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

Rhea-AI Summary

Starwood Property Trust reported a strong third quarter for 2022, achieving GAAP net income of $194.6 million ($0.61 per diluted share) and Distributable Earnings of $163.3 million ($0.51 per diluted share). The company undertook $1.3 billion in investments, including $0.9 billion in commercial lending, and increased its undepreciated book value by $0.18 to $21.69 per share. A new $600 million term loan enhances liquidity, which now stands at $1.3 billion. Additionally, LNR regained its position as the largest special servicer in the U.S., servicing over $100 billion.

Positive

• GAAP net income of $194.6 million ($0.61 per diluted share)
• Distributable Earnings of $163.3 million ($0.51 per diluted share)
• Undepreciated book value increased by $0.18 to $21.69
• $1.3 billion of liquidity, including new term loan proceeds
• LNR regains position as largest special servicer in the U.S., with over $100 billion in named servicing

Negative

• None.

– Quarterly GAAP Earnings of $0.61 and Distributable Earnings (DE) of $0.51 per Diluted Share –

– $1.3 Billion of Investment Activity, Including $0.9 Billion in Commercial Lending –

– Undepreciated Book Value Increased $0.18 Quarter-over-Quarter to $21.69 –

– Priced New $600 Million 5-year Term Loan –

– Liquidity of $1.3 Billion, Including Term Loan Net Proceeds –

– LNR Regains Position as Largest Special Servicer in the U.S., with Over $100 Billion in Named Servicing –

– Paid Dividend of $0.48 per Share –

GREENWICH, Conn., Nov. 9, 2022 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2022.  The Company's third quarter 2022 GAAP net income was $194.6 million, or $0.61 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $163.3 million, or $0.51 per diluted share.

"We are proud of the multi-cylinder platform we have built over the past 13 years, the diversification of which has allowed us to continue to generate consistent returns across varying market conditions.  Our company is well-positioned for the current environment with $1.3 billion of liquidity and $1.6 billion of embedded unrealized gains in our owned property portfolio.  We will remain laser focused on managing both sides of our balance sheet as we selectively deploy capital into attractive risk adjusted investments," stated Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"Last week, we further fortified our balance sheet with a new $600 million 5-year term loan at pricing which reflects the high credit quality of our business.  This new capital, coupled with our $3.9 billion of unencumbered assets, gives us extraordinary access to incremental liquidity, allowing us to take advantage of very accretive investment opportunities in the future," 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, November 9, 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:  13730652
The playback can be accessed through November 16, 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 $93 billion of capital since inception and manages a portfolio of over $27 billion across debt and equity investments. Starwood Property Trust's investment objective is to generate attractive and stable returns for shareholders, primarily through dividends, by leveraging a premiere global organization to identify and execute on the best risk adjusted returning investments across its target assets. Additional information can be found at www.starwoodpropertytrust.com.

