stwd_Current folio_10Q

Table of Contents 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2015

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 001-34436

 


 

Starwood Property Trust, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Maryland

 

27-0247747

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

591 West Putnam Avenue

 

 

Greenwich, Connecticut

 

06830

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:

(203) 422-8100

 


 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

Large accelerated filer 

 

Accelerated filer 

 

 

 

Non-accelerated filer 

 

Smaller reporting company 

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of October 30,  2015 was 237,672,948.

 

 

 

 

 

 


 

Table of Contents 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including without limitation, statements concerning our operations, economic performance and financial condition. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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. Forward-looking statements do not guarantee future performance, which may be materially different from that expressed in, or implied by, any such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates.

 

These forward-looking statements are based largely on our current beliefs, assumptions and expectations of our future performance taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or within our control, and which could materially affect actual results, performance or achievements. Factors that may cause actual results to vary from our forward-looking statements include, but are not limited to:

 

·

factors described in our Annual Report on Form 10-K for the year ended December 31, 2014, this Quarterly Report on Form 10-Q and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015, including those set forth under the captions “Risk Factors” and “Business”;

 

·

defaults by borrowers in paying debt service on outstanding indebtedness;

 

·

impairment in the value of real estate property securing our loans or in which we invest;

 

·

availability of mortgage origination and acquisition opportunities acceptable to us;

 

·

our ability to fully integrate LNR Property LLC, a Delaware limited liability company (“LNR”), which was acquired on April 19, 2013, into our business and achieve the benefits that we anticipate from this acquisition;

 

·

potential mismatches in the timing of asset repayments and the maturity of the associated financing agreements;

 

·

national and local economic and business conditions;

 

·

general and local commercial and residential real estate property conditions;

 

·

changes in federal government policies;

 

·

changes in federal, state and local governmental laws and regulations;

 

·

increased competition from entities engaged in mortgage lending and securities investing activities;

 

·

changes in interest rates; and

 

·

the availability of, and costs associated with, sources of liquidity.

 

In light of these risks and uncertainties, there can be no assurances that the results referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q 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.

2


 

Table of Contents 

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

Part I 

Financial Information

 

Item 1. 

Financial Statements

 

Condensed Consolidated Balance Sheets

 

Condensed Consolidated Statements of Operations

 

Condensed Consolidated Statements of Comprehensive Income

 

Condensed Consolidated Statements of Equity

 

Condensed Consolidated Statements of Cash Flows

 

Notes to Condensed Consolidated Financial Statements

10 

 

Note 1 Business and Organization

10 

 

Note 2 Summary of Significant Accounting Policies

11 

 

Note 3 Acquisitions and Divestitures

17 

 

Note 4 Loans

19 

 

Note 5 Investment Securities

24 

 

Note 6 Properties

29 

 

Note 7 Investment in Unconsolidated Entities

30 

 

Note 8 Goodwill and Intangible Assets

30 

 

Note 9 Secured Financing Agreements

32 

 

Note 10 Convertible Senior Notes

35 

 

Note 11 Loan Securitization/Sale Activities

36 

 

Note 12 Derivatives and Hedging Activity

37 

 

Note 13 Offsetting Assets and Liabilities

39 

 

Note 14 Variable Interest Entities

40 

 

Note 15 Related-Party Transactions

41 

 

Note 16 Stockholders’ Equity

43 

 

Note 17 Earnings per Share

45 

 

Note 18 Accumulated Other Comprehensive Income

46 

 

Note 19 Fair Value

47 

 

Note 20 Income Taxes

52 

 

Note 21 Commitments and Contingencies

54 

 

Note 22 Segment Data

54 

 

Note 23 Subsequent Events

61 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

62 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

91 

Item 4. 

Controls and Procedures

93 

Part II 

Other Information

 

Item 1. 

Legal Proceedings

94 

Item 1A. 

Risk Factors

94 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

94 

Item 3. 

