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Starwood Property Trust Reports Results for the Quarter Ended September 30, 2018

November 09, 2018
- Quarterly GAAP Earnings of $0.31 and Core Earnings of $0.53 per Diluted Common Share -
- Year-to-Date Capital Deployed of $8.9 Billion, Up 77% Versus 2017 -
- Deploys $2.5 Billion for the Acquisition of Infrastructure Finance Platform and Portfolio and $1.3 Billion in the Commercial and Residential Lending Segment -
- Moody's Revises Rating Outlook to Positive from Stable -
- Declares Dividend of $0.48 per share for the Fourth Quarter of 2018 -

GREENWICH, Conn., Nov. 9, 2018 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2018.  The Company's third quarter 2018 GAAP net income was $84.5 million, or $0.31 per diluted share, and Core Earnings (a non-GAAP financial measure) was $148.4 million, or $0.53 per diluted share.  This includes $6.9 million, or $0.03 per diluted share, and $3.0 million, or $0.01 per diluted share, of acquisition costs associated with the infrastructure finance platform and portfolio for GAAP and Core Earnings, respectively.

"We are excited to have completed another successful quarter which was highlighted by record levels of capital deployment including the acquisition of our new infrastructure finance platform," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust. "We continue to see the benefits of a multi-cylinder approach as we execute on attractive investments across our existing businesses. During the quarter, our asset base and commercial loan portfolio both reached record levels, with assets of $16.0 billion and commercial loans of $7.5 billion."

"We intend to capitalize on attractive opportunities to expand our infrastructure finance platform as we continue to execute on the prudent allocation of capital across our cylinders allowing us to achieve the best risk-adjusted returns for our shareholders."

Dividend

On November 9, 2018, the Company's Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending December 31, 2018. The dividend is payable on January 15, 2019 to common stockholders of record as of December 31, 2018.

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 webcast and conference call on Friday, November 9, 2018, at 10:00 a.m. Eastern Time to discuss the quarter's financial results and recent events.  A webcast will be available on the Company's website at www.starwoodpropertytrust.com.  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.

To Participate in the Telephone Conference Call:

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:  13684083

The playback can be accessed through November 23, 2018.

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 $48 billion of capital since inception and manages a portfolio in excess of $15 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.  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 completion of pending investments, continued ability to acquire additional investments, competition within the finance and real estate industries, economic conditions, availability of financing and other risks detailed from time to time in the Company's reports filed with the SEC.

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, 2018

(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


$

147,913


$

3,053


$


$

3,535


$


$

154,501


$


$

154,501

Interest income from investment securities



10,320



107





34,477





44,904



(33,396)



11,508

Servicing fees



98







34,100





34,198



(6,374)



27,824

Rental income







76,067



15,065





91,132





91,132

Other revenues



265



44



169



229



89



796



(42)



754

Total revenues



158,596



3,204



76,236



87,406



89



325,531



(39,812)



285,719

Costs and expenses:

























Management fees



453







18



25,937



26,408



111



26,519

Interest expense



43,322



2,258



19,483



7,396



30,475



102,934



(276)



102,658

General and administrative



7,016



537



1,680



19,131



2,753



31,117



86



31,203

Acquisition and investment pursuit costs



341



6,725





(539)





6,527





6,527

Costs of rental operations







23,052



7,139





30,191





30,191

Depreciation and amortization



17





28,448



5,828





34,293





34,293

Loan loss allowance, net



929











929





929

Other expense



76











76





76

Total costs and expenses



52,154



9,520



72,663



38,973



59,165



232,475



(79)



232,396

Income (loss) before other income (loss), income taxes and non-controlling 
     interests



106,442



(6,316)



3,573



48,433



(59,076)



93,056



(39,733)



53,323

Other income (loss):

























Change in net assets related to consolidated VIEs















33,289



33,289

Change in fair value of servicing rights









(1,994)





(1,994)



1,020



(974)

Change in fair value of investment securities, net



238







(4,966)





(4,728)



5,029



301

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



1,343







2,597





3,940





3,940

Earnings (loss) from unconsolidated entities



514





1,988



(134)





2,368



257



2,625

Gain on sale of investments and other assets, net



47







1,415





1,462





1,462

Gain (loss) on derivative financial instruments, net



7,278



455



5,895



3,076



(4,969)



11,735





11,735

Foreign currency loss, net



(3,546)



(531)



(1)







(4,078)





(4,078)

Loss on extinguishment of debt



(730)









(1,810)



(2,540)





(2,540)

Other income (loss), net



(1)





2



(1,422)





(1,421)





(1,421)

Total other income (loss)



5,143



(76)



7,884



(1,428)



(6,779)



4,744



39,595



44,339

Income (loss) before income taxes



111,585



(6,392)



11,457



47,005



(65,855)



97,800



(138)



97,662

Income tax provision



(314)





(125)



(7,842)





(8,281)





(8,281)

Net income (loss)



111,271



(6,392)



11,332



39,163



(65,855)



89,519



(138)



89,381

Net (income) loss attributable to non-controlling interests



(365)





(4,769)



151





(4,983)



138



(4,845)

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


$

110,906


$

(6,392)


$

6,563


$

39,314


$

(65,855)


$

84,536


$


$

84,536

 

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, 2018

(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.