Forward-Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words "believe," "expect," "anticipate" and other similar expressions.  Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained.  Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, 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 September 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 September 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	$            284,197		$           43,018		$              —		$           1,139		$              —		$      328,354		$                 —		$        328,354
Interest income from investment securities	28,560		1,204		—		27,585		—		57,349		(38,330)		19,019
Servicing fees	142		—		—		11,830		—		11,972		(3,545)		8,427
Rental income	1,944		—		22,886		8,102		—		32,932		—		32,932
Other revenues	138		129		54		1,491		—		1,812		(3)		1,809
Total revenues	314,981		44,351		22,940		50,147		—		432,419		(41,878)		390,541
Costs and expenses:
Management fees	227		—		—		—		27,129		27,356		—		27,356
Interest expense	145,107		22,500		9,266		6,601		39,166		222,640		(217)		222,423
General and administrative	16,458		3,588		933		20,046		4,384		45,409		86		45,495
Acquisition and investment pursuit costs	1,164		2		—		47		—		1,213		—		1,213
Costs of rental operations	2,633		—		5,793		3,780		—		12,206		—		12,206
Depreciation and amortization	1,629		101		8,161		2,720		—		12,611		—		12,611
Credit loss provision, net	8,401		6,942		—		—		—		15,343		—		15,343
Total costs and expenses	175,619		33,133		24,153		33,194		70,679		336,778		(131)		336,647
Other income (loss):
Change in net assets related to consolidated VIEs	—		—		—		—		—		—		37,146		37,146
Change in fair value of servicing rights	—		—		—		357		—		357		158		515
Change in fair value of investment securities, net	16,398		—		—		(21,412)		—		(5,014)		4,931		(83)
Change in fair value of mortgage loans, net	(90,159)		—		—		2,685		—		(87,474)		—		(87,474)
Income from affordable housing fund investments	—		—		117,527		—		—		117,527		—		117,527
(Loss) earnings from unconsolidated entities	(4,044)		1,892		—		602		—		(1,550)		(494)		(2,044)
(Loss) gain on sale of investments and other assets, net	(288)		—		—		13,741		—		13,453		—		13,453
Gain (loss) on derivative financial instruments, net	220,296		331		10,262		6,849		(31,668)		206,070		—		206,070
Foreign currency (loss) gain, net	(107,087)		(253)		22		—		—		(107,318)		—		(107,318)
Loss on extinguishment of debt	—		—		—		(212)		—		(212)		—		(212)
Other loss, net	(56,391)		—		—		—		—		(56,391)		—		(56,391)
Total other income (loss)	(21,275)		1,970		127,811		2,610		(31,668)		79,448		41,741		121,189
Income (loss) before income taxes	118,087		13,188		126,598		19,563		(102,347)		175,089		(6)		175,083
Income tax benefit (provision)	53,099		2		—		(4,346)		—		48,755		—		48,755
Net income (loss)	171,186		13,190		126,598		15,217		(102,347)		223,844		(6)		223,838
Net income attributable to non-controlling interests	(3)		—		(28,486)		(793)		—		(29,282)		6		(29,276)
Net income (loss) attributable to Starwood Property Trust, Inc.	$            171,183		$           13,190		$        98,112		$         14,424		$     (102,347)		$      194,562		$                 —		$       194,562

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 September 30, 2022 for additional information regarding Distributable Earnings.

Reconciliation of Net Income to Distributable Earnings
For the three months ended September 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.	$                       171,183		$                          13,190		$                          98,112		$                          14,424		$                     (102,347)		$                       194,562
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units	—		—		4,691		—		—		4,691
Non-controlling interests attributable to unrealized gains/losses	—		—		21,111		(4,019)		—		17,092
Non-cash equity compensation expense	1,660		338		75		1,458		6,172		9,703
Management incentive fee	—		—		—		—		895		895
Acquisition and investment pursuit costs	(22)		—		(82)		—		—		(104)
Depreciation and amortization	1,728		90		8,232		2,841		—		12,891
Interest income adjustment for securities	1,280		—		—		2,746		—		4,026
Extinguishment of debt, net	—		—		—		—		(246)		(246)
Consolidated income tax benefit associated with fair value adjustments	(53,099)		(2)		—		4,346		—		(48,755)
Other non-cash items	55,522		—		344		76		—		55,942
Reversal of GAAP unrealized and realized (gains) / losses on:
Loans	90,159		—		—		(2,685)		—		87,474
Credit loss provision, net	8,401		6,942		—		—		—		15,343
Securities	(16,398)		—		—		21,412		—		5,014
Woodstar Fund investments	—		—		(117,527)		—		—		(117,527)
Derivatives	(220,296)		(331)		(10,262)		(6,849)		31,668		(206,070)
Foreign currency	107,087		253		(22)		—		—		107,318
Loss (earnings) from unconsolidated entities	4,044		(1,892)		—		(602)		—		1,550
Sales of properties	—		—		—		(13,741)		—		(13,741)
Recognition of Distributable realized gains / (losses) on:
Loans	(470)		—		—		3,078		—		2,608
Securities	(1)		—		—		(5,341)		—		(5,342)
Woodstar Fund investments	—		—		14,855		—		—		14,855
Derivatives	9,144		18		1,345		2,923		(1,109)		12,321
Foreign currency	(2,579)		(57)		22		—		—		(2,614)
(Loss) earnings from unconsolidated entities	(3,846)		1,893		—		913		—		(1,040)
Sales of properties	—		—		—		12,424		—		12,424
Distributable Earnings (Loss)	$                       153,497		$                          20,442		$                          20,894		$                          33,404		$                        (64,967)		$                       163,270
Distributable Earnings (Loss) per Weighted Average Diluted Share	$                              0.48		$                              0.06		$                              0.07		$                              0.10		$                             (0.20)		$                              0.51

