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Starwood Property Trust Reports Results for the Quarter Ended June 30, 2019

- Quarterly GAAP Earnings of $0.45 and Core Earnings of $0.52 per Diluted Common Share -

- Deploys $2.1 Billion of Capital, Including $1.1 Billion in Commercial Lending -

- Declares Dividend of $0.48 per share for the Third Quarter of 2019 -

- Subsequent to Quarter End, Executes $2.1 Billion of Capital Transactions, Including $1.1 Billion CRE CLO, $500 Million Infrastructure Financing Facility, $400 Million Term Loan B and $100 Million Revolver -

GREENWICH, Conn., Aug. 7, 2019 /PRNewswire/ -- Starwood Property Trust, Inc. (STWD) today announced operating results for the fiscal quarter ended June 30, 2019.  The Company's second quarter 2019 GAAP net income was $127.0 million, or $0.45 per diluted share, and Core Earnings (a non-GAAP financial measure) was $153.9 million, or $0.52 per diluted share.

"Our strong second quarter results included positive contributions from across our business segments, led by commercial lending with $1.1 billion of capital deployed. The performance of our Property Segment continues to strengthen as we realized over 6% rent increases across our affordable multifamily portfolio, well above our underwriting. We are also pleased with the growth of our non-agency residential lending business. We remain disciplined and focused and are well positioned to continue to deploy capital across our various cylinders with a robust pipeline of global opportunities," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"This year has been the year of balance sheet restructuring.  Subsequent to quarter end, we diversified and strengthened our liability structure, executing over $2.1 billion of capital transactions and dramatically reducing our reliance on on-balance sheet bank financing. We priced the largest post-crisis CRE CLO, which we expect to close in mid-August and will provide us with a highly flexible structure and competitive expected cost of funds. We also closed a $400 million Term Loan B facility which was attractively priced, unprecedented in structure and significantly grew our unencumbered asset base. Finally, we successfully increased financing capacity for our Infrastructure Lending platform.  With this meaningful expansion of our financial capacity, we have further improved our competitive positioning as we seek to continue creating shareholder value over the long term."

Dividend

On August 7, 2019, the Company's Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending September 30, 2019. The dividend is payable on October 15, 2019 to common stockholders of record as of September 30, 2019.

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.

Conference Call and Webcast Information 

The Company will host a live webcast and conference call on Wednesday, August 7, 2019, 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 and download and install any necessary audio software.  The webcast is available at www.starwoodpropertytrust.com in the investor relations section of the website.

To Participate via Telephone:
Dial in at least five 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:  13692433
The playback can be accessed through August 14, 2019.

About Starwood Property Trust, Inc.

Starwood Property Trust (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 $55 billion of capital since inception and manages a portfolio in excess of $16 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, completion of pending investments and financings, continued ability to acquire additional investments, competition within the finance and real estate industries, economic conditions, availability of financing and other risks detailed under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as well as other risks and uncertainties set forth from time to time in the Company's reports filed with the SEC.

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 June 30, 2019
(Amounts in thousands)




Commercial and

















Residential


Infrastructure




Investing











Lending


Lending


Property


and Servicing






Securitization





Segment


Segment


Segment


Segment


Corporate


Subtotal


VIEs


Total

Revenues:

























Interest income from loans


$

163,071


$

25,291


$


$

3,104


$


$

191,466


$


$

191,466

Interest income from investment securities



24,367



868





31,163





56,398



(33,853)



22,545

Servicing fees



90







15,880





15,970



(6,962)



9,008

Rental income







72,326



14,971





87,297





87,297

Other revenues



252



7



88



515



6



868



(3)



865

Total revenues 



187,780



26,166



72,414



65,633



6



351,999



(40,818)



311,181

Costs and expenses:

























Management fees



353







18



22,107



22,478



45



22,523

Interest expense



58,564



16,258



19,132



8,515



27,821



130,290



(164)



130,126

General and administrative



6,754



4,830



1,706



20,177



4,019



37,486



92



37,578

Acquisition and investment pursuit costs



160



14





(100)





