Starwood Property Trust Reports Results for the Quarter Ended September 30, 2016

GREENWICH, Conn., Nov. 2, 2016 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2016.  The Company's third quarter 2016 GAAP net income was $105.8 million, or $0.44 per diluted share, and Core Earnings (a non-GAAP financial measure) was $141.1 million, or $0.59 per diluted share. 

"Our results this quarter were driven by contributions from across our businesses, demonstrating the strength of our multi-cylinder platform," stated Barry Sternlicht, Chairman and Chief Executive Officer of Starwood Property Trust. "We deployed over $1.3 billion of capital this quarter and $3.8 billion year-to-date through volatile market conditions. The credit quality of our $9.1 billion portfolio remains strong, with an LTV on our loan book of just 63%. Since our move into long duration equity assets, we have reviewed countless property investments. This quarter, we identified an investment that met our objectives of long-term stable and rising cash flows, with attractive current cash-on-cash yields. We are under contract to close this investment, an exceptionally high quality medical office portfolio consisting of 38 buildings throughout the U.S. The portfolio is positioned to benefit from growth in the medical sector, high industry-wide tenant retention rates, minimal new supply and favorable demographic trends. By adding a resilient income stream that extends the duration of our overall book, we continue to build a portfolio that can withstand various market cycles."

Mr. Sternlicht continued, "We continue to utilize our global scale and the deep industry relationships of both Starwood Property Trust and its manager, Starwood Capital Group, to identify unique investment opportunities.  In doing so, we have developed a portfolio of both debt and equity investments with attractive in-place cash flows, strong underlying fundamentals and moderate risk profiles, which continues to drive the best risk-adjusted returns for our shareholders."

Dividend

On November 2, 2016, the Company's Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending December 31, 2016. The dividend is payable on January 13, 2017 to common stockholders of record as of December 30, 2016. 

Supplemental Schedules

Starting this quarter, all of the quarterly disclosure by business segment that was previously contained in the Company's earnings press release can be found in the Company's supplemental earnings schedules, which the Company has published in order to provide additional disclosure and financial information for the benefit of the Company's stakeholders.  Specifically, these materials can be found at the Company's website in the Investor Relations section under "Financial Information" at www.starwoodpropertytrust.com.

Conference Call and Webcast Information 

The Company will host a webcast and conference call on Wednesday, November 2, 2016 at 10:00 a.m. Eastern Time to discuss third quarter financial results and recent events.  A webcast will be available on the Company's website at www.starwoodpropertytrust.com.  To listen to a live broadcast, access the site at least five minutes prior to the scheduled start time in order to register and download and install any necessary audio software.

To Participate in the Telephone Conference Call:

Dial in at least five minutes prior to start time.

Domestic:  1-888-891-7634
International:  1-719-325-2201

Conference Call Playback:

Domestic:  1-877-870-5176
International:  1-858-384-5517
Passcode:  8035266

The playback can be accessed through November 16, 2016.

About Starwood Property Trust, Inc.

Starwood Property Trust (NYSE: STWD), an affiliate of global private investment firm Starwood Capital Group, is the largest commercial mortgage real estate investment trust in the United States. The Company's core business focuses on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt and equity investments. Through its subsidiary LNR Property, LLC, Starwood Property Trust also operates as the largest commercial mortgage special servicer in the United States. With total capital deployed since inception of over $29 billion, Starwood Property Trust continues to solidify its position as one of the premier real estate finance companies in the country.

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.  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 completion of pending investments, continued ability to acquire additional investments, competition within the finance and real estate industries, economic conditions, availability of financing and other risks detailed from time to time in the Company's reports filed with the SEC.

