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

-- Quarterly GAAP Earnings of $0.49 and Core Earnings of $0.52 per Diluted Common Share --

-- Deploys $2.5 Billion of Capital, Including $1.2 Billion in Commercial Lending --

-- Executes $1.1 Billion CRE CLO --

-- Enhances Capital Structure with $400 Million Term Loan B and $100 Million Revolver --

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

GREENWICH, Conn., Nov. 8, 2019 /PRNewswire/ -- Starwood Property Trust, Inc. (STWD) today announced operating results for the fiscal quarter ended September 30, 2019.  The Company's third quarter 2019 GAAP net income was $140.4 million, or $0.49 per diluted share, and Core Earnings (a non-GAAP financial measure) was $152.6 million, or $0.52 per diluted share.

"We had another strong quarter, with over $2.5 billion of capital deployed across all our segments, including $1.2 billion in Commercial Lending.  Notably, our non-agency residential lending business continued to expand with purchases of over $600 million of loans and the completion of our fourth and largest securitization for $546 million. We also continue to experience growing, double-digit yields in our Property segment.  We expect that these yields will increase over 200 basis points as a result of the $180 million partial cash out refinance of our medical office portfolio and first multifamily portfolio, which have appreciated meaningfully since acquisition.  Our pipeline remains robust, and we expect to invest this capital accretively as we continue to utilize our global organization to find the best opportunities across our cylinders," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

Added Jeffrey DiModica, President of Starwood Property Trust, "During the quarter, we continued to reduce our reliance on warehouse financing, completing our first $1.1 billion CRE CLO.  The transaction was structurally superior, reducing balance sheet exposure, and with a higher advance rate and lower cost of funds than the repurchase facilities it replaced.  We also executed on a $400 million term loan, which allowed us to increase our unencumbered asset base, providing us with additional capacity to issue attractive corporate debt in the future.  We ended the quarter with a record high of over $8.0 billion of available capacity across our financing facilities, giving us tremendous flexibility as investment opportunities arise."

Dividend

On November 8, 2019, the Company's Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending December 31, 2019. The dividend is payable on January 15, 2020 to common stockholders of record as of December 31, 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 Friday, November 8, 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:  13695217
The playback can be accessed through November 15, 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 $57 billion of capital since inception and manages a portfolio 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 September 30, 2019
(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


$

145,290


$

22,763


$


$

3,977


$


$

172,030


$


$

172,030

Interest income from investment securities



18,163



810





32,556





51,529



(34,853)



16,676

Servicing fees



97







18,243





18,340



(4,007)



14,333

Rental income







72,251



12,403





84,654





84,654

Other revenues



258



39



125



218





640



(3)



637

Total revenues 



163,808



23,612



72,376



67,397





327,193



(38,863)



288,330

Costs and expenses:

























Management fees



363







18



29,829



30,210



28



30,238

Interest expense



51,844



14,422



19,020



8,891



29,142



123,319



(163)



123,156

General and administrative



7,104



4,315



2,170



22,915



3,184



39,688



78



39,766

Acquisition and investment pursuit costs



506



21





(364)





163





163

Costs of rental operations



765





24,784



6,019





31,568





31,568

Depreciation and amortization



339



15



23,106



4,809





28,269





28,269

Loan loss provision, net



(39)











(39)





(39)

Other expense



77





46







123





123

Total costs and expenses 



60,959



18,773



69,126



42,288



62,155



253,301



(57)



253,244

Other income (loss):

























Change in net assets related to consolidated VIEs















61,767



61,767

Change in fair value of servicing rights









57





57



(682)



(625)

Change in fair value of investment securities, net



(303)







22,476





22,173



(21,907)



266

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



10,088







22,433





32,521





32,521

Earnings from unconsolidated entities



2,507





223



253





2,983



(236)



2,747

Gain (loss) on sale of investments and other assets, net



482



(25)





20,700





21,157





21,157

Gain (loss) on derivative financial instruments, net



15,729



(109)



5,900



(6,376)



6,789



21,933





21,933

Foreign currency loss, net



(15,337)



(319)



(8)







(15,664)





(15,664)

Loss on extinguishment of debt



(857)



(2,101)





(194)



(1,472)



(4,624)





(4,624)

Other loss, net





(50)









(50)





(50)

Total other income (loss)



12,309



(2,604)



6,115



59,349



5,317



80,486



38,942



119,428

Income (loss) before income taxes 



115,158



2,235



9,365



84,458



(56,838)



154,378



136



154,514

Income tax (provision) benefit



(3,194)



475





(1,794)





(4,513)





(4,513)

Net income (loss) 



111,964



2,710



9,365



82,664



(56,838)



149,865



136



150,001

Net income attributable to non-controlling interests







(5,250)



(4,219)





(9,469)



(136)



(9,605)

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


$

111,964


$

2,710


$

4,115


$

78,445


$

(56,838)


$

140,396


$


$

140,396

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 September 30, 2019
(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.


