
|
0.0770 |
|
May 31, 2026 |
|
|
0.0628 |
|
|
|
0.0627 |
|
|
|
0.0729 |
|
|
|
0.0770 |
|
June 30, 2026 |
|
|
0.0633 |
|
|
|
0.0632 |
|
|
|
0.0730 |
|
|
|
0.0770 |
|
Total |
|
$ |
0.4581 |
|
|
$ |
0.4576 |
|
|
$ |
0.5173 |
|
|
$ |
0.5415 |
|
50
The following table summarizes our distributions declared on our common stock and Operating Partnership units held by parties other than us during the six months ended June 30, 2026 and 2025 ($ in thousands):
|
For the Six Months Ended |
|
|
For the Six Months Ended |
|
|
|||||||||||
|
Amount |
|
|
% |
|
|
Amount |
|
|
% |
|
|
|||||
Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Payable in cash |
|
$ |
154,381 |
|
|
|
75 |
|
% |
$ |
174,872 |
|
|
|
72 |
|
% |
Reinvested in shares |
|
|
51,468 |
|
|
|
25 |
|
% |
|
68,798 |
|
|
|
28 |
|
% |
Total distributions |
|
$ |
205,849 |
|
|
|
100 |
|
% |
$ |
243,670 |
|
|
|
100 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sources of Distributions |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash flows from operating activities |
|
$ |
139,361 |
|
|
|
68 |
|
% |
$ |
236,291 |
|
|
|
97 |
|
% |
Cash flows from investing activities(1) |
|
|
3,117 |
|
|
|
1 |
|
% |
|
7,379 |
|
|
|
3 |
|
% |
Offering proceeds(2) |
|
|
63,371 |
|
|
|
31 |
|
% |
|
— |
|
|
|
— |
|
% |
Total sources of distributions |
|
$ |
205,849 |
|
|
|
100 |
|
% |
$ |
243,670 |
|
|
|
100 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash flows from operating activities |
|
$ |
160,252 |
|
|
|
|
|
$ |
197,692 |
|
|
|
|
|
||
Funds from operations(3) |
|
$ |
122,927 |
|
|
|
|
|
$ |
(25,478 |
) |
|
|
|
|
||
__________
Liquidity and Capital Resources
Our primary sources of liquidity include cash and cash equivalents and available borrowings under our unsecured line of credit and senior secured revolving credit facility. The following table summarizes amounts available under these sources as of June 30, 2026 ($ in thousands):
|
|
June 30, 2026 |
|
|
|
Cash and cash equivalents |
|
$ |
207,304 |
|
|
Available borrowings on undrawn unsecured line of credit |
|
|
— |
|
|
Available borrowings on undrawn senior secured revolving credit facility |
|
|
86,500 |
|
|
Total available liquidity and capital resources |
|
$ |
293,804 |
|
|
Our primary needs for liquidity and capital resources are to fund our investments, to make distributions to our stockholders, to repurchase shares of our common stock pursuant to our share repurchase plan, to pay our offering and operating expenses and capital expenditures, to pay debt service on the outstanding indebtedness we incur, and to repay principal on outstanding indebtedness as it comes due. Our operating expenses include, among other things, fees and expenses related to managing our properties and other investments, the management fee we pay to the Advisor (to the extent the Advisor elects to receive the management fee in cash), the performance participation allocation that the Operating Partnership will pay to the Special Limited Partner (when earned and to the extent that the Special Limited Partner elects to receive the performance participation allocation in cash) and general corporate expenses. Since October 2022, share repurchase requests from our stockholders have exceeded the limits of our share repurchase plan. In April 2026, we amended our share repurchase plan to further limit repurchases and reduced distributions paid on our common stock.
Our cash needs for acquisitions and other investments will be funded primarily from the sale of shares of our common stock and through the assumption or incurrence of debt.
Other potential future sources of capital include secured or unsecured financings from banks or other lenders and proceeds from the sale of assets and our investment in real estate-related debt. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. From inception through June 30, 2026, our distributions have been primarily funded from cash flows from operating activities in addition to certain cash flows from interest rate derivatives, classified as cash flows from investing activities. In addition, for the six months ended June 30, 2026 and 2025, we have repurchased approximately $0.2 billion and $0.2 billion in shares of our common stock under our share repurchase plan.
