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Starwood Property Trust Reports Results for the Quarter and Year Ended December 31, 2023

Published: 2024-02-22 12:00:00 ET
<<<  go to STWD company page

– Quarterly GAAP Earnings of $0.22 and Distributable Earnings (DE) of $0.58 per Diluted Share –

– Originated or Acquired $1.6 Billion of Assets in the Quarter and $3.1 Billion for the Year –

– Received Repayments of $1.1 Billion in the Quarter and $4.0 Billion for the Year –

–  Liquidity Increased to $1.2 Billion –

– Undepreciated Book Value Per Share of $20.93 –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., Feb. 22, 2024 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter and year ended December 31, 2023.  The Company's fourth quarter 2023 GAAP net income was $71.0 million, or $0.22 per diluted share. Distributable Earnings (a non-GAAP financial measure) was $189.4 million, or $0.58 per diluted share. The Company's full year 2023 GAAP net income was $339.2 million, or $1.07 per diluted share, and Distributable Earnings was $662.6 million, or $2.05 per diluted share. 

"When we created STWD more than 14 years ago, we set out to build an enterprise that would be durable and so we diversified into multiple business lines to raise our return on equity, provide some consistency to our cash flows, and enable us to selectively deploy capital as risk and reward in the markets changed. The commercial real estate industry faces a balance sheet issue that was not created by a lack of discipline per se.  Rather, the issue arose from a rapid and unprecedented increase in interest rates meant to halt inflation that was largely caused by multiple COVID stimulus packages followed by the American Rescue Plan Act of 2021. These well-intended programs hit a tattered supply chain which caused prices to increase. We will continue to face headwinds in real estate both in the U.S. and abroad until the central banks lower short-term rates to more accurately reflect spreading weakness in the private economy.

However, with our strong balance sheet and multiple investment cylinders, we are able to allocate capital to our highest returning verticals like energy infrastructure lending, and we are well positioned to navigate the challenging environment," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust. "We are not out of the woods, particularly in domestic office markets, but there is light at the end of the tunnel as inevitably the Fed's data catches up with the realities of declining housing costs which represent almost one-third of CPI."

"Our full year results demonstrated the strength of our diversified platform, which has allowed us to maintain low leverage and strong access to liquidity," 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, February 22, 2024, 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:  13740779

The playback can be accessed through March 7, 2024

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, 2023, the Company has successfully deployed over $97 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, 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, 2023, 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, 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

$            390,873

$           63,915

$              —

$           5,260

$              —

$      460,048

$                 —

$        460,048

Interest income from investment securities

32,668

147

—

22,626

—

55,441

(36,606)

18,835

Servicing fees

112

—

—

14,423

—

14,535

(3,642)

10,893

Rental income

1,959

—

22,872

5,148

—

29,979

—

29,979

Other revenues

520

301

219

1,033

450

2,523

—

2,523

Total revenues

426,132

64,363

23,091

48,490

450

562,526

(40,248)

522,278

Costs and expenses:

Management fees

(133)

—

—

—

44,015

43,882

—

43,882

Interest expense

246,576

37,828

14,293

9,859

60,774

369,330

(213)

369,117

General and administrative

13,665

4,049

1,189

25,567

3,787

48,257

—

48,257

Acquisition and investment pursuit costs

463

—

(5)

(158)

—

300

—

300

Costs of rental operations

1,272

—

5,772

2,888

—

9,932

—

9,932

Depreciation and amortization

1,944

19

7,899

2,185

84

12,131

—

12,131

Credit loss provision, net

25,281

694

—

—

—

25,975

—

25,975

Other expense

279

—

—

51

—

330

—

330

Total costs and expenses

289,347

42,590

29,148

40,392

108,660

510,137

(213)

509,924

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

42,664

42,664

Change in fair value of servicing rights

—

—

—

3,085

—

3,085

(1,889)

1,196

Change in fair value of investment securities, net

6,493

—

—

(5,676)

—

817

(403)

414

Change in fair value of mortgage loans, net

151,264

—

—

22,685

—

173,949

—

173,949

Income from affordable housing fund investments

—

—

37,548

—

—

37,548

—

37,548

Earnings (loss)  from unconsolidated entities

847

4,378

—

456

—

5,681

(337)

5,344

Gain  on sale of investments and other assets, net

28

—

—

10,215

—

10,243

—

10,243

(Loss) gain on derivative financial instruments, net

(157,892)

(121)

(2,337)

(8,817)

12,131

(157,036)

—

(157,036)

