Starwood Property Trust Reports Results for the Quarter and Year Ended December 31, 2023
- Quarterly GAAP Earnings of $0.22 and Distributable Earnings (DE) of $0.58 per Diluted Share -
- Originated or Acquired $1.6 Billion of Assets in the Quarter and $3.1 Billion for the Year -
- Received Repayments of $1.1Billion in the Quarter and $4.0Billion for the Year -
- Liquidity Increased to $1.2 Billion -
- Undepreciated Book Value Per Share of $20.93 -
- Paid Dividend of $0.48 per Share -
GREENWICH, Conn., Feb. 22, 2024 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter and year ended December 31, 2023. The Company's fourth quarter 2023 GAAP net income was $71.0 million, or $0.22 per diluted share. Distributable Earnings (a non-GAAP financial measure) was $189.4 million, or $0.58 per diluted share. The Company's full year 2023 GAAP net income was $339.2 million, or $1.07 per diluted share, and Distributable Earnings was $662.6 million, or $2.05 per diluted share.
"When we created STWD more than 14 years ago, we set out to build an enterprise that would be durable and so we diversified into multiple business lines to raise our return on equity, provide some consistency to our cash flows, and enable us to selectively deploy capital as risk and reward in the markets changed. The commercial real estate industry faces a balance sheet issue that was not created by a lack of discipline per se. Rather, the issue arose from a rapid and unprecedented increase in interest rates meant to halt inflation that was largely caused by multiple COVID stimulus packages followed by the American Rescue Plan Act of 2021. These well-intended programs hit a tattered supply chain which caused prices to increase. We will continue to face headwinds in real estate both in the U.S. and abroad until the central banks lower short-term rates to more accurately reflect spreading weakness in the private economy.
However, with our strong balance sheet and multiple investment cylinders, we are able to allocate capital to our highest returning verticals like energy infrastructure lending, and we are well positioned to navigate the challenging environment," commented Barry Sternlicht, Chairman and CEO of Starwood Property Trust. "We are not out of the woods, particularly in domestic office markets, but there is light at the end of the tunnel as inevitably the Fed's data catches up with the realities of declining housing costs which represent almost one-third of CPI."
"Our full year results demonstrated the strength of our diversified platform, which has allowed us to maintain low leverage and strong access to liquidity," added Jeffrey DiModica, President 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 Thursday, February 22, 2024, 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
The playback can be accessed through March 7, 2024
About Starwood Property Trust, Inc.
Starwood Property Trust (NYSE: STWD), an affiliate of global private investment firm Starwood Capital Group, is a leading diversified finance company with a core focus on the real estate and infrastructure sectors. As of December 31, 2023, the Company has successfully deployed over $97 billion of capital since inception and manages a portfolio of over $27 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, availability of financing, and other risks detailed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, 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.
Condensed Consolidated Statement of Operations by Segment
For the three months ended December 31, 2023
(Amounts in thousands)
Commercial and
Residential
Lending
Segment
Infrastructure
Lending
Segment
Property
Segment
Investing
and Servicing
Segment
Corporate
Subtotal
Securitization
VIEs
Total
Revenues:
Interest income from loans
$ 390,873
$ 63,915
$ -
$ 5,260
$ -
$ 460,048
$ -
$ 460,048
Interest income from investment securities
32,668
147
-
22,626
-
55,441
(36,606)
18,835
Servicing fees
112
-
-
14,423
-
14,535
(3,642)
10,893
Rental income
1,959
-
