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Starwood Property Trust Reports Results for Quarter Ended March 31, 2023

Published: 2023-05-04 11:00:00 ET
<<<  go to STWD company page

– Quarterly GAAP Earnings of $0.16 and Distributable Earnings (DE) of $0.49 per Diluted Share –

– Undepreciated Book Value Per Share of $21.37 –

– LNR Affirmed by Fitch at CSS1, Only Special Servicer Carrying Highest Rating –

– Repaid $250 Million April 2023 Convertible Notes Subsequent to Quarter End –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., May 4, 2023 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2023.  The Company's first quarter 2023 GAAP net income was $52.0 million, and Distributable Earnings (a non-GAAP financial measure) was $157.2 million.

"Our business model has continued to evolve since our inception in 2009.  We have built a diversified enterprise on both sides of the balance sheet that would perform well in normal markets and outperform in volatile ones. This model is supported by one of the lowest leverage ratios in our sector at 2.5x and $1.5 billion of unrealized gains in our owned property portfolio, giving us tremendous flexibility.  We are extremely proud of how the Company has performed throughout cycles since inception.  Since that time, we have diversified our business model with more than 40% of our distributable earnings coming from sources other than commercial lending," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"During the quarter, in light of the market conditions, our new investing was concentrated in infrastructure lending, which comprised 73% of our new origination activity.  Our best-in-class balance sheet remains one of our key competitive advantages.  In addition to $4.2 billion of unencumbered collateral and $3.4 billion of owned property, we also have $25.6 billion of financing capacity diversified across 25 lenders and over 40 facilities, of which $8.3 billion is undrawn," 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 Thursday, May 4, 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:  13736883The playback can be accessed through May 18, 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 March 31, 2023, the Company has successfully deployed over $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 severity and duration of economic disruption caused by the COVID-19 global pandemic (including the variants and resurgences) 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, 2022, 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 March 31, 2023.

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 March 31, 2023

(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

$            375,601

$           54,760

$              —

$              547

$              —

$      430,908

$                 —

$        430,908

Interest income from investment securities

32,521

1,338

—

22,785

—

56,644

(38,007)

18,637

Servicing fees

159

—

—

9,834

—

9,993

(2,737)

7,256

Rental income

1,981

—

23,695

6,613

—

32,289

—

32,289

Other revenues

344

216

103

383

278

1,324

—

1,324

Total revenues

410,606

56,314

23,798

40,162

278

531,158

(40,744)

490,414

Costs and expenses:

Management fees

218

—

—

—

39,322

39,540

—

39,540

Interest expense

226,393

32,818

12,599

7,429

56,272

335,511

(210)

335,301

General and administrative

11,893

3,964

952

20,047

5,252

42,108

—

42,108

Acquisition and investment pursuit costs

207

8

—

54

—

269

—

269

Costs of rental operations

2,451

—

5,549

3,666

—

11,666

—

11,666

Depreciation and amortization

1,631

30

8,108

2,647

—

12,416

—

12,416

Credit loss provision, net

30,790

12,404

—

—

—

43,194

—

43,194

Other expense

832

—

—

16

—

848

—

848

Total costs and expenses

274,415

49,224

27,208

33,859

100,846

485,552

(210)

485,342

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

41,138

41,138

Change in fair value of servicing rights

—

—

—

(50)

—

(50)

354

304

Change in fair value of investment securities, net

14,866

—

—

(14,459)

—

407

(325)

82

Change in fair value of mortgage loans, net

8,262

—

—

639

—

8,901

—

8,901

Income from affordable housing fund investments

—

—

12,965

—

—

12,965

—

12,965

Earnings (loss) from unconsolidated entities

939

1,740

—

679

—

3,358

(633)

2,725

Gain on sale of investments and other assets, net

—

—

—

190

—

190

—

190

(Loss) gain on derivative financial instruments, net

(34,363)

(51)

(1,217)

(3,467)

6,270

(32,828)

—

(32,828)

Foreign currency gain, net

14,930

75

14

—

—

15,019

—

15,019

Loss on extinguishment of debt

(61)

—

—

—

—

(61)

—

(61)

Other loss, net

(2,541)

—

—

—

—

(2,541)

—

(2,541)

Total other income (loss)

2,032

1,764

11,762

(16,468)

6,270

5,360

40,534

45,894

Income (loss) before income taxes

138,223

8,854

8,352

(10,165)

(94,298)

50,966

—

50,966

Income tax benefit

6,557

46

—

2,192

—

8,795

—

8,795

Net income (loss)

144,780

8,900

8,352

(7,973)

(94,298)

59,761

—

59,761

Net income attributable to non-controlling interests

(3)

—

(6,978)

(806)

—

(7,787)

—

(7,787)

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

$            144,777

$             8,900

$          1,374

$          (8,779)

$      (94,298)

$        51,974

$                 —

$          51,974

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 March 31, 2023 for additional information regarding Distributable Earnings.

Reconciliation of Net Income to Distributable Earnings

For the three months ended March 31, 2023

(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.