 


Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the three months ended September 30, 2016

(Amounts in thousands)






Investing








Investing





Lending


and Servicing


Property






and Servicing





Segment


Segment


Segment


Corporate


Subtotal


VIEs


Total

Revenues:






















Interest income from loans


$

114,506


$

6,719


$


$


$

121,225


$


$

121,225

Interest income from investment securities



13,301



35,274







48,575



(29,400)



19,175

Servicing fees



195



37,678







37,873



(14,955)



22,918

Rental income





10,516



29,226





39,742





39,742

Other revenues



99



1,692



11





1,802



(157)



1,645

Total revenues



128,101



91,879



29,237





249,217



(44,512)



204,705

Costs and expenses:






















Management fees



525



24





27,183



27,732



48



27,780

Interest expense



22,678



4,877



5,536



26,181



59,272



(190)



59,082

General and administrative



5,067



43,711



867



1,651



51,296



174



51,470

Acquisition and investment pursuit costs



322



416



759



12



1,509





1,509

Costs of rental operations





4,872



13,139





18,011





18,011

Depreciation and amortization





4,482



10,870





15,352





15,352

Loan loss allowance, net



2,127









2,127





2,127

Total costs and expenses



30,719



58,382



31,171



55,027



175,299



32



175,331

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



97,382



33,497



(1,934)



(55,027)



73,918



(44,544)



29,374

Other income (loss):






















Change in net assets related to consolidated VIEs













47,848



47,848

Change in fair value of servicing rights





(14,006)







(14,006)



(277)



(14,283)

Change in fair value of investment securities, net



207



620







827



(3,613)



(2,786)

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





49,996







49,996





49,996

Earnings from unconsolidated entities



852



617



2,455





3,924



381



4,305

Gain on sale of investments and other assets, net



10









10





10

Gain (loss) on derivative financial instruments, net



4,982



(2,590)



(4,720)





(2,328)





(2,328)

Foreign currency (loss) gain, net



(3,839)



632



(7)





(3,214)





(3,214)

OTTI





(198)



(513)





(711)





(711)

Other income, net





35





234



269





269

Total other income (loss)



2,212



35,106



(2,785)



234



34,767



44,339



79,106

Income (loss) before income taxes



99,594



68,603



(4,719)



(54,793)



108,685



(205)



108,480

Income tax provision





(2,667)







(2,667)





(2,667)

Net income (loss)



99,594



65,936



(4,719)



(54,793)



106,018



(205)



105,813

Net (income) loss attributable to non-controlling interests



(352)



100







(252)



205



(47)

Net income (loss) attributable to Starwood Property Trust, Inc.


$

99,242


$

66,036


$

(4,719)


$

(54,793)


$

105,766


$


$

105,766

 

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,  losses on debt extinguishment 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. 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, 2016

(Amounts in thousands except per share data)







Investing










Lending


and Servicing


Property








Segment


Segment


Segment


Corporate


Total

Net income (loss) attributable to Starwood 
     Property Trust, Inc
.


$

99,242


$

66,036


$

(4,719)


$

(54,793)


$

105,766

Add / (Deduct):
















Non-cash equity compensation expense



824



1,298



27



5,986



8,135

Management incentive fee









6,303



6,303

Acquisition and investment pursuit costs





89



727



12



828

Depreciation and amortization





3,791



10,908





14,699

Loan loss allowance, net



2,127









2,127

Interest income adjustment for securities



(236)



3,874







3,638

Other non-cash items





230



(108)





122

Reversal of unrealized (gains) / losses on:
















Loans held-for-sale





(49,996)







(49,996)

Securities



(207)



(620)







(827)

Derivatives



(5,624)



1,932



4,720





1,028

Foreign currency



3,839



(632)



7





3,214

Earnings from unconsolidated entities



(852)



(617)



(2,455)





(3,924)

Recognition of realized gains / (losses) on:
















Loans held-for-sale





52,919







52,919

Securities





(3,259)







(3,259)

Derivatives



7,436



(6,042)



44





1,438

Foreign currency



(6,145)



632



(7)





(5,520)

Earnings from unconsolidated entities



852



1,100



2,487





4,439

Core Earnings (Loss)


$

101,256


$

70,735


$

11,631


$

(42,492)


$

141,130

Core Earnings (Loss) per Weighted Average 
     Diluted Share


$

0.42


$

0.30


$

0.05


$

(0.18)


$

0.59

 