22,872
5,148
-
29,979
-
29,979
Other revenues
520
301
219
1,033
450
2,523
-
2,523
Total revenues
426,132
64,363
23,091
48,490
450
562,526
(40,248)
522,278
Costs and expenses:
Management fees
(133)
-
-
-
44,015
43,882
-
43,882
Interest expense
246,576
37,828
14,293
9,859
60,774
369,330
(213)
369,117
General and administrative
13,665
4,049
1,189
25,567
3,787
48,257
-
48,257
Acquisition and investment pursuit costs
463
-
(5)
(158)
-
300
-
300
Costs of rental operations
1,272
-
5,772
2,888
-
9,932
-
9,932
Depreciation and amortization
1,944
19
7,899
2,185
84
12,131
-
12,131
Credit loss provision, net
25,281
694
-
-
-
25,975
-
25,975
Other expense
279
-
-
51
-
330
-
330
Total costs and expenses
289,347
42,590
29,148
40,392
108,660
510,137
(213)
509,924
Other income (loss):
Change in net assets related to consolidated VIEs
-
-
-
-
-
-
42,664
42,664
Change in fair value of servicing rights
-
-
-
3,085
-
3,085
(1,889)
1,196
Change in fair value of investment securities, net
6,493
-
-
(5,676)
-
817
(403)
414
Change in fair value of mortgage loans, net
151,264
-
-
22,685
-
173,949
-
173,949
Income from affordable housing fund investments
-
-
37,548
-
-
37,548
-
37,548
Earnings (loss) from unconsolidated entities
847
4,378
-
456
-
5,681
(337)
5,344
Gain on sale of investments and other assets, net
28
-
-
10,215
-
10,243
-
10,243
(Loss) gain on derivative financial instruments, net
(157,892)
(121)
(2,337)
(8,817)
12,131
(157,036)
-
(157,036)
Foreign currency gain (loss), net
78,762
426
(61)
-
-
79,127
-
79,127
Gain on extinguishment of debt
1,018
-
-
-
-
1,018
-
1,018
Other loss, net
(103,883)
-
-
17
-
(103,866)
-
(103,866)
Total other income (loss)
(23,363)
4,683
35,150
21,965
12,131
50,566
40,035
90,601
Income (loss) before income taxes
113,422
26,456
29,093
30,063
(96,079)
102,955
-
102,955
Income tax (provision) benefit
(14,991)
9
-
(3,333)
-
(18,315)
-
(18,315)
Net income (loss)
98,431
26,465
29,093
26,730
(96,079)
84,640
-
84,640
Net income attributable to non-controlling interests
(4)
-
(12,007)
(1,668)
-
(13,679)
-
(13,679)
Net income (loss) attributable to Starwood Property Trust, Inc.
$ 98,427
$ 26,465
$ 17,086
$ 25,062
$ (96,079)
$ 70,961
$ -
$ 70,961
Definition of Distributable Earnings
Distributable 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, Distributable 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 for successful acquisitions, depreciation and amortization of real estate and associated intangibles, any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period 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. Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2023 for additional information regarding Distributable Earnings.
Reconciliation of Net Income to Distributable Earnings
For the three months ended December 31, 2023
(Amounts in thousands except per share data)
Commercial and
Residential
Lending
Segment
Infrastructure
Lending
Segment
Property
Segment
Investing
and Servicing
Segment
Corporate
Total
Net income (loss) attributable to Starwood Property Trust, Inc.
$ 98,427
$ 26,465
$ 17,086
$ 25,062
$ (96,079)
$ 70,961
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units
-
-
4,659
-
-
4,659
Non-controlling interests attributable to unrealized gains/losses
-
-
4,558
(2,546)
-
2,012
Non-cash equity compensation expense
2,237
387
79
1,601
3,888
8,192
Management incentive fee
-
-
-
-
19,530
19,530
Acquisition and investment pursuit costs
-
-
(82)
(261)
-
(343)
Depreciation and amortization
2,114
9
7,979
2,298
84
12,484
Interest income adjustment for securities
5,743
-
-
8,125
-
13,868
Consolidated income tax provision (benefit) associated with fair value adjustments
14,991
(9)
-
3,333
-
18,315
Other non-cash items
5
-
351
63
-
419
Reversal of GAAP unrealized and realized (gains) / losses on:
Loans
(151,264)
-
-
(22,685)
-
(173,949)
Credit loss provision, net
25,281
694
-
-
-
25,975
Securities
(6,493)
-
-
5,676
-
(817)
Woodstar Fund investments
-
-
(37,548)
-
-
(37,548)
Derivatives
157,892
121
2,337
8,817
(12,131)