Defaults Upon Senior Securities

94 

Item 4. 

Mine Safety Disclosures

94 

Item 5. 

Other Information

94 

Item 6. 

Exhibits

96 

 

 

 

3


 

Table of Contents 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

    

As of

    

As of

 

 

 

September 30, 2015

 

December 31, 2014

 

Assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

372,768

 

$

255,187

 

Restricted cash

 

 

43,620

 

 

48,704

 

Loans held-for-investment, net

 

 

5,814,886

 

 

5,779,238

 

Loans held-for-sale ($423,630 and $391,620 held at fair value)

 

 

450,828

 

 

391,620

 

Loans transferred as secured borrowings

 

 

142,456

 

 

129,427

 

Investment securities ($421,456 and $556,253 held at fair value)

 

 

786,461

 

 

998,248

 

Properties, net

 

 

530,438

 

 

39,854

 

Intangible assets ($123,892 and $132,303 held at fair value)

 

 

191,080

 

 

144,152

 

Investment in unconsolidated entities

 

 

199,171

 

 

193,983

 

Goodwill

 

 

140,437

 

 

140,437

 

Derivative assets

 

 

36,307

 

 

26,628

 

Accrued interest receivable

 

 

36,042

 

 

40,102

 

Other assets

 

 

137,296

 

 

95,652

 

Variable interest entity (“VIE”) assets, at fair value

 

 

82,937,617

 

 

107,816,065

 

Total Assets 

 

$

91,819,407

 

$

116,099,297

 

Liabilities and Equity

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

137,786

 

$

144,516

 

Related-party payable

 

 

22,804

 

 

40,751

 

Dividends payable

 

 

115,191

 

 

108,189

 

Derivative liabilities

 

 

14,901

 

 

5,476

 

Secured financing agreements, net

 

 

3,682,274

 

 

3,137,789

 

Convertible senior notes, net

 

 

1,320,207

 

 

1,418,022

 

Secured borrowings on transferred loans

 

 

143,926

 

 

129,441

 

VIE liabilities, at fair value

 

 

82,181,138

 

 

107,232,201

 

Total Liabilities 

 

 

87,618,227

 

 

112,216,385

 

Commitments and contingencies (Note 21)

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Starwood Property Trust, Inc. Stockholders’ Equity:

 

 

 

 

 

 

 

Preferred stock, $0.01 per share, 100,000,000 shares authorized, no shares issued and outstanding 

 

 

 —

 

 

 —

 

Common stock, $0.01 per share, 500,000,000 shares authorized, 240,665,588 issued and 237,658,615 outstanding as of September 30, 2015 and 224,752,053 issued and 223,538,303 outstanding as of December 31, 2014

 

 

2,407

 

 

2,248

 

Additional paid-in capital

 

 

4,184,538

 

 

3,835,725

 

Treasury stock (3,006,973 shares and 1,213,750 shares)

 

 

(61,525)

 

 

(23,635)

 

Accumulated other comprehensive income

 

 

39,510

 

 

55,896

 

Retained earnings (accumulated deficit) 

 

 

5,843

 

 

(9,378)

 

Total Starwood Property Trust, Inc. Stockholders’ Equity

 

 

4,170,773

 

 

3,860,856

 

Non-controlling interests in consolidated subsidiaries

 

 

30,407

 

 

22,056

 

Total Equity 

 

 

4,201,180

 

 

3,882,912

 

Total Liabilities and Equity 

 

$

91,819,407

 

$

116,099,297

 

 

See notes to condensed consolidated financial statements.

