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Starwood Property Trust Reports Results for the Quarter and Year Ended December 31, 2022

Published: 2023-03-01 12:00:00 ET
<<<  go to STWD company page

– Quarterly GAAP Earnings of $0.44 and Distributable Earnings (DE) of $0.50 per Diluted Share –

– Undepreciated Book Value Per Share Increased $0.96 Year-over-Year to $21.70 –

– $10.7 Billion of Investment Activity in 2022, Including $5.3 Billion in CRE Lending –

– $1.2 Billion of Investment Activity in the Fourth Quarter –

– Largest Commercial Mortgage REIT Balance Sheet with Total Assets of $28.3 Billion –

– Liquidity of $1.1 Billion –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., March 1, 2023 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter and year ended December 31, 2022.  The Company's fourth quarter 2022 GAAP net income was $140.0 million, or $0.44 per diluted share. Distributable Earnings (a non-GAAP financial measure) was $160.5 million, or $0.50 per diluted share. The Company's full year 2022 GAAP net income was $871.5 million, or $2.74 per diluted share, and Distributable Earnings was $726.3 million, or $2.28 per diluted share. 

"We built our unique multi-cylinder platform to perform through economic cycles. We have the most diversified asset and liability structure in our sector, which enabled us to once again generate consistent returns in 2022.  Our results were highlighted by continued income growth in our Woodstar Fund investments, which  increased in fair value by $555.0 million this year alone and contributed to record book value growth of 26% over the last two years," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"We are well-positioned to take advantage of outsized investment opportunities across our business lines in 2023, with strong liquidity levels and access to significant sources of capital, including $3.9 billion of unencumbered assets which allow for incremental debt capacity and $1.5 billion of unrealized gains in our property portfolio which are available to be harvested to create incremental liquidity.  As we evaluate investing into these outsized opportunities, we remain laser focused on protecting our low leverage balance sheet," 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, March 1, 2023, 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:  1-844-512-2921International:  1-412-317-6671Passcode:  13735050

The playback can be accessed through March 15, 2023.

About Starwood Property Trust, Inc.

Starwood Property Trust (NYSE: STWD), an affiliate of global private investment firm Starwood Capital Group, is a leading diversified finance company with a core focus on the real estate and infrastructure sectors. As of December 31, 2022, the Company has successfully deployed $94 billion of capital since inception and manages a portfolio of over $28 billion across debt and equity investments. Starwood Property Trust's investment objective is to generate attractive and stable returns for shareholders, primarily through dividends, by leveraging a premiere global organization to identify and execute on the best risk adjusted returning investments across its target assets. Additional information can be found at www.starwoodpropertytrust.com.

Forward-Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words "believe," "expect," "anticipate" and other similar expressions.  Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.  Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, completion of pending investments and financings, continued ability to acquire additional investments, competition within the finance and real estate industries, availability of financing, the duration and extent of the ongoing effects of the COVID-19 pandemic (including variants and resurgences) and other risks detailed under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, 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 TanenbaumStarwood Property TrustPhone: 203-422-7788Email: ztanenbaum@starwood.com

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the three months ended December 31, 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

$            344,104

$           50,133

$              —

$           1,161

$              —

$      395,398

$                 —

$        395,398

Interest income from investment securities

30,138

557

—

23,079

—

53,774

(37,024)

16,750

Servicing fees

138

—

—

13,319

—

13,457

(4,070)

9,387

Rental income

1,793

—

23,708

6,726

—

32,227

—

32,227

Other revenues

253

164

93

259

66

835

—

835

Total revenues

376,426

50,854

23,801

44,544

66

495,691

(41,094)

454,597

Costs and expenses:

Management fees

(166)

—

—

—

41,442

41,276

—

41,276

Interest expense

199,191

29,706

11,517

7,484

47,947

295,845

(216)

295,629

General and administrative

12,796

3,457

1,105

18,875

4,423

40,656

23

40,679

Acquisition and investment pursuit costs

1,233

—

—

15

—

1,248

—

1,248

Costs of rental operations

2,855

—

5,858

3,308

—

12,021

—

12,021

Depreciation and amortization

1,614

77

8,155

2,949

—

12,795

—

12,795

Credit loss provision (reversal), net

26,753

(219)

—

—

—

26,534

—

26,534

Other expense

—

—

—

1

—

1

—

1

Total costs and expenses

244,276

33,021

26,635

32,632

93,812

430,376

(193)

430,183

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

51,733

51,733

Change in fair value of servicing rights

—

—

—

(2,734)

—

(2,734)

2,510

(224)

