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Starwood Property Trust Reports Results for Quarter Ended September 30, 2023

Published: 2023-11-08 12:00:00 ET
<<<  go to STWD company page

– Quarterly GAAP Earnings of $0.15 and Distributable Earnings (DE) of $0.49 per Diluted Share –

– Undepreciated Book Value Per Share of $21.15 –

– Originated or Acquired $652 Million of Assets in the Quarter and $1.5 Billion Year-To-Date –

– Received Repayments of $1.1 Billion in the Quarter and $2.9 Billion Year-To-Date –

– Repaid $300 Million of Senior Notes at Maturity Subsequent to Quarter End –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., Nov. 8, 2023 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2023.  The Company's third quarter 2023 GAAP net income was $47.4 million, and Distributable Earnings (a non-GAAP financial measure) was $158.4 million.

"With the U.S. regional and money center banks having dramatically reduced their real estate lending activities, the lending markets today present tremendous return opportunities.  In contrast to many of our public peers, we have actually been deploying capital, with $2.7 billion of new investments over the last twelve months.  We have been extremely selective in doing so until both the level of interest rates and the trajectory of the economy become more transparent. Nonetheless, we are positioned to perform. Our significant current liquidity, our lower leveraged balance sheet, and our diversified business model, position STWD to immediately capitalize on these credit conditions as the windshield clears. With the opportunity set before us, and what we feel will be a more permanent lack of capital from traditional lending sources, STWD is positioned to become one of the leading private credit alternative firms for real estate and infrastructure lending in the world," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"We again demonstrated our access to capital in the most difficult markets, raising $381 million of convertible notes.  With near record levels of liquidity and access to significant additional capital sources, we are very well positioned for this environment," 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 8, 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:  13739159The playback can be accessed through November 22, 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 September 30, 2023, the Company has successfully deployed over $95 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, 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 September 30, 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 September 30, 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

$                       397,045

$           58,628

$           —

$           1,626

$             —

$   457,299

$                 —

$  457,299

Interest income from investment securities

36,178

155

—

25,133

—

61,466

(41,333)

20,133

Servicing fees

147

—

—

11,228

—

11,375

(2,745)

8,630

Rental income

2,470

—

23,567

7,054

—

33,091

—

33,091

Other revenues

822

469

193

407

503

2,394

—

2,394

Total revenues

436,662

59,252

23,760

45,448

503

565,625

(44,078)

521,547

Costs and expenses:

Management fees

199

—

—

—

26,944

27,143

—

27,143

Interest expense

247,727

34,887

14,161

8,448

63,346

368,569

(212)

368,357

General and administrative

15,659

3,822

1,021

21,365

4,824

46,691

—

46,691

Acquisition and investment pursuit costs

207

4

—

—

—

211

—

211

Costs of rental operations

2,475

—

6,039

3,263

—

11,777

—

11,777

Depreciation and amortization

1,912

27

7,930

2,402

—

12,271

—

12,271

Credit loss provision, net

51,487

1,147

—

—

—

52,634

—

52,634

Other expense

516

—

—

—

—

516

—

516

Total costs and expenses

320,182

39,887

29,151

35,478

95,114

519,812

(212)

519,600

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

43,763

43,763

Change in fair value of servicing rights

—

—

—

(983)

—

(983)

915

(68)

Change in fair value of investment securities, net

21,456

—

—

(20,753)

—

703

(420)

283

Change in fair value of mortgage loans, net

(68,450)

—

—

1,644

—

(66,806)

—

(66,806)

Income from affordable housing fund investments

—

—

16,908

—

—

16,908

—

16,908

Earnings (loss) from unconsolidated entities

1,142

(2,459)

—

400

—

(917)

(392)

(1,309)

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

(52)

—

—

10,668

—

10,616

—

10,616

Gain (loss) on derivative financial instruments, net

99,735

98

557

4,116

(9,623)

94,883

—

94,883

Foreign currency (loss) gain, net

(56,309)

(382)

45

—

—

(56,646)

—

(56,646)

Loss on extinguishment of debt

(757)

—

—

(315)

—

(1,072)

—

(1,072)

Other (loss) income, net

(2,527)

(6)

—

12

—

(2,521)

—

(2,521)

Total other income (loss)