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the nine months ended September 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	$            714,222		$         100,097		$              —		$             8,804		$              —		$      823,123		$                 —		$         823,123
Interest income from investment securities	71,987		3,124		—		75,964		—		151,075		(102,767)		48,308
Servicing fees	420		—		—		41,517		—		41,937		(10,965)		30,972
Rental income	4,674		—		67,879		23,483		—		96,036		—		96,036
Other revenues	251		287		152		10,999		3		11,692		(12)		11,680
Total revenues	791,554		103,508		68,031		160,767		3		1,123,863		(113,744)		1,010,119
Costs and expenses:
Management fees	758		—		—		—		113,517		114,275		—		114,275
Interest expense	301,935		49,431		22,421		19,202		109,150		502,139		(647)		501,492
General and administrative	39,905		10,730		2,964		66,603		14,354		134,556		265		134,821
Acquisition and investment pursuit costs	2,401		3		7		(259)		—		2,152		—		2,152
Costs of rental operations	4,978		—		16,010		11,106		—		32,094		—		32,094
Depreciation and amortization	3,106		310		24,559		8,523		—		36,498		—		36,498
Credit loss provision, net	13,027		7,096		—		—		—		20,123		—		20,123
Other expense	1,251		—		55		7		—		1,313		—		1,313
Total costs and expenses	367,361		67,570		66,016		105,182		237,021		843,150		(382)		842,768
Other income (loss):
Change in net assets related to consolidated VIEs	—		—		—		—		—		—		72,268		72,268
Change in fair value of servicing rights	—		—		—		683		—		683		551		1,234
Change in fair value of investment securities, net	(5,019)		—		—		(38,853)		—		(43,872)		42,189		(1,683)
Change in fair value of mortgage loans, net	(327,743)		—		—		1,006		—		(326,737)		—		(326,737)
Income from affordable housing fund investments	—		—		658,733		—		—		658,733		—		658,733
(Loss) earnings from unconsolidated entities	(2,598)		2,631		—		2,501		—		2,534		(1,623)		911
Gain  on sale of investments and other assets, net	86,460		—		—		25,599		—		112,059		—		112,059
Gain (loss) on derivative financial instruments, net	465,831		1,228		33,162		43,719		(82,019)		461,921		—		461,921
Foreign currency (loss) gain, net	(212,672)		(570)		41		—		—		(213,201)		—		(213,201)
Loss on extinguishment of debt	(206)		(469)		—		(360)		—		(1,035)		—		(1,035)
Other (loss) income, net	(90,988)		—		—		—		—		(90,988)		25		(90,963)
Total other income (loss)	(86,935)		2,820		691,936		34,295		(82,019)		560,097		113,410		673,507
Income (loss) before income taxes	337,258		38,758		693,951		89,880		(319,037)		840,810		48		840,858
Income tax benefit (provision)	57,682		7		—		(8,690)		—		48,999		—		48,999
Net income (loss)	394,940		38,765		693,951		81,190		(319,037)		889,809		48		889,857
Net income attributable to non-controlling interests	(10)		—		(148,379)		(9,972)		—		(158,361)		(48)		(158,409)
Net income (loss) attributable to Starwood Property Trust, Inc.	$            394,930		$           38,765		$      545,572		$           71,218		$    (319,037)		$      731,448		$                 —		$         731,448

