STARWOOD PROPERTY TRUST, INC. GREENWICH, Conn., Nov. 5, 2014 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended September 30, 2014. The Company's Core Earnings, a Non-GAAP financial measure, were $124.8 million, or $0.55 per diluted share, for the third quarter of 2014, an increase of 8% over the $115.2 million, or $0.51 per diluted share, reported for the second quarter of 2014.
GAAP net income attributable to the Company for the third quarter of 2014 was $165.0 million, or $0.73 per diluted share, an increase of 40% over the $117.9 million, or $0.52 per diluted share, reported for the second quarter of 2014.
"We continue to grow our investment portfolio, as we successfully deployed $2.3 billion of capital in the quarter, despite increased competition and market volatility. Our team's ability to source and structure large and complex real estate lending transactions continues to provide a robust pipeline of financing opportunities with very attractive risk adjusted returns in a yield starved world. As we move on in the real estate cycle, we remain focused on maintaining both our rigorous underwriting standards and the credit quality of our investments, and we are encouraged that the LTV of our $5.5 billion loan portfolio remains below 65%. I am pleased with the diversity of our investment portfolios, the success we have had deploying significant capital into new business lines, such as CMBS and B-pieces, and the profitability of our conduit operations," stated Barry Sternlicht, Chairman and Chief Executive Officer of Starwood Property Trust.
Mr. Sternlicht continued, "Our job since our inception was to find the most attractive risk adjusted opportunities for our shareholders that can offer both safety and predictable cash flows to support our distributions. Accordingly, we believe it is prudent to take advantage of market conditions by complementing our core lending and servicing segments with targeted core plus real estate investments. Subsequent to the quarter end, we participated in the acquisition of a high quality and attractively priced regional mall portfolio. We intend to take full advantage of Starwood Capital Group's global coverage, expertise and scale in all the major asset classes as we seek to further diversify our business. Our focus remains the same - to build the premiere diversified real estate investment and finance company which generates sustainable, attractive risk adjusted total returns for our shareholders."
Highlights for the Third Quarter 2014 by Business Segment
The Company operates in two reportable segments: Real Estate Investment Lending and LNR. The Single-Family Residential segment, now called Starwood Waypoint Residential Trust, was spun off to the Company's shareholders on January 31, 2014, and as such, the results of this segment prior to spinoff are included in the year-to-date numbers presented herein.
Real Estate Investment Lending Segment
The Lending Segment represents the Company's commercial real estate finance business. During the third quarter of 2014, the Lending Segment contributed GAAP and Core Earnings of $69.2 million and $71.0 million, respectively. Originations and acquisitions during the quarter, all of which consisted of LIBOR-based floating rate loans, totaled $1.7 billion and include the following significant transactions:
-- Originated a $480.0 million first mortgage and mezzanine financing for
the construction of a 54-story Class A+ office and luxury condominium
tower in San Francisco, California.
-- Originated a $264.3 million first mortgage land improvement loan on 196
acres of oceanfront land in Orange County, California.
-- Originated a $150.0 million first mortgage financing for the
redevelopment of a luxury resort in Maui, Hawaii.
-- Announced the co-origination of £86.75 million in a £101.75 million
first mortgage loan for the development of a 46-story residential tower
and 18-story housing development containing a total of 366 private
residential and affordable housing units located in London.
-- Acquired a $123.4 million portfolio of diverse office, retail and
multi-family loans throughout the United States.
-- Originated a $103.3 million first mortgage and mezzanine loan to
refinance and expand a 149-key, full service boutique hotel in Boston,
Massachusetts.
-- Originated an $81.5 million first mortgage and mezzanine financing
secured by a 36-building office and industrial portfolio in Lenexa,
Kansas.
-- Co-originated EUR58.0 million of a EUR99.0 million mortgage loan for the
refinancing and refurbishment of a 239-key, full service hotel located
in Amsterdam, Netherlands.
As of September 30, 2014, 95% of the Lending Segment's pipeline and 78% of the existing loan portfolio is indexed to LIBOR. In addition, 87% of the floating rate portfolio benefits from having a LIBOR floor at an average rate of 0.36%. For the 22% of the portfolio that is fixed rate, the weighted average coupon is 8.7%.
