Starwood Real Estate Income Trust, Inc. Notes to Consolidated Financial Statements
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 investments in real estate debt, mortgage notes, 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 December 31, 2024. The following table details the Company’s assets and liabilities measured at fair value on a recurring basis ($ in thousands):
December 31, 2024
December 31, 2023
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets:
Investments in real estate debt
$
— $
— $ 852,461 $ 852,461 $
— $ 201,070 $1,388,280 $1,589,350
Derivatives
— 368,871
— 368,871
— 554,263
— 554,263
Total
$
— $ 368,871 $ 852,461 $ 1,221,332 $
— $ 755,333 $1,388,280 $2,143,613
Liabilities:
Derivatives
$ $
— $ 9,505 $ — $ 9,505 $
— $ — $
9,505 $ 9,505 $
— $ 46,178 $ — $ 46,178 $
— $ 46,178 — $ 46,178
Total
The following table details the Company’s assets measured at fair value on a recurring basis using Level 3 inputs ($ in thousands): Investments in Real Estate Debt Balance as of December 31, 2023 $ 1,388,280 Dispositions (438,092) Included in net loss Foreign currency exchange (93,260) Realized losses on dispositions (4,418) Unrealized loss (49) Balance as of December 31, 2024 $ 852,461 The following table contains the quantitative inputs and assumptions used for items categorized in Level 3 of the fair value hierarchy ($ in thousands): December 31, 2024
Impact to Valuation from an Increase in Input
Fair Value
Valuation Technique Unobservable Inputs Weighted Average
Investments in real estate debt
Discounted Cash Flow
$
852,461
Discount Rate
9.5%
Decrease
December 31, 2023
Impact to Valuation from an Increase in Input
Unobservable Inputs
Fair Value
Valuation Technique Discounted Cash Flow
Weighted Average
Investments in real estate debt
$ 1,388,280
Discount Rate
9.7%
Decrease
Valuation of assets measured at fair value on a nonrecurring basis Certain of the Company’s assets are not 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.
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