Foreign currency gain (loss), net

78,762

426

(61)

—

—

79,127

—

79,127

Gain on extinguishment of debt

1,018

—

—

—

—

1,018

—

1,018

Other loss, net

(103,883)

—

—

17

—

(103,866)

—

(103,866)

Total other income (loss)

(23,363)

4,683

35,150

21,965

12,131

50,566

40,035

90,601

Income (loss) before income taxes

113,422

26,456

29,093

30,063

(96,079)

102,955

—

102,955

Income tax (provision) benefit

(14,991)

9

—

(3,333)

—

(18,315)

—

(18,315)

Net income (loss)

98,431

26,465

29,093

26,730

(96,079)

84,640

—

84,640

Net income attributable to non-controlling interests

(4)

—

(12,007)

(1,668)

—

(13,679)

—

(13,679)

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

$              98,427

$           26,465

$        17,086

$          25,062

$      (96,079)

$        70,961

$                 —

$          70,961

 

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, 2023 for additional information regarding Distributable Earnings.

Reconciliation of Net Income to Distributable Earnings

For the three months ended December 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.

$                          98,427

$                          26,465

$                          17,086

$                          25,062

$                       (96,079)

$                          70,961

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

4,659

—

—

4,659

Non-controlling interests attributable to unrealized gains/losses

—

—

4,558

(2,546)

—

2,012

Non-cash equity compensation expense

2,237

387

79

1,601

3,888

8,192

Management incentive fee

—

—

—

—

19,530

19,530

Acquisition and investment pursuit costs

—

—

(82)

(261)

—

(343)

Depreciation and amortization

2,114

9

7,979

2,298

84

12,484

Interest income adjustment for securities

5,743

—

—

8,125

—

13,868

Consolidated income tax provision (benefit) associated with fair value adjustments

14,991

(9)

—

3,333

—

18,315

Other non-cash items

5

—

351

63

—

419

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

Loans

(151,264)

—

—

(22,685)

—

(173,949)

Credit loss provision, net

25,281

694

—

—

—

25,975

Securities

(6,493)

—

—

5,676

—

(817)

Woodstar Fund investments

—

—

(37,548)

—

—

(37,548)

Derivatives

157,892

121

2,337

8,817

(12,131)

157,036

Foreign currency

(78,762)

(426)

61

—

—

(79,127)

Earnings from unconsolidated entities

(847)

(4,378)

—

(456)

—

(5,681)

Sales of properties

—

—

—

(10,215)

—

(10,215)

Impairment of properties

101,069

—

—

—

—

101,069

Recognition of Distributable realized gains / (losses) on:

Loans

(541)

—

—

21,326

—

20,785

Realized credit loss recovery

2,370

311

—

—

—

2,681

Securities

54

—

—

(3,432)

—

(3,378)

Woodstar Fund investments

—

—

16,115

—

—

16,115

Derivatives

34,120

102

6,619

(4,297)

(9,222)

27,322

Foreign currency

(2,084)

53

(60)

—

—

(2,091)

Earnings from unconsolidated entities

847

93

—

427

—

1,367

Sales of properties

—

—

—

(198)

—

(198)

Distributable Earnings (Loss)

$                       205,159

$                          23,422

$                          22,154

$                          32,638

$                       (93,930)

$                       189,443

Distributable Earnings (Loss) per Weighted Average Diluted Share

$                              0.63

$                              0.07

$                              0.07

$                              0.10

$                            (0.29)

$                              0.58

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the year ended December 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

$           1,557,631

$         236,884

$              —

$             9,589

$              —

$   1,804,104

$                 —

$      1,804,104

Interest income from investment securities

135,130

1,805

—

92,147

—

229,082

(152,558)

76,524

Servicing fees

553

—

—

44,895

—

45,448

(12,327)

33,121

Rental income

8,369

—

93,459

25,838

—

127,666

—

127,666

Other revenues

2,527

1,296

713

2,335

1,622

8,493

—

8,493

Total revenues

1,704,210

239,985

94,172

174,804

1,622

2,214,793

(164,885)

2,049,908

Costs and expenses:

Management fees

496

—

—

—

141,047

141,543

—

$         141,543

Interest expense

971,028

141,016

54,522

34,611

235,776

1,436,953

(846)

1,436,107

General and administrative

55,782

15,569

4,155

87,619

17,087

180,212

—

180,212

Acquisition and investment pursuit costs

1,128

17

(5)

(215)