The carrying value of the Lending Segment's total investment portfolio was $6.1 billion as of September 30, 2014, of which $5.7 billion represents its target portfolio. This portfolio is anticipated to generate a current leveraged return of 10.1% and an optimal asset-level return of 10.9% (refer to footnotes (3) and (4) in the following table for a discussion of how these returns are computed).
The following is a summary of the Lending Segment's investments as of September 30, 2014:
Lending Segment Investment Portfolio
(Amounts in millions)
Face Amount Carry Asset Specific Net Return Current Optimal
Value (1) Financing (2) Investment on Asset Leveraged Asset-Level
Return (3) Return (4)
Investment
---------- ---
First mortgages held for investment $3,437 $3,377 $1,501 $1,876 6.3% 8.5% 9.8%
Subordinated mortgages held for investment 418 387 2 385 11.1% 11.1% 11.2%
Mezzanine loans held for investment 1,430 1,431 58 1,373 11.5% 11.7% 12.1%
Preferred equity investments held to maturity 288 287 - 287 10.0% 10.0% 10.0%
CMBS (5) 182 190 58 132 9.0% 12.0% 12.0%
--- --- --- ---
Target portfolio of Lending Segment $5,755 $5,672 $1,619 $4,053 8.2% 10.1% 10.9%
------ ------ ------ ------ --- ---- ----
RMBS available-for-sale at fair value 284 216 130 86 15.2%
Loans transferred as secured borrowings or 143 143 143 -
held-for-sale
Equity security 15 15 - 15
Investment in unconsolidated entities N/A 48 - 48
Total investments $6,197 $6,094 $1,892 $4,202
====== ====== ====== ======
(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 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 leveraged return represents the compounded effective rate of return earned over the life of the investment based on existing leverage levels as of September 30, 2014, 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 September 30, 2014 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) Consists of available-for-sale and held-to-maturity CMBS with carrying values of $106 million and $84 million, respectively.
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 September 30, 2014:
Weighted Average LTV of Loan Portfolio (1)
-----------------------------------------
First Mortgages Subordinated Mortgages Mezzanine Preferred Equity Total (2)
--------------- ---------------------- --------- ---------------- --------
Beginning LTV 0.0% 36.8% 28.0% 38.9% 12.4%
Ending LTV 63.2% 70.5% 67.1% 53.1% 64.2%
(1) 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 and
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.
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.
(2) 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).
LNR Segment
For the third quarter of 2014, the LNR Segment contributed GAAP and Core Earnings of $95.8 million and $53.9 million, or $0.42 and $0.24 per diluted share, respectively, each after (i) $12.6 million in shared cost allocations of management fees and corporate interest expense and (ii) an income tax provision of $4.1 million.
At September 30, 2014, the carrying amount of the LNR Segment's principal assets, consisting mainly of CMBS, servicing intangibles and conduit loans, was $1.2 billion and is summarized below:
LNR Investments as of September 30, 2014
(Amounts in millions)
Investment Face Carry Asset Net
Amount Value Investment
Specific
Financing
--- ---------
CMBS $3,935 $698 $ - $698
Special
servicing
intangibles N/A 203 - 203
Conduit
loans 249 248 169 79
Loans held-
for-
investment 7 4 - 4
Investment
in
unconsolidated
entities N/A 69 - 69
--- --- --- ---
Total
investments $4,191 $1,222 $169 $1,053
====== ====== ==== ======
Significant activity during the third quarter with respect to these assets includes:
-- CMBS purchases of $43.4 million, including new issue B-piece purchases
of $36.8 million.
-- Realized and unrealized gains in the CMBS portfolio of $12.7 million and
$39.4 million, respectively.
-- Net decrease in the fair value of the domestic servicing intangible on a
GAAP and Core basis of $18.3 million, resulting from the continued
amortization of this asset, net of increases in fair value due to the
attainment of new servicing contracts.
-- As of September 30, 2014, LNR was named special servicer on $15.0
billion of loans and real estate owned ("REO").
-- The conduit loan business contributed net securitization profits of
$17.0 million and $16.3 million on a GAAP and Core basis, respectively.
Financing Activities
As of September 30, 2014, the Company had an aggregate outstanding balance of $3.8 billion and a maximum borrowing capacity of $4.8 billion under its twelve financing facilities and two convertible senior notes. The Company continues to maintain conservative overall leverage, with a debt-to-equity ratio of 1.0x at the end of the quarter.
