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Section 1: 8-K (8-K)

stwd_Current folio_8K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM 8-K

 

CURRENT REPORT


Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 

 

Date of Report (Date of earliest event reported): May 9, 2016

 

Starwood Property Trust, Inc.

(Exact name of registrant as specified in its charter)

 

Maryland
(State or other jurisdiction
of incorporation)

 

001-34436
(Commission
File Number)

 

27-0247747
(IRS Employer
Identification No.)

 

 

591 West Putnam Avenue

Greenwich, CT 

 

06830

(Address of principal

 

(Zip Code)

executive offices)

 

 

Registrant’s telephone number,
including area code:
(203) 422-7700

 

 

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CAR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CAR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CAR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CAR 240.13e-4(c))

 

 


 

Item 2.02. Results of Operations and Financial Condition.

 

On May 9, 2016, Starwood Property Trust, Inc. issued a press release announcing its financial results for the quarter ended March 31, 2016. A copy of the press release is attached as Exhibit 99.1 hereto and incorporated herein by reference.

 

Item 9.01.  Financial Statements and Exhibits.

 

(d)Exhibits

 

 

 

Exhibit

Number

 

Description

 

 

99.1

Press Release, dated May 9, 2016

 

2

 


 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: May 9, 2016

STARWOOD PROPERTY TRUST, INC. 

 

 

 

By:

/s/ ANDREW J. SOSSEN

 

Name:

Andrew J. Sossen

 

Title:

Chief Operating Officer

 

3

 


 

EXHIBIT INDEX

 

Exhibit
Number

Description

 

 

99.1

Press Release, dated May 9, 2016

 

4

 


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

stwd_Current folio_Press Release

Exhibit 99.1

C:\Users\105621\Desktop\Starwood_Logo.jpg

 

For Immediate Release

Starwood Property Trust Reports Results for the

Quarter Ended March 31, 2016

– Quarterly Core Earnings of $0.50 per Diluted Common Share –

– Deploys $930 Million of Capital During the Quarter –

– Approximately $1.0 Billion Closed or in the Process of Closing Since March 31, 2016 –

– Declares Dividend of $0.48 per Share for the Second Quarter of 2016 –

 

GREENWICH, Conn., May 9, 2016 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended March 31, 2016.  The Company’s first quarter 2016 Core Earnings (a non-GAAP financial measure) were $118.9 million, or $0.50 per diluted share.    GAAP net income for the first quarter of 2016, which was impacted by unrealized changes in fair value of securities and foreign currency hedges, as well as depreciation on the Company’s property portfolio, was $26.7 million, or $0.11 per diluted share.

 

“I am very pleased with our performance this quarter. Last quarter, we suggested that we would take a step back and exercise great caution, faced with a volatile credit market that was experiencing significant credit spread deterioration. We said that we would be cautious with our capital deployment. Patience was a costly but prudent strategy as we waited for the volatility to subside, enabling us to reevaluate the playing field,” stated Barry Sternlicht, Chairman and Chief Executive Officer of Starwood Property Trust.

 

“Despite the conscious slowdown of our lending activities and the consequent drag of having excess cash, our diversified businesses were able to deliver solid quarterly results. We have not realized a single credit loss in the $17.9 billion of loans that we have originated or acquired since our inception in 2009.  Our weighted average LTV of 61.2% is our lowest ever as a public company and speaks to the strong credit culture engrained in our organization. Just as exciting, we can now suggest that several of our equity investments are exceeding our projected returns and should increase our book value per share as they are harvested,” added Mr. Sternlicht.

 

Mr. Sternlicht continued, “Looking forward, with a world awash in liquidity, we are now seeing the contraction of credit spreads.  This, along with the structural changes taking place in the domestic and European lending markets, is leading to a robust pipeline of attractive opportunities in what appears to be a compelling investing environment for commercial real estate.  Our dedicated group of nearly 500 Starwood Property Trust professionals coupled with Starwood Capital Group’s over 1,500 employees across 10 global offices, is superbly and uniquely positioned to find, underwrite and execute on excellent investment opportunities across our various businesses in a focused effort to continue to generate exceptional risk adjusted total returns for our shareholders.”