$

110,906


$

(6,392)


$

6,563


$

39,314


$

(65,855)


$

84,536

Add / (Deduct):



















Non-controlling interests attributable to Woodstar II Class A Units







4,769







4,769

Non-cash equity compensation expense



750



13



98



1,321



3,769



5,951

Management incentive fee











4,299



4,299

Acquisition and investment pursuit costs



45



3,770



(89)



(129)





3,597

Depreciation and amortization



17





28,780



5,456





34,253

Loan loss allowance, net



929











929

Interest income adjustment for securities



(137)







6,573





6,436

Extinguishment of debt, net











(922)



(922)

Other non-cash items







(632)



1,622



986



1,976

Reversal of GAAP unrealized (gains) / losses on:



















Loans held-for-sale



(1,343)







(2,597)





(3,940)

Securities



(338)







4,966





4,628

Derivatives



(7,497)



(455)



(4,779)



(3,424)



5,248



(10,907)

Foreign currency



3,546



531



1







4,078

Earnings from unconsolidated entities



(514)





(1,988)



134





(2,368)

Recognition of Core realized gains / (losses) on:



















Loans held-for-sale



3,558







4,415





7,973

Securities



100







1,673





1,773

Derivatives



6





(230)



1,048





824

Foreign currency



225



(8)









217

Earnings from unconsolidated entities



581







613





1,194

Sales of properties









(928)





(928)

Core Earnings (Loss)


$

110,834


$

(2,541)


$

32,493


$

60,057


$

(52,475)


$

148,368

Core Earnings (Loss) per Weighted Average Diluted Share


$

0.40


$

(0.01)


$

0.12


$

0.21


$

(0.19)


$

0.53

 

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the nine months ended September 30, 2018

(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


$

431,153


$

3,053


$


$

9,619


$


$

443,825


$


$

443,825

Interest income from investment securities



33,689



107





99,348





133,144



(95,577)



37,567

Servicing fees



313







92,221





92,534



(21,328)



71,206

Rental income







217,178



43,955





261,133





261,133

Other revenues



683



44



351



973



227



2,278



(147)



2,131

Total revenues



465,838



3,204



217,529



246,116



227



932,914



(117,052)



815,862

Costs and expenses:

























Management fees



1,396







54



82,895



84,345



310



84,655

Interest expense



110,169



2,258



55,397



18,298



96,132



282,254



(821)



281,433

General and administrative



19,962



537



5,510



64,006



8,602



98,617



256



98,873

Acquisition and investment pursuit costs



2,253



6,725



(46)



(467)





8,465





8,465

Costs of rental operations







72,531



20,250





92,781





92,781

Depreciation and amortization



50





86,655



16,482





103,187





103,187

Loan loss allowance, net



27,726











27,726





27,726

Other expense



230







447





677





677

Total costs and expenses



161,786



9,520



220,047



119,070



187,629



698,052



(255)



697,797

Income (loss) before other income (loss), income taxes and non-controlling 
     interests



304,052



(6,316)



(2,518)



127,046



(187,402)



234,862



(116,797)



118,065

Other income (loss):

























Change in net assets related to consolidated VIEs















129,888



129,888

Change in fair value of servicing rights









(14,417)





(14,417)



5,426



(8,991)

Change in fair value of investment securities, net



16







24,123





24,139



(16,285)



7,854

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



(165)







26,738





26,573





26,573

Earnings from unconsolidated entities



3,761





1,406



2,916





8,083



(1,450)



6,633

Gain on sale of investments and other assets, net



461





6,883



18,215





25,559





25,559

Gain (loss) on derivative financial instruments, net



15,927



455



27,734



7,720



(24,338)



27,498





27,498

Foreign currency loss, net



(3,260)



(531)





(2)





(3,793)





(3,793)

Loss on extinguishment of debt



(730)







(186)



(1,810)



(2,726)





(2,726)

Other income (loss), net



42





508



(1,365)





(815)





(815)

Total other income (loss)



16,052



(76)



36,531



63,742



(26,148)



90,101



117,579



207,680

Income (loss) before income taxes



320,104



(6,392)



34,013



190,788



(213,550)



324,963



782



325,745

Income tax provision



(2,981)





(1,997)



(9,502)





(14,480)





(14,480)

Net income (loss)



317,123



(6,392)



32,016



181,286



(213,550)



310,483



782



311,265

Net income attributable to non-controlling interests



(1,087)





(11,906)



(3,792)





(16,785)



(782)



(17,567)

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


$

316,036


$

(6,392)


$

20,110


$

177,494


$

(213,550)


$

293,698


$


$

293,698

 

 

Reconciliation of Net Income to Core Earnings

For the nine months ended September 30, 2018

(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.


