For Immediate Release
Starwood Property Trust Reports Results for
Quarter Ended March 31, 2022
– Quarterly GAAP Earnings of $1.02 and Distributable Earnings (DE) of $0.76 per Diluted Share –
– $4.4 Billion of Investment Activity, Including $1.9 Billion in Commercial Lending –
– Multifamily Becomes the Largest Property Type at 32% of CRE Loan Portfolio –
– Generated Gain of $87 Million GAAP and $85 Million DE on Sale of Industrial Asset –
– S&P Corporate Credit Rating Upgraded to BB/Outlook Stable –
– Paid Dividend of $0.48 per Share –
GREENWICH, Conn., May 4, 2022 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2022. The Company’s first quarter 2022 GAAP net income was $324.6 million, or $1.02 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $240.0 million, or $0.76 per diluted share. GAAP net income reflects $173.5 million, or $0.55 per diluted share, of unrealized increases in fair value of the Woodstar Fund's affordable housing investments, net of non-controlling interests, and an $86.6 million, or $0.27 per diluted share, gain on sale of a distribution facility ($84.7 million, or $0.27 per share, in Distributable Earnings). The fair value of the Woodstar Fund’s investments is an estimate that is subject to future increases or decreases as property values are affected by, among other things, the availability of capital, occupancy rates, rental rates and interest and inflation rates.
“This quarter once again highlighted the strength of the Starwood platform and our ability to create value for our shareholders well beyond our core lending business, differentiating us from our peers. We experienced another increase in book value driven by a fair market value increase of $218 million in our affordable housing fund. Rising median income levels in Florida, which govern rents for this portfolio, are expected to drive further increases in net operating income in the future. In addition, we monetized a second industrial asset that we foreclosed on less than three years ago, taking back an $18 million loan, repositioning and re-leasing the property, and then selling it for $115 million,” stated Barry Sternlicht, Chairman and CEO of Starwood Property Trust.
“We have taken advantage of market opportunities across cylinders, deploying over $18 billion of capital during the last 12 months. Following our two most productive quarters in our 13-year history, in which 47% of our commercial lending was on multifamily assets, our multifamily loan portfolio increased to $4.7 billion, more than 4x the balance entering COVID. Our low leverage, fortress balance sheet combined with our strong access to capital positions us to drive continued growth across our platform,” 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 4, 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: 13728386
The playback can be accessed through May 11, 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 over $87 billion of capital since inception and manages a portfolio of over $25 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 three months ended March 31, 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 March 31, 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 | $ | 202,470 | | | $ | 26,983 | | | $ | — | | | $ | 4,166 | | | $ | — | | | $ | 233,619 | | | $ | — | | | $ | 233,619 | |
| Interest income from investment securities | 20,836 | | | 747 | | | — | | | 27,389 | | | — | | | 48,972 | | | (34,989) | | | 13,983 | |
| Servicing fees | 136 | | | — | | | — | | | 14,071 | | | — | | | 14,207 | | | (4,215) | | | 9,992 | |
| Rental income | 1,686 | | | — | | | 22,365 | | | 7,529 | | | — | | | 31,580 | | | — | | | 31,580 | |
| Other revenues | 52 | | | 68 | | | 50 | | | 4,654 | | | — | | | 4,824 | | | (6) | | | 4,818 | |
