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

Published: 2022-08-04 11:00:00 ET
<<<  go to STWD company page

– Quarterly GAAP Earnings of $0.67 and Distributable Earnings (DE) of $0.51 per Diluted Share –

– $3.8 Billion of Investment Activity, Including $2.2 Billion in Commercial Lending –

– Undepreciated Book Value Increased 26% Year-over-Year to $21.51 -

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., Aug. 4, 2022 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended June 30, 2022.  The Company's second quarter 2022 GAAP net income was $212.3 million, or $0.67 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $162.5 million, or $0.51 per diluted share. GAAP net income reflects unrealized increases in fair value of the Woodstar Fund's affordable housing investments, net of non-controlling interests.  It also reflects unrealized reductions in the fair value of residential lending investments, which together resulted in a net  increase to undepreciated book value in the quarter of $0.25(*). 

"Our diversified platform delivered strong performance this quarter despite a turbulent equity and credit market backdrop. We closed on nearly $4 billion of new investments, growing our portfolio to a record of $27 billion. Book value increased again this quarter, driven in large part by our affordable housing assets which appreciated due to continued robust rent growth. Today, our commercial loan portfolio LTV stands at just 61%, a major cushion to possible adverse movements in equity cap rates, and is 99% floating rate, providing upside to higher rates. Moreover, the commercial loan book has dramatically changed in its constitution, from 13% in the resilient multifamily sector pre-COVID to more than one third multifamily at quarter end. Similarly, the proportion of loans in the more challenged office asset class has dropped from almost 40% to roughly half that today," stated Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"There are great opportunities for our enterprise as the banks take steps back from the lending market but we must be, as we have through each cycle since we created STWD in 2009, careful to balance growth against a cushion that is prudent in this volatile and uncertain world right now. In addition to our available funds, we believe we can access incremental capital through partial or full sales of our owned property assets or obtaining leverage on our unencumbered asset portfolio. As we always do, we will continue to balance growth and liquidity preservation for the remainder of the year," added Jeffrey DiModica, President of Starwood Property Trust.

(*) These fair values represent estimates and are subject to change.  The fair value of the Woodstar Fund's investments is an estimate that is subject to future increases or decreases as property values are affected by, among other things, the availability of capital, occupancy rates, rental rates and interest and inflation rates.  Similarly, residential lending investments are impacted by changes in interest rates and credit spreads, which could cause increases or decreases to fair value.

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, August 4, 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:  13730650The playback can be accessed through August 11, 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 over $91 billion of capital since inception and manages a portfolio of $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 June 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 June 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

$            227,555

$           30,096

$              —

$           3,499

$              —

$      261,150

$                 —

$        261,150

Interest income from investment securities

22,591

1,173

—

20,990

—

44,754

(29,448)

15,306

Servicing fees

142

—

—

15,616

—

15,758

(3,205)

12,553

Rental income

1,044

—

22,628

7,852

—

31,524

—

31,524

Other revenues

61

90

48

4,854

3

5,056

(3)

5,053

Total revenues

251,393

31,359

22,676

52,811

3

358,242

(32,656)

325,586

Costs and expenses:

Management fees

254

—

—

—

31,370

31,624

—

31,624

Interest expense

88,226

15,001

7,074

6,391

36,142

152,834

(216)

152,618

General and administrative

11,845

3,631

975

23,114

5,342

44,907

98

45,005

Acquisition and investment pursuit costs

738

—

2

(223)

—

517

—

517

Costs of rental operations

1,826

—

5,216

3,556

—

10,598

—

10,598

Depreciation and amortization

1,183

104

8,179

2,774

—

12,240

—

12,240

Credit loss provision, net

7,925

513

—

—

—

8,438

—

8,438

Other expense

1,251

—

—

7

—

1,258

—

1,258

Total costs and expenses

113,248

19,249

21,446

35,619

72,854

262,416

(118)

262,298

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

8,373

8,373

Change in fair value of servicing rights

—

—

—

543

—

543

(908)

(365)

Change in fair value of investment securities, net

(19,312)

—

—

(8,150)

—

(27,462)

26,217

(1,245)

Change in fair value of mortgage loans, net

(121,356)

—

—

7,876

—

(113,480)

—

(113,480)

