For Immediate Release
Starwood Property Trust Reports Results for the
Quarter Ended June 30, 2016
– Quarterly GAAP Earnings of $0.47 and Core Earnings of $0.50 per Diluted Common Share –
– Deploys $1.6 Billion of Capital During the Quarter –
– Declares Dividend of $0.48 per Share for the Third Quarter of 2016 –
GREENWICH, Conn., August 4, 2016 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended June 30, 2016. The Company’s second quarter 2016 GAAP net income was $111.5 million, or $0.47 per diluted share, and Core Earnings (a non-GAAP financial measure) was $119.9 million, or $0.50 per diluted share.
“We are pleased with our strong performance this quarter, driven by significant contributions from each of our business segments. Despite a volatile market backdrop in the first half of the year, including an uncertain domestic economic and geopolitical environment, we deployed $2.5 billion of capital and continued to source investments with attractive returns and a risk profile consistent with our historical standards. In our seven years as a public company, we have not realized a single credit loss in the $19.0 billion of loans we have originated or acquired. As a testament to our conservative underwriting, our loan portfolio continues to maintain a conservative weighted average LTV of 61.9%, which is down from a peak of 67.8% in 2011 when our loan book was one-third the size it is today. We are particularly pleased with the progress of our equity investments, including those embedded in our loan book, where we continue to expect meaningful appreciation over time,” stated Barry Sternlicht, Chairman and Chief Executive Officer of Starwood Property Trust.
Mr. Sternlicht continued, “We believe opportunities will remain abundant as recent structural changes in the U.S. and European lending markets are coinciding with increasing levels of commercial real estate debt maturities. Our servicing platform should provide a front row seat to any distress that may occur as those pre-2008 borrowers refinance. Our conservative balance sheet and access to liquidity should allow us to capitalize on these opportunities and any future dislocations in the credit markets. As we have done in the past, we will leverage our global operating platforms across Starwood Property Trust and Starwood Capital Group to source the best risk-adjusted investments for our shareholders in order to generate exceptional returns over the long term.”
1
Highlights for the Second Quarter 2016 by Business Segment
The Company currently operates in three reportable segments: Real Estate Lending (the “Lending Segment”), Real Estate Investing and Servicing (the “Investing and Servicing Segment”) and Real Estate Property (the “Property Segment”). The Lending Segment primarily represents the Company’s on-balance sheet loan origination business. The Investing and Servicing Segment includes the Company’s U.S. and European servicing businesses, CMBS investment business, conduit loan origination platform and commercial real estate properties acquired from CMBS trusts. The Property Segment includes the Company’s investments in stabilized commercial real estate properties that are held for investment.
Real Estate Lending Segment
During the second quarter of 2016, the Lending Segment contributed GAAP Earnings of $98.9 million, or $0.42 per diluted share, and Core Earnings of $102.4 million, or $0.43 per diluted share.
The Lending Segment originated or acquired investments of $1.1 billion during the quarter, with fundings of $775.0 million, including $123.8 million related to previously originated loans. Repayments during the quarter totaled $1.0 billion. Newly originated or acquired investments included the following:
|
· |
$330.0 million first mortgage and mezzanine loan for the development of an 856-unit luxury multi-family project located in Brooklyn, New York. |
|
· |
$216.0 million portfolio of three first mortgage loans secured by 25 office properties located in Long Island, New York and a two-building office complex in San Jose, California. |
|
· |
€165.4 million investment in a €98.9 million first mortgage loan, secured by a shopping center in Lisbon, Portugal and a €66.5 million first mortgage loan portfolio, secured by five food-related retail properties primarily in the Greater Lisbon area. |
|
· |
$183.0 million first mortgage and mezzanine loan for the refinancing and renovation of a four-tower luxury multi-family complex located in the Greater Philadelphia area. |
At June 30, 2016, the Lending Segment’s principal assets were as follows:
Lending Segment Investments
(Dollars in millions)
|
Investment |
|
Face |
|
Carry |
|
Asset Specific |
|
Net |
|
Unlevered |
|
Current |
|
Optimal |
|
||||
|
First mortgages held-for-investment (5) |
$ |
4,586 |
$ |
4,530 |
$ |
2,179 |
$ |
2,351 | 6.7 |
% |
9.3 |
% |
10.7 |
% |
|||||
|
Subordinated mortgages held-for-investment |
413 | 392 | 6 | 386 | 11.3 |
% |
11.3 |
% |
11.4 |
% |
|||||||||
|
Mezzanine loans held-for-investment (5) |
756 | 765 |
- |
765 | 10.9 |
% |
10.9 |
% |
10.9 |
% |
|||||||||
|
CMBS held-to-maturity |
507 | 501 | 314 | 187 | 5.5 |
% |
10.6 |
% |
11.6 |
% |
|||||||||
|
Preferred equity investments held-to-maturity |
19 | 20 |
- |
20 | 13.3 |
% |
13.3 |
% |
13.3 |
% |
|||||||||
|
Target portfolio of Lending Segment |
$ |
6,281 |
$ |
6,208 |
$ |
2,499 |
$ |
3,709 | 7.4 |
% |
9.9 |
% |
10.9 |
% |
|||||
|
RMBS available-for-sale at fair value |
409 | 251 | 102 | 149 | 10.3 |
% |
|||||||||||||
|
Loans transferred as secured borrowings |
95 | 93 | 95 | (2) | |||||||||||||||
|
Equity security |
12 | 13 |
- |
13 | |||||||||||||||
|
Investment in unconsolidated entities |
N/A |
31 |
- |
31 | |||||||||||||||
|
Total investments |
$ |
6,797 |
$ |
6,596 |
$ |
2,696 |
$ |
3,900 | |||||||||||
2
Loan-to-Value of Portfolio
The following table reflects the weighted average loan-to-value (“LTV”) ratio of the Lending Segment’s loan portfolio as of June 30, 2016:
|
Weighted Average LTV of Loan Portfolio (5)(6) |
|
||||||||||
|
|
|
First |
|
Subordinated |
|
Mezzanine |
|
Preferred |
|
Total (7) |
|
|
Beginning LTV |
|
0.0 |
% |
25.3 |
% |
48.3 |
% |
64.9 |
% |
8.3 |
% |
|
Ending LTV |
|
61.7 |
% |
52.8 |
% |
67.8 |
% |
78.9 |
% |
61.9 |
% |
Real Estate Investing and Servicing Segment
During the second quarter of 2016, the Investing and Servicing Segment contributed GAAP Earnings of $51.2 million, or $0.22 per diluted share, and Core Earnings of $49.9 million, or $0.21 per diluted share.
