Starwood Property Trust Reports Results for the Quarter Ended March 31, 2019

- Deploys $2.0 Billion of Capital, Including $1.0 Billion in Commercial Lending -

- Declares Dividend of $0.48 per share for the Second Quarter of 2019 -

News provided by

May 08, 2019, 07:00 ET

GREENWICH, Conn., May 8, 2019 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2019. The Company's first quarter 2019 GAAP net income was $70.4 million, or $0.25 per diluted share, and Core Earnings was $82.9 million, or $0.28 per diluted share. These amounts reflect a write down of the Company's interest in a regional mall portfolio of $44.9 million and $68.9 million for GAAP and Core Earnings, respectively, or $0.16 and $0.24 per diluted share, respectively.

"Our multi-cylinder platform continues to generate consistent returns, led by our commercial lending business, which deployed $1.0 billion of capital during the quarter. We are also proud of the performance of our owned property portfolio, marked by 98% occupancy and stable and growing double-digit cash returns on invested capital. We believe this portfolio on an undepreciated basis has over $500 million in unrealized gains," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust.

"We continue to source attractive and high credit quality investments across our businesses, with our commercial lending portfolio growing to $8.2 billion and our asset base growing to $16.7 billion, both record highs. With low leverage, ample capacity and the ability to monetize appreciated assets, our balance sheet and access to capital remain strong. We believe we are well-positioned to execute on our long-term business plan, regardless of interest rate environment, by prudently allocating capital across our multiple cylinders to generate attractive and sustainable risk adjusted returns for our shareholders."

Dividend

On May 8, 2019, the Company's Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending June 30, 2019. The dividend is payable on July 15, 2019 to common stockholders of record as of June 28, 2019.

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 live webcast and conference call on Wednesday, May 8, 2019, 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 and download and install any necessary audio software. The webcast is available at www.starwoodpropertytrust.com in the investor relations section of the website.

To Participate via Telephone:

Dial in at least ten 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: 13689755
The playback can be accessed through May 15, 2019.

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 $53 billion of capital since inception and manages a portfolio in excess of $16 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, 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 under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, 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: [email protected]

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Statement of Operations by Segment For the three months ended March 31, 2019 (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	$	154,595	$	26,915	$	—	$	1,906	$	—	$	183,416	$	—	$	183,416
Interest income from investment securities		19,908		885		—		24,293		—		45,086		(27,454)		17,632
Servicing fees		123		—		—		27,243		—		27,366		(2,933)		24,433
Rental income		—		—		70,521		13,312		—		83,833		—		83,833
Other revenues		204		686		78		196		20		1,184		(18)		1,166
Total revenues		174,830		28,486		70,599		66,950		20		340,885		(30,405)		310,480
Costs and expenses:
Management fees		411		—		—		18		22,988		23,417		49		23,466
Interest expense		61,604		18,577		18,990		7,746		27,915		134,832		(160)		134,672
General and administrative		6,768		4,479		1,518		18,851		3,226		34,842		88		34,930
Acquisition and investment pursuit costs		249		16		—		77		—		342		—		342
Costs of rental operations		19		—		22,937		6,695		—		29,651		—		29,651
Depreciation and amortization		71		—		23,896		5,287		—		29,254		—		29,254
Loan loss provision, net		(11)		774		—		—		—		763		—		763
Other expense		77		—		134		—		—		211		—		211
Total costs and expenses		69,188		23,846		67,475		38,674		54,129		253,312		(23)		253,289
Other income (loss):
Change in net assets related to consolidated VIEs		—		—		—		—		—		—		47,836		47,836
Change in fair value of servicing rights		—		—		—		(515)		—		(515)		(252)		(767)
Change in fair value of investment securities, net		(1,694)		—		—		18,140		—		16,446		(16,384)		62
Change in fair value of mortgage loans held-for-sale, net		1,386		—		—		9,880		—		11,266		—		11,266
Earnings (loss) from unconsolidated entities		577		—		(43,805)		594		—		(42,634)		(566)		(43,200)
Gain on sale of investments and other assets, net		2,755		790		—		940		—		4,485		—		4,485
(Loss) gain on derivative financial instruments, net		(9,297)		(395)		1,290		(3,432)		9,627		(2,207)		—		(2,207)
Foreign currency gain (loss), net		5,239		300		9		(1)		—		5,547		—		5,547
(Loss) gain on extinguishment of debt		—		(3,304)		—		—		6		(3,298)		—		(3,298)
Other loss, net		—		—		—		—		(73)		(73)		—		(73)
Total other income (loss)		(1,034)		(2,609)		(42,506)		25,606		9,560		(10,983)		30,634		19,651
Income (loss) before income taxes		104,608		2,031		(39,382)		53,882		(44,549)		76,590		252		76,842
Income tax benefit (provision)		248		85		(258)		(409)		—		(334)		—		(334)
Net income (loss)		104,856		2,116		(39,640)		53,473		(44,549)		76,256		252		76,508
Net (income) loss attributable to non-controlling interests		(371)		—		(5,717)		215		—		(5,873)		(252)		(6,125)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	104,485	$	2,116	$	(45,357)	$	53,688	$	(44,549)	$	70,383	$	—	$	70,383