51
The following table is a summary of our indebtedness as of June 30, 2026 and December 31, 2025 ($ in thousands):
|
|
|
|
|
|
|
|
|
Principal Balance Outstanding(3) |
|
||||||
Indebtedness |
|
Weighted |
|
Weighted |
|
Maximum |
|
|
June 30, |
|
|
December 31, |
|
|||
Fixed rate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Fixed rate mortgages |
|
3.41% |
|
January 2031 |
|
N/A |
|
|
$ |
3,158,891 |
|
|
$ |
3,167,322 |
|
|
Total fixed rate loans |
|
|
|
|
|
|
|
|
|
3,158,891 |
|
|
|
3,167,322 |
|
|
Variable rate loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Floating rate mortgages |
|
B + 1.95% |
|
February 2031 |
|
N/A |
|
|
|
8,711,064 |
|
|
|
8,690,438 |
|
|
Variable rate secured credit facility(4) |
|
B + 2.25% |
|
June 2027 |
|
$150,300 |
|
|
|
150,300 |
|
|
|
161,140 |
|
|
Senior secured revolving credit facility(5) |
|
B + 2.50% |
|
January 2027 |
|
$150,000 |
|
|
|
63,500 |
|
|
|
— |
|
|
Total variable rate loans |
|
|
|
|
|
|
|
|
|
8,924,864 |
|
|
|
8,851,578 |
|
|
Total loans secured by the Company’s |
|
|
|
|
|
|
|
|
|
12,083,755 |
|
|
|
12,018,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Secured financings on investment in real estate debt |
|
B + 2.65% |
|
June 2030 |
|
$ |
572,391 |
|
|
|
572,391 |
|
|
|
550,951 |
|
Unsecured line of credit(6) |
|
B + 2.50% |
|
May 2027 |
|
$ |
1,550,000 |
|
|
|
1,550,000 |
|
|
|
1,373,000 |
|
Total Indebtedness |
|
|
|
|
|
|
|
|
$ |
14,206,146 |
|
|
$ |
13,942,851 |
|
|
__________
Effective April 29, 2026, we amended our share repurchase plan, beginning with repurchases submitted during the month of April 2026 such that (i) repurchase requests made upon the death or qualifying disability of a stockholder who is a natural person will be repurchased in full to the extent there are available funds up to a limit of $5.0 million per month; and (ii) repurchase requests for accounts having a balance below $5,000 will be repurchased in full to the extent there are available funds up to a limit of $5.0 million per month. As a result, no repurchase requests will be accepted except in connection with (i) and (ii) above.
Pursuant to the terms of the amended share repurchase plan described above, during the months of April, May, and June 2026, we accepted approximately $4.8 million, $2.3 million, and $2.5 million, respectively, of common stock under our share repurchase plan, which represented all repurchase requests for such period made upon the death or qualifying disability of a stockholder and for accounts having a balance below $5,000.
In August 2026, we formed a joint venture with funds managed by and affiliates of Apollo to which we contributed approximately 120 of our affordable housing properties and in which Apollo invested approximately $1.02 billion. Consistent with the strategic capital plan described above for addressing our upcoming debt maturities, we used the proceeds to repay and refinance a portion of our indebtedness, including the repayment in full and retirement of our senior secured revolving credit facility and the repayment and refinancing of our unsecured line of credit. See Note 16 — “Subsequent Events.”
During the period from July 1, 2026 through August 12, 2026, we refinanced and closed an aggregate of approximately $1.2 billion in property-level financing.
52
Cash Flows
The following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash ($ in thousands):
|
For the Six Months Ended |
|
|||||||
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Cash flows provided by operating activities |
$ |
|
160,252 |
|
|
$ |
|
197,692 |
|
Cash flows (used in) provided by investing activities |
|
|
(29,867 |
) |
|
|
|
1,213,076 |
|
Cash flows used in financing activities |
|
|
(107,820 |
) |
|
|
|
(1,471,611 |
) |
Effect of exchange rate changes |
|
|
538 |
|
|
|
|
3,346 |
|
Net increase (decrease) in cash and cash equivalents and restricted cash |
$ |
|
23,103 |
|
|
$ |
|
(57,497 |
) |
Cash flows provided by operating activities decreased by approximately $37.4 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This decrease is primarily attributable to a reduction in property operating income as a result of asset sales during the six months ended June 30, 2025.
Cash flows provided by investing activities decreased by approximately $1.2 billion during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decrease was primarily due to approximately $1.2 billion in proceeds from dispositions of real estate during the six months ended June 30, 2025.
Cash flows used in financing activities decreased by approximately $1.4 billion during the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decrease was primarily driven by a $1.4 billion decrease in net borrowings on our mortgage notes as a result of the repayment of property-level financing associated with asset sales during the six months ended June 30, 2025. This was offset by additional net borrowings on our unsecured line of credit and our senior secured revolving credit facility during the six months ended June 30, 2026.
