PR Newswire | Nov 9, 2021 07:01AM EST

11/09 06:00 CST

Starwood Property Trust Reports Results for the Quarter Ended September 30, 2021-- Quarterly GAAP Earnings of $0.44 and Distributable Earnings of $0.52 per Diluted Share --- $3.8 Billion of Investment Activity in Third Quarter --- $9.6 Billion of Investment Activity Year-to-Date, Including $5.6 Billion in Commercial Lending --- Paid Dividend of $0.48 per Share --- After Quarter End, Sold a 20.6% Interest in New Investment Fund Which Holds Affordable Housing Portfolio at a $2.3 Billion Valuation -- GREENWICH, Conn., Nov. 9, 2021

GREENWICH, Conn., Nov. 9, 2021 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2021. The Company's third quarter 2021 GAAP net income was $128.6 million, or $0.44 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $155.1 million, or $0.52 per diluted share.

"We have been telling you for years about the significant unrealized gains in our property portfolio which highlights the uniqueness of our diversified platform and differentiates us from our peers. We are pleased to announce that after quarter end, we established a new investment fund to hold our Woodstar affordable housing portfolio and sold a 20.6% interest in the fund at a valuation that is approximately $1.1 billion in excess of our cost. This crystallized a portion of our embedded gain and validated over 80% of the $4.57 per share estimated fair market value gains in our properties that we have spoken with you about. Our unique ability to monetize these embedded gains and create incremental value for our shareholders provides us enormous financial flexibility," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"We deployed $3.8 billion of capital this quarter, growing our portfolio to an all-time high of over $21.0 billion. We further enhanced the strength of our balance sheet with the issuance of a $400.0 million corporate sustainability bond, and upsizes to our revolver, term loan and multifamily portfolio debt. We have a strong pipeline of domestic and international opportunities across our business cylinders and have already closed over $2.0 billion of investments in the fourth quarter, including $1.1 billion in commercial lending," added Jeffrey DiModica, President 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 Tuesday, November 9, 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: 13723497 The playback can be accessed through November 16, 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 $76 billion of capital since inception and manages a portfolio of over $21 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 September 30, 2021 (Amounts in thousands)



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

Revenues:

Interest income from loans $179,486 $21,566 $- $2,200 $- $203,252$- $203,252

Interest income from investment securities 16,043 540 - 25,140 - 41,723 (31,026) 10,697

Servicing fees 99 - - 15,447 - 15,546 (5,073) 10,473

Rental income 1,358 - 66,673 9,481 - 77,512 - 77,512

Other revenues 59 66 54 173 - 352 - 352

Total revenues 197,045 22,172 66,727 52,441 - 338,385 (36,099) 302,286

Costs and expenses:

Management fees 286 - - (1,239) 24,680 23,727 - 23,727

Interest expense 52,066 9,381 17,002 5,652 31,651 115,752 (221) 115,531

General and administrative 9,178 3,307 913 21,022 4,372 38,792 72 38,864

Acquisition and investment pursuit costs 158 - - 56 - 214 - 214

Costs of rental operations 438 - 26,634 4,444 - 31,516 - 31,516

Depreciation and amortization 312 101 17,882 3,746 - 22,041 - 22,041

Credit loss provision (reversal), net 19 (582) - - - (563) - (563)

Other expense - - - 23 - 23 - 23

Total costs and expenses 62,457 12,207 62,431 33,704 60,703 231,502 (149) 231,353

Other income (loss):

Change in net assets related to consolidated VIEs - - - - - - 28,049 28,049

Change in fair value of servicing rights - - - (410) - (410) 2,647 2,237

Change in fair value of investment securities, net (8,682) - - 2,870 - (5,812) 5,513 (299)

Change in fair value of mortgage loans, net 22,464 - - 9,263 - 31,727 - 31,727

Earnings (loss) from unconsolidated entities 1,666 399 - 153 - 2,218 (176) 2,042

Loss on sale of investments and other assets, net (47) - - - - (47) - (47)

Gain (loss) on derivative financial instruments, 38,016 87 (318) 3,992 35 41,812 - 41,812 net

Foreign currency (loss) gain, net (26,820) (168) (16) 1 - (27,003) - (27,003)

Loss on extinguishment of debt - (18) - - (481) (499) - (499)

Other loss, net (964) - - - - (964) - (964)

Total other income (loss) 25,633 300 (334) 15,869 (446) 41,022 36,033 77,055

Income (loss) before income taxes 160,221 10,265 3,962 34,606 (61,149) 147,905 83 147,988

Income tax (provision) benefit (5,652) 488 - (2,337) - (7,501) - (7,501)

Net income (loss) 154,569 10,753 3,962 32,269 (61,149) 140,404 83 140,487

Net income attributable to non-controlling (3) - (4,691)(7,108) - (11,802) (83) (11,885) interests

Net income (loss) attributable to Starwood Property$154,566 $10,753 $(729)$25,161 $(61,149)$128,602$- $128,602 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 September 30, 2021 (Amounts in thousands except per share data)



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

Net income (loss) attributable to Starwood Property Trust, Inc. $154,566 $10,753 $(729) $25,161 $(61,149)$128,602