4


 

Table of Contents 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Operations

(Unaudited, amounts in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2015

    

2014

 

2015

    

2014

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from loans

 

$

120,598

 

$

110,669

 

$

357,319

 

$

321,034

Interest income from investment securities

 

 

24,674

 

 

28,640

 

 

76,228

 

 

85,714

Servicing fees

 

 

32,528

 

 

34,641

 

 

90,939

 

 

101,533

Rental income

 

 

10,045

 

 

3,385

 

 

17,731

 

 

6,520

Other revenues

 

 

4,300

 

 

4,033

 

 

7,437

 

 

9,296

Total revenues 

 

 

192,145

 

 

181,368

 

 

549,654

 

 

524,097

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

28,082

 

 

24,943

 

 

82,871

 

 

77,849

Interest expense

 

 

50,688

 

 

39,739

 

 

151,021

 

 

115,265

General and administrative

 

 

38,693

 

 

47,640

 

 

115,361

 

 

136,835

Acquisition and investment pursuit costs

 

 

3,682

 

 

759

 

 

9,735

 

 

1,924

Costs of rental operations

 

 

2,352

 

 

1,783

 

 

5,261

 

 

3,889

Depreciation and amortization

 

 

7,234

 

 

3,017

 

 

17,147

 

 

12,807

Loan loss allowance, net

 

 

(2,667)

 

 

1,575

 

 

311

 

 

1,933

Other expense

 

 

3

 

 

918

 

 

378

 

 

6,527

Total costs and expenses 

 

 

128,067

 

 

120,374

 

 

382,085

 

 

357,029

Income before other income, income taxes and non-controlling interests

 

 

64,078

 

 

60,994

 

 

167,569

 

 

167,068

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Change in net assets related to consolidated VIEs

 

 

49,665

 

 

87,778

 

 

153,399

 

 

190,810

Change in fair value of servicing rights

 

 

(4,217)

 

 

(7,897)

 

 

(8,411)

 

 

(18,671)

Change in fair value of investment securities, net

 

 

2,617

 

 

1,860

 

 

3,564

 

 

15,180

Change in fair value of mortgage loans held-for-sale, net

 

 

19,082

 

 

15,517

 

 

51,044

 

 

48,018

Earnings from unconsolidated entities

 

 

5,706

 

 

3,805

 

 

20,747

 

 

13,432

Gain on sale of investments and other assets, net

 

 

3,348

 

 

1,332

 

 

20,755

 

 

12,965

Gain on derivative financial instruments, net

 

 

2,230

 

 

29,275

 

 

7,323

 

 

11,619

Foreign currency loss, net

 

 

(17,782)

 

 

(21,466)

 

 

(27,235)

 

 

(16,212)

Total other-than-temporary impairment (“OTTI”)

 

 

 —

 

 

(264)

 

 

 —

 

 

(2,256)

Noncredit portion of OTTI recognized in other comprehensive income

 

 

 —

 

 

264

 

 

 —

 

 

1,246

Net impairment losses recognized in earnings

 

 

 —

 

 

 —

 

 

 —

 

 

(1,010)

Loss on extinguishment of debt

 

 

 —

 

 

 —

 

 

(5,921)

 

 

 —

Other income, net

 

 

64

 

 

28

 

 

119

 

 

738

Total other income 

 

 

60,713

 

 

110,232

 

 

215,384

 

 

256,869

Income from continuing operations before income taxes 

 

 

124,791

 

 

171,226

 

 

382,953

 

 

423,937

Income tax provision

 

 

(7,675)

 

 

(3,836)

 

 

(27,418)

 

 

(13,733)

Income from continuing operations 

 

 

117,116

 

 

167,390

 

 

355,535

 

 

410,204

Loss from discontinued operations, net of tax (Note 3)

 

 

 —

 

 

 —

 

 

 —

 

 

(1,551)

Net income 

 

 

117,116

 

 

167,390

 

 

355,535

 

 

408,653

Net income attributable to non-controlling interests

 

 

(381)

 

 

(2,346)

 

 

(1,289)

 

 

(5,140)

Net income attributable to Starwood Property Trust, Inc.  

