PR Newswire | Feb 25, 2021 07:03AM EST

31, 2020

02/25 06:00 CST

Starwood Property Trust Reports Results for the Quarter and Year Ended December 31, 2020- Quarterly GAAP Earnings of $0.37 and Distributable Earnings of $0.50 per Diluted Share -- Originated or Acquired $1.2 Billion of Assets in Q4 -- Originated or Acquired $4.6 Billion of Assets in 2020, Including $3.0 Billion after Q1 -- Paid Fourth Quarter Dividend of $0.48 per Share -- Subsequent to Quarter End, Priced $500 Million Inaugural Infrastructure CLO - GREENWICH, Conn., February 25, 2021

GREENWICH, Conn., February 25, 2021 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter and year ended December 31, 2020. The Company's fourth quarter 2020 GAAP net income was $107.0 million, or $0.37 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $148.4 million, or $0.50 per diluted share. The Company's full year 2020 GAAP net income was $331.7 million, or $1.16 per diluted share, and Distributable Earnings was $585.3 million, or $1.98 per diluted share.

"At no time other than 2020 was the power and strength of the company we built from a blind pool of capital over a decade ago more evident. We have proven that we are more than a portfolio of real estate mortgage loans, as good as our book has proven to be. The pandemic presented us with one of the most challenging market cycles and opportunities we have seen since our inception. Given our superior liquidity position, we never contemplated distressed asset sales or capital raises that would have been dilutive to our fair value in order to navigate the immense challenges of 2020. Our multiple business cylinders allowed us to generate excess liquidity, while unlocking accretive avenues to deploy that capital. Once we felt the worst had passed, we among our peers uniquely deployed $3.0 billion of capital in multiple business lines after the first quarter, including $2.3 billion in commercial and residential lending.

We enter 2021 in a position of significant strength, with access to multiple sources of liquidity, a robust commercial lending pipeline and an increasingly large array of investment opportunities across business lines," 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, February 25, 2021, 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: 13715683 The playback can be accessed through March 4, 2021.

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 $66 billion of capital since inception and manages a portfolio of over $18 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, 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 December 31, 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 from loans $173,014 $18,477 $- $2,518 $- $194,009 $ - $194,009

Interest income from investment securities 21,132 618 - 20,512 - 42,262 (29,920) 12,342

Servicing fees 125 - - 13,024 - 13,149 (4,514) 8,635

Rental income 1,924 - 64,000 9,070 - 74,994 - 74,994

Other revenues 114 155 65 248 - 582 - 582

Total revenues 196,309 19,250 64,065 45,372 - 324,996 (34,434) 290,562

Costs and expenses:

Management fees (191) - - 221 40,115 40,145 12 40,157

Interest expense 41,987 9,204 16,147 5,507 29,643 102,488 (224) 102,264

General and administrative 12,742 3,345 1,089 25,549 4,207 46,932 85 47,017

Acquisition and investment pursuit costs 211 4 - (26) - 189 - 189

Costs of rental operations 777 - 25,279 4,252 - 30,308 - 30,308

Depreciation and amortization 433 96 18,675 4,219 - 23,423 - 23,423

Credit loss reversal, net (5,037) (7,094) - - - (12,131) - (12,131)

Other expense 77 - 99 - - 176 - 176

Total costs and expenses 50,999 5,555 61,289 39,722 73,965 231,530 (127) 231,403

Other income (loss):

Change in net assets related to consolidated VIEs - - - - - - 13,905 13,905

Change in fair value of servicing rights - - - 1,809 - 1,809 (3,196) (1,387)

Change in fair value of investment securities, net (6,294) - - (15,377) - (21,671) 23,932 2,261

Change in fair value of mortgage loans, net 20,002 - - 33,422 - 53,424 - 53,424

Earnings (loss) from unconsolidated entities 4,804 431 - 341 - 5,576 (324) 5,252

Gain on sale of investments and other assets, net - 10 - 532 - 542 - 542

(Loss) gain on derivative financial instruments, net (49,156) (171) 758 1,627 (751) (47,693) - (47,693)

Foreign currency gain (loss), net 43,962 260 39 (5) - 44,256 - 44,256

Loss on extinguishment of debt - (789) - - (488) (1,277) - (1,277)

Other (loss) income, net - - (406) - - (406) - (406)

Total other income (loss) 13,318 (259) 391 22,349 (1,239) 34,560 34,317 68,877

Income (loss) before income taxes 158,628 13,436 3,167 27,999 (75,204) 128,026 10 128,036

Income tax provision (5,556) (120) - (7,705) - (13,381) - (13,381)

Net income (loss) 153,072 13,316 3,167 20,294 (75,204) 114,645 10 114,655

Net income attributable to non-controlling interests (4) - (5,100) (2,573) - (7,677) (10) (7,687)

Net income (loss) attributable to Starwood $153,068 $13,316 $(1,933)$17,721 $(75,204)$106,968 $ - $106,968 Property Trust, Inc.