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, 2019 (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.	$	104,485	$	2,116	$	(45,357)	$	53,688	$	(44,549)	$	70,383
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units		—		—		5,717		—		—		5,717
Non-cash equity compensation expense		706		551		69		1,350		3,687		6,363
Management incentive fee		—		—		—		—		173		173
Acquisition and investment pursuit costs		(38)		2		(89)		—		—		(125)
Depreciation and amortization		71		—		24,211		4,915		—		29,197
Loan loss provision, net		(11)		774		—		—		—		763
Interest income adjustment for securities		(197)		—		—		5,972		—		5,775
Extinguishment of debt, net		—		—		—		—		(1,211)		(1,211)
Other non-cash items		—		—		(434)		137		168		(129)
Reversal of GAAP unrealized (gains) / losses on:
Loans held-for-sale		(1,386)		—		—		(9,880)		—		(11,266)
Securities		1,694		—		—		(18,140)		—		(16,446)
Derivatives		9,505		395		316		3,324		(10,144)		3,396
Foreign currency		(5,239)		(300)		(9)		1		—		(5,547)
Earnings from unconsolidated entities		(577)		—		43,805		(594)		—		42,634
Recognition of Core realized gains / (losses) on:
Loans held-for-sale		(653)		—		—		7,430		—		6,777
Securities		—		—		—		7,532		—		7,532
Derivatives		87		768		367		(1,625)		—		(403)
Foreign currency		391		(891)		9		8		—		(483)
Earnings from unconsolidated entities		98		—		(68,905)		8,733		—		(60,074)
Sales of properties		—		—		—		(76)		—		(76)
Core Earnings (Loss)	$	108,936	$	3,415	$	(40,300)	$	62,775	$	(51,876)	$	82,950
Core Earnings (Loss) per Weighted Average Diluted Share	$	0.37	$	0.01	$	(0.14)	$	0.22	$	(0.18)	$	0.28

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Balance Sheet by Segment As of March 31, 2019 (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	$	13,206	$	58	$	36,107	$	47,225	$	295,463	$	392,059	$	20,211	$	412,270
Restricted cash		32,156		68,057		19,671		13,295		535		133,714		—		133,714
Loans held-for-investment, net		7,513,130		1,450,097		—		1,498		—		8,964,725		—		8,964,725
Loans held-for-sale		688,435		302,803		—		153,252		—		1,144,490		—		1,144,490
Investment securities		1,061,011		59,610		—		992,739		—		2,113,360		(1,203,127)		910,233
Properties, net		8,937		—		2,487,285		273,152		—		2,769,374		—		2,769,374
Intangible assets		—		—		85,356		75,806		—		161,162		(24,327)		136,835
Investment in unconsolidated entities		35,351		—		70,557		54,251		—		160,159		(35,799)		124,360
Goodwill		—		119,409		—		140,437		—		259,846		—		259,846
Derivative assets		14,247		1,029		32,093		41		—		47,410		—		47,410
Accrued interest receivable		50,269		7,135		392		296		3,079		61,171		(857)		60,314
Other assets		11,259		72,720		65,898		75,348		1,944		227,169		(16)		227,153
VIE assets, at fair value		—		—		—		—		—		—		56,974,864		56,974,864
Total Assets	$	9,428,001	$	2,080,918	$	2,797,359	$	1,827,340	$	301,021	$	16,434,639	$	55,730,949	$	72,165,588
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	29,302	$	6,788	$	63,644	$	71,675	$	21,628	$	193,037	$	106	$	193,143
Related-party payable		1		—		—		9		23,935		23,945		—		23,945
Dividends payable		—		—		—		—		135,889		135,889		—		135,889
Derivative liabilities		4,608		772		—		2,739		2,044		10,163		—		10,163
Secured financing agreements, net		5,010,958		1,410,124		1,876,514		653,078		298,186		9,248,860		(13,950)		9,234,910
Unsecured senior notes, net		—		—		—		—		1,922,795		1,922,795		—		1,922,795
VIE liabilities, at fair value		—		—		—		—		—		—		55,727,776		55,727,776
Total Liabilities		5,044,869		1,417,684		1,940,158		727,501		2,404,477		11,534,689		55,713,932		67,248,621
Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock		—		—		—		—		2,855		2,855		—		2,855
Additional paid-in capital		1,199,646		663,692		631,392		118,760		2,466,683		5,080,173		—		5,080,173
Treasury stock		—		—		—		—		(104,194)		(104,194)		—		(104,194)
Accumulated other comprehensive income (loss)		53,128		—		2,734		(64)		—		55,798		—		55,798
Retained earnings (accumulated deficit)		3,120,166		(458)		(31,787)		967,326		(4,468,800)		(413,553)		—		(413,553)
Total Starwood Property Trust, Inc. Stockholders' Equity		4,372,940		663,234		602,339		1,086,022		(2,103,456)		4,621,079		—		4,621,079
Non-controlling interests in consolidated subsidiaries		10,192		—		254,862		13,817		—		278,871		17,017		295,888
Total Equity		4,383,132		663,234		857,201		1,099,839		(2,103,456)		4,899,950		17,017		4,916,967
Total Liabilities and Equity	$	9,428,001	$	2,080,918	$	2,797,359	$	1,827,340	$	301,021	$	16,434,639	$	55,730,949	$	72,165,588