PR Newswire | Aug 5, 2020 07:01AM EDT

08/05 06:00 CDT

Starwood Property Trust Reports Results for the Quarter Ended June 30, 2020- Received 7th Consecutive NAREIT Gold Award for Investor Communications and Reporting Excellence -- Paid Dividend of $0.48 per share for the Second Quarter of 2020 - GREENWICH, Conn., Aug. 5, 2020

GREENWICH, Conn., Aug. 5, 2020 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended June 30, 2020. The Company's second quarter 2020 GAAP net income was $139.7 million, or $0.49 per diluted share, and Core Earnings (a non-GAAP financial measure) was $126.1 million, or $0.43 per diluted share.

"It is a difficult time to figure out the right balance between playing offense and defense as this Category 5 hurricane that we call the Coronavirus sweeps through the U.S. and the global economies. Since March, we have erred on the side of caution and are only making occasional investments that we find decidedly compelling. From the outset of this pandemic, our strategy has been to solidify our fortress balance sheet. We now sit with over $800 million of cash and approved, undrawn debt capacity, after paying our full dividend the past two quarters, deleveraging our balance sheet by more than $350 million and dramatically lowering our future funding obligations by over $700 million.

All this caution has and will probably continue to reduce our earnings until our capital deployment returns to more normalized levels. Nonetheless, the breadth of our enterprise provides numerous opportunities for us to realize the significant embedded gains in our portfolio if and when we choose to do so. Our complex, but diversified, business lines have performed in line with our expectations. We are very well-positioned to carefully comb through investments in each of our business segments, work with our borrowers, and return to investing globally where the opportunity set is clearly better today than in years past," commented Barry Sternlicht, Chairman and CEO 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, August 5, 2020, 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: 1-844-512-2921International: 1-412-317-6671Passcode: 13706902 The playback can be accessed through August 12, 2020.

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 $63 billion of capital since inception and manages a portfolio of $17 billion across debt and equity investments. Starwood Property Trust's investment objective is to generate attractive and stable returns for shareholders, primarily through dividends, by leveraging a premiere global organization to identify and execute on the best risk adjusted returning investments across its target assets. Additional information can be found at www.starwoodpropertytrust.com.

Forward-Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words "believe," "expect," "anticipate" and other similar expressions. Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, the severity and duration of economic disruption caused by the COVID-19 global pandemic, completion of pending investments and financings, continued ability to acquire additional investments, competition within the finance and real estate industries, availability of financing and other risks detailed under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and our quarterly report on Form 10-Q for the quarter ended June 30, 2020, as well as other risks and uncertainties set forth from time to time in the Company's reports filed with the SEC.

In light of these risks and uncertainties, there can be no assurances that the results referred to in the forward-looking statements contained herein will in fact occur. Except to the extent required by applicable law or regulation, we undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, changes to future results over time or otherwise.

Additional information can be found on the Company's website at www.starwoodpropertytrust.com.

Contact:Zachary TanenbaumStarwood 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 June 30, 2020 (Amounts in thousands)



Commercial and

Residential Infrastructure Investing

Lending Lending Property and Servicing Securitization

Segment Segment Segment Segment Corporate Subtotal VIEs Total

Revenues:

Interest income$ 150,136 $ 19,126 $- $1,841 $- $171,103 $- $171,103 from loans

Interest income from investment 17,345 683 - 24,924 - 42,952 (28,308) 14,644 securities

Servicing fees 142 - - 8,591 - 8,733 (2,075) 6,658

Rental income 690 - 63,566 8,454 - 72,710 - 72,710

Other revenues 54 100 58 280 - 492 (1) 491

Total revenues 168,367 19,909 63,624 44,090 - 295,990 (30,384) 265,606

Costs and expenses:

Management fees 339 - - 220 22,554 23,113 2 23,115

Interest 41,871 9,678 15,942 6,177 27,825 101,493 - 101,493 expense

General and 8,615 4,337 1,281 14,993 3,368 32,594 83 32,677 administrative

Acquisition and investment 578 1,100 - (88) - 1,590 - 1,590 pursuit costs

Costs of rental 988 - 24,703 3,941 - 29,632 - 29,632 operations

Depreciation and 430 89 19,153 3,749 - 23,421 - 23,421 amortization

Credit loss 11,294 (1,092) - - - 10,202 - 10,202 provision, net

Other expense 76 - 26 - - 102 - 102

Total costs and 64,191 14,112 61,105 28,992 53,747 222,147 85 222,232 expenses

Other income (loss):

