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Starwood Property Trust Reports Results for Quarter Ended September 30, 2022

November 09, 2022

– Quarterly GAAP Earnings of $0.61 and Distributable Earnings (DE) of $0.51 per Diluted Share –

– $1.3 Billion of Investment Activity, Including $0.9 Billion in Commercial Lending –

– Undepreciated Book Value Increased $0.18 Quarter-over-Quarter to $21.69 –

– Priced New $600 Million 5-year Term Loan –

– Liquidity of $1.3 Billion, Including Term Loan Net Proceeds –

– LNR Regains Position as Largest Special Servicer in the U.S., with Over $100 Billion in Named Servicing –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., Nov. 9, 2022 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2022.  The Company's third quarter 2022 GAAP net income was $194.6 million, or $0.61 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $163.3 million, or $0.51 per diluted share.

"We are proud of the multi-cylinder platform we have built over the past 13 years, the diversification of which has allowed us to continue to generate consistent returns across varying market conditions.  Our company is well-positioned for the current environment with $1.3 billion of liquidity and $1.6 billion of embedded unrealized gains in our owned property portfolio.  We will remain laser focused on managing both sides of our balance sheet as we selectively deploy capital into attractive risk adjusted investments," stated Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"Last week, we further fortified our balance sheet with a new $600 million 5-year term loan at pricing which reflects the high credit quality of our business.  This new capital, coupled with our $3.9 billion of unencumbered assets, gives us extraordinary access to incremental liquidity, allowing us to take advantage of very accretive investment opportunities in the future," added Jeffrey DiModica, President of Starwood Property Trust.

Supplemental Schedules

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

Webcast and Conference Call Information  

The Company will host a live webcast and conference call on Wednesday, November 9, 2022, at 10:00 a.m. Eastern Time.  To listen to a live broadcast, access the site at least 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software.  The webcast is available at www.starwoodpropertytrust.com in the Investor Relations section of the website.  The Company encourages use of the webcast due to potential extended wait times to access the conference call via dial-in. 

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

Conference Call Playback:
Domestic:  1-844-512-2921
International:  1-412-317-6671
Passcode:  13730652
The playback can be accessed through November 16, 2022.

About Starwood Property Trust, Inc.

Starwood Property Trust (NYSE: STWD) is a leading diversified finance company with a core focus on the real estate and infrastructure sectors. An affiliate of global private investment firm Starwood Capital Group, the Company has successfully deployed $93 billion of capital since inception and manages a portfolio of over $27 billion across debt and equity investments. Starwood Property Trust's investment objective is to generate attractive and stable returns for shareholders, primarily through dividends, by leveraging a premiere global organization to identify and execute on the best risk adjusted returning investments across its target assets. Additional information can be found at www.starwoodpropertytrust.com.

Forward-Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words "believe," "expect," "anticipate" and other similar expressions.  Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.  Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, the severity and duration of economic disruption caused by the COVID-19 global pandemic (including the emergence of new strains of the virus), completion of pending investments and financings, continued ability to acquire additional investments, competition within the finance and real estate industries, availability of financing and other risks detailed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as well as other risks and uncertainties set forth from time to time in the Company's reports filed with the SEC, including its Quarterly Report on Form 10-Q for the quarter ended September 30, 2022.

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

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

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


Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the three months ended September 30, 2022

(Amounts in thousands)



Commercial and

Residential

Lending

Segment


Infrastructure

Lending

Segment


Property

Segment


Investing

and Servicing

Segment


Corporate


Subtotal


Securitization

VIEs


Total

Revenues:
















Interest income from loans

$            284,197


$           43,018


$              —


$           1,139


$              —


$      328,354


$                 —


$        328,354

Interest income from investment securities

28,560


1,204



27,585



57,349


(38,330)


19,019

Servicing fees

142




11,830



11,972


(3,545)


8,427

Rental income

1,944



22,886


8,102



32,932



32,932

Other revenues

138


129


54


1,491



1,812


(3)


1,809

Total revenues

314,981


44,351


22,940


50,147



432,419


(41,878)


390,541

Costs and expenses:
















Management fees

227





27,129


27,356



27,356

Interest expense

145,107


22,500


9,266


6,601


39,166


222,640


(217)


222,423

General and administrative

16,458


3,588


933


20,046


4,384


45,409


86


45,495

Acquisition and investment pursuit costs

1,164


2



47



1,213



1,213

Costs of rental operations

2,633



5,793


3,780



12,206



12,206

Depreciation and amortization

1,629


101


8,161


2,720



12,611



12,611

Credit loss provision, net

8,401


6,942





15,343



15,343

Total costs and expenses

175,619


33,133


24,153


33,194


70,679


336,778


(131)