During the third quarter, the Company:
-- Entered into a new $250.0 million revolving repurchase facility.
-- Amended one of its revolving repurchase facilities to upsize available
borrowings from $225.0 million to $325.0 million and reduced pricing.
-- Established a share repurchase program which allows for the repurchase
of up to $250.0 million of its common stock over a one year period.
During the quarter, the Company repurchased $13.0 million of common
stock at a weighted average share price of $22.10.
Subsequent to quarter end, the Company:
-- Issued $431.3 million of 3.75% Convertible Senior Notes due 2017.
-- Increased available borrowings from $1.0 billion to $1.25 billion under
one of its revolving repurchase facilities.
-- Extended the maturity dates on two facilities while reducing pricing on
one of these facilities.
These subsequent financings increased the Company's maximum borrowing capacity to $5.4 billion.
Interest Rate Sensitivity
The Company should benefit from a rising rate environment given its high volume of LIBOR-based floating rate loans. The Company continues to pursue its strategy of financing floating rate investments with floating rate debt and fixed rate investments with either fixed rate debt or floating rate debt hedged by interest swaps. Additional benefit would be realized from the Company's fixed-rate convertible notes, which limit exposure to rising rates.
The following table summarizes the impact to annual net income from a specified hypothetical change in LIBOR (amounts in millions):
Income (Expense) Subject to Interest Rate Variable-rate 3.0% 2.5% 2.0% 1.5% 1.0%
investments and Increase Increase Increase Increase Increase
indebtedness
--- ------------
Investment income from variable-rate $4,284 $133 $110 $86 $63 $40
investments
Interest expense from variable-rate (2,580) (74) (61) (48) (35) (23)
debt
Net investment income from variable $1,704 $59 $49 $38 $28 $17
rate instruments
Additionally, LNR's special servicing revenues would likely benefit from a rising rate environment due to an expected increase in the number of loans that would enter special servicing.
Book Value and Fair Value Per Share, Net of Minority Interest
The fair value of the Company's net assets at September 30, 2014 was approximately $17.65 per fully diluted share, assuming debt is valued at its par settlement amount, up 3% from $17.20 at June 30, 2014. On a fully diluted basis, the Company's GAAP book value at September 30, 2014 was $17.06 per share, up 3% from $16.59 at June 30, 2014. These amounts reflect share dilution as of September 30, 2014 and June 30, 2014 of 1.0 million and 4.1 million shares, respectively, resulting from the in-the-money portion of the Company's convertible notes.
Investment Related Activity Subsequent to September 30, 2014
Subsequent to quarter end, the Lending Segment invested in the following:
-- $150 million core plus equity co-investment in a partnership established
to acquire and operate four high-quality regional shopping malls.
-- $120 million first mortgage and mezzanine loan to refinance and
redevelop two office buildings in New Orleans, Louisiana, one of which
will include a new 195-key hotel.
Subsequent to quarter end, the following occurred in the LNR Segment:
-- Originated conduit loans of $218.5 million.
-- Received proceeds of $194.2 million from the securitization of conduit
loan inventory, bringing the total number of year-to-date securitization
to nine.
Investment Capacity
As of October 31, 2014, the Company had approximately $280.9 million of available cash and equivalents, approximately $87.5 million of net equity invested in RMBS that are classified as available-for-sale, $83.5 million of approved but undrawn capacity under existing financing facilities and $749.4 million of unallocated warehouse capacity. In addition, the Company expects to receive $417.0 million during the fourth quarter from loan financings, maturities, prepayments, sales and participations. These liquidity sources provide the Company with the capacity to acquire or originate up to $1.4 billion of new investments.
Dividend
On November 5, 2014, the Company's Board of Directors declared a dividend of $0.48 per share of common stock for the quarter ending December 31, 2014. The dividend is payable on January 15, 2015 to common shareholders of record as of December 31, 2014. During the nine months ended September 30, 2014, the Company paid dividends of $1.44 per share compared to core earnings per diluted share of $1.67.