Reconciliation of Net Income to Distributable Earnings
For the nine months ended September 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.	$         394,930		$           38,765		$         545,572		$           71,218		$       (319,037)		$         731,448
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units	—		—		14,073		—		—		14,073
Non-controlling interests attributable to unrealized gains/losses	—		—		126,056		(3,373)		—		122,683
Non-cash equity compensation expense	6,113		980		209		4,157		18,244		29,703
Management incentive fee	—		—		—		—		35,121		35,121
Acquisition and investment pursuit costs	(359)		—		(242)		(169)		—		(770)
Depreciation and amortization	3,191		281		24,774		8,888		—		37,134
Interest income adjustment for securities	6,343		—		—		4,761		—		11,104
Extinguishment of debt, net	—		—		—		—		(739)		(739)
Consolidated income tax benefit associated with fair value adjustments	(53,099)		(2)		—		4,346		—		(48,755)
Other non-cash items	88,191		—		1,136		278		—		89,605
Reversal of GAAP unrealized and realized (gains) / losses on:
Loans	327,743		—		—		(1,006)		—		326,737
Credit loss provision, net	13,027		7,096		—		—		—		20,123
Securities	5,019		—		—		38,853		—		43,872
Woodstar Fund investments	—		—		(658,733)		—		—		(658,733)
Derivatives	(465,831)		(1,228)		(33,162)		(43,719)		82,019		(461,921)
Foreign currency	212,672		570		(41)		—		—		213,201
Loss (earnings) from unconsolidated entities	2,598		(2,631)		—		(2,501)		—		(2,534)
Sales of properties	(86,610)		—		—		(25,599)		—		(112,209)
Recognition of Distributable realized gains / (losses) on:
Loans	(73,021)		—		—		270		—		(72,751)
Securities	(3,102)		—		—		(9,728)		—		(12,830)
Woodstar Fund investments	—		—		45,689		—		—		45,689
Derivatives	82,165		(59)		(1,102)		33,772		5,006		119,782
Foreign currency	(4,874)		24		41		—		—		(4,809)
(Loss) earnings from unconsolidated entities	(2,182)		2,632		—		3,758		—		4,208
Sales of properties	84,738		—				12,601		—		97,339
Distributable Earnings (Loss)	$        537,652		$           46,428		$           64,270		$           96,807		$        (179,386)		$         565,771
Distributable Earnings (Loss) per Weighted Average Diluted Share	$               1.69		$               0.15		$               0.20		$               0.30		$              (0.56)		$               1.78

