Starwood Property Trust Reports Results for the Quarter Ended March 31, 2021

Rhea-AI Summary

Starwood Property Trust (NYSE: STWD) reported its Q1 2021 results, achieving a GAAP net income of $111.4 million or $0.38 per diluted share, and Distributable Earnings of $150.8 million or $0.50 per diluted share. The company deployed $2.7 billion in capital, boosting total post-COVID deployment to $5.7 billion. A notable achievement includes the upgrade of LNR by Fitch to the highest servicer rating globally. Starwood also closed two CLOs totaling $1.8 billion, enhancing balance sheet stability.

Positive

• Q1 2021 GAAP net income of $111.4 million.
• Distributable Earnings of $150.8 million.
• Capital deployment in Q1 reached $2.7 billion.
• Post-COVID capital deployment totals $5.7 billion.
• LNR upgraded to highest servicer rating by Fitch.
• Closed two CLOs totaling $1.8 billion.

Negative

• None.

GREENWICH, Conn., May 6, 2021 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2021.  The Company's first quarter 2021 GAAP net income was $111.4 million, or $0.38 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $150.8 million, or $0.50 per diluted share.

"We benefited from a strong start to the year with $2.7 billion of capital deployed in the first quarter across our business cylinders, including $2.2 billion in Commercial Lending, bringing our post-COVID capital deployment to $5.7 billion. The credit performance of our diversified business lines coupled with our robust liquidity position gave us the confidence to continue our strong pace of investment activity.  Eleven years into our journey, the LTV of our loan book remains low at 60.1%, and we continue to provide an attractive yield in a low rate world," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust. 

"After quarter end, we closed two CLOs totaling $1.8 billion: our inaugural Infrastructure CLO for $500 million and our second CRE CLO for $1.3 billion. These financings allowed us to further de-risk our balance sheet and diversify our funding sources.

"After a year of unprecedented distress which led to record volume in our special servicer, LNR was upgraded by Fitch to its highest servicer rating and is the only CMBS special servicer at this level globally.  We are extremely proud of this achievement which recognizes the strength and tenure of our team, years of operating at the highest level, our commitment to technology and our exemplary performance," commented Jeff 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, May 6, 2021, 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:  13718432
The playback can be accessed through May 13, 2021.

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 $69 billion of capital since inception and manages a portfolio of over $18 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, 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 March 31, 2021 (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		$	170,593		$	18,808		$	—		$	1,174		$	—		$	190,575		$	—		$	190,575
Interest income from investment securities			18,385			564			—			20,940			—			39,889			(28,279)			11,610
Servicing fees			124			—			—			12,456			—			12,580			(4,178)			8,402
Rental income			1,339			—			65,104			9,895			—			76,338			—			76,338
Other revenues			90			93			40			82			—			305			—			305
Total revenues			190,531			19,465			65,144			44,547			—			319,687			(32,457)			287,230
Costs and expenses:
Management fees			315			—			—			222			38,188			38,725			11			38,736
Interest expense			44,295			8,841			15,832			5,449			29,148			103,565			(191)			103,374
General and administrative			11,333			3,442			1,023			18,440			4,311			38,549			87			38,636
Acquisition and investment pursuit costs			185			—			—			—			—			185			—			185
Costs of rental operations			477			—			23,960			4,308			—			28,745			—			28,745
Depreciation and amortization			307			100			18,100			3,967			—			22,474			—			22,474
Credit loss (reversal) provision, net			(529)			573			—			—			—			44			—			44
Other expense			31			—			583			71			—			685			—			685
Total costs and expenses			56,414			12,956			59,498			32,457			71,647			232,972			(93)			232,879
Other income (loss):
Change in net assets related to consolidated VIEs			—			—			—			—			—			—			39,745			39,745
Change in fair value of servicing rights			—			—			—			745			—			745			(1,541)			(796)
Change in fair value of investment securities, net			(2,050)			—			—			7,170			—			5,120			(5,426)			(306)
Change in fair value of mortgage loans, net			(10,714)			—			—			1,236			—			(9,478)			—			(9,478)
Earnings (loss) from unconsolidated entities			1,753			(254)			—			589			—			2,088			(354)			1,734
Gain on sale of investments and other assets, net			17,693			—			—			—			—			17,693			—			17,693
Gain (loss) on derivative financial instruments, net			26,141			684			4,724			9,283			(6,843)			33,989			—			33,989
Foreign currency (loss) gain, net			(11,594)			(49)			25			(63)			—			(11,681)			—			(11,681)
Loss on extinguishment of debt			(68)			(307)			(141)			—			—			(516)			—			(516)
Other income, net			—			21			—			—			—			21			—			21
Total other income (loss)			21,161			95			4,608			18,960			(6,843)			37,981			32,424			70,405
Income (loss) before income taxes			155,278			6,604			10,254			31,050			(78,490)			124,696			60			124,756
Income tax provision			(1,505)			(92)			—			(633)			—			(2,230)			—			(2,230)
Net income (loss)			153,773			6,512			10,254			30,417			(78,490)			122,466			60			122,526
Net income attributable to non-controlling interests			(3)			—			(5,077)			(6,008)			—			(11,088)			(60)			(11,148)
Net income (loss) attributable to Starwood    Property Trust, Inc.		$	153,770		$	6,512		$	5,177		$	24,409		$	(78,490)		$	111,378		$	—		$	111,378

