PR Newswire | Aug 5, 2021 07:02AM EDT

08/05 06:00 CDT

Starwood Property Trust Reports Results for the Quarter Ended June 30, 2021- Quarterly GAAP Earnings of $0.40 and Distributable Earnings of $0.51 per Diluted Share -- $3.1 Billion of Investment Activity in Second Quarter, Including $1.7 Billion in Commercial Lending -- $5.8 Billion of Investment Activity in First Half, Including $4.0 Billion in Commercial Lending -- Paid Dividend of $0.48 per Share -- Issued $400 Million of 3.625% Senior Sustainability Notes Due 2026 - GREENWICH, Conn., Aug. 5, 2021

GREENWICH, Conn., Aug. 5, 2021 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended June 30, 2021. The Company's second quarter 2021 GAAP net income was $116.3 million, or $0.40 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $153.2 million, or $0.51 per diluted share.

"We are pleased to report another very active quarter growing our total portfolio to a record of $19.3 billion. Our diversified business remains extremely well positioned with strong asset performance across our cylinders and a growing investment pipeline. We executed two CLOs totaling $1.8 billion during the quarter, further reducing our mark to market financing exposure in an effort to build a fortress balance sheet. With continued recovery in the commercial real estate markets, the unrealized gains across our owned real estate portfolio have reached a record level of over $4.00 a share, providing stability, liquidity and power to invest opportunistically," 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, August 5, 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: 13720976 The playback can be accessed through August 12, 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 $72 billion of capital since inception and manages a portfolio of over $19 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 (including the emergence of new strains of the virus), 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 June 30, 2021

(Amounts in thousands)

Commercial and Infrastructure Investing Residential Property Securitization Lending and ServicingCorporate Subtotal Total Lending Segment VIEs Segment Segment Segment

Revenues:

Interest income from loans $165,697 $21,171 $- $2,404 $- $189,272$- $189,272

Interest income from investment securities 17,190 555 - 25,668 - 43,413 (32,765) 10,648

Servicing fees 110 - - 16,365 - 16,475 (5,611) 10,864

Rental income 1,419 - 65,410 10,290 - 77,119 - 77,119

Other revenues 74 69 44 2,777 - 2,964 - 2,964

Total revenues 184,490 21,795 65,454 57,504 - 329,243 (38,376) 290,867

Costs and expenses:

Management fees 300 - - 224 28,716 29,240 10 29,250

Interest expense 48,356 9,694 16,863 5,789 29,171 109,873 (220) 109,653

General and administrative 10,411 3,532 1,028 25,720 4,489 45,180 85 45,265

Acquisition and investment pursuit costs 179 249 - (21) - 407 - 407

Costs of rental operations 433 - 25,922 4,376 - 30,731 - 30,731

Depreciation and amortization 311 100 17,901 4,165 - 22,477 - 22,477

Credit loss (reversal) provision, net (12,447) 603 - - - (11,844) - (11,844)

Other expense - - - - - - - -

Total costs and expenses 47,543 14,178 61,714 40,253 62,376 226,064 (125) 225,939

Other income (loss):

Change in net assets related to consolidated VIEs - - - - - - 12,509 12,509

Change in fair value of servicing rights - - - 460 - 460 839 1,299

Change in fair value of investment securities, net (9,402) - - (12,585) - (21,987) 23,495 1,508

Change in fair value of mortgage loans, net 12,329 - - 33,538 - 45,867 - 45,867

Earnings (loss) from unconsolidated entities 1,996 (70) - (507) - 1,419 807 2,226

(Loss) gain on sale of investments and other assets, net (1,019) 27 - 9,723 - 8,731 - 8,731

(Loss) gain on derivative financial instruments, net (4,945) 112 (372) (5,731) 927 (10,009) - (10,009)

Foreign currency gain (loss), net 2,715 (62) (25) (1) - 2,627 - 2,627

Loss on extinguishment of debt (221) (939) - (22) - (1,182) - (1,182)