157,036
Foreign currency
(78,762)
(426)
61
-
-
(79,127)
Earnings from unconsolidated entities
(847)
(4,378)
-
(456)
-
(5,681)
Sales of properties
-
-
-
(10,215)
-
(10,215)
Impairment of properties
101,069
-
-
-
-
101,069
Recognition of Distributable realized gains / (losses) on:
Loans
(541)
-
-
21,326
-
20,785
Realized credit loss recovery
2,370
311
-
-
-
2,681
Securities
54
-
-
(3,432)
-
(3,378)
Woodstar Fund investments
-
-
16,115
-
-
16,115
Derivatives
34,120
102
6,619
(4,297)
(9,222)
27,322
Foreign currency
(2,084)
53
(60)
-
-
(2,091)
Earnings from unconsolidated entities
847
93
-
427
-
1,367
Sales of properties
-
-
-
(198)
-
(198)
Distributable Earnings (Loss)
$ 205,159
$ 23,422
$ 22,154
$ 32,638
$ (93,930)
$ 189,443
Distributable Earnings (Loss) per Weighted Average Diluted Share
$ 0.63
$ 0.07
$ 0.07
$ 0.10
$ (0.29)
$ 0.58
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the year ended December 31, 2023
(Amounts in thousands)
Commercial and
Residential
Lending
Segment
Infrastructure
Lending
Segment
Property
Segment
Investing
and Servicing
Segment
Corporate
Subtotal
Securitization
VIEs
Total
Revenues:
Interest income from loans
$ 1,557,631
$ 236,884
$ -
$ 9,589
$ -
$ 1,804,104
$ -
$ 1,804,104
Interest income from investment securities
135,130
1,805
-
92,147
-
229,082
(152,558)
76,524
Servicing fees
553
-
-
44,895
-
45,448
(12,327)
33,121
Rental income
8,369
-
93,459
25,838
-
127,666
-
127,666
Other revenues
2,527
1,296
713
2,335
1,622
8,493
-
8,493
Total revenues
1,704,210
239,985
94,172
174,804
1,622
2,214,793
(164,885)
2,049,908
Costs and expenses:
Management fees
496
-
-
-
141,047
141,543
-
$ 141,543
Interest expense
971,028
141,016
54,522
34,611
235,776
1,436,953
(846)
1,436,107
General and administrative
55,782
15,569
4,155
87,619
17,087
180,212
-
180,212
Acquisition and investment pursuit costs
1,128
17
(5)
(215)
-
925
-
925
Costs of rental operations
8,777
-
22,806
13,259
-
44,842
-
44,842
Depreciation and amortization
7,206
103
31,960
9,788
84
49,141
-
49,141
Credit loss provision, net
225,720
18,008
-
-
-
243,728
-
243,728
Other expense
1,730
-
23
67
-
1,820
-
1,820
Total costs and expenses
1,271,867
174,713
113,461
145,129
393,994
2,099,164
(846)
2,098,318
Other income (loss):
Change in net assets related to consolidated VIEs
-
-
-
-
-
-
181,688
181,688
Change in fair value of servicing rights
-
-
-
401
-
401
1,193
1,594
Change in fair value of investment securities, net
69,259
-
-
(51,889)
-
17,370
(16,603)
767
Change in fair value of mortgage loans, net
25,874
-
-
36,828
-
62,702
-
62,702
Income from affordable housing fund investments
-
-
291,244
-
-
291,244
-
291,244
Earnings (loss) from unconsolidated entities
4,410
5,702
-
8,849
-
18,961
(2,239)
16,722
(Loss) gain on sale of investments and other assets, net
(112)
-
-
25,841
-
25,729
-
25,729
(Loss) gain on derivative financial instruments, net
(25,206)
123
2,111
(4,348)
(11,285)
(38,605)
-
(38,605)
Foreign currency gain (loss), net
60,644
201
(11)
-
-
60,834
-
60,834
Loss on extinguishment of debt
(804)
-
-
(434)
-
(1,238)
-
(1,238)
Other (loss) income, net
(135,576)
-
(5)
29
-
(135,552)
-
(135,552)
Total other income (loss)
(1,511)
6,026
293,339
15,277
(11,285)
301,846
164,039
465,885
Income (loss) before income taxes
430,832
71,298
274,050
44,952
(403,657)
417,475
-
417,475
Income tax benefit (provision)
990
590
-
(898)
-
682
-
682
Net income (loss)
431,822
71,888
274,050
44,054
(403,657)
418,157
-
418,157
Net income attributable to non-controlling interests
(14)
-
(77,156)
(1,774)
-
(78,944)
-
(78,944)
Net income (loss) attributable to Starwood Property Trust, Inc.
$ 431,808
$ 71,888
$ 196,894
$ 42,280
$ (403,657)
$ 339,213
$ -
$ 339,213
Reconciliation of Net Income to Distributable Earnings
For the year ended December 31, 2023
(Amounts in thousands except per share data)
Commercial and
Residential
Lending
Segment
Infrastructure
Lending
Segment
Property
Segment
Investing
and Servicing
Segment
Corporate
Total
Net income (loss) attributable to Starwood Property Trust, Inc.
