GREENWICH, Conn., Aug. 6, 2013 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the second fiscal quarter ended June 30, 2013. The Company's Core Earnings, a Non-GAAP financial measure, were $69.0 million, or $0.42 per diluted share, compared to $50.0 million, or $0.45 per diluted share, for the second quarter of 2012. Core Earnings in the second quarter includes $17.1 million (net of $2.6 million tax benefit), or $0.10 per diluted share, of expense attributable to costs related to the acquisition of LNR Property LLC ("LNR"). Core Earnings for the six months ended June 30, 2013 were $127.1 million (net of $2.6 million tax benefit), or $0.85 per diluted share, compared to Core Earnings for the six months ended June 30, 2012 of $105.0 million, or $1.02 per diluted share. Core Earnings for the six months ended June 30, 2013 includes $21.7 million, or $0.14 per diluted share, of expense attributable to the acquisition of LNR.
Net income attributable to the Company for the three and six months ended June 30, 2013 was approximately $62.3 million and $124.5 million, respectively, or $79.4 million and $146.3 million, respectively, excluding expenses attributable to the LNR acquisition (net of $2.6 million tax benefit), compared to $44.5 million and $94.6 million, respectively, for the three and six months ended June 30, 2012. Net income per diluted share outstanding for the three months ended June 30, 2013 was $0.38, compared to $0.40 for the three months ended June 30, 2012. For the six months ended June 30, 2013, net income per diluted share outstanding was $0.83 compared to $0.92 for the six months ended June 30, 2012.
"The combination of our operating and origination platform with LNR's businesses resulted in excellent results for the quarter," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust. "With the accretive deployment of over $3 billion of capital since the start of the year, we believe that we are very well positioned to continue to outperform as we made substantial progress in all of our business lines in the quarter. Our core lending business experienced rapid growth, we began to invest in new business lines through LNR and we expanded our residential platform to reach critical mass. We are now very active in Europe and look forward to systematically deploying capital in accretive proprietary opportunities."
Mr. Sternlicht continued, "With our well capitalized balance sheet, robust transaction pipeline, multiple business cylinders and stable dividend, we are perfectly positioned to build a premier real estate finance platform that can thrive in most any economic cycle. With our pipeline of future investments, we are confident in our ability to continue to achieve best in class returns for our shareholders."
Andrew Sossen, Chief Operating Officer of Starwood Property Trust, stated "We have created a highly efficient platform that should outperform in various economic scenarios, including a rising interest rate environment, due to a business model which utilizes predominantly match funded LIBOR-based lending and borrowings and a financing policy of matching floating rate investments with floating rate debt and fixed rate investments with fixed rate debt. With a pipeline of investments under term sheet that is over 90% LIBOR-based, over $1.7 billion of LIBOR-based credit facilities and a legacy investment book that is either floating rate, fixed rate with hedges or investments with fixed rate returns well in excess of 10%, we believe our portfolio of 106 loans secured by 1,722 properties is substantially insulated from rising rates. Additionally, we took advantage of historically low interest rates earlier this year to raise over $1 billion of fixed rate convertible notes with coupons below 4.55% which we expect to be quite accretive in a rising interest rate environment."
Highlights for the Second Quarter 2013 by Business Segment
Since its inception in 2009, the Company focused primarily on originating and acquiring real estate-related debt investments and operated in one reportable segment. As a result of both the acquisition of LNR and the increased significance of the single family residential operation, the Company now has the following three reportable segments: Real Estate Investment Lending, LNR and Single-Family Residential.
Real Estate Investment Lending Segment
The Real Estate Investment Lending segment (the "Finance Segment") represents the Company's commercial real estate finance business. During the second quarter of 2013, the Finance Segment originated and/or acquired $838.5 million of new investments, of which $529.2 million was funded at closing and/or acquisition. The carrying value of the Finance Segment portfolio was $4.1 billion as of June 30, 2013.
The carrying amount of the Finance Segment's core investment portfolio was approximately $3.2 billion at June 30, 2013, which the Company expects will generate an annualized leveraged return of between 12.0% and 12.5% on an annually compounded basis.