(5,762)

(2,749)

17,510

(5,211)

(9,623)

(5,835)

43,866

38,031

Income (loss) before income taxes

110,718

16,616

12,119

4,759

(104,234)

39,978

—

39,978

Income tax benefit

9,823

243

—

1,333

—

11,399

—

11,399

Net income (loss)

120,541

16,859

12,119

6,092

(104,234)

51,377

—

51,377

Net income attributable to non-controlling interests

(3)

—

(7,812)

3,873

—

(3,942)

—

(3,942)

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

$                       120,538

$           16,859

$       4,307

$           9,965

$   (104,234)

$     47,435

$                 —

$    47,435

 

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, 2023 for additional information regarding Distributable Earnings.

Reconciliation of Net Income to Distributable Earnings

For the three months ended September 30, 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.

$                           120,538

$                              16,859

$                              4,307

$                               9,965

$                        (104,234)

$                              47,435

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

4,691

—

—

4,691

Non-controlling interests attributable to unrealized gains/losses

—

—

(109)

(7,312)

—

(7,421)

Non-cash equity compensation expense

2,209

387

79

1,601

6,345

10,621

Acquisition and investment pursuit costs

—

—

(82)

(66)

—

(148)

Depreciation and amortization

2,099

17

8,001

2,519

—

12,636

Interest income adjustment for securities

5,504

—

—

7,229

—

12,733

Consolidated income tax benefit associated with fair value adjustments

(9,823)

(243)

—

(1,333)

—

(11,399)

Other non-cash items

4

—

370

74

—

448

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

Loans

68,450

—

—

(1,644)

—

66,806

Credit loss provision, net

51,487

1,147

—

—

—

52,634

Securities

(21,456)

—

—

20,753

—

(703)

Woodstar Fund investments

—

—

(16,908)

—

—

(16,908)

Derivatives

(99,735)

(98)

(557)

(4,116)

9,623

(94,883)

Foreign currency

56,309

382

(45)

—

—

56,646

(Earnings) loss from unconsolidated entities

(1,142)

2,459

—

(400)

—

917

Sales of properties

—

—

—

(10,668)

—

(10,668)

Recognition of Distributable realized gains / (losses) on:

Loans

(1,190)

—

—

2,764

—

1,574

Realized credit loss

—

(11,106)

—

—

—

(11,106)

Securities

41

—

—

(11,571)

—

(11,530)

Woodstar Fund investments

—

—

16,736

—

—

16,736

Derivatives

35,488

105

6,558

1,615

(8,912)

34,854

Foreign currency

(2,542)

(24)

44

—

—

(2,522)

Earnings (loss) from unconsolidated entities

1,142

(865)

—

315

—

592

Sales of properties

—

—

—

6,321

—

6,321

Distributable Earnings (Loss)

$                           207,383

$                                9,020

$                            23,085

$                             16,046

$                          (97,178)

$                           158,356

Distributable Earnings (Loss) per Weighted Average Diluted Share

$                                  0.64

$                                  0.03

$                                0.07

$                                  0.05

$                               (0.30)

$                                  0.49

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the nine months ended September 30, 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

$         1,166,758

$         172,969

$              —

$             4,329

$              —

$   1,344,056

$                 —

$      1,344,056

Interest income from investment securities

102,462

1,658

—

69,521

—

173,641

(115,952)

57,689

Servicing fees

441

—

—

30,472

—

30,913

(8,685)

22,228

Rental income

6,410

—

70,587

20,690

—

97,687

—

97,687

Other revenues

2,007

995

494

1,302

1,172

5,970

—

5,970

Total revenues

1,278,078

175,622

71,081

126,314

1,172

1,652,267

(124,637)

1,527,630

Costs and expenses:

Management fees

629

—

—

—

97,032

97,661

—

97,661

Interest expense

724,452

103,188

40,229

24,752

175,002

1,067,623

(633)

1,066,990

General and administrative

42,117

11,520

2,966

62,052

13,300

131,955

—

131,955

Acquisition and investment pursuit costs

665

17

—

(57)