 

1

 


 

Highlights for the First 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 first quarter of 2016, the Lending Segment contributed Core Earnings of $98.5 million, or $0.41 per diluted share.  GAAP earnings during the first quarter of 2016 were $93.5 million, or $0.39 per diluted share. 

 

The Lending Segment originated or acquired investments of $437.4 million during the quarter, with fundings of $526.1 million, including $185.6 million relating to previously originated loans. Repayments totaled $301.6 million, including $97.9 million from loan sales. Newly originated or acquired loans include the following:

 

·

$162.0 million first mortgage and mezzanine loan for the acquisition and renovation of a 10-building office and warehouse complex located in Brooklyn, New York.

 

·

$105.0 million first mortgage secured by two Class A multifamily properties located in Orlando, Florida.

 

·

$65.0 million first mortgage and mezzanine loan for the refinancing of a data center located in Orlando, Florida.

 

·

$54.2 million first mortgage and mezzanine loan for the acquisition and renovation of a 491-room hotel located in Cincinnati, Ohio.

 

Subsequent to quarter end, the Lending Segment closed $216.0 million of new loan originations with over $600 million in the process of closing.

 

At March 31, 2016, the Lending Segment’s principal assets were as follows: 

 

Lending Segment Investments

(Amounts in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment

    

Face
Amount

    

Carry
Value (1)

    

Asset Specific
Financing (2)

    

Net
Investment

    

Unlevered
Return on
Asset

    

Current
Leveraged
Return (3)

    

Optimal
Asset-Level
Return (4)

 

First mortgages held-for-investment (5)

 

$

5,064 

 

$

5,010 

 

$

2,469 

 

$

2,541 

 

6.9 

%  

9.6 

%  

11.0 

%  

Subordinated mortgages held-for-investment

 

 

415 

 

 

392 

 

 

 

 

386 

 

11.3 

%  

11.3 

%  

11.3 

%  

Mezzanine loans held-for-investment (5)

 

 

754 

 

 

768 

 

 

-

 

 

768 

 

10.9 

%  

10.9 

%  

10.9 

%  

CMBS held-to-maturity

 

 

309 

 

 

308 

 

 

176 

 

 

132 

 

6.1 

%  

10.6 

%  

11.4 

%  

Preferred equity investments held-to-maturity

 

 

19 

 

 

20 

 

 

-

 

 

20 

 

13.3 

%  

13.3 

%  

13.3 

%  

Target portfolio of Lending Segment

 

$

6,561 

 

$

6,498 

 

$

2,651 

 

$

3,847 

 

7.6 

%  

10.1 

%  

11.1 

%  

RMBS available-for-sale at fair value

 

 

327 

 

 

211 

 

 

72 

 

 

139 

 

10.5 

%  

 

 

 

 

Loans transferred as secured borrowings 

 

 

90 

 

 

88 

 

 

90 

 

 

(2)

 

 

 

 

 

 

 

Equity security

 

 

13 

 

 

14 

 

 

-

 

 

14 

 

 

 

 

 

 

 

Investment in unconsolidated entities

 

 

N/A

 

 

30 

 

 

-

 

 

30 

 

 

 

 

 

 

 

Total investments

 

$

6,991 

 

$

6,841 

 

$

2,813 

 

$

4,028 

 

 

 

 

 

 

 

 

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 March 31, 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average LTV of Loan Portfolio (5)(6)

 

 

    

First
Mortgages

    

Subordinated
Mortgages

    

Mezzanine

    

Preferred
Equity

    

Total (7)

 

Beginning LTV

 

0.0 

%  

25.8 

%  

48.3 

%  

65.2 

%  

7.7 

%  

Ending LTV

 

60.7 

%  

55.0 

%  

67.5 

%  

79.1 

%  

61.2 

%  

 

Real Estate Investing and Servicing Segment

 

During the first quarter of 2016, the Investing and Servicing Segment contributed Core Earnings of $52.4 million, or $0.22 per diluted share.  Due to an unrealized decrease in fair value of the Company’s CMBS portfolio of $51.5 million, GAAP net losses during the first quarter of 2016 were $2.2 million.

