Try our mobile app

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

Published: 2022-11-09 12:00:00 ET
<<<  go to STWD company page

– 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:  1-844-512-2921International:  1-412-317-6671Passcode:  13730652The 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 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 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.