The $838.5 million of new investments during the second quarter of 2013 included the following significant transactions:
- Originated a $350.0 million first mortgage and mezzanine loan for the construction of the Hudson Yards South Tower located on Manhattan's West side. Approximately $98.9 million was funded at closing
- Purchased $146.7 million in B-Notes secured by two Class-A office buildings in Austin, Texas
- Originated a $158.5 million first mortgage and mezzanine loan secured by an office/retail building located in Midtown Manhattan. Approximately $122.9 million was funded at closing
The following is a summary of the Finance Segment's investments as of June 30, 2013:
|
Finance Segment Investment Portfolio
(Amounts in millions)
|
|
|
Investment
|
Face
Amount
|
Carry
Value (1)
|
Existing
Leverage (2)
|
Net
Investment
|
Return
on Asset
|
Leveraged
Return (3)
|
Optimal
Leveraged Return (4)
|
|
First mortgages held for investment
|
$1,264
|
$1,226
|
$539
|
$687
|
7.7%
|
10.6%
|
10.9%
|
|
Subordinated mortgages held for investment
|
501
|
463
|
135
|
328
|
10.9%
|
12.8%
|
13.0%
|
|
Mezzanine loans held for investment
|
1,258
|
1,241
|
157
|
1,084
|
12.1%
|
13.3%
|
13.3%
|
|
CMBS available-for-sale at fair value
|
301
|
313
|
146
|
167
|
7.6%
|
11.4%
|
12.2%
|
|
Total core portfolio of Finance Segment(3)
|
$3,324
|
$3,243
|
$977
|
$2,266
|
9.8%
|
12.3%
|
12.4%
|
|
First mortgages held for sale
|
418
|
415
|
226
|
189
|
6.9%
|
|
|
|
RMBS available-for-sale at fair value
|
468
|
320
|
167
|
153
|
11.2%
|
|
|
|
Loans transferred in secured borrowings
|
86
|
86
|
87
|
(1)
|
|
|
|
|
Security held to maturity and equity security
|
52
|
51
|
—
|
51
|
|
|
|
|
Investment in unconsolidated entities
|
32
|
32
|
—
|
32
|
|
|
|
|
Total investments
|
$4,380
|
$4,147
|
$1,457
|
$2,690
|
|
|
|
|
|
(1) The difference between the Carry Value and Face Amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs. The difference between the Carry Value and Face Amount of the available-for-sale securities consists of the unrealized gains/(losses) on the fair value of the securities and unamortized purchase discount.
|
|
(2) Current financings are either floating rate or swapped to fixed rate to match the interest rate characteristics of the underlying asset.
|
|
(3) Leveraged returns for core investments as of June 30, 2013 are the compounded effective rate of return earned over the life of the investment determined after the effects of existing and projected leverage, and calculated on a weighted average basis. The leveraged returns include the loan coupon, amortization of premium or discount, and the effects of costs and fees, all recognized on the effective interest method as disclosed in the Company's filings with the Securities and Exchange Commission. Leveraged returns are based upon management's assumptions, which the Company believes are reasonable. The leveraged returns are presented solely for informational purposes and will not equal income recognized in prior or future periods due mainly to the fact that (i) interest earned on the Company's floating rate loans will change in the future when interest rates change, and these leveraged returns assume interest rates remain at current levels and (ii) the Company assumes that the leverage levels existing at June 30, 2013 will be maintained either throughout the remaining term of the applicable credit facilities or the remaining term of the investment, if shorter. However, leverage levels in future periods will likely fluctuate as the Company manages its day-to-day liquidity.
|
|
(4) The optimal leveraged return is calculated in the same manner as the leveraged return except that the assumed financing on any investments that are less than fully leveraged as of June 30, 2013 is increased to the full advance amount available under the Company's credit facilities that has either been approved or is expected to be approved by the respective lender.