Significant activity during the quarter included:
|
· |
Originated $288.2 million of conduit loans and participated in two securitizations with loan sales totaling $218.4 million. |
|
· |
Invested $54.8 million in CMBS, including two new issue B-pieces where we partnered with another party and acquired a minority share. |
|
· |
Awarded special servicing on $1.8 billion of collateral in connection with our CMBS investments during the quarter. |
|
· |
Purchased four properties and a 50% interest in one additional property from CMBS trusts for $62.6 million. |
As of June 30, 2016, the Company was active special servicer on $11.0 billion of loans and real estate owned and was named special servicer on $100.9 billion of loans and real estate owned. The Investing and Servicing Segment’s principal assets were as follows:
Investing and Servicing Segment Investments
(Amounts in millions)
|
Investment |
|
Carry Value |
|
Asset |
|
Net |
|||
|
CMBS (8) |
|
$ |
1,051 |
|
$ |
240 |
|
$ |
811 |
|
Special servicing intangibles |
|
|
115 |
|
|
- |
|
|
115 |
|
Conduit loans |
|
|
237 |
|
|
147 |
|
|
90 |
|
Properties and lease intangibles, net |
|
|
256 |
|
|
117 |
|
|
139 |
|
Investment in unconsolidated entities |
|
|
55 |
|
|
- |
|
|
55 |
|
Loans held-for-investment |
|
|
6 |
|
|
- |
|
|
6 |
|
Total investments |
|
$ |
1,720 |
|
$ |
504 |
|
$ |
1,216 |
Real Estate Property Segment
During the second quarter of 2016, the Property Segment contributed GAAP Earnings of $14.8 million, or $0.06 per diluted share, and Core Earnings of $12.7 million, or $0.05 per diluted share.
In April, the Property Segment acquired the final two of the 32 previously announced affordable housing communities referred to as the “Woodstar Portfolio” for $39.4 million and net equity of $17.9 million. These two properties are comprised of 628 units and were funded with a combination of cash, assumed government-
3
sponsored financing and other assumed debt. The Woodstar Portfolio totals 8,948 units concentrated primarily in the Tampa, Orlando and West Palm Beach, Florida metropolitan areas and, as of June 30, 2016, is 98% occupied.
At June 30, 2016, the Property Segment’s principal assets were as follows:
Property Segment Investments
(Dollars in millions)
|
Investment |
Carrying Value |
Asset Specific Financing |
Net Investment |
Q2 2016 Net Operating Income |
Occupancy Rate |
Weighted Average Lease Term |
|||||||||||
|
Wholly-Owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dublin, Ireland - Office (9) |
|
$ |
485 |
|
$ |
311 |
|
$ |
174 |
|
$ |
6.8 |
|
98.6 |
% |
10.1 years |
|
|
Dublin, Ireland - Multi-family residential (9) |
|
|
17 |
|
|
11 |
|
|
6 |
|
|
0.2 |
|
97.0 |
% |
0.5 years |
|
|
Southeast, U.S. - Multi-family residential (9) |
|
|
606 |
|
|
404 |
|
|
202 |
|
|
9.6 |
|
97.5 |
% |
0.5 years |
|
|
Subtotal - Undepreciated Carrying Value |
$ |
1,108 |
$ |
726 |
$ |
382 |
$ |
16.6 |
(10) |
||||||||
|
Accumulated Depreciation and Amortization |
(46) |
- |
(46) | ||||||||||||||
|
Net Carrying Value |
$ |
1,062 |
$ |
726 |
$ |
336 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint Venture: |
|||||||||||||||||
|
Investment in unconsolidated entity - retail |
122 |
- |
122 | ||||||||||||||
|
$ |
1,184 |
$ |
726 |
$ |
458 | ||||||||||||
Financing Activities
As of June 30, 2016, the Company had an aggregate outstanding debt balance of $5.9 billion and maximum borrowing capacity of $8.4 billion, with a debt-to-equity ratio of 1.4x.