 

$

116,735

 

$

165,044

 

$

354,246

 

$

403,513

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share data attributable to Starwood Property Trust, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.49

 

$

0.73

 

$

1.51

 

$

1.89

Loss from discontinued operations

 

 

 —

 

 

 —

 

 

 —

 

 

(0.01)

Net income

 

$

0.49

 

$

0.73

 

$

1.51

 

$

1.88

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

0.49

 

$

0.73

 

$

1.51

 

$

1.88

Loss from discontinued operations

 

 

 —

 

 

 —

 

 

 —

 

 

(0.01)

Net income

 

$

0.49

 

$

0.73

 

$

1.51

 

$

1.87

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.48

 

$

0.48

 

$

1.44

 

$

1.44

 

See notes to condensed consolidated financial statements.

 

 

5


 

Table of Contents 

 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

For the Three Months Ended

    

For the Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2015

 

2014

 

2015

 

2014

Net income 

 

$

117,116

 

$

167,390

 

$

355,535

 

$

408,653

Other comprehensive (loss) income (net change by component):

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges

 

 

(208)

 

 

530

 

 

(348)

 

 

559

Available-for-sale securities

 

 

(9,095)

 

 

3,954

 

 

(18,915)

 

 

(2,166)

Foreign currency remeasurement

 

 

2,912

 

 

(9,765)

 

 

2,877

 

 

(4,161)

Other comprehensive loss

 

 

(6,391)

 

 

(5,281)

 

 

(16,386)

 

 

(5,768)

Comprehensive income 

 

 

110,725

 

 

162,109

 

 

339,149

 

 

402,885

Less: Comprehensive income attributable to non-controlling interests

 

 

(381)

 

 

(2,346)

 

 

(1,289)

 

 

(5,140)

Comprehensive income attributable to Starwood Property Trust, Inc.  

 

$

110,344

 

$

159,763

 

$

337,860

 

$

397,745

 

See notes to condensed consolidated financial statements.

 

 

6


 

Table of Contents 

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(Unaudited, amounts in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

Starwood

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Accumulated

 

Other

 

Property

 

 

 

 

 

 

 

 

 

Common stock

 

Additional

 

 

 

 

 

 

Deficit)

 

Comprehensive

 

Trust, Inc.

 

Non-

 

 

 

 

 

 

 

 

Par

 

Paid-in

 

Treasury Stock

 

Retained

 

Income

 

Stockholders’

 

Controlling

 

Total

 

 

    

Shares

    

Value

    

Capital

    

Shares

    

Amount

    

Earnings

    

(Loss)

    

Equity

    

Interests

    

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2015

 

224,752,053

 

$

2,248

 

$

3,835,725

 

1,213,750

 

$

(23,635)

 

$

(9,378)

 

$

55,896

 

$

3,860,856

 

$

22,056

 

$

3,882,912

 

Proceeds from public offering of common stock

 

13,800,000

 

 

138

 

 

326,004

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

326,142

 

 

 —

 

 

326,142

 

Proceeds from DRIP Plan

 

9,400

 

 

 —

 

 

219

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

219

 

 

 —

 

 

219

 

Equity offering costs

 

 —

 

 

 —

 

 

(945)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(945)

 

 

 —

 

 

(945)

 

Common stock repurchased

 

 —

 

 

 —

 

 

 —

 

1,793,223

 

 

(37,890)

 

 

 —

 

 

 —

 

 

(37,890)

 

 

 —

 

 

(37,890)

 

Equity component of 4.0% Convertible Senior Notes repurchase

 

 —

 

 

 —

 

 

(17,727)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(17,727)

 

 

 —

 

 

(17,727)

 

Share-based compensation

 

1,484,879

 

 

15

 

 

26,440

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

26,455

 

 

 —

 

 

26,455

 

Manager incentive fee paid in stock

 

619,256

 

 

6

 

 

14,822

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14,828

 

 

 —

 

 

14,828

 

Net income

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

354,246

 

 

 —

 

 

354,246

 

 

1,289

 

 

355,535

 

Dividends declared, $1.44 per share 

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(339,025)

