Starwood Property Trust : Reports Results for Quarter Ended June 30, 2022 - Form 8-K
August 04, 2022 at 04:32 pm IST
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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., August 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.
1
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.
2
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
3
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
4
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
5
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
6
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
7
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
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
8
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Starwood Property Trust Inc. published this content on 04 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 August 2022 11:01:07 UTC.
Starwood Property Trust, Inc. is a real estate investment trust. The Company's segments include Commercial and Residential Lending, Infrastructure Lending, Property, and Investing and Servicing. Commercial and Residential Lending segment is engaged in originating, acquiring, financing and managing commercial first mortgages, non-agency residential mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities, residential mortgage-backed securities and other real estate and real estate-related debt investments in the United States, Europe and Australia. Infrastructure Lending segment is engaged in originating, acquiring, financing and managing infrastructure debt investments. Property segment is engaged primarily in acquiring and managing equity interests in stabilized commercial real estate properties. Investing and Servicing segment includes a servicing business in the United States; an investment business, and a mortgage loan business.