|
Loan to Value of Portfolio
The following table reflects the weighted average loan-to-value ("LTV") ratio of the Finance Segment's loan portfolio as of June 30, 2013:
|
Weighted Average LTV of Loan Portfolio (1)
|
|
|
First
Mortgages
|
|
Subordinated
Mortgages
|
|
Mezzanine
|
|
Total (2)
|
|
Beginning LTV
|
|
0.0%
|
|
47.1%
|
|
40.4%
|
|
20.4%
|
|
Ending LTV
|
|
61.9%
|
|
75.1%
|
|
63.2%
|
|
64.0%
|
|
|
|
|
|
|
|
|
|
|
(1) Underlying property values are determined by the Company's management based on its ongoing asset assessments, and loan balances are the face value of a loan regardless of whether the Company has purchased the loan at a discount or premium to par. Assets characterized as first mortgages include all loan components where the Company owns the senior most interest in the loan and assets characterized as subordinated mortgages are the subordinated components of first mortgages where the Company does not own the senior most interest in the loan. For any loans collateralized by ground-up construction projects, the fully-funded loan balance is included in the numerator and an estimate of the stabilized value upon completion of construction in the denominator. Includes loans held for investment (excluding a $95.0 million participation liability) and first mortgages held for sale.
|
|
(2) Represents the Company's entire investment, which includes all components of the capital stack that it owns (i.e., first mortgages, subordinated mortgages and mezzanine loans).
|
LNR Segment
The Company completed the acquisition of LNR on April 19, 2013. The initial purchase price was $859 million and was reduced for transaction expenses and distributions occurring after September 30, 2012, resulting in cash consideration paid by the Company of $730 million. For the period from April 19, 2013 to June 30, 2013, the LNR Segment contributed GAAP and Core net income of $34.6 million and $35.6 million, respectively, both after an income tax provision of $10.9 million and $4.2 million in shared cost allocations of management fees and corporate interest expense.
At June 30, 2013, the carrying amount of the LNR Segment's principal assets, consisting of CMBS, the servicing intangibles and conduit loans, was $844 million. Significant activity during the quarter with respect to these assets includes:
- Net increase in fair value of the servicing intangible of $6.1 million, principally due to the attainment of new servicing contracts in the quarter
- CMBS purchases of $84.1 million, including new issue B-piece purchases of $76.9 million
- Conduit loan originations of $390.7 million
- Proceeds from sales of conduit loans of $476.5 million
The following is a summary of the LNR Segment's investments and their related returns:
|
LNR Investments as of June 30, 2013
(Amounts in millions)
|
|
|
Investment
|
|
Face Amount
|
|
Carry Value/Fair Value
|
|
Existing Leverage
|
|
Net Investment
|
Return on Asset
|
|
Leveraged Return
|
|
CMBS
|
$
|
2,497
|
$
|
392
|
$
|
-
|
$
|
392
|
15%
|
(1)
|
N/A
|
|
Special servicing intangibles
|
|
N/A
|
|
281
|
|
-
|
|
281
|
N/A
|
(2)
|
N/A
|
|
Conduit loans
|
|
180
|
|
171
|
|
134
|
|
37
|
23%
|
(3)
|
72%
|
|
Total investments
|
$
|
2,677
|
$
|
844
|
$
|
134
|
$
|
710
|
|
|
|
|
|
(1) The returns on CMBS were calculated on an annualized basis using gross cash receipts for the period from April 19, 2013 to June 30, 2013. These returns are not necessarily indicative of future results due to the short time period in which the returns were attained.
|
|
(2) The servicing intangibles are not financial instruments, and as such, a return on asset calculation is not meaningful. The intangibles represent operating businesses which produce highly volatile cash flows and equally volatile returns from period to period. In connection with the acquisition, the Company underwrote this business to a 15% return, which is expected to be realized over the assets' life cycle. However, the return in any given period is expected to differ significantly from this amount because of the highly volatile nature of the underlying cash flow stream.
|
|
(3) The returns on conduit loans were calculated using only the three securitizations that closed during the April 19, 2013 to June 30, 2013 stub period. The returns were calculated using a daily (not annualized) IRR and were based on the original gross cash flows related to these deals (without regard to purchase accounting), including cash from interest, derivatives and proceeds from the sale of the loans as a percentage of the purchased portfolio. These returns are not necessarily indicative of future results because (i) the loans in this portfolio experience high turnover, with loans originated and securitized within a 30-60 day timeframe, (ii) the returns are only representative of a short time period in which these returns were attained, and (iii) the returns assume interest rates remain at current levels.
|
Single Family Residential ("SFR") Segment
The Company invested $415.5 million in SFR homes and non-performing residential loans ("NPL") from January 1, 2013 through August 2, 2013, representing 3,514 units, bringing aggregate acquisitions since the inception of this strategy to $581.3 million, representing 4,853 units. The expected stabilized rental yield from this portfolio is between 6.0% and 7.0% with projected IRRs in excess of such yields after factoring in potential home price appreciation. The Company is currently in discussions to obtain a financing facility for its SFR and NPL investments. The investment balance, net of depreciation, for this segment was $548.0 million as of June 30, 2013.