 

 

 —

 

 

(339,025)

 

 

 —

 

 

(339,025)

 

Other comprehensive loss, net

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(16,386)

 

 

(16,386)

 

 

 —

 

 

(16,386)

 

VIE non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4,188

 

 

4,188

 

Contributions from non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4,133

 

 

4,133

 

Distributions to non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,259)

 

 

(1,259)

 

Balance, September 30, 2015

 

240,665,588

 

$

2,407

 

$

4,184,538

 

3,006,973

 

$

(61,525)

 

$

5,843

 

$

39,510

 

$

4,170,773

 

$

30,407

 

$

4,201,180

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2014

 

196,139,045

 

$

1,961

 

$

4,300,479

 

625,850

 

$

(10,642)

 

$

(84,719)

 

$

75,449

 

$

4,282,528

 

$

44,605

 

$

4,327,133

 

Proceeds from public offering of common stock

 

25,300,000

 

 

253

 

 

564,442

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

564,695

 

 

 —

 

 

564,695

 

Proceeds from ATM Agreement

 

759,000

 

 

8

 

 

18,338

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

18,346

 

 

 —

 

 

18,346

 

Proceeds from DRIP Plan

 

2,430

 

 

 —

 

 

58

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

58

 

 

 —

 

 

58

 

Equity offering costs

 

 —

 

 

 —

 

 

(1,623)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,623)

 

 

 —

 

 

(1,623)

 

Common stock repurchased

 

 —

 

 

 —

 

 

 —

 

587,900

 

 

(12,993)

 

 

 —

 

 

 —

 

 

(12,993)

 

 

 —

 

 

(12,993)

 

Share-based compensation

 

1,025,144

 

 

10

 

 

21,491

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

21,501

 

 

 —

 

 

21,501

 

Manager incentive fee paid in stock

 

376,932

 

 

4

 

 

8,986

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

8,990

 

 

 —

 

 

8,990

 

Net income

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

403,513

 

 

 —

 

 

403,513

 

 

5,140

 

 

408,653

 

Dividends declared,  $1.44 per share

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(311,492)

 

 

 —

 

 

(311,492)

 

 

 —

 

 

(311,492)

 

Spin-off of Starwood Waypoint Residential Trust

 

 —

 

 

 —

 

 

(1,118,743)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,118,743)

 

 

(1,594)

 

 

(1,120,337)

 

Other comprehensive loss, net

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(5,768)

 

 

(5,768)

 

 

 —

 

 

(5,768)

 

VIE non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

382

 

 

382

 

Distributions to non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(33,582)

 

 

(33,582)

 

Balance, September 30, 2014

 

223,602,551

 

$

2,236

 

$

3,793,428

 

1,213,750

 

$

(23,635)

 

$

7,302

 

$

69,681

 

$

3,849,012

 

$

14,951

 

$

3,863,963

 

 

See notes to condensed consolidated financial statements.

 

7


 

Table of Contents 

 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

 

2015

    

2014

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

Net income

 

$

355,535

 

$

408,653

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Amortization of deferred financing costs

 

 

11,055

 

 

8,501

 

Amortization of convertible debt discount and deferred fees

 

 

15,631

 

 

9,376

 

Accretion of net discount on investment securities

 

 

(20,312)

 

 

(17,174)

 

Accretion of net deferred loan fees and discounts

 

 

(26,615)

 

 

(16,756)

 

Amortization of net premium (discount) from secured borrowings on transferred loans

 

 

4

 

 

(862)

 

Share-based compensation

 

 

26,455

 

 

21,501

 

Share-based component of incentive fees

 

 

14,828

 

 

8,990

 

Change in fair value of fair value option investment securities

 

 

(3,564)

 

 

(15,180)

 

Change in fair value of consolidated VIEs

 

 

17,438

 

 

(71,105)

 

Change in fair value of servicing rights

 

 

8,411

 

 

18,671

 