| Total revenues | 225,180 | | | 27,798 | | | 22,415 | | | 57,809 | | | — | | | 333,202 | | | (39,210) | | | 293,992 | |
| Costs and expenses: | | | | | | | | | | | | | | | |
| Management fees | 277 | | | — | | | — | | | — | | | 55,018 | | | 55,295 | | | — | | | 55,295 | |
| Interest expense | 68,602 | | | 11,930 | | | 6,081 | | | 6,210 | | | 33,842 | | | 126,665 | | | (214) | | | 126,451 | |
| General and administrative | 11,602 | | | 3,511 | | | 1,056 | | | 23,443 | | | 4,628 | | | 44,240 | | | 81 | | | 44,321 | |
| Acquisition and investment pursuit costs | 499 | | | 1 | | | 5 | | | (83) | | | — | | | 422 | | | — | | | 422 | |
| Costs of rental operations | 519 | | | — | | | 5,001 | | | 3,770 | | | — | | | 9,290 | | | — | | | 9,290 | |
| Depreciation and amortization | 294 | | | 105 | | | 8,219 | | | 3,029 | | | — | | | 11,647 | | | — | | | 11,647 | |
| Credit loss reversal, net | (3,299) | | | (359) | | | — | | | — | | | — | | | (3,658) | | | — | | | (3,658) | |
| Other expense | — | | | — | | | 55 | | | — | | | — | | | 55 | | | — | | | 55 | |
| Total costs and expenses | 78,494 | | | 15,188 | | | 20,417 | | | 36,369 | | | 93,488 | | | 243,956 | | | (133) | | | 243,823 | |
| Other income (loss): | | | | | | | | | | | | | | | |
| Change in net assets related to consolidated VIEs | — | | | — | | | — | | | — | | | — | | | — | | | 26,749 | | | 26,749 | |
| Change in fair value of servicing rights | — | | | — | | | — | | | (217) | | | — | | | (217) | | | 1,301 | | | 1,084 | |
| Change in fair value of investment securities, net | (2,105) | | | — | | | — | | | (9,291) | | | — | | | (11,396) | | | 11,041 | | | (355) | |
| Change in fair value of mortgage loans, net | (116,228) | | | — | | | — | | | (9,555) | | | — | | | (125,783) | | | — | | | (125,783) | |
| Income from affordable housing fund investments | — | | | — | | | 234,041 | | | — | | | — | | | 234,041 | | | — | | | 234,041 | |
| (Loss) earnings from unconsolidated entities | (1,340) | | | 345 | | | — | | | 151 | | | — | | | (844) | | | (66) | | | (910) | |
| Gain on sale of investments and other assets, net | 86,610 | | | — | | | — | | | 11,858 | | | — | | | 98,468 | | | — | | | 98,468 | |
| Gain (loss) on derivative financial instruments, net | 118,395 | | | 632 | | | 17,546 | | | 27,863 | | | (37,168) | | | 127,268 | | | — | | | 127,268 | |
| Foreign currency (loss) gain, net | (27,254) | | | (28) | | | 1 | | | — | | | — | | | (27,281) | | | — | | | (27,281) | |
| Loss on extinguishment of debt | (206) | | | (469) | | | — | | | (148) | | | — | | | (823) | | | — | | | (823) | |
| Other (loss) income, net | (788) | | | — | | | — | | | — | | | — | | | (788) | | | 25 | | | (763) | |
| Total other income (loss) | 57,084 | | | 480 | | | 251,588 | | | 20,661 | | | (37,168) | | | 292,645 | | | 39,050 | | | 331,695 | |
| Income (loss) before income taxes | 203,770 | | | 13,090 | | | 253,586 | | | 42,101 | | | (130,656) | | | 381,891 | | | (27) | | | 381,864 | |
| Income tax benefit (provision) | 5,140 | | | 4 | | | — | | | (2,694) | | | — | | | 2,450 | | | — | | | 2,450 | |
| Net income (loss) | 208,910 | | | 13,094 | | | 253,586 | | | 39,407 | | | (130,656) | | | 384,341 | | | (27) | | | 384,314 | |
| Net income attributable to non-controlling interests | (3) | | | — | | | (52,411) | | | (7,328) | | | — | | | (59,742) | | | 27 | | | (59,715) | |
| Net income (loss) attributable to Starwood Property Trust, Inc. | $ | 208,907 | | | $ | 13,094 | | | $ | 201,175 | | | $ | 32,079 | | | $ | (130,656) | | | $ | 324,599 | | | $ | — | | | $ | 324,599 | |
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, 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. | $ | 208,907 | | | $ | 13,094 | | | $ | 201,175 | | | $ | 32,079 | | | $ | (130,656) | | | $ | 324,599 | |
| Add / (Deduct): | | | | | | | | | | | |