 


Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the nine months ended September 30, 2016

(Amounts in thousands)







Investing








Investing





Lending


and Servicing


Property






and Servicing





Segment


Segment


Segment


Corporate


Subtotal


VIEs


Total

Revenues:






















Interest income from loans


$

348,460


$

12,854


$


$


$

361,314


$


$

361,314

Interest income from investment securities



33,975



115,335







149,310



(95,431)



53,879

Servicing fees



560



111,145







111,705



(40,784)



70,921

Rental income





25,214



85,048





110,262





110,262

Other revenues



180



4,110



35





4,325



(511)



3,814

Total revenues



383,175



268,658



85,083





736,916



(136,726)



600,190

Costs and expenses:






















Management fees



1,295



54





75,015



76,364



146



76,510

Interest expense



67,585



11,443



16,163



78,236



173,427



(190)



173,237

General and administrative



13,529



95,726



2,259



7,631



119,145



532



119,677

Acquisition and investment pursuit costs



1,602



1,551



1,517



1,012



5,682





5,682

Costs of rental operations





11,595



34,923





46,518





46,518

Depreciation and amortization





11,263



41,922





53,185





53,185

Loan loss allowance, net



3,395









3,395





3,395

Other expense





100







100





100

Total costs and expenses



87,406



131,732



96,784



161,894



477,816



488



478,304

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



295,769



136,926



(11,701)



(161,894)



259,100



(137,214)



121,886

Other (loss) income:






















Change in net assets related to consolidated VIEs













94,388



94,388

Change in fair value of servicing rights





(33,710)







(33,710)



497



(33,213)

Change in fair value of investment securities, net



(37)



(43,449)







(43,486)



42,772



(714)

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





70,122







70,122





70,122

Earnings from unconsolidated entities



2,544



3,280



7,313





13,137



(288)



12,849

Gain on sale of investments and other assets, net



165









165





165

Gain (loss) on derivative financial instruments, net



17,824



(17,780)



(6,837)





(6,793)





(6,793)

Foreign currency (loss) gain, net



(23,501)



2,962



(41)





(20,580)





(20,580)

OTTI





(198)



(513)





(711)





(711)

Other income, net





112



9,102



1,784



10,998





10,998

Total other (loss) income



(3,005)



(18,661)



9,024



1,784



(10,858)



137,369



126,511

Income (loss) before income taxes



292,764



118,265



(2,677)



(160,110)



248,242



155



248,397

Income tax provision



(75)



(3,392)







(3,467)





(3,467)

Net income (loss)



292,689



114,873



(2,677)



(160,110)



244,775



155



244,930

Net (income) loss attributable to non-controlling interests



(1,050)



171







(879)



(155)



(1,034)

Net income (loss) attributable to 
     Starwood Property Trust, Inc
.


$

291,639


$

115,044


$

(2,677)


$

(160,110)


$

243,896


$


$

243,896

 

 


Reconciliation of Net Income to Core Earnings

For the nine months ended September 30, 2016

(Amounts in thousands except per share data)







Investing









Lending


and Servicing


Property







Segment


Segment


Segment


Corporate


Total

Net income (loss) attributable to Starwood 
     Property Trust, Inc
.


$

291,639


$

115,044


$

(2,677)


$

(160,110)


$

243,896

Add / (Deduct):
















Non-cash equity compensation expense



2,110



3,785



89



16,893



22,877

Management incentive fee









13,770



13,770

Acquisition and investment pursuit costs





904



1,421



12



2,337

Depreciation and amortization





8,918



41,997





50,915

Loan loss allowance, net



3,395









3,395

Interest income adjustment for securities



(740)



10,620







9,880

Other non-cash items





247



(10,922)





(10,675)

Reversal of unrealized (gains) / losses on:
















Loans held-for-sale





(70,122)







(70,122)

Securities



37



43,449







43,486

Derivatives



(19,807)



16,330



6,837





3,360

Foreign currency



23,501



(2,962)



41





20,580

Earnings from unconsolidated entities



(2,544)



(3,280)



