Starwood Property Trust Reports Results for the Quarter Ended September 30, 2020

Rhea-AI Summary

Starwood Property Trust announced its Q3 2020 results, reporting a GAAP net income of $151.8 million, or $0.52 per diluted share, alongside Core Earnings of $148.6 million, or $0.50 per diluted share. The company deployed $1.5 billion during the quarter, capitalizing on lucrative opportunities. Addressing upcoming debt maturities, it raised funds through two successful debt offerings, including its first sustainability bond. With a liquidity of over $880 million and a significant portion of its portfolio in affordable housing producing high yields, Starwood remains well-positioned for future investments.

Positive

• GAAP net income of $151.8 million, or $0.52 per diluted share.
• Core Earnings of $148.6 million, or $0.50 per diluted share.
• Successfully deployed $1.5 billion in capital during Q3 2020.
• Addressed $500 million February 2021 notes with two successful debt raises.
• Liquidity remains strong with over $880 million in cash and undrawn debt capacity.
• Owned real estate portfolio yields over 15% cash on cash.
• Estimated $3.00 per share in unrealized gains across owned property assets.

Negative

• None.

GREENWICH, Conn., Nov. 5, 2020 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2020.  The Company's third quarter 2020 GAAP net income was $151.8 million, or $0.52 per diluted share, and Core Earnings (a non-GAAP financial measure) was $148.6 million, or $0.50 per diluted share.

"We shifted from a cautious stance in the second quarter and deployed $1.5 billion in the third quarter, taking advantage of the most compelling risk adjusted returns presented across our various business lines. We also proactively addressed the near-term maturity of our $500 million February 2021 notes by successfully completing two successful debt raises, including issuing our first ever sustainability bond.

Our diversified platform showed its power versus pure play commercial mortgage REITs, as we deployed nearly two thirds of the capital this quarter outside our core commercial real estate lending business. Our owned real estate portfolio, over half of which consists of affordable housing, continues to shine, producing a cash on cash yield exceeding 15%. We estimate that we have approximately $3.00 per share of unrealized gains across our owned property assets today. With over $880 million of cash and undrawn debt capacity, our liquidity remains strong and we remain well positioned to selectively deploy capital going forward," commented Barry Sternlicht, Chairman and CEO 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, November 5, 2020, 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:  13709052
The playback can be accessed through November 12, 2020.

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 $65 billion of capital since inception and manages a portfolio of over $17 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, 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 our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and our quarterly report on Form 10-Q for the quarter ended September 30, 2020, as well as other risks and uncertainties set forth from time to time in the Company's reports filed with the SEC.

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, 2020
(Amounts in thousands)
		Commercial and
		Residential			Infrastructure						Investing
		Lending			Lending			Property			and Servicing									Securitization
		Segment			Segment			Segment			Segment			Corporate			Subtotal			VIEs			Total
Revenues:
Interest income from loans		$	149,972		$	17,835		$	—		$	1,597		$	—		$	169,404		$	—		$	169,404
Interest income from investment securities			21,385			635			—			23,587			—			45,607			(33,421)			12,186
Servicing fees			110			—			—			13,749			—			13,859			(4,311)			9,548
Rental income			2,014			—			63,925			10,039			—			75,978			—			75,978
Other revenues			66			101			48			98			—			313			(2)			311
Total revenues			173,547			18,571			63,973			49,070			—			305,161			(37,734)			267,427
Costs and expenses:
Management fees			297			—			—			221			22,596			23,114			13			23,127
Interest expense			38,422			8,914			16,180			5,425			27,040			95,981			—			95,981
General and administrative			12,483			3,568			1,094			18,813			3,436			39,394			84			39,478
Acquisition and investment pursuit costs			757			62			—			65			—			884			—			884
Costs of rental operations			643			—			24,302			4,577			—			29,522			—			29,522
Depreciation and amortization			430			87			19,130			3,934			—			23,581			—			23,581
Credit loss provision (reversal), net			782			(4,369)			—			—			—			(3,587)			—			(3,587)
Other expense			77			—			95			—			—			172			—			172
Total costs and expenses			53,891			8,262			60,801			33,035			53,072			209,061			97			209,158
Other income (loss):
Change in net assets related to consolidated VIEs			—			—			—			—			—			—			58,585			58,585
Change in fair value of servicing rights			—			—			—			3,960			—			3,960			(3,326)			634
Change in fair value of investment securities, net			13,611			—			—			3,249			—			16,860			(17,059)			(199)
Change in fair value of mortgage loans, net			59,402			—			—			1,982			—			61,384			—			61,384
Earnings (loss) from unconsolidated entities			3,253			(80)			—			358			—			3,531			(339)			3,192
(Loss) gain on derivative financial instruments, net			(28,577)			110			(313)			38			645			(28,097)			—			(28,097)
Foreign currency gain, net			25,302			110			14			26			—			25,452			—			25,452
Other (loss) income, net			—			—			(1)			358			—			357			—			357
Total other income (loss)			72,991			140			(300)			9,971			645			83,447			37,861			121,308
Income (loss) before income taxes			192,647			10,449			2,872			26,006			(52,427)			179,547			30			179,577
Income tax (provision) benefit			(16,700)			(86)			—			1,943			—			(14,843)			—			(14,843)
Net income (loss)			175,947			10,363			2,872			27,949			(52,427)			164,704			30			164,734
Net income attributable to non-controlling interests			(3)			—			(5,072)			(7,795)			—			(12,870)			(30)			(12,900)
Net income (loss) attributable to Starwood Property Trust, Inc.		$	175,944		$	10,363		$	(2,200)		$	20,154		$	(52,427)		$	151,834		$	—		$	151,834