336,647

Other income (loss):
















Change in net assets related to consolidated VIEs







37,146


37,146

Change in fair value of servicing rights




357



357


158


515

Change in fair value of investment securities, net

16,398




(21,412)



(5,014)


4,931


(83)

Change in fair value of mortgage loans, net

(90,159)




2,685



(87,474)



(87,474)

Income from affordable housing fund investments



117,527




117,527



117,527

(Loss) earnings from unconsolidated entities

(4,044)


1,892



602



(1,550)


(494)


(2,044)

(Loss) gain on sale of investments and other assets, net

(288)




13,741



13,453



13,453

Gain (loss) on derivative financial instruments, net

220,296


331


10,262


6,849


(31,668)


206,070



206,070

Foreign currency (loss) gain, net

(107,087)


(253)


22




(107,318)



(107,318)

Loss on extinguishment of debt




(212)



(212)



(212)

Other loss, net

(56,391)






(56,391)



(56,391)

Total other income (loss)

(21,275)


1,970


127,811


2,610


(31,668)


79,448


41,741


121,189

Income (loss) before income taxes

118,087


13,188


126,598


19,563


(102,347)


175,089


(6)


175,083

Income tax benefit (provision)

53,099


2



(4,346)



48,755



48,755

Net income (loss)

171,186


13,190


126,598


15,217


(102,347)


223,844


(6)


223,838

Net income attributable to non-controlling interests

(3)



(28,486)


(793)



(29,282)


6


(29,276)

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

$            171,183


$           13,190


$        98,112


$         14,424


$     (102,347)


$      194,562


$                 —


$       194,562

Definition of Distributable Earnings

Distributable Earnings, a non-GAAP financial measure, is used to compute the Company's incentive fees to its external manager and is an appropriate supplemental disclosure for a mortgage REIT.  For the Company's purposes, Distributable Earnings is defined as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee due to the Company's external manager, acquisition costs from successful acquisitions, depreciation and amortization of real estate and associated intangibles, any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period 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. Refer to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 for additional information regarding Distributable Earnings.


Reconciliation of Net Income to Distributable Earnings

For the three months ended September 30, 2022

(Amounts in thousands except per share data)



Commercial and

Residential

Lending

Segment


Infrastructure

Lending

Segment


Property

Segment


Investing

and Servicing

Segment


Corporate


Total

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

$                       171,183


$                          13,190


$                          98,112


$                          14,424


$                     (102,347)


$                       194,562

Add / (Deduct):












Non-controlling interests attributable to Woodstar II Class A Units



4,691




4,691

Non-controlling interests attributable to unrealized gains/losses



21,111


(4,019)



17,092

Non-cash equity compensation expense

1,660


338


75


1,458


6,172


9,703

Management incentive fee





895


895

Acquisition and investment pursuit costs

(22)



(82)




(104)

Depreciation and amortization

1,728


90


8,232


2,841



12,891

Interest income adjustment for securities

1,280




2,746



4,026

Extinguishment of debt, net





(246)


(246)

Consolidated income tax benefit associated with fair value adjustments

(53,099)


(2)



4,346



(48,755)

Other non-cash items

55,522



344


76



55,942

Reversal of GAAP unrealized and realized (gains) / losses on:












Loans

90,159




(2,685)



87,474

Credit loss provision, net

8,401


6,942





15,343

Securities

(16,398)




21,412



5,014

Woodstar Fund investments



(117,527)




(117,527)

Derivatives

(220,296)


(331)


(10,262)


(6,849)


31,668


(206,070)

Foreign currency

107,087


253


(22)




107,318

Loss (earnings) from unconsolidated entities

4,044


(1,892)



(602)



1,550

Sales of properties




(13,741)



(13,741)

Recognition of Distributable realized gains / (losses) on:












Loans

(470)




3,078



2,608

Securities

(1)




(5,341)



(5,342)

Woodstar Fund investments



14,855




14,855

Derivatives

9,144


18


1,345


2,923


(1,109)


12,321

Foreign currency

(2,579)


(57)


22




(2,614)

(Loss) earnings from unconsolidated entities

(3,846)


1,893



913



(1,040)

Sales of properties




12,424



12,424

Distributable Earnings (Loss)

$                       153,497


$                          20,442


$                          20,894


$                          33,404


$                        (64,967)


$                       163,270

Distributable Earnings (Loss) per Weighted Average Diluted Share

$                              0.48


$                              0.06


$                              0.07


$                              0.10


$                             (0.20)


$                              0.51




Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the nine months ended September 30, 2022

(Amounts in thousands)