| Non-controlling interests attributable to Woodstar II Class A Units | — | | | — | | | 4,691 | | | — | | | — | | | 4,691 | |
| Non-controlling interests attributable to unrealized gains/losses | — | | | — | | | 44,902 | | | 2,556 | | | — | | | 47,458 | |
| Non-cash equity compensation expense | 2,417 | | | 297 | | | 58 | | | 1,275 | | | 6,046 | | | 10,093 | |
| Management incentive fee | — | | | — | | | — | | | — | | | 28,955 | | | 28,955 | |
| Acquisition and investment pursuit costs | (298) | | | — | | | (78) | | | (169) | | | — | | | (545) | |
| Depreciation and amortization | 234 | | | 95 | | | 8,292 | | | 3,152 | | | — | | | 11,773 | |
| Interest income adjustment for securities | 2,490 | | | — | | | — | | | (1,708) | | | — | | | 782 | |
| Extinguishment of debt, net | — | | | — | | | — | | | — | | | (246) | | | (246) | |
| Other non-cash items | 3 | | | — | | | 456 | | | 122 | | | — | | | 581 | |
| Reversal of GAAP unrealized (gains) / losses on: | | | | | | | | | | | |
| Loans | 116,228 | | | — | | | — | | | 9,555 | | | — | | | 125,783 | |
| Credit loss reversal, net | (3,299) | | | (359) | | | — | | | — | | | — | | | (3,658) | |
| Securities | 2,105 | | | — | | | — | | | 9,291 | | | — | | | 11,396 | |
| Woodstar Fund investments | — | | | — | | | (234,041) | | | — | | | — | | | (234,041) | |
| Derivatives | (121,172) | | | (685) | | | (19,170) | | | (29,089) | | | 40,773 | | | (129,343) | |
| Foreign currency | 27,254 | | | 28 | | | (1) | | | — | | | — | | | 27,281 | |
| (Earnings) loss from unconsolidated entities | 1,340 | | | (345) | | | — | | | (151) | | | — | | | 844 | |
| Sales of properties | (86,610) | | | — | | | — | | | (11,858) | | | — | | | (98,468) | |
| Recognition of Distributable realized gains / (losses) on: | | | | | | | | | | | |
| Loans | (36,208) | | | — | | | — | | | (10,561) | | | — | | | (46,769) | |
| | | | | | | | | | | |
| Securities | (2,768) | | | — | | | — | | | 26 | | | — | | | (2,742) | |
| Woodstar Fund investments | — | | | — | | | 15,659 | | | — | | | — | | | 15,659 | |
| | | | | | | | | | | |
| Derivatives | 36,893 | | | — | | | (35) | | | 24,639 | | | — | | | 61,497 | |
| Foreign currency | (178) | | | 112 | | | 1 | | | — | | | — | | | (65) | |
| Earnings (loss) from unconsolidated entities | (1,239) | | | 345 | | | — | | | 470 | | | — | | | (424) | |
| Sales of properties | 84,738 | | | — | | | — | | | 177 | | | — | | | 84,915 | |
| Distributable Earnings (Loss) | $ | 230,837 | | | $ | 12,582 | | | $ | 21,909 | | | $ | 29,806 | | | $ | (55,128) | | | $ | 240,006 | |
| Distributable Earnings (Loss) per Weighted Average Diluted Share | $ | 0.73 | | | $ | 0.04 | | | $ | 0.07 | | | $ | 0.09 | | | $ | (0.17) | | | $ | 0.76 | |
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of March 31, 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 | $ | 58,377 | | | $ | 38,762 | | | $ | 20,077 | | | $ | 27,836 | | | $ | 118,573 | | | $ | 263,625 | | | $ | 584 | | | $ | 264,209 | |
| Restricted cash | 13,142 | | | 27,401 | | | 950 | | | 26,371 | | | 41,701 | | | 109,565 | | | — | | | 109,565 | |
| Loans held-for-investment, net | 14,107,316 | | | 2,136,118 | | | — | | | 9,823 | | | — | | | 16,253,257 | | | — | | | 16,253,257 | |
| Loans held-for-sale | 2,299,153 | | | — | | | — | | | 385,359 | | | — | | | 2,684,512 | | | — | | | 2,684,512 | |
| Investment securities | 1,207,667 | | | 49,198 | | | — | | | 1,155,469 | | | — | | | 2,412,334 | | | (1,543,145) | | | 869,189 | |
| Properties, net | 104,901 | | | — | | | 880,392 | | | 137,064 | | | — | | | 1,122,357 | | | — | | | 1,122,357 | |
| Investments of consolidated affordable housing fund | — | | | — | | | 1,264,160 | | | — | | | — | | | 1,264,160 | | | — | | | 1,264,160 | |
