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Starwood Property Trust, Inc. (STWD) SEC Filing 8-K Material Event for the period ending Monday, May 4, 2020

Starwood Property Trust, Inc.

CIK: 1465128 Ticker: STWD

Exhibit 99.1

Picture 2

 

For Immediate Release

Starwood Property Trust Reports Results for the

Quarter Ended March 31, 2020

 

GREENWICH, Conn., May 4, 2020 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2020.  The Company had a first quarter 2020 GAAP net loss of $66.8 million, or $(0.24) per diluted share, and Core Earnings of $162.1 million, or $0.55 per diluted share. GAAP net loss includes the unrealized, non-cash impacts of mark-to-market adjustments and the recently implemented CECL accounting standard, totaling $148.6 million ($0.53 per diluted share) and $48.7 million ($0.17 per diluted share), respectively, both of which reflect the market volatility and dislocation caused by the COVID-19 pandemic. 

“Starwood Property Trust has one of the strongest balance sheets in the commercial mortgage REIT industry, with over $870 million in cash and approved undrawn capacity, and well over $1.0 billion of additional liquidity available to us if ever needed. Our powerful balance sheet is bolstered by our diversified platform, anchored by our real estate equity book and multiple business lines that create considerable stability in an uncertain time. We continue to benefit from our scale, relatively low leverage and $3.3 billion unencumbered asset base. STWD is well positioned to take advantage of dislocations in the market and to weather this economic storm with immense human and financial resources,” 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 Monday, May 4, 2020, at 8:30 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:  13702227

The playback can be accessed through May 11, 2020.

 

1

 

 

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 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 March 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 Tanenbaum

Starwood Property Trust

Phone: 203-422-7788

Email: ztanenbaum@starwood.com

 

 

2

 

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the three months ended March 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

  

$

192,381

 

$

22,413

  

$

 —

  

$

2,633

  

$

 —

  

$

217,427

  

$

 —

  

$

217,427

Interest income from investment securities

 

 

18,628

 

 

701

 

 

 —

 

 

24,800

 

 

 —

 

 

44,129

 

 

(28,889)

 

 

15,240

Servicing fees

 

 

172

 

 

 —

 

 

 —

 

 

6,442

 

 

 —

 

 

6,614

 

 

(1,821)

 

 

4,793

Rental income

 

 

78

 

 

 —

 

 

63,961

 

 

10,107

 

 

 —

 

 

74,146

 

 

 —

 

 

74,146

Other revenues

 

 

178

 

 

143

 

 

122

 

 

513

 

 

 —

 

 

956

 

 

(2)

 

 

954

Total revenues 

 

 

211,437

 

 

23,257

 

 

64,083

 

 

44,495

 

 

 —

 

 

343,272

 

 

(30,712)

 

 

312,560

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

351

 

 

 —

 

 

 —

 

 

239

 

 

40,107

 

 

40,697

 

 

31

 

 

40,728

Interest expense

 

 

53,950

 

 

13,117

 

 

17,121

 

 

7,194

 

 

28,805

 

 

120,187

 

 

(162)

 

 

120,025

General and administrative

 

 

8,132

 

 

4,423

 

 

1,078

 

 

20,684

 

 

4,301

 

 

38,618

 

 

84

 

 

38,702

Acquisition and investment pursuit costs

 

 

860

 

 

17

 

 

12

 

 

20

 

 

 —

 

 

909

 

 

 —

 

 

909

Costs of rental operations

 

 

778

 

 

 —

 

 

22,852

 

 

4,584

 

 

 —

 

 

28,214

 

 

 —

 

 

28,214

Depreciation and amortization

 

 

415

 

 

70

 

 

19,288

 

 

4,207

 

 

 —

 

 

23,980

 

 

 —

 

 

23,980

Credit loss provision, net

 

 

40,217

 

 

8,452

 

 

 —

 

 

 —

 

 

 —

 

 

48,669

 

 

 —

 

 

48,669

Other expense

 

 

77

 

 

 —

 

 

311

 

 

 —

 

 

 —

 

 

388

 

 

 —

 

 

388

Total costs and expenses 

 

 

104,780

 

 

26,079

 

 

60,662

 

 

36,928

 

 

73,213

 

 

301,662

 

 

(47)

 

 

301,615

Other (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net assets related to consolidated VIEs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(45,493)

 

 

(45,493)

Change in fair value of servicing rights

 

 

 —

 

 

 —

 

 

 —

 

 

318

 

 

 —

 

 

318

 

 

(711)

 

 

(393)

Change in fair value of investment securities, net

 

 

(27,879)

 

 

 —

 

 

 —

 

 

(47,216)

 

 

 —

 

 

(75,095)