74





74

Costs of rental operations



741





23,125



6,789





30,655





30,655

Depreciation and amortization



285





23,076



5,191





28,552





28,552

Loan loss provision, net



2,096



422









2,518





2,518

Other expense



76





1,173



194





1,443





1,443

Total costs and expenses 



69,029



21,524



68,212



40,784



53,947



253,496



(27)



253,469

Other income (loss):

























Change in net assets related to consolidated VIEs















55,158



55,158

Change in fair value of servicing rights









(1,159)





(1,159)



243



(916)

Change in fair value of investment securities, net



(948)







15,815





14,867



(14,200)



667

Change in fair value of mortgage loans held-for-sale, net



5,363







16,528





21,891





21,891

Earnings from unconsolidated entities



5,492





1,044



2,754





9,290



(473)



8,817

Gain on sale of investments and other assets, net



239



2,276









2,515





2,515

Gain (loss) on derivative financial instruments, net



5,592



(2,833)



(11,147)



(6,953)



15,309



(32)





(32)

Foreign currency (loss) gain, net



(6,927)



(83)



(8)



1





(7,017)





(7,017)

Loss on extinguishment of debt





(2,816)









(2,816)





(2,816)

Total other income (loss)



8,811



(3,456)



(10,111)



26,986



15,309



37,539



40,728



78,267

Income (loss) before income taxes 



127,562



1,186



(5,909)



51,835



(38,632)



136,042



(63)



135,979

Income tax (provision) benefit



(1,832)



186





(1,887)





(3,533)





(3,533)

Net income (loss) 



125,730



1,372



(5,909)



49,948



(38,632)



132,509



(63)



132,446

Net income attributable to non-controlling interests



(21)





(5,355)



(117)





(5,493)



63



(5,430)

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


$

125,709


$

1,372


$

(11,264)


$

49,831


$

(38,632)


$

127,016


$


$

127,016

 

Definition of Core Earnings

Core 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, Core 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 Core Earnings
For the three months ended June 30, 2019
(Amounts in thousands except per share data)




Commercial and













Residential


Infrastructure




Investing







Lending


Lending


Property


and Servicing







Segment


Segment


Segment


Segment


Corporate


Total

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


$

125,709


$

1,372


$

(11,264)


$

49,831


$

(38,632)


$

127,016

Add / (Deduct):



















Non-controlling interests attributable to Woodstar II Class A Units







5,355







5,355

Non-cash equity compensation expense



911



563



77



1,702



3,811



7,064

Acquisition and investment pursuit costs



(24)





(88)



(305)



(356)



(773)

Depreciation and amortization



285





23,416



4,822





28,523

Loan loss provision, net



2,096



422









2,518

Interest income adjustment for securities



(194)







3,381





3,187

Extinguishment of debt, net











(246)



(246)

Other non-cash items







(452)



371



150



69

Reversal of GAAP unrealized (gains) / losses on:



















Loans held-for-sale



(5,363)







(16,528)





(21,891)

Securities



948







(15,815)





(14,867)

Derivatives



(5,519)



2,833



12,717



6,927



(15,858)



1,100

Foreign currency



6,927



83



8



(1)





7,017

Earnings from unconsolidated entities



(5,492)





(1,044)



(2,754)





(9,290)

Recognition of Core realized gains / (losses) on:



















Loans held-for-sale



(550)



(755)





20,155





18,850

Securities



597







(423)





174

Derivatives



736



(2,228)



1,484



(7,614)





(7,622)

Foreign currency



(1,205)



64



(8)



1





(1,148)

Earnings from unconsolidated entities



4,682







4,137





8,819

Core Earnings (Loss)


$

124,544


$

2,354


$

30,201


$

47,887


$

(51,131)


$

153,855

Core Earnings (Loss) per Weighted Average Diluted Share


$

0.42


$

0.01


$

0.10


$

0.16


$

(0.17)


$

0.52

 

 


Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the six months ended June 30, 2019
(Amounts in thousands)




Commercial and

















Residential


Infrastructure




Investing











Lending


Lending


Property


and Servicing






Securitization





Segment


Segment


Segment


Segment


Corporate


Subtotal


VIEs


Total

Revenues:

























Interest income from loans


$

317,666


$

52,206


$


$

5,010


$


$

374,882


$


$

374,882

Interest income from investment securities



44,275



1,753





55,456





101,484



(61,307)



