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, 2018

 

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) 422-7700


 

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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

 

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

 

 

 

 

Large accelerated filer ☒

 

Accelerated filer ☐

Non-accelerated filer ☐

 

Smaller reporting company ☐

 

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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 November 5, 2018 was 275,351,911.

 

 

 

 

 


 

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, 2017, our Quarterly Report on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018 and this Quarterly Report on Form 10-Q, 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;

 

·

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

 

·

our ability to integrate our recently completed acquisition of the project finance origination, underwriting and capital markets business of GE Capital Global Holdings, LLC into our business and to achieve the benefits that we anticipate from the acquisition;

 

·

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

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Comprehensive Income

6

 

Condensed Consolidated Statements of Equity

7

 

Condensed Consolidated Statements of Cash Flows

8

 

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

18

 

Note 4 Loans

21

 

Note 5 Investment Securities

27

 

Note 6 Properties

31

 

Note 7 Investment in Unconsolidated Entities

33

 

Note 8 Goodwill and Intangibles

34

 

Note 9 Secured Financing Agreements

36

 

Note 10 Unsecured Senior Notes

39

 

Note 11 Loan Securitization/Sale Activities

41

 

Note 12 Derivatives and Hedging Activity

42

 

Note 13 Offsetting Assets and Liabilities

44

 

Note 14 Variable Interest Entities

45

 

Note 15 Related-Party Transactions

47

 

Note 16 Stockholders’ Equity and Non-Controlling Interests

49

 

Note 17 Earnings per Share

51

 

Note 18 Accumulated Other Comprehensive Income

52

 

Note 19 Fair Value

53

 

Note 20 Income Taxes

57

 

Note 21 Commitments and Contingencies

58

 

Note 22 Segment Data

58

 

Note 23 Subsequent Events

65

Item 2. 

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

66

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

101

Item 4. 

Controls and Procedures

104

Part II 

Other Information

 

Item 1. 

Legal Proceedings

105

Item 1A. 

Risk Factors

105

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

110

Item 3. 

Defaults Upon Senior Securities

110

Item 4. 

Mine Safety Disclosures

110

Item 5. 

Other Information

110

Item 6. 

Exhibits

111

 

 

 

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, 2018

 

December 31, 2017

Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

265,757

 

$

369,448

Restricted cash

 

 

124,264

 

 

48,825

Loans held-for-investment, net

 

 

8,500,674

 

 

6,562,495

Loans held-for-sale ($913,505 and $745,743 held at fair value)

 

 

1,326,837

 

 

745,743

Loans transferred as secured borrowings

 

 

74,281

 

 

74,403

Investment securities ($289,554 and $284,735 held at fair value)

 

 

763,450

 

 

718,203

Properties, net

 

 

2,888,737

 

 

2,647,481

Properties held-for-sale

 

 

52,302

 

 

 —

Intangible assets ($21,768 and $30,759 held at fair value)

 

 

153,948

 

 

183,092

Investment in unconsolidated entities

 

 

168,788

 

 

185,503

Goodwill

 

 

256,425

 

 

140,437

Derivative assets

 

 

59,807

 

 

33,898

Accrued interest receivable

 

 

52,911

 

 

47,747

Other assets

 

 

198,688

 

 

138,140

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

 

 

48,034,610

 

 

51,045,874

Total Assets 

 

$

62,921,479

 

$

62,941,289

Liabilities and Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

214,902

 

$

185,117

Related-party payable

 

 

25,286

 

 

42,369

Dividends payable

 

 

132,549

 

 

125,916

Derivative liabilities

 

 

35,386

 

 

36,200

Secured financing agreements, net

 

 

8,586,687

 

 

5,773,056

Unsecured senior notes, net

 

 

2,024,570

 

 

2,125,235

Secured borrowings on transferred loans, net

 

 

74,148

 

 

74,185

VIE liabilities, at fair value

 

 

46,945,674

 

 

50,000,010

Total Liabilities 

 

 

58,039,202

 

 

58,362,088

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, 279,302,395 issued and 274,122,255 outstanding as of September 30, 2018 and 265,983,309  issued and 261,376,424 outstanding as of December 31, 2017

 

 

2,793

 

 

2,660

Additional paid-in capital

 

 

4,963,061

 

 