 

 

77,599

 

 

2,504

Change in fair value of mortgage loans, net

 

 

(35,517)

 

 

 —

 

 

 —

 

 

19,383

 

 

 —

 

 

(16,134)

 

 

 —

 

 

(16,134)

Earnings (loss) from unconsolidated entities

 

 

51

 

 

 —

 

 

 —

 

 

620

 

 

 —

 

 

671

 

 

(574)

 

 

97

Gain on sale of investments and other assets, net

 

 

 —

 

 

296

 

 

 —

 

 

 —

 

 

 —

 

 

296

 

 

 —

 

 

296

Gain (loss) on derivative financial instruments, net

 

 

30,805

 

 

(1,001)

 

 

(30,223)

 

 

(19,106)

 

 

29,235

 

 

9,710

 

 

 —

 

 

9,710

Foreign currency (loss) gain, net

 

 

(34,001)

 

 

(473)

 

 

(19)

 

 

 7

 

 

 —

 

 

(34,486)

 

 

 —

 

 

(34,486)

Loss on extinguishment of debt

 

 

 —

 

 

(170)

 

 

 —

 

 

 —

 

 

 —

 

 

(170)

 

 

 —

 

 

(170)

Other income, net

 

 

 —

 

 

 —

 

 

50

 

 

76

 

 

 —

 

 

126

 

 

 —

 

 

126

Total other (loss) income

 

 

(66,541)

 

 

(1,348)

 

 

(30,192)

 

 

(45,918)

 

 

29,235

 

 

(114,764)

 

 

30,821

 

 

(83,943)

Income (loss) before income taxes 

 

 

40,116

 

 

(4,170)

 

 

(26,771)

 

 

(38,351)

 

 

(43,978)

 

 

(73,154)

 

 

156

 

 

(72,998)

Income tax benefit

 

 

4,422

 

 

145

 

 

 —

 

 

2,162

 

 

 —

 

 

6,729

 

 

 —

 

 

6,729

Net income (loss) 

 

 

44,538

 

 

(4,025)

 

 

(26,771)

 

 

(36,189)

 

 

(43,978)

 

 

(66,425)

 

 

156

 

 

(66,269)

Net (income) loss attributable to non-controlling interests

 

 

(3)

 

 

 —

 

 

(5,111)

 

 

4,770

 

 

 —

 

 

(344)

 

 

(156)

 

 

(500)

Net income (loss) attributable to Starwood Property Trust, Inc.  

 

$

44,535

 

$

(4,025)

 

$

(31,882)

 

$

(31,419)

 

$

(43,978)

 

$

(66,769)

 

$

 —

 

$

(66,769)

 

3

 

 

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 March 31, 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 Starwood Property Trust, Inc.

 

$

44,535

 

$

(4,025)

 

$

(31,882)

 

$

(31,419)

 

$

(43,978)

 

$

(66,769)

Add / (Deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-controlling interests attributable to Woodstar II Class A Units

 

 

 —

 

 

 —

 

 

5,111

 

 

 —

 

 

 —

 

 

5,111

Non-cash equity compensation expense

 

 

1,112

 

 

466

 

 

73

 

 

1,263

 

 

5,886

 

 

8,800

Management incentive fee

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

15,799

 

 

15,799

Acquisition and investment pursuit costs

 

 

358

 

 

 —

 

 

(89)

 

 

 —

 

 

 —

 

 

269

Depreciation and amortization

 

 

355

 

 

51

 

 

19,381

 

 

3,807

 

 

 —

 

 

23,594

Credit loss provision, net

 

 

40,217

 

 

8,452

 

 

 —

 

 

 —

 

 

 —

 

 

48,669

Interest income adjustment for securities

 

 

124

 

 

 —

 

 

 —

 

 

6,315

 

 

 —

 

 

6,439

Extinguishment of debt, net

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(246)

 

 

(246)

Income tax benefit associated with fair value adjustments

 

 

(5,821)

 

 

 —

 

 

 —

 

 

(1,442)

 

 

 —

 

 

(7,263)

Other non-cash items

 

 

 3

 

 

 —

 

 

(491)

 

 

248

 

 

156

 

 

(84)

Reversal of GAAP unrealized (gains) / losses on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

35,517

 

 

 —

 

 

 —

 

 

(19,383)

 

 

 —

 

 

16,134

Securities

 

 

27,879

 

 

 —

 

 

 —

 

 

47,216

 

 

 —

 

 

75,095

Derivatives

 

 

(30,563)

 

 

1,013

 

 

30,569

 

 

19,013

 

 

(27,649)

 

 

(7,617)

Foreign currency

 

 

34,001

 

 

473

 

 

19

 

 

(7)

 