 

Significant activity during the quarter included:

 

·

Originated $200.6 million of conduit loans and participated in three securitizations totaling $257.0 million.

·

Purchased $46.6 million of CMBS.

·

Purchased two properties and one non-performing loan from CMBS trusts for a gross purchase price of $33.1 million.

 

As of March 31, 2016, the Company was active special servicer on $10.6 billion of loans and real estate owned and was named special servicer on $105.9 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
Specific
Financing

    

Net
Investment

CMBS (8)

 

$

1,013 

 

$

215 

 

$

798 

Special servicing intangibles

 

 

125 

 

 

-

 

 

125 

Conduit loans

 

 

154 

 

 

83 

 

 

71 

Properties and lease intangibles, net

 

 

190 

 

 

100 

 

 

90 

Investment in unconsolidated entities

 

 

52 

 

 

-

 

 

52 

Loans held-for-investment

 

 

18 

 

 

-

 

 

18 

    Total investments

 

$

1,552 

 

$

398 

 

$

1,154 

 

Real Estate Property Segment

 

During the first quarter of 2016, the Property Segment contributed Core Earnings of $9.8 million, or $0.04 per diluted share.  Due to $15.7 million of depreciation and amortization of properties and lease intangibles and $10.0 million of unrealized changes in fair value of foreign currency hedges, GAAP net losses during the first quarter of 2016 were $12.8 million.

 

During the first quarter of 2016, the Property Segment acquired 12 of the 32 previously announced affordable housing communities referred to as the “Woodstar Portfolio” for $202.8 million and net equity of $79.9 million.  These 12 properties comprise 3,082 units and were funded with cash and assumed government-sponsored financing of $142.3 million.  The Company acquired the remaining two properties in April 2016 for a total purchase price of $39.4 million. The Woodstar Portfolio totals 8,948 units concentrated primarily in the Tampa, Orlando and West Palm Beach, Florida metropolitan areas and is 98% occupied.   

3

 


 

 

At March 31, 2016, the Property Segment’s principal assets were as follows: 

 

Property Segment Investments

(Amounts in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment

 

Net Carrying Value

 

Asset Specific Financing

 

Net Investment

 

Q1 2016 Net Operating Income

 

Occupancy Rate

 

Weighted Average Lease Term

 

Wholly-Owned:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dublin, Ireland - Office (9)

 

$

482

 

$

318

 

$

164

 

$

6.7

 

98.5 

%

10.4 years

 

Dublin, Ireland - Multi-family residential (9)

 

 

18

 

 

12

 

 

6

 

 

0.2

 

97.0 

%

0.5 years

 

Southeast, U.S. - Multi-family residential (9)

 

 

541

 

 

383

 

 

158

 

 

8.1

(10)

97.8 

%

0.5 years

 

 

 

$

1,041

 

$

713

 

$

328

 

$

15.0

 

 

 

 

 

Joint Venture:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in unconsolidated entity - retail

 

 

121

 

 

-

 

 

121

 

 

 

 

 

 

 

 

 

 

$

1,162

 

$

713

 

$

449

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Activities

 

As of March 31, 2016, the Company had an aggregate outstanding debt balance of $5.9 billion and maximum borrowing capacity of $8.6 billion, with a debt-to-equity ratio of 1.4x. 

 

During the first quarter of 2016, the Company:

 

·

Amended an existing revolving repurchase facility to upsize available borrowings to $600.0 million from $500.0 million.

·

Assumed 16 government-sponsored financing facilities totaling $142.3 million associated with affordable housing communities acquired in the Woodstar Portfolio. 