Definition of Distributable Earnings

Distributable 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, Distributable 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 Distributable Earnings

For the three months ended December 31, 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 Starwood Property Trust, Inc. $ 153,068 $ 13,316 $(1,933)$ 17,721 $(75,204)$106,968

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A - - 5,100 - - 5,100 Units

Non-cash equity compensation expense 891 299 34 869 6,707 8,800

Management incentive fee - - - - 14,974 14,974

Acquisition and investment pursuit costs (278) - (89) - - (367)

Depreciation and amortization 372 86 18,736 3,832 - 23,026

Credit loss reversal, net (5,037) (7,094) - - - (12,131)

Interest income adjustment for securities (1,102) - - 5,245 - 4,143

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

Income tax provision associated with fair value adjustments 4,883 - - 550 - 5,433

Other non-cash items 4 - (374) 239 161 30

Reversal of GAAP unrealized (gains) / losses on:

Loans (20,002) - - (33,422) - (53,424)

Securities 6,294 - - 15,377 - 21,671

Derivatives 48,046 105 (2,480) (2,218) 3,945 47,398

Foreign currency (43,962) (260) (39) 5 - (44,256)

Earnings from unconsolidated entities (4,804) (431) - (341) - (5,576)

Recognition of Distributable realized gains / (losses) on:

Loans 2,461 - - 32,528 - 34,989

Securities 398 - - (9,389) - (8,991)

Derivatives (3,858) - (34) 20 - (3,872)

Foreign currency 631 14 39 (5) - 679

Earnings from unconsolidated entities 2,914 431 - 745 - 4,090

Distributable Earnings (Loss) $ 140,919 $ 6,466 $18,960 $ 31,756 $(49,664)$148,437

Distributable Earnings (Loss) per Weighted Average Diluted $ 0.47 $ 0.02 $0.07 $ 0.11 $(0.17) $0.50 Share

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the year ended December 31, 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 from loans $ 665,503 $ 77,851 $- $ 8,589 $- $751,943 $ - $751,943

Interest income from investment securities 78,490 2,637 - 93,823 - 174,950 (120,538) 54,412

Servicing fees 549 - - 41,806 - 42,355 (12,721) 29,634

Rental income 4,706 - 255,452 37,670 - 297,828 - 297,828

Other revenues 412 499 293 1,139 - 2,343 (5) 2,338

Total revenues 749,660 80,987 255,745 183,027 - 1,269,419 (133,264) 1,136,155

Costs and expenses:

Management fees 796 - - 901 125,372 127,069 58 127,127

Interest expense 176,230 40,913 65,390 24,303 113,313 420,149 (386) 419,763

General and administrative 41,972 15,673 4,542 80,039 15,312 157,538 336 157,874

Acquisition and investment pursuit costs 2,406 1,183 12 (29) - 3,572 - 3,572

Costs of rental operations 3,186 - 97,136 17,354 - 117,676 - 117,676

Depreciation and amortization 1,708 342 76,246 16,109 - 94,405 - 94,405

Credit loss provision (reversal), net 47,256 (4,103) - - - 43,153 - 43,153

Other expense 307 - 531 - - 838 - 838

Total costs and expenses 273,861 54,008 243,857 138,677 253,997 964,400 8 964,408

Other income (loss):

Change in net assets related to consolidated VIEs - - - - - - 78,258 78,258

Change in fair value of servicing rights - - - 11,415 - 11,415 (15,130) (3,715)

Change in fair value of investment securities, net (15,108) - - (51,403) - (66,511) 71,904 5,393

Change in fair value of mortgage loans, net 76,897 - - 56,227 - 133,124 - 133,124

Earnings (loss) from unconsolidated entities 8,779 (767) - 30,845 - 38,857 (1,540) 37,317

(Loss) gain on sale of investments and other assets, (961) 306 - 7,965 - 7,310 - 7,310 net

(Loss) gain on derivative financial instruments, net (58,664) (1,499) (34,392) (21,269) 33,646 (82,178) - (82,178)

Foreign currency gain (loss), net 42,205 207 (14) (3) - 42,395 - 42,395

Loss on extinguishment of debt (22) (959) (2,185) - (488) (3,654) - (3,654)

Other (loss) income, net - - (166) 447 - 281 - 281

Total other income (loss) 53,126 (2,712) (36,757) 34,224 33,158 81,039 133,492 214,531

Income (loss) before income taxes 528,925 24,267 (24,869) 78,574 (220,839) 386,058 220 386,278

Income tax (provision) benefit (21,091) (117) - 1,011 - (20,197) - (20,197)

Net income (loss) 507,834 24,150 (24,869) 79,585 (220,839) 365,861 220 366,081

Net income attributable to non-controlling interests (14) - (20,394) (13,764) - (34,172) (220) (34,392)

Net income (loss) attributable to Starwood Property $ 507,820 $ 24,150 $(45,263)$ 65,821 $(220,839)$331,689 $ - $331,689 Trust, Inc.

Reconciliation of Net Income to Distributable Earnings

For the year ended December 31, 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 Starwood Property $ 507,820 $ 24,150 $(45,263)$ 65,821 $(220,839)$331,689 Trust, Inc.

