Starwood Property Trust Reports Results for the Quarter and Year Ended December 31, 2020

GREENWICH, Conn., February 25, 2021 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today announced operating results for the fiscal quarter and year ended December 31, 2020. The Company's fourth quarter 2020 GAAP net income was $107.0 million, or $0.37 per diluted share, and Distributable Earnings (a non-GAAP financial measure) was $148.4 million, or $0.50 per diluted share. The Company's full year 2020 GAAP net income was $331.7 million, or $1.16 per diluted share, and Distributable Earnings was $585.3 million, or $1.98 per diluted share.

"At no time other than 2020 was the power and strength of the company we built from a blind pool of capital over a decade ago more evident. We have proven that we are more than a portfolio of real estate mortgage loans, as good as our book has proven to be. The pandemic presented us with one of the most challenging market cycles and opportunities we have seen since our inception. Given our superior liquidity position, we never contemplated distressed asset sales or capital raises that would have been dilutive to our fair value in order to navigate the immense challenges of 2020. Our multiple business cylinders allowed us to generate excess liquidity, while unlocking accretive avenues to deploy that capital. Once we felt the worst had passed, we among our peers uniquely deployed $3.0 billion of capital in multiple business lines after the first quarter, including $2.3 billion in commercial and residential lending.

We enter 2021 in a position of significant strength, with access to multiple sources of liquidity, a robust commercial lending pipeline and an increasingly large array of investment opportunities across business lines," 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 Thursday, February 25, 2021, 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: 13715683
The playback can be accessed through March 4, 2021.

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 $66 billion of capital since inception and manages a portfolio of over $18 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, 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 December 31, 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	$	173,014	$	18,477	$	—	$	2,518	$	—	$	194,009	$	—	$	194,009
Interest income from investment securities		21,132		618		—		20,512		—		42,262		(29,920)		12,342
Servicing fees		125		—		—		13,024		—		13,149		(4,514)		8,635
Rental income		1,924		—		64,000		9,070		—		74,994		—		74,994
Other revenues		114		155		65		248		—		582		—		582
Total revenues		196,309		19,250		64,065		45,372		—		324,996		(34,434)		290,562
Costs and expenses:
Management fees		(191)		—		—		221		40,115		40,145		12		40,157
Interest expense		41,987		9,204		16,147		5,507		29,643		102,488		(224)		102,264
General and administrative		12,742		3,345		1,089		25,549		4,207		46,932		85		47,017
Acquisition and investment pursuit costs		211		4		—		(26)		—		189		—		189
Costs of rental operations		777		—		25,279		4,252		—		30,308		—		30,308
Depreciation and amortization		433		96		18,675		4,219		—		23,423		—		23,423
Credit loss reversal, net		(5,037)		(7,094)		—		—		—		(12,131)		—		(12,131)
Other expense		77		—		99		—		—		176		—		176
Total costs and expenses		50,999		5,555		61,289		39,722		73,965		231,530		(127)		231,403
Other income (loss):
Change in net assets related to consolidated VIEs		—		—		—		—		—		—		13,905		13,905
Change in fair value of servicing rights		—		—		—		1,809		—		1,809		(3,196)		(1,387)
Change in fair value of investment securities, net		(6,294)		—		—		(15,377)		—		(21,671)		23,932		2,261
Change in fair value of mortgage loans, net		20,002		—		—		33,422		—		53,424		—		53,424
Earnings (loss) from unconsolidated entities		4,804		431		—		341		—		5,576		(324)		5,252
Gain on sale of investments and other assets, net		—		10		—		532		—		542		—		542
(Loss) gain on derivative financial instruments, net		(49,156)		(171)		758		1,627		(751)		(47,693)		—		(47,693)
Foreign currency gain (loss), net		43,962		260		39		(5)		—		44,256		—		44,256
Loss on extinguishment of debt		—		(789)		—		—		(488)		(1,277)		—		(1,277)
Other (loss) income, net		—		—		(406)		—		—		(406)		—		(406)
Total other income (loss)		13,318		(259)		391		22,349		(1,239)		34,560		34,317		68,877
Income (loss) before income taxes		158,628		13,436		3,167		27,999		(75,204)		128,026		10		128,036
Income tax provision		(5,556)		(120)		—		(7,705)		—		(13,381)		—		(13,381)
Net income (loss)		153,072		13,316		3,167		20,294		(75,204)		114,645		10		114,655
Net income attributable to non-controlling interests		(4)		—		(5,100)		(2,573)		—		(7,677)		(10)		(7,687)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	153,068	$	13,316	$	(1,933)	$	17,721	$	(75,204)	$	106,968	$	—	$	106,968