 

Definition of Distributable Earnings

Distributable Earnings, a non-GAAP financial measure, is used to compute the Company's incentive fees to its external manager and is an appropriate supplemental disclosure for a mortgage REIT.  For the Company's purposes, Distributable Earnings is defined as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee due to the Company's external manager, acquisition costs from successful acquisitions, depreciation and amortization of real estate and associated intangibles and any unrealized gains, losses or other non-cash items recorded in net income for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income and, to the extent deducted from net income (loss), distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein. The amount is adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash adjustments as determined by the Company's external manager and approved by a majority of the Company's independent directors. 

 

Reconciliation of Net Income to Distributable Earnings For the three months ended March 31, 2021 (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.		$	153,770		$	6,512		$	5,177		$	24,409		$	(78,490)		$	111,378
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units			—			—			5,077			—			—			5,077
Non-cash equity compensation expense			1,781			300			31			881			7,317			10,310
Management incentive fee			—			—			—			—			13,123			13,123
Acquisition and investment pursuit costs			(164)			—			(89)			—			—			(253)
Depreciation and amortization			247			91			18,161			3,603			—			22,102
Credit loss (reversal) provision, net			(529)			573			—			—			—			44
Interest income adjustment for securities			(1,300)			—			—			3,995			—			2,695
Extinguishment of debt, net			—			—			—			—			(246)			(246)
Income tax (provision) benefit associated with realized (gains) losses			(6,495)			—			—			405			—			(6,090)
Other non-cash items			3			—			(337)			207			415			288
Reversal of GAAP unrealized (gains) / losses on:
Loans			10,714			—			—			(1,236)			—			9,478
Securities			2,050			—			—			(7,170)			—			(5,120)
Derivatives			(27,171)			(745)			(6,446)			(9,719)			9,313			(34,768)
Foreign currency			11,594			49			(25)			63			—			11,681
(Earnings) loss from unconsolidated entities			(1,753)			254			—			(589)			—			(2,088)
Sales of properties			(17,693)			—			—			—			—			(17,693)
Recognition of Distributable realized gains / (losses) on:
Loans			14,553			—			—			4,672			—			19,225
Realized credit loss			(7,757)			—			—			—			—			(7,757)
Securities			(2,861)			—			—			1,776			—			(1,085)
Derivatives			1,950			—			(35)			1,595			—			3,510
Foreign currency			4,784			(10)			25			(63)			—			4,736
Earnings (loss) from unconsolidated entities			3,218			(254)			—			964			—			3,928
Sales of properties			8,298			—			—			—			—			8,298
Distributable Earnings (Loss)		$	147,239		$	6,770		$	21,539		$	23,793		$	(48,568)		$	150,773
Distributable Earnings (Loss) per Weighted Average Diluted    Share		$	0.49		$	0.02		$	0.07		$	0.08		$	(0.16)		$	0.50