Other (loss) income, net (5,504) 2 - 29 - (5,473) - (5,473)

Total other income (loss) (4,051) (930) (397) 24,904 927 20,453 37,650 58,103

Income (loss) before income taxes 132,896 6,687 3,343 42,155 (61,449) 123,632 (601) 123,031

Income tax benefit (provision) 8,043 (58) - (4,632) - 3,353 - 3,353

Net income (loss) 140,939 6,629 3,343 37,523 (61,449) 126,985 (601) 126,384

Net (income) loss attributable to non-controlling interests (4) - (4,914) (5,757) - (10,675) 601 (10,074)

Net income (loss) attributable to Starwood Property Trust, Inc.$140,935 $6,629 $(1,571)$31,766 $(61,449)$116,310$- $116,310

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 June 30, 2021

(Amounts in thousands except per share data)

Commercial and Infrastructure Investing Residential Property Lending and ServicingCorporate Total Lending Segment Segment Segment Segment

Net income (loss) attributable to Starwood Property Trust, Inc. $140,935 $6,629 $(1,571)$31,766 $(61,449)$116,310

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A - - 4,914 - - 4,914 Units

Non-cash equity compensation expense 1,859 440 57 1,190 6,051 9,597

Management incentive fee - - - - 5,031 5,031

Acquisition and investment pursuit costs (196) - (88) (58) - (342)

Depreciation and amortization 251 90 17,969 3,812 - 22,122

Credit loss (reversal) provision, net (12,447) 603 - - - (11,844)

Interest income adjustment for securities (861) - - 3,662 - 2,801

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

Other non-cash items 6 - (262) 205 - (51)

Reversal of GAAP unrealized (gains) / losses on:

Loans (12,329) - - (33,538) - (45,867)

Securities 9,402 - - 12,585 - 21,987

Derivatives 3,594 (173) (1,401) 4,927 1,532 8,479

Foreign currency (2,715) 62 25 1 - (2,627)

(Earnings) loss from unconsolidated entities (1,996) 70 - 507 - (1,419)

Sales of properties - - - (9,723) - (9,723)

Recognition of Distributable realized gains / (losses) on:

Loans 11,062 - - 30,623 - 41,685

Securities (18,088) - - (2,779) - (20,867)

Derivatives (2,546) - (34) (718) - (3,298)

Foreign currency 6,518 (31) (25) (1) - 6,461

Earnings (loss) from unconsolidated entities 4,444 (70) - 776 - 5,150

Sales of properties - - - 4,975 - 4,975

Distributable Earnings (Loss) $126,893 $7,620 $19,584 $48,212 $(49,082)$153,227

Distributable Earnings (Loss) per Weighted Average Diluted Share$0.42 $0.02 $0.07 $0.16 $(0.16) $0.51

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the six months ended June 30, 2021

(Amounts in thousands)

Commercial and Infrastructure Investing Residential Property Securitization Lending and ServicingCorporate Subtotal Total Lending Segment VIEs Segment Segment Segment

Revenues:

Interest income from loans $336,290 $39,979 $- $3,578 $- $379,847$- $379,847

Interest income from investment securities 35,575 1,119 - 46,608 - 83,302 (61,044) 22,258

Servicing fees 234 - - 28,821 - 29,055 (9,789) 19,266

Rental income 2,758 - 130,51420,185 - 153,457 - 153,457

Other revenues 164 162 84 2,859 - 3,269 - 3,269

Total revenues 375,021 41,260 130,598102,051 - 648,930 (70,833) 578,097

Costs and expenses:

Management fees 615 - - 446 66,904 67,965 21 67,986

Interest expense 92,651 18,535 32,695 11,238 58,319 213,438 (411) 213,027

General and administrative 21,744 6,974 2,051 44,160 8,800 83,729 172 83,901

Acquisition and investment pursuit costs 364 249 - (21) - 592 - 592

Costs of rental operations 910 - 49,882 8,684 - 59,476 - 59,476

Depreciation and amortization 618 200 36,001 8,132 - 44,951 - 44,951

Credit loss (reversal) provision, net (12,976) 1,176 - - - (11,800) - (11,800)

Other expense 31 - 583 71 - 685 - 685

Total costs and expenses 103,957 27,134 121,21272,710 134,023 459,036 (218) 458,818

Other income (loss):

Change in net assets related to consolidated VIEs - - - - - - 52,254 52,254

Change in fair value of servicing rights - - - 1,205 - 1,205 (702) 503

Change in fair value of investment securities, net (11,452) - - (5,415) - (16,867) 18,069 1,202

Change in fair value of mortgage loans, net 1,615 - - 34,774 - 36,389 - 36,389

Earnings (loss) from unconsolidated entities 3,749 (324) - 82 - 3,507 453 3,960

Gain on sale of investments and other assets, net 16,674 27 - 9,723 - 26,424 - 26,424

Gain (loss) on derivative financial instruments, net 21,196 796 4,352 3,552 (5,916) 23,980 - 23,980

Foreign currency loss, net (8,879) (111) - (64) - (9,054) - (9,054)

Loss on extinguishment of debt (289) (1,246) (141) (22) - (1,698) - (1,698)

Other (loss) income, net (5,504) 23 - 29 - (5,452) - (5,452)

Total other income (loss) 17,110 (835) 4,211 43,864 (5,916) 58,434 70,074 128,508

Income (loss) before income taxes 288,174 13,291 13,597 73,205 (139,939) 248,328 (541) 247,787

Income tax benefit (provision) 6,538 (150) - (5,265) - 1,123 - 1,123

Net income (loss) 294,712 13,141 13,597 67,940 (139,939) 249,451 (541) 248,910

Net (income) loss attributable to non-controlling interests (7) - (9,991)(11,765) - (21,763) 541 (21,222)

Net income (loss) attributable to Starwood Property Trust, Inc.$294,705 $13,141 $3,606$56,175 $(139,939)$227,688$- $227,688

Reconciliation of Net Income to Distributable Earnings

For the six months ended June 30, 2021

(Amounts in thousands except per share data)

Commercial and Infrastructure Investing Residential Property Lending and ServicingCorporate Total Lending Segment Segment Segment Segment

Net income (loss) attributable to Starwood Property Trust, Inc. $294,705 $13,141 $3,606 $56,175 $(139,939)$227,688

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A - - 9,991 - - 9,991 Units

Non-cash equity compensation expense 3,640 740 88 2,071 13,368 19,907

Management incentive fee - - - - 18,154 18,154

Acquisition and investment pursuit costs (360) - (177) (58) - (595)

Depreciation and amortization 498 181 36,130 7,415 - 44,224

Credit loss (reversal) provision, net (12,976) 1,176 - - - (11,800)

Interest income adjustment for securities (2,161) - - 7,657 - 5,496

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

Income tax (provision) benefit associated with realized (gains) (6,495) - - 405 - (6,090) losses

Other non-cash items 9 - (599) 412 415 237

Reversal of GAAP unrealized (gains) / losses on:

Loans (1,615) - - (34,774) - (36,389)

Securities 11,452 - - 5,415 - 16,867

Derivatives (23,577) (918) (7,847) (4,792) 10,845 (26,289)

Foreign currency 8,879 111 - 64 - 9,054

(Earnings) loss from unconsolidated entities (3,749) 324 - (82) - (3,507)

Sales of properties (17,693) - - (9,723) - (27,416)

Recognition of Distributable realized gains / (losses) on:

Loans 25,615 - - 35,295 - 60,910

Realized credit loss (7,757) - - - - (7,757)

Securities (20,949) - - (1,003) - (21,952)