Since it commenced operations in the second quarter of 2012, the SFR Segment has been focused primarily on acquiring SFR homes and NPLs and preparing these investments for their intended use. This segment has operated at a net loss since inception and it is expected that this will continue in the near future, excluding anticipated gains from the liquidation of investments, until the investment portfolio attains a level of stabilization such that net rental income exceeds the expenses associated with growing the portfolio and from NPL workouts.
As part of the Company's continuing efforts to provide value to its shareholders, the Company is considering a transaction to separate its SFR and NPLs from the remainder of its investment portfolio. If the transaction resulted in these assets being held in a stand-alone entity, the Company expects that such entity would elect and qualify to be taxed as a real estate investment trust for U.S. federal income tax purposes. The Company's board of directors has not formally evaluated any such transaction, and there can be no assurance as to the assets to be included or the timing, terms, structure or completion of any such transaction.
Investment Related Activity Subsequent to Quarter-End
Since July 1, 2013, the Finance Segment originated, acquired, and/or refinanced $625.5 million of new investments, of which $545.0 million was funded at closing and/or acquisition, which includes the following:
- Origination of a $275.0 million first mortgage loan secured by the leasehold interest on the Four Seasons Resort Hualalai, located in Hawaii. Approximately $225.0 million was funded at closing
- Origination of a $40.0 million first mortgage loan secured by an 18-story Class B/B+ office building located in Orange County, CA
- Recapitalization of an existing loan into a $140.0 million first mortgage loan secured by an office building located in San Francisco. Approximately $115.0 million was funded at closing
- Modification of an existing loan secured by an existing portfolio of 123 budget hotels into a $142.5 million pari passu first mortgage. On July 30, 2013 the Company entered into an agreement to sell $100 million A-Notes of the pari passu loan into a securitization for gross proceeds of $99.9 million, scheduled to settle on August 8, 2013
Investment Capacity
As of August 1, 2013, the Company had approximately $354 million of available cash and equivalents, approximately $177.9 million of net equity invested in RMBS that are classified as available-for-sale and $127.4 million of approved but undrawn capacity under existing financing facilities. Accordingly, the Company has the capacity to acquire or originate an additional $500 million to $700 million of new investments.
Financing Activities
As of June 30, 2013, the Company had an aggregate outstanding balance of approximately $2.3 billion under its eleven financing facilities and senior convertible note. The sale of senior notes (A-Notes) has become an increasingly important part of the Company's financing strategy since it provides the Company with match termed non-recourse financing. Accordingly, during the quarter and subsequent to quarter end, the Company sold $227.1 million in face amount of first mortgage loans and B-note participations.
In addition, on June 27, 2013 the Company sold $400.0 million in aggregate principal amount of 4.0% Convertible Senior Notes due 2019 (the "Notes") for total gross proceeds of $400.0 million. The underwriters had a 30-day option to purchase up to an additional $60.0 million in aggregate principal amount of the Notes, which they exercised. The Notes were sold to the underwriters at a discount of 2.125% resulting in net proceeds to us of $450.2 million. The transaction closed on July 3, 2013.
Book Value and Fair Value Net of Minority Interest
The fair value of the Company's net assets at June 30, 2013 was approximately $21.77 per fully diluted share. On a fully diluted basis, the Company's GAAP book value at June 30, 2013 was $21.21 per share.
Dividend
On August 6, 2013, the Company's Board of Directors declared a dividend of $0.46 per share of common stock for the quarter ending September 30, 2013. The dividend is payable on October 15, 2013 to common shareholders of record as of September 30, 2013.
2013 Guidance
For 2013, the Company is estimating Core Earnings in the range of $1.90 to $2.10 per diluted share, or $2.04 to $2.24 per diluted share, excluding business combination and severance costs related to the acquisition of LNR. This guidance does not include the impact of a potential separation of the SFR Segment or any incremental (i) investments beyond the Company's existing pipeline or (ii) capital markets transactions. In addition, this guidance reflects the Company's estimates on the (i) yield on existing investments; (ii) amount and timing of capital deployment and (iii) cost of and continued access to additional financing. All guidance is based on current expectations of future economic conditions, the dynamics of the commercial real estate markets in which it operates and the judgment of the Company's management team.