2014 Guidance
For 2014, the Company is narrowing its Core Earnings guidance to a range of $2.12 to $2.16 per diluted share. This guidance reflects the Company's estimates on the (i) yield on existing investments; (ii) yield on incremental investments inclusive of the Company's existing pipeline; (iii) amount and timing of debt and equity capital deployment to fund new investments; (iv) costs of additional debt and equity capital to fund new investments; (v) pace of amortization of the servicing intangible based on the amount and timing of servicing fees on existing contracts; (vi) taxation associated with the TRSs, particularly the LNR TRSs, which house this segment's servicing and conduit loan operations, both of which generate significant taxable income; and (vii) changes in costs and expenses reflective of the Company's forecasted operations. All guidance is based on current expectations of future economic conditions, the dynamics of the commercial real estate markets in which it operates and the judgment of the Company's management team.
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 Wednesday, November 5, 2014 at 9:00 a.m. Eastern Time to discuss third 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 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 15 minutes prior to start time.
Domestic: 1-800-946-0709
International: 1-719-457-2604
Conference Call Playback:
Domestic: 1-877-870-5176
International: 1-858-384-5517
Passcode: 9281101
The playback can be accessed through November 19, 2014.
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 investments. Through its subsidiaries LNR Property, LLC and Hatfield Philips International, the Company also operates as the largest commercial mortgage special servicer in the United States and one of the largest primary and special servicers in Europe.
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 September 30, 2014
(Amounts in thousands)
Real Estate LNR Subtotal LNR VIEs Total
Investment
Lending
-------
Revenues:
Interest income from loans $106,369 $4,300 $110,669 $ - $110,669
Interest income from investment securities 15,729 30,136 45,865 (17,225) 28,640
Servicing fees 63 58,826 58,889 (24,248) 34,641
Other revenues 130 7,604 7,734 (316) 7,418
--- ----- ----- ---- -----
Total revenues 122,291 100,866 223,157 (41,789) 181,368
------- ------- ------- ------- -------
Costs and expenses:
Management fees 17,330 7,571 24,901 42 24,943
Interest expense 33,138 6,601 39,739 - 39,739
General and administrative 9,049 38,414 47,463 177 47,640
Acquisition and investment pursuit costs 583 176 759 - 759
Depreciation and amortization - 3,017 3,017 - 3,017
Loan loss allowance, net 1,575 - 1,575 - 1,575
Other expense - 2,701 2,701 - 2,701
Total costs and expenses 61,675 58,480 120,155 219 120,374
------ ------ ------- --- -------
Income before other income, income taxes and non?controlling interests 60,616 42,386 103,002 (42,008) 60,994
Other income:
Income of consolidated VIEs, net - - - 87,778 87,778
Change in fair value of servicing rights - (18,312) (18,312) 10,415 (7,897)
Change in fair value of investment securities, net (140) 52,067 51,927 (50,067) 1,860
Change in fair value of mortgage loans held?for?sale, net - 15,517 15,517 - 15,517
Earnings from unconsolidated entities 1,875 5,905 7,780 (3,975) 3,805
Gain on sale of investments, net 1,332 - 1,332 - 1,332
Gain on derivative financial instruments, net 26,540 2,735 29,275 - 29,275
Foreign currency (loss), net (21,019) (447) (21,466) - (21,466)
Other-than-temporary-impairment, net - - - - -
Other income, net - 28 28 - 28
--- --- --- --- ---
Total other income 8,588 57,493 66,081 44,151 110,232
----- ------ ------ ------ -------
Income before income taxes 69,204 99,879 169,083 2,143 171,226
Income tax benefit (provision) 233 (4,069) (3,836) - (3,836)
--- ------ ------ --- ------
Net income 69,437 95,810 165,247 2,143 167,390
Net income attributable to non?controlling interests (203) - (203) (2,143) (2,346)
---- --- ---- ------ ------
Net income attributable to Starwood Property Trust, Inc. $69,234 $95,810 $165,044 $ - $165,044