4,715,246

Treasury stock (5,180,140 shares and 4,606,885 shares)

 

 

(104,194)

 

 

(92,104)

Accumulated other comprehensive income

 

 

67,920

 

 

69,924

Accumulated deficit

 

 

(308,343)

 

 

(217,312)

Total Starwood Property Trust, Inc. Stockholders’ Equity

 

 

4,621,237

 

 

4,478,414

Non-controlling interests in consolidated subsidiaries

 

 

261,040

 

 

100,787

Total Equity 

 

 

4,882,277

 

 

4,579,201

Total Liabilities and Equity 

 

$

62,921,479

 

$

62,941,289

 

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,

 

    

2018

    

2017

    

2018

    

2017

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from loans

 

$

154,501

 

$

138,599

 

$

443,825

 

$

371,094

Interest income from investment securities

 

 

11,508

 

 

12,451

 

 

37,567

 

 

40,045

Servicing fees

 

 

27,824

 

 

14,842

 

 

71,206

 

 

47,572

Rental income

 

 

91,132

 

 

60,153

 

 

261,133

 

 

176,161

Other revenues

 

 

754

 

 

722

 

 

2,131

 

 

2,184

Total revenues 

 

 

285,719

 

 

226,767

 

 

815,862

 

 

637,056

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

26,519

 

 

30,980

 

 

84,655

 

 

79,997

Interest expense

 

 

102,658

 

 

76,431

 

 

281,433

 

 

213,608

General and administrative

 

 

31,203

 

 

32,892

 

 

98,873

 

 

95,841

Acquisition and investment pursuit costs

 

 

6,527

 

 

1,024

 

 

8,465

 

 

2,232

Costs of rental operations

 

 

30,191

 

 

23,799

 

 

92,781

 

 

67,701

Depreciation and amortization

 

 

34,293

 

 

22,871

 

 

103,187

 

 

67,131

Loan loss allowance, net

 

 

929

 

 

(171)

 

 

27,726

 

 

(3,170)

Other expense

 

 

76

 

 

376

 

 

677

 

 

1,276

Total costs and expenses 

 

 

232,396

 

 

188,202

 

 

697,797

 

 

524,616

Income before other income (loss), income taxes and non-controlling interests

 

 

53,323

 

 

38,565

 

 

118,065

 

 

112,440

Other income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Change in net assets related to consolidated VIEs

 

 

33,289

 

 

56,177

 

 

129,888

 

 

203,108

Change in fair value of servicing rights

 

 

(974)

 

 

(4,867)

 

 

(8,991)

 

 

(21,301)

Change in fair value of investment securities, net

 

 

301

 

 

(397)

 

 

7,854

 

 

(4,061)

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

 

 

3,940

 

 

19,485

 

 

26,573

 

 

45,484

Earnings (loss) from unconsolidated entities

 

 

2,625

 

 

(4,689)

 

 

6,633

 

 

27,763

Gain on sale of investments and other assets, net

 

 

1,462

 

 

11,877

 

 

25,559

 

 

17,004

Gain (loss) on derivative financial instruments, net

 

 

11,735

 

 

(24,224)

 

 

27,498

 

 

(66,159)

Foreign currency (loss) gain, net

 

 

(4,078)

 

 

10,660

 

 

(3,793)

 

 

28,434

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

 

 

 —

 

 

(66)

 

 

 —

 

 

(175)

Noncredit portion of OTTI recognized in other comprehensive income

 

 

 —

 

 

66

 

 

 —

 

 

66

Net impairment losses recognized in earnings

 

 

 —

 

 

 —

 

 

 —

 

 

(109)

Loss on extinguishment of debt

 

 

(2,540)

 

 

 —

 

 

(2,726)

 

 

(5,916)

Other (loss) income, net

 

 

(1,421)

 

 

28

 

 

(815)

 

 

484

Total other income

 

 

44,339

 

 

64,050

 

 

207,680

 

 

224,731

Income before income taxes

 

 

97,662

 

 

102,615

 

 

325,745

 

 

337,171

Income tax provision

 

 

(8,281)

 

 

(9,816)

 

 

(14,480)

 

 

(18,285)

Net income 

 

 

89,381

 

 

92,799

 

 

311,265

 

 

318,886

Net income attributable to non-controlling interests

 

 

(4,845)

 

 

(4,371)

 

 

(17,567)

 

 

(10,720)

Net income attributable to Starwood Property Trust, Inc.  