40,177

Servicing fees



213







43,123





43,336



(9,895)



33,441

Rental income







142,847



28,283





171,130





171,130

Other revenues



456



693



166



711



26



2,052



(21)



2,031

Total revenues 



362,610



54,652



143,013



132,583



26



692,884



(71,223)



621,661

Costs and expenses:

























Management fees



764







36



45,095



45,895



94



45,989

Interest expense



120,168



34,835



38,122



16,261



55,736



265,122



(324)



264,798

General and administrative



13,522



9,309



3,224



39,028



7,245



72,328



180



72,508

Acquisition and investment pursuit costs



409



30





(23)





416





416

Costs of rental operations



760





46,062



13,484





60,306





60,306

Depreciation and amortization



356





46,972



10,478





57,806





57,806

Loan loss provision, net



2,085



1,196









3,281





3,281

Other expense



153





1,307



194





1,654





1,654

Total costs and expenses 



138,217



45,370



135,687



79,458



108,076



506,808



(50)



506,758

Other income (loss):

























Change in net assets related to consolidated VIEs















102,994



102,994

Change in fair value of servicing rights









(1,674)





(1,674)



(9)



(1,683)

Change in fair value of investment securities, net



(2,642)







33,955





31,313



(30,584)



729

Change in fair value of mortgage loans held-for-sale, net



6,749







26,408





33,157





33,157

Earnings (loss) from unconsolidated entities



6,069





(42,761)



3,348





(33,344)



(1,039)



(34,383)

Gain on sale of investments and other assets, net



2,994



3,066





940





7,000





7,000

(Loss) gain on derivative financial instruments, net



(3,705)



(3,228)



(9,857)



(10,385)



24,936



(2,239)





(2,239)

Foreign currency (loss) gain, net



(1,688)



217



1







(1,470)





(1,470)

(Loss) gain on extinguishment of debt





(6,120)







6



(6,114)





(6,114)

Other loss, net











(73)



(73)





(73)

Total other income (loss)



7,777



(6,065)



(52,617)



52,592



24,869



26,556



71,362



97,918

Income (loss) before income taxes 



232,170



3,217



(45,291)



105,717



(83,181)



212,632



189



212,821

Income tax (provision) benefit



(1,584)



271



(258)



(2,296)





(3,867)





(3,867)

Net income (loss) 



230,586



3,488



(45,549)



103,421



(83,181)



208,765



189



208,954

Net (income) loss attributable to non-controlling interests



(392)





(11,072)



98





(11,366)



(189)



(11,555)

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


$

230,194


$

3,488


$

(56,621)


$

103,519


$

(83,181)


$

197,399


$


$

197,399

 

 

Reconciliation of Net Income to Core Earnings
For the six months ended June 30, 2019
(Amounts in thousands except per share data)




Commercial and













Residential


Infrastructure




Investing







Lending


Lending


Property


and Servicing







Segment


Segment


Segment


Segment


Corporate


Total

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


$

230,194


$

3,488


$

(56,621)


$

103,519


$

(83,181)


$

197,399

Add / (Deduct):



















Non-controlling interests attributable to Woodstar II Class A Units







11,072







11,072

Non-cash equity compensation expense



1,617



1,114



146



3,052



7,498



13,427

Management incentive fee











173



173

Acquisition and investment pursuit costs



(62)



2



(177)



(305)



(356)



(898)

Depreciation and amortization



356





47,627



9,737





57,720

Loan loss provision, net



2,085



1,196









3,281

Interest income adjustment for securities



(391)







9,353





8,962

Extinguishment of debt, net











(1,457)



(1,457)

Other non-cash items







(886)



508



318



(60)

Reversal of GAAP unrealized (gains) / losses on:


















Loans held-for-sale



(6,749)







(26,408)





(33,157)

Securities



2,642







(33,955)





(31,313)

Derivatives



3,986



3,228



13,033



10,251



(26,002)



4,496

Foreign currency



1,688



(217)



(1)







1,470

(Earnings) loss from unconsolidated entities



(6,069)





42,761



(3,348)





33,344

Recognition of Core realized gains / (losses) on:


