$

316,036


$

(6,392)


$

20,110


$

177,494


$

(213,550)


$

293,698

Add / (Deduct):



















Non-controlling interests attributable to Woodstar II Class A Units







11,906







11,906

Non-cash equity compensation expense



2,079



13



228



3,613



10,635



16,568

Management incentive fee











19,620



19,620

Acquisition and investment pursuit costs



1,430



3,770



(249)



(215)





4,736

Depreciation and amortization



50





87,648



15,253





102,951

Loan loss allowance, net



27,726











27,726

Interest income adjustment for securities



(531)







8,206





7,675

Extinguishment of debt, net











8,586



8,586

Other non-cash items







(2,406)



2,194



2,762



2,550

Reversal of GAAP unrealized (gains) / losses on:



















Loans held-for-sale



165







(26,738)





(26,573)

Securities



(259)







(24,123)





(24,382)

Derivatives



(16,665)



(455)



(25,228)



(8,788)



26,797



(24,339)

Foreign currency



3,260



531





2





3,793

Earnings from unconsolidated entities



(3,761)





(1,406)



(2,916)





(8,083)

Recognition of Core realized gains / (losses) on:



















Loans held-for-sale



1,487







28,285





29,772

Securities



242







(4,419)





(4,177)

Derivatives



(5,848)





(938)



7,197





411

Foreign currency



8,136



(8)





(42)





8,086

Earnings from unconsolidated entities



3,986







2,875





6,861

Sales of properties







(365)



(4,374)





(4,739)

Core Earnings (Loss)


$

337,533


$

(2,541)


$

89,300


$

173,504


$

(145,150)


$

452,646

Core Earnings (Loss) per Weighted Average Diluted Share


$

1.24


$

(0.01)


$

0.33


$

0.63


$

(0.53)


$

1.66

 

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of September 30, 2018

(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


$

15,217


$

8


$

23,496


$

44,771


$

180,946


$

264,438


$

1,319


$

265,757

Restricted cash



34,325



28,222



18,239



14,508



28,970



124,264





124,264

Loans held-for-investment, net



7,004,938



1,492,276





3,460





8,500,674





8,500,674

Loans held-for-sale



719,781



320,270





286,786





1,326,837





1,326,837

Loans transferred as secured borrowings



74,281











74,281





74,281

Investment securities



718,262



65,060





1,027,554





1,810,876



(1,047,426)



763,450

Properties, net







2,620,220



268,517





2,888,737





2,888,737

Properties held-for-sale







31,928



20,374





52,302





52,302

Intangible assets







96,348



80,420





176,768



(22,820)



153,948

Investment in unconsolidated entities



34,334





112,110



43,804





190,248



(21,460)



168,788

Goodwill





115,988





140,437





256,425





256,425

Derivative assets



15,232



481



41,461



2,633





59,807





59,807

Accrued interest receivable



42,080



6,356



269



1,090



3,243



53,038



(127)



52,911

Other assets



38,604



8,398



99,412



49,882



2,399



198,695



(7)



198,688

VIE assets, at fair value















48,034,610



48,034,610

Total Assets


$

8,697,054


$

2,037,059


$

3,043,483


$

1,984,236


$

215,558


$

15,977,390


$

46,944,089


$

62,921,479

Liabilities and Equity

























Liabilities:

























Accounts payable, accrued expenses and other liabilities


$

23,681


$

10,889


$

71,253


$

80,353


$

28,600


$

214,776


$

126


$

214,902

Related-party payable









74



25,212



25,286





25,286

Dividends payable











132,549



132,549





132,549

Derivative liabilities



3,015



381



2,276



251



29,463



35,386





35,386

Secured financing agreements, net



4,117,051



1,507,073



1,929,596



759,012



297,655



8,610,387



(23,700)



8,586,687

Unsecured senior notes, net











2,024,570



2,024,570





2,024,570

Secured borrowings on transferred loans, net



74,148











74,148





74,148

VIE liabilities, at fair value















46,945,674



46,945,674

Total Liabilities



4,217,895



1,518,343



2,003,125



839,690



2,538,049



11,117,102



46,922,100



58,039,202

Equity:

























Starwood Property Trust, Inc. Stockholders' Equity:

























Common stock











2,793



2,793





2,793

Additional paid-in capital



1,481,943



525,108



809,734



270,045



1,876,231



4,963,061





4,963,061

Treasury stock











(104,194)



(104,194)





(104,194)

Accumulated other comprehensive income (loss)



60,811





7,171



(62)





67,920





67,920

Retained earnings (accumulated deficit)



2,926,015



(6,392)



5,775



863,580



(4,097,321)



(308,343)





(308,343)

Total Starwood Property Trust, Inc. Stockholders' Equity



4,468,769



518,716



822,680



1,133,563



(2,322,491)



4,621,237





4,621,237

Non-controlling interests in consolidated subsidiaries



10,390





217,678



10,983





239,051



21,989



261,040

Total Equity



4,479,159



518,716



1,040,358



1,144,546



(2,322,491)



4,860,288



21,989



4,882,277

Total Liabilities and Equity


$

8,697,054


$

2,037,059


$

3,043,483


$

1,984,236


$

215,558


$

15,977,390


$

46,944,089


$

62,921,479

 

Cision View original content:http://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-the-quarter-ended-september-30-2018-300747332.html

SOURCE Starwood Property Trust, Inc.

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