Supplemental Schedules
The Company has published supplemental earnings schedules in order to provide additional disclosure and financial information for the benefit of the Company's stakeholders. These can be found at the Company's website in the Investor Relations section under "Financial Information".
Conference Call and Webcast Information
The Company will host a webcast and conference call on Tuesday, August 6, 2013 at 10:00 a.m. Eastern Time to discuss second quarter 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 software.
To Participate in the Telephone Conference Call:
Dial in at least five minutes prior to start time.
Domestic: 1-888-461-2021
International: 1-719-325-2414
Conference Call Playback:
Domestic: 1-877-870-5176
International: 1-858-384-5517
Passcode: 5292510
The playback can be accessed through August 20, 2013.
About Starwood Property Trust, Inc.
Starwood Property Trust, Inc. is focused on originating, investing in, financing and managing commercial mortgage loans and other commercial real estate debt investments, commercial mortgage-backed securities ("CMBS"), and other commercial real estate-related debt investments. The Company through its 2013 acquisition of LNR now also operates as a special servicer in the United States and as a primary and special servicer in Europe and has expanded its product offering to include fixed rate conduit loans. Starwood Property Trust, Inc. also invests in residential mortgage-backed securities ("RMBS") and residential real estate owned, and may invest in non-performing loans, commercial properties subject to net leases and residential mortgage loans. The Company is externally managed and advised by SPT Management, LLC, an affiliate of Starwood Capital Group, and has elected to be taxed as a real estate investment trust for U.S. federal income tax purposes.
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.
|
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations by Segment
For the three months ended June 30, 2013
(Amounts in thousands, except per share data)
|
|
|
|
Real Estate
Investment
Lending
|
|
Single Family Residential
|
|
LNR
|
|
Subtotal
|
|
LNR VIEs
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from loans
|
$
|
72,676
|
$
|
-
|
$
|
2,260
|
$
|
74,936
|
$
|
-
|
$
|
74,936
|
|
Interest income from investment securities
|
|
13,638
|
|
-
|
|
11,758
|
|
25,396
|
|
(6,819)
|
|
18,577
|
|
Servicing fees
|
|
-
|
|
-
|
|
52,860
|
|
52,860
|
|
(13,725)
|
|
39,135
|
|
Other revenues
|
|
96
|
|
65
|
|
1,972
|
|
2,133
|
|
(273)
|
|
1,860
|
|
Rental income
|
|
-
|
|
2,529
|
|
-
|
|
2,529
|
|
-
|
|
2,529
|
|
Total revenues
|
|
86,410
|
|
2,594
|
|
68,850
|
|
157,854
|
|
(20,817)
|
|
137,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
13,842
|
|
3,192
|
|
2,274
|
|
19,308
|
|
18
|
|
19,326
|
|
Interest expense
|
|
19,941
|
|
1,300
|
|
2,707
|
|
23,948
|
|
-
|
|
23,948
|
|
General and administrative
|
|
3,615
|
|
994
|
|
40,573
|
|
45,182
|
|
147
|
|
45,329
|
|
Business Combination costs