| Investments in unconsolidated entities | 43,349 | | | 27,061 | | | — | | | 33,878 | | | — | | | 104,288 | | | (15,038) | | | 89,250 | |
| Goodwill | — | | | 119,409 | | | — | | | 140,437 | | | — | | | 259,846 | | | — | | | 259,846 | |
| Intangible assets | — | | | — | | | 33,292 | | | 69,674 | | | — | | | 102,966 | | | (40,818) | | | 62,148 | |
| Derivative assets | 58,904 | | | 161 | | | 486 | | | 1,318 | | | — | | | 60,869 | | | — | | | 60,869 | |
| Accrued interest receivable | 114,367 | | | 6,274 | | | — | | | 1,745 | | | 1,556 | | | 123,942 | | | (141) | | | 123,801 | |
| Other assets | 135,095 | | | 10,229 | | | 59,100 | | | 33,857 | | | 23,146 | | | 261,427 | | | (235) | | | 261,192 | |
| VIE assets, at fair value | — | | | — | | | — | | | — | | | — | | | — | | | 57,763,543 | | | 57,763,543 | |
| Total Assets | $ | 18,142,271 | | | $ | 2,414,613 | | | $ | 2,258,457 | | | $ | 2,022,831 | | | $ | 184,976 | | | $ | 25,023,148 | | | $ | 56,164,750 | | | $ | 81,187,898 | |
| Liabilities and Equity | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | |
| Accounts payable, accrued expenses and other liabilities | $ | 102,124 | | | $ | 15,347 | | | $ | 11,503 | | | $ | 32,297 | | | $ | 34,834 | | | $ | 196,105 | | | $ | 40 | | | $ | 196,145 | |
| Related-party payable | — | | | — | | | — | | | — | | | 56,615 | | | 56,615 | | | — | | | 56,615 | |
| Dividends payable | — | | | — | | | — | | | — | | | 148,743 | | | 148,743 | | | — | | | 148,743 | |
| Derivative liabilities | 10,990 | | | 225 | | | — | | | 145 | | | 27,349 | | | 38,709 | | | — | | | 38,709 | |
| Secured financing agreements, net | 8,294,408 | | | 924,242 | | | 787,977 | | | 774,460 | | | 771,944 | | | 11,553,031 | | | (21,460) | | | 11,531,571 | |
| Collateralized loan obligations and single asset securitization, net | 2,985,637 | | | 812,258 | | | — | | | — | | | — | | | 3,797,895 | | | — | | | 3,797,895 | |
| Unsecured senior notes, net | — | | | — | | | — | | | — | | | 2,322,630 | | | 2,322,630 | | | — | | | 2,322,630 | |
| VIE liabilities, at fair value | — | | | — | | | — | | | — | | | — | | | — | | | 56,185,937 | | | 56,185,937 | |
| Total Liabilities | 11,393,159 | | | 1,752,072 | | | 799,480 | | | 806,902 | | | 3,362,115 | | | 18,113,728 | | | 56,164,517 | | | 74,278,245 | |
Temporary Equity: Redeemable non-controlling interests | — | | | — | | | 261,685 | | | — | | | — | | | 261,685 | | | — | | | 261,685 | |
| Permanent Equity: | | | | | | | | | | | | | | | |
| Starwood Property Trust, Inc. Stockholders’ Equity: | | | | | | | | | | | | | | | |
| Common stock | — | | | — | | | — | | | — | | | 3,144 | | | 3,144 | | | — | | | 3,144 | |
| Additional paid-in capital | 1,931,043 | | | 606,871 | | | (373,851) | | | (388,580) | | | 3,933,544 | | | 5,709,027 | | | — | | | 5,709,027 | |
| Treasury stock | — | | | — | | | — | | | — | | | (138,022) | | | (138,022) | | | — | | | (138,022) | |
| Accumulated other comprehensive income | 35,669 | | | — | | | — | | | — | | | — | | | 35,669 | | | — | | | 35,669 | |
| Retained earnings (accumulated deficit) | 4,782,282 | | | 55,670 | | | 1,362,509 | | | 1,445,221 | | | (6,975,805) | | | 669,877 | | | — | | | 669,877 | |
| Total Starwood Property Trust, Inc. Stockholders’ Equity | 6,748,994 | | | 662,541 | | | 988,658 | | | 1,056,641 | | | (3,177,139) | | | 6,279,695 | | | — | | | 6,279,695 | |
| Non-controlling interests in consolidated subsidiaries | 118 | | | — | | | 208,634 | | | 159,288 | | | — | | | 368,040 | | | 233 | | | 368,273 | |
| Total Permanent Equity | 6,749,112 | | | 662,541 | | | 1,197,292 | | | 1,215,929 | | | (3,177,139) | | | 6,647,735 | | | 233 | | | 6,647,968 | |
| Total Liabilities and Equity | $ | 18,142,271 | | | $ | 2,414,613 | | | $ | 2,258,457 | | | $ | 2,022,831 | | | $ | 184,976 | | | $ | 25,023,148 | | | $ | 56,164,750 | | | $ | 81,187,898 | |