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A - - 4,691 - - 4,691 Units

Non-cash equity compensation expense 1,787 423 54 1,108 6,080 9,452

Management incentive fee - - - - 953 953

Acquisition and investment pursuit costs (98) - (89) - - (187)

Depreciation and amortization 252 91 17,950 3,884 - 22,177

Credit loss provision (reversal), net 19 (582) - - - (563)

Interest income adjustment for securities (171) - - 3,748 - 3,577

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

Other non-cash items 3 - (282) 173 (2) (108)

Reversal of GAAP unrealized (gains) / losses on:

Loans (22,464) - - (9,263) - (31,727)

Securities 8,682 - - (2,870) - 5,812

Derivatives (40,473) (150) (1,495) (4,660) 2,406 (44,372)

Foreign currency 26,820 168 16 (1) - 27,003

(Earnings) loss from unconsolidated entities (1,666) (399) - (153) - (2,218)

Sales of properties - - - - - -

Recognition of Distributable realized gains / (losses) on:

Loans 19,010 - - 9,141 - 28,151

Securities (11,093) - - 3,642 - (7,451)

Derivatives 6,129 - (35) 4,183 - 10,277

Foreign currency (1,171) (13) (16) 1 - (1,199)

Earnings (loss) from unconsolidated entities 1,806 399 - 261 - 2,466

Sales of properties - - - - - -

Distributable Earnings (Loss) $141,938 $10,690 $20,065$34,355 $(51,958)$155,090

Distributable Earnings (Loss) per Weighted Average Diluted Share$0.47 $0.04 $0.07 $0.11 $(0.17) $0.52

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Statement of Operations by Segment For the nine months ended September 30, 2021 (Amounts in thousands)



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

Revenues:

Interest income from loans $515,776 $61,545 $ - $5,778 $- $583,099$- $583,099

Interest income from investment securities 51,618 1,659 - 71,748 - 125,025 (92,070) 32,955

Servicing fees 333 - - 44,268 - 44,601 (14,862) 29,739

Rental income 4,116 - 197,187 29,666 - 230,969 - 230,969

Other revenues 223 228 138 3,032 - 3,621 - 3,621

Total revenues 572,066 63,432 197,325 154,492 - 987,315 (106,932) 880,383

Costs and expenses:

Management fees 901 - - (793) 91,584 91,692 21 91,713

Interest expense 144,717 27,916 49,697 16,890 89,970 329,190 (632) 328,558

General and administrative 30,922 10,281 2,964 65,182 13,172 122,521 244 122,765

Acquisition and investment pursuit costs 522 249 - 35 - 806 - 806

Costs of rental operations 1,348 - 76,516 13,128 - 90,992 - 90,992

Depreciation and amortization 930 301 53,883 11,878 - 66,992 - 66,992

Credit loss (reversal) provision, net (12,957) 594 - - - (12,363) - (12,363)

Other expense 31 - 583 94 - 708 - 708

Total costs and expenses 166,414 39,341 183,643 106,414 194,726 690,538 (367) 690,171

Other income (loss):

Change in net assets related to consolidated VIEs - - - - - - 80,303 80,303

Change in fair value of servicing rights - - - 795 - 795 1,945 2,740

Change in fair value of investment securities, net (20,134) - - (2,545) - (22,679) 23,582 903

Change in fair value of mortgage loans, net 24,079 - - 44,037 - 68,116 - 68,116

Earnings from unconsolidated entities 5,415 75 - 235 - 5,725 277 6,002

Gain on sale of investments and other assets, net 16,627 27 - 9,723 - 26,377 - 26,377

Gain (loss) on derivative financial instruments, net 59,212 883 4,034 7,544 (5,881) 65,792 - 65,792

Foreign currency loss, net (35,699) (279) (16) (63) - (36,057) - (36,057)

Loss on extinguishment of debt (289) (1,264) (141) (22) (481) (2,197) - (2,197)

Other (loss) income, net (6,468) 23 - 29 - (6,416) - (6,416)

Total other income (loss) 42,743 (535) 3,877 59,733 (6,362) 99,456 106,107 205,563

Income (loss) before income taxes 448,395 23,556 17,559 107,811 (201,088) 396,233 (458) 395,775

Income tax benefit (provision) 886 338 - (7,602) - (6,378) - (6,378)

Net income (loss) 449,281 23,894 17,559 100,209 (201,088) 389,855 (458) 389,397

Net (income) loss attributable to non-controlling interests(10) - (14,682)(18,873) - (33,565) 458 (33,107)

Net income (loss) attributable to Starwood Property $449,271 $23,894 $ 2,877$81,336 $(201,088)$356,290$- $356,290 Trust, Inc.

