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Starwood Property Trust Reports Results for the Quarter Ended September 30, 2020

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GREENWICH, Conn., Nov. 5, 2020 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE:STWD) today announced operating results for the fiscal quarter ended September 30, 2020.  The Company's third quarter 2020 GAAP net income was $151.8 million, or $0.52 per diluted share, and Core Earnings (a non-GAAP financial measure) was $148.6 million, or $0.50 per diluted share.

"We shifted from a cautious stance in the second quarter and deployed $1.5 billion in the third quarter, taking advantage of the most compelling risk adjusted returns presented across our various business lines. We also proactively addressed the near-term maturity of our $500 million February 2021 notes by successfully completing two successful debt raises, including issuing our first ever sustainability bond.

Our diversified platform showed its power versus pure play commercial mortgage REITs, as we deployed nearly two thirds of the capital this quarter outside our core commercial real estate lending business. Our owned real estate portfolio, over half of which consists of affordable housing, continues to shine, producing a cash on cash yield exceeding 15%. We estimate that we have approximately $3.00 per share of unrealized gains across our owned property assets today. With over $880 million of cash and undrawn debt capacity, our liquidity remains strong and we remain well positioned to selectively deploy capital going forward," commented Barry Sternlicht, Chairman and CEO 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 Thursday, November 5, 2020, 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:  13709052
The playback can be accessed through November 12, 2020.

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 $65 billion of capital since inception and manages a portfolio of over $17 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, 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and our quarterly report on Form 10-Q for the quarter ended September 30, 2020, 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, 2020

(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


$

149,972


$

17,835


$


$

1,597


$


$

169,404


$


$

169,404

Interest income from investment securities



21,385



635





23,587





45,607



(33,421)



12,186

Servicing fees



110







13,749





13,859



(4,311)



9,548

Rental income



2,014





63,925



10,039





75,978





75,978

Other revenues



66



101



48



98





313



(2)



311

Total revenues 



173,547



18,571



63,973



49,070





305,161



(37,734)



267,427

Costs and expenses:

























Management fees



297







221



22,596



23,114



13



23,127

Interest expense



38,422



8,914



16,180



5,425



27,040



95,981





95,981

General and administrative



12,483



3,568



1,094



18,813



3,436



39,394



84



39,478

Acquisition and investment pursuit costs



757



62





65





884





884

Costs of rental operations



643





24,302



4,577





29,522





29,522

Depreciation and amortization



430



87



19,130



3,934





23,581





23,581

Credit loss provision (reversal), net



782



(4,369)









(3,587)





(3,587)

Other expense



77





95







172





172

Total costs and expenses 



53,891



8,262



60,801



33,035



53,072



209,061



97



209,158

Other income (loss):

























Change in net assets related to consolidated VIEs















58,585



58,585

Change in fair value of servicing rights









3,960





3,960



(3,326)



634

Change in fair value of investment securities, net



13,611







3,249





16,860



(17,059)



(199)

Change in fair value of mortgage loans, net



59,402







1,982





61,384





61,384

Earnings (loss) from unconsolidated entities



3,253



(80)





358





3,531



(339)



3,192

(Loss) gain on derivative financial instruments, net



(28,577)



110



(313)



38



645



(28,097)





(28,097)

Foreign currency gain, net



25,302



110



14



26





25,452





25,452

Other (loss) income, net







(1)



358





357





357

Total other income (loss)



72,991



140



(300)



9,971



645



83,447



37,861



121,308

Income (loss) before income taxes 



192,647



10,449



2,872



26,006



(52,427)



179,547



30



179,577

Income tax (provision) benefit



(16,700)



(86)





1,943





(14,843)





(14,843)

Net income (loss) 



175,947



10,363



2,872



27,949



(52,427)



164,704



30



164,734

Net income attributable to non-controlling interests



(3)





(5,072)



(7,795)





(12,870)



(30)



(12,900)

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


$

175,944


$

10,363


$

(2,200)


$

20,154


$

(52,427)


$

151,834


$


$

151,834

 

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, 2020

(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.