|
|
12,982
|
|
-
|
|
-
|
|
12,982
|
|
-
|
|
12,982
|
|
Acquisition and investment pursuit costs
|
|
963
|
|
1,684
|
|
391
|
|
3,038
|
|
-
|
|
3,038
|
|
Residential segment, other operating costs
|
|
-
|
|
1,997
|
|
-
|
|
1,997
|
|
-
|
|
1,997
|
|
Depreciation and amortization
|
|
-
|
|
715
|
|
2,228
|
|
2,943
|
|
-
|
|
2,943
|
|
Loan loss allowance
|
|
725
|
|
-
|
|
-
|
|
725
|
|
-
|
|
725
|
|
Other expense
|
|
58
|
|
-
|
|
138
|
|
196
|
|
-
|
|
196
|
|
Total costs and expenses
|
|
52,126
|
|
9,882
|
|
48,311
|
|
110,319
|
|
165
|
|
110,484
|
|
Income before other income (expense),
income taxes and non-controlling interests
|
|
34,284
|
|
(7,288)
|
|
20,539
|
|
47,535
|
|
(20,982)
|
|
26,553
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of consolidated VIEs, net
|
|
-
|
|
-
|
|
-
|
|
-
|
|
31,949
|
|
31,949
|
|
Change in fair value of servicing rights
|
|
-
|
|
-
|
|
6,114
|
|
6,114
|
|
(3,216)
|
|
2,898
|
|
Change in fair value of investment securities
|
|
(331)
|
|
-
|
|
6,388
|
|
6,057
|
|
(7,449)
|
|
(1,392)
|
|
Change in fair value of mortgage loans held-for-sale
|
|
-
|
|
-
|
|
458
|
|
458
|
|
-
|
|
458
|
|
Earnings from unconsolidated entities
|
|
1,851
|
|
-
|
|
3,942
|
|
5,793
|
|
(196)
|
|
5,597
|
|
Gain/loss on sale of investments
|
|
(18)
|
|
1,068
|
|
-
|
|
1,050
|
|
-
|
|
1,050
|
|
Gain/loss on derivative financial instruments
|
|
(2,001)
|
|
-
|
|
8,159
|
|
6,158
|
|
-
|
|
6,158
|
|
Foreign currency gain/loss, net
|
|
1,647
|
|
-
|
|
(67)
|
|
1,580
|
|
-
|
|
1,580
|
|
OTTI
|
|
(359)
|
|
-
|
|
-
|
|
(359)
|
|
-
|
|
(359)
|
|
Other income
|
|
-
|
|
-
|
|
39
|
|
39
|
|
-
|
|
39
|
|
Total other income
|
|
789
|
|
1,068
|
|
25,033
|
|
26,890
|
|
21,088
|
|
47,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
35,073
|
|
(6,220)
|
|
45,572
|
|
74,425
|
|
106
|
|
74,531
|
|
Income tax provision
|
|
411
|
|
(150)
|
|
10,932
|
|
11,193
|
|
-
|
|
11,193
|
|
Net Income
|
|
34,662
|
|
(6,070)
|
|
34,640
|
|
63,232
|
|
106
|
|
63,338
|
|
Net income attributable to non-controlling
interests
|
|
961
|
|
(10)
|
|
-
|
|
951
|
|
106
|
|
1,057
|
|
Net income attributable to Starwood
Property Trust, Inc.
|
$
|
33,701
|
$
|
(6,060)
|
$
|
34,640
|
$
|
62,281
|
$
|
-
|
$
|
62,281
|
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, depreciation and amortization (to the extent that the Company owns any properties), 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. The amount will be 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. The definition of Core Earnings was amended effective for the first quarter of 2012 to allow for the exclusion of certain non-cash adjustments as determined by the manager and approved by the Company's independent directors.
|
Reconciliation of Net Income to Core Earnings
For three months ended June 30, 2013
(Amounts in thousands except per share data)
|
|
|
|
Real
Estate
Investment
Lending
|
|
Single
Family
Residential
|
|
LNR
|
|
Total
|
|
Net income (loss) attributable to Starwood
Property Trust, Inc.