·

Repurchased 1.1 million shares of common stock at an average price of $18.71 for $19.7 million, bringing the remaining capacity under the repurchase program to $282.1 million as of March 31, 2016.

 

Book Value and Undepreciated Book Value Per Share

 

The Company’s book value per diluted share metrics were as follows:

 

    


March 31, 2016

    

December 31, 2015

    

Undepreciated book value per diluted share (11)

 

$

17.13 

 

$

17.37 

 

Book value per diluted share

 

$

16.98 

 

$

17.29 

 

 

The change in undepreciated book value per diluted share during the quarter was primarily due to an unrealized decrease in fair value of the Company’s CMBS portfolio and unrealized changes in fair value of foreign currency hedges.

 

Investment Capacity

 

As of May 3, 2016, the Company has the capacity to acquire or originate up to $2.5 billion of new investments through (i) $734.9 million of expected maturities, prepayments, sales and participations over the next 90 days; (ii) $1.4 billion of unallocated warehouse capacity; (iii) $159.3 million of approved but undrawn capacity under existing financing facilities; (iv) $402.1 million of available cash and equivalents; and (v) approximately $94.4 million of net equity invested in RMBS that are classified as available-for-sale.

4

 


 

Dividend

 

On May 9, 2016, the Company’s Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending June 30, 2016. The dividend is payable on July 15, 2016 to common stockholders of record as of June 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 Monday, May 9, 2016 at 9:00 a.m. Eastern Time to discuss first 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:  1-877-741-4241

International:  1-719-325-4765

 

Conference Call Playback:

Domestic:  1-877-870-5176

International:  1-858-384-5517

Passcode:  1574449

 

The playback can be accessed through May 23, 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 approximately $27 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 March 31, 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 March 31, 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 $1.0 billion being classified as first mortgages as of March 31, 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 $4.6 billion. Differences between face amount and carry value are principally attributable to purchase discounts and changes in fair value.

(9)

Net carrying value includes all components of the related asset, including properties and intangibles.

(10)

Excludes income of $1.6 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 March 31, 2016

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Investing

    

 

    

 

    

 

    

Investing

    

 

 

 

Lending

 

and Servicing

 

Property

 

 

 

 

 

and Servicing

 

 

 

 

Segment

 

Segment

 

Segment

 

Corporate

 

Subtotal

 

VIEs

 

Total

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from loans

  

$

114,658

  

$

2,874

  

$

 —

  

$

 —

  

$

117,532

  

$

 —

  

$

117,532

Interest income from investment securities

 

 

9,628

  

 

47,626

 

 

 —

 

 

 —

 

 

57,254

 

 

(37,851)

 

 

19,403

Servicing fees

 

 

159

  

 

36,218

 

 

 —

 

 

 —

 

 

36,377

 

 

(11,686)

 

 

24,691

Rental income

 

 

 —

 

 

6,475

 

 

26,202

 

 

 —

 

 

32,677

 

 

 —

 

 

32,677

Other revenues

 

 

23

 

 

1,342

 

 

6

 

 

 —

 

 

1,371

 

 

(181)

 

 

1,190

Total revenues 

 

 

124,468

 

 

94,535

 

 

26,208

 

 

 —

 

 

245,211

 

 

(49,718)

 

 

195,493

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

375

 

 

18

 

 

 —

 

 

24,528

 

 

24,921

 

 

42

 

 

24,963

Interest expense

 

 

22,335

 

 

3,238

 

 

4,949

 

 

25,998

 

 

56,520

 

 

 —

 

 

56,520

General and administrative

 

 

3,922

 

 

25,294

 

 

555

 

 

2,850

 

 

32,621

 

 

177

 

 

32,798

Acquisition and investment pursuit costs

 

 

338

 

 

355

 

 

592

 

 

 —

 

 

1,285

 

 

 —

 

 

1,285

Costs of rental operations

 

 

 —

 

 

3,062

 