Commercial and

Residential

Lending

Segment


Infrastructure

Lending

Segment


Property

Segment


Investing

and Servicing

Segment


Corporate


Subtotal


Securitization

VIEs


Total

Revenues:
















Interest income from loans

$            714,222


$         100,097


$              —


$             8,804


$              —


$      823,123


$                 —


$         823,123

Interest income from investment securities

71,987


3,124



75,964



151,075


(102,767)


48,308

Servicing fees

420




41,517



41,937


(10,965)


30,972

Rental income

4,674



67,879


23,483



96,036



96,036

Other revenues

251


287


152


10,999


3


11,692


(12)


11,680

Total revenues

791,554


103,508


68,031


160,767


3


1,123,863


(113,744)


1,010,119

Costs and expenses:
















Management fees

758





113,517


114,275



114,275

Interest expense

301,935


49,431


22,421


19,202


109,150


502,139


(647)


501,492

General and administrative

39,905


10,730


2,964


66,603


14,354


134,556


265


134,821

Acquisition and investment pursuit costs

2,401


3


7


(259)



2,152



2,152

Costs of rental operations

4,978



16,010


11,106



32,094



32,094

Depreciation and amortization

3,106


310


24,559


8,523



36,498



36,498

Credit loss provision, net

13,027


7,096





20,123



20,123

Other expense

1,251



55


7



1,313



1,313

Total costs and expenses

367,361


67,570


66,016


105,182


237,021


843,150


(382)


842,768

Other income (loss):
















Change in net assets related to consolidated VIEs







72,268


72,268

Change in fair value of servicing rights




683



683


551


1,234

Change in fair value of investment securities, net

(5,019)




(38,853)



(43,872)


42,189


(1,683)

Change in fair value of mortgage loans, net

(327,743)




1,006



(326,737)



(326,737)

Income from affordable housing fund investments



658,733




658,733



658,733

(Loss) earnings from unconsolidated entities

(2,598)


2,631



2,501



2,534


(1,623)


911

Gain  on sale of investments and other assets, net

86,460




25,599



112,059



112,059

Gain (loss) on derivative financial instruments, net

465,831


1,228


33,162


43,719


(82,019)


461,921



461,921

Foreign currency (loss) gain, net

(212,672)


(570)


41




(213,201)



(213,201)

Loss on extinguishment of debt

(206)


(469)



(360)



(1,035)



(1,035)

Other (loss) income, net

(90,988)






(90,988)


25


(90,963)

Total other income (loss)

(86,935)


2,820


691,936


34,295


(82,019)


560,097


113,410


673,507

Income (loss) before income taxes

337,258


38,758


693,951


89,880


(319,037)


840,810


48


840,858

Income tax benefit (provision)

57,682


7



(8,690)



48,999



48,999

Net income (loss)

394,940


38,765


693,951


81,190


(319,037)


889,809


48


889,857

Net income attributable to non-controlling interests

(10)



(148,379)


(9,972)



(158,361)


(48)


(158,409)

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

$            394,930


$           38,765


$      545,572


$           71,218


$    (319,037)


$      731,448


$                 —


$         731,448




Reconciliation of Net Income to Distributable Earnings

For the nine months ended September 30, 2022

(Amounts in thousands except per share data)



Commercial and

Residential

Lending

Segment


Infrastructure

Lending

Segment


Property

Segment


Investing

and Servicing

Segment


Corporate


Total

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

$         394,930


$           38,765


$         545,572


$           71,218


$       (319,037)


$         731,448

Add / (Deduct):












Non-controlling interests attributable to Woodstar II Class A Units



14,073




14,073

Non-controlling interests attributable to unrealized gains/losses



126,056


(3,373)



122,683

Non-cash equity compensation expense

6,113


980


209


4,157


18,244


29,703

Management incentive fee





35,121


35,121

Acquisition and investment pursuit costs

(359)



(242)


(169)



(770)

Depreciation and amortization

3,191


281


24,774


8,888



37,134

Interest income adjustment for securities

6,343




4,761



11,104

Extinguishment of debt, net





(739)


(739)

Consolidated income tax benefit associated with fair value adjustments

(53,099)


(2)



4,346



(48,755)

Other non-cash items

88,191



1,136


278



89,605

Reversal of GAAP unrealized and realized (gains) / losses on:












Loans

327,743




(1,006)



326,737

Credit loss provision, net

13,027


7,096





20,123

Securities

5,019




38,853



43,872

Woodstar Fund investments



(658,733)




(658,733)

Derivatives

(465,831)


(1,228)


(33,162)


(43,719)


82,019


(461,921)

Foreign currency

212,672


570


(41)




213,201

Loss (earnings) from unconsolidated entities

2,598


(2,631)



(2,501)



(2,534)

Sales of properties

(86,610)