|
$
|
33,701
|
$
|
(6,060)
|
$
|
34,640
|
$
|
62,281
|
|
|
|
|
|
|
|
|
|
|
Add / (Deduct):
|
|
|
|
|
|
|
|
|
|
Non-cash equity compensation expense
|
|
4,173
|
|
—
|
|
—
|
|
4,173
|
|
Management incentive fee
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Change in Control Plan
|
|
—
|
|
—
|
|
8,512
|
|
8,512
|
|
Depreciation and amortization
|
|
—
|
|
715
|
|
112
|
|
827
|
|
Loan loss allowance
|
|
725
|
|
—
|
|
—
|
|
725
|
|
Interest income adjustment for securities
|
|
(488)
|
|
—
|
|
3,806
|
|
3,318
|
|
(Gains) / losses on:
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
|
—
|
|
—
|
|
8,344
|
|
8,344
|
|
Securities
|
|
690
|
|
—
|
|
(5,248)
|
|
(4,558)
|
|
Impairment of real estate
|
|
—
|
|
458
|
|
—
|
|
458
|
|
Derivatives
|
|
1,144
|
|
—
|
|
(6,037)
|
|
(4,893)
|
|
Foreign currency
|
|
(1,716)
|
|
—
|
|
—
|
|
(1,716)
|
|
Earnings from unconsolidated entities
|
|
—
|
|
—
|
|
(2,373)
|
|
(2,373)
|
|
U.S. special servicing intangible
|
|
—
|
|
—
|
|
(6,114)
|
|
(6,114)
|
|
Core Earnings (Loss)
|
$
|
38,229
|
$
|
(4,887)
|
$
|
35,642
|
$
|
68,984
|
|
Core Earnings (Loss) per Weighted
Average Diluted Share
|
$
|
0.23
|
$
|
(0.03)
|
$
|
0.22
|
$
|
0.42
|
|
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations by Segment
For the six months ended June 30, 2013
(Amounts in thousands, except per share data)
|
|
|
|
Real Estate
Investment
Lending
|
|
Single Family Residential
|
|
LNR
|
|
Subtotal
|
|
LNR VIEs
|
|
Total
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from loans
|
$
|
140,366
|
$
|
-
|
$
|
2,260
|
$
|
142,626
|
$
|
-
|
$
|
142,626
|
|
Interest income from investment securities
|
|
29,878
|
|
-
|
|
11,758
|
|
41,636
|
|
(6,819)
|
|
34,817
|
|
Servicing fees
|
|
-
|
|
-
|
|
52,860
|
|
52,860
|
|
(13,725)
|
|
39,135
|
|
Other revenues
|
|
175
|
|
105
|
|
1,972
|
|
2,252
|
|
(273)
|
|
1,979
|
|
Rental income
|
|
-
|
|
3,653
|
|
-
|
|
3,653
|
|
-
|
|
3,653
|
|
Total revenues
|
|
170,419
|
|
3,758
|
|
68,850
|
|
243,027
|
|
(20,817)
|
|
222,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
28,923
|
|
3,661
|
|
2,274
|
|
34,858
|
|
18
|
|
34,876
|
|
Interest expense
|
|
36,928
|
|
1,300
|
|
2,707
|
|
40,935
|
|
-
|
|
40,935
|
|
General and administrative
|
|
7,653
|
|
1,061
|
|
40,573
|
|
49,287
|
|
147
|
|
49,434
|
|
Business Combination costs
|
|
17,616
|
|
-
|
|
-
|
|
17,616
|
|
-
|
|
17,616
|
|
Acquisition and investment pursuit costs
|
|
1,045
|
|
2,560
|
|
391
|
|
3,996
|
|
-
|
|
3,996
|
|
Residential segment, other operating costs
|
|
-
|
|
3,485
|
|
-
|
|
3,485
|
|
-
|
|
3,485
|
|
Depreciation and amortization
|
|
-
|
|
1,428
|
|
2,228
|
|
3,656
|
|
-
|
|
3,656
|
|
Loan loss allowance
|
|
755
|
|
-
|
|
-
|
|
755
|
|
-
|
|
755
|
|
Other expense
|
|
91
|
|
-
|
|
138
|
|
229
|
|
-
|
|
229
|
|
Total costs and expenses
|
|
93,011
|
|
13,495
|
|
48,311
|
|
154,817
|
|
165
|
|
154,982
|
|
Income before other income (expense),
income taxes and non-controlling interests
|
|
77,408
|
|
(9,737)
|
|
20,539
|
|
88,210
|
|
(20,982)
|
|
67,228
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income of consolidated VIEs, net
|
|
-