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 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 Distributable Earnings
For the three months ended December 31, 2020
(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.	$	153,068	$	13,316	$	(1,933)	$	17,721	$	(75,204)	$	106,968
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units		—		—		5,100		—		—		5,100
Non-cash equity compensation expense		891		299		34		869		6,707		8,800
Management incentive fee		—		—		—		—		14,974		14,974
Acquisition and investment pursuit costs		(278)		—		(89)		—		—		(367)
Depreciation and amortization		372		86		18,736		3,832		—		23,026
Credit loss reversal, net		(5,037)		(7,094)		—		—		—		(12,131)
Interest income adjustment for securities		(1,102)		—		—		5,245		—		4,143
Extinguishment of debt, net		—		—		—		—		(247)		(247)
Income tax provision associated with fair value adjustments		4,883		—		—		550		—		5,433
Other non-cash items		4		—		(374)		239		161		30
Reversal of GAAP unrealized (gains) / losses on:
Loans		(20,002)		—		—		(33,422)		—		(53,424)
Securities		6,294		—		—		15,377		—		21,671
Derivatives		48,046		105		(2,480)		(2,218)		3,945		47,398
Foreign currency		(43,962)		(260)		(39)		5		—		(44,256)
Earnings from unconsolidated entities		(4,804)		(431)		—		(341)		—		(5,576)
Recognition of Distributable realized gains / (losses) on:
Loans		2,461		—		—		32,528		—		34,989
Securities		398		—		—		(9,389)		—		(8,991)
Derivatives		(3,858)		—		(34)		20		—		(3,872)
Foreign currency		631		14		39		(5)		—		679
Earnings from unconsolidated entities		2,914		431		—		745		—		4,090
Distributable Earnings (Loss)	$	140,919	$	6,466	$	18,960	$	31,756	$	(49,664)	$	148,437
Distributable Earnings (Loss) per Weighted Average Diluted Share	$	0.47	$	0.02	$	0.07	$	0.11	$	(0.17)	$	0.50

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations by Segment
For the year ended December 31, 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	$	665,503	$	77,851	$	—	$	8,589	$	—	$	751,943	$	—	$	751,943
Interest income from investment securities		78,490		2,637		—		93,823		—		174,950		(120,538)		54,412
Servicing fees		549		—		—		41,806		—		42,355		(12,721)		29,634
Rental income		4,706		—		255,452		37,670		—		297,828		—		297,828
Other revenues		412		499		293		1,139		—		2,343		(5)		2,338
Total revenues		749,660		80,987		255,745		183,027		—		1,269,419		(133,264)		1,136,155
Costs and expenses:
Management fees		796		—		—		901		125,372		127,069		58		127,127
Interest expense		176,230		40,913		65,390		24,303		113,313		420,149		(386)		419,763
General and administrative		41,972		15,673		4,542		80,039		15,312		157,538		336		157,874
Acquisition and investment pursuit costs		2,406		1,183		12		(29)		—		3,572		—		3,572
Costs of rental operations		3,186		—		97,136		17,354		—		117,676		—		117,676
Depreciation and amortization		1,708		342		76,246		16,109		—		94,405		—		94,405
Credit loss provision (reversal), net		47,256		(4,103)		—		—		—		43,153		—		43,153
Other expense		307		—		531		—		—		838		—		838
Total costs and expenses		273,861		54,008		243,857		138,677		253,997		964,400		8		964,408
Other income (loss):
Change in net assets related to consolidated VIEs		—		—		—		—		—		—		78,258		78,258
Change in fair value of servicing rights		—		—		—		11,415		—		11,415		(15,130)		(3,715)
Change in fair value of investment securities, net		(15,108)		—		—		(51,403)		—		(66,511)		71,904		5,393
Change in fair value of mortgage loans, net		76,897		—		—		56,227		—		133,124		—		133,124
Earnings (loss) from unconsolidated entities		8,779		(767)		—		30,845		—		38,857		(1,540)		37,317
(Loss) gain on sale of investments and other assets, net		(961)		306		—		7,965		—		7,310		—		7,310
(Loss) gain on derivative financial instruments, net		(58,664)		(1,499)		(34,392)		(21,269)		33,646		(82,178)		—		(82,178)
Foreign currency gain (loss), net		42,205		207		(14)		(3)		—		42,395		—		42,395
Loss on extinguishment of debt		(22)		(959)		(2,185)		—		(488)		(3,654)		—		(3,654)
Other (loss) income, net		—		—		(166)		447		—		281		—		281
Total other income (loss)		53,126		(2,712)		(36,757)		34,224		33,158		81,039		133,492		214,531
Income (loss) before income taxes		528,925		24,267		(24,869)		78,574		(220,839)		386,058		220		386,278
Income tax (provision) benefit		(21,091)		(117)		—		1,011		—		(20,197)		—		(20,197)
Net income (loss)		507,834		24,150		(24,869)		79,585		(220,839)		365,861		220		366,081
Net income attributable to non-controlling interests		(14)		—		(20,394)		(13,764)		—		(34,172)		(220)		(34,392)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	507,820	$	24,150	$	(45,263)	$	65,821	$	(220,839)	$	331,689	$	—	$	331,689

