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Press Releases

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

– 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:  1-844-512-2921

International:  1-412-317-6671

Passcode:  13730650

The 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 Tanenbaum

Starwood Property Trust

Phone: 203-422-7788

Email: 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.

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