======= ======= ======== === === ========
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, depreciation and amortization (to the extent that the Company owns any properties), 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 will be 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 September 30, 2014
(Amounts in thousands except per share data)
Real Estate LNR Total
Investment
Lending
-------
Net income
attributable to
Starwood Property
Trust, Inc. $69,234 $95,810 $165,044
Add / (Deduct):
Non?cash equity
compensation
expense 6,498 272 6,770
Management
incentive fee - 4,288 4,288
Depreciation and
amortization - 532 532
Loan loss
allowance, net 1,575 - 1,575
Interest income
adjustment for
securities 542 3,085 3,627
Other non-cash
items - 338 338
Reversal of
unrealized (gains)
/losses on:
Loans held?for?sale - (15,517) (15,517)
Securities (396) (52,067) (52,463)
Derivatives (27,088) (4,001) (31,089)
Foreign currency 21,020 - 21,020
Earnings from
unconsolidated
entities - (4,671) (4,671)
Recognition of
realized gains /
(losses) on:
Loans held?for?sale - 16,660 16,660
Securities 413 8,175 8,588
Derivatives 12 947 959
Foreign currency (858) - (858)
Earnings from
unconsolidated
entities - - -
--- --- ---
Core Earnings $70,952 $53,851 $124,803
======= ======= ========
Core Earnings per
Weighted Average
Diluted Share $0.31 $0.24 $0.55
===== ===== =====
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the nine months ended September 30, 2014
(Amounts in thousands)
Real Estate LNR Single Family Subtotal LNR VIEs Total
Investment Residential
Lending
-------
Revenues:
Interest income from loans $311,348 $9,686 $ - $321,034 $ - $321,034
Interest income from investment securities 49,196 83,225 - 132,421 (46,707) 85,714
Servicing fees 253 172,845 - 173,098 (71,565) 101,533
Other revenues 318 16,437 - 16,755 (939) 15,816
--- ------ --- ------ ---- ------
Total revenues 361,115 282,193 - 643,308 (119,211) 524,097
------- ------- --- ------- -------- -------
Costs and expenses:
Management fees 51,959 24,979 791 77,729 120 77,849
Interest expense 95,949 18,225 1,091 115,265 - 115,265
General and administrative 21,900 114,391 - 136,291 544 136,835
Acquisition and investment pursuit costs 1,318 606 - 1,924 - 1,924
Depreciation and amortization - 12,807 - 12,807 - 12,807
Loan loss allowance, net 1,933 - - 1,933 - 1,933
Other expense 52 10,364 - 10,416 - 10,416
Total costs and expenses 173,111 181,372 1,882 356,365 664 357,029
------- ------- ----- ------- --- -------
Income before other income, income taxes and non?controlling interests 188,004 100,821 (1,882) 286,943 (119,875) 167,068
Other income:
Income of consolidated VIEs, net - - - - 190,810 190,810
Change in fair value of servicing rights - (43,291) - (43,291) 24,620 (18,671)
Change in fair value of investment securities, net 565 105,313 - 105,878 (90,698) 15,180
Change in fair value of mortgage loans held?for?sale, net - 48,018 - 48,018 - 48,018
Earnings from unconsolidated entities 6,847 9,741 - 16,588 (3,156) 13,432
Gain on sale of investments, net 12,965 - - 12,965 - 12,965
Gain (loss) on derivative financial instruments, net 16,142 (4,523) - 11,619 - 11,619
Foreign currency (loss), net (15,376) (836) - (16,212) - (16,212)
Other-than-temporary-impairment, net (214) (796) - (1,010) - (1,010)
Other income, net 54 684 - 738 - 738
--- --- --- --- --- ---
Total other income 20,983 114,310 - 135,293 121,576 256,869
------ ------- --- ------- ------- -------
Income from continuing operations before income taxes 208,987 215,131 (1,882) 422,236 1,701 423,937
Income tax provision (293) (13,440) - (13,733) - (13,733)
---- ------- --- ------- --- -------
Income from continuing operations 208,694 201,691 (1,882) 408,503 1,701 410,204
Loss from discontinued operations, net of tax - - (1,551) (1,551) - (1,551)
--- --- ------ ------ --- ------
Net income 208,694 201,691 (3,433) 406,952 1,701 408,653
Net income attributable to non?controlling interests (3,439) - - (3,439) (1,701) (5,140)
------ --- --- ------ ------ ------
Net income attributable to Starwood Property Trust, Inc. $205,255 $201,691 $(3,433) $403,513 $ - $403,513