Loans held-for-sale



(1,203)



(755)





27,585





25,627

Securities



597







7,109





7,706

Derivatives



823



(1,460)



1,851



(9,239)





(8,025)

Foreign currency



(814)



(827)



1



9





(1,631)

Earnings (loss) from unconsolidated entities



4,780





(68,905)



12,870





(51,255)

Sales of properties









(76)





(76)

Core Earnings (Loss)


$

233,480


$

5,769


$

(10,099)


$

110,662


$

(103,007)


$

236,805

Core Earnings (Loss) per Weighted Average Diluted Share


$

0.80


$

0.02


$

(0.04)


$

0.38


$

(0.35)


$

0.81

 

 

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of June 30, 2019
(Amounts in thousands)




Commercial and

















Residential


Infrastructure




Investing











Lending


Lending


Property


and Servicing






Securitization





Segment


Segment


Segment


Segment


Corporate


Subtotal


VIEs


Total

Assets:

























Cash and cash equivalents


$

21,709


$

126


$

30,493


$

27,082


$

253,779


$

333,189


$

1,099


$

334,288

Restricted cash



34,070



111,076



21,598



15,166





181,910





181,910

Loans held-for-investment, net



7,406,274



1,356,511





1,431





8,764,216





8,764,216

Loans held-for-sale



1,156,778



214,501





215,620





1,586,899





1,586,899

Investment securities



957,783



55,332





1,015,379





2,028,494



(1,178,922)



849,572

Properties, net



27,150





2,476,175



268,635





2,771,960





2,771,960

Intangible assets







80,840



72,720





153,560



(24,083)



129,477

Investment in unconsolidated entities



36,336





71,601



34,536





142,473



(22,597)



119,876

Goodwill





119,409





140,437





259,846





259,846

Derivative assets



21,604



357



17,857



44



13,814



53,676





53,676

Accrued interest receivable



42,644



5,512



350



366



13,277



62,149



(769)



61,380

Other assets



15,048



4,645



71,166



66,564



9,222



166,645



10



166,655

VIE assets, at fair value















57,667,606



57,667,606

Total Assets


$

9,719,396


$

1,867,469


$

2,770,080


$

1,857,980


$

290,092


$

16,505,017


$

56,442,344


$

72,947,361

Liabilities and Equity

























Liabilities:

























Accounts payable, accrued expenses and other liabilities


$

33,625


$

4,099


$

61,947


$

68,021


$

53,666


$

221,358


$

76


$

221,434

Related-party payable









11



21,133



21,144





21,144

Dividends payable











136,424



136,424





136,424

Derivative liabilities



5,966



435





2,490





8,891





8,891

Secured financing agreements, net



5,177,123



1,237,526



1,882,956



702,781



298,451



9,298,837



(13,950)



9,284,887

Unsecured senior notes, net











1,924,711



1,924,711





1,924,711

VIE liabilities, at fair value















56,446,619



56,446,619

Total Liabilities



5,216,714



1,242,060



1,944,903



773,303



2,434,385



11,611,365



56,432,745



68,044,110

Equity:

























Starwood Property Trust, Inc. Stockholders' Equity:

























Common stock











2,864



2,864





2,864

Additional paid-in capital



1,203,757



624,494



625,962



49,768



2,599,790



5,103,771





5,103,771

Treasury stock











(104,194)



(104,194)





(104,194)

Accumulated other comprehensive income (loss)



53,050





4,139



(65)





57,124





57,124

Retained earnings (accumulated deficit)



3,245,875



915



(43,051)



1,017,156



(4,642,753)



(421,858)





(421,858)

Total Starwood Property Trust, Inc. Stockholders' Equity



4,502,682



625,409



587,050



1,066,859



(2,144,293)



4,637,707





4,637,707

Non-controlling interests in consolidated subsidiaries







238,127



17,818





255,945



9,599



265,544

Total Equity



4,502,682



625,409



825,177



1,084,677



(2,144,293)



4,893,652



9,599



4,903,251

Total Liabilities and Equity


$

9,719,396


$

1,867,469


$

2,770,080


$

1,857,980


$

290,092


$

16,505,017


$

56,442,344


$

72,947,361

 

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