During the second quarter of 2016, the Company:
|
· |
Expanded an existing repurchase financing facility by €124.1 million in order to finance the acquisition of the Company’s new investments in Portugal. The financing carries a four-year term and an annual interest rate of EURIBOR plus 2.00%. |
|
· |
Amended an existing revolving repurchase facility to increase available borrowings to $185.0 million from $125.0 million. |
|
· |
Modified an existing revolving repurchase facility to allow for up to $200.0 million of financing for conduit mortgage loan originations under the existing borrowing capacity. |
Book Value and Undepreciated Book Value Per Share
The Company’s book value per diluted share metrics were as follows:
|
|
March 31, 2016 |
||||||
|
Undepreciated book value per diluted share (11) |
|
$ |
17.19 |
|
$ |
17.13 |
|
|
Book value per diluted share |
|
$ |
16.96 |
|
$ |
16.98 |
|
As of June 30, 2016, these per share metrics include dilution of $0.03 per diluted share attributable to the Company’s 2019 convertible senior notes. There was no such dilution as of March 31, 2016.
4
Investment Capacity
As of July 29, 2016, the Company has the capacity to acquire or originate up to $2.3 billion of new investments through (i) $1.2 billion of unallocated warehouse capacity; (ii) $586.9 million of available cash and equivalents; (iii) $549.7 million of expected maturities, prepayments, sales and participations over the next 90 days; (iv) $99.3 million of approved but undrawn capacity under existing financing facilities; and (v) approximately $107.4 million of net equity invested in RMBS that are classified as available-for-sale.
Dividend
On August 4, 2016, the Company’s Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending September 30, 2016. The dividend is payable on October 17, 2016 to common stockholders of record as of September 30, 2016.
Supplemental Schedules
The Company has published supplemental earnings schedules in order to provide additional disclosure and financial information for the benefit of the Company’s stakeholders. These can be found at the Company’s website in the Investor Relations section under “Financial Information”.
Conference Call and Webcast Information
The Company will host a webcast and conference call on Thursday, August 4, 2016 at 10:00 a.m. Eastern Time to discuss second quarter financial results and recent events. A webcast will be available on the Company’s website at www.starwoodpropertytrust.com. To listen to a live broadcast, access the site at least five minutes prior to the scheduled start time in order to register and download and install any necessary audio software.
To Participate in the Telephone Conference Call:
Dial in at least five minutes prior to start time.
Domestic: 1-888-364-3104
International: 1-719-325-2298
Conference Call Playback:
Domestic: 1-877-870-5176
International: 1-858-384-5517
Passcode: 8410647
The playback can be accessed through August 18, 2016.
About Starwood Property Trust, Inc.
Starwood Property Trust (NYSE: STWD), an affiliate of global private investment firm Starwood Capital Group, is the largest commercial mortgage real estate investment trust in the United States. The Company’s core business focuses on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt and equity investments. Through its subsidiaries LNR Property, LLC and Hatfield Philips International, Starwood Property Trust also operates as the largest commercial mortgage special servicer in the United States and one of the largest primary and special servicers in Europe. With total capital deployed since inception of over $28 billion, Starwood Property Trust continues to solidify its position as one of the premier real estate finance companies in the country.
5
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. 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 completion of pending investments, continued ability to acquire additional investments, competition within the finance and real estate industries, economic conditions, availability of financing and other risks detailed from time to time in the Company's reports filed with the SEC.
6
Footnotes
|
(1) |