 

Definition of Core Earnings

Core 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, Core 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 Core Earnings
For the three months ended September 30, 2020
(Amounts in thousands except per share data)
		Commercial
		and
		Residential			Infrastructure						Investing
		Lending			Lending			Property			and Servicing
		Segment			Segment			Segment			Segment			Corporate			Total
Net income (loss) attributable to Starwood Property Trust, Inc.			175,944			10,363			(2,200)			20,154			(52,427)			151,834
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units			—			—			5,072			—			—			5,072
Non-cash equity compensation expense			1,015			(126)			54			1,215			4,131			6,289
Acquisition and investment pursuit costs			(163)			—			(89)			—			—			(252)
Depreciation and amortization			370			78			19,191			3,525			—			23,164
Credit loss reversal, net			(259)			(4,369)			—			—			—			(4,628)
Interest income adjustment for securities			(1,035)			—			—			1,914			—			879
Extinguishment of debt, net			—			—			—			—			(246)			(246)
Income tax provision associated with fair value adjustments			5,519			—			—			879			—			6,398
Other non-cash items			3			—			(713)			225			158			(327)
Reversal of GAAP unrealized (gains) / losses on:
Loans			(59,402)			—			—			(1,982)			—			(61,384)
Securities			(13,611)			—			—			(3,249)			—			(16,860)
Derivatives			28,336			(173)			(1,377)			(551)			4,380			30,615
Foreign currency			(25,302)			(110)			(14)			(26)			—			(25,452)
(Earnings) loss from unconsolidated entities			(3,253)			80			—			(358)			—			(3,531)
Recognition of Core realized gains / (losses) on:
Loans			49,241			—			—			6,201			—			55,442
Securities			—			—			—			(4,318)			—			(4,318)
Derivatives			(11,625)			—			(35)			(7,341)			—			(19,001)
Foreign currency			799			(5)			16			26			—			836
Earnings (loss) from unconsolidated entities			3,352			(80)			—			772			—			4,044
Core Earnings (Loss)		$	149,929		$	5,658		$	19,905		$	17,086		$	(44,004)		$	148,574
Core Earnings (Loss) per Weighted Average Diluted Share		$	0.51		$	0.02		$	0.06		$	0.06		$	(0.15)		$	0.50

 