$

111,964


$

2,710


$

4,115


$

78,445


$

(56,838)


$

140,396

Add / (Deduct):



















Non-controlling interests attributable to Woodstar II Class A Units







5,250







5,250

Non-cash equity compensation expense



1,140



577



83



1,765



9,411



12,976

Management incentive fee











1,875



1,875

Acquisition and investment pursuit costs



6





(89)



(146)





(229)

Depreciation and amortization



339



15



23,440



4,444





28,238

Loan loss provision, net



(39)











(39)

Interest income adjustment for securities



(194)







5,345





5,151

Extinguishment of debt, net











(247)



(247)

Other non-cash items







321



191



152



664

Reversal of GAAP unrealized (gains) / losses on:



















Loans held-for-sale



(10,088)







(22,433)





(32,521)

Securities



303







(22,476)





(22,173)

Derivatives



(15,749)



109



(4,576)



6,590



(6,913)



(20,539)

Foreign currency



15,337



319



8







15,664

Earnings from unconsolidated entities



(2,507)





(223)



(253)





(2,983)

Recognition of Core realized gains / (losses) on:



















Loans held-for-sale



8,383



(230)





22,134





30,287

Securities



373







4,593





4,966

Derivatives



977



64



406



(7,875)





(6,428)

Foreign currency



(3,911)



(171)



(8)







(4,090)

Earnings from unconsolidated entities



2,298







1,324





3,622

Sales of properties









(7,221)





(7,221)

Core Earnings (Loss)


$

108,632


$

3,393


$

28,727


$

64,427


$

(52,560)


$

152,619

Core Earnings (Loss) per Weighted Average Diluted Share


$

0.37


$

0.01


$

0.10


$

0.22


$

(0.18)


$

0.52

 


Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the nine months ended September 30, 2019
(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


$

462,956


$

74,969


$


$

8,987


$


$

546,912


$


$

546,912

Interest income from investment securities



62,438



2,563





88,012





153,013



(96,160)



56,853

Servicing fees



310







61,366





61,676



(13,902)



47,774

Rental income







215,098



40,686





255,784





255,784

Other revenues



714



732



291



929



26



2,692



(24)



2,668

Total revenues 



526,418



78,264



215,389



199,980



26



1,020,077



(110,086)



909,991

Costs and expenses:

























Management fees



1,127







54



74,924



76,105



122



76,227

Interest expense



172,012



49,257



57,142



25,152



84,878



388,441



(487)



387,954

General and administrative



20,626



13,624



5,394



61,943



10,429



112,016



258



112,274

Acquisition and investment pursuit costs



915



51





(387)





579





579

Costs of rental operations



1,525





70,846



19,503





91,874





91,874

Depreciation and amortization



695



15



70,078



15,287





86,075





86,075

Loan loss provision, net



2,046



1,196









3,242





3,242

Other expense



230





1,353



194





1,777





1,777

Total costs and expenses 



199,176



64,143



204,813



121,746



170,231



760,109



(107)



760,002

Other income (loss):

























Change in net assets related to consolidated VIEs















164,761



164,761

Change in fair value of servicing rights









(1,617)





(1,617)



(691)



(2,308)

Change in fair value of investment securities, net



(2,945)







56,431





53,486



(52,491)



995

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



16,837







48,841





65,678





65,678

Earnings (loss) from unconsolidated entities



8,576





(42,538)



3,601





(30,361)



(1,275)



(31,636)

Gain on sale of investments and other assets, net



3,476



3,041





21,640





28,157





28,157

Gain (loss) on derivative financial instruments, net



12,024



(3,337)



(3,957)



(16,761)



31,725



19,694





19,694

Foreign currency loss, net



(17,025)



(102)



(7)







(17,134)





(17,134)

Loss on extinguishment of debt



(857)



(8,221)





(194)



(1,466)



(10,738)





(10,738)

Other loss, net





(50)







(73)



(123)





(123)

Total other income (loss)



20,086



(8,669)



(46,502)



111,941



30,186



107,042



110,304



217,346

Income (loss) before income taxes 



347,328



5,452



(35,926)



190,175



(140,019)



367,010



325



367,335

Income tax (provision) benefit



(4,778)



746



(258)



(4,090)





(8,380)





(8,380)

Net income (loss) 



342,550



6,198



(36,184)



186,085



(140,019)



358,630



325



358,955

Net income attributable to non-controlling interests



(392)





(16,322)



(4,121)





(20,835)



(325)



(21,160)

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


$

342,158


$

6,198


$

(52,506)


$

181,964


$

(140,019)


$

337,795


$


$

337,795

 

Reconciliation of Net Income to Core Earnings
For the nine months ended September 30, 2019
(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.


