PR Newswire | Nov 5, 2020 07:02AM EST

11/05 06:00 CST

Starwood Property Trust Reports Results for the Quarter Ended September 30, 2020-- Quarterly GAAP Earnings of $0.52 and Core Earnings of $0.50 per Diluted Share --- Originated or Acquired $1.5 Billion of Assets --- Paid Third Quarter Dividend of $0.48 per Share --- Subsequent to Quarter End, Issued $550 Million of Corporate Debt -- GREENWICH, Conn., Nov. 5, 2020

GREENWICH, Conn., Nov. 5, 2020 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2020. The Company's third quarter 2020 GAAP net income was $151.8 million, or $0.52 per diluted share, and Core Earnings (a non-GAAP financial measure) was $148.6 million, or $0.50 per diluted share.

"We shifted from a cautious stance in the second quarter and deployed $1.5 billion in the third quarter, taking advantage of the most compelling risk adjusted returns presented across our various business lines. We also proactively addressed the near-term maturity of our $500 millionFebruary 2021 notes by successfully completing two successful debt raises, including issuing our first ever sustainability bond.

Our diversified platform showed its power versus pure play commercial mortgage REITs, as we deployed nearly two thirds of the capital this quarter outside our core commercial real estate lending business. Our owned real estate portfolio, over half of which consists of affordable housing, continues to shine, producing a cash on cash yield exceeding 15%. We estimate that we have approximately $3.00 per share of unrealized gains across our owned property assets today. With over $880 million of cash and undrawn debt capacity, our liquidity remains strong and we remain well positioned to selectively deploy capital going forward," 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 Thursday, November 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: 1-844-512-2921 International: 1-412-317-6671 Passcode: 13709052 The playback can be accessed through November 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 $65 billion of capital since inception and manages a portfolio of over $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 September 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 September 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$ 149,972 $ 17,835 $- $1,597 $- $169,404 $- $169,404 from loans

Interest income from investment 21,385 635 - 23,587 - 45,607 (33,421) 12,186 securities

Servicing fees 110 - - 13,749 - 13,859 (4,311) 9,548

Rental income 2,014 - 63,925 10,039 - 75,978 - 75,978

Other revenues 66 101 48 98 - 313 (2) 311

Total revenues 173,547 18,571 63,973 49,070 - 305,161 (37,734) 267,427

Costs and expenses:

Management fees 297 - - 221 22,596 23,114 13 23,127

Interest 38,422 8,914 16,180 5,425 27,040 95,981 - 95,981 expense

General and 12,483 3,568 1,094 18,813 3,436 39,394 84 39,478 administrative

Acquisition and investment 757 62 - 65 - 884 - 884 pursuit costs

Costs of rental 643 - 24,302 4,577 - 29,522 - 29,522 operations

Depreciation and 430 87 19,130 3,934 - 23,581 - 23,581 amortization

Credit loss provision 782 (4,369) - - - (3,587) - (3,587) (reversal), net

Other expense 77 - 95 - - 172 - 172

Total costs and 53,891 8,262 60,801 33,035 53,072 209,061 97 209,158 expenses

Other income (loss):

Change in net assets related - - - - - - 58,585 58,585 to consolidated VIEs

Change in fair value of - - - 3,960 - 3,960 (3,326) 634 servicing rights

Change in fair value of 13,611 - - 3,249 - 16,860 (17,059) (199) investment securities, net

Change in fair value of 59,402 - - 1,982 - 61,384 - 61,384 mortgage loans, net

Earnings (loss) from 3,253 (80) - 358 - 3,531 (339) 3,192 unconsolidated entities

(Loss) gain on derivative financial (28,577) 110 (313) 38 645 (28,097) - (28,097)instruments, net

Foreign currency gain, 25,302 110 14 26 - 25,452 - 25,452 net

Other (loss) - - (1) 358 - 357 - 357 income, net

Total other 72,991 140 (300) 9,971 645 83,447 37,861 121,308 income (loss)

Income (loss) before income 192,647 10,449 2,872 26,006 (52,427) 179,547 30 179,577 taxes

Income tax (provision) (16,700) (86) - 1,943 - (14,843) - (14,843)benefit

Net income 175,947 10,363 2,872 27,949 (52,427) 164,704 30 164,734 (loss)

Net income attributable to (3) - (5,072) (7,795) - (12,870) (30) (12,900)non-controlling interests

Net income (loss) attributable to$ 175,944 $ 10,363 $(2,200)$20,154 $(52,427)$151,834 $- $151,834 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 September 30, 2020

(Amounts in thousands except per share data)



Commercial

and

ResidentialInfrastructure Investing

Lending Lending Property and Servicing

Segment Segment Segment Segment Corporate Total

Net income (loss) attributable to 175,944 10,363 (2,200) 20,154 (52,427) 151,834 Starwood Property Trust, Inc.