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A - - 20,394 - - 20,394 Units

Non-cash equity compensation expense 4,454 1,120 219 4,594 20,854 31,241

Management incentive fee - - - - 30,773 30,773

Acquisition and investment pursuit costs 123 - (355) (72) - (304)

Depreciation and amortization 1,467 294 76,544 14,501 - 92,806

Credit loss provision (reversal), net 46,215 (4,103) - - - 42,112

Interest income adjustment for securities (864) - - 15,101 - 14,237

Extinguishment of debt, net - - - - (986) (986)

Income tax provision (benefit) associated with fair value 6,495 - - (405) - 6,090 adjustments

Other non-cash items 14 - (2,063) 942 631 (476)

Reversal of GAAP unrealized (gains) / losses on:

Loans (76,897) - - (56,227) - (133,124)

Securities 15,108 - - 51,403 - 66,511

Derivatives 56,862 1,365 30,113 19,768 (19,564) 88,544

Foreign currency (42,205) (207) 14 3 - (42,395)

(Earnings) loss from unconsolidated entities (8,779) 767 - (30,845) - (38,857)

Recognition of Distributable realized gains / (losses) on:

Loans 48,203 (62) - 55,287 - 103,428

Securities 398 - - (18,100) - (17,702)

Derivatives (7,711) 118 (473) (13,418) - (21,484)

Foreign currency (4,810) (133) (14) (3) - (4,960)

Earnings (loss) from unconsolidated entities 5,686 (382) - 18,247 - 23,551

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

Distributable Earnings (Loss) $ 551,579 $ 22,927 $79,116 $ 120,808 $(189,131)$585,299

Distributable Earnings (Loss) per Weighted Average $ 1.86 $ 0.08 $0.27 $ 0.41 $(0.64) $1.98 Diluted Share

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of December 31, 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 $ 160,007 $ 4,440 $32,080 $ 19,546 $346,372 $562,445 $ 772 $563,217

Restricted cash 93,445 45,113 7,192 13,195 - 158,945 - 158,945

Loans held-for-investment, net 9,673,625 1,412,440 - 1,008 - 11,087,073 - 11,087,073

Loans held-for-sale 841,963 120,540 - 90,332 - 1,052,835 - 1,052,835

Investment securities 1,014,402 35,681 - 1,112,145 - 2,162,228 (1,425,570) 736,658

Properties, net 103,896 - 1,969,414 197,843 - 2,271,153 - 2,271,153

Intangible assets - - 40,370 71,123 - 111,493 (41,376) 70,117

Investment in unconsolidated entities 54,407 25,095 - 44,664 - 124,166 (16,112) 108,054

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

Derivative assets 6,595 - 41 147 33,772 40,555 - 40,555

Accrued interest receivable 87,922 2,091 - 123 5,978 96,114 (134) 95,980

Other assets 61,638 4,531 69,859 44,579 10,148 190,755 (7) 190,748

VIE assets, at fair value - - - - - - 64,238,328 64,238,328

Total Assets $ 12,097,900 $ 1,769,340 $2,118,956$ 1,735,142 $396,270 $18,117,608$ 62,755,901 $80,873,509

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other $ 41,104 $ 12,144 $43,630 $ 45,309 $64,583 $206,770 $ 75 $206,845 liabilities

Related-party payable - - - 5 39,165 39,170 - 39,170

Dividends payable - - - - 137,959 137,959 - 137,959

Derivative liabilities 39,082 1,718 - 524 - 41,324 - 41,324

Secured financing agreements, net 5,893,999 1,240,763 1,794,609 606,100 632,719 10,168,190 (22,000) 10,146,190

Collateralized loan obligations, net 930,554 - - - - 930,554 - 930,554

Unsecured senior notes, net - - - - 1,732,520 1,732,520 - 1,732,520

VIE liabilities, at fair value - - - - - - 62,776,371 62,776,371

Total Liabilities 6,904,739 1,254,625 1,838,239 651,938 2,606,946 13,256,487 62,754,446 76,010,933

Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock - - - - 2,921 2,921 - 2,921

Additional paid-in capital 1,192,584 496,387 98,882 (322,992) 3,744,878 5,209,739 - 5,209,739

Treasury stock - - - - (138,022) (138,022) - (138,022)

Accumulated other comprehensive income (loss) 44,057 - - (64) - 43,993 - 43,993

Retained earnings (accumulated deficit) 3,956,405 18,328 (44,832) 1,260,819 (5,820,453) (629,733) - (629,733)

Total Starwood Property Trust, Inc. Stockholders' 5,193,046 514,715 54,050 937,763 (2,210,676) 4,488,898 - 4,488,898 Equity

Non-controlling interests in 115 - 226,667 145,441 - 372,223 1,455 373,678 consolidated subsidiaries

Total Equity 5,193,161 514,715 280,717 1,083,204 (2,210,676) 4,861,121 1,455 4,862,576

Total Liabilities and Equity $ 12,097,900 $ 1,769,340 $2,118,956$ 1,735,142 $396,270 $18,117,608$ 62,755,901 $80,873,509

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SOURCE Starwood Property Trust, Inc.