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the nine months ended September 30, 2020
(Amounts in thousands)
		Commercial and
		Residential			Infrastructure						Investing
		Lending			Lending			Property			and Servicing									Securitization
		Segment			Segment			Segment			Segment			Corporate			Subtotal			VIEs			Total
Revenues:
Interest income from loans		$	492,489		$	59,374		$	—		$	6,071		$	—		$	557,934		$	—		$	557,934
Interest income from investment securities			57,358			2,019			—			73,311			—			132,688			(90,618)			42,070
Servicing fees			424			—			—			28,782			—			29,206			(8,207)			20,999
Rental income			2,782			—			191,452			28,600			—			222,834			—			222,834
Other revenues			298			344			228			891			—			1,761			(5)			1,756
Total revenues			553,351			61,737			191,680			137,655			—			944,423			(98,830)			845,593
Costs and expenses:
Management fees			987			—			—			680			85,257			86,924			46			86,970
Interest expense			134,243			31,709			49,243			18,796			83,670			317,661			(162)			317,499
General and administrative			29,230			12,328			3,453			54,490			11,105			110,606			251			110,857
Acquisition and investment pursuit costs			2,195			1,179			12			(3)			—			3,383			—			3,383
Costs of rental operations			2,409			—			71,857			13,102			—			87,368			—			87,368
Depreciation and amortization			1,275			246			57,571			11,890			—			70,982			—			70,982
Credit loss provision, net			52,293			2,991			—			—			—			55,284			—			55,284
Other expense			230			—			432			—			—			662			—			662
Total costs and expenses			222,862			48,453			182,568			98,955			180,032			732,870			135			733,005
Other income (loss):
Change in net assets related to consolidated VIEs			—			—			—			—			—			—			64,353			64,353
Change in fair value of servicing rights			—			—			—			9,606			—			9,606			(11,934)			(2,328)
Change in fair value of investment securities, net			(8,814)			—			—			(36,026)			—			(44,840)			47,972			3,132
Change in fair value of mortgage loans, net			56,895			—			—			22,805			—			79,700			—			79,700
Earnings (loss) from unconsolidated entities			3,975			(1,198)			—			30,504			—			33,281			(1,216)			32,065
(Loss) gain on sale of investments and other assets, net			(961)			296			—			7,433			—			6,768			—			6,768
(Loss) gain on derivative financial instruments, net			(9,508)			(1,328)			(35,150)			(22,896)			34,397			(34,485)			—			(34,485)
Foreign currency (loss)  gain, net			(1,757)			(53)			(53)			2			—			(1,861)			—			(1,861)
Loss on extinguishment of debt			(22)			(170)			(2,185)			—			—			(2,377)			—			(2,377)
Other income, net			—			—			240			447			—			687			—			687
Total other income (loss)			39,808			(2,453)			(37,148)			11,875			34,397			46,479			99,175			145,654
Income (loss) before income taxes			370,297			10,831			(28,036)			50,575			(145,635)			258,032			210			258,242
Income tax (provision) benefit			(15,535)			3			—			8,716			—			(6,816)			—			(6,816)
Net income (loss)			354,762			10,834			(28,036)			59,291			(145,635)			251,216			210			251,426
Net income attributable to non-controlling interests			(10)			—			(15,294)			(11,191)			—			(26,495)			(210)			(26,705)
Net income (loss) attributable to Starwood Property Trust, Inc.		$	354,752		$	10,834		$	(43,330)		$	48,100		$	(145,635)		$	224,721		$	—		$	224,721

 

Reconciliation of Net Income to Core Earnings
For the nine months ended September 30, 2020
(Amounts in thousands except per share data)
		Commercial
		and
		Residential			Infrastructure						Investing
		Lending			Lending			Property			and Servicing
		Segment			Segment			Segment			Segment			Corporate			Total
Net income (loss) attributable to Starwood Property Trust, Inc.			354,752			10,834			(43,330)			48,100			(145,635)			224,721
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units			—			—			15,294			—			—			15,294
Non-cash equity compensation expense			3,563			821			185			3,725			14,147			22,441
Management incentive fee			—			—			—			—			15,799			15,799
Acquisition and investment pursuit costs			401			—			(266)			(72)			—			63
Depreciation and amortization			1,095			208			57,808			10,669			—			69,780
Credit loss provision, net			51,252			2,991			—			—			—			54,243
Interest income adjustment for securities			238			—			—			9,856			—			10,094
Extinguishment of debt, net			—			—			—			—			(739)			(739)
Income tax provision (benefit) associated with fair value adjustments			1,612			—			—			(955)			—			657
Other non-cash items			10			—			(1,689)			703			470			(506)
Reversal of GAAP unrealized (gains) / losses on:
Loans			(56,895)			—			—			(22,805)			—			(79,700)
Securities			8,814			—			—			36,026			—			44,840
Derivatives			8,816			1,260			32,593			21,986			(23,509)			41,146
Foreign currency			1,757			53			53			(2)			—			1,861
(Earnings) loss from unconsolidated entities			(3,975)			1,198			—			(30,504)			—			(33,281)
Recognition of Core realized gains / (losses) on:
Loans			45,742			(62)			—			22,759			—			68,439
Securities			—			—			—			(8,711)			—			(8,711)
Derivatives			(3,853)			118			(439)			(13,438)			—			(17,612)
Foreign currency			(5,441)			(147)			(53)			2			—			(5,639)
Earnings (loss) from unconsolidated entities			2,772			(813)			—			17,502			—			19,461
Sales of properties			—			—			—			(5,789)			—			(5,789)
Core Earnings (Loss)		$	410,660		$	16,461		$	60,156		$	89,052		$	(139,467)		$	436,862
Core Earnings (Loss) per Weighted Average Diluted Share		$	1.39		$	0.06		$	0.20		$	0.30		$	(0.47)		$	1.48

 