Income from affordable housing fund investments

—

—

307,165

—

—

307,165

—

307,165

Earnings (loss) from unconsolidated entities

2,786

394

—

1,748

—

4,928

(1,063)

3,865

Gain on sale of investments and other assets, net

138

—

—

—

—

138

—

138

Gain (loss) on derivative financial instruments, net

127,140

265

5,354

9,007

(13,183)

128,583

—

128,583

Foreign currency (loss) gain, net

(78,331)

(289)

18

—

—

(78,602)

—

(78,602)

Other loss, net

(33,809)

—

—

—

—

(33,809)

—

(33,809)

Total other income (loss)

(122,744)

370

312,537

11,024

(13,183)

188,004

32,619

220,623

Income (loss) before income taxes

15,401

12,480

313,767

28,216

(86,034)

283,830

81

283,911

Income tax (provision) benefit

(557)

1

—

(1,650)

—

(2,206)

—

(2,206)

Net income (loss)

14,844

12,481

313,767

26,566

(86,034)

281,624

81

281,705

Net income attributable to non-controlling interests

(4)

—

(67,482)

(1,851)

—

(69,337)

(81)

(69,418)

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

$              14,840

$           12,481

$      246,285

$          24,715

$       (86,034)

$      212,287

$                 —

$        212,287

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 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 Distributable Earnings

For the three months ended June 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.

$                          14,840

$                          12,481

$                       246,285

$                          24,715

$                        (86,034)

$                       212,287

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

4,691

—

—

4,691

Non-controlling interests attributable to unrealized gains/losses

—

—

60,043

(1,910)

—

58,133

Non-cash equity compensation expense

2,036

345

76

1,424

6,026

9,907

Management incentive fee

—

—

—

—

5,271

5,271

Acquisition and investment pursuit costs

(39)

—

(82)

—

—

(121)

Depreciation and amortization

1,229

96

8,250

2,895

—

12,470

Interest income adjustment for securities

2,573

—

—

3,723

—

6,296

Extinguishment of debt, net

—

—

—

—

(247)

(247)

Other non-cash items

32,666

—

336

80

—

33,082

Reversal of GAAP unrealized (gains) / losses on:

Loans

121,356

—

—

(7,876)

—

113,480

Credit loss provision, net

7,925

513

—

—

—

8,438

Securities

19,312

—

—

8,150

—

27,462

Woodstar Fund investments

—

—

(307,165)

—

—

(307,165)

Derivatives

(130,811)

(290)

(6,108)

(9,818)

15,693

(131,334)

Foreign currency

78,331

289

(18)

—

—

78,602

Earnings from unconsolidated entities

(2,786)

(394)

—

(1,748)

—

(4,928)

Recognition of Distributable realized gains / (losses) on:

Loans

(36,343)

—

—

7,753

—

(28,590)

Securities

(333)

—

—

(4,413)

—

(4,746)

Woodstar Fund investments

—

—

15,175

—

—

15,175

Derivatives

42,576

—

(34)

8,247

—

50,789

Foreign currency

(2,117)

(31)

18

—

—

(2,130)

Earnings from unconsolidated entities

2,903

394

—

2,375

—

5,672

Distributable Earnings (Loss)

$                       153,318

$                          13,403

$                          21,467

$                          33,597

$                        (59,291)

$                       162,494

Distributable Earnings (Loss) per Weighted Average Diluted Share

$                              0.48

$                              0.04

$                              0.07

$                              0.11

$                             (0.19)

$                              0.51

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the six months ended June 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

$            430,025

$           57,079

$              —

$             7,665

$              —

$      494,769

$                 —

$         494,769

Interest income from investment securities

43,427

1,920

—

48,379

—

93,726

(64,437)

29,289

Servicing fees

278

—

—

29,687

—

29,965

(7,420)

22,545

Rental income

2,730

—

44,993

15,381

—

63,104

—

63,104

Other revenues

113

158

98

9,508

3

9,880

(9)

9,871

Total revenues

476,573

59,157

45,091

110,620

3

691,444

(71,866)

619,578

Costs and expenses:

Management fees

531

—

—

—

86,388

86,919

—

86,919

Interest expense

156,828

26,931

13,155

12,601

69,984

279,499

(430)

279,069

General and administrative

23,447

7,142

2,031

46,557

9,970

89,147

179

89,326

Acquisition and investment pursuit costs

1,237

1

7

(306)