—

925

—

925

Costs of rental operations

8,777

—

22,806

13,259

—

44,842

—

44,842

Depreciation and amortization

7,206

103

31,960

9,788

84

49,141

—

49,141

Credit loss provision, net

225,720

18,008

—

—

—

243,728

—

243,728

Other expense

1,730

—

23

67

—

1,820

—

1,820

Total costs and expenses

1,271,867

174,713

113,461

145,129

393,994

2,099,164

(846)

2,098,318

Other income (loss):

Change in net assets related to consolidated VIEs

—

—

—

—

—

—

181,688

181,688

Change in fair value of servicing rights

—

—

—

401

—

401

1,193

1,594

Change in fair value of investment securities, net

69,259

—

—

(51,889)

—

17,370

(16,603)

767

Change in fair value of mortgage loans, net

25,874

—

—

36,828

—

62,702

—

62,702

Income from affordable housing fund investments

—

—

291,244

—

—

291,244

—

291,244

Earnings (loss) from unconsolidated entities

4,410

5,702

—

8,849

—

18,961

(2,239)

16,722

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

(112)

—

—

25,841

—

25,729

—

25,729

(Loss) gain on derivative financial instruments, net

(25,206)

123

2,111

(4,348)

(11,285)

(38,605)

—

(38,605)

Foreign currency gain (loss), net

60,644

201

(11)

—

—

60,834

—

60,834

Loss on extinguishment of debt

(804)

—

—

(434)

—

(1,238)

—

(1,238)

Other (loss) income, net

(135,576)

—

(5)

29

—

(135,552)

—

(135,552)

Total other income (loss)

(1,511)

6,026

293,339

15,277

(11,285)

301,846

164,039

465,885

Income (loss) before income taxes

430,832

71,298

274,050

44,952

(403,657)

417,475

—

417,475

Income tax benefit (provision)

990

590

—

(898)

—

682

—

682

Net income (loss)

431,822

71,888

274,050

44,054

(403,657)

418,157

—

418,157

Net income attributable to non-controlling interests

(14)

—

(77,156)

(1,774)

—

(78,944)

—

(78,944)

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

$             431,808

$           71,888

$      196,894

$           42,280

$    (403,657)

$      339,213

$                 —

$         339,213

 

Reconciliation of Net Income to Distributable Earnings

For the year ended December 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.

$         431,808

$           71,888

$         196,894

$           42,280

$       (403,657)

$         339,213

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A Units

—

—

18,732

—

—

18,732

Non-controlling interests attributable to unrealized gains/losses

—

—

47,249

(13,885)

—

33,364

Non-cash equity compensation expense

8,755

1,469

310

6,372

22,341

39,247

Management incentive fee

—

—

—

—

35,709

35,709

Acquisition and investment pursuit costs

(81)

—

(328)

(555)

—

(964)

Depreciation and amortization

7,810

64

32,257

10,263

84

50,478

Interest income adjustment for securities

22,404

—

—

28,368

—

50,772

Extinguishment of debt, net

—

—

—

—

(246)

(246)

Consolidated income tax (benefit) provision associated with fair value adjustments

(990)

(590)

—

898

—

(682)

Other non-cash items

15

—

1,468

285

—

1,768

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

—

Loans

(25,874)

—

—

(36,828)

—

(62,702)

Credit loss provision, net

225,720

18,008

—

—

—

243,728

Securities

(69,259)

—

—

51,889

—

(17,370)

Woodstar Fund investments

—

—

(291,244)

—

—

(291,244)

Derivatives

25,206

(123)

(2,111)

4,348

11,285

38,605

Foreign currency

(60,644)

(201)

11

—

—

(60,834)

Earnings from unconsolidated entities

(4,410)

(5,702)

—

(8,849)

—

(18,961)

Sales of properties

—

—

—

(25,841)

—

(25,841)

Impairment of properties

124,902

—

—

—

—

124,902

Recognition of Distributable realized gains / (losses) on:

—

Loans

(4,072)

—

—

36,375

—

32,303

Realized credit loss

(12,292)

(10,795)

—

—

—

(23,087)

Securities

105

—

—

(22,475)

—

(22,370)

Woodstar Fund investments

—

—

61,513

—

—

61,513

Derivatives

119,917

397

22,851

(2,493)

(32,659)

108,013

Foreign currency

(7,250)

13

(11)

—

—

(7,248)

Earnings (loss) from unconsolidated entities

4,410

(1,908)

—

7,020

—

9,522

Sales of properties

—

—

6,246

—

6,246

Distributable Earnings (Loss)

$         786,180

$           72,520

$           87,591

$           83,418

$       (367,143)