Change in fair value of investment securities, net

16,837

—

—

(4,326)

—

12,511

(13,032)

(521)

Change in fair value of mortgage loans, net

(24,669)

—

—

5,184

—

(19,485)

—

(19,485)

Income from affordable housing fund investments

—

—

97,003

—

—

97,003

—

97,003

(Loss) earnings from unconsolidated entities

(8,644)

1,351

—

370

—

(6,923)

(311)

(7,234)

Gain  on sale of investments and other assets, net

72

—

—

25,480

—

25,552

—

25,552

(Loss) gain on derivative financial instruments, net

(126,837)

7

1,919

(2,027)

(968)

(127,906)

—

(127,906)

Foreign currency gain (loss), net

116,021

253

(29)

—

—

116,245

—

116,245

Loss on extinguishment of debt

(3)

—

—

(147)

—

(150)

—

(150)

Other loss, net

(1,644)

—

(1,103)

—

—

(2,747)

—

(2,747)

Total other income (loss)

(28,867)

1,611

97,790

21,800

(968)

91,366

40,900

132,266

Income (loss) before income taxes

103,283

19,444

94,956

33,712

(94,714)

156,681

(1)

156,680

Income tax benefit

11,517

5

—

1,002

—

12,524

—

12,524

Net income (loss)

114,800

19,449

94,956

34,714

(94,714)

169,205

(1)

169,204

Net income attributable to non-controlling interests

(4)

—

(24,219)

(4,955)

—

(29,178)

1

(29,177)

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

$            114,796

$           19,449

$        70,737

$          29,759

$      (94,714)

$      140,027

$                 —

$        140,027

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 for 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 Annual Report on Form 10-K for the year ended December 31, 2022 for additional information regarding Distributable Earnings.

Reconciliation of Net Income to Distributable Earnings

For the three months ended December 31, 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.

$                       114,796

$                          19,449

$                          70,737

$                          29,759

$                       (94,714)

$                       140,027

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

4,691

—

—

4,691

Non-controlling interests attributable to unrealized gains/losses

—

—

17,713

(1,788)

—

15,925

Non-cash equity compensation expense

1,853

266

76

1,459

6,828

10,482

Management incentive fee

—

—

—

—

14,465

14,465

Acquisition and investment pursuit costs

(22)

—

(82)

(223)

—

(327)

Depreciation and amortization

1,728

67

8,231

3,071

—

13,097

Interest income adjustment for securities

4,434

—

—

7,601

—

12,035

Extinguishment of debt, net

—

—

—

—

(247)

(247)

Income tax benefit associated with unrealized fair value adjustments

(11,517)

(5)

—

(1,001)

—

(12,523)

Other non-cash items

3

—

362

77

—

442

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

Loans

24,669

—

—

(5,184)

—

19,485

Credit loss provision (reversal), net

26,753

(219)

—

—

—

26,534

Securities

(16,837)

—

—

4,326

—

(12,511)

Woodstar Fund investments

—

—

(97,003)

—

—

(97,003)

Derivatives

126,837

(7)

(1,919)

2,027

968

127,906

Foreign currency

(116,021)

(253)

29

—

—

(116,245)

Loss (earnings) from unconsolidated entities

8,644

(1,351)

—

(370)

—

6,923

Sales of properties

—

—

—

(25,480)

—

(25,480)

Recognition of Distributable realized gains / (losses) on:

Loans

(385)

—

—

5,197

—

4,812

Securities

—

—

—

(10,715)

—

(10,715)

Woodstar Fund investments

—

—

10,887

—

—

10,887

Derivatives

15,279

64

3,240

(1,181)

(4,792)

12,610

Foreign currency

222

34

(29)

—

—

227

(Loss) earnings from unconsolidated entities

(8,616)

—

—

478

—

(8,138)

Sales of properties

—

—

—

23,167

—

23,167

Distributable Earnings (Loss)

$                       171,820

$                          18,045

$                          16,933

$                          31,220

$                       (77,492)

$                       160,526

Distributable Earnings (Loss) per Weighted Average Diluted Share

$                              0.53

$                              0.06

$                              0.05

$                              0.10

$                            (0.24)

$                              0.50

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the year ended December 31, 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

$           1,058,326

$         150,230

$              —

$             9,965

$              —

$   1,218,521

$                 —

$      1,218,521

Interest income from investment securities

102,125

3,681

—

99,043

—

204,849

(139,791)

65,058

Servicing fees

558

—

—

54,836

—

55,394

(15,035)

40,359

Rental income

6,467

—

91,587

30,209

—

128,263

—

128,263

Other revenues

504

451

245

11,258

69

12,527

(12)

