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

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Starwood Property Trust, Inc. (NYSE: STWD) announced Q2 2023 GAAP net income of $168.8 million, DE of $157.5 million, and a dividend of $0.48 per share. Undepreciated book value per share increased to $21.46. The company received repayments of $1.3 billion in the quarter and issued $381 million of 2027 Sustainable Convertible Notes. The Federal Reserve's interest rate increase has impacted real estate transaction volumes, but STWD remains well-positioned for future lending opportunities.
Positive
  • Strong Q2 2023 GAAP net income and DE figures
  • Substantial repayments and issuance of convertible notes
  • Positive outlook on future lending opportunities
Negative
  • None.

– Quarterly GAAP Earnings of $0.54 and Distributable Earnings (DE) of $0.49 per Diluted Share –

– Undepreciated Book Value Per Share Increased to $21.46

– Received Repayments of $1.3 Billion in the Quarter and $0.5 Billion Subsequent to Quarter End –

– Issued $381 Million of 2027 Sustainable Convertible Notes Subsequent to Quarter End –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., Aug. 3, 2023 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended June 30, 2023. The Company's second quarter 2023 GAAP net income was $168.8 million, and Distributable Earnings (a non-GAAP financial measure) was $157.5 million.

"The Federal Reserve's rapid increase in interest rates to combat inflation has created some collateral damage. Transaction volumes in real estate across the globe have declined precipitously as owners wait for more accommodating financial markets and lenders have cut lending, particularly in the regional banking system as they manage their balance sheets. This environment should provide exceptional lending opportunities for STWD as the underlying real estate markets remain in fundamentally good condition. Inflation is subsiding, and we expect rate increases to stop or reverse in the near term. As we have in past cycles, we have positioned our company conservatively to take advantage of these future compelling opportunities when the windshield becomes less opaque," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"Our unique, diversified, low leverage company has near record liquidity of $1.2 billion and access to significant incremental liquidity.  This provides us with tremendous flexibility to take advantage of opportunities to earn compelling risk adjusted returns as we continue to build our unique, diversified enterprise," 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, August 3, 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: 1-844-512-2921
International: 1-412-317-6671
Passcode: 13738883
The playback can be accessed through August 17, 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 June 30, 2023, the Company has successfully deployed $95 billion of capital since inception and manages a portfolio of $28 billion across debt and equity investments. Starwood Property Trust's investment objective is to generate attractive and stable returns for shareholders, primarily through dividends, by leveraging a premiere global organization to identify and execute on the best risk adjusted returning investments across its target assets. Additional information can be found at www.starwoodpropertytrust.com.

Forward-Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words "believe," "expect," "anticipate" and other similar expressions. Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, completion of pending investments and financings, continued ability to acquire additional investments, competition within the finance and real estate industries, availability of financing, the severity and duration of economic disruption caused by the COVID-19 global pandemic (including the variants and resurgences) and other risks detailed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as well as other risks and uncertainties set forth from time to time in the Company's reports filed with the SEC, including its Quarterly Report on Form 10-Q for the quarter ended June 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 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, 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

$            394,112


$           59,581


$              —


$           2,156


$              —


$      455,849


$                 —


$        455,849

Interest income from investment securities

33,763


165



21,603



55,531


(36,612)


18,919

Servicing fees

135




9,410



9,545


(3,203)


6,342

Rental income

1,959



23,325


7,023



32,307



32,307

Other revenues

841


310


198


512


391


2,252



2,252

Total revenues

430,810


60,056


23,523


40,704


391


555,484


(39,815)


515,669

Costs and expenses:
















Management fees

212





30,766


30,978



30,978

Interest expense

250,332


35,483


13,469


8,875


55,384


363,543


(211)


363,332

General and administrative

14,565


3,734


993


20,640


3,224


43,156



43,156

Acquisition and investment pursuit costs

251


5



(111)



145



145

Costs of rental operations

2,579



5,446


3,442



11,467



11,467

Depreciation and amortization

1,719


27


8,023


2,554



12,323



12,323

Credit loss provision, net

118,162


3,763





121,925



121,925

Other expense

103



23




126



126

Total costs and expenses

387,923


43,012


27,954


35,400


89,374


583,663


(211)


583,452

Other income (loss):
















Change in net assets related to consolidated VIEs







54,123


54,123

Change in fair value of servicing rights




(1,651)