Reconciliation of Net Income to Distributable Earnings
For the year ended December 31, 2020
(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.	$	507,820	$	24,150	$	(45,263)	$	65,821	$	(220,839)	$	331,689
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units		—		—		20,394		—		—		20,394
Non-cash equity compensation expense		4,454		1,120		219		4,594		20,854		31,241
Management incentive fee		—		—		—		—		30,773		30,773
Acquisition and investment pursuit costs		123		—		(355)		(72)		—		(304)
Depreciation and amortization		1,467		294		76,544		14,501		—		92,806
Credit loss provision (reversal), net		46,215		(4,103)		—		—		—		42,112
Interest income adjustment for securities		(864)		—		—		15,101		—		14,237
Extinguishment of debt, net		—		—		—		—		(986)		(986)
Income tax provision (benefit) associated with fair value adjustments		6,495		—		—		(405)		—		6,090
Other non-cash items		14		—		(2,063)		942		631		(476)
Reversal of GAAP unrealized (gains) / losses on:
Loans		(76,897)		—		—		(56,227)		—		(133,124)
Securities		15,108		—		—		51,403		—		66,511
Derivatives		56,862		1,365		30,113		19,768		(19,564)		88,544
Foreign currency		(42,205)		(207)		14		3		—		(42,395)
(Earnings) loss from unconsolidated entities		(8,779)		767		—		(30,845)		—		(38,857)
Recognition of Distributable realized gains / (losses) on:
Loans		48,203		(62)		—		55,287		—		103,428
Securities		398		—		—		(18,100)		—		(17,702)
Derivatives		(7,711)		118		(473)		(13,418)		—		(21,484)
Foreign currency		(4,810)		(133)		(14)		(3)		—		(4,960)
Earnings (loss) from unconsolidated entities		5,686		(382)		—		18,247		—		23,551
Sales of properties		—		—		—		(5,789)		—		(5,789)
Distributable Earnings (Loss)	$	551,579	$	22,927	$	79,116	$	120,808	$	(189,131)	$	585,299
Distributable Earnings (Loss) per Weighted Average Diluted Share	$	1.86	$	0.08	$	0.27	$	0.41	$	(0.64)	$	1.98

Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet by Segment
As of December 31, 2020
(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	$	160,007	$	4,440	$	32,080	$	19,546	$	346,372	$	562,445	$	772	$	563,217
Restricted cash		93,445		45,113		7,192		13,195		—		158,945		—		158,945
Loans held-for-investment, net		9,673,625		1,412,440		—		1,008		—		11,087,073		—		11,087,073
Loans held-for-sale		841,963		120,540		—		90,332		—		1,052,835		—		1,052,835
Investment securities		1,014,402		35,681		—		1,112,145		—		2,162,228		(1,425,570)		736,658
Properties, net		103,896		—		1,969,414		197,843		—		2,271,153		—		2,271,153
Intangible assets		—		—		40,370		71,123		—		111,493		(41,376)		70,117
Investment in unconsolidated entities		54,407		25,095		—		44,664		—		124,166		(16,112)		108,054
Goodwill		—		119,409		—		140,437		—		259,846		—		259,846
Derivative assets		6,595		—		41		147		33,772		40,555		—		40,555
Accrued interest receivable		87,922		2,091		—		123		5,978		96,114		(134)		95,980
Other assets		61,638		4,531		69,859		44,579		10,148		190,755		(7)		190,748
VIE assets, at fair value		—		—		—		—		—		—		64,238,328		64,238,328
Total Assets	$	12,097,900	$	1,769,340	$	2,118,956	$	1,735,142	$	396,270	$	18,117,608	$	62,755,901	$	80,873,509
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	41,104	$	12,144	$	43,630	$	45,309	$	64,583	$	206,770	$	75	$	206,845
Related-party payable		—		—		—		5		39,165		39,170		—		39,170
Dividends payable		—		—		—		—		137,959		137,959		—		137,959
Derivative liabilities		39,082		1,718		—		524		—		41,324		—		41,324
Secured financing agreements, net		5,893,999		1,240,763		1,794,609		606,100		632,719		10,168,190		(22,000)		10,146,190
Collateralized loan obligations, net		930,554		—		—		—		—		930,554		—		930,554
Unsecured senior notes, net		—		—		—		—		1,732,520		1,732,520		—		1,732,520
VIE liabilities, at fair value		—		—		—		—		—		—		62,776,371		62,776,371
Total Liabilities		6,904,739		1,254,625		1,838,239		651,938		2,606,946		13,256,487		62,754,446		76,010,933
Equity:
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock		—		—		—		—		2,921		2,921		—		2,921
Additional paid-in capital		1,192,584		496,387		98,882		(322,992)		3,744,878		5,209,739		—		5,209,739
Treasury stock		—		—		—		—		(138,022)		(138,022)		—		(138,022)
Accumulated other comprehensive income (loss)		44,057		—		—		(64)		—		43,993		—		43,993
Retained earnings (accumulated deficit)		3,956,405		18,328		(44,832)		1,260,819		(5,820,453)		(629,733)		—		(629,733)
Total Starwood Property Trust, Inc. Stockholders' Equity		5,193,046		514,715		54,050		937,763		(2,210,676)		4,488,898		—		