Derivatives (596) - (69) 877 - 212

Foreign currency 11,302 (41) - (64) - 11,197

Earnings (loss) from unconsolidated entities 7,662 (324) - 1,740 - 9,078

Sales of properties 8,298 - - 4,975 - 13,273

Distributable Earnings (Loss) $274,132 $14,390 $41,123$72,005 $(97,650) $304,000

Distributable Earnings (Loss) per Weighted Average Diluted Share $0.92 $0.05 $0.14 $0.24 $(0.33) $1.02

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of June 30, 2021

(Amounts in thousands)

Commercial and Infrastructure Investing Residential Property Securitization Lending and ServicingCorporate Subtotal Total Lending Segment VIEs Segment Segment Segment

Assets:

Cash and cash equivalents $60,651 $31,695 $28,088 $22,618 $ 110,904 $253,956 $ 611 $254,567

Restricted cash 60,416 25,840 6,681 13,072 - 106,009 - 106,009

Loans held-for-investment, net 11,068,406 1,694,109 - 857 - 12,763,372 - 12,763,372

Loans held-for-sale 494,113 85,875 - 381,689 - 961,677 - 961,677

Investment securities 951,036 33,881 - 1,145,485 - 2,130,402 (1,456,836) 673,566

Properties, net 124,916 - 1,941,500 177,153 - 2,243,569 - 2,243,569

Intangible assets - - 37,361 69,910 - 107,271 (42,078) 65,193

Investment in unconsolidated entities 43,717 24,770 - 42,954 - 111,441 (14,652) 96,789

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

Derivative assets 12,472 - 124 92 22,927 35,615 - 35,615

Accrued interest receivable 102,086 5,307 - 495 6,031 113,919 (119) 113,800

Other assets 81,621 11,497 91,158 42,237 14,977 241,490 13 241,503

VIE assets, at fair value - - - - - - 63,493,796 63,493,796

Total Assets $12,999,434 $2,032,383 $2,104,912$2,036,999 $ 154,839 $19,328,567$ 61,980,735$81,309,302

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other liabilities$38,973 $8,464 $45,231 $40,245 $ 49,260 $182,173 $ 53 $182,226

Related-party payable - - - - 26,393 26,393 38 26,431

Dividends payable - - - - 139,457 139,457 - 139,457

Derivative liabilities 31,530 1,118 - 413 - 33,061 - 33,061

Secured financing agreements, net 5,751,375 957,605 1,872,043 742,811 630,578 9,954,412 (21,750) 9,932,662

Collateralized loan obligations, net 2,000,073 404,599 - - - 2,404,672 - 2,404,672

Unsecured senior notes, net - - - - 1,737,383 1,737,383 - 1,737,383

VIE liabilities, at fair value - - - - - - 62,001,710 62,001,710

Total Liabilities 7,821,951 1,371,786 1,917,274 783,469 2,583,071 14,477,551 61,980,051 76,457,602

Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock - - - - 2,952 2,952 - 2,952

Additional paid-in capital 878,471 629,130 16,967 (218,645) 3,942,567 5,248,490 - 5,248,490

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

Accumulated other comprehensive income 41,310 - - - - 41,310 - 41,310

Retained earnings (accumulated deficit) 4,257,587 31,467 (47,694) 1,316,994 (6,235,729)(677,375) - (677,375)

Total Starwood Property Trust, Inc. Stockholders' Equity5,177,368 660,597 (30,727) 1,098,349 (2,428,232)4,477,355 - 4,477,355

Non-controlling interests in consolidated subsidiaries 115 - 218,365 155,181 - 373,661 684 374,345

Total Equity 5,177,483 660,597 187,638 1,253,530 (2,428,232)4,851,016 684 4,851,700

Total Liabilities and Equity $12,999,434 $2,032,383 $2,104,912$2,036,999 $ 154,839 $19,328,567$ 61,980,735$81,309,302

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SOURCE Starwood Property Trust, Inc.