Add / (Deduct):

Non-controlling interests attributable to - - 5,072 - - 5,072 Woodstar II Class A Units

Non-cash equity 1,015 (126) 54 1,215 4,131 6,289 compensation expense

Acquisition and investment pursuit (163) - (89) - - (252) costs

Depreciation and 370 78 19,191 3,525 - 23,164 amortization

Credit loss (259) (4,369) - - - (4,628) reversal, net

Interest income adjustment for (1,035) - - 1,914 - 879 securities

Extinguishment of - - - - (246) (246) debt, net

Income tax provision associated with fair 5,519 - - 879 - 6,398 value adjustments

Other non-cash items 3 - (713) 225 158 (327)

Reversal of GAAP unrealized (gains) / losses on:

Loans (59,402) - - (1,982) - (61,384)

Securities (13,611) - - (3,249) - (16,860)

Derivatives 28,336 (173) (1,377) (551) 4,380 30,615

Foreign currency (25,302) (110) (14) (26) - (25,452)

(Earnings) loss from unconsolidated (3,253) 80 - (358) - (3,531) entities

Recognition of Core realized gains / (losses) on:

Loans 49,241 - - 6,201 - 55,442

Securities - - - (4,318) - (4,318)

Derivatives (11,625) - (35) (7,341) - (19,001)

Foreign currency 799 (5) 16 26 - 836

Earnings (loss) from unconsolidated 3,352 (80) - 772 - 4,044 entities

Core Earnings (Loss)$149,929 $ 5,658 $19,905 $17,086 $(44,004)$148,574

Core Earnings (Loss) per Weighted Average$0.51 $ 0.02 $0.06 $0.06 $(0.15) $0.50 Diluted Share

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the nine months ended September 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$ 492,489 $ 59,374 $- $6,071 $- $557,934 $- $557,934 from loans

Interest income from investment 57,358 2,019 - 73,311 - 132,688 (90,618) 42,070 securities

Servicing fees 424 - - 28,782 - 29,206 (8,207) 20,999

Rental income 2,782 - 191,452 28,600 - 222,834 - 222,834

Other revenues 298 344 228 891 - 1,761 (5) 1,756

Total revenues 553,351 61,737 191,680 137,655 - 944,423 (98,830) 845,593

Costs and expenses:

Management fees 987 - - 680 85,257 86,924 46 86,970

Interest 134,243 31,709 49,243 18,796 83,670 317,661 (162) 317,499 expense

General and 29,230 12,328 3,453 54,490 11,105 110,606 251 110,857 administrative

Acquisition and investment 2,195 1,179 12 (3) - 3,383 - 3,383 pursuit costs

Costs of rental 2,409 - 71,857 13,102 - 87,368 - 87,368 operations

Depreciation and 1,275 246 57,571 11,890 - 70,982 - 70,982 amortization

Credit loss 52,293 2,991 - - - 55,284 - 55,284 provision, net

Other expense 230 - 432 - - 662 - 662

Total costs and 222,862 48,453 182,568 98,955 180,032 732,870 135 733,005 expenses

Other income (loss):

Change in net assets related - - - - - - 64,353 64,353 to consolidated VIEs

Change in fair value of - - - 9,606 - 9,606 (11,934) (2,328) servicing rights

Change in fair value of (8,814) - - (36,026) - (44,840) 47,972 3,132 investment securities, net

Change in fair value of 56,895 - - 22,805 - 79,700 - 79,700 mortgage loans, net

Earnings (loss) from 3,975 (1,198) - 30,504 - 33,281 (1,216) 32,065 unconsolidated entities

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

(Loss) gain on derivative financial (9,508) (1,328) (35,150) (22,896) 34,397 (34,485) - (34,485)instruments, net

Foreign currency (loss) (1,757) (53) (53) 2 - (1,861) - (1,861) gain, net

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

Other income, - - 240 447 - 687 - 687 net

Total other 39,808 (2,453) (37,148) 11,875 34,397 46,479 99,175 145,654 income (loss)

Income (loss) before income 370,297 10,831 (28,036) 50,575 (145,635) 258,032 210 258,242 taxes

Income tax (provision) (15,535) 3 - 8,716 - (6,816) - (6,816) benefit

Net income 354,762 10,834 (28,036) 59,291 (145,635) 251,216 210 251,426 (loss)

Net income attributable to (10) - (15,294) (11,191) - (26,495) (210) (26,705)non-controlling interests

Net income (loss) attributable to$ 354,752 $ 10,834 $(43,330)$48,100 $(145,635)$224,721 $- $224,721 Starwood Property Trust, Inc.

Reconciliation of Net Income to Core Earnings

For the nine months ended September 30, 2020

(Amounts in thousands except per share data)



Commercial

and

ResidentialInfrastructure Investing

Lending Lending Property and Servicing

Segment Segment Segment Segment Corporate Total

Net income (loss) attributable to 354,752 10,834 (43,330) 48,100 (145,635) 224,721 Starwood Property Trust, Inc.