(1,651)


1,813


162

Change in fair value of investment securities, net

26,444




(11,001)



15,443


(15,455)


(12)

Change in fair value of mortgage loans, net

(65,202)




11,860



(53,342)



(53,342)

Income from affordable housing fund investments



223,823




223,823



223,823

Earnings (loss) from unconsolidated entities

1,482


2,043



7,314



10,839


(877)


9,962

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

(88)




4,768



4,680



4,680

Gain (loss) on derivative financial instruments, net

67,314


197


5,108


3,820


(20,063)


56,376



56,376

Foreign currency gain (loss), net

23,261


82


(9)




23,334



23,334

Loss on extinguishment of debt

(1,004)




(119)



(1,123)



(1,123)

Other (loss) income, net

(26,625)


6


(5)




(26,624)



(26,624)

Total other income (loss)

25,582


2,328


228,917


14,991


(20,063)


251,755


39,604


291,359

Income (loss) before income taxes

68,469


19,372


224,486


20,295


(109,046)


223,576



223,576

Income tax (provision) benefit

(399)


292



(1,090)



(1,197)



(1,197)

Net income (loss)

68,070


19,664


224,486


19,205


(109,046)


222,379



222,379

Net income attributable to non-controlling interests

(4)



(50,359)


(3,173)



(53,536)



(53,536)

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

$              68,066


$           19,664


$      174,127


$          16,032


$    (109,046)


$      168,843


$                 —


$        168,843

 

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 June 30, 2023 for additional information regarding Distributable Earnings.

 

Reconciliation of Net Income to Distributable Earnings 
For the three months ended June 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

$                          68,066


$                          19,664


$                       174,127


$                          16,032


$                     (109,046)


$                       168,843

Add / (Deduct):












Non-controlling interests attributable to Woodstar II Class A Units



4,691




4,691

Non-controlling interests attributable to unrealized gains/losses



43,063


(1,229)



41,834

Non-cash equity compensation expense

2,222


383


78


1,575


5,240


9,498

Management incentive fee





3,814


3,814

Acquisition and investment pursuit costs

(59)



(82)


(228)



(369)

Depreciation and amortization

1,855


18


8,092


2,675



12,640

Interest income adjustment for securities

5,937




7,594



13,531

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

399


(292)



1,090



1,197

Other non-cash items

3



395


74



472

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












Loans

65,202




(11,860)



53,342

Credit loss provision, net

118,162


3,763





121,925

Securities

(26,444)




11,001



(15,443)

Woodstar Fund investments



(223,823)




(223,823)

Derivatives

(67,314)


(197)


(5,108)


(3,820)


20,063


(56,376)

Foreign currency

(23,261)


(82)


9




(23,334)

Earnings from unconsolidated entities

(1,482)


(2,043)



(7,314)



(10,839)

Sales of properties




(4,768)



(4,768)

Unrealized impairment of properties

23,833






23,833

Recognition of Distributable realized gains / (losses) on:












Loans

(621)




10,522



9,901

Realized credit loss

(14,662)






(14,662)

Securities

10




(5,396)



(5,386)

Woodstar Fund investments



14,419




14,419

Derivatives

30,363


99


5,462


300


(7,996)


28,228

Foreign currency

(1,910)


14


(9)




(1,905)

Earnings (loss) from unconsolidated entities

1,482


(1,040)



5,781



6,223

Sales of properties




44



44

Distributable Earnings (Loss)

$                       181,781


$                          20,287


$                          21,314


$                          22,073


$                       (87,925)


$                       157,530

Distributable Earnings (Loss) per Weighted Average Diluted Share

$                              0.56


$                              0.06


$                              0.07


$                              0.07


$                            (0.27)


$                              0.49

 

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the six months ended June 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

$            769,713


$         114,341


$              —


$             2,703


$              —


$      886,757


$                 —


$         886,757

Interest income from investment securities

66,284


1,503



44,388



112,175


(74,619)


37,556

Servicing fees

294




19,244



19,538


(5,940)


13,598

Rental income

3,940



47,020


13,636



64,596



64,596

Other revenues

1,185


526


301


895


669


3,576



3,576

Total revenues

841,416


116,370


47,321


80,866


669


1,086,642


(80,559)


1,006,083

Costs and expenses:
















Management fees

430





70,088


70,518



70,518

Interest expense

476,725


68,301


26,068


16,304


111,656


699,054


(421)