|
|
-
|
|
-
|
|
-
|
|
31,949
|
|
31,949
|
|
Change in fair value of servicing rights
|
|
-
|
|
-
|
|
6,114
|
|
6,114
|
|
(3,216)
|
|
2,898
|
|
Change in fair value of investment securities
|
|
74
|
|
-
|
|
6,388
|
|
6,462
|
|
(7,449)
|
|
(987)
|
|
Change in fair value of mortgage loans held-for-sale
|
|
-
|
|
-
|
|
458
|
|
458
|
|
-
|
|
458
|
|
Earnings from unconsolidated entities
|
|
2,592
|
|
-
|
|
3,942
|
|
6,534
|
|
(196)
|
|
6,338
|
|
Gain/loss on sale of investments
|
|
13,506
|
|
1,403
|
|
-
|
|
14,909
|
|
-
|
|
14,909
|
|
Gain/loss on derivative financial instruments
|
|
14,227
|
|
-
|
|
8,159
|
|
22,386
|
|
-
|
|
22,386
|
|
Foreign currency gain/loss, net
|
|
(6,018)
|
|
-
|
|
(67)
|
|
(6,085)
|
|
-
|
|
(6,085)
|
|
OTTI
|
|
(401)
|
|
-
|
|
-
|
|
(401)
|
|
-
|
|
(401)
|
|
Other income
|
|
-
|
|
-
|
|
39
|
|
39
|
|
-
|
|
39
|
|
Total other income
|
|
23,980
|
|
1,403
|
|
25,033
|
|
50,416
|
|
21,088
|
|
71,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
101,388
|
|
(8,334)
|
|
45,572
|
|
138,626
|
|
106
|
|
138,732
|
|
Income tax provision
|
|
1,.026
|
|
12
|
|
10,932
|
|
11,970
|
|
-
|
|
11,970
|
|
Net Income
|
|
100,362
|
|
(8,346)
|
|
34,640
|
|
126,656
|
|
106
|
|
126,762
|
|
Net income attributable to non-controlling interests
|
|
2,148
|
|
(16)
|
|
-
|
|
2,132
|
|
106
|
|
2,238
|
|
Net income attributable to Starwood Property Trust, Inc.
|
$
|
98,214
|
$
|
(8,330)
|
$
|
34,640
|
$
|
124,524
|
$
|
-
|
$
|
124,524
|
|
Reconciliation of Net Income to Core Earnings
For six months ended June 30, 2013
(Amounts in thousands except per share data)
|
|
|
|
Real
Estate
Investment
Lending
|
|
Single
Family
Residential
|
|
LNR
|
|
Total
|
|
Net income (loss) attributable to Starwood
Property Trust, Inc.
|
$
|
98,214
|
$
|
(8,330)
|
$
|
34,640
|
$
|
124,524
|
|
|
|
|
|
|
|
|
|
|
Add / (Deduct):
|
|
|
|
|
|
|
|
|
|
Non-cash equity compensation expense
|
|
8,829
|
|
—
|
|
—
|
|
8,829
|
|
Management incentive fee
|
|
47
|
|
—
|
|
—
|
|
47
|
|
Change in Control Plan
|
|
—
|
|
—
|
|
8,512
|
|
8,512
|
|
Depreciation and amortization
|
|
—
|
|
1,428
|
|
112
|
|
1,540
|
|
Loan loss allowance
|
|
755
|
|
—
|
|
—
|
|
755
|
|
Interest income adjustment for securities
|
|
(488)
|
|
—
|
|
3,806
|
|
3,318
|
|
(Gains) / losses on:
|
|
|
|
|
|
|
|
|
|
Loans held for sale
|
|
—
|
|
—
|
|
8,344
|
|
8,344
|
|
Securities
|
|
252
|
|
—
|
|
(5,248)
|
|
(4,996)
|
|
Impairment of real estate
|
|
—
|
|
458
|
|
—
|
|
458
|
|
Derivatives
|
|
(15,436)
|
|
—
|
|
(6,037)
|
|
(21,473)
|
|
Foreign currency
|
|
5,711
|
|
—
|
|
—
|
|
5,711
|
|
Earnings from unconsolidated entities
|
|
—
|
|
—
|
|
(2,373)
|
|
(2,373)
|
|
U.S. special servicing intangible
|
|
—
|
|
—
|
|
(6,114)
|
|
(6,114)
|
|
Core Earnings (Loss)
|
$
|
97,884
|
$
|
(6,444)
|
$
|
35,642
|
$
|
127,082
|
|
Core Earnings (Loss) per Weighted Average Diluted Share
|
$
|
0.65
|
$
|
(0.04)
|
$
|
0.24
|
$
|
0.85
|
Additional information can be found on the Company's website at www.starwoodpropertytrust.com
Contact: Investor Relations
Phone: 203-422-7788
Email: investorrelations@stwdreit.com
SOURCE Starwood Property Trust, Inc.