Critical Accounting Policies
The preparation of the financial statements in accordance with GAAP involves significant judgments and assumptions and requires estimates about matters that are inherently uncertain. These judgments will affect our reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Refer to “Critical Accounting Policies”, as reflected in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations, to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025, for further descriptions of such accounting policies.
Recent Accounting Pronouncements
See Note 2 — “Summary of Significant Accounting Policies” to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q for a discussion concerning recent accounting pronouncements.
Off-Balance Sheet Arrangements
We have no existing off-balance sheet arrangements.
53
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Capital Market Risk
We are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our common stock. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under mortgages, repurchase obligations or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business.
Economic events affecting the U.S. economy, such as the general negative performance of the real estate sector (including as a result of inflation or higher interest rates), actual or perceived instability in the U.S. banking system, disruptions in the labor market (including labor shortages and unemployment), stock market volatility, trade conflict, civil unrest, national and international security events, geopolitical events, military conflicts and war (including the ongoing conflicts in the Middle East and Ukraine), have resulted in extreme volatility in a variety of global markets, including the real estate-related debt markets. Recent bank failures and consolidations have contributed to volatility in global markets and resulted in diminished liquidity and credit availability in the market broadly. We have received and may in the future receive margin calls from our lenders as a result of the decline in the market value of assets pledged by us to our lenders under our secured financings on investment in real estate debt, and if we fail to resolve such margin calls when due by payment of cash or delivery of additional collateral, the lenders may exercise remedies including taking ownership of the assets securing the applicable obligations.
Interest Rate Risk
We are exposed to interest rate risk with respect to our variable-rate mortgage indebtedness, variable-rate secured credit facilities, secured financings on investment in real estate debt and our unsecured line of credit, where an increase in interest rates would directly result in higher interest expense costs. We seek to manage our exposure to interest rate risk by utilizing a mix of fixed and floating rate financings with staggered maturities and through interest rate protection agreements to fix or cap a portion of our variable rate debt. As of June 30, 2026, the outstanding principal balance of our variable rate indebtedness was $11.0 billion.
Certain of our mortgage loans and secured financings on investment in real estate debt are variable rate and are indexed to the one-month SOFR or other benchmark rates. We have executed interest rate caps and swaps with an aggregate notional amount of $8.9 billion as of June 30, 2026 to hedge the risk of increasing interest rates. For the three and six months ended June 30, 2026, a 10 basis point increase in the SOFR or other benchmark rates would have resulted in an increase in interest expense of $2.6 million and $4.6 million, respectively, of net of the impact of our interest rate caps and swaps.
Foreign Currency Risk
We intend to hedge our currency exposures in a prudent manner to the extent it is cost effective to do so. However, our currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amount of payments received on the related investments, and/or unequal, inaccurate, or unavailable hedges to perfectly offset changes in future exchange rates. Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.
Consistent with our strategy of hedging foreign currency exposure on certain investments, we typically enter into a series of foreign currency forward contracts to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income, rental income, principal payments and net sales proceeds after the repayment of debt) we expect to receive from our foreign currency denominated investments.
Investment in Real Estate Debt
As of June 30, 2026, we held a $0.9 billion investment in real estate debt. Our investment in real estate debt is floating rate and indexed to various benchmark rates and as such, are exposed to interest rate risk. Our net income will increase or decrease depending on interest rate movements. While we cannot predict factors that may or may not affect interest rates, for the three and six months ended June 30, 2026, a 10 basis point increase or decrease in the various benchmark rates would have resulted in an increase or decrease to income from investment in real estate debt of $0.2 million and $0.5 million, respectively.
We may also be exposed to market risk with respect to our investment in real estate debt due to changes in the fair value of our investments. We seek to manage our exposure to market risk with respect to our investment in real estate debt by making investments in securities backed by different types of collateral and varying credit ratings. The fair value of our investment may fluctuate, thus the amount we will realize upon any sale of our investment is unknown. As of June 30, 2026, the fair value at which we may sell our
54
investment in real estate debt is not known, but a 10% change in the fair value of our investment in real estate debt may result in an unrealized gain or loss of approximately $94.9 million.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q was made under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures (i) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms and (ii) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting
There have been no changes in our “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
55
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of June 30, 2026, we were not involved in any material legal proceedings.
ITEM 1A. RISK FACTORS
Except as set forth below, there were no material changes during the period covered by this Quarterly Report to the risk factors previously disclosed under Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2025 and Item 1A. of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026.
Failure to exercise the Apollo buyout option may increase our payment obligations and limit our operating flexibility.
