Starwood Property Trust Reports Results for the Quarter and Year Ended December 31, 2019

- Originated or Acquired a Record $4.2 Billion of Assets ($10.8 Billion in 2019), Including a Record $2.2 Billion in Commercial Lending ($5.5 Billion in 2019) -

- Completed Sale of Owned Ireland Property Portfolio -

- Enhanced Capital Structure with $1.8 Billion of New and Expanded Credit Facilities -

- Completed Refinancings of two Property Portfolios -

- Declares Dividend of $0.48 per share for the First Quarter of 2020 -

News provided by

Starwood Property Trust, Inc.

Feb 25, 2020, 07:00 ET

GREENWICH, Conn., Feb. 25, 2020 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter and year ended December 31, 2019. The Company's fourth quarter 2019 GAAP net income was $171.9 million, or $0.60 per diluted share, and Core Earnings (a non-GAAP financial measure) was $139.5 million, or $0.47 per diluted share. These amounts include a gain on sale of the Company's Ireland property portfolio of $119.7 million and $60.1 million for GAAP and Core Earnings, respectively, or $0.41 and $0.20 per diluted share, respectively, and a GAAP and Core loss of $71.9 million and $70.6 million, respectively, resulting from the impairment of the Company's interest in a regional mall portfolio, or $0.25 and $0.24 per diluted share, respectively.

The Company's full year 2019 GAAP net income was $509.7 million, or $1.79 per diluted share, and Core Earnings was $528.9 million, or $1.80 per diluted share. These amounts include the fourth quarter gain on sale of the Company's Ireland property portfolio discussed above and a full year GAAP and Core write down of $116.8 million and $139.5 million, respectively, relating to the Company's interest in the regional mall portfolio, or $0.40 and $0.48 per diluted share, respectively.

"Our fourth quarter results were highlighted by contributions throughout our multi-cylinder platform, which brought our investment portfolio to a record size of over $17 billion. In our primary business line, commercial lending, we originated $2.2 billion this quarter, bringing our on balance sheet portfolio to a record $9.1 billion. We also added over $600 million of new loans to our infrastructure portfolio. Our residential lending platform continues to perform well, with over $1.4 billion of assets and the completion of our fifth securitization. We continue to execute strategic joint ventures in our CMBS portfolio, the largest of which closed in the fourth quarter. This has allowed us to expand our named special servicing footprint.

We successfully completed the sale of our Ireland portfolio this quarter, realizing a Core gain of $83 million before a tax withholding adjustment. We believe we still have over $800 million in unrealized gains remaining in our book, over $700 million of which relates to the four portfolios remaining in our property segment. Following the successful refinancings of our medical office and first multifamily portfolios, we expect the yields on our stabilized property portfolio to be approximately 15%," commented Jeffrey DiModica, President of Starwood Property Trust.

"Our balance sheet activity continues to create a very strong liquidity position headed into 2020," added Barry Sternlicht, Chairman and CEO of Starwood Property Trust. "We have a strong pipeline of investment opportunities across our business cylinders and will remain highly selective as to where we deploy capital. We intend to stay disciplined with the right side of our balance sheet but are in a prime position to take advantage of any future dislocations across our target asset classes."

Dividend

On February 25, 2020, the Company's Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending March 31, 2020. The dividend is payable on April 15, 2020 to common stockholders of record as of March 31, 2020.

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 Tuesday, February 25, 2020, 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 five 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: 13698502
The playback can be accessed through March 3, 2020.

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 $61 billion of capital since inception and manages a portfolio of over $17 billion across debt and equity investments. Starwood Property Trust's investment objective is to generate attractive and stable returns for shareholders, primarily through dividends, by leveraging a premiere global organization to identify and execute on the best risk adjusted returning investments across its target assets. Additional information can be found at www.starwoodpropertytrust.com.

