Starwood Property Trust Reports Results for Quarter Ended March 31, 2024

Rhea-AI Summary

Starwood Property Trust reported strong results for the quarter ended March 31, 2024, with GAAP earnings of $0.48 and Distributable Earnings of $0.59 per diluted share. The company issued $600 million of senior unsecured sustainability notes due 2029, sold a master lease portfolio for $387 million, and recorded over $1.0 billion in loan repayments. Liquidity reached a record $1.5 billion, and undepreciated book value per share stood at $20.69. The company paid a dividend of $0.48 per share. Starwood Property Trust continues to navigate the market successfully, focusing on low leverage multi-cylinder business strategies to create value and deploy capital into the best risk-adjusted investments across all business lines.

Positive

• Strong GAAP earnings of $0.48 and Distributable Earnings of $0.59 per diluted share showcase financial stability and growth.

• Successful issuance of $600 million of senior unsecured sustainability notes due 2029 highlights access to liquidity and investor confidence.

• Sold master lease portfolio for $387 million and recorded over $1.0 billion in loan repayments, demonstrating effective asset management and capital deployment.

• Record liquidity of $1.5 billion and undepreciated book value per share of $20.69 indicate strong financial health and asset value.

• Paid dividend of $0.48 per share, reflecting commitment to shareholder value and consistent returns.

Negative

• None.

Insights

Financial Analyst

Starwood Property Trust's report for the quarter ended March 31, 2024, showcases a robust financial position, with GAAP net income reported at $154.3 million and Distributable Earnings (DE) of $191.6 million. These figures include gains from the sale of their Master Lease Portfolio, which appears to be a strategic divestiture contributing $90.8 million to GAAP net income and $37.4 million to DE. Furthermore, the issuance of $600 million in Senior Unsecured Sustainability Notes is a significant event, indicating strong market confidence, as evidenced by the issuance being 7x oversubscribed. The company also shows prudent financial management with over $1.0 billion in loan repayments and an increase in liquidity to a record $1.5 billion. The declared dividend of $0.48 per share is consistent with the earnings reported and the company's undepreciated book value per share of $20.69 signals a robust balance sheet. For retail investors, these results demonstrate solid financial health and could be considered positive indicators of the company's ability to generate value and sustain dividend payments.

Market Research Analyst

The company's strategy of diversifying its business lines, including infrastructure lending, residential lending, special servicing, CMBS and conduit businesses, in addition to its core commercial lending, signifies an adaptive approach to market dynamics. This reduces reliance on any single revenue stream and potentially mitigates sector-specific risks. Monetizing the Master Lease Portfolio and maintaining strong liquidity through strategic financial maneuvers, such as the recent unsecured debt issuance, positions Starwood Property Trust favorably in the eyes of investors who value both stability and innovative asset management. Long-term, these activities signal the presence of a strategic roadmap designed to navigate and capitalize on evolving market conditions, which could result in sustained growth and stability for shareholders.

– Quarterly GAAP Earnings of $0.48 and Distributable Earnings (DE) of $0.59 per Diluted Share –

– Issued $600 Million of Senior Unsecured Sustainability Notes due 2029 –

– Sold Master Lease Portfolio for $387 Million –

– Over $1.0 Billion in Loan Repayments –

–  Liquidity Increased to a Record $1.5 Billion –

– Undepreciated Book Value Per Share of $20.69 –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., May 8, 2024 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2024.  The Company's first quarter 2024 GAAP net income was $154.3 million, and Distributable Earnings (a non-GAAP financial measure) was $191.6 million.  These amounts include net gains of $90.8 million and $37.4 million, respectively, on the sale of our Master Lease Portfolio.

"We continue to navigate this dynamic market landscape with our low leverage multi-cylinder business. This quarter, we monetized our Master Lease Portfolio, highlighting the success we have had in creating value from our owned property assets. Along with our infrastructure lending, residential lending, special servicing, CMBS and conduit businesses, the properties have been a strong complement to our core commercial lending business. We will continue to pursue opportunities to deploy capital into the best risk-adjusted investments across all of our business lines as opportunities arise," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"We have maintained our strong access to liquidity, as demonstrated by our $600 million five-year unsecured debt issuance this quarter. We were the first in our industry to issue unsecured debt in over two years with a transaction that was 7x oversubscribed from more than 150 institutional credit investors," added Jeffrey DiModica, President of Starwood Property Trust.

Supplemental Schedules

The Company has published supplemental earnings schedules on its website in order to provide additional disclosure and financial information for the benefit of the Company's stakeholders.  Specifically, these materials can be found on the Company's website in the Investor Relations section under "Quarterly Results" at www.starwoodpropertytrust.com.