Between the fifth and 12th anniversary of the closing of our joint venture with Apollo, and at certain intervals thereafter, we have the right, in our discretion, to exercise a call option to redeem Apollo’s interest in the joint venture at a price designed to provide Apollo with its target return, after taking into account prior distributions. If we do not exercise that right at or shortly after the fifth anniversary, we will be subject to increased payment obligations and economic constraints, including minimum yield payments, make-whole contributions and other contingent payment obligations, which increase each year Apollo remains an investor in the joint venture. These obligations could require us to make cash payments even if the underlying assets do not generate sufficient distributable cash flow, which could reduce cash available for other corporate purposes, investments, stockholder redemptions or distributions to our stockholders. Delaying or declining to exercise the buyout option will make a future redemption of Apollo’s interests more expensive. Additionally, if we cannot satisfy the payment obligations, Apollo may be entitled to governing rights with respect to the joint venture’s portfolio. These rights and obligations may limit our ability to manage, refinance, sell or otherwise monetize the underlying assets on the timing or terms we would otherwise prefer. If the joint venture underperforms, these consequences could have a material adverse effect on our liquidity, financial condition, results of operations and ability to make distributions to our stockholders.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
Except as described below, during the three months ended June 30, 2026, we did not sell any equity securities that were not registered under the Securities Act. As described in Note 12 – “Related Party Transactions” to our condensed consolidated financial statements in this Quarterly Report on Form 10-Q, the Advisor is entitled to a management fee payable monthly in cash, shares of common stock, or units of the Operating Partnership, in each case at the Advisor’s election. For the three months ended June 30, 2026, the Advisor elected to receive its management fees in Class I shares and we issued an aggregate of 684,043 unregistered Class I shares to the Advisor in satisfaction of the management fee for April 2026 and May 2026. Additionally, we issued 342,721 unregistered Class I shares to the Advisor in July 2026 in satisfaction of the June 2026 management fee. The shares were issued at the applicable NAV per share at the end of each month for which the fee was earned. Each issuance to the Advisor was made pursuant to Section 4(a)(2) of the Securities Act.
Share Repurchase Plan
We have adopted a share repurchase plan, whereby on a monthly basis, stockholders may request that we repurchase all or any portion of their shares. We may choose to repurchase all, some or none of the shares that have been requested to be repurchased at the end of any particular month, in our discretion, subject to any limitations in the share repurchase plan.
In the event that we determine to repurchase some but not all of the shares submitted for repurchase during any month, shares submitted for repurchase during such month will be repurchased on a pro rata basis subject to the following repurchase priority. First, repurchase requests made upon the death or qualifying disability of a stockholder who is a natural person will be repurchased in full to the extent there are available funds up to a limit of $5.0 million per month. Second, repurchase requests that would result in the account having a balance below $2,500 will be repurchased in full to the extent there are available funds. Thereafter, any remaining funds will be used to repurchase all other shares submitted for repurchase during such month on a pro rata basis.
The total amount of aggregate repurchases of Class T, Class S, Class D, and Class I shares (excluding any early repurchase deduction) is limited. From our inception until our share repurchase plan was amended as described below, the total amount of shares that we could repurchase was limited to 2% of the aggregate NAV per month (measured using the aggregate NAV attributable to stockholders
56
as of the end of the immediately preceding month) and 5% of the aggregate NAV per calendar quarter (measured using the aggregate NAV attributable to stockholders as of the end of the immediately preceding quarter). On May 23, 2024, we amended our share repurchase plan such that, beginning with repurchases during the month of May 2024, we limited share repurchases to 0.33% of NAV per month (measured using the aggregate NAV attributable to stockholders as of the end of the immediately preceding month) and, beginning on July 1, 2024, we limited share repurchases to 1% of NAV per quarter (measured using the aggregate NAV attributable to stockholders as of the end of the immediately preceding quarter). On June 6, 2025, we amended our share repurchase plan so that beginning with repurchases during the month of June 2025, we limit share repurchases to 0.5% of NAV per month (measured using the aggregate NAV attributable to stockholders as of the end of the immediately preceding month). Beginning July 1, 2025, the share repurchase plan has been amended such that we limit share repurchases to 1.5% of NAV per quarter (measured using the aggregate NAV attributable to stockholders as of the end of the immediately preceding quarter).
Effective April 29, 2026, we amended our share repurchase plan, beginning with repurchases submitted during the month of April 2026 such that (i) repurchase requests made upon the death or qualifying disability of a stockholder who is a natural person will be repurchased in full to the extent there are available funds up to a limit of $5.0 million per month; and (ii) repurchase requests for accounts having a balance below $5,000 will be repurchased in full to the extent there are available funds up to a limit of $5.0 million per month. As a result, no repurchase requests will be accepted except in connection with (i) and (ii) above.