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of September 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	$                   76,654		$                59,925		$                32,464		$                43,172		$             124,945		$             337,160		$                  2,550		$             339,710
Restricted cash	6,230		33,410		978		3,789		77,163		121,570		—		121,570
Loans held-for-investment, net	15,719,718		2,374,444		—		9,660		—		18,103,822		—		18,103,822
Loans held-for-sale	2,125,827		—		—		79,857		—		2,205,684		—		2,205,684
Investment securities	1,318,372		66,728		—		1,183,831		—		2,568,931		(1,678,803)		890,128
Properties, net	214,896		—		868,454		134,076		—		1,217,426		—		1,217,426
Investments of consolidated affordable housing fund	—		—		1,669,265		—		—		1,669,265		—		1,669,265
Investments in unconsolidated entities	34,319		29,347		—		35,494		—		99,160		(15,996)		83,164
Goodwill	—		119,409		—		140,437		—		259,846		—		259,846
Intangible assets	14,302		—		30,829		69,532		—		114,663		(41,567)		73,096
Derivative assets	249,120		242		321		1,488		—		251,171		—		251,171
Accrued interest receivable	143,352		9,177		412		1,412		—		154,353		(205)		154,148
Other assets	254,353		4,332		77,207		27,033		55,907		418,832		(374)		418,458
VIE assets, at fair value	—		—		—		—		—		—		54,215,370		54,215,370
Total Assets	$          20,157,143		$          2,697,014		$          2,679,930		$          1,729,781		$             258,015		$       27,521,883		$       52,480,975		$       80,002,858
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$                404,982		$                41,457		$                12,105		$                43,658		$                60,171		$             562,373		$                        88		$             562,461
Related-party payable	—		—		—		—		26,146		26,146		—		26,146
Dividends payable	—		—		—		—		150,196		150,196		—		150,196
Derivative liabilities	8,943		223		—		—		73,600		82,766		—		82,766
Secured financing agreements, net	10,250,349		1,095,459		789,138		612,409		769,814		13,517,169		(21,267)		13,495,902
Collateralized loan obligations and single asset securitization, net	2,877,567		813,429		—		—		—		3,690,996		—		3,690,996
Unsecured senior notes, net	—		—		—		—		2,326,988		2,326,988		—		2,326,988
VIE liabilities, at fair value	—		—		—		—		—		—		52,501,845		52,501,845
Total Liabilities	13,541,841		1,950,568		801,243		656,067		3,406,915		20,356,634		52,480,666		72,837,300
Temporary Equity: Redeemable non-controlling interests	—		—		344,373		—		—		344,373		—		344,373
Permanent Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock	—		—		—		—		3,170		3,170		—		3,170
Additional paid-in capital	1,624,104		665,104		(381,226)		(575,971)		4,447,676		5,779,687		—		5,779,687
Treasury stock	—		—		—		—		(138,022)		(138,022)		—		(138,022)
Retained earnings (accumulated deficit)	4,968,304		81,342		1,706,906		1,484,360		(7,461,724)		779,188		—		779,188
Accumulated other comprehensive income	22,776		—		—		—		—		22,776		—		22,776
Total Starwood Property Trust, Inc. Stockholders' Equity	6,615,184		746,446		1,325,680		908,389		(3,148,900)		6,446,799		—		6,446,799
Non-controlling interests in consolidated subsidiaries	118		—		208,634		165,325		—		374,077		309		374,386
Total Permanent Equity	6,615,302		746,446		1,534,314		1,073,714		(3,148,900)		6,820,876		309		6,821,185
Total Liabilities and Equity	$          20,157,143		$          2,697,014		$          2,679,930		$          1,729,781		$             258,015		$       27,521,883		$       52,480,975		$       80,002,858

 

View original content:https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-quarter-ended-september-30-2022-301672486.html

SOURCE Starwood Property Trust, Inc.

FAQ

What were Starwood Property Trust's earnings for Q3 2022?

Starwood Property Trust reported GAAP net income of $194.6 million, or $0.61 per diluted share, for Q3 2022.

What is the distributable earnings for STWD in Q3 2022?

The distributable earnings for Starwood Property Trust in Q3 2022 were $163.3 million, or $0.51 per diluted share.

How much liquidity does Starwood Property Trust currently have?

Starwood Property Trust has a liquidity of $1.3 billion, including the proceeds from a new $600 million term loan.

What is the undepreciated book value per share for STWD?

The undepreciated book value per share for Starwood Property Trust increased by $0.18 to $21.69.

What significant investment activity did STWD undertake in Q3 2022?

In Q3 2022, Starwood Property Trust undertook $1.3 billion in investment activity, including $0.9 billion in commercial lending.

What is LNR's role in Starwood Property Trust's operations?

LNR has regained its position as the largest special servicer in the U.S., with over $100 billion in named servicing.