Webcast and Conference Call Information 

The Company will host a live webcast and conference call on Wednesday, May 8, 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:  1-844-512-2921
International:  1-412-317-6671
Passcode:  13742859
The playback can be accessed through May 22, 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 March 31, 2024, the Company has successfully deployed over $97 billion of capital since inception and manages a portfolio of over $26 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, including its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

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 March 31, 2024
(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	$                       394,472		$           66,398		$           —		$           2,622		$             —		$   463,492		$                 —		$  463,492
Interest income from investment securities	31,405		138		—		21,144		—		52,687		(34,481)		18,206
Servicing fees	128		—		—		13,039		—		13,167		(3,478)		9,689
Rental income	3,565		—		20,775		4,507		—		28,847		—		28,847
Other revenues	983		392		127		748		604		2,854		—		2,854
Total revenues	430,553		66,928		20,902		42,060		604		561,047		(37,959)		523,088
Costs and expenses:
Management fees	192		—		—		—		45,822		46,014		—		46,014
Interest expense	236,149		38,973		13,298		8,317		59,429		356,166		(210)		355,956
General and administrative	16,828		5,955		1,263		23,467		3,150		50,663		—		50,663
Costs of rental operations	2,025		—		5,707		2,612		—		10,344		—		10,344
Depreciation and amortization	1,949		14		5,855		1,749		251		9,818		—		9,818
Credit loss provision, net	34,977		862		—		—		—		35,839		—		35,839
Other expense	730		—		—		(56)		—		674		—		674
Total costs and expenses	292,850		45,804		26,123		36,089		108,652		509,518		(210)		509,308
Other income (loss):
Change in net assets related to consolidated VIEs	—		—		—		—		—		—		10,086		10,086
Change in fair value of servicing rights	—		—		—		(3,381)		—		(3,381)		3,609		228
Change in fair value of investment securities, net	(6,991)		—		—		(16,458)		—		(23,449)		24,364		915
Change in fair value of mortgage loans, net	(40,677)		—		—		11,664		—		(29,013)		—		(29,013)
Income from affordable housing fund investments	—		—		9,448		—		—		9,448		—		9,448
Earnings from unconsolidated entities	7,345		327		—		313		—		7,985		(310)		7,675
(Loss) gain on sale of investments and other assets, net	(41)		—		92,003		—		—		91,962		—		91,962
Gain (loss) on derivative financial instruments, net	110,952		122		1,721		3,012		(13,868)		101,939		—		101,939
Foreign currency (loss) gain, net	(41,818)		(84)		32		—		—		(41,870)		—		(41,870)
Gain (loss) on extinguishment of debt	315		(560)		(1,209)		—		—		(1,454)		—		(1,454)
Other (loss) income, net	(2,676)		40		—		6		—		(2,630)		—		(2,630)
Total other income (loss)	26,409		(155)		101,995		(4,844)		(13,868)		109,537		37,749		147,286
Income (loss) before income taxes	164,112		20,969		96,774		1,127		(121,916)		161,066		—		161,066
Income tax (provision) benefit	(721)		128		—		(613)		—		(1,206)		—		(1,206)
Net income (loss)	163,391		21,097		96,774		514		(121,916)		159,860		—		159,860
Net (income) loss attributable to non-controlling interests	(3)		—		(6,225)		700		—		(5,528)		—		(5,528)
Net income (loss) attributable to Starwood Property Trust, Inc.	$                       163,388		$           21,097		$     90,549		$           1,214		$   (121,916)		$   154,332		$                 —		$  154,332

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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 for additional information regarding Distributable Earnings.

 

Reconciliation of Net Income to Distributable Earnings
For the three months ended March 31, 2024
(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.	$                           163,388		$                              21,097		$                            90,549		$                               1,214		$                        (121,916)		$                           154,332
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units	—		—		4,659		—		—		4,659
Non-controlling interests attributable to unrealized gains/losses	—		—		(1,678)		(2,053)		—		(3,731)
Non-cash equity compensation expense	2,200		456		86		1,597		5,707		10,046
Management incentive fee	—		—		—		—		19,083		19,083
Depreciation and amortization	2,099		5		5,939		1,843		—		9,886
Interest income adjustment for securities	5,581		—		—		10,005		—		15,586
Consolidated income tax provision (benefit) associated with fair value adjustments	721		(128)		—		613		—		1,206
Other non-cash items	3		—		274		38		9		324
Reversal of GAAP unrealized and realized (gains) / losses on:
Loans	40,677		—		—		(11,664)		—		29,013
Credit loss provision, net	34,977		862		—		—		—		35,839
Securities	6,991		—		—		16,458		—		23,449
Woodstar Fund investments	—		—		(9,448)		—		—		(9,448)
Derivatives	(110,952)		(122)		(1,721)		(3,012)		13,868		(101,939)
Foreign currency	41,818		84		(32)		—		—		41,870
Earnings from unconsolidated entities	(7,345)		(327)		—		(313)		—		(7,985)
Sales of properties	—		—		(92,003)		—		—		(92,003)
Recognition of Distributable realized gains / (losses) on:
Loans	(2,395)		—		—		11,642		—		9,247
Realized credit loss	—		(1,546)		—		—		—		(1,546)
Securities	(8,994)		—		—		(31,982)		—		(40,976)
Woodstar Fund investments	—		—		17,610		—		—		17,610
Derivatives	40,734		95		5,817		4,353		(9,149)		41,850
Foreign currency	(5,601)		(15)		32		—		—		(5,584)
Earnings (loss) from unconsolidated entities	1,324		(16)		—		313		—		1,621
Sales of properties	—		—		39,150		—		—		39,150
Distributable Earnings (Loss)	$                           205,226		$                              20,445		$                            59,234		$                                 (948)		$                          (92,398)		$                           191,559
Distributable Earnings (Loss) per Weighted Average Diluted Share	$                                  0.63		$                                  0.06		$                                0.18		$                                     —		$                               (0.28)		$                                  0.59

