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Starwood Property Trust Reports Results for Quarter Ended March 31, 2022

·14 min read

– Quarterly GAAP Earnings of $1.02 and Distributable Earnings (DE) of $0.76 per Diluted Share –

$4.4 Billion of Investment Activity, Including $1.9 Billion in Commercial Lending –

– Multifamily Becomes the Largest Property Type at 32% of CRE Loan Portfolio –

– Generated Gain of $87 Million GAAP and $85 Million DE on Sale of Industrial Asset –

– S&P Corporate Credit Rating Upgraded to BB/Outlook Stable –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., May 4, 2022 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2022. The Company's first quarter 2022 GAAP net income was $324.6 million, or $1.02 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $240.0 million, or $0.76 per diluted share. GAAP net income reflects $173.5 million, or $0.55 per diluted share, of unrealized increases in fair value of the Woodstar Fund's affordable housing investments, net of non-controlling interests, and an $86.6 million, or $0.27 per diluted share, gain on sale of a distribution facility ($84.7 million, or $0.27 per share, in Distributable Earnings). The fair value of the Woodstar Fund's investments is an estimate that is subject to future increases or decreases as property values are affected by, among other things, the availability of capital, occupancy rates, rental rates and interest and inflation rates.

"This quarter once again highlighted the strength of the Starwood platform and our ability to create value for our shareholders well beyond our core lending business, differentiating us from our peers. We experienced another increase in book value driven by a fair market value increase of $218 million in our affordable housing fund. Rising median income levels in Florida, which govern rents for this portfolio, are expected to drive further increases in net operating income in the future. In addition, we monetized a second industrial asset that we foreclosed on less than three years ago, taking back an $18 million loan, repositioning and re-leasing the property, and then selling it for $115 million," stated Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"We have taken advantage of market opportunities across cylinders, deploying over $18 billion of capital during the last 12 months. Following our two most productive quarters in our 13-year history, in which 47% of our commercial lending was on multifamily assets, our multifamily loan portfolio increased to $4.7 billion, more than 4x the balance entering COVID. Our low leverage, fortress balance sheet combined with our strong access to capital positions us to drive continued growth across our platform," added Jeffrey DiModica, President of Starwood Property Trust.

Supplemental Schedules
The Company has published supplemental earnings schedules on its website in order to provide additional disclosure and financial information for the benefit of the Company's stakeholders. Specifically, these materials can be found on the Company's website in the Investor Relations section under "Quarterly Results" at www.starwoodpropertytrust.com.

Webcast and Conference Call Information
The Company will host a live webcast and conference call on Wednesday, May 4, 2022, at 10:00 a.m. Eastern Time. To listen to a live broadcast, access the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. The webcast is available at www.starwoodpropertytrust.com in the Investor Relations section of the website. The Company encourages use of the webcast due to potential extended wait times to access the conference call via dial-in.

To Participate via Telephone Conference Call:
Dial in at least 15 minutes prior to start time.
Domestic: 1-877-407-9039
International: 1-201-689-8470

Conference Call Playback:
Domestic: 1-844-512-2921
International: 1-412-317-6671
Passcode: 13728386
The playback can be accessed through May 11, 2022.

About Starwood Property Trust, Inc.

Starwood Property Trust (NYSE: STWD) is a leading diversified finance company with a core focus on the real estate and infrastructure sectors. An affiliate of global private investment firm Starwood Capital Group, the Company has successfully deployed over $87 billion of capital since inception and manages a portfolio of over $25 billion across debt and equity investments. Starwood Property Trust's investment objective is to generate attractive and stable returns for shareholders, primarily through dividends, by leveraging a premiere global organization to identify and execute on the best risk adjusted returning investments across its target assets. Additional information can be found at www.starwoodpropertytrust.com.

Forward-Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words "believe," "expect," "anticipate" and other similar expressions. Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, the severity and duration of economic disruption caused by the COVID-19 global pandemic (including the emergence of new strains of the virus), completion of pending investments and financings, continued ability to acquire additional investments, competition within the finance and real estate industries, availability of financing and other risks detailed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as well as other risks and uncertainties set forth from time to time in the Company's reports filed with the SEC, including its Quarterly Report on Form 10-Q for the three months ended March 31, 2022.

In light of these risks and uncertainties, there can be no assurances that the results referred to in the forward-looking statements contained herein will in fact occur. Except to the extent required by applicable law or regulation, we undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, changes to future results over time or otherwise.

Additional information can be found on the Company's website at www.starwoodpropertytrust.com.

