Starwood Property Trust Reports Results for the Quarter Ended March 31, 2018

- Quarterly GAAP Earnings of $0.38 and Core Earnings of $0.58 per Diluted Common Share -

- Deploys $2.0 Billion of Capital -

- Closes $405 Million of Previously Announced $595 Million Affordable Housing Portfolio Purchase -

- Issues $500 Million of 3.625% Unsecured Notes (Swapped to L+128 bps) -

- Retires $370 Million of 4.55% Convertible Senior Notes -

- Declares Dividend of $0.48 per share for the Second Quarter of 2018 -

News provided by

Starwood Property Trust, Inc.

May 04, 2018, 06:45 ET

GREENWICH, Conn., May 4, 2018 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2018. The Company's first quarter 2018 GAAP net income was $99.9 million, or $0.38 per diluted share, and Core Earnings (a non-GAAP financial measure) was $155.8 million, or $0.58 per diluted share.

"2018 is off to a great start as we have put more than $2.5 billion of capital to work year-to-date, including $1.8 billion in our Lending Segment," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust. "Our advantaged access to best-in-class low cost funding options, including our most recent $500 million unsecured debt offering, has enabled us to continue to source and close attractive risk adjusted lending investments in a very competitive market. With a robust investment pipeline generated by our multi-cylinder investment platform, and a very strong liquidity profile, we are well positioned to continue to deliver stable and compelling total returns for our shareholders for the long-term."

Dividend

On May 4, 2018, the Company's Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending June 30, 2018. The dividend is payable on July 13, 2018 to common stockholders of record as of June 29, 2018.

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.

Conference Call and Webcast Information

The Company will host a webcast and conference call on Friday, May 4, 2018, at 10:00 a.m. Eastern Time to discuss the quarter's 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 15 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: 1-800-263-0877
International: 1-323-794-2094

Conference Call Playback:
Domestic: 1-844-512-2921
International: 1-412-317-6671
Passcode: 8903392

The playback can be accessed through May 18, 2018.

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. With total capital deployed since inception of over $41 billion, Starwood Property Trust continues to solidify its position as one of the premier real estate finance companies in the country.

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.

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the three months ended March 31, 2018
(Amounts in thousands)

					Investing						Investing
	Lending		Property		and Servicing						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	134,972	$	—	$	2,648	$	—	$	137,620	$	—	$	137,620
Interest income from investment securities		14,439		—		34,399		—		48,838		(33,569)		15,269
Servicing fees		165		—		33,434		—		33,599		(7,532)		26,067
Rental income		—		66,710		14,400		—		81,110		—		81,110
Other revenues		194		101		228		52		575		(54)		521
Total revenues		149,770		66,811		85,109		52		301,742		(41,155)		260,587
Costs and expenses:
Management fees		480		—		18		30,051		30,549		93		30,642
Interest expense		32,021		16,534		5,095		33,803		87,453		(270)		87,183
General and administrative		6,695		1,859		21,020		2,482		32,056		86		32,142
Acquisition and investment pursuit costs		220		6		151		—		377		—		377
Costs of rental operations		—		23,488		6,205		—		29,693		—		29,693
Depreciation and amortization		17		26,469		5,258		—		31,744		—		31,744
Loan loss allowance, net		1,538		—		—		—		1,538		—		1,538
Other expense		77		—		27		—		104		—		104
Total costs and expenses		41,048		68,356		37,774		66,336		213,514		(91)		213,423
Income (loss) before other income (loss), income taxes and non- controlling interests		108,722		(1,545)		47,335		(66,284)		88,228		(41,064)		47,164
Other income (loss):
Change in net assets related to consolidated VIEs		—		—		—		—		—		52,653		52,653
Change in fair value of servicing rights		—		—		(9,168)		—		(9,168)		3,354		(5,814)
Change in fair value of investment securities, net		(704)		—		13,979		—		13,275		(13,424)		(149)
Change in fair value of mortgage loans held-for-sale, net		(1,692)		—		9,492		—		7,800		—		7,800
Earnings (loss) from unconsolidated entities		1,444		(3,515)		1,596		—		(475)		(987)		(1,462)
Gain on sale of investments and other assets, net		279		3,942		6,439		—		10,660		—		10,660
(Loss) gain on derivative financial instruments, net		(10,818)		1,919		5,042		(13,002)		(16,859)		—		(16,859)
Foreign currency gain (loss), net		13,550		2		(3)		—		13,549		—		13,549
Other income, net		43		17		48		—		108		—		108
Total other income (loss)		2,102		2,365		27,425		(13,002)		18,890		41,596		60,486
Income (loss) before income taxes		110,824		820		74,760		(79,286)		107,118		532		107,650
Income tax provision		(947)		(1,261)		(648)		—		(2,856)		—		(2,856)
Net income (loss)		109,877		(441)		74,112		(79,286)		104,262		532		104,794
Net income attributable to non- controlling interests		(361)		(2,453)		(1,516)		—		(4,330)		(532)		(4,862)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	109,516	$	(2,894)	$	72,596	$	(79,286)	$	99,932	$	—	$	99,932

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, 2018
(Amounts in thousands except per share data)