 

$

84,536

 

$

88,428

 

$

293,698

 

$

308,166

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.31

 

$

0.34

 

$

1.11

 

$

1.18

Diluted

 

$

0.31

 

$

0.33

 

$

1.09

 

$

1.17

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

2018

 

2017

 

2018

 

2017

Net income 

 

$

89,381

 

$

92,799

 

$

311,265

 

$

318,886

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

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges

 

 

(6)

 

 

(22)

 

 

(24)

 

 

56

Available-for-sale securities

 

 

737

 

 

3,975

 

 

2,923

 

 

10,728

Foreign currency translation

 

 

(945)

 

 

5,337

 

 

(4,903)

 

 

18,349

Other comprehensive (loss) income

 

 

(214)

 

 

9,290

 

 

(2,004)

 

 

29,133

Comprehensive income 

 

 

89,167

 

 

102,089

 

 

309,261

 

 

348,019

Less: Comprehensive income attributable to non-controlling interests

 

 

(4,845)

 

 

(4,371)

 

 

(17,567)

 

 

(10,720)

Comprehensive income attributable to Starwood Property Trust, Inc.  

 

$

84,322

 

$

97,718

 

$

291,694

 

$

337,299

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Starwood

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

Property

 

 

 

 

 

 

 

 

 

Common stock

 

Additional

 

 

 

 

 

 

 

 

Other

 

Trust, Inc.

 

Non-

 

 

 

 

 

 

 

 

Par

 

Paid-in

 

Treasury Stock

 

Accumulated

 

Comprehensive

 

Stockholders’

 

Controlling

 

Total

 

 

    

Shares

    

Value

    

Capital

    

Shares

    

Amount

    

Deficit

    

Income

    

Equity

    

Interests

    

Equity

 

Balance, January 1, 2018

 

265,983,309

 

$

2,660

 

$

4,715,246

 

4,606,885

 

$

(92,104)

 

$

(217,312)

 

$

69,924

 

$

4,478,414

 

$

100,787

 

$

4,579,201

 

Proceeds from DRIP Plan

 

21,512

 

 

 —

 

 

459

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

459

 

 

 —

 

 

459

 

Equity offering costs

 

 —

 

 

 —

 

 

(22)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(22)

 

 

 —

 

 

(22)

 

Conversion of 2019 Convertible Notes

 

11,181,546

 

 

112

 

 

215,265

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

215,377

 

 

 —

 

 

215,377

 

Common stock repurchased

 

 —

 

 

 —

 

 

 —

 

573,255

 

 

(12,090)

 

 

 —

 

 

 —

 

 

(12,090)

 

 

 —

 

 

(12,090)

 

Share-based compensation

 

1,215,137

 

 

12

 

 

16,442

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

16,454

 

 

 —

 

 

16,454

 

Manager incentive fee paid in stock

 

900,891

 

 

 9

 

 

18,633

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

18,642

 

 

 —

 

 

18,642

 

Net income

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

293,698

 

 

 —

 

 

293,698

 

 

17,567

 

 

311,265

 

Dividends declared, $1.44 per share

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(384,729)

 

 

 —

 

 

(384,729)

 

 

 —

 

 

(384,729)

 

Other comprehensive loss, net

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(2,004)

 

 

(2,004)

 

 

 —

 

 

(2,004)

 

VIE non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(291)

 

 

(291)

 

Contributions from non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

387,481

 

 

387,481

 

Distributions to non-controlling interests

 

 —

 

 

 —

 

 

(2,962)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(2,962)

 

 

(244,185)

 

 

(247,147)

 

Sale of controlling interest in majority owned property asset

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(319)

 

 

(319)

 

Balance, September 30, 2018

 

279,302,395

 

$

2,793

 

$

4,963,061

 

5,180,140

 

$

(104,194)

 

$

(308,343)

 

$

67,920

 

$

4,621,237

 

$

261,040

 

$

4,882,277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2017

 

263,893,806

 

$

2,639

 

$

4,691,180

 

4,606,885

 

$

(92,104)

 

$

(115,579)

 

$

36,138

 

$

4,522,274

 

$

37,799

 

$

4,560,073

 

Proceeds from DRIP Plan

 