Forward-Looking Statements

Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words "believe," "expect," "anticipate" and other similar expressions. Although Starwood Property Trust, Inc. believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, completion of pending investments and financings, 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, 2019, 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 December 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	$	147,360	$	24,611	$	—	$	5,130	$	—	$	177,101	$	—	$	177,101
Interest income from investment securities		18,817		3,755		—		29,651		—		52,223		(32,447)		19,776
Servicing fees		113		—		—		8,596		—		8,709		(2,187)		6,522
Rental income		—		—		71,996		10,186		—		82,182		—		82,182
Other revenues		324		19		118		388		—		849		(2)		847
Total revenues		166,614		28,385		72,114		53,951		—		321,064		(34,636)		286,428
Costs and expenses:
Management fees		368		—		—		18		42,480		42,866		39		42,905
Interest expense		50,106		13,579		19,696		8,469		29,086		120,936		(161)		120,775
General and administrative		8,855		4,636		838		25,172		3,252		42,753		85		42,838
Acquisition and investment pursuit costs		436		24		217		(200)		—		477		—		477
Costs of rental operations		1,166		—		24,524		5,418		—		31,108		—		31,108
Depreciation and amortization		396		68		22,483		4,300		—		27,247		—		27,247
Loan loss provision, net		570		3,314		—		—		—		3,884		—		3,884
Other expense		77		—		340		171		—		588		—		588
Total costs and expenses		61,974		21,621		68,098		43,348		74,818		269,859		(37)		269,822
Other income (loss):
Change in net assets related to consolidated VIEs		—		—		—		—		—		—		71,548		71,548
Change in fair value of servicing rights		—		—		—		149		—		149		(1,481)		(1,332)
Change in fair value of investment securities, net		1,861		—		—		32,775		—		34,636		(34,798)		(162)
Change in fair value of mortgage loans held-for-sale, net		(6,375)		—		—		12,298		—		5,923		—		5,923
Earnings (loss) from unconsolidated entities		2,073		—		(71,824)		565		—		(69,186)		(532)		(69,718)
Gain on sale of investments and other assets, net		1,143		—		119,746		38,982		—		159,871		—		159,871
(Loss) gain on derivative financial instruments, net		(32,349)		(12)		2,673		9,347		(5,663)		(26,004)		—		(26,004)
Foreign currency gain (loss), net		34,367		307		44		(2)		—		34,716		—		34,716
Loss on extinguishment of debt		—		(3,136)		(4,745)		(651)		—		(8,532)		—		(8,532)
Other (loss) income, net		—		—		(100)		16		—		(84)		—		(84)
Total other income (loss)		720		(2,841)		45,794		93,479		(5,663)		131,489		34,737		166,226
Income (loss) before income taxes		105,360		3,923		49,810		104,082		(80,481)		182,694		138		182,832
Income tax provision		(40)		(657)		(135)		(4,020)		—		(4,852)		—		(4,852)
Net income (loss)		105,320		3,266		49,675		100,062		(80,481)		177,842		138		177,980
Net income attributable to non-controlling interests		—		—		(5,308)		(665)		—		(5,973)		(138)		(6,111)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	105,320	$	3,266	$	44,367	$	99,397	$	(80,481)	$	171,869	$	—	$	171,869

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 December 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.	$	105,320		3,266		44,367		99,397		(80,481)		171,869
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units		—		—		5,308		—		—		5,308
Non-cash equity compensation expense		1,161		992		83		1,765		5,788		9,789
Management incentive fee		—		—		—		—		18,117		18,117
Acquisition and investment pursuit costs		(826)		—		(89)		(329)		—		(1,244)
Depreciation and amortization		396		68		22,797		3,975		—		27,236
Loan loss provision, net		570		3,314		—		—		—		3,884
Interest income adjustment for securities		(32)		—		—		1,235		—		1,203
Extinguishment of debt, net		—		—		—		—		(246)		(246)
Other non-cash items		—		—		(1,233)		(1,766)		153		(2,846)
Reversal of GAAP unrealized (gains) / losses on:
Loans held-for-sale		6,375		—		—		(12,298)		—		(5,923)
Securities		(1,861)		—		—		(32,775)		—		(34,636)
Derivatives		32,443		16		(2,189)		(9,305)		6,519		27,484
Foreign currency		(34,367)		(307)		(44)		2		—		(34,716)
(Earnings) loss from unconsolidated entities		(2,073)		—		71,824		(565)		—		69,186
Recognition of Core realized gains / (losses) on:
Loans held-for-sale		1,848		1		—		14,189		—		16,038
Securities		—		—		—		2,906		—		2,906
Derivatives		(7,300)		210		14,981		6,961		—		14,852
Foreign currency		5,347		(83)		44		(2)		—		5,306
Earnings (loss) from unconsolidated entities		1,773		—		(70,557)		1,618		—		(67,166)
Sales of properties		—		—		(74,878)		(12,062)		—		(86,940)
Core Earnings (Loss)	$	108,774	$	7,477	$	10,414	$	62,946	$	(50,150)	$	139,461
Core Earnings (Loss) per Weighted Average Diluted Share	$	0.37	$	0.02	$	0.04	$	0.21	$	(0.17)	$	0.47