Change in net assets related - - - - - - 51,261 51,261 to consolidated VIEs

Change in fair value of - - - 5,328 - 5,328 (7,897) (2,569) servicing rights

Change in fair value of 5,454 - - 7,941 - 13,395 (12,568) 827 investment securities, net

Change in fair value of 33,010 - - 1,440 - 34,450 - 34,450 mortgage loans, net

Earnings (loss) from 671 (1,118) - 29,526 - 29,079 (303) 28,776 unconsolidated entities

(Loss) gain on sale of investments and (961) - - 7,433 - 6,472 - 6,472 other assets, net

(Loss) gain on derivative financial (11,736) (437) (4,614) (3,828) 4,517 (16,098) - (16,098)instruments, net

Foreign currency gain 6,942 310 (48) (31) - 7,173 - 7,173 (loss), net

Loss on extinguishment (22) - (2,185) - - (2,207) - (2,207) of debt

Other income, - - 191 13 - 204 - 204 net

Total other 33,358 (1,245) (6,656) 47,822 4,517 77,796 30,493 108,289 income (loss)

Income (loss) before income 137,534 4,552 (4,137) 62,920 (49,230) 151,639 24 151,663 taxes

Income tax (provision) (3,257) (56) - 4,611 - 1,298 - 1,298 benefit

Net income 134,277 4,496 (4,137) 67,531 (49,230) 152,937 24 152,961 (loss)

Net income attributable to (4) - (5,111) (8,166) - (13,281) (24) (13,305)non-controlling interests

Net income (loss) attributable to$ 134,273 $ 4,496 $(9,248)$59,365 $(49,230)$139,656 $- $139,656 Starwood Property Trust, Inc.

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 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 Core Earnings For the three months ended June 30, 2020 (Amounts in thousands except per share data)



Commercial and

Residential Infrastructure Investing

Lending Lending Property and Servicing

Segment Segment Segment Segment Corporate Total

Net income (loss) attributable to $134,273 $ 4,496 $(9,248)$59,365 $(49,230)$139,656 Starwood Property Trust, Inc.

Add / (Deduct):

Non-controlling interests attributable to - - 5,111 - - 5,111 Woodstar II Class A Units

Non-cash equity 1,436 481 58 1,247 4,130 7,352 compensation expense

Acquisition and investment pursuit 206 - (88) (72) - 46 costs

Depreciation and 370 79 19,236 3,337 - 23,022 amortization

Credit loss 11,294 (1,092) - - - 10,202 provision, net

Interest income adjustment for 1,149 - - 1,627 - 2,776 securities

Extinguishment of - - - - (247) (247) debt, net

Income tax provision (benefit) associated 1,914 - - (392) - 1,522 with fair value adjustments

Other non-cash items 4 - (485) 230 156 (95)

Reversal of GAAP unrealized (gains) / losses on:

Loans (33,010) - - (1,440) - (34,450)

Securities (5,454) - - (7,941) - (13,395)

Derivatives 11,043 420 3,401 3,524 (240) 18,148

Foreign currency (6,942) (310) 48 31 - (7,173)

(Earnings) loss from unconsolidated (671) 1,118 - (29,526) - (29,079)entities

Recognition of Core realized gains / (losses) on:

Loans (5,663) - - (1) - (5,664)

Securities - - - (181) - (181)

Derivatives 4,522 - (369) (10) - 4,143

Foreign currency (1,969) 52 (50) (31) - (1,998)

(Loss) earnings from unconsolidated (24) (733) - 12,992 - 12,235 entities

Sales of properties - - - (5,789) - (5,789)

Core Earnings (Loss)$112,478 $ 4,511 $17,614 $36,970 $(45,431)$126,142

Core Earnings (Loss) per Weighted Average$0.38 $ 0.02 $0.06 $0.12 $(0.15) $0.43 Diluted Share

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Statement of Operations by Segment For the six months ended June 30, 2020 (Amounts in thousands)



Commercial and

Residential Infrastructure Investing

Lending Lending Property and Servicing Securitization

Segment Segment Segment Segment Corporate Subtotal VIEs Total

Revenues:

Interest income$ 342,517 $ 41,539 $- $4,474 $- $388,530 $- $388,530 from loans

Interest income from investment 35,973 1,384 - 49,724 - 87,081 (57,197) 29,884 securities