$ 431,808
$ 71,888
$ 196,894
$ 42,280
$ (403,657)
$ 339,213
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units
-
-
18,732
-
-
18,732
Non-controlling interests attributable to unrealized gains/losses
-
-
47,249
(13,885)
-
33,364
Non-cash equity compensation expense
8,755
1,469
310
6,372
22,341
39,247
Management incentive fee
-
-
-
-
35,709
35,709
Acquisition and investment pursuit costs
(81)
-
(328)
(555)
-
(964)
Depreciation and amortization
7,810
64
32,257
10,263
84
50,478
Interest income adjustment for securities
22,404
-
-
28,368
-
50,772
Extinguishment of debt, net
-
-
-
-
(246)
(246)
Consolidated income tax (benefit) provision associated with fair value adjustments
(990)
(590)
-
898
-
(682)
Other non-cash items
15
-
1,468
285
-
1,768
Reversal of GAAP unrealized and realized (gains) / losses on:
-
Loans
(25,874)
-
-
(36,828)
-
(62,702)
Credit loss provision, net
225,720
18,008
-
-
-
243,728
Securities
(69,259)
-
-
51,889
-
(17,370)
Woodstar Fund investments
-
-
(291,244)
-
-
(291,244)
Derivatives
25,206
(123)
(2,111)
4,348
11,285
38,605
Foreign currency
(60,644)
(201)
11
-
-
(60,834)
Earnings from unconsolidated entities
(4,410)
(5,702)
-
(8,849)
-
(18,961)
Sales of properties
-
-
-
(25,841)
-
(25,841)
Impairment of properties
124,902
-
-
-
-
124,902
Recognition of Distributable realized gains / (losses) on:
-
Loans
(4,072)
-
-
36,375
-
32,303
Realized credit loss
(12,292)
(10,795)
-
-
-
(23,087)
Securities
105
-
-
(22,475)
-
(22,370)
Woodstar Fund investments
-
-
61,513
-
-
61,513
Derivatives
119,917
397
22,851
(2,493)
(32,659)
108,013
Foreign currency
(7,250)
13
(11)
-
-
(7,248)
Earnings (loss) from unconsolidated entities
4,410
(1,908)
-
7,020
-
9,522
Sales of properties
-
-
6,246
-
6,246
Distributable Earnings (Loss)
$ 786,180
$ 72,520
$ 87,591
$ 83,418
$ (367,143)
$ 662,566
Distributable Earnings (Loss) per Weighted Average Diluted Share
$ 2.43
$ 0.22
$ 0.27
$ 0.26
$ (1.13)
$ 2.05
Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of December 31, 2023
(Amounts in thousands)
Commercial and
Residential Lending
Segment
Infrastructure
Lending
Segment
Property
Segment
Investing
and Servicing
Segment
Corporate
Subtotal
Securitization
VIEs
Total
Assets:
Cash and cash equivalents
$ 8,823
$ 56,300
$ 19,957
$ 22,011
$ 87,569
$ 194,660
$ -
$ 194,660
Restricted cash
23,902
28,693
1,016
5,175
58,526
117,312
-
117,312
Loans held-for-investment, net
15,069,389
2,495,660
-
9,200
-
17,574,249
-
17,574,249
Loans held-for-sale
2,604,594
-
-
41,043
-
2,645,637
-
2,645,637
Investment securities
1,147,829
19,042
-
1,147,550
-
2,314,421
(1,578,859)
735,562
Properties, net
431,155
-
555,455
59,774
-
1,046,384
-
1,046,384
Properties held-for-sale
-
-
290,937
-
-
290,937
-
290,937
Investments of consolidated affordable housing fund
-
-
2,012,833
-
-
2,012,833
-
2,012,833
Investments in unconsolidated entities
19,151
52,691
-
33,134
-
104,976
(14,600)
90,376
Goodwill
-
119,409
-
140,437
-
259,846
-
259,846
Intangible assets
13,415
-
25,432
63,985
-
102,832
(37,865)
64,967
Derivative assets
55,559
84
5,638
2,156
-
63,437
-
63,437
Accrued interest receivable
180,441
12,485
1,502
1,369
5,070
200,867
-
200,867
Other assets
301,436
3,486
50,459
15,828
49,564
420,773
-
420,773
VIE assets, at fair value
-
-
-
-
-
-
43,786,356
43,786,356
Total Assets
$ 19,855,694
$ 2,787,850
$ 2,963,229
$ 1,541,662
$ 200,729
$ 27,349,164
$ 42,155,032
$ 69,504,196
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities
$ 106,236
$ 45,232
$ 12,225
$ 44,452
$ 85,297
$ 293,442
$ -
$ 293,442
Related-party payable
-
-
-
-
44,816
44,816
-
44,816
Dividends payable
-
-
-
-
152,888
152,888
-
152,888
Derivative liabilities
54,066
-
-
-
48,401
102,467
-
102,467
Secured financing agreements, net
10,368,668
1,088,965
598,350
495,857
1,336,913
13,888,753
(20,757)
13,867,996
Collateralized loan obligations and single asset securitization, net