The difference between the Carry Value and Face Amount of the loans held for investment consists of unamortized purchase discount, deferred loan fees and loan origination costs. The difference between the Carry Value and Face Amount of the RMBS available-for-sale securities consists of the unrealized gains/(losses) on the fair value of the securities and unamortized purchase discount. |
|
(2) |
Current financings are either floating rate or swapped to fixed rate to match the interest rate characteristics of the underlying asset. |
|
(3) |
The current leveraged return represents the compounded effective rate of return earned over the life of the investment based on existing leverage levels as of June 30, 2016, and calculated on a weighted average basis. Leveraged returns include the loan coupon, amortization of premium or discount, and the effects of costs and fees, all recognized on the effective interest method. Leveraged returns are presented solely for informational purposes and will not equal income recognized in prior or future periods due mainly to the fact that (i) interest earned on the Company’s floating rate loans will change in the future when interest rates change, and these leveraged returns assume interest rates remain at current levels and (ii) the leveraged returns assume that the leverage levels existing at June 30, 2016 will be maintained either throughout the remaining term of the applicable credit facilities or the remaining term of the investment, if shorter. However, leverage levels in future periods will likely fluctuate as the Company manages its day-to-day liquidity. |
|
(4) |
The optimal asset-level return assumes (i) maximum available leverage in place or in negotiation for each asset, notwithstanding the amount actually borrowed, and (ii) full syndication of the first mortgage when syndication is deemed probable. |
|
(5) |
First mortgages include first mortgage loans and any contiguous subordinated mortgage and/or mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan. The application of this methodology resulted in mezzanine loans with carrying values of $949.2 million being classified as first mortgages as of June 30, 2016. |
|
(6) |
Underlying property values are determined by the Company’s management based on its ongoing asset assessments, and loan balances that are the face value of a loan regardless of whether the Company has purchased the loan at a discount or premium to par. Assets characterized as first mortgages include all loan components where the Company owns the senior most interest in the loan, which may include subordinated mortgages and/or mezzanine loans. Assets characterized as subordinated mortgages are the subordinated components of first mortgages where the Company does not own the senior most interest in the loan. Assets characterized as mezzanine loans are mezzanine loans where the Company does not own the senior most interest in the loan. For any loans collateralized by ground-up construction projects without significant leasing or units with executed sales contracts, the fully funded loan balance is included in the numerator and the fully budgeted construction cost, including costs of acquisition of the property, is included in the denominator. For ground up construction loans which have significant leasing or units under contract for sale, the fully funded loan balance is included in the numerator with an estimate of the stabilized value upon completion of construction included in the denominator. Includes loans held for investment and preferred equity. |
|
(7) |
Represents the Company’s entire investment, which includes all components of the capital stack that it owns (i.e., first mortgages, subordinated mortgages, mezzanine loans and preferred equity). |
|
(8) |
Face amount is $4.7 billion. Differences between face amount and carry value are principally attributable to purchase discounts and changes in fair value. |
|
(9) |
Carrying value includes all components of the related asset, including properties and intangibles. |
|
(10) |
Excludes income of $0.8 million associated with the forgiveness of certain government-sponsored financing. |
|
(11) |
Adjusted for accumulated depreciation and amortization associated with commercial real estate properties. |
7
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the three months ended June 30, 2016
(Amounts in thousands)
|
|
|
|
|
Investing |
|
|
|
|
|
|
|
Investing |
|
|
|||||||
|
|
|
Lending |
|
and Servicing |
|
Property |