12,515

Total revenues

1,167,980

154,362

91,832

205,311

69

1,619,554

(154,838)

1,464,716

Costs and expenses:

Management fees

592

—

—

—

154,959

155,551

—

155,551

Interest expense

501,126

79,137

33,938

26,686

157,097

797,984

(863)

797,121

General and administrative

52,701

14,187

4,069

85,478

18,777

175,212

288

175,500

Acquisition and investment pursuit costs

3,634

3

7

(244)

—

3,400

—

3,400

Costs of rental operations

7,833

—

21,868

14,414

—

44,115

—

44,115

Depreciation and amortization

4,720

387

32,714

11,472

—

49,293

—

49,293

Credit loss provision, net

39,780

6,877

—

—

—

46,657

—

46,657

Other expense

1,251

—

55

8

—

1,314

—

1,314

Total costs and expenses

611,637

100,591

92,651

137,814

330,833

1,273,526

(575)

1,272,951

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

124,001

124,001

Change in fair value of servicing rights

—

—

—

(2,051)

—

(2,051)

3,061

1,010

Change in fair value of investment securities, net

11,818

—

—

(43,179)

—

(31,361)

29,157

(2,204)

Change in fair value of mortgage loans, net

(352,412)

—

—

6,190

—

(346,222)

—

(346,222)

Income from affordable housing fund investments

—

—

755,736

—

—

755,736

—

755,736

(Loss) earnings from unconsolidated entities

(11,242)

3,982

—

2,871

—

(4,389)

(1,934)

(6,323)

Gain on sale of investments and other assets, net

86,532

—

—

51,079

—

137,611

—

137,611

Gain (loss) on derivative financial instruments, net

338,994

1,235

35,081

41,692

(82,987)

334,015

—

334,015

Foreign currency (loss) gain, net

(96,651)

(317)

12

—

—

(96,956)

—

(96,956)

Loss on extinguishment of debt

(209)

(469)

—

(507)

—

(1,185)

—

(1,185)

Other (loss) income, net

(92,632)

—

(1,103)

—

—

(93,735)

25

(93,710)

Total other income (loss)

(115,802)

4,431

789,726

56,095

(82,987)

651,463

154,310

805,773

Income (loss) before income taxes

440,541

58,202

788,907

123,592

(413,751)

997,491

47

997,538

Income tax benefit (provision)

69,199

12

—

(7,688)

—

61,523

—

61,523

Net income (loss)

509,740

58,214

788,907

115,904

(413,751)

1,059,014

47

1,059,061

Net income attributable to non-controlling interests

(14)

—

(172,598)

(14,927)

—

(187,539)

(47)

(187,586)

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

$             509,726

$           58,214

$      616,309

$         100,977

$    (413,751)

$      871,475

$                 —

$         871,475

 

Reconciliation of Net Income to Distributable Earnings

For the year ended December 31, 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.

509,726

58,214

616,309

100,977

(413,751)

871,475

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

18,764

—

—

18,764

Non-controlling interests attributable to unrealized gains/losses

—

—

143,769

(5,161)

—

138,608

Non-cash equity compensation expense

7,966

1,246

285

5,616

25,072

40,185

Management incentive fee

—

—

—

—

49,586

49,586

Acquisition and investment pursuit costs

(381)

—

(324)

(392)

—

(1,097)

Depreciation and amortization

4,919

348

33,005

11,959

—

50,231

Interest income adjustment for securities

10,777

—

—

12,362

—

23,139

Extinguishment of debt, net

—

—

—

—

(986)

(986)

Income tax benefit associated with unrealized fair value adjustments

(64,616)

(7)

—

3,345

—

(61,278)

Other non-cash items

88,194

—

1,498

355

—

90,047

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

Loans

352,412

—

—

(6,190)

—

346,222

Credit loss provision, net

39,780

6,877

—

—

—

46,657

Securities

(11,818)

—

—

43,179

—

31,361

Woodstar Fund investments

—

—

(755,736)

—

—

(755,736)

Derivatives

(338,994)

(1,235)

(35,081)

(41,692)

82,987

(334,015)

Foreign currency

96,651

317

(12)

—

—

96,956

Loss (earnings) from unconsolidated entities

11,242

(3,982)

—

(2,871)

—

4,389

Sales of properties

(86,610)

—

—

(51,079)

—

(137,689)

Recognition of Distributable realized gains / (losses) on:

Loans

(73,406)

—

—

5,467

—

(67,939)

Securities

(3,102)

—

—

(20,443)