175,944



10,363



(2,200)



20,154



(52,427)



151,834

Add / (Deduct):



















Non-controlling interests attributable to Woodstar II Class A Units







5,072







5,072

Non-cash equity compensation expense



1,015



(126)



54



1,215



4,131



6,289

Acquisition and investment pursuit costs



(163)





(89)







(252)

Depreciation and amortization



370



78



19,191



3,525





23,164

Credit loss reversal, net



(259)



(4,369)









(4,628)

Interest income adjustment for securities



(1,035)







1,914





879

Extinguishment of debt, net











(246)



(246)

Income tax provision associated with fair value adjustments



5,519







879





6,398

Other non-cash items



3





(713)



225



158



(327)

Reversal of GAAP unrealized (gains) / losses on:



















Loans



(59,402)







(1,982)





(61,384)

Securities



(13,611)







(3,249)





(16,860)

Derivatives



28,336



(173)



(1,377)



(551)



4,380



30,615

Foreign currency



(25,302)



(110)



(14)



(26)





(25,452)

(Earnings) loss from unconsolidated entities



(3,253)



80





(358)





(3,531)

Recognition of Core realized gains / (losses) on:



















Loans



49,241







6,201





55,442

Securities









(4,318)





(4,318)

Derivatives



(11,625)





(35)



(7,341)





(19,001)

Foreign currency



799



(5)



16



26





836

Earnings (loss) from unconsolidated entities



3,352



(80)





772





4,044

Core Earnings (Loss)


$

149,929


$

5,658


$

19,905


$

17,086


$

(44,004)


$

148,574

Core Earnings (Loss) per Weighted Average Diluted Share


$

0.51


$

0.02


$

0.06


$

0.06


$

(0.15)


$

0.50

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the nine months ended September 30, 2020

(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


$

492,489


$

59,374


$


$

6,071


$


$

557,934


$


$

557,934

Interest income from investment securities



57,358



2,019





73,311





132,688



(90,618)



42,070

Servicing fees



424







28,782





29,206



(8,207)



20,999

Rental income



2,782





191,452



28,600





222,834





222,834

Other revenues



298



344



228



891





1,761



(5)



1,756

Total revenues 



553,351



61,737



191,680



137,655





944,423



(98,830)



845,593

Costs and expenses:

























Management fees



987







680



85,257



86,924



46



86,970

Interest expense



134,243



31,709



49,243



18,796



83,670



317,661



(162)



317,499

General and administrative



29,230



12,328



3,453



54,490



11,105



110,606



251



110,857

Acquisition and investment pursuit costs



2,195



1,179



12



(3)





3,383





3,383

Costs of rental operations



2,409





71,857



13,102





87,368





87,368

Depreciation and amortization



1,275



246



57,571



11,890





70,982





70,982

Credit loss provision, net



52,293



2,991









55,284





55,284

Other expense



230





432







662





662

Total costs and expenses 



222,862



48,453



182,568



98,955



180,032



732,870



135



733,005

Other income (loss):

























Change in net assets related to consolidated VIEs















64,353



64,353

Change in fair value of servicing rights









9,606





9,606



(11,934)



(2,328)

Change in fair value of investment securities, net



(8,814)







(36,026)





(44,840)



47,972



3,132

Change in fair value of mortgage loans, net



56,895







22,805





79,700





79,700

Earnings (loss) from unconsolidated entities



3,975



(1,198)





30,504





33,281



(1,216)



32,065

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



(961)



296





7,433





6,768





6,768

(Loss) gain on derivative financial instruments, net



(9,508)



(1,328)



(35,150)



(22,896)



34,397



(34,485)





(34,485)

Foreign currency (loss)  gain, net



(1,757)



(53)



(53)



2





(1,861)





(1,861)

Loss on extinguishment of debt



(22)



(170)



(2,185)







(2,377)





(2,377)

Other income, net







240



447





687





687

Total other income (loss)



39,808



(2,453)



(37,148)



11,875



34,397



46,479



99,175



145,654

Income (loss) before income taxes 



370,297



10,831



(28,036)



50,575



(145,635)



258,032



210



258,242

Income tax (provision) benefit



(15,535)



3





8,716





(6,816)





(6,816)

Net income (loss) 



354,762



10,834



(28,036)



59,291



(145,635)



251,216



210



251,426

Net income attributable to non-controlling interests



(10)





(15,294)



(11,191)





(26,495)



(210)



(26,705)

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


$

354,752


$

10,834


$

(43,330)


$

48,100


$

(145,635)


$

224,721


$


$

224,721

 

Reconciliation of Net Income to Core Earnings

For the nine months ended September 30, 2020

(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.