(25,599)



(112,209)

Recognition of Distributable realized gains / (losses) on:












Loans

(73,021)




270



(72,751)

Securities

(3,102)




(9,728)



(12,830)

Woodstar Fund investments



45,689




45,689

Derivatives

82,165


(59)


(1,102)


33,772


5,006


119,782

Foreign currency

(4,874)


24


41




(4,809)

(Loss) earnings from unconsolidated entities

(2,182)


2,632



3,758



4,208

Sales of properties

84,738





12,601



97,339

Distributable Earnings (Loss)

$        537,652


$           46,428


$           64,270


$           96,807


$        (179,386)


$         565,771

Distributable Earnings (Loss) per Weighted Average Diluted Share

$               1.69


$               0.15


$               0.20


$               0.30


$              (0.56)


$               1.78




Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of September 30, 2022

(Amounts in thousands)



Commercial and

Residential

Lending

Segment


Infrastructure

Lending

Segment


Property

Segment


Investing

and Servicing

Segment


Corporate


Subtotal


Securitization

VIEs


Total

Assets:
















Cash and cash equivalents

$                   76,654


$                59,925


$                32,464


$                43,172


$             124,945


$             337,160


$                  2,550


$             339,710

Restricted cash

6,230


33,410


978


3,789


77,163


121,570



121,570

Loans held-for-investment, net

15,719,718


2,374,444



9,660



18,103,822



18,103,822

Loans held-for-sale

2,125,827




79,857



2,205,684



2,205,684

Investment securities

1,318,372


66,728



1,183,831



2,568,931


(1,678,803)


890,128

Properties, net

214,896



868,454


134,076



1,217,426



1,217,426

Investments of consolidated affordable housing fund



1,669,265




1,669,265



1,669,265

Investments in unconsolidated entities

34,319


29,347



35,494



99,160


(15,996)


83,164

Goodwill


119,409



140,437



259,846



259,846

Intangible assets

14,302



30,829


69,532



114,663


(41,567)


73,096

Derivative assets

249,120


242


321


1,488



251,171



251,171

Accrued interest receivable

143,352


9,177


412


1,412



154,353


(205)


154,148

Other assets

254,353


4,332


77,207


27,033


55,907


418,832


(374)


418,458

VIE assets, at fair value







54,215,370


54,215,370

Total Assets

$          20,157,143


$          2,697,014


$          2,679,930


$          1,729,781


$             258,015


$       27,521,883


$       52,480,975


$       80,002,858

Liabilities and Equity
















Liabilities:
















Accounts payable, accrued expenses and other liabilities

$                404,982


$                41,457


$                12,105


$                43,658


$                60,171


$             562,373


$                        88


$             562,461

Related-party payable





26,146


26,146



26,146

Dividends payable





150,196


150,196



150,196

Derivative liabilities

8,943


223




73,600


82,766



82,766

Secured financing agreements, net

10,250,349


1,095,459


789,138


612,409


769,814


13,517,169


(21,267)


13,495,902

Collateralized loan obligations and single asset securitization, net

2,877,567


813,429





3,690,996



3,690,996

Unsecured senior notes, net





2,326,988


2,326,988



2,326,988

VIE liabilities, at fair value







52,501,845


52,501,845

Total Liabilities

13,541,841


1,950,568


801,243


656,067


3,406,915


20,356,634


52,480,666


72,837,300

Temporary Equity: Redeemable non-controlling interests



344,373




344,373



344,373

Permanent Equity:
















Starwood Property Trust, Inc. Stockholders' Equity:
















Common stock





3,170


3,170



3,170

Additional paid-in capital

1,624,104


665,104


(381,226)


(575,971)


4,447,676


5,779,687



5,779,687

Treasury stock





(138,022)


(138,022)



(138,022)

Retained earnings (accumulated deficit)

4,968,304


81,342


1,706,906


1,484,360


(7,461,724)


779,188



779,188

Accumulated other comprehensive income

22,776






22,776



22,776

Total Starwood Property Trust, Inc. Stockholders' Equity

6,615,184


746,446


1,325,680


908,389


(3,148,900)


6,446,799



6,446,799

Non-controlling interests in consolidated subsidiaries

118



208,634


165,325



374,077


309


374,386

Total Permanent Equity

6,615,302


746,446


1,534,314


1,073,714


(3,148,900)


6,820,876


309


6,821,185

Total Liabilities and Equity

$          20,157,143


$          2,697,014


$          2,679,930


$          1,729,781


$             258,015


$       27,521,883


$       52,480,975


$       80,002,858

 

Cision View original content:https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-quarter-ended-september-30-2022-301672486.html

SOURCE Starwood Property Trust, Inc.

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