 

9,593

 

 

 —

 

 

12,655

 

 

 —

 

 

12,655

Depreciation and amortization

 

 

 —

 

 

3,051

 

 

15,709

 

 

 —

 

 

18,760

 

 

 —

 

 

18,760

Loan loss allowance, net

 

 

(761)

 

 

 —

 

 

 —

 

 

 —

 

 

(761)

 

 

 —

 

 

(761)

Other expense

 

 

 —

 

 

100

 

 

 —

 

 

 —

 

 

100

 

 

 —

 

 

100

Total costs and expenses 

 

 

26,209

 

 

35,118

 

 

31,398

 

 

53,376

 

 

146,101

 

 

219

 

 

146,320

Income (loss) before other income (loss), income taxes and non-controlling interests

 

 

98,259

 

 

59,417

 

 

(5,190)

 

 

(53,376)

 

 

99,110

 

 

(49,937)

 

 

49,173

Other income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in net assets related to consolidated VIEs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(4,167)

 

 

(4,167)

Change in fair value of servicing rights

 

 

 —

 

 

(8,670)

 

 

 —

 

 

 —

 

 

(8,670)

 

 

1,931

 

 

(6,739)

Change in fair value of investment securities, net

 

 

(214)

 

 

(51,528)

 

 

 —

 

 

 —

 

 

(51,742)

 

 

52,495

 

 

753

Change in fair value of mortgage loans held-for-sale, net

 

 

 —

 

 

6,891

 

 

 —

 

 

 —

 

 

6,891

 

 

 —

 

 

6,891

Earnings from unconsolidated entities

 

 

468

 

 

1,377

 

 

2,429

 

 

 —

 

 

4,274

 

 

(209)

 

 

4,065

Gain on sale of investments and other assets, net

 

 

245

 

 

 —

 

 

 —

 

 

 —

 

 

245

 

 

 —

 

 

245

Loss on derivative financial instruments, net

 

 

(3,026)

 

 

(11,245)

 

 

(10,447)

 

 

 —

 

 

(24,718)

 

 

 —

 

 

(24,718)

Foreign currency (loss) gain, net

 

 

(1,822)

 

 

1,460

 

 

(16)

 

 

 —

 

 

(378)

 

 

 —

 

 

(378)

Other income, net

 

 

 —

 

 

43

 

 

422

 

 

1,550

 

 

2,015

 

 

 —

 

 

2,015

Total other income (loss) 

 

 

(4,349)

 

 

(61,672)

 

 

(7,612)

 

 

1,550

 

 

(72,083)

 

 

50,050

 

 

(22,033)

Income (loss) before income taxes 

 

 

93,910

 

 

(2,255)

 

 

(12,802)

 

 

(51,826)

 

 

27,027

 

 

113

 

 

27,140

Income tax provision

 

 

(75)

 

 

(19)

 

 

 —

 

 

 —

 

 

(94)

 

 

 —

 

 

(94)

Net income (loss) 

 

 

93,835

 

 

(2,274)

 

 

(12,802)

 

 

(51,826)

 

 

26,933

 

 

113

 

 

27,046

Net (income) loss attributable to non-controlling interests

 

 

(350)

 

 

74

 

 

 —

 

 

 —

 

 

(276)

 

 

(113)

 

 

(389)

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

 

$

93,485

 

$

(2,200)

 

$

(12,802)

 

$

(51,826)

 

$

26,657

 

$

 —

 

$

26,657

 

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 March 31, 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.