Servicing fees 314 - - 15,033 - 15,347 (3,896) 11,451

Rental income 768 - 127,527 18,561 - 146,856 - 146,856

Other revenues 232 243 180 793 - 1,448 (3) 1,445

Total revenues 379,804 43,166 127,707 88,585 - 639,262 (61,096) 578,166

Costs and expenses:

Management fees 690 - - 459 62,661 63,810 33 63,843

Interest 95,821 22,795 33,063 13,371 56,630 221,680 (162) 221,518 expense

General and 16,747 8,760 2,359 35,677 7,669 71,212 167 71,379 administrative

Acquisition and investment 1,438 1,117 12 (68) - 2,499 - 2,499 pursuit costs

Costs of rental 1,766 - 47,555 8,525 - 57,846 - 57,846 operations

Depreciation and 845 159 38,441 7,956 - 47,401 - 47,401 amortization

Credit loss 51,511 7,360 - - - 58,871 - 58,871 provision, net

Other expense 153 - 337 - - 490 - 490

Total costs and 168,971 40,191 121,767 65,920 126,960 523,809 38 523,847 expenses

Other income (loss):

Change in net assets related - - - - - - 5,768 5,768 to consolidated VIEs

Change in fair value of - - - 5,646 - 5,646 (8,608) (2,962) servicing rights

Change in fair value of (22,425) - - (39,275) - (61,700) 65,031 3,331 investment securities, net

Change in fair value of (2,507) - - 20,823 - 18,316 - 18,316 mortgage loans, net

Earnings (loss) from 722 (1,118) - 30,146 - 29,750 (877) 28,873 unconsolidated entities

(Loss) gain on sale of investments and (961) 296 - 7,433 - 6,768 - 6,768 other assets, net

Gain (loss) on derivative financial 19,069 (1,438) (34,837) (22,934) 33,752 (6,388) - (6,388) instruments, net

Foreign currency loss, (27,059) (163) (67) (24) - (27,313) - (27,313)net

Loss on extinguishment (22) (170) (2,185) - - (2,377) - (2,377) of debt

Other income, - - 241 89 - 330 - 330 net

Total other (33,183) (2,593) (36,848) 1,904 33,752 (36,968) 61,314 24,346 (loss) income

Income (loss) before income 177,650 382 (30,908) 24,569 (93,208) 78,485 180 78,665 taxes

Income tax 1,165 89 - 6,773 - 8,027 - 8,027 benefit

Net income 178,815 471 (30,908) 31,342 (93,208) 86,512 180 86,692 (loss)

Net income attributable to (7) - (10,222) (3,396) - (13,625) (180) (13,805)non-controlling interests

Net income (loss) attributable to$ 178,808 $ 471 $(41,130)$27,946 $(93,208)$72,887 $- $72,887 Starwood Property Trust, Inc.

Reconciliation of Net Income to Core Earnings For the six months ended June 30, 2020 (Amounts in thousands except per share data)





Commercial and

Residential Infrastructure Investing

Lending Lending Property and Servicing

Segment Segment Segment Segment Corporate Total

Net income (loss) attributable to$178,808 $ 471 $(41,130)$27,946 $(93,208)$72,887 Starwood Property Trust, Inc.

Add / (Deduct):

Non-controlling interests attributable to - - 10,222 - - 10,222 Woodstar II Class A Units

Non-cash equity compensation 2,548 947 131 2,510 10,016 16,152 expense

Management - - - - 15,799 15,799 incentive fee

Acquisition and investment 564 - (177) (72) - 315 pursuit costs

Depreciation and 725 130 38,617 7,144 - 46,616 amortization

Credit loss 51,511 7,360 - - - 58,871 provision, net

Interest income adjustment for 1,273 - - 7,942 - 9,215 securities

Extinguishment - - - - (493) (493) of debt, net

Income tax benefit associated with (3,907) - - (1,834) - (5,741) fair value adjustment

Other non-cash 7 - (976) 478 312 (179) items

Reversal of GAAP unrealized (gains) / losses on:

Loans 2,507 - - (20,823) - (18,316)

Securities 22,425 - - 39,275 - 61,700

Derivatives (19,520) 1,433 33,970 22,537 (27,889) 10,531

Foreign 27,059 163 67 24 - 27,313 currency

(Earnings) loss from (722) 1,118 - (30,146) - (29,750)unconsolidated entities

Recognition of Core realized gains / (losses) on:

Loans (3,499) (62) - 16,558 - 12,997

Securities - - - (4,393) - (4,393)

Derivatives 7,772 118 (404) (6,097) - 1,389

Foreign (6,240) (142) (69) (24) - (6,475) currency

(Loss) earnings from (580) (733) - 16,730 - 15,417 unconsolidated entities

Sales of - - - (5,789) - (5,789) properties

Core Earnings $260,731 $ 10,803 $40,251 $71,966 $(95,463)$288,288 (Loss)

Core Earnings (Loss) per Weighted $0.88 $ 0.04 $0.14 $0.24 $(0.32) $0.98 Average Diluted Share

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Balance Sheet by Segment As of June 30, 2020 (Amounts in thousands)



Commercial and

Residential Infrastructure Investing

Lending Lending Property and Servicing Securitization

Segment Segment Segment Segment Corporate Subtotal VIEs Total

Assets:

Cash and cash equivalents$13,959 $299 $30,237 $35,855 $266,333 $346,683 $1,051 $347,734

Restricted cash 114,656 34,160 7,537 20,044 - 176,397 - 176,397

Loans 8,960,410 1,459,239 - 1,153 - 10,420,802 - 10,420,802held-for-investment, net

Loans held-for-sale 432,786 44,876 - 194,097 - 671,759 - 671,759

Investment securities 1,120,624 40,312 - 1,094,613 - 2,255,549 (1,503,524) 752,025

Properties, net 27,283 - 1,998,759 198,281 - 2,224,323 - 2,224,323

Intangible assets - - 43,580 67,567 - 111,147 (34,854) 76,293

Investment in 49,853 24,744 - 47,114 - 121,711 (16,798) 104,913 unconsolidated entities

Goodwill - 119,409 - 140,437 - 259,846 - 259,846

Derivative assets 47,875 - 348 586 42,096 90,905 - 90,905

Accrued interest 55,877 3,163 - 520 13,589 73,149 (1,401) 71,748 receivable

Other assets 29,864 5,616 81,859 57,321 9,512 184,172 (25) 184,147

VIE assets, at fair value - - - - - - 64,175,387 64,175,387

Total Assets $10,853,187 $1,731,818 $2,162,320$1,857,588 $331,530 $16,936,443$62,619,836 $79,556,279

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other $27,941 $10,285 $45,277 $36,400 $91,765 $211,668 $54 $211,722 liabilities

Related-party payable - - - 5 20,936 20,941 - 20,941

Dividends payable - - - - 138,778 138,778 - 138,778

Derivative liabilities 2,260 1,620 - - - 3,880 - 3,880

Secured financing 4,749,321 1,221,001 1,792,818 683,466 389,714 8,836,320 - 8,836,320 agreements, net

Collateralized loan 929,307 - - - - 929,307 - 929,307 obligations, net

Unsecured senior notes, - - - - 1,932,560 1,932,560 - 1,932,560 net

VIE liabilities, at fair - - - - - - 62,617,975 62,617,975value

Total Liabilities 5,708,829 1,232,906 1,838,095 719,871 2,573,753 12,073,454 62,618,029 74,691,483

Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock - - - - 2,916 2,916 - 2,916

Additional paid-in 1,473,921 504,262 137,777 (228,654) 3,306,266 5,193,572 - 5,193,572 capital

Treasury stock - - - - (133,024) (133,024) - (133,024)

Accumulated other comprehensive income 42,930 - - (64) - 42,866 - 42,866 (loss)

Retained earnings 3,627,392 (5,350) (40,699) 1,222,945 (5,418,381) (614,093) - (614,093) (accumulated deficit)

Total Starwood Property Trust, Inc. Stockholders' 5,144,243 498,912 97,078 994,227 (2,242,223) 4,492,237 - 4,492,237 Equity

Non-controlling interests in 115 - 227,147 143,490 - 370,752 1,807 372,559 consolidated subsidiaries

Total Equity 5,144,358 498,912 324,225 1,137,717 (2,242,223) 4,862,989 1,807 4,864,796

Total Liabilities and $10,853,187 $1,731,818 $2,162,320$1,857,588 $331,530 $16,936,443$62,619,836 $79,556,279Equity

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SOURCE Starwood Property Trust, Inc.