 

 —

 

 

34,486

Earnings from unconsolidated entities

 

 

(51)

 

 

 —

 

 

 —

 

 

(620)

 

 

 —

 

 

(671)

Recognition of Core realized gains / (losses) on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

2,164

 

 

(62)

 

 

 —

 

 

16,559

 

 

 —

 

 

18,661

Securities

 

 

 —

 

 

 —

 

 

 —

 

 

(4,212)

 

 

 —

 

 

(4,212)

Derivatives

 

 

3,250

 

 

118

 

 

(35)

 

 

(6,087)

 

 

 —

 

 

(2,754)

Foreign currency

 

 

(4,271)

 

 

(194)

 

 

(19)

 

 

 7

 

 

 —

 

 

(4,477)

(Loss) earnings from unconsolidated entities

 

 

(556)

 

 

 —

 

 

 —

 

 

3,738

 

 

 —

 

 

3,182

Core Earnings (Loss)

 

$

148,253

 

$

6,292

 

$

22,637

 

$

34,996

 

$

(50,032)

 

$

162,146

Core Earnings (Loss) per Weighted Average Diluted Share

 

$

0.50

 

$

0.02

 

$

0.08

 

$

0.12

 

$

(0.17)

 

$

0.55

4

 

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of March 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

 

$

22,910

 

$

40

 

$

28,137

 

$

36,913

 

$

719,222

 

$

807,222

 

$

4,434

 

$

811,656

Restricted cash

 

 

50,331

 

 

43,679

 

 

7,362

 

 

18,365

 

 

 —

 

 

119,737

 

 

 —

 

 

119,737

Loans held-for-investment, net

 

 

9,106,441

 

 

1,381,271

 

 

 —

 

 

1,224

 

 

 —

 

 

10,488,936

 

 

 —

 

 

10,488,936

Loans held-for-sale

 

 

886,076

 

 

101,895

 

 

 —

 

 

186,963

 

 

 —

 

 

1,174,934

 

 

 —

 

 

1,174,934

Investment securities

 

 

955,614

 

 

44,141

 

 

 —

 

 

1,095,990

 

 

 —

 

 

2,095,745

 

 

(1,317,773)

 

 

777,972

Properties, net

 

 

26,585

 

 

 —

 

 

2,014,007

 

 

212,478

 

 

 —

 

 

2,253,070

 

 

 —

 

 

2,253,070

Intangible assets

 

 

 —

 

 

 —

 

 

45,331

 

 

63,632

 

 

 —

 

 

108,963

 

 

(26,958)

 

 

82,005

Investment in unconsolidated entities

 

 

50,017

 

 

25,862

 

 

 —

 

 

31,321

 

 

 —

 

 

107,200

 

 

(19,866)

 

 

87,334

Goodwill

 

 

 —

 

 

119,409

 

 

 —

 

 

140,437

 

 

 —

 

 

259,846

 

 

 —

 

 

259,846

Derivative assets

 

 

57,238

 

 

 6

 

 

98

 

 

2,250

 

 

41,856

 

 

101,448

 

 

 —

 

 

101,448

Accrued interest receivable

 

 

49,942

 

 

4,949

 

 

 —

 

 

1,047

 

 

3,357

 

 

59,295

 

 

(758)

 

 

58,537

Other assets

 

 

61,109

 

 

5,108

 

 

76,776

 

 

52,119

 

 

8,812

 

 

203,924

 

 

(15)

 

 

203,909

VIE assets, at fair value

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

61,157,805

 

 

61,157,805

Total Assets

 

$

11,266,263

 

$

1,726,360

 

$

2,171,711

 

$

1,842,739

 

$

773,247

 

$

17,780,320

 

$

59,796,869

 

$

77,577,189

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

33,645

 

$

11,933

 

$

48,748

 

$

48,090

 

$

79,178

 

$

221,594

 

$

75

 

$

221,669

Related-party payable

 

 

 —

 

 

 —

 

 

 —

 

 

 5

 

 

39,261

 

 

39,266

 

 

 —

 

 

39,266

Dividends payable

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

137,529

 

 

137,529

 

 

 —

 

 

137,529

Derivative liabilities

 

 

3,740

 

 

1,292

 

 

 —

 

 

86

 

 

 —

 

 

5,118

 

 

 —

 

 

5,118

Secured financing agreements, net

 

 

5,611,239

 

 

1,190,995

 

 

1,698,044

 

 

692,941

 

 

510,414

 

 

9,703,633

 

 

(13,950)

 

 

9,689,683

Collateralized loan obligations, net

 

 

928,683

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

928,683

 

 

 —

 

 

928,683

Unsecured senior notes, net

 

 

 —

 

 

 —