Change in fair value of loans held-for-sale

 

 

(51,044)

 

 

(48,018)

 

Change in fair value of derivatives

 

 

(12,765)

 

 

(14,595)

 

Foreign currency loss, net

 

 

27,372

 

 

15,767

 

Gain on sale of investments and other assets

 

 

(20,755)

 

 

(13,907)

 

Other-than-temporary impairment

 

 

 —

 

 

1,010

 

Loan loss allowance, net

 

 

311

 

 

1,933

 

Depreciation and amortization

 

 

15,873

 

 

13,178

 

Earnings from unconsolidated entities

 

 

(20,747)

 

 

(13,432)

 

Distributions of earnings from unconsolidated entities

 

 

18,665

 

 

9,354

 

Loss on extinguishment of debt

 

 

5,921

 

 

 —

 

Originations of loans held-for-sale, net of principal collections

 

 

(1,424,837)

 

 

(1,159,058)

 

Proceeds from sale of loans held-for-sale

 

 

1,443,871

 

 

1,165,583

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Related-party payable, net

 

 

(17,947)

 

 

7,073

 

Accrued and capitalized interest receivable, less purchased interest

 

 

(48,310)

 

 

(29,770)

 

Other assets

 

 

(29,576)

 

 

(6,192)

 

Accounts payable, accrued expenses and other liabilities

 

 

(25,211)

 

 

(46,997)

 

Net cash provided by operating activities

 

 

259,687

 

 

236,544

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

Origination and purchase of loans held-for-investment

 

 

(1,670,124)

 

 

(2,123,947)

 

Proceeds from principal collections on loans

 

 

1,057,700

 

 

966,350

 

Proceeds from loans sold

 

 

599,504

 

 

341,472

 

Purchase of investment securities

 

 

(163,018)

 

 

(67,230)

 

Proceeds from sales of investment securities

 

 

6,301

 

 

100,166

 

Proceeds from principal collections on investment securities

 

 

348,090

 

 

40,999

 

Real estate business combinations, net of cash acquired

 

 

(239,933)

 

 

 —

 

Proceeds from sale of properties

 

 

33,056

 

 

1,784

 

Purchase of other assets

 

 

(309)

 

 

(18,731)

 

Investment in unconsolidated entities

 

 

(32,063)

 

 

(21,973)

 

Distribution of capital from unconsolidated entities

 

 

29,003

 

 

38,946

 

Payments for purchase or termination of derivatives

 

 

(18,271)

 

 

(16,081)

 

Proceeds from termination of derivatives

 

 

30,194

 

 

5,611

 

Return of investment basis in purchased derivative asset

 

 

260

 

 

1,222

 

Decrease in restricted cash, net

 

 

9,404

 

 

8,890

 

Spin-off of Starwood Waypoint Residential Trust

 

 

 —

 

 

(111,960)

 

Acquisition and improvement of single family homes

 

 

 —

 

 

(61,901)

 

Proceeds from sale of non-performing loans

 

 

 —

 

 

1,153

 

Net cash used in investing activities

 

 

(10,206)

 

 

(915,230)

 

 

See notes to condensed consolidated financial statements.

8


 

Table of Contents 

 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited, amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

September 30,

 

 

2015

    

2014

Cash Flows from Financing Activities:

 

 

 

 

 

 

Borrowings under financing agreements

 

$

3,423,328

 

$

2,917,281

Principal repayments on and repurchases of borrowings

 

 

(3,289,937)

 

 

(2,459,837)

Payment of deferred financing costs

 

 

(13,876)

 

 

(11,536)

Proceeds from common stock issuances

 

 

326,361

 

 

583,099

Payment of equity offering costs

 

 

(945)

 

 

(1,623)

Payment of dividends

 

 

(332,023)

 

 

(293,607)

Distributions to non-controlling interests

 

 

(1,259)

 

 

(33,582)

Purchase of treasury stock

 

 

(29,792)