|
|
|
|
|
and Servicing |
|
|
|||||||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Corporate |
|
Subtotal |
|
VIEs |
|
Total |
|||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from loans |
|
$ |
119,296 |
|
$ |
3,261 |
|
$ |
— |
|
$ |
— |
|
$ |
122,557 |
|
$ |
— |
|
$ |
122,557 |
|
Interest income from investment securities |
|
|
11,046 |
|
|
32,435 |
|
|
— |
|
|
— |
|
|
43,481 |
|
|
(28,180) |
|
|
15,301 |
|
Servicing fees |
|
|
206 |
|
|
37,249 |
|
|
— |
|
|
— |
|
|
37,455 |
|
|
(14,143) |
|
|
23,312 |
|
Rental income |
|
|
— |
|
|
8,223 |
|
|
29,620 |
|
|
— |
|
|
37,843 |
|
|
— |
|
|
37,843 |
|
Other revenues |
|
|
58 |
|
|
1,076 |
|
|
18 |
|
|
— |
|
|
1,152 |
|
|
(173) |
|
|
979 |
|
Total revenues |
|
|
130,606 |
|
|
82,244 |
|
|
29,638 |
|
|
— |
|
|
242,488 |
|
|
(42,496) |
|
|
199,992 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
|
395 |
|
|
12 |
|
|
— |
|
|
23,304 |
|
|
23,711 |
|
|
56 |
|
|
23,767 |
|
Interest expense |
|
|
22,572 |
|
|
3,328 |
|
|
5,678 |
|
|
26,057 |
|
|
57,635 |
|
|
— |
|
|
57,635 |
|
General and administrative |
|
|
4,540 |
|
|
26,721 |
|
|
837 |
|
|
3,130 |
|
|
35,228 |
|
|
181 |
|
|
35,409 |
|
Acquisition and investment pursuit costs |
|
|
942 |
|
|
780 |
|
|
166 |
|
|
1,000 |
|
|
2,888 |
|
|
— |
|
|
2,888 |
|
Costs of rental operations |
|
|
— |
|
|
3,661 |
|
|
12,191 |
|
|
— |
|
|
15,852 |
|
|
— |
|
|
15,852 |
|
Depreciation and amortization |
|
|
— |
|
|
3,730 |
|
|
15,343 |
|
|
— |
|
|
19,073 |
|
|
— |
|
|
19,073 |
|
Loan loss allowance, net |
|
|
2,029 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,029 |
|
|
— |
|
|
2,029 |
|
Total costs and expenses |
|
|
30,478 |
|
|
38,232 |
|
|
34,215 |
|
|
53,491 |
|
|
156,416 |
|
|
237 |
|
|
156,653 |
|
Income (loss) before other (loss) income, income taxes and non-controlling interests |
|
|
100,128 |
|
|
44,012 |
|
|
(4,577) |
|
|
(53,491) |
|
|
86,072 |
|
|
(42,733) |
|
|
43,339 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net assets related to consolidated VIEs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
50,707 |
|
|
50,707 |
|
Change in fair value of servicing rights |
|
|
— |
|
|
(11,034) |
|
|
— |
|
|
— |
|
|
(11,034) |
|
|
(1,157) |
|
|
(12,191) |
|
Change in fair value of investment securities, net |
|
|
(30) |
|
|
7,459 |
|
|
— |
|
|
— |
|
|
7,429 |
|
|
(6,110) |
|
|
1,319 |
|
Change in fair value of mortgage loans held-for-sale, net |
|
|
— |
|
|
13,235 |
|
|
— |
|
|
— |
|
|
13,235 |
|
|
— |
|
|
13,235 |
|
Earnings from unconsolidated entities |
|
|
1,224 |
|
|
1,286 |
|
|
2,429 |
|
|
— |
|
|
4,939 |
|
|
(460) |
|
|
4,479 |
|
(Loss) gain on sale of investments and other assets, net |
|
|
(90) |
|
|
— |
|
|
— |
|
|
— |
|
|
(90) |
|
|
— |
|
|
(90) |
|
Gain (loss) on derivative financial instruments, net |
|
|
15,868 |
|
|
(3,945) |
|
|
8,330 |
|
|
— |
|
|
20,253 |
|
|
— |
|
|
20,253 |
|
Foreign currency (loss) gain, net |
|
|
(17,840) |
|
|
870 |
|
|
(18) |
|
|
— |
|
|
(16,988) |
|
|
— |
|
|
(16,988) |
|
Other income, net |
|
|
— |
|
|
34 |
|
|
8,680 |
|
|
— |
|
|
8,714 |
|
|
— |
|
|
8,714 |
|
Total other (loss) income |
|
|
(868) |
|
|
7,905 |
|
|
19,421 |
|
|
— |
|
|
26,458 |
|
|
42,980 |
|
|
69,438 |
|
Income (loss) before income taxes |
|
|
99,260 |
|
|
51,917 |
|
|
14,844 |
|
|
(53,491) |
|
|
112,530 |
|
|
247 |
|
|
112,777 |
|
Income tax provision |
|
|
— |
|
|
(706) |
|
|
— |
|
|
— |
|
|
(706) |
|
|
— |
|
|
(706) |
|
Net income (loss) |
|
|
99,260 |
|
|
51,211 |
|
|
14,844 |
|
|
(53,491) |
|
|
111,824 |
|
|
247 |
|
|
112,071 |
|
Net income attributable to non-controlling interests |
|
|
(348) |
|
|
(3) |
|
|
— |
|
|
— |
|
|
(351) |
|
|
(247) |
|
|
(598) |
|
Net income (loss) attributable to Starwood Property Trust, Inc. |
|
$ |
98,912 |
|
$ |
51,208 |
|
$ |
14,844 |
|
$ |
(53,491) |
|
$ |
111,473 |
|
$ |
— |
|
$ |
111,473 |
8
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, losses on debt extinguishment 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. 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 June 30, 2016
(Amounts in thousands except per share data)
|
|
|
|
|
Investing |
|
|
|
|
|
|
|
||||
|
|
|
Lending |
|
and Servicing |
|
Property |
|
|
|
|
|
||||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Corporate |
|
Total |
|||||
|
Net income (loss) attributable to Starwood Property Trust, Inc. |
|