354,752



10,834



(43,330)



48,100



(145,635)



224,721

Add / (Deduct):



















Non-controlling interests attributable to Woodstar II Class A Units







15,294







15,294

Non-cash equity compensation expense



3,563



821



185



3,725



14,147



22,441

Management incentive fee











15,799



15,799

Acquisition and investment pursuit costs



401





(266)



(72)





63

Depreciation and amortization



1,095



208



57,808



10,669





69,780

Credit loss provision, net



51,252



2,991









54,243

Interest income adjustment for securities



238







9,856





10,094

Extinguishment of debt, net











(739)



(739)

Income tax provision (benefit) associated with fair value adjustments



1,612







(955)





657

Other non-cash items



10





(1,689)



703



470



(506)

Reversal of GAAP unrealized (gains) / losses on:



















Loans



(56,895)







(22,805)





(79,700)

Securities



8,814







36,026





44,840

Derivatives



8,816



1,260



32,593



21,986



(23,509)



41,146

Foreign currency



1,757



53



53



(2)





1,861

(Earnings) loss from unconsolidated entities



(3,975)



1,198





(30,504)





(33,281)

Recognition of Core realized gains / (losses) on:



















Loans



45,742



(62)





22,759





68,439

Securities









(8,711)





(8,711)

Derivatives



(3,853)



118



(439)



(13,438)





(17,612)

Foreign currency



(5,441)



(147)



(53)



2





(5,639)

Earnings (loss) from unconsolidated entities



2,772



(813)





17,502





19,461

Sales of properties









(5,789)





(5,789)

Core Earnings (Loss)


$

410,660


$

16,461


$

60,156


$

89,052


$

(139,467)


$

436,862

Core Earnings (Loss) per Weighted Average Diluted Share


$

1.39


$

0.06


$

0.20


$

0.30


$

(0.47)


$

1.48

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of September 30, 2020

(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


$

19,111


$

994


$

38,119


$

22,054


$

298,844


$

379,122


$

748


$

379,870

Restricted cash



69,351



31,515



7,632



22,838





131,336





131,336

Loans held-for-investment, net



9,373,503



1,544,068





1,081





10,918,652





10,918,652

Loans held-for-sale



747,654







265,019





1,012,673





1,012,673

Investment securities



1,152,362



39,813





1,097,322





2,289,497



(1,544,384)



745,113

Properties, net



27,123





1,983,124



197,575





2,207,822





2,207,822

Intangible assets







41,946



70,374





112,320



(38,181)



74,139

Investment in unconsolidated entities



50,850



24,664





45,236





120,750



(16,366)



104,384

Goodwill





119,409





140,437





259,846





259,846

Derivative assets



25,805





54



1,250



37,716



64,825





64,825

Accrued interest receivable



72,344



3,244





334



3,484



79,406



(1,376)



78,030

Other assets



24,705



4,216



70,369



52,352



11,829



163,471



3



163,474

VIE assets, at fair value















64,477,475



64,477,475

Total Assets


$

11,562,808


$

1,767,923


$

2,141,244


$

1,915,872


$

351,873


$

17,739,720


$

62,877,919


$

80,617,639

Liabilities and Equity

























Liabilities:

























Accounts payable, accrued expenses and other liabilities


$

36,378


$

8,545


$

49,758


$

35,796


$

70,956


$

201,433


$

58


$

201,491

Related-party payable









5



22,091



22,096





22,096

Dividends payable











138,264



138,264





138,264

Derivative liabilities



8,839



1,516





3,097





13,452





13,452

Secured financing agreements, net



5,576,092



1,243,001



1,793,731



614,055



389,013



9,615,892





9,615,892

Collateralized loan obligations, net



929,931











929,931





929,931

Unsecured senior notes, net











1,934,555



1,934,555





1,934,555

VIE liabilities, at fair value















62,876,265



62,876,265

Total Liabilities



6,551,240



1,253,062



1,843,489



652,953



2,554,879



12,855,623



62,876,323



75,731,946

Equity:

























Starwood Property Trust, Inc. Stockholders' Equity:

























Common stock











2,918



2,918





2,918

Additional paid-in capital



1,165,764



509,848



115,246



(124,805)



3,534,663



5,200,716





5,200,716

Treasury stock











(133,024)



(133,024)





(133,024)

Accumulated other comprehensive income (loss)



42,350







(65)





42,285





42,285

Retained earnings (accumulated deficit)



3,803,336



5,013



(42,898)



1,243,098



(5,607,563)



(599,014)





(599,014)

Total Starwood Property Trust, Inc. Stockholders' Equity



5,011,450



514,861



72,348



1,118,228



(2,203,006)



4,513,881





4,513,881

Non-controlling interests in consolidated subsidiaries



118





225,407



144,691





370,216



1,596



371,812

Total Equity



5,011,568



514,861



297,755



1,262,919



(2,203,006)



4,884,097



1,596



4,885,693

Total Liabilities and Equity


$

11,562,808


$

1,767,923


$

2,141,244


$

1,915,872


$

351,873


$

17,739,720


$

62,877,919


$

80,617,639

 

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SOURCE Starwood Property Trust, Inc.

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