Contact:
Zachary Tanenbaum
Starwood Property Trust
Phone: 203-422-7788
Email: ztanenbaum@starwood.com

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the three months ended March 31, 2022

(Amounts in thousands)




Commercial and

Residential

Lending

Segment


Infrastructure

Lending

Segment


Property

Segment


Investing

and Servicing

Segment


Corporate


Subtotal


Securitization

VIEs


Total

Revenues:
















Interest income from loans

$ 202,470


$ 26,983


$ —


$ 4,166


$ —


$ 233,619


$ —


$ 233,619

Interest income from investment securities

20,836


747



27,389



48,972


(34,989)


13,983

Servicing fees

136




14,071



14,207


(4,215)


9,992

Rental income

1,686



22,365


7,529



31,580



31,580

Other revenues

52


68


50


4,654



4,824


(6)


4,818

Total revenues

225,180


27,798


22,415


57,809



333,202


(39,210)


293,992

Costs and expenses:
















Management fees

277





55,018


55,295



55,295

Interest expense

68,602


11,930


6,081


6,210


33,842


126,665


(214)


126,451

General and administrative

11,602


3,511


1,056


23,443


4,628


44,240


81


44,321

Acquisition and investment pursuit costs

499


1


5


(83)



422



422

Costs of rental operations

519



5,001


3,770



9,290



9,290

Depreciation and amortization

294


105


8,219


3,029



11,647



11,647

Credit loss reversal, net

(3,299)


(359)





(3,658)



(3,658)

Other expense



55




55



55

Total costs and expenses

78,494


15,188


20,417


36,369


93,488


243,956


(133)


243,823

Other income (loss):
















Change in net assets related to consolidated VIEs







26,749


26,749

Change in fair value of servicing rights




(217)



(217)


1,301


1,084

Change in fair value of investment securities, net

(2,105)




(9,291)



(11,396)


11,041


(355)

Change in fair value of mortgage loans, net

(116,228)




(9,555)



(125,783)



(125,783)

Income from affordable housing fund investments



234,041




234,041



234,041

(Loss) earnings from unconsolidated entities

(1,340)


345



151



(844)


(66)


(910)

Gain on sale of investments and other assets, net

86,610




11,858



98,468



98,468

Gain (loss) on derivative financial instruments, net

118,395


632


17,546


27,863


(37,168)


127,268



127,268

Foreign currency (loss) gain, net

(27,254)


(28)


1




(27,281)



(27,281)

Loss on extinguishment of debt

(206)


(469)



(148)



(823)



(823)

Other (loss) income, net

(788)






(788)


25


(763)

Total other income (loss)

57,084


480


251,588


20,661


(37,168)


292,645


39,050


331,695

Income (loss) before income taxes

203,770


13,090


253,586


42,101


(130,656)


381,891


(27)


381,864

Income tax benefit (provision)

5,140


4



(2,694)



2,450



2,450

Net income (loss)

208,910


13,094


253,586


39,407


(130,656)


384,341


(27)


384,314

Net income attributable to non-controlling interests

(3)



(52,411)


(7,328)



(59,742)


27


(59,715)

Net income (loss) attributable to Starwood Property
Trust, Inc.

$ 208,907


$ 13,094


$ 201,175


$ 32,079


$ (130,656)


$ 324,599


$ —


$ 324,599

Definition of Distributable Earnings

Distributable Earnings, a non-GAAP financial measure, is used to compute the Company's incentive fees to its external manager and is an appropriate supplemental disclosure for a mortgage REIT. For the Company's purposes, Distributable Earnings is defined as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee due to the Company's external manager, acquisition costs from successful acquisitions, depreciation and amortization of real estate and associated intangibles and any unrealized gains, losses or other non-cash items recorded in net income for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income and, to the extent deducted from net income (loss), distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein. The amount is adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash adjustments as determined by the Company's external manager and approved by a majority of the Company's independent directors.

Reconciliation of Net Income to Distributable Earnings

For the three months ended March 31, 2022

(Amounts in thousands except per share data)



Commercial and

Residential

Lending

Segment


Infrastructure

Lending

Segment


Property

Segment


Investing

and Servicing

Segment


Corporate


Total

Net income (loss) attributable to Starwood Property Trust, Inc.

$ 208,907


$ 13,094


$ 201,175


$ 32,079


$ (130,656)


$ 324,599

Add / (Deduct):












Non-controlling interests attributable to Woodstar II Class A Units



4,691




4,691

Non-controlling interests attributable to unrealized gains/losses



44,902


2,556



47,458

Non-cash equity compensation expense

2,417


297


58


1,275


6,046


10,093

Management incentive fee





28,955


28,955

Acquisition and investment pursuit costs

(298)



(78)


(169)



(545)

Depreciation and amortization

234


95


8,292


3,152



11,773

Interest income adjustment for securities

2,490




(1,708)



782

Extinguishment of debt, net





(246)


(246)

Other non-cash items

3



456


122



581

Reversal of GAAP unrealized (gains) / losses on:












Loans

116,228




9,555



125,783

Credit loss reversal, net

(3,299)


(359)





(3,658)

Securities

2,105




9,291



11,396

Woodstar Fund investments



(234,041)




(234,041)

Derivatives

(121,172)