24,217

 

 

 —

 

 

541

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

541

 

 

 —

 

 

541

 

Equity offering costs

 

 —

 

 

 —

 

 

(12)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(12)

 

 

 —

 

 

(12)

 

Equity component of 2023 Convertible Senior Notes issuance

 

 —

 

 

 —

 

 

3,755

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,755

 

 

 —

 

 

3,755

 

Equity component of 2018 Convertible Senior Notes repurchase

 

 —

 

 

 —

 

 

(18,105)

 

 —

 

 

 —

 

 

 

 

 

 

 

 

(18,105)

 

 

 

 

 

(18,105)

 

Share-based compensation

 

849,045

 

 

 9

 

 

13,281

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

13,290

 

 

 —

 

 

13,290

 

Manager incentive fee paid in stock

 

639,555

 

 

 6

 

 

14,404

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14,410

 

 

 —

 

 

14,410

 

Net income

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

308,166

 

 

 —

 

 

308,166

 

 

10,720

 

 

318,886

 

Dividends declared, $1.44 per share

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(376,660)

 

 

 —

 

 

(376,660)

 

 

 —

 

 

(376,660)

 

Other comprehensive income, net

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

29,133

 

 

29,133

 

 

 —

 

 

29,133

 

VIE non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,837

 

 

1,837

 

Contributions from non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

105

 

 

105

 

Distributions to non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(7,519)

 

 

(7,519)

 

Balance, September 30, 2017

 

265,406,623

 

$

2,654

 

$

4,705,044

 

4,606,885

 

$

(92,104)

 

$

(184,073)

 

$

65,271

 

$

4,496,792

 

$

42,942

 

$

4,539,734

 

 

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,

 

    

2018

    

2017

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

311,265

 

$

318,886

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Amortization of deferred financing costs, premiums and discounts on secured financing agreements and secured borrowings on transferred loans

 

 

18,156

 

 

14,131

Amortization of discounts and deferred financing costs on senior notes

 

 

9,674

 

 

17,514

Accretion of net discount on investment securities

 

 

(12,013)

 

 

(11,669)

Accretion of net deferred loan fees and discounts

 

 

(28,954)

 

 

(27,014)

Share-based compensation

 

 

16,454

 

 

13,290

Share-based component of incentive fees

 

 

18,642

 

 

14,410

Change in fair value of investment securities

 

 

(7,854)

 

 

4,061

Change in fair value of consolidated VIEs

 

 

(12,173)

 

 

(59,160)

Change in fair value of servicing rights

 

 

8,991

 

 

21,301

Change in fair value of loans held-for-sale

 

 

(26,573)

 

 

(45,484)

Change in fair value of derivatives

 

 

(24,339)

 

 

62,463

Foreign currency gain (loss), net

 

 

3,734

 

 

(28,211)

Gain on sale of investments and other assets

 

 

(25,559)

 

 

(17,004)

Impairment charges on properties and related intangibles

 

 

1,864

 

 

1,099

Loan loss allowance, net

 

 

27,726

 

 

(3,170)

Depreciation and amortization

 

 

101,760

 

 

64,937

Earnings from unconsolidated entities

 

 

(6,633)

 

 

(27,763)

Distributions of earnings from unconsolidated entities

 

 

5,001

 

 

4,716

Loss on extinguishment of debt

 

 

2,726

 

 

5,916

Origination and purchase of loans held-for-sale, net of principal collections

 

 

(1,386,609)

 

 

(1,487,813)

Proceeds from sale of loans held-for-sale

 

 

1,243,109

 

 

987,828

Changes in operating assets and liabilities:

 

 

 

 

 

 

Related-party payable, net

 

 

(17,083)

 

 

(7,829)

Accrued and capitalized interest receivable, less purchased interest

 

 

(37,314)

 

 

(63,032)

Other assets

 

 

(32,348)

 

 

(12,198)

Accounts payable, accrued expenses and other liabilities

 

 

22,997

 

 

37,367

Net cash provided by (used in) operating activities

 

 

174,647

 

 

(222,428)

Cash Flows from Investing Activities:

 

 

 

 

 

 

Origination and purchase of loans held-for-investment

 

 

(3,495,080)

 

 

(2,195,258)

Proceeds from principal collections on loans

 

 

2,225,575