—

939

—

939

Costs of rental operations

2,345

—

10,217

7,326

—

19,888

—

19,888

Depreciation and amortization

1,477

209

16,398

5,803

—

23,887

—

23,887

Credit loss provision, net

4,626

154

—

—

—

4,780

—

4,780

Other expense

1,251

—

55

7

—

1,313

—

1,313

Total costs and expenses

191,742

34,437

41,863

71,988

166,342

506,372

(251)

506,121

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

35,122

35,122

Change in fair value of servicing rights

—

—

—

326

—

326

393

719

Change in fair value of investment securities, net

(21,417)

—

—

(17,441)

—

(38,858)

37,258

(1,600)

Change in fair value of mortgage loans, net

(237,584)

—

—

(1,679)

—

(239,263)

—

(239,263)

Income from affordable housing fund investments

—

—

541,206

—

—

541,206

—

541,206

Earnings (loss) from unconsolidated entities

1,446

739

—

1,899

—

4,084

(1,129)

2,955

Gain  on sale of investments and other assets, net

86,748

—

—

11,858

—

98,606

—

98,606

Gain (loss) on derivative financial instruments, net

245,535

897

22,900

36,870

(50,351)

255,851

—

255,851

Foreign currency (loss) gain, net

(105,585)

(317)

19

—

—

(105,883)

—

(105,883)

Loss on extinguishment of debt

(206)

(469)

—

(148)

—

(823)

—

(823)

Other (loss) income, net

(34,597)

—

—

—

—

(34,597)

25

(34,572)

Total other income (loss)

(65,660)

850

564,125

31,685

(50,351)

480,649

71,669

552,318

Income (loss) before income taxes

219,171

25,570

567,353

70,317

(216,690)

665,721

54

665,775

Income tax benefit (provision)

4,583

5

—

(4,344)

—

244

—

244

Net income (loss)

223,754

25,575

567,353

65,973

(216,690)

665,965

54

666,019

Net income attributable to non-controlling interests

(7)

—

(119,893)

(9,179)

—

(129,079)

(54)

(129,133)

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

$            223,747

$           25,575

$      447,460

$           56,794

$     (216,690)

$      536,886

$                 —

$         536,886

 

Reconciliation of Net Income to Distributable Earnings

For the six months ended June 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.

$         223,747

$           25,575

$         447,460

$           56,794

$        (216,690)

$         536,886

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

9,382

—

—

9,382

Non-controlling interests attributable to unrealized gains/losses

—

—

104,945

646

—

105,591

Non-cash equity compensation expense

4,453

642

134

2,699

12,072

20,000

Management incentive fee

—

—

—

—

34,226

34,226

Acquisition and investment pursuit costs

(337)

—

(160)

(169)

—

(666)

Depreciation and amortization

1,463

191

16,542

6,047

—

24,243

Interest income adjustment for securities

5,063

—

—

2,015

—

7,078

Extinguishment of debt, net

—

—

—

—

(493)

(493)

Income tax (provision) benefit associated with realized (gains) losses

—

—

—

—

—

—

Other non-cash items

32,669

—

792

202

—

33,663

Reversal of GAAP unrealized (gains) / losses on:

Loans

237,584

—

—

1,679

—

239,263

Credit loss provision, net

4,626

154

—

—

—

4,780

Securities

21,417

—

—

17,441

—

38,858

Woodstar Fund investments

—

—

(541,206)

—

—

(541,206)

Derivatives

(251,983)

(975)

(25,278)

(38,907)

56,466

(260,677)

Foreign currency

105,585

317

(19)

—

—

105,883

Earnings from unconsolidated entities

(1,446)

(739)

—

(1,899)

—

(4,084)

Sales of properties

(86,610)

—

—

(11,858)

—

(98,468)

Recognition of Distributable realized gains / (losses) on:

Loans

(72,551)

—

—

(2,808)

—

(75,359)

Securities

(3,101)

—

—

(4,387)

—

(7,488)

Woodstar Fund investments

—

—

30,834

—

—

30,834

Derivatives

79,469

—

(69)

32,886

—

112,286

Foreign currency

(2,295)

81

19

—

—

(2,195)