$                       144,777

$                            8,900

$                            1,374

$                          (8,779)

$                       (94,298)

$                          51,974

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

4,691

—

—

4,691

Non-controlling interests attributable to unrealized gains/losses

—

—

(263)

(2,798)

—

(3,061)

Non-cash equity compensation expense

2,087

312

74

1,595

6,868

10,936

Management incentive fee

—

—

—

—

12,365

12,365

Acquisition and investment pursuit costs

(22)

—

(82)

—

—

(104)

Depreciation and amortization

1,742

20

8,185

2,771

—

12,718

Interest income adjustment for securities

5,220

—

—

5,420

—

10,640

Extinguishment of debt, net

—

—

—

—

(246)

(246)

Consolidated income tax benefit associated with fair value adjustments

(6,557)

(46)

—

(2,192)

—

(8,795)

Other non-cash items

3

—

352

74

—

429

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

Loans

(8,262)

—

—

(639)

—

(8,901)

Credit loss provision, net

30,790

12,404

—

—

—

43,194

Securities

(14,866)

—

—

14,459

—

(407)

Woodstar Fund investments

—

—

(12,965)

—

—

(12,965)

Derivatives

34,363

51

1,217

3,467

(6,270)

32,828

Foreign currency

(14,930)

(75)

(14)

—

—

(15,019)

(Earnings) from unconsolidated entities

(939)

(1,740)

—

(679)

—

(3,358)

Sales of properties

—

—

—

(190)

—

(190)

Recognition of Distributable realized gains / (losses) on:

Loans

(1,720)

—

—

1,763

—

43

Securities

—

—

—

(2,076)

—

(2,076)

Woodstar Fund investments

—

—

14,243

—

—

14,243

Derivatives

19,946

91

4,212

(111)

(6,529)

17,609

Foreign currency

(714)

(30)

14

—

—

(730)

Earnings (loss) from unconsolidated entities

939

(96)

—

497

—

1,340

Sales of properties

—

—

—

79

—

79

Distributable Earnings (Loss)

$                       191,857

$                          19,791

$                          21,038

$                          12,661

$                       (88,110)

$                       157,237

Distributable Earnings (Loss) per Weighted Average Diluted Share

$                              0.60

$                              0.06

$                              0.06

$                              0.04

$                            (0.27)

$                              0.49

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of March 31, 2023

(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

$                   13,903

$                30,948

$                27,742

$                16,910

$             306,296

$             395,799

$                        —

$             395,799

Restricted cash

9,872

33,848

943

4,632

86,342

135,637

—

135,637

Loans held-for-investment, net

16,085,101

2,357,831

—

9,492

—

18,452,424

—

18,452,424

Loans held-for-sale

2,733,358

—

—

77,531

—

2,810,889

—

2,810,889

Investment securities

1,257,966

20,841

—

1,149,916

—

2,428,723

(1,655,836)

772,887

Properties, net

464,183

—

860,220

119,576

—

1,443,979

—

1,443,979

Investments of consolidated affordable housing fund

—

—

1,762,162

—

—

1,762,162

—

1,762,162

Investments in unconsolidated entities

24,955

48,819

—

33,178

—

106,952

(13,883)

93,069

Goodwill

—

119,409

—

140,437

—

259,846

—

259,846

Intangible assets

11,273

—

28,442

65,785

—

105,500

(38,704)

66,796

Derivative assets

90,967

219

3,025

2,408

—

96,619

—

96,619

Accrued interest receivable

171,304

8,408

967

1,356

60

182,095

(288)

181,807

Other assets

218,197

3,658

57,323

20,850

56,048

356,076

—

356,076

VIE assets, at fair value

—

—

—

—

—

—

50,526,390

50,526,390

Total Assets

$          21,081,079

$          2,623,981

$          2,740,824

$          1,642,071

$             448,746

$       28,536,701

$       48,817,679

$       77,354,380

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other liabilities

$                154,121

$                19,433

$                13,601

$                23,093

$                67,082

$             277,330

$                        —

$             277,330

Related-party payable

—

—

—

—

39,583

39,583

—

39,583

Dividends payable

—

—

—

—

152,267

152,267

—

152,267

Derivative liabilities

21,283

146

—

—

56,978

78,407

—

78,407

Secured financing agreements, net

11,097,202

1,048,486

790,299

591,279

1,340,784

14,868,050

(21,062)

14,846,988

Collateralized loan obligations and single asset securitization, net

2,858,185

814,598

—

—

—

3,672,783

—

3,672,783

Unsecured senior notes, net

—

—

—

—

2,331,445

2,331,445

—

2,331,445

VIE liabilities, at fair value

—

—

—

—

—

—

48,838,686

48,838,686

Total Liabilities

14,130,791

1,882,663

803,900

614,372

3,988,139

21,419,865

48,817,624

70,237,489

Temporary Equity: Redeemable non-controlling interests

—

—

364,418

—

—

364,418

—

364,418

Permanent Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock

—

—

—

—

3,197

3,197

—

3,197

Additional paid-in capital

1,702,444

631,627

(415,147)

(639,082)

4,546,667

5,826,509

—

5,826,509

Treasury stock

—

—

—

—

(138,022)

(138,022)

—

(138,022)

Retained earnings (accumulated deficit)

5,227,875

109,691

1,779,019

1,505,340

(7,951,235)

670,690

—

670,690

Accumulated other comprehensive income

19,851

—

—

—

—

19,851

—

19,851

Total Starwood Property Trust, Inc. Stockholders' Equity

6,950,170

741,318

1,363,872

866,258

(3,539,393)

6,382,225

—

6,382,225

Non-controlling interests in consolidated subsidiaries

118

—

208,634

161,441

—

370,193

55

370,248

Total Permanent Equity

6,950,288

741,318

1,572,506

1,027,699

(3,539,393)

6,752,418

55

6,752,473

Total Liabilities and Equity

$          21,081,079

$          2,623,981

$          2,740,824

$          1,642,071

$             448,746

$       28,536,701

$       48,817,679

$       77,354,380

 

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SOURCE Starwood Property Trust, Inc.