Add / (Deduct):

Non-controlling interests attributable to - - 15,294 - - 15,294 Woodstar II Class A Units

Non-cash equity compensation 3,563 821 185 3,725 14,147 22,441 expense

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

Acquisition and investment 401 - (266) (72) - 63 pursuit costs

Depreciation and 1,095 208 57,808 10,669 - 69,780 amortization

Credit loss 51,252 2,991 - - - 54,243 provision, net

Interest income adjustment for 238 - - 9,856 - 10,094 securities

Extinguishment - - - - (739) (739) of debt, net

Income tax provision (benefit) 1,612 - - (955) - 657 associated with fair value adjustments

Other non-cash 10 - (1,689) 703 470 (506) items

Reversal of GAAP unrealized (gains) / losses on:

Loans (56,895) - - (22,805) - (79,700)

Securities 8,814 - - 36,026 - 44,840

Derivatives 8,816 1,260 32,593 21,986 (23,509) 41,146

Foreign 1,757 53 53 (2) - 1,861 currency

(Earnings) loss from (3,975) 1,198 - (30,504) - (33,281)unconsolidated entities

Recognition of Core realized gains / (losses) on:

Loans 45,742 (62) - 22,759 - 68,439

Securities - - - (8,711) - (8,711)

Derivatives (3,853) 118 (439) (13,438) - (17,612)

Foreign (5,441) (147) (53) 2 - (5,639) currency

Earnings (loss) from 2,772 (813) - 17,502 - 19,461 unconsolidated entities

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

Core Earnings $410,660 $16,461 $60,156 $89,052 $(139,467)$436,862 (Loss)

Core Earnings (Loss) per Weighted $1.39 $0.06 $0.20 $0.30 $(0.47) $1.48 Average Diluted Share

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of September 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 $19,111 $994 $38,119 $22,054 $298,844 $379,122 $748 $379,870 equivalents

Restricted cash 69,351 31,515 7,632 22,838 - 131,336 - 131,336

Loans held-for-investment, 9,373,503 1,544,068 - 1,081 - 10,918,652 - 10,918,652net

Loans held-for-sale 747,654 - - 265,019 - 1,012,673 - 1,012,673

Investment securities 1,152,362 39,813 - 1,097,322 - 2,289,497 (1,544,384) 745,113

Properties, net 27,123 - 1,983,124 197,575 - 2,207,822 - 2,207,822

Intangible assets - - 41,946 70,374 - 112,320 (38,181) 74,139

Investment in unconsolidated 50,850 24,664 - 45,236 - 120,750 (16,366) 104,384 entities

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

Derivative assets 25,805 - 54 1,250 37,716 64,825 - 64,825

Accrued interest 72,344 3,244 - 334 3,484 79,406 (1,376) 78,030 receivable

Other assets 24,705 4,216 70,369 52,352 11,829 163,471 3 163,474

VIE assets, at fair - - - - - - 64,477,475 64,477,475value

Total Assets $11,562,808 $1,767,923 $2,141,244$1,915,872 $351,873 $17,739,720$62,877,919 $80,617,639

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses $36,378 $8,545 $49,758 $35,796 $70,956 $201,433 $58 $201,491 and other liabilities

Related-party payable - - - 5 22,091 22,096 - 22,096

Dividends payable - - - - 138,264 138,264 - 138,264

Derivative 8,839 1,516 - 3,097 - 13,452 - 13,452 liabilities

Secured financing 5,576,092 1,243,001 1,793,731 614,055 389,013 9,615,892 - 9,615,892 agreements, net

Collateralized loan 929,931 - - - - 929,931 - 929,931 obligations, net

Unsecured senior - - - - 1,934,555 1,934,555 - 1,934,555 notes, net

VIE liabilities, at - - - - - - 62,876,265 62,876,265fair value

Total Liabilities 6,551,240 1,253,062 1,843,489 652,953 2,554,879 12,855,623 62,876,323 75,731,946

Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock - - - - 2,918 2,918 - 2,918

Additional paid-in 1,165,764 509,848 115,246 (124,805) 3,534,663 5,200,716 - 5,200,716 capital

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

Accumulated other comprehensive income 42,350 - - (65) - 42,285 - 42,285 (loss)

Retained earnings 3,803,336 5,013 (42,898) 1,243,098 (5,607,563) (599,014) - (599,014) (accumulated deficit)

Total Starwood Property Trust, Inc. 5,011,450 514,861 72,348 1,118,228 (2,203,006) 4,513,881 - 4,513,881 Stockholders' Equity

Non-controlling interests in 118 - 225,407 144,691 - 370,216 1,596 371,812 consolidated subsidiaries

Total Equity 5,011,568 514,861 297,755 1,262,919 (2,203,006) 4,884,097 1,596 4,885,693

Total Liabilities and$11,562,808 $1,767,923 $2,141,244$1,915,872 $351,873 $17,739,720$62,877,919 $80,617,639Equity

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SOURCE Starwood Property Trust, Inc.