(685)


(19,170)


(29,089)


40,773


(129,343)

Foreign currency

27,254


28


(1)




27,281

(Earnings) loss from unconsolidated entities

1,340


(345)



(151)



844

Sales of properties

(86,610)




(11,858)



(98,468)

Recognition of Distributable realized gains /

(losses) on:












Loans

(36,208)




(10,561)



(46,769)

Securities

(2,768)




26



(2,742)

Woodstar Fund investments



15,659




15,659

Derivatives

36,893



(35)


24,639



61,497

Foreign currency

(178)


112


1




(65)

Earnings (loss) from unconsolidated entities

(1,239)


345



470



(424)

Sales of properties

84,738




177



84,915

Distributable Earnings (Loss)

$ 230,837


$ 12,582


$ 21,909


$ 29,806


$ (55,128)


$ 240,006

Distributable Earnings (Loss) per Weighted Average Diluted Share

$ 0.73


$ 0.04


$ 0.07


$ 0.09


$ (0.17)


$ 0.76

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of March 31, 2022

(Amounts in thousands)



Commercial and

Residential

Lending

Segment


Infrastructure

Lending

Segment


Property

Segment


Investing

and Servicing

Segment


Corporate


Subtotal


Securitization

VIEs


Total

Assets:
















Cash and cash equivalents

$ 58,377


$ 38,762


$ 20,077


$ 27,836


$ 118,573


$ 263,625


$ 584


$ 264,209

Restricted cash

13,142


27,401


950


26,371


41,701


109,565



109,565

Loans held-for-investment, net

14,107,316


2,136,118



9,823



16,253,257



16,253,257

Loans held-for-sale

2,299,153




385,359



2,684,512



2,684,512

Investment securities

1,207,667


49,198



1,155,469



2,412,334


(1,543,145)


869,189

Properties, net

104,901



880,392


137,064



1,122,357



1,122,357

Investments of consolidated affordable housing fund



1,264,160




1,264,160



1,264,160

Investments in unconsolidated entities

43,349


27,061



33,878



104,288


(15,038)


89,250

Goodwill


119,409



140,437



259,846



259,846

Intangible assets



33,292


69,674



102,966


(40,818)


62,148

Derivative assets

58,904


161


486


1,318



60,869



60,869

Accrued interest receivable

114,367


6,274



1,745


1,556


123,942


(141)


123,801

Other assets

135,095


10,229


59,100


33,857


23,146


261,427


(235)


261,192

VIE assets, at fair value







57,763,543


57,763,543

Total Assets

$ 18,142,271


$ 2,414,613


$ 2,258,457


$ 2,022,831


$ 184,976


$ 25,023,148


$ 56,164,750


$ 81,187,898

Liabilities and Equity
















Liabilities:
















Accounts payable, accrued expenses and other liabilities

$ 102,124


$ 15,347


$ 11,503


$ 32,297


$ 34,834


$ 196,105


$ 40


$ 196,145

Related-party payable





56,615


56,615



56,615

Dividends payable





148,743


148,743



148,743

Derivative liabilities

10,990


225



145


27,349


38,709



38,709

Secured financing agreements, net

8,294,408


924,242


787,977


774,460


771,944


11,553,031


(21,460)


11,531,571

Collateralized loan obligations and single asset securitization, net

2,985,637


812,258





3,797,895



3,797,895

Unsecured senior notes, net





2,322,630


2,322,630



2,322,630

VIE liabilities, at fair value







56,185,937


56,185,937

Total Liabilities

11,393,159


1,752,072


799,480


806,902


3,362,115


18,113,728


56,164,517


74,278,245

Temporary Equity: Redeemable non-controlling interests



261,685




261,685



261,685

Permanent Equity:
















Starwood Property Trust, Inc. Stockholders' Equity:
















Common stock





3,144


3,144



3,144

Additional paid-in capital

1,931,043


606,871


(373,851)


(388,580)


3,933,544


5,709,027



5,709,027

Treasury stock





(138,022)


(138,022)



(138,022)

Accumulated other comprehensive income

35,669






35,669



35,669

Retained earnings (accumulated deficit)

4,782,282


55,670


1,362,509


1,445,221


(6,975,805)


669,877



669,877

Total Starwood Property Trust, Inc. Stockholders' Equity

6,748,994


662,541


988,658


1,056,641


(3,177,139)


6,279,695



6,279,695

Non-controlling interests in consolidated subsidiaries

118



208,634


159,288



368,040


233


368,273

Total Permanent Equity

6,749,112


662,541


1,197,292


1,215,929


(3,177,139)


6,647,735


233


6,647,968

Total Liabilities and Equity

$ 18,142,271


$ 2,414,613


$ 2,258,457


$ 2,022,831


$ 184,976


$ 25,023,148


$ 56,164,750


$ 81,187,898

Cision
Cision

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SOURCE Starwood Property Trust, Inc.