Earnings from unconsolidated entities

1,664

739

—

2,845

—

5,248

Sales of properties

84,738

—

177

—

84,915

Distributable Earnings (Loss)

$         384,155

$           25,985

$           43,376

$           63,403

$        (114,419)

$         402,500

Distributable Earnings (Loss) per Weighted Average Diluted Share

$               1.21

$               0.08

$               0.14

$               0.20

$              (0.36)

$               1.27

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of June 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

$                   67,812

$                26,325

$                27,926

$                27,863

$             120,192

$             270,118

$                  2,056

$             272,174

Restricted cash

2,889

38,835

958

10,011

11,939

64,632

—

64,632

Loans held-for-investment, net

15,623,041

2,263,006

—

9,742

—

17,895,789

—

17,895,789

Loans held-for-sale

2,195,953

—

—

40,694

—

2,236,647

—

2,236,647

Investment securities

1,338,195

67,336

—

1,210,361

—

2,615,892

(1,702,532)

913,360

Properties, net

215,099

—

874,119

136,761

—

1,225,979

—

1,225,979

Investments of consolidated affordable housing fund

—

—

1,558,850

—

—

1,558,850

—

1,558,850

Investments in unconsolidated entities

38,612

27,454

—

35,246

—

101,312

(15,802)

85,510

Goodwill

—

119,409

—

140,437

—

259,846

—

259,846

Intangible assets

14,948

—

32,050

69,691

—

116,689

(41,725)

74,964

Derivative assets

126,546

232

371

1,578

—

128,727

—

128,727

Accrued interest receivable

117,918

4,941

14

1,118

7,827

131,818

(158)

131,660

Other assets

126,936

6,952

66,483

34,667

22,453

257,491

(306)

257,185

VIE assets, at fair value

—

—

—

—

—

—

57,993,563

57,993,563

Total Assets

$          19,867,949

$          2,554,490

$          2,560,771

$          1,718,169

$             162,411

$       26,863,790

$       56,235,096

$       83,098,886

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other liabilities

$                152,679

$                24,052

$                10,161

$                48,634

$                37,823

$             273,349

$                        65

$             273,414

Related-party payable

—

—

—

—

30,754

30,754

—

30,754

Dividends payable

—

—

—

—

149,991

149,991

—

149,991

Derivative liabilities

11,899

197

—

—

43,041

55,137

—

55,137

Secured financing agreements, net

9,999,749

1,025,145

788,557

584,395

770,965

13,168,811

(21,364)

13,147,447

Collateralized loan obligations and single asset securitization, net

2,951,308

812,843

—

—

—

3,764,151

—

3,764,151

Unsecured senior notes, net

—

—

—

—

2,324,772

2,324,772

—

2,324,772

VIE liabilities, at fair value

—

—

—

—

—

—

56,256,080

56,256,080

Total Liabilities

13,115,635

1,862,237

798,718

633,029

3,357,346

19,766,965

56,234,781

76,001,746

Temporary Equity: Redeemable non-controlling interests

—

—

322,753

—

—

322,753

—

322,753

Permanent Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock

—

—

—

—

3,167

3,167

—

3,167

Additional paid-in capital

1,926,108

624,101

(378,128)

(556,122)

4,150,574

5,766,533

—

5,766,533

Treasury stock

—

—

—

—

(138,022)

(138,022)

—

(138,022)

Accumulated other comprehensive income

28,970

—

—

—

—

28,970

—

28,970

Retained earnings (accumulated deficit)

4,797,121

68,152

1,608,794

1,469,935

(7,210,654)

733,348

—

733,348

Total Starwood Property Trust, Inc. Stockholders' Equity

6,752,199

692,253

1,230,666

913,813

(3,194,935)

6,393,996

—

6,393,996

Non-controlling interests in consolidated subsidiaries

115

—

208,634

171,327

—

380,076

315

380,391

Total Permanent Equity

6,752,314

692,253

1,439,300

1,085,140

(3,194,935)

6,774,072

315

6,774,387

Total Liabilities and Equity

$          19,867,949

$          2,554,490

$          2,560,771

$          1,718,169

$             162,411

$       26,863,790

$       56,235,096

$       83,098,886

 

Cision View original content:https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-quarter-ended-june-30-2022-301599758.html

SOURCE Starwood Property Trust, Inc.