$         662,566

Distributable Earnings (Loss) per Weighted Average Diluted Share

$               2.43

$               0.22

$               0.27

$               0.26

$             (1.13)

$               2.05

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of December 31, 2023

(Amounts in thousands)

Commercial and

ResidentialLending

Segment

Infrastructure

Lending

Segment

Property

Segment

Investing

and Servicing

Segment

Corporate

Subtotal

Securitization

VIEs

Total

Assets:

Cash and cash equivalents

$                           8,823

$                56,300

$             19,957

$                22,011

$              87,569

$       194,660

$                       —

$              194,660

Restricted cash

23,902

28,693

1,016

5,175

58,526

117,312

—

117,312

Loans held-for-investment, net

15,069,389

2,495,660

—

9,200

—

17,574,249

—

17,574,249

Loans held-for-sale

2,604,594

—

—

41,043

—

2,645,637

—

2,645,637

Investment securities

1,147,829

19,042

—

1,147,550

—

2,314,421

(1,578,859)

735,562

Properties, net

431,155

—

555,455

59,774

—

1,046,384

—

1,046,384

Properties held-for-sale

—

—

290,937

—

—

290,937

—

290,937

Investments of consolidated affordable housing fund

—

—

2,012,833

—

—

2,012,833

—

2,012,833

Investments in unconsolidated entities

19,151

52,691

—

33,134

—

104,976

(14,600)

90,376

Goodwill

—

119,409

—

140,437

—

259,846

—

259,846

Intangible assets

13,415

—

25,432

63,985

—

102,832

(37,865)

64,967

Derivative assets

55,559

84

5,638

2,156

—

63,437

—

63,437

Accrued interest receivable

180,441

12,485

1,502

1,369

5,070

200,867

—

200,867

Other assets

301,436

3,486

50,459

15,828

49,564

420,773

—

420,773

VIE assets, at fair value

—

—

—

—

—

—

43,786,356

43,786,356

Total Assets

$                 19,855,694

$          2,787,850

$       2,963,229

$          1,541,662

$           200,729

$ 27,349,164

$      42,155,032

$        69,504,196

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other liabilities

$                       106,236

$                45,232

$             12,225

$                44,452

$              85,297

$       293,442

$                       —

$              293,442

Related-party payable

—

—

—

—

44,816

44,816

—

44,816

Dividends payable

—

—

—

—

152,888

152,888

—

152,888

Derivative liabilities

54,066

—

—

—

48,401

102,467

—

102,467

Secured financing agreements, net

10,368,668

1,088,965

598,350

495,857

1,336,913

13,888,753

(20,757)

13,867,996

Collateralized loan obligations and single asset securitization, net

2,674,938

816,354

—

—

—

3,491,292

—

3,491,292

Unsecured senior notes, net

—

—

—

—

2,158,888

2,158,888

—

2,158,888

Debt related to properties held-for-sale

—

—

193,691

—

—

193,691

—

193,691

VIE liabilities, at fair value

—

—

—

—

—

—

42,175,734

42,175,734

Total Liabilities

13,203,908

1,950,551

804,266

540,309

3,827,203

20,326,237

42,154,977

62,481,214

Temporary Equity: Redeemable non-controlling interests

—

—

414,348

—

—

414,348

—

414,348

Permanent Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock

—

—

—

—

3,208

3,208

—

3,208

Additional paid-in capital

1,121,413

664,621

(437,169)

(705,176)

5,220,981

5,864,670

—

5,864,670

Treasury stock

—

—

—

—

(138,022)

(138,022)

—

(138,022)

Retained earnings (accumulated deficit)

5,514,906

172,678

1,974,539

1,556,399

(8,712,641)

505,881

—

505,881

Accumulated other comprehensive income

15,352

—

—

—

—

15,352

—

15,352

Total Starwood Property Trust, Inc. Stockholders' Equity

6,651,671

837,299

1,537,370

851,223

(3,626,474)

6,251,089

—

6,251,089

Non-controlling interests in consolidated subsidiaries

115

—

207,245

150,130

—

357,490

55

357,545

Total Permanent Equity

6,651,786

837,299

1,744,615

1,001,353

(3,626,474)

6,608,579

55

6,608,634

Total Liabilities and Equity

$                 19,855,694

$          2,787,850

$       2,963,229

$          1,541,662

$           200,729

$ 27,349,164

$      42,155,032

$        69,504,196

 

Cision View original content:https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-the-quarter-and-year-ended-december-31-2023-302068465.html

SOURCE Starwood Property Trust, Inc.