698,633

General and administrative

26,458


7,698


1,945


40,687


8,476


85,264



85,264

Acquisition and investment pursuit costs

458


13



(57)



414



414

Costs of rental operations

5,030



10,995


7,108



23,133



23,133

Depreciation and amortization

3,350


57


16,131


5,201



24,739



24,739

Credit loss provision, net

148,952


16,167





165,119



165,119

Other expense

935



23


16



974



974

Total costs and expenses

662,338


92,236


55,162


69,259


190,220


1,069,215


(421)


1,068,794

Other income (loss):
















Change in net assets related to consolidated VIEs







95,261


95,261

Change in fair value of servicing rights




(1,701)



(1,701)


2,167


466

Change in fair value of investment securities, net

41,310




(25,460)



15,850


(15,780)


70

Change in fair value of mortgage loans, net

(56,940)




12,499



(44,441)



(44,441)

Income from affordable housing fund investments



236,788




236,788



236,788

Earnings (loss) from unconsolidated entities

2,421


3,783



7,993



14,197


(1,510)


12,687

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

(88)




4,958



4,870



4,870

Gain (loss) on derivative financial instruments, net

32,951


146


3,891


353


(13,793)


23,548



23,548

Foreign currency gain, net

38,191


157


5




38,353



38,353

Loss on extinguishment of debt

(1,065)




(119)



(1,184)



(1,184)

Other (loss) income, net

(29,166)


6


(5)




(29,165)



(29,165)

Total other income (loss)

27,614


4,092


240,679


(1,477)


(13,793)


257,115


80,138


337,253

Income (loss) before income taxes

206,692


28,226


232,838


10,130


(203,344)


274,542



274,542

Income tax benefit

6,158


338



1,102



7,598



7,598

Net income (loss)

212,850


28,564


232,838


11,232


(203,344)


282,140



282,140

Net income attributable to non-controlling interests

(7)



(57,337)


(3,979)



(61,323)



(61,323)

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

$            212,843


$           28,564


$      175,501


$             7,253


$    (203,344)


$      220,817


$                 —


$         220,817

 

Reconciliation of Net Income to Distributable Earnings 
For the six months ended June 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

$         212,843


$           28,564


$         175,501


$             7,253


$       (203,344)


$         220,817

Add / (Deduct):












Non-controlling interests attributable to Woodstar II Class A Units



9,382




9,382

Non-controlling interests attributable to unrealized gains/losses



42,800


(4,027)



38,773

Non-cash equity compensation expense

4,309


695


152


3,170


12,108


20,434

Management incentive fee





16,179


16,179

Acquisition and investment pursuit costs

(81)



(164)


(228)



(473)

Depreciation and amortization

3,597


38


16,277


5,446



25,358

Interest income adjustment for securities

11,157




13,014



24,171

Extinguishment of debt, net





(246)


(246)

Consolidated income tax benefit associated with fair value adjustments

(6,158)


(338)



(1,102)



(7,598)

Other non-cash items

6



747


148



901

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












Loans

56,940




(12,499)



44,441

Credit loss provision, net

148,952


16,167





165,119

Securities

(41,310)




25,460



(15,850)

Woodstar Fund investments



(236,788)




(236,788)

Derivatives

(32,951)


(146)


(3,891)


(353)


13,793


(23,548)

Foreign currency

(38,191)


(157)


(5)




(38,353)

Earnings from unconsolidated entities

(2,421)


(3,783)



(7,993)



(14,197)

Sales of properties




(4,958)



(4,958)

Unrealized impairment of properties

23,833






23,833

Recognition of Distributable realized gains / (losses) on:












Loans

(2,341)




12,285



9,944

Realized credit loss

(14,662)






(14,662)

Securities

10




(7,472)



(7,462)

Woodstar Fund investments



28,662




28,662

Derivatives

50,309


190


9,674


189


(14,525)


45,837

Foreign currency

(2,624)


(16)


5




(2,635)

Earnings (loss) from unconsolidated entities

2,421


(1,136)



6,278



7,563

Sales of properties





123



123

Distributable Earnings (Loss)

$         373,638


$           40,078


$           42,352


$           34,734


$       (176,035)


$         314,767

Distributable Earnings (Loss) per Weighted Average Diluted Share

$               1.16


$               0.12


$               0.13


$               0.11


$             (0.54)