(7,313)





(13,137)

Recognition of realized gains / (losses) on:
















Loans held-for-sale





71,390







71,390

Securities





(11,136)







(11,136)

Derivatives



33,311



(15,858)



(26)





17,427

Foreign currency



(31,916)



2,825



(41)





(29,132)

Earnings from unconsolidated entities



3,148



2,855



4,820





10,823

Core Earnings (Loss)


$

302,134


$

173,009


$

34,226


$

(129,435)


$

379,934

Core Earnings (Loss) per Weighted Average 
     Diluted Share


$

1.26


$

0.73


$

0.14


$

(0.54)


$

1.59

 

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of September 30, 2016

(Amounts in thousands)







Investing








Investing





Lending


and Servicing


Property






and Servicing





Segment


Segment


Segment


Corporate


Subtotal


VIEs


Total

Assets:






















Cash and cash equivalents


$

136,096


$

73,779


$

6,222


$

284,325


$

500,422


$

1,135


$

501,557

Restricted cash



26,963



16,301



8,471





51,735





51,735

Loans held-for-investment, net



5,207,092



25,139







5,232,231





5,232,231

Loans held-for-sale





347,490







347,490





347,490

Loans transferred as secured borrowings



100,978









100,978





100,978

Investment securities



795,882



1,029,205







1,825,087



(970,420)



854,667

Properties, net





225,608



1,012,271





1,237,879





1,237,879

Intangible assets





137,746



47,495





185,241



(29,849)



155,392

Investment in unconsolidated entities



30,838



41,453



120,970





193,261



(7,513)



185,748

Goodwill





140,437







140,437





140,437

Derivative assets



29,818



1,399



3,092





34,309





34,309

Accrued interest receivable



25,771



973







26,744





26,744

Other assets



6,947



89,097



32,250



2,519



130,813



(2,521)



128,292

VIE assets, at fair value













73,923,699



73,923,699

Total Assets


$

6,360,385


$

2,128,627


$

1,230,771


$

286,844


$

10,006,627


$

72,914,531


$

82,921,158

Liabilities and Equity






















Liabilities:






















Accounts payable, accrued expenses and other liabilities


$

21,410


$

87,324


$

46,530


$

18,025


$

173,289


$

835


$

174,124

Related-party payable





279





23,622



23,901





23,901

Dividends payable









115,190



115,190





115,190

Derivative liabilities



12,002



455



296





12,753





12,753

Secured financing agreements, net



2,269,960



494,213



737,796



644,570



4,146,539



(23,700)



4,122,839

Convertible senior notes, net









1,339,853



1,339,853





1,339,853

Secured borrowings on transferred loans



102,365









102,365





102,365

VIE liabilities, at fair value













72,924,751



72,924,751

Total Liabilities



2,405,737



582,271



784,622



2,141,260



5,913,890



72,901,886



78,815,776

Equity:






















Starwood Property Trust, Inc. Stockholders' Equity:






















Common stock









2,430



2,430





2,430

Additional paid-in capital



1,814,902



1,205,686



438,512



771,477



4,230,577





4,230,577

Treasury stock









(92,104)



(92,104)





(92,104)

Accumulated other comprehensive income (loss)



45,762



(7,696)



2,182





40,248





40,248

Retained earnings (accumulated deficit)



2,082,734



335,727



5,455



(2,536,219)



(112,303)





(112,303)

Total Starwood Property Trust, Inc. Stockholders' Equity



3,943,398



1,533,717



446,149



(1,854,416)



4,068,848





4,068,848

Non-controlling interests in consolidated subsidiaries



11,250



12,639







23,889



12,645



36,534

Total Equity



3,954,648



1,546,356



446,149



(1,854,416)



4,092,737



12,645



4,105,382

Total Liabilities and Equity


$

6,360,385


$

2,128,627


$

1,230,771


$

286,844


$

10,006,627


$

72,914,531


$

82,921,158

 

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

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-the-quarter-ended-september-30-2016-300355669.html

SOURCE Starwood Property Trust, Inc.

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