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Statement of Operations by Segment For the year ended December 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	$	610,316	$	99,580	$	—	$	14,117	$	—	$	724,013	$	—	$	724,013
Interest income from investment securities		81,255		6,318		—		117,663		—		205,236		(128,607)		76,629
Servicing fees		423		—		—		69,962		—		70,385		(16,089)		54,296
Rental income		—		—		287,094		50,872		—		337,966		—		337,966
Other revenues		1,038		751		409		1,317		26		3,541		(26)		3,515
Total revenues		693,032		106,649		287,503		253,931		26		1,341,141		(144,722)		1,196,419
Costs and expenses:
Management fees		1,495		—		—		72		117,404		118,971		161		119,132
Interest expense		222,118		62,836		76,838		33,621		113,964		509,377		(648)		508,729
General and administrative		29,481		18,260		6,232		87,115		13,681		154,769		343		155,112
Acquisition and investment pursuit costs		1,351		75		217		(587)		—		1,056		—		1,056
Costs of rental operations		2,691		—		95,370		24,921		—		122,982		—		122,982
Depreciation and amortization		1,091		83		92,561		19,587		—		113,322		—		113,322
Loan loss provision, net		2,616		4,510		—		—		—		7,126		—		7,126
Other expense		307		—		1,693		365		—		2,365		—		2,365
Total costs and expenses		261,150		85,764		272,911		165,094		245,049		1,029,968		(144)		1,029,824
Other income (loss):
Change in net assets related to consolidated VIEs		—		—		—		—		—		—		236,309		236,309
Change in fair value of servicing rights		—		—		—		(1,468)		—		(1,468)		(2,172)		(3,640)
Change in fair value of investment securities, net		(1,084)		—		—		89,206		—		88,122		(87,289)		833
Change in fair value of mortgage loans held-for-sale, net		10,462		—		—		61,139		—		71,601		—		71,601
Earnings (loss) from unconsolidated entities		10,649		—		(114,362)		4,166		—		(99,547)		(1,807)		(101,354)
Gain on sale of investments and other assets, net		4,619		3,041		119,746		60,622		—		188,028		—		188,028
(Loss) gain on derivative financial instruments, net		(20,325)		(3,349)		(1,284)		(7,414)		26,062		(6,310)		—		(6,310)
Foreign currency gain (loss), net		17,342		205		37		(2)		—		17,582		—		17,582
Loss on extinguishment of debt		(857)		(11,357)		(4,745)		(845)		(1,466)		(19,270)		—		(19,270)
Other (loss) income, net		—		(50)		(100)		16		(73)		(207)		—		(207)
Total other income (loss)		20,806		(11,510)		(708)		205,420		24,523		238,531		145,041		383,572
Income (loss) before income taxes		452,688		9,375		13,884		294,257		(220,500)		549,704		463		550,167
Income tax (provision) benefit		(4,818)		89		(393)		(8,110)		—		(13,232)		—		(13,232)
Net income (loss)		447,870		9,464		13,491		286,147		(220,500)		536,472		463		536,935
Net income attributable to non-controlling interests		(392)		—		(21,630)		(4,786)		—		(26,808)		(463)		(27,271)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	447,478	$	9,464	$	(8,139)	$	281,361	$	(220,500)	$	509,664	$	—	$	509,664

Reconciliation of Net Income to Core Earnings For the year ended December 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.	$	447,478		9,464		(8,139)		281,361		(220,500)		509,664
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units		—		—		21,630		—		—		21,630
Non-cash equity compensation expense		3,918		2,683		312		6,582		22,697		36,192
Management incentive fee		—		—		—		—		20,165		20,165
Acquisition and investment pursuit costs		(882)		2		(355)		(780)		(356)		(2,371)
Depreciation and amortization		1,091		83		93,864		18,156		—		113,194
Loan loss provision, net		2,616		4,510		—		—		—		7,126
Interest income adjustment for securities		(617)		—		—		15,933		—		15,316
Extinguishment of debt, net		—		—		—		—		(1,950)		(1,950)
Other non-cash items		—		—		(1,798)		(1,067)		623		(2,242)
Reversal of GAAP unrealized (gains) / losses on:
Loans held-for-sale		(10,462)		—		—		(61,139)		—		(71,601)
Securities		1,084		—		—		(89,206)		—		(88,122)
Derivatives		20,680		3,353		6,268		7,536		(26,396)		11,441
Foreign currency		(17,342)		(205)		(37)		2		—		(17,582)
(Earnings) loss from unconsolidated entities		(10,649)		—		114,362		(4,166)		—		99,547
Recognition of Core realized gains / (losses) on:
Loans held-for-sale		9,028		(984)		—		63,908		—		71,952
Securities		970		—		—		14,608		—		15,578
Derivatives		(5,500)		(1,186)		17,238		(10,153)		—		399
Foreign currency		622		(1,081)		37		7		—		(415)
Earnings (loss) from unconsolidated entities		8,851		—		(139,462)		15,812		—		(114,799)
Sales of properties		—		—		(74,878)		(19,359)		—		(94,237)
Core Earnings (Loss)	$	450,886	$	16,639	$	29,042	$	238,035	$	(205,717)	$	528,885
Core Earnings (Loss) per Weighted Average Diluted Share	$	1.54	$	0.05	$	0.10	$	0.81	$	(0.70)	$	1.80

Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Balance Sheet by Segment As of December 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	$	26,278	$	2,209	$	30,123	$	61,693	$	356,864	$	477,167	$	1,221	$	478,388
Restricted cash		36,135		41,967		7,171		10,370		—		95,643		—		95,643
Loans held-for-investment, net		9,187,332		1,397,448		—		1,294		—		10,586,074		—		10,586,074
Loans held-for-sale		605,384		119,528		—		159,238		—		884,150		—		884,150
Investment securities		992,974		45,153		—		1,177,148		—		2,215,275		(1,405,037)		810,238
Properties, net		26,834		—		2,029,024		210,582		—		2,266,440		—		2,266,440
Intangible assets		—		—		47,303		64,644		—		111,947		(26,247)		85,700
Investment in unconsolidated entities		46,921		25,862		—		32,183		—		104,966		(20,637)		84,329
Goodwill		—		119,409		—		140,437		—		259,846		—		259,846
Derivative assets		14,718		7		3		7		14,208		28,943		—		28,943
Accrued interest receivable		45,996		3,134		133		2,388		13,242		64,893		(806)		64,087
Other assets		59,170		6,101		82,910		54,238		8,911		211,330		(7)		211,323
VIE assets, at fair value		—		—		—		—		—		—		62,187,175		62,187,175
Total Assets	$	11,041,742	$	1,760,818	$	2,196,667	$	1,914,222	$	393,225	$	17,306,674	$	60,735,662	$	78,042,336
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	30,594	$	6,443	$	48,370	$	73,021	$	53,494	$	211,922	$	84	$	212,006
Related-party payable		—		—		—		5		40,920		40,925		—		40,925
Dividends payable		—		—		—		—		137,427		137,427		—		137,427
Derivative liabilities		7,698		750		—		292		—		8,740		—		8,740
Secured financing agreements, net		5,038,876		1,217,066		1,698,334		574,507		391,215		8,919,998		(13,950)		8,906,048
Collateralized loan obligations, net		928,060		—		—		—		—		928,060		—		928,060
Unsecured senior notes, net		—		—		—		—		1,928,622		1,928,622		—		1,928,622
VIE liabilities, at fair value		—		—		—		—		—		—		60,743,494		60,743,494
Total Liabilities		6,005,228		1,224,259		1,746,704		647,825		2,551,678		12,175,694		60,729,628		72,905,322
Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock		—		—		—		—		2,874		2,874		—		2,874
Additional paid-in capital		1,522,360		529,668		208,650		(123,210)		2,995,064		5,132,532		—		5,132,532
Treasury stock		—		—		—		—		(104,194)		(104,194)		—		(104,194)
Accumulated other comprehensive income (loss)		50,996		—		—		(64)		—		50,932		—		50,932
Retained earnings (accumulated deficit)		3,463,158		6,891		5,431		1,194,998		(5,052,197)		(381,719)		—		(381,719)
Total Starwood Property Trust, Inc. Stockholders' Equity		5,036,514		536,559		214,081		1,071,724		(2,158,453)		4,700,425		—		4,700,425
Non-controlling interests in consolidated subsidiaries		—		—		235,882		194,673		—		430,555		6,034		436,589
Total Equity		5,036,514		536,559		449,963		1,266,397		(2,158,453)		5,130,980		6,034		5,137,014
Total Liabilities and Equity	$	11,041,742	$	1,760,818	$	2,196,667	$	1,914,222	$	393,225	$	17,306,674	$	60,735,662	$	78,042,336