Reconciliation of Net Income to Distributable Earnings For the nine months ended September 30, 2021 (Amounts in thousands except per share data)



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

Net income (loss) attributable to Starwood Property Trust, Inc. $449,271 $23,894 $2,877 $81,336 $(201,088)$356,290

Add / (Deduct):

Non-controlling interests attributable to Woodstar II Class A - - 14,682 - - 14,682 Units

Non-cash equity compensation expense 5,427 1,163 142 3,179 19,448 29,359

Management incentive fee - - - - 19,107 19,107

Acquisition and investment pursuit costs (458) - (266) (58) - (782)

Depreciation and amortization 750 272 54,080 11,299 - 66,401

Credit loss (reversal) provision, net (12,957) 594 - - - (12,363)

Interest income adjustment for securities (2,332) - - 11,405 - 9,073

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

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

Other non-cash items 12 - (881) 585 413 129

Reversal of GAAP unrealized (gains) / losses on:

Loans (24,079) - - (44,037) - (68,116)

Securities 20,134 - - 2,545 - 22,679

Derivatives (64,050) (1,068) (9,342) (9,452) 13,251 (70,661)

Foreign currency 35,699 279 16 63 - 36,057

(Earnings) loss from unconsolidated entities (5,415) (75) - (235) - (5,725)

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

Recognition of Distributable realized gains / (losses) on:

Loans 44,625 - - 44,436 - 89,061

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

Securities (32,042) - - 2,639 - (29,403)

Derivatives 5,533 - (104) 5,060 - 10,489

Foreign currency 10,131 (54) (16) (63) - 9,998

Earnings (loss) from unconsolidated entities 9,468 75 - 2,001 - 11,544

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

Distributable Earnings (Loss) $416,070 $25,080 $61,188$106,360 $(149,608)$459,090

Distributable Earnings (Loss) per Weighted Average Diluted Share$1.39 $0.08 $0.20 $0.36 $(0.50) $1.53

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Balance Sheet by Segment As of September 30, 2021 (Amounts in thousands)



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

Assets:

Cash and cash equivalents $19,626 $16,695 $32,162 $29,027 $ 175,197 $272,707 $ 609 $273,316

Restricted cash 60,183 23,628 6,807 19,854 - 110,472 - 110,472

Loans held-for-investment, net 11,603,370 1,688,847 - 781 - 13,292,998 - 13,292,998

Loans held-for-sale 1,813,458 84,253 - 285,808 - 2,183,519 - 2,183,519

Investment securities 927,411 33,323 - 1,128,921 - 2,089,655 (1,418,768) 670,887

Properties, net 124,691 - 1,928,853 175,318 - 2,228,862 - 2,228,862

Intangible assets - - 35,958 68,596 - 104,554 (39,432) 65,122

Investment in unconsolidated entities 45,129 25,170 - 38,239 - 108,538 (14,538) 94,000

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

Derivative assets 31,835 36 96 78 20,521 52,566 - 52,566

Accrued interest receivable 101,539 4,372 - 1,887 447 108,245 (119) 108,126

Other assets 159,296 4,186 77,928 34,054 19,298 294,762 (92) 294,670

VIE assets, at fair value - - - - - - 62,346,480 62,346,480

Total Assets $14,886,538$1,999,919 $2,081,804$1,923,000 $ 215,463 $21,106,724$ 60,874,140$81,980,864

Liabilities and Equity

Liabilities:

Accounts payable, accrued expenses and other liabilities $55,572 $10,064 $48,663 $44,405 $ 51,321 $210,025 $ 55 $210,080

Related-party payable - - - - 23,378 23,378 - 23,378

Dividends payable - - - - 139,738 139,738 - 139,738

Derivative liabilities 14,924 419 - 272 - 15,615 - 15,615

Secured financing agreements, net 7,206,946 905,343 1,873,053 763,555 774,812 11,523,709 (21,657) 11,502,052

Collateralized loan obligations and single asset securitization, net2,209,270 404,960 - - - 2,614,230 - 2,614,230

Unsecured senior notes, net - - - - 1,733,684 1,733,684 - 1,733,684

VIE liabilities, at fair value - - - - - - 60,894,975 60,894,975

Total Liabilities 9,486,712 1,320,786 1,921,716 808,232 2,722,933 16,260,379 60,873,373 77,133,752

Equity:

Starwood Property Trust, Inc. Stockholders' Equity:

Common stock - - - - 2,961 2,961 - 2,961

Additional paid-in capital 929,932 636,911 17,137 (377,386) 4,063,671 5,270,265 - 5,270,265

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

Accumulated other comprehensive income 40,486 - - - - 40,486 - 40,486

Retained earnings (accumulated deficit) 4,429,290 42,222 (65,568) 1,342,156 (6,436,080)(687,980) - (687,980)

Total Starwood Property Trust, Inc. Stockholders' Equity 5,399,708 679,133 (48,431) 964,770 (2,507,470)4,487,710 - 4,487,710

Non-controlling interests in consolidated subsidiaries 118 - 208,519 149,998 - 358,635 767 359,402

Total Equity 5,399,826 679,133 160,088 1,114,768 (2,507,470)4,846,345 767 4,847,112

Total Liabilities and Equity $14,886,538$1,999,919 $2,081,804$1,923,000 $ 215,463 $21,106,724$ 60,874,140$81,980,864

View original content: https://www.prnewswire.com/news-releases/starwood-property-trust-reports-results-for-the-quarter-ended-september-30-2021-301419295.html

SOURCE Starwood Property Trust, Inc.