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Starwood Property Trust Reports Results for the Quarter Ended June 30, 2020
Commercial Property Investing in Property Property

Starwood Property Trust Reports Results for the Quarter Ended June 30, 2020

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Cision

Cision

– Received 7th Consecutive NAREIT Gold Award for Investor Communications and Reporting Excellence –

– Paid Dividend of $0.48 per share for the Second Quarter of 2020 –

GREENWICH, Conn. , Aug. 5, 2020 /PRNewswire/ — Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter ended June 30 , 2020.  The Company’s second quarter 2020 GAAP net income was $139.7 million , or $0.49 per diluted share, and Core Earnings (a non-GAAP financial measure) was $126.1 million , or $0.43 per diluted share.

“It is a difficult time to figure out the right balance between playing offense and defense as this Category 5 hurricane that we call the Coronavirus sweeps through the U.S. and the global economies. Since March, we have erred on the side of caution and are only making occasional investments that we find decidedly compelling. From the outset of this pandemic, our strategy has been to solidify our fortress balance sheet. We now sit with over $800 million of cash and approved, undrawn debt capacity, after paying our full dividend the past two quarters, deleveraging our balance sheet by more than $350 million and dramatically lowering our future funding obligations by over $700 million .

All this caution has and will probably continue to reduce our earnings until our capital deployment returns to more normalized levels. Nonetheless, the breadth of our enterprise provides numerous opportunities for us to realize the significant embedded gains in our portfolio if and when we choose to do so. Our complex, but diversified, business lines have performed in line with our expectations. We are very well-positioned to carefully comb through investments in each of our business segments, work with our borrowers, and return to investing globally where the opportunity set is clearly better today than in years past,” commented Barry Sternlicht , Chairman and CEO of Starwood Property Trust.

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 .

Webcast and Conference Call Information  

The Company will host a live webcast and conference call on Wednesday, August 5, 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, download and install any necessary audio software.  The webcast is available at www.starwoodpropertytrust.com in the Investor Relations section of the website.  The Company encourages use of the webcast due to potential extended wait times to access the conference call via dial-in. 

To Participate via Telephone Conference Call:

Dial in at least 15 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:  13706902

The playback can be accessed through August 12, 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 $63 billion of capital since inception and manages a portfolio of $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, the severity and duration of economic disruption caused by the COVID-19 global pandemic, completion of pending investments and financings, continued ability to acquire additional investments, competition within the finance and real estate industries, 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 and our quarterly report on Form 10-Q for the quarter ended June 30, 2020 , 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: ztanenbaum@starwood.com

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Operations by Segment

For the three months ended June 30, 2020

(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

$

150,136

$

19,126

$

$

1,841

$

$

171,103

$

$

171,103

Interest income from investment securities

17,345

683

24,924

42,952

(28,308)

14,644

Servicing fees

142

8,591

8,733

(2,075)

6,658

Rental income

690

63,566

8,454

72,710

72,710

Other revenues

54

100

58

280

492

(1)

491

Total revenues  

168,367

19,909

63,624

44,090

295,990

(30,384)

265,606

Costs and expenses:

Management fees

339

220

22,554

23,113

2

23,115

Interest expense

41,871

9,678

15,942

6,177

27,825

101,493

101,493

General and administrative

8,615

4,337

1,281

14,993

3,368

32,594

83

32,677

Acquisition and investment pursuit costs

578

1,100

(88)

1,590

1,590

Costs of rental operations

988

24,703

3,941

29,632

29,632

Depreciation and amortization

430

89

19,153

3,749

23,421

23,421

Credit loss provision, net

11,294

(1,092)

10,202

10,202

Other expense

76

26

102

102

Total costs and expenses  

64,191

14,112

61,105

28,992

53,747

222,147

85

222,232

Other income (loss):

Change in net assets related to consolidated VIEs

51,261

51,261

Change in fair value of servicing rights

5,328

5,328

(7,897)

(2,569)

Change in fair value of investment securities, net

5,454

7,941

13,395

(12,568)

827

Change in fair value of mortgage loans, net

33,010

1,440

34,450

34,450

Earnings (loss) from unconsolidated entities

671

(1,118)

29,526

29,079

(303)

28,776

(Loss) gain on sale of investments and other assets, net

(961)

7,433

6,472

6,472

(Loss) gain on derivative financial instruments, net

(11,736)

(437)

(4,614)

(3,828)

4,517

(16,098)

(16,098)

Foreign currency gain (loss), net

6,942

310

(48)

(31)

7,173

7,173

Loss on extinguishment of debt

(22)

(2,185)

(2,207)

(2,207)

Other income, net

191

13

204

204

Total other income (loss)

33,358

(1,245)

(6,656)

47,822

4,517

77,796

30,493

108,289

Income (loss) before income taxes  

137,534

4,552

(4,137)

62,920

(49,230)

151,639

24

151,663

Income tax (provision) benefit

(3,257)

(56)

4,611

1,298

1,298

Net income (loss)  

134,277

4,496

(4,137)

67,531

(49,230)

152,937

24

152,961

Net income attributable to non-controlling interests

(4)

(5,111)

(8,166)

(13,281)

(24)

(13,305)

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

$

134,273

$

4,496

$

(9,248)

$

59,365

$

(49,230)

$

139,656

$

$

139,656

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 June 30, 2020

(Amounts in thousands except per share data)

Commercial and

Residential

Infrastructure

Investing

Lending





























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