—

625

—

625

Costs of rental operations

7,505

—

17,034

10,371

—

34,910

—

34,910

Depreciation and amortization

5,262

84

24,061

7,603

—

37,010

—

37,010

Credit loss provision, net

200,439

17,314

—

—

—

217,753

—

217,753

Other expense

1,451

—

23

16

—

1,490

—

1,490

Total costs and expenses

982,520

132,123

84,313

104,737

285,334

1,589,027

(633)

1,588,394

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

139,024

139,024

Change in fair value of servicing rights

—

—

—

(2,684)

—

(2,684)

3,082

398

Change in fair value of investment securities, net

62,766

—

—

(46,213)

—

16,553

(16,200)

353

Change in fair value of mortgage loans, net

(125,390)

—

—

14,143

—

(111,247)

—

(111,247)

Income from affordable housing fund investments

—

—

253,696

—

—

253,696

—

253,696

Earnings (loss) from unconsolidated entities

3,563

1,324

—

8,393

—

13,280

(1,902)

11,378

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

(140)

—

—

15,626

—

15,486

—

15,486

Gain (loss) on derivative financial instruments, net

132,686

244

4,448

4,469

(23,416)

118,431

—

118,431

Foreign currency (loss) gain, net

(18,118)

(225)

50

—

—

(18,293)

—

(18,293)

Loss on extinguishment of debt

(1,822)

—

—

(434)

—

(2,256)

—

(2,256)

Other (loss) income, net

(31,693)

—

(5)

12

—

(31,686)

—

(31,686)

Total other income (loss)

21,852

1,343

258,189

(6,688)

(23,416)

251,280

124,004

375,284

Income (loss) before income taxes

317,410

44,842

244,957

14,889

(307,578)

314,520

—

314,520

Income tax benefit

15,981

581

—

2,435

—

18,997

—

18,997

Net income (loss)

333,391

45,423

244,957

17,324

(307,578)

333,517

—

333,517

Net income attributable to non-controlling interests

(10)

—

(65,149)

(106)

—

(65,265)

—

(65,265)

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

$            333,381

$           45,423

$      179,808

$           17,218

$    (307,578)

$      268,252

$                 —

$         268,252

 

Reconciliation of Net Income to Distributable Earnings

For the nine months ended September 30, 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.

$         333,381

$           45,423

$         179,808

$           17,218

$       (307,578)

$         268,252

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

14,073

—

—

14,073

Non-controlling interests attributable to unrealized gains/losses

—

—

42,691

(11,339)

—

31,352

Non-cash equity compensation expense

6,518

1,082

231

4,771

18,453

31,055

Management incentive fee

—

—

—

—

16,179

16,179

Acquisition and investment pursuit costs

(81)

—

(246)

(294)

—

(621)

Depreciation and amortization

5,696

55

24,278

7,965

—

37,994

Interest income adjustment for securities

16,661

—

—

20,243

—

36,904

Extinguishment of debt, net

—

—

—

—

(246)

(246)

Consolidated income tax benefit associated with fair value adjustments

(15,981)

(581)

—

(2,435)

—

(18,997)

Other non-cash items

10

—

1,117

222

—

1,349

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

Loans

125,390

—

—

(14,143)

—

111,247

Credit loss provision, net

200,439

17,314

—

—

—

217,753

Securities

(62,766)

—

—

46,213

—

(16,553)

Woodstar Fund investments

—

—

(253,696)

—

—

(253,696)

Derivatives

(132,686)

(244)

(4,448)

(4,469)

23,416

(118,431)

Foreign currency

18,118

225

(50)

—

—

18,293

Earnings from unconsolidated entities

(3,563)

(1,324)

—

(8,393)

—

(13,280)

Sales of properties

—

—

—

(15,626)

—

(15,626)

Unrealized impairment of properties

23,833

—

—

—

—

23,833

Recognition of Distributable realized gains / (losses) on:

Loans

(3,531)

—

—

15,049

—

11,518

Realized credit loss

(14,662)

(11,106)

—

—

—

(25,768)

Securities

51

—

—

(19,043)

—

(18,992)

Woodstar Fund investments

—

—

45,398

—

—

45,398

Derivatives

85,797

295

16,232

1,804

(23,437)

80,691

Foreign currency

(5,166)

(40)

49

—

—

(5,157)

Earnings (loss) from unconsolidated entities

3,563

(2,001)