$ |
98,912 |
|
$ |
51,208 |
|
$ |
14,844 |
|
$ |
(53,491) |
|
$ |
111,473 |
|
Add / (Deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash equity compensation expense |
|
|
704 |
|
|
1,401 |
|
|
29 |
|
|
5,524 |
|
|
7,658 |
|
Management incentive fee |
|
|
— |
|
|
— |
|
|
— |
|
|
2,868 |
|
|
2,868 |
|
Acquisition and investment pursuit costs |
|
|
— |
|
|
226 |
|
|
136 |
|
|
— |
|
|
362 |
|
Depreciation and amortization |
|
|
— |
|
|
2,921 |
|
|
15,369 |
|
|
— |
|
|
18,290 |
|
Loan loss allowance, net |
|
|
2,029 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,029 |
|
Interest income adjustment for securities |
|
|
(243) |
|
|
5,857 |
|
|
— |
|
|
— |
|
|
5,614 |
|
Other non-cash items |
|
|
— |
|
|
17 |
|
|
(9,206) |
|
|
— |
|
|
(9,189) |
|
Reversal of unrealized (gains) / losses on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale |
|
|
— |
|
|
(13,235) |
|
|
— |
|
|
— |
|
|
(13,235) |
|
Securities |
|
|
30 |
|
|
(7,459) |
|
|
— |
|
|
— |
|
|
(7,429) |
|
Derivatives |
|
|
(16,530) |
|
|
3,635 |
|
|
(8,330) |
|
|
— |
|
|
(21,225) |
|
Foreign currency |
|
|
17,840 |
|
|
(870) |
|
|
18 |
|
|
— |
|
|
16,988 |
|
Earnings from unconsolidated entities |
|
|
(1,224) |
|
|
(1,286) |
|
|
(2,429) |
|
|
— |
|
|
(4,939) |
|
Recognition of realized gains / (losses) on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale |
|
|
— |
|
|
13,679 |
|
|
— |
|
|
— |
|
|
13,679 |
|
Securities |
|
|
— |
|
|
(4,554) |
|
|
— |
|
|
— |
|
|
(4,554) |
|
Derivatives |
|
|
25,321 |
|
|
(3,104) |
|
|
— |
|
|
— |
|
|
22,217 |
|
Foreign currency |
|
|
(25,704) |
|
|
839 |
|
|
(19) |
|
|
— |
|
|
(24,884) |
|
Earnings from unconsolidated entities |
|
|
1,224 |
|
|
630 |
|
|
2,333 |
|
|
— |
|
|
4,187 |
|
Core Earnings (Loss) |
|
$ |
102,359 |
|
$ |
49,905 |
|
$ |
12,745 |
|
$ |
(45,099) |
|
$ |
119,910 |
|
Core Earnings (Loss) per Weighted Average Diluted Share |
|
$ |
0.43 |
|
$ |
0.21 |
|
$ |
0.05 |
|
$ |
(0.19) |
|
$ |
0.50 |
9
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the six months ended June 30, 2016
(Amounts in thousands)
|
|
|
|
|
Investing |
|
|
|
|
|
|
|
Investing |
|
|
|||||||
|
|
|
Lending |
|
and Servicing |
|
Property |
|
|
|
|
|
and Servicing |
|
|
|||||||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Corporate |
|
Subtotal |
|
VIEs |
|
Total |
|||||||
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income from loans |
|
$ |
233,954 |
|
$ |
6,135 |
|
$ |
— |
|
$ |
— |
|
$ |
240,089 |
|
$ |
— |
|
$ |
240,089 |
|
Interest income from investment securities |
|
|
20,674 |
|
|
80,061 |
|
|
— |
|
|
— |
|
|
100,735 |
|
|
(66,031) |
|
|
34,704 |
|
Servicing fees |
|
|
365 |
|
|
73,467 |
|
|
— |
|
|
— |
|
|
73,832 |
|
|
(25,829) |
|
|
48,003 |
|
Rental income |
|
|
— |
|
|
14,698 |
|
|
55,822 |
|
|
— |
|
|
70,520 |
|
|
— |
|
|
70,520 |
|
Other revenues |
|
|
81 |
|
|
2,418 |
|
|
24 |
|
|
— |
|
|
2,523 |
|
|
(354) |
|
|
2,169 |
|
Total revenues |
|
|
255,074 |
|
|
176,779 |
|
|
55,846 |
|
|
— |
|
|
487,699 |
|
|
(92,214) |
|
|
395,485 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
|
770 |
|
|
30 |
|
|
— |
|
|
47,832 |
|
|
48,632 |
|
|
98 |
|
|
48,730 |
|
Interest expense |
|
|
44,907 |
|
|
6,566 |
|
|
10,627 |
|
|
52,055 |
|
|
114,155 |
|
|
— |
|
|
114,155 |
|
General and administrative |
|
|
8,462 |
|
|
52,015 |
|
|
1,392 |
|
|
5,980 |
|
|
67,849 |
|
|
358 |
|
|
68,207 |
|
Acquisition and investment pursuit costs |
|
|
1,280 |
|
|
1,135 |
|
|
758 |
|
|
1,000 |
|
|
4,173 |
|
|
— |
|
|
4,173 |
|
Costs of rental operations |
|
|
— |
|
|
6,723 |
|
|
21,784 |
|
|
— |
|
|
28,507 |
|
|
— |
|
|
28,507 |
|
Depreciation and amortization |
|
|
— |
|
|
6,781 |
|
|
31,052 |
|
|
— |
|
|
37,833 |
|
|
— |
|
|
37,833 |
|
Loan loss allowance, net |
|
|
1,268 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,268 |
|
|
— |
|
|
1,268 |
|
Other expense |
|
|
— |
|
|
100 |
|
|
— |
|
|
— |
|
|
100 |
|
|
— |
|
|
100 |
|
Total costs and expenses |
|
|
56,687 |
|
|
73,350 |
|
|
65,613 |
|
|
106,867 |
|
|
302,517 |
|
|
456 |
|
|
302,973 |
|
Income (loss) before other (loss) income, income taxes and non-controlling interests |
|
|
198,387 |
|
|
103,429 |
|
|
(9,767) |
|
|
(106,867) |
|
|
185,182 |
|
|
(92,670) |
|
|
92,512 |
|
Other income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in net assets related to consolidated VIEs |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