$               0.98

 

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of June 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

$                   54,876


$                79,411


$                31,769


$                31,614


$             136,259


$             333,929


$                        —


$             333,929

Restricted cash

25,912


23,060


958


4,637


65,716


120,283



120,283

Loans held-for-investment, net

15,511,767


2,191,973



9,406



17,713,146



17,713,146

Loans held-for-sale

2,663,034




111,354



2,774,388



2,774,388

Investment securities

1,266,437


20,157



1,127,934



2,414,528


(1,650,411)


764,117

Properties, net

476,847



857,354


108,562



1,442,763



1,442,763

Investments of consolidated affordable housing fund



1,976,985




1,976,985



1,976,985

Investments in unconsolidated entities

24,815


50,352



32,947



108,114


(14,463)


93,651

Goodwill


119,409



140,437



259,846



259,846

Intangible assets

14,933



27,365


62,825



105,123


(36,891)


68,232

Derivative assets

73,909


189


1,073


3,838



79,009



79,009

Accrued interest receivable

167,752


14,272


1,213


1,551


5,114


189,902


(280)


189,622

Other assets

340,171


19,316


54,319


20,214


55,506


489,526



489,526

VIE assets, at fair value







46,864,870


46,864,870

Total Assets

$          20,620,453


$          2,518,139


$          2,951,036


$          1,655,319


$             262,595


$       28,007,542


$       45,162,825


$       73,170,367

Liabilities and Equity
















Liabilities:
















Accounts payable, accrued expenses and other liabilities

$                131,382


$                20,197


$                13,463


$                29,472


$                73,563


$             268,077


$                        —


$             268,077

Related-party payable





27,325


27,325



27,325

Dividends payable





152,418


152,418



152,418

Derivative liabilities

28,278


161




69,044


97,483



97,483

Secured financing agreements, net

10,830,397


974,267


790,880


590,969


1,339,494


14,526,007


(20,960)


14,505,047

Collateralized loan obligations and single asset securitization, net

2,844,610


815,183





3,659,793



3,659,793

Unsecured senior notes, net





2,083,517


2,083,517



2,083,517

VIE liabilities, at fair value







45,183,730


45,183,730

Total Liabilities

13,834,667


1,809,808


804,343


620,441


3,745,361


20,814,620


45,162,770


65,977,390

Temporary Equity: Redeemable non-controlling interests



408,034




408,034



408,034

Permanent Equity:
















Starwood Property Trust, Inc. Stockholders' Equity:
















Common stock





3,202


3,202



3,202

Additional paid-in capital

1,472,374


578,977


(423,121)


(648,140)


4,862,723


5,842,813



5,842,813

Treasury stock





(138,022)


(138,022)



(138,022)

Retained earnings (accumulated deficit)

5,295,942


129,354


1,953,146


1,521,373


(8,210,669)


689,146



689,146

Accumulated other comprehensive income

17,355






17,355



17,355

Total Starwood Property Trust, Inc. Stockholders' Equity

6,785,671


708,331


1,530,025


873,233


(3,482,766)


6,414,494



6,414,494

Non-controlling interests in consolidated subsidiaries

115



208,634


161,645



370,394


55


370,449

Total Permanent Equity

6,785,786


708,331


1,738,659


1,034,878


(3,482,766)


6,784,888


55


6,784,943

Total Liabilities and Equity

$          20,620,453


$          2,518,139


$          2,951,036


$          1,655,319


$             262,595


$       28,007,542


$       45,162,825


$       73,170,367

 

 

Cision View original content:https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-quarter-ended-june-30-2023-301892493.html

SOURCE Starwood Property Trust, Inc.

FAQ

What were Starwood Property Trust's Q2 2023 GAAP net income and DE?

Starwood Property Trust's Q2 2023 GAAP net income was $168.8 million, and Distributable Earnings (DE) was $157.5 million.

What was the undepreciated book value per share?

The undepreciated book value per share increased to $21.46.

What actions did the company take in terms of repayments and notes issuance?

The company received repayments of $1.3 billion in the quarter and issued $381 million of 2027 Sustainable Convertible Notes.

What impact did the Federal Reserve's interest rate increase have on the company?

The interest rate increase impacted real estate transaction volumes, but the company remains well-positioned for future lending opportunities.

STARWOOD PROPERTY TRUST, INC.

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