					Investing
	Lending		Property		and Servicing
	Segment		Segment		Segment		Corporate		Total
Net income (loss) attributable to Starwood Property Trust, Inc.	$	109,516	$	(2,894)	$	72,596	$	(79,286)	$	99,932
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units		—		2,453		—		—		2,453
Non-cash equity compensation expense		563		43		975		3,199		4,780
Management incentive fee		—		—		—		9,634		9,634
Acquisition and investment pursuit costs		119		(93)		(29)		—		(3)
Depreciation and amortization		17		26,805		4,912		—		31,734
Loan loss allowance, net		1,538		—		—		—		1,538
Interest income adjustment for securities		(197)		—		(1,062)		—		(1,259)
Extinguishment of debt, net		—		—		—		9,755		9,755
Other non-cash items		—		(562)		124		881		443
Reversal of unrealized (gains) / losses on:
Loans held-for-sale		1,692		—		(9,492)		—		(7,800)
Securities		704		—		(13,979)		—		(13,275)
Derivatives		10,529		(1,436)		(5,422)		14,398		18,069
Foreign currency		(13,550)		(2)		3		—		(13,549)
Earnings from unconsolidated entities		(1,444)		3,515		(1,596)		—		475
Purchases and sales of properties		—		—		—		—		—
Recognition of realized gains / (losses) on:
Loans held-for-sale		(875)		—		9,643		—		8,768
Securities		—		—		(4,114)		—		(4,114)
Derivatives		(5,725)		(479)		5,531		—		(673)
Foreign currency		8,051		2		(41)		—		8,012
Earnings from unconsolidated entities		1,847		—		1,044		—		2,891
Purchases and sales of properties		—		(210)		(1,765)		—		(1,975)
Core Earnings (Loss)	$	112,785	$	27,142	$	57,328	$	(41,419)	$	155,836
Core Earnings (Loss) per Weighted Average Diluted Share	$	0.42	$	0.10	$	0.21	$	(0.15)	$	0.58

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of March 31, 2018
(Amounts in thousands)

					Investing						Investing
	Lending		Property		and Servicing						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Assets:
Cash and cash equivalents	$	30,048	$	14,738	$	55,167	$	179,987	$	279,940	$	6,215	$	286,155
Restricted cash		52,855		15,343		8,478		16,590		93,266		—		93,266
Loans held-for-investment, net		6,179,100		—		3,686		—		6,182,786		—		6,182,786
Loans held-for-sale		662,971		—		60,762		—		723,733		—		723,733
Loans transferred as secured borrowings		74,463		—		—		—		74,463		—		74,463
Investment securities		490,494		—		1,045,217		—		1,535,711		(1,021,248)		514,463
Properties, net		—		2,699,492		289,372		—		2,988,864		—		2,988,864
Intangible assets		—		118,522		85,999		—		204,521		(24,892)		179,629
Investment in unconsolidated entities		29,537		107,189		45,361		—		182,087		(21,975)		160,112
Goodwill		—		—		140,437		—		140,437		—		140,437
Derivative assets		4,240		36,056		771		—		41,067		—		41,067
Accrued interest receivable		39,002		163		258		1,830		41,253		—		41,253
Other assets		328,622		88,708		50,830		2,083		470,243		(2,923)		467,320
VIE assets, at fair value		—		—		—		—		—		49,233,307		49,233,307
Total Assets	$	7,891,332	$	3,080,211	$	1,786,338	$	200,490	$	12,958,371	$	48,168,484	$	61,126,855
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	18,332	$	68,115	$	48,925	$	20,894	$	156,266	$	1,297	$	157,563
Related-party payable		20		—		28		31,733		31,781		—		31,781
Dividends payable		—		—		—		126,244		126,244		—		126,244
Derivative liabilities		19,576		20,630		330		17,064		57,600		—		57,600
Secured financing agreements, net		2,936,419		1,936,367		408,104		297,124		5,578,014		(23,700)		5,554,314
Unsecured senior notes, net		—		—		—		2,252,631		2,252,631		—		2,252,631
Secured borrowings on transferred loans, net		74,275		—		—		—		74,275		—		74,275
VIE liabilities, at fair value		—		—		—		—		—		48,167,760		48,167,760
Total Liabilities		3,048,622		2,025,112		457,387		2,745,690		8,276,811		48,145,357		56,422,168
Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock		—		—		—		2,671		2,671		—		2,671
Additional paid-in capital		2,054,473		850,185		562,815		1,260,710		4,728,183		—		4,728,183
Treasury stock		—		—		—		(104,194)		(104,194)		—		(104,194)
Accumulated other comprehensive income (loss)		59,082		16,259		(31)		—		75,310		—		75,310
Retained earnings (accumulated deficit)		2,718,567		(17,229)		759,611		(3,704,387)		(243,438)		—		(243,438)
Total Starwood Property Trust, Inc. Stockholders' Equity		4,832,122		849,215		1,322,395		(2,545,200)		4,458,532		—		4,458,532
Non-controlling interests in consolidated subsidiaries		10,588		205,884		6,556		—		223,028		23,127		246,155
Total Equity		4,842,710		1,055,099		1,328,951		(2,545,200)		4,681,560		23,127		4,704,687
Total Liabilities and Equity	$	7,891,332	$	3,080,211	$	1,786,338	$	200,490	$	12,958,371	$	48,168,484	$	61,126,855