 

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of March 31, 2024
(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	$                     9,602		$             137,049		$                29,103		$                  8,340		$             143,269		$             327,363		$                        —		$             327,363
Restricted cash	11,506		41,394		1,031		6,862		64,548		125,341		—		125,341
Loans held-for-investment, net	14,221,471		2,376,191		—		9,200		—		16,606,862		—		16,606,862
Loans held-for-sale	2,518,600		47,149		—		123,619		—		2,689,368		—		2,689,368
Investment securities	1,113,081		18,422		—		1,124,724		—		2,256,227		(1,540,154)		716,073
Properties, net	434,365		—		551,502		58,698		—		1,044,565		—		1,044,565
Investments of consolidated affordable housing fund	—		—		2,008,937		—		—		2,008,937		—		2,008,937
Investments in unconsolidated entities	25,371		53,018		—		33,154		—		111,543		(14,616)		96,927
Goodwill	—		119,409		—		140,437		—		259,846		—		259,846
Intangible assets	12,724		—		24,505		60,293		—		97,522		(34,255)		63,267
Derivative assets	73,830		216		4,280		4,590		—		82,916		—		82,916
Accrued interest receivable	179,147		11,750		1,484		1,939		178		194,498		—		194,498
Other assets	186,807		5,745		61,505		17,296		48,500		319,853		—		319,853
VIE assets, at fair value	—		—		—		—		—		—		41,633,853		41,633,853
Total Assets	$          18,786,504		$          2,810,343		$          2,682,347		$          1,589,152		$             256,495		$       26,124,841		$       40,044,828		$       66,169,669
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$                127,023		$                24,337		$                10,730		$                28,936		$                68,972		$             259,998		$                        —		$             259,998
Related-party payable	—		—		—		—		44,226		44,226		—		44,226
Dividends payable	—		—		—		—		153,174		153,174		—		153,174
Derivative liabilities	22,074		—		—		261		52,312		74,647		—		74,647
Secured financing agreements, net	9,051,746		1,069,519		598,850		521,399		1,335,623		12,577,137		(20,650)		12,556,487
Collateralized loan obligations and single asset securitization, net	2,406,928		816,939		—		—		—		3,223,867		—		3,223,867
Unsecured senior notes, net	—		—		—		—		2,751,666		2,751,666		—		2,751,666
VIE liabilities, at fair value	—		—		—		—		—		—		40,065,423		40,065,423
Total Liabilities	11,607,771		1,910,795		609,580		550,596		4,405,973		19,084,715		40,044,773		59,129,488
Temporary Equity: Redeemable non-controlling interests	—		—		415,485		—		—		415,485		—		415,485
Permanent Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock	—		—		—		—		3,234		3,234		—		3,234
Additional paid-in capital	1,486,260		705,773		(615,052)		(663,588)		4,972,459		5,885,852		—		5,885,852
Treasury stock	—		—		—		—		(138,022)		(138,022)		—		(138,022)
Retained earnings (accumulated deficit)	5,678,294		193,775		2,065,089		1,557,613		(8,987,149)		507,622		—		507,622
Accumulated other comprehensive income	14,061		—		—		—		—		14,061		—		14,061
Total Starwood Property Trust, Inc. Stockholders' Equity	7,178,615		899,548		1,450,037		894,025		(4,149,478)		6,272,747		—		6,272,747
Non-controlling interests in consolidated subsidiaries	118		—		207,245		144,531		—		351,894		55		351,949
Total Permanent Equity	7,178,733		899,548		1,657,282		1,038,556		(4,149,478)		6,624,641		55		6,624,696
Total Liabilities and Equity	$          18,786,504		$          2,810,343		$          2,682,347		$          1,589,152		$             256,495		$       26,124,841		$       40,044,828		$       66,169,669

 

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SOURCE Starwood Property Trust, Inc.