Shares are repurchased at a price equal to the transaction price on the applicable repurchase date, subject to any early repurchase deduction. Shares that have not been outstanding for at least one year are repurchased at 95% of the transaction price. Due to the illiquid nature of investments in real estate, we may not have sufficient liquid resources to fund repurchase requests and may elect not to repurchase some or all of the shares submitted for repurchase in a given period. Further, we may make exceptions to, modify or suspend the share repurchase plan. Our board of directors may also determine to terminate our share repurchase plan if required by applicable law or in connection with a transaction in which our stockholders receive liquidity for their shares of our common stock, such as a sale or merger of our company or listing of our shares on a national securities exchange.
If the transaction price for the applicable month is not made available by the tenth business day prior to the last business day of the month (or is changed after such date), then no repurchase requests will be accepted for such month and stockholders who wish to have their shares repurchased the following month must resubmit their repurchase requests.
During the three months ended June 30, 2026, we repurchased shares of our common stock in the following amounts:
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Total Number of |
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Maximum Number of |
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||||
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|
|
|
|
|
|
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Shares Repurchased |
|
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Shares That May Yet |
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||||
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Total Number |
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Average |
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as Part of Publicly |
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Be Repurchased Pursuant to |
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||||
|
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of Shares |
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Price Paid |
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Announced Plans |
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Publicly Announced |
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Month of: |
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Repurchased (1) (2) |
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|
per Share |
|
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or Programs |
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Plans or Programs (2) |
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||||
April 2026(3) |
|
|
2,926,961 |
|
(4) |
$ |
19.79 |
|
|
|
2,926,961 |
|
|
|
— |
|
May 2026(3) |
|
|
250,304 |
|
|
|
19.76 |
|
|
|
250,304 |
|
|
|
— |
|
June 2026(3) |
|
|
114,899 |
|
|
|
19.73 |
|
|
|
114,899 |
|
|
|
— |
|
Total |
|
|
3,292,164 |
|
|
$ |
19.78 |
|
|
|
3,292,164 |
|
|
|
— |
|
__________
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Trading Arrangements
Third Amended and Restated Advisory Agreement
On August 11, 2026, we, the Operating Partnership and our Advisor entered into that certain Third Amended and Restated Advisory Agreement (the “Advisory Agreement”). The Advisory Agreement amends and restates the prior version of the agreement to, among other things, make certain updates requested by a state securities examiner.
Second Amended and Restated Limited Partnership Agreement
On August 11, 2026, we, the Operating Partnership and the Special Limited Partner entered into that certain Second Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”). The Partnership Agreement amends and restates the prior version of the agreement to, among other things, make certain updates requested by a state securities examiner.
58
ITEM 6. EXHIBITS
Exhibit Number |
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Description |
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3.1 |
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Articles of Amendment and Restatement (filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed on March 30, 2018 and incorporated herein by reference) |
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3.2 |
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Articles of Amendment (filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2019 and incorporated herein by reference) |
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3.3 |
|
Second Articles of Amendment (filed as Exhibit 3.3 to the Company’s Quarterly Report on Form 10-Q filed on May 11, 2021 and incorporated herein by reference) |
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3.4 |
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Amended & Restated Bylaws (filed as Exhibit 3.4 to the Company’s Quarterly Report on Form 10-Q filed on August 12, 2022 and incorporated herein by reference) |
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4.1 |
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Distribution Reinvestment Plan (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-11 filed on April 9, 2025 and incorporated herein by reference) |
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10.1* |
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Third Amended and Restated Advisory Agreement, dated August 11, 2026, by and among Starwood Real Estate Income Trust, Inc., Starwood REIT Operating Partnership, L.P. and Starwood REIT Advisors, L.L.C. |
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10.2* |
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Second Amended and Restated Limited Partnership Agreement of Starwood REIT Operating Partnership, L.P., dated August 11, 2026 |
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31.1* |
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2* |
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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|
32.1** |
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Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2** |
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Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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|
|
101 |
|
The following information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in iXBRL (inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations and Comprehensive Loss (iii) Condensed Consolidated Statements of Changes in Equity; and (iv) Condensed Consolidated Statements of Cash Flows |
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|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
** Furnished herewith
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
59
SIGNATURES
Pursuant to the requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
STARWOOD REAL ESTATE INCOME TRUST, INC.
August 12, 2026 |
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/s/ Nora Creedon |
Date |
|
Nora Creedon |
|
|
Chief Executive Officer, President, and Director (Principal Executive Officer) |
|
|
|
August 12, 2026 |
|
/s/ Joseph Nieto |
Date |
|
Joseph Nieto |
|
|
Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |
60