—

(23,545)

Woodstar Fund investments

—

—

56,576

—

—

56,576

Derivatives

97,444

5

2,138

32,591

214

132,392

Foreign currency

(4,652)

58

12

—

—

(4,582)

(Loss) earnings from unconsolidated entities

(10,798)

2,632

—

4,236

—

(3,930)

Sales of properties

84,738

—

35,768

—

120,506

Distributable Earnings (Loss)

$         709,472

$           64,473

$           81,203

$         128,027

$       (256,878)

$         726,297

Distributable Earnings (Loss) per Weighted Average Diluted Share

$               2.22

$               0.20

$               0.26

$               0.40

$             (0.80)

$               2.28

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of December 31, 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

$                68,593

$                31,153

$                31,194

$                39,023

$                91,098

$             261,061

$                        —

$             261,061

Restricted cash

18,556

31,133

981

5,259

65,143

121,072

—

121,072

Loans held-for-investment, net

16,038,930

2,352,932

—

9,577

—

18,401,439

—

18,401,439

Loans held-for-sale

2,763,458

—

—

21,136

—

2,784,594

—

2,784,594

Investment securities

1,250,893

66,204

—

1,165,628

—

2,482,725

(1,666,921)

815,804

Properties, net

463,492

—

864,778

121,716

—

1,449,986

—

1,449,986

Investments of consolidated affordable housing fund

—

—

1,761,002

—

—

1,761,002

—

1,761,002

Investments in unconsolidated entities

25,326

47,078

—

33,030

—

105,434

(13,542)

91,892

Goodwill

—

119,409

—

140,437

—

259,846

—

259,846

Intangible assets

11,908

—

29,613

66,310

—

107,831

(39,058)

68,773

Derivative assets

101,082

122

1,803

5,614

—

108,621

—

108,621

Accrued interest receivable

151,852

9,856

863

1,105

5,120

168,796

(275)

168,521

Other assets

170,177

3,614

54,313

12,929

56,444

297,477

—

297,477

VIE assets, at fair value

—

—

—

—

—

—

52,453,041

52,453,041

Total Assets

$       21,064,267

$          2,661,501

$          2,744,547

$          1,621,764

$             217,805

$       28,309,884

$       50,733,245

$       79,043,129

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other liabilities

$             146,897

$                20,656

$                11,716

$                46,377

$                73,353

$             298,999

$                        —

$             298,999

Related-party payable

—

—

—

—

41,186

41,186

—

41,186

Dividends payable

—

—

—

—

151,511

151,511

—

151,511

Derivative liabilities

21,523

105

—

—

69,776

91,404

—

91,404

Secured financing agreements, net

10,804,970

1,042,679

789,719

543,256

1,342,074

14,522,698

(21,166)

14,501,532

Collateralized loan obligations and single asset securitization, net

2,862,211

814,013

—

—

—

3,676,224

—

3,676,224

Unsecured senior notes, net

—

—

—

—

2,329,211

2,329,211

—

2,329,211

VIE liabilities, at fair value

—

—

—

—

—

—

50,754,355

50,754,355

Total Liabilities

13,835,601

1,877,453

801,435

589,633

4,007,111

21,111,233

50,733,189

71,844,422

Temporary Equity: Redeemable non-controlling interests

—

—

362,790

—

—

362,790

—

362,790

Permanent Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock

—

—

—

—

3,181

3,181

—

3,181

Additional paid-in capital

2,124,496

683,258

(405,955)

(646,662)

4,051,950

5,807,087

—

5,807,087

Treasury stock

—

—

—

—

(138,022)

(138,022)

—

(138,022)

Retained earnings (accumulated deficit)

5,083,100

100,790

1,777,643

1,514,119

(7,706,415)

769,237

—

769,237

Accumulated other comprehensive income

20,955

—

—

—

—

20,955

—

20,955

Total Starwood Property Trust, Inc. Stockholders' Equity

7,228,551

784,048

1,371,688

867,457

(3,789,306)

6,462,438

—

6,462,438

Non-controlling interests in consolidated subsidiaries

115

—

208,634

164,674

—

373,423

56

373,479

Total Permanent Equity

7,228,666

784,048

1,580,322

1,032,131

(3,789,306)

6,835,861

56

6,835,917

Total Liabilities and Equity

$       21,064,267

$          2,661,501

$          2,744,547

$          1,621,764

$             217,805

$       28,309,884

$       50,733,245

$       79,043,129

 

Cision View original content:https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-the-quarter-and-year-ended-december-31-2022-301759216.html

SOURCE Starwood Property Trust, Inc.