======== ======== ======= ======== === === ========
Reconciliation of Net Income to Core Earnings
For the nine months ended September 30, 2014
(Amounts in thousands except per share data)
Real Estate LNR Single Family Total
Investment Residential
Lending
-------
Net income attributable to Starwood Property Trust, Inc. $205,255 $201,691 $(3,433) $403,513
Add / (Deduct):
Non?cash equity compensation expense 20,787 714 - 21,501
Management incentive fee - 15,511 - 15,511
Change in Control Plan - 1,279 - 1,279
Depreciation and amortization - 1,602 1,540 3,142
Loan loss allowance, net 1,933 - - 1,933
Interest income adjustment for securities (808) 8,940 - 8,132
Other non-cash items - 587 - 587
Reversal of unrealized (gains) / losses on:
Loans held?for?sale - (48,018) - (48,018)
Securities (12,027) (105,313) - (117,340)
Derivatives (16,408) 2,082 - (14,326)
Foreign currency 15,376 - - 15,376
Earnings from unconsolidated entities - (5,263) - (5,263)
Recognition of realized gains / (losses) on:
Loans held?for?sale - 46,045 - 46,045
Securities 10,992 22,306 - 33,298
Derivatives (851) (1,810) - (2,661)
Foreign currency (1,139) - - (1,139)
Earnings from unconsolidated entities - - - -
--- --- --- ---
Core Earnings $223,110 $140,353 $(1,893) $361,570
======== ======== ======= ========
Core Earnings per Weighted Average Diluted Share $1.03 $0.65 $(0.01) $1.67
===== ===== ====== =====
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of September 30, 2014
(Amounts in thousands)
Real Estate LNR Subtotal LNR VIEs Total
Investment
Lending
-------
Assets:
Cash and cash equivalents $140,142 $186,531 $326,673 $649 $327,322
Restricted cash 33,769 11,956 45,725 - 45,725
Loans held-for-investment, net 5,194,824 4,103 5,198,927 - 5,198,927
Loans held-for-sale - 248,165 248,165 - 248,165
Loans transferred as secured borrowings....... 142,516 - 142,516 - 142,516
Investment securities 709,343 697,733 1,407,076 (512,774) 894,302
Intangible assets-servicing rights - 203,503 203,503 (57,713) 145,790
Investment in unconsolidated entities 47,934 69,175 117,109 (6,540) 110,569
Goodwill - 140,437 140,437 - 140,437
Derivative assets 10,532 2,822 13,354 - 13,354
Accrued interest receivable 34,338 727 35,065 - 35,065
Other assets 38,054 86,722 124,776 (1,304) 123,472
VIE assets, at fair value - - - 109,468,293 109,468,293
--- --- --- ----------- -----------
Total Assets $6,351,452 $1,651,874 $8,003,326 $108,890,611 $116,893,937
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Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities $49,659 $103,981 $153,640 $418 $154,058
Related-party payable 20,268 4,598 24,866 - 24,866
Dividends payable 108,056 - 108,056 - 108,056
Derivative liabilities 5,189 273 5,462 - 5,462
Secured financing agreements, net 2,538,886 169,222 2,708,108 - 2,708,108
Convertible senior notes, net 1,006,927 - 1,006,927 - 1,006,927
Secured borrowings on transferred loans........ 142,575 - 142,575 - 142,575
VIE liabilities, at fair value - - - 108,879,922 108,879,922
--- --- --- ----------- -----------
Total Liabilities 3,871,560 278,074 4,149,634 108,880,340 113,029,974
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Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Preferred stock - - - - -
Common stock 2,236 - 2,236 - 2,236
Additional paid-in capital 2,401,673 1,391,755 3,793,428 - 3,793,428
Treasury stock (23,635) - (23,635) - (23,635)
Accumulated other comprehensive income 64,184 5,497 69,681 - 69,681
Retained earnings (deficit) 30,754 (23,452) 7,302 - 7,302
------ ------- ----- --- -----
Total Starwood Property Trust, Inc. Stockholders' Equity 2,475,212 1,373,800 3,849,012 - 3,849,012
Non-controlling interests in consolidated subsidiaries 4,680 - 4,680 10,271 14,951
----- --- ----- ------ ------
Total Equity 2,479,892 1,373,800 3,853,692 10,271 3,863,963
--------- --------- --------- ------ ---------
Total Liabilities and Equity $6,351,452 $1,651,874 $8,003,326 $108,890,611 $116,893,937
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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
SOURCE Starwood Property Trust, Inc.