 

 

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Balance Sheet by Segment As of March 31, 2021 (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		$	56,629		$	7,873		$	39,791		$	29,064		$	217,049		$	350,406		$	784		$	351,190
Restricted cash			69,882			27,973			6,672			14,197			—			118,724			—			118,724
Loans held-for-investment, net			10,733,752			1,586,808			—			933			—			12,321,493			—			12,321,493
Loans held-for-sale			587,037			89,368			—			168,226			—			844,631			—			844,631
Investment securities			969,968			34,951			—			1,106,000			—			2,110,919			(1,432,632)			678,287
Properties, net			93,718			—			1,954,880			196,150			—			2,244,748			—			2,244,748
Intangible assets			—			—			38,833			70,857			—			109,690			(42,918)			66,772
Investment in unconsolidated entities			47,514			24,840			—			44,435			—			116,789			(15,882)			100,907
Goodwill			—			119,409			—			140,437			—			259,846			—			259,846
Derivative assets			13,088			—			162			320			24,459			38,029			—			38,029
Accrued interest receivable			97,853			3,310			—			274			408			101,845			(132)			101,713
Other assets			61,677			7,107			85,740			44,719			9,646			208,889			(16)			208,873
VIE assets, at fair value			—			—			—			—			—			—			62,367,110			62,367,110
Total Assets		$	12,731,118		$	1,901,639		$	2,126,078		$	1,815,612		$	251,562		$	18,826,009		$	60,876,314		$	79,702,323
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other    liabilities		$	37,206		$	16,010		$	44,184		$	24,110		$	56,614		$	178,124		$	91		$	178,215
Related-party payable			—			—			—			—			36,135			36,135			—			36,135
Dividends payable			—			—			—			—			138,906			138,906			—			138,906
Derivative liabilities			33,190			1,310			—			305			—			34,805			—			34,805
Secured financing agreements, net			6,502,059			1,259,813			1,871,026			653,222			631,655			10,917,775			(21,843)			10,895,932
Collateralized loan obligations, net			931,178			—			—			—			—			931,178			—			931,178
Unsecured senior notes, net			—			—			—			—			1,735,658			1,735,658			—			1,735,658
VIE liabilities, at fair value			—			—			—			—			—			—			60,896,709			60,896,709
Total Liabilities			7,503,633			1,277,133			1,915,210			677,637			2,598,968			13,972,581			60,874,957			74,847,538
Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock			—			—			—			—			2,943			2,943			—			2,943
Additional paid-in capital			1,074,553			599,666			25,905			(298,098)			3,823,011			5,225,037			—			5,225,037
Treasury stock			—			—			—			—			(138,022)			(138,022)			—			(138,022)
Accumulated other comprehensive income			41,654			—			—			—			—			41,654			—			41,654
Retained earnings (accumulated deficit)			4,111,160			24,840			(40,641)			1,285,229			(6,035,338)			(654,750)			—			(654,750)
Total Starwood Property Trust, Inc. Stockholders'    Equity			5,227,367			624,506			(14,736)			987,131			(2,347,406)			4,476,862			—			4,476,862
Non-controlling interests in consolidated subsidiaries			118			—			225,604			150,844			—			376,566			1,357			377,923
Total Equity			5,227,485			624,506			210,868			1,137,975			(2,347,406)			4,853,428			1,357			4,854,785
Total Liabilities and Equity		$	12,731,118		$	1,901,639		$	2,126,078		$	1,815,612		$	251,562		$	18,826,009		$	60,876,314		$	79,702,323

 

 

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SOURCE Starwood Property Trust, Inc.