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of September 30, 2020
(Amounts in thousands)
		Commercial and
		Residential			Infrastructure						Investing
		Lending			Lending			Property			and Servicing									Securitization
		Segment			Segment			Segment			Segment			Corporate			Subtotal			VIEs			Total
Assets:
Cash and cash equivalents		$	19,111		$	994		$	38,119		$	22,054		$	298,844		$	379,122		$	748		$	379,870
Restricted cash			69,351			31,515			7,632			22,838			—			131,336			—			131,336
Loans held-for-investment, net			9,373,503			1,544,068			—			1,081			—			10,918,652			—			10,918,652
Loans held-for-sale			747,654			—			—			265,019			—			1,012,673			—			1,012,673
Investment securities			1,152,362			39,813			—			1,097,322			—			2,289,497			(1,544,384)			745,113
Properties, net			27,123			—			1,983,124			197,575			—			2,207,822			—			2,207,822
Intangible assets			—			—			41,946			70,374			—			112,320			(38,181)			74,139
Investment in unconsolidated entities			50,850			24,664			—			45,236			—			120,750			(16,366)			104,384
Goodwill			—			119,409			—			140,437			—			259,846			—			259,846
Derivative assets			25,805			—			54			1,250			37,716			64,825			—			64,825
Accrued interest receivable			72,344			3,244			—			334			3,484			79,406			(1,376)			78,030
Other assets			24,705			4,216			70,369			52,352			11,829			163,471			3			163,474
VIE assets, at fair value			—			—			—			—			—			—			64,477,475			64,477,475
Total Assets		$	11,562,808		$	1,767,923		$	2,141,244		$	1,915,872		$	351,873		$	17,739,720		$	62,877,919		$	80,617,639
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities		$	36,378		$	8,545		$	49,758		$	35,796		$	70,956		$	201,433		$	58		$	201,491
Related-party payable			—			—			—			5			22,091			22,096			—			22,096
Dividends payable			—			—			—			—			138,264			138,264			—			138,264
Derivative liabilities			8,839			1,516			—			3,097			—			13,452			—			13,452
Secured financing agreements, net			5,576,092			1,243,001			1,793,731			614,055			389,013			9,615,892			—			9,615,892
Collateralized loan obligations, net			929,931			—			—			—			—			929,931			—			929,931
Unsecured senior notes, net			—			—			—			—			1,934,555			1,934,555			—			1,934,555
VIE liabilities, at fair value			—			—			—			—			—			—			62,876,265			62,876,265
Total Liabilities			6,551,240			1,253,062			1,843,489			652,953			2,554,879			12,855,623			62,876,323			75,731,946
Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock			—			—			—			—			2,918			2,918			—			2,918
Additional paid-in capital			1,165,764			509,848			115,246			(124,805)			3,534,663			5,200,716			—			5,200,716
Treasury stock			—			—			—			—			(133,024)			(133,024)			—			(133,024)
Accumulated other comprehensive income (loss)			42,350			—			—			(65)			—			42,285			—			42,285
Retained earnings (accumulated deficit)			3,803,336			5,013			(42,898)			1,243,098			(5,607,563)			(599,014)			—			(599,014)
Total Starwood Property Trust, Inc. Stockholders' Equity			5,011,450			514,861			72,348			1,118,228			(2,203,006)			4,513,881			—			4,513,881
Non-controlling interests in consolidated subsidiaries			118			—			225,407			144,691			—			370,216			1,596			371,812
Total Equity			5,011,568			514,861			297,755			1,262,919			(2,203,006)			4,884,097			1,596			4,885,693
Total Liabilities and Equity		$	11,562,808		$	1,767,923		$	2,141,244		$	1,915,872		$	351,873		$	17,739,720		$	62,877,919		$	80,617,639

 

View original content:http://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-the-quarter-ended-september-30-2020-301166996.html

SOURCE Starwood Property Trust, Inc.

FAQ

What were Starwood Property Trust's Q3 2020 earnings?

Starwood Property Trust reported Q3 2020 earnings of $151.8 million in GAAP net income, equating to $0.52 per diluted share.

How much capital did Starwood Property Trust deploy in Q3 2020?

Starwood Property Trust deployed $1.5 billion during Q3 2020.

What steps did Starwood Property Trust take regarding its February 2021 notes?

The company successfully completed two debt raises to address the $500 million February 2021 notes.

What is the cash yield of Starwood Property Trust's owned real estate portfolio?

The owned real estate portfolio of Starwood Property Trust produces a cash on cash yield exceeding 15%.

What is the liquidity position of Starwood Property Trust?

Starwood Property Trust has over $880 million in cash and undrawn debt capacity.