$

342,158


$

6,198


$

(52,506)


$

181,964


$

(140,019)


$

337,795

Add / (Deduct):



















Non-controlling interests attributable to Woodstar II Class A Units







16,322







16,322

Non-cash equity compensation expense



2,757



1,691



229



4,817



16,909



26,403

Management incentive fee











2,048



2,048

Acquisition and investment pursuit costs



(56)



2



(266)



(451)



(356)



(1,127)

Depreciation and amortization



695



15



71,067



14,181





85,958

Loan loss provision, net



2,046



1,196









3,242

Interest income adjustment for securities



(585)







14,698





14,113

Extinguishment of debt, net











(1,704)



(1,704)

Other non-cash items







(565)



699



470



604

Reversal of GAAP unrealized (gains) / losses on:



















Loans held-for-sale



(16,837)







(48,841)





(65,678)

Securities



2,945







(56,431)





(53,486)

Derivatives



(11,763)



3,337



8,457



16,841



(32,915)



(16,043)

Foreign currency



17,025



102



7







17,134

(Earnings) loss from unconsolidated entities



(8,576)





42,538



(3,601)





30,361

Recognition of Core realized gains / (losses) on:



















Loans held-for-sale



7,180



(985)





49,719





55,914

Securities



970







11,702





12,672

Derivatives



1,800



(1,396)



2,257



(17,114)





(14,453)

Foreign currency



(4,725)



(998)



(7)



9





(5,721)

Earnings (loss) from unconsolidated entities



7,078





(68,905)



14,194





(47,633)

Sales of properties









(7,297)





(7,297)

Core Earnings (Loss)


$

342,112


$

9,162


$

18,628


$

175,089


$

(155,567)


$

389,424

Core Earnings (Loss) per Weighted Average Diluted Share


$

1.17


$

0.03


$

0.06


$

0.60


$

(0.53)


$

1.33

 

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of September 30, 2019
(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


$

64,343


$

6,404


$

35,940


$

46,872


$

129,369


$

282,928


$

1,189


$

284,117

Restricted cash



36,771



33,366



21,186



19,218





110,541





110,541

Loans held-for-investment, net



7,636,475



1,281,815





1,363





8,919,653





8,919,653

Loans held-for-sale



809,604



163,932





468,583





1,442,119





1,442,119

Investment securities



938,300



54,048





1,009,249





2,001,597



(1,192,460)



809,137

Properties, net



26,902





2,441,480



261,156





2,729,538





2,729,538

Intangible assets







75,965



68,748





144,713



(24,766)



119,947

Investment in unconsolidated entities



42,518





71,824



33,246





147,588



(21,473)



126,115

Goodwill





119,409





140,437





259,846





259,846

Derivative assets



37,507



652



21,994



603



20,727



81,483





81,483

Accrued interest receivable



43,747



4,015



245



1,321



3,125



52,453



(676)



51,777

Other assets



98,664



5,978



72,932



64,068



9,129



250,771



2



250,773

VIE assets, at fair value















59,249,054



59,249,054

Total Assets


$

9,734,831


$

1,669,619


$

2,741,566


$

2,114,864


$

162,350


$

16,423,230


$

58,010,870


$

74,434,100

Liabilities and Equity

























Liabilities:

























Accounts payable, accrued expenses and other liabilities


$

25,836


$

15,719


$

69,550


$

72,055


$

50,868


$

234,028


$

92


$

234,120

Related-party payable









44



24,442



24,486





24,486

Dividends payable











137,273



137,273





137,273

Derivative liabilities



2,336



904





1,541





4,781





4,781

Secured financing agreements, net



4,061,849



1,168,166



1,868,416



771,618



391,989



8,262,038



(13,950)



8,248,088

Collateralized loan obligations, net



927,436











927,436





927,436

Unsecured senior notes, net











1,926,693



1,926,693





1,926,693

VIE liabilities, at fair value















58,018,209



58,018,209

Total Liabilities



5,017,457



1,184,789



1,937,966



845,258



2,531,265



11,516,735



58,004,351



69,521,086

Equity:

























Starwood Property Trust, Inc. Stockholders' Equity:

























Common stock











2,871



2,871





2,871

Additional paid-in capital



1,307,064



481,206



609,241



156,094



2,568,066



5,121,671





5,121,671

Treasury stock











(104,194)



(104,194)





(104,194)

Accumulated other comprehensive income (loss)



52,471





(30)



(64)





52,377





52,377

Retained earnings (accumulated deficit)



3,357,839



3,624



(38,936)



1,095,602



(4,835,658)



(417,529)





(417,529)

Total Starwood Property Trust, Inc. Stockholders' Equity



4,717,374



484,830



570,275



1,251,632



(2,368,915)



4,655,196





4,655,196

Non-controlling interests in consolidated subsidiaries







233,325



17,974





251,299



6,519



257,818

Total Equity



4,717,374



484,830



803,600



1,269,606



(2,368,915)



4,906,495



6,519



4,913,014

Total Liabilities and Equity


$

9,734,831


$

1,669,619


$

2,741,566


$

2,114,864


$

162,350


$

16,423,230


$

58,010,870


$

74,434,100

 

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