—

6,593

—

8,155

Sales of properties

—

—

6,444

—

6,444

Distributable Earnings (Loss)

$         581,021

$           49,098

$           65,437

$           50,780

$       (273,213)

$         473,123

Distributable Earnings (Loss) per Weighted Average Diluted Share

$               1.80

$               0.15

$               0.20

$               0.16

$             (0.84)

$               1.47

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of September 30, 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

$                     7,078

$                35,247

$                37,281

$                  9,840

$             105,873

$             195,319

$                        —

$             195,319

Restricted cash

29,474

22,178

997

4,746

178,556

235,951

—

235,951

Loans held-for-investment, net

14,950,568

2,274,318

—

9,319

—

17,234,205

—

17,234,205

Loans held-for-sale

2,499,681

—

—

102,584

—

2,602,265

—

2,602,265

Investment securities

1,237,362

19,582

—

1,106,436

—

2,363,380

(1,641,787)

721,593

Properties, net

469,343

—

851,713

84,735

—

1,405,791

—

1,405,791

Investments of consolidated affordable housing fund

—

—

1,979,184

—

—

1,979,184

—

1,979,184

Investments in unconsolidated entities

25,207

48,224

—

33,050

—

106,481

(14,557)

91,924

Goodwill

—

119,409

—

140,437

—

259,846

—

259,846

Intangible assets

14,153

—

26,375

61,435

—

101,963

(35,974)

65,989

Derivative assets

123,662

134

2,640

6,580

—

133,016

—

133,016

Accrued interest receivable

160,815

9,574

1,298

1,770

88

173,545

(285)

173,260

Other assets

394,099

6,306

51,914

19,533

54,590

526,442

—

526,442

VIE assets, at fair value

—

—

—

—

—

—

44,668,904

44,668,904

Total Assets

$          19,911,442

$          2,534,972

$          2,951,402

$          1,580,465

$             339,107

$       27,317,388

$       42,976,301

$       70,293,689

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other liabilities

$                266,031

$                21,885

$                12,724

$                35,998

$                71,077

$             407,715

$                        —

$             407,715

Related-party payable

—

—

—

—

24,282

24,282

—

24,282

Dividends payable

—

—

—

—

152,737

152,737

—

152,737

Derivative liabilities

15,901

—

—

—

69,756

85,657

—

85,657

Secured financing agreements, net

9,974,212

935,043

791,461

539,820

1,338,203

13,578,739

(20,858)

13,557,881

Collateralized loan obligations and single asset securitization, net

2,702,506

815,768

—

—

—

3,518,274

—

3,518,274

Unsecured senior notes, net

—

—

—

—

2,456,583

2,456,583

—

2,456,583

VIE liabilities, at fair value

—

—

—

—

—

—

42,997,104

42,997,104

Total Liabilities

12,958,650

1,772,696

804,185

575,818

4,112,638

20,223,987

42,976,246

63,200,233

Temporary Equity: Redeemable non-controlling interests

—

—

409,659

—

—

409,659

—

409,659

Permanent Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock

—

—

—

—

3,205

3,205

—

3,205

Additional paid-in capital

1,522,081

616,063

(428,536)

(680,659)

4,827,013

5,855,962

—

5,855,962

Treasury stock

—

—

—

—

(138,022)

(138,022)

—

(138,022)

Retained earnings (accumulated deficit)

5,416,479

146,213

1,957,453

1,531,338

(8,465,727)

585,756

—

585,756

Accumulated other comprehensive income

14,114

—

—

—

—

14,114

—

14,114

Total Starwood Property Trust, Inc. Stockholders' Equity

6,952,674

762,276

1,528,917

850,679

(3,773,531)

6,321,015

—

6,321,015

Non-controlling interests in consolidated subsidiaries

118

—

208,641

153,968

—

362,727

55

362,782

Total Permanent Equity

6,952,792

762,276

1,737,558

1,004,647

(3,773,531)

6,683,742

55

6,683,797

Total Liabilities and Equity

$          19,911,442

$          2,534,972

$          2,951,402

$          1,580,465

$             339,107

$       27,317,388

$       42,976,301

$       70,293,689

 

Cision View original content:https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-quarter-ended-september-30-2023-301980944.html

SOURCE Starwood Property Trust, Inc.