 

$

93,485

 

$

(2,200)

 

$

(12,802)

 

$  

(51,826)

 

$

26,657

Add / (Deduct):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash equity compensation expense

 

 

582

 

 

1,086

 

 

33

 

 

5,383

 

 

7,084

Management incentive fee

 

 

 —

 

 

 —

 

 

 —

 

 

4,599

 

 

4,599

Acquisition and investment pursuit costs

 

 

 —

 

 

589

 

 

558

 

 

 —

 

 

1,147

Depreciation and amortization

 

 

 —

 

 

2,206

 

 

15,720

 

 

 —

 

 

17,926

Loan loss allowance, net

 

 

(761)

 

 

 —

 

 

 —

 

 

 —

 

 

(761)

Interest income adjustment for securities

 

 

(261)

 

 

889

 

 

 —

 

 

 —

 

 

628

Other non-cash items

 

 

 —

 

 

 —

 

 

(1,608)

 

 

 —

 

 

(1,608)

Reversal of unrealized (gains) / losses on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held-for-sale

 

 

 —

 

 

(6,891)

 

 

 —

 

 

 —

 

 

(6,891)

Securities

 

 

214

 

 

51,528

 

 

 —

 

 

 —

 

 

51,742

Derivatives

 

 

2,347

 

 

10,763

 

 

10,447

 

 

 —

 

 

23,557

Foreign currency

 

 

1,822

 

 

(1,460)

 

 

16

 

 

 —

 

 

378

Earnings from unconsolidated entities

 

 

(468)

 

 

(1,377)

 

 

(2,429)

 

 

 —

 

 

(4,274)

Recognition of realized gains / (losses) on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held-for-sale

 

 

 —

 

 

4,792

 

 

 —

 

 

 —

 

 

4,792

Securities

 

 

 —

 

 

(3,323)

 

 

 —

 

 

 —

 

 

(3,323)

Derivatives

 

 

554

 

 

(6,712)

 

 

(70)

 

 

 —

 

 

(6,228)

Foreign currency

 

 

(67)

 

 

1,354

 

 

(15)

 

 

 —

 

 

1,272

Earnings from unconsolidated entities

 

 

1,072

 

 

1,125

 

 

 —

 

 

 —

 

 

2,197

Core Earnings (Loss)

 

$

98,519

 

$

52,369

 

$

9,850

 

$

(41,844)

 

$

118,894

Core Earnings (Loss) per Weighted Average Diluted Share

 

$

0.41

 

$

0.22

 

$

0.04

 

$

(0.17)

 

$

0.50

 

9

 


 

 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheet by Segment

As of March 31, 2016

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Investing

    

 

    

 

    

 

    

Investing

    

 

 

 

Lending

 

and Servicing

 

Property

 

 

 

 

 

and Servicing

 

 

 

 

Segment

 

Segment

 

Segment

 

Corporate

 

Subtotal

 

VIEs

 

Total

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

103,942

 

$

70,684

 

$

15,486

 

$

144,062

 

$

334,174

 

$

1,045

 

$

335,219

Restricted cash

 

 

31,474

 

 

11,710

 

 

5,191

 

 

 —

 

 

48,375

 

 

 —

 

 

48,375

Loans held-for-investment, net

 

 

6,169,937

 

 

17,717

 

 

 —

 

 

 —

 

 

6,187,654

 

 

 —

 

 

6,187,654

Loans held-for-sale

 

 

 —

 

 

154,225

 

 

 —

 

 

 —

 

 

154,225

 

 

 —

 

 

154,225

Loans transferred as secured borrowings

 

 

88,512

 

 

 —

 

 

 —

 

 

 —

 

 

88,512

 

 

 —

 

 

88,512

Investment securities

 

 

552,640

 

 

1,012,618

 

 

 —

 

 

 —

 

 

1,565,258

 

 

(915,894)

 

 

649,364

Properties, net

 

 

 —

 

 

172,289

 

 

982,686

 

 

 —

 

 

1,154,975

 

 

 —

 

 

1,154,975

Intangible assets

 

 

 —

 

 

147,495

 

 

60,346

 

 

 —

 

 

207,841

 

 

(27,365)

 

 

180,476

Investment in unconsolidated entities

 

 

30,311

 

 

52,463

 

 

121,297

 

 

 —

 

 

204,071

 

 

(7,434)

 

 

196,637

Goodwill

 

 

 —

 

 

140,437

 