46,540 |
|
|
46,540 |
|
Change in fair value of servicing rights |
|
|
— |
|
|
(19,704) |
|
|
— |
|
|
— |
|
|
(19,704) |
|
|
774 |
|
|
(18,930) |
|
Change in fair value of investment securities, net |
|
|
(244) |
|
|
(44,069) |
|
|
— |
|
|
— |
|
|
(44,313) |
|
|
46,385 |
|
|
2,072 |
|
Change in fair value of mortgage loans held-for-sale, net |
|
|
— |
|
|
20,126 |
|
|
— |
|
|
— |
|
|
20,126 |
|
|
— |
|
|
20,126 |
|
Earnings from unconsolidated entities |
|
|
1,692 |
|
|
2,663 |
|
|
4,858 |
|
|
— |
|
|
9,213 |
|
|
(669) |
|
|
8,544 |
|
Gain on sale of investments and other assets, net |
|
|
155 |
|
|
— |
|
|
— |
|
|
— |
|
|
155 |
|
|
— |
|
|
155 |
|
Gain (loss) on derivative financial instruments, net |
|
|
12,842 |
|
|
(15,190) |
|
|
(2,117) |
|
|
— |
|
|
(4,465) |
|
|
— |
|
|
(4,465) |
|
Foreign currency (loss) gain, net |
|
|
(19,662) |
|
|
2,330 |
|
|
(34) |
|
|
— |
|
|
(17,366) |
|
|
— |
|
|
(17,366) |
|
Other income, net |
|
|
— |
|
|
77 |
|
|
9,102 |
|
|
1,550 |
|
|
10,729 |
|
|
— |
|
|
10,729 |
|
Total other (loss) income |
|
|
(5,217) |
|
|
(53,767) |
|
|
11,809 |
|
|
1,550 |
|
|
(45,625) |
|
|
93,030 |
|
|
47,405 |
|
Income (loss) before income taxes |
|
|
193,170 |
|
|
49,662 |
|
|
2,042 |
|
|
(105,317) |
|
|
139,557 |
|
|
360 |
|
|
139,917 |
|
Income tax provision |
|
|
(75) |
|
|
(725) |
|
|
— |
|
|
— |
|
|
(800) |
|
|
— |
|
|
(800) |
|
Net income (loss) |
|
|
193,095 |
|
|
48,937 |
|
|
2,042 |
|
|
(105,317) |
|
|
138,757 |
|
|
360 |
|
|
139,117 |
|
Net (income) loss attributable to non-controlling interests |
|
|
(698) |
|
|
71 |
|
|
— |
|
|
— |
|
|
(627) |
|
|
(360) |
|
|
(987) |
|
Net income (loss) attributable to Starwood Property Trust, Inc. |
|
$ |
192,397 |
|
$ |
49,008 |
|
$ |
2,042 |
|
$ |
(105,317) |
|
$ |
138,130 |
|
$ |
— |
|
$ |
138,130 |
10
Reconciliation of Net Income to Core Earnings
For the six months ended June 30, 2016
(Amounts in thousands except per share data)
|
|
|
|
|
Investing |
|
|
|
|
|
|
|||||
|
|
|
Lending |
|
and Servicing |
|
Property |
|
|
|
|
|||||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Corporate |
|
Total |
|||||
|
Net income (loss) attributable to Starwood Property Trust, Inc. |
|
$ |
192,397 |
|
$ |
49,008 |
|
$ |
2,042 |
|
$ |
(105,317) |
|
$ |
138,130 |
|
Add / (Deduct): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash equity compensation expense |
|
|
1,286 |
|
|
2,487 |
|
|
62 |
|
|
10,907 |
|
|
14,742 |
|
Management incentive fee |
|
|
— |
|
|
— |
|
|
— |
|
|
7,467 |
|
|
7,467 |
|
Acquisition and investment pursuit costs |
|
|
— |
|
|
815 |
|
|
694 |
|
|
— |
|
|
1,509 |
|
Depreciation and amortization |
|
|
— |
|
|
5,127 |
|
|
31,089 |
|
|
— |
|
|
36,216 |
|
Loan loss allowance, net |
|
|
1,268 |
|
|
— |
|
|
— |
|
|
— |
|
|
1,268 |
|
Interest income adjustment for securities |
|
|
(504) |
|
|
6,746 |
|
|
— |
|
|
— |
|
|
6,242 |
|
Other non-cash items |
|
|
— |
|
|
17 |
|
|
(10,814) |
|
|
— |
|
|
(10,797) |
|
Reversal of unrealized (gains) / losses on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale |
|
|
— |
|
|
(20,126) |
|
|
— |
|
|
— |
|
|
(20,126) |
|
Securities |
|
|
244 |
|
|
44,069 |
|
|
— |
|
|
— |
|
|
44,313 |
|
Derivatives |
|
|
(14,183) |
|
|
14,398 |
|
|
2,117 |
|
|
— |
|
|
2,332 |
|
Foreign currency |
|
|
19,662 |
|
|
(2,330) |
|
|
34 |
|
|
— |
|
|
17,366 |
|
Earnings from unconsolidated entities |
|
|
(1,692) |
|
|
(2,663) |
|
|
(4,858) |
|
|
— |
|
|
(9,213) |
|
Recognition of realized gains / (losses) on: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held-for-sale |
|
|
— |
|
|
18,471 |
|
|
— |
|
|
— |
|
|
18,471 |
|
Securities |
|
|
— |
|
|
(7,877) |
|
|
— |
|
|
— |
|
|
(7,877) |
|
Derivatives |
|
|
25,875 |
|
|
(9,816) |
|
|
(70) |
|
|
— |
|
|
15,989 |
|
Foreign currency |
|
|
(25,771) |
|
|
2,193 |
|
|
(34) |
|
|
— |
|
|
(23,612) |
|
Earnings from unconsolidated entities |
|
|
2,296 |
|
|
1,755 |
|
|
2,333 |
|
|
— |
|
|
6,384 |
|
Core Earnings (Loss) |
|
$ |
200,878 |
|
$ |
102,274 |
|
$ |
22,595 |
|
$ |
(86,943) |
|
$ |
238,804 |
|
Core Earnings (Loss) per Weighted Average Diluted Share |
|
$ |
0.84 |
|
$ |
0.43 |
|
$ |
0.09 |
|
$ |
(0.36) |
|
$ |
1.00 |
11
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of June 30, 2016
(Amounts in thousands)
|
|
|
|
|
Investing |
|
|
|
|
|
|
|
Investing |
|
|
|||||||
|
|
|
Lending |
|
and Servicing |
|
Property |
|
|
|
|
|
and Servicing |
|
|
|||||||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Corporate |
|
Subtotal |
|
VIEs |
|
Total |
|||||||
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
127,803 |
|
$ |
69,803 |
|
$ |
18,723 |
|
$ |
187,335 |
|
$ |
403,664 |
|
$ |
1,156 |
|
$ |
404,820 |
|
Restricted cash |
|
|
17,359 |
|
|
16,092 |
|
|
7,680 |
|
|
— |
|
|
41,131 |
|
|
— |
|
|
41,131 |
|
Loans held-for-investment, net |
|
|
5,687,399 |
|
|
6,053 |
|
|
— |
|
|
— |
|
|
5,693,452 |
|
|
— |
|
|
5,693,452 |
|
Loans held-for-sale |
|
|
— |
|
|
237,106 |
|
|
— |
|
|
— |
|
|
237,106 |
|
|
— |
|
|
237,106 |
|
Loans transferred as secured borrowings |
|
|
93,268 |
|
|
— |
|
|
— |
|
|
— |
|
|
93,268 |
|
|
— |
|
|
93,268 |
|
Investment securities |
|
|
784,463 |
|
|
1,050,909 |
|
|
— |
|
|
— |
|
|
1,835,372 |
|
|
(936,569) |
|
|
898,803 |
|
Properties, net |
|
|
— |
|
|
220,340 |
|
|
1,012,515 |
|
|
— |
|
|
1,232,855 |
|
|
— |
|
|
1,232,855 |
|
Intangible assets |
|
|
— |
|
|
154,975 |
|
|
51,650 |
|
|
— |
|
|
206,625 |
|
|
(29,572) |
|
|
177,053 |
|
Investment in unconsolidated entities |
|
|
30,873 |
|
|
55,432 |
|
|
122,130 |
|
|
— |
|
|
208,435 |
|
|
(7,894) |
|
|
200,541 |
|
Goodwill |
|
|
— |
|
|
140,437 |
|
|
— |
|
|
— |
|
|
140,437 |
|
|
— |
|
|
140,437 |
|
Derivative assets |
|
|
32,446 |
|
|
2,736 |
|
|
7,510 |
|
|
— |
|
|
42,692 |
|
|
— |
|
|
42,692 |
|
Accrued interest receivable |
|
|
29,028 |
|
|
1,008 |
|
|
— |
|
|
— |
|
|
30,036 |
|
|
— |
|
|
30,036 |
|
Other assets |
|
|
12,234 |
|
|
74,481 |
|
|
32,544 |
|
|
1,163 |
|
|
120,422 |
|
|
(2,372) |
|
|
118,050 |
|
VIE assets, at fair value |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
80,076,117 |
|
|
80,076,117 |
|
Total Assets |
|
$ |
6,814,873 |
|
$ |
2,029,372 |
|
$ |
1,252,752 |
|
$ |
188,498 |
|
$ |
10,285,495 |
|
$ |
79,100,866 |
|
$ |
89,386,361 |
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable, accrued expenses and other liabilities |
|
$ |
9,352 |
|
$ |
58,583 |
|
$ |
48,600 |
|
$ |
23,295 |
|
$ |
139,830 |
|
$ |
782 |
|
$ |
140,612 |
|
Related-party payable |
|
|
— |
|
|
555 |
|
|
— |
|
|
19,763 |
|
|
20,318 |
|
|
— |
|
|
20,318 |
|
Dividends payable |
|
|
— |
|
|
— |
|
|
— |
|
|
115,013 |
|
|
115,013 |
|
|
— |
|
|
115,013 |
|
Derivative liabilities |
|
|
13,706 |
|
|
4,163 |
|
|
1 |
|
|
— |
|
|
17,870 |
|
|
— |
|
|
17,870 |
|
Secured financing agreements, net |
|
|
2,600,851 |
|
|
503,864 |
|
|
725,856 |
|
|
645,650 |
|
|
4,476,221 |
|
|
— |
|
|
4,476,221 |
|
Convertible senior notes, net |
|
|
— |
|
|
— |
|
|
— |
|
|
1,334,424 |
|
|
1,334,424 |
|
|
— |
|
|
1,334,424 |
|
Secured borrowings on transferred loans |
|
|
94,668 |
|
|
— |
|
|
— |
|
|
— |
|
|
94,668 |
|
|
— |
|
|
94,668 |
|
VIE liabilities, at fair value |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
79,087,142 |
|
|
79,087,142 |
|
Total Liabilities |
|
|
2,718,577 |
|
|
567,165 |
|
|
774,457 |
|
|
2,138,145 |
|
|
6,198,344 |
|
|
79,087,924 |
|
|
85,286,268 |
|
Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Starwood Property Trust, Inc. Stockholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
— |
|
|
— |
|
|
— |
|
|
2,427 |
|
|
2,427 |
|
|
— |
|
|
2,427 |
|
Additional paid-in capital |
|
|
2,062,358 |
|
|
1,183,776 |
|
|
467,993 |
|
|
506,760 |
|
|
4,220,887 |
|
|
— |
|
|
4,220,887 |
|
Treasury stock |
|
|
— |
|
|
— |
|
|
— |
|
|
(92,104) |
|
|
(92,104) |
|
|
— |
|
|
(92,104) |
|
Accumulated other comprehensive income (loss) |
|
|
39,472 |
|
|
(6,973) |
|
|
128 |
|
|
— |
|
|
32,627 |
|
|
— |
|
|
32,627 |
|
Retained earnings (accumulated deficit) |
|
|
1,983,102 |
|
|
270,081 |
|
|
10,174 |
|
|
(2,366,730) |
|
|
(103,373) |
|
|
— |
|
|
(103,373) |
|
Total Starwood Property Trust, Inc. Stockholders’ Equity |
|
|
4,084,932 |
|
|
1,446,884 |
|
|
478,295 |
|
|
(1,949,647) |
|
|
4,060,464 |
|
|
— |
|
|
4,060,464 |
|
Non-controlling interests in consolidated subsidiaries |
|
|
11,364 |
|
|
15,323 |
|
|
— |
|
|
— |
|
|
26,687 |
|
|
12,942 |
|
|
39,629 |
|
Total Equity |
|
|
4,096,296 |
|
|
1,462,207 |
|
|
478,295 |
|
|
(1,949,647) |
|
|
4,087,151 |
|
|
12,942 |
|
|
4,100,093 |
|
Total Liabilities and Equity |
|
$ |
6,814,873 |
|
$ |
2,029,372 |
|
$ |
1,252,752 |
|
$ |
188,498 |
|
$ |
10,285,495 |
|
$ |
79,100,866 |
|
$ |
89,386,361 |
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
12