 

 —

 

 

 —

 

 

140,437

 

 

 —

 

 

140,437

Derivative assets

 

 

33,237

 

 

2,911

 

 

790

 

 

 —

 

 

36,938

 

 

 —

 

 

36,938

Accrued interest receivable

 

 

35,451

 

 

469

 

 

 —

 

 

 —

 

 

35,920

 

 

52

 

 

35,972

Other assets

 

 

14,640

 

 

70,562

 

 

27,132

 

 

1,737

 

 

114,071

 

 

(2,211)

 

 

111,860

VIE assets, at fair value

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

85,115,662

 

 

85,115,662

Total Assets

 

$

7,060,144

 

$

1,853,580

 

$

1,212,928

 

$

145,799

 

$

10,272,451

 

$

84,163,855

 

$

94,436,306

Liabilities and Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

28,501

 

$

51,774

 

$

42,329

 

$

15,962

 

$

138,566

 

$

720

 

$

139,286

Related-party payable

 

 

 —

 

 

689

 

 

 —

 

 

23,468

 

 

24,157

 

 

 —

 

 

24,157

Dividends payable

 

 

 —

 

 

 —

 

 

 —

 

 

114,839

 

 

114,839

 

 

 —

 

 

114,839

Derivative liabilities

 

 

12,551

 

 

2,106

 

 

1,545

 

 

 —

 

 

16,202

 

 

 —

 

 

16,202

Secured financing agreements, net

 

 

2,723,567

 

 

397,884

 

 

712,782

 

 

646,727

 

 

4,480,960

 

 

 —

 

 

4,480,960

Convertible senior notes, net

 

 

 —

 

 

 —

 

 

 —

 

 

1,329,072

 

 

1,329,072

 

 

 —

 

 

1,329,072

Secured borrowings on transferred loans

 

 

89,905

 

 

 —

 

 

 —

 

 

 —

 

 

89,905

 

 

 —

 

 

89,905

VIE liabilities, at fair value

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

84,151,022

 

 

84,151,022

Total Liabilities

 

 

2,854,524

 

 

452,453

 

 

756,656

 

 

2,130,068

 

 

6,193,701

 

 

84,151,742

 

 

90,345,443

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Starwood Property Trust, Inc. Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

 —

 

 

 —

 

 

 —

 

 

2,422

 

 

2,422

 

 

 —

 

 

2,422

Additional paid-in capital

 

 

2,276,386

 

 

1,173,852

 

 

456,658

 

 

304,008

 

 

4,210,904

 

 

 —

 

 

4,210,904

Treasury stock

 

 

 —

 

 

 —

 

 

 —

 

 

(92,104)

 

 

(92,104)

 

 

 —

 

 

(92,104)

Accumulated other comprehensive income (loss)

 

 

33,569

 

 

(4,395)

 

 

4,283

 

 

 —

 

 

33,457

 

 

 —

 

 

33,457

Retained earnings (accumulated deficit)

 

 

1,884,190

 

 

218,873

 

 

(4,669)

 

 

(2,198,595)

 

 

(100,201)

 

 

 —

 

 

(100,201)

Total Starwood Property Trust, Inc. Stockholders’ Equity

 

 

4,194,145

 

 

1,388,330

 

 

456,272

 

 

(1,984,269)

 

 

4,054,478

 

 

 —

 

 

4,054,478

Non-controlling interests in consolidated subsidiaries

 

 

11,475

 

 

12,797

 

 

 —

 

 

 —

 

 

24,272

 

 

12,113

 

 

36,385

Total Equity

 

 

4,205,620

 

 

1,401,127

 

 

456,272

 

 

(1,984,269)

 

 

4,078,750

 

 

12,113

 

 

4,090,863

Total Liabilities and Equity

 

$

7,060,144

 

$

1,853,580

 

$

1,212,928

 

$

145,799

 

$

10,272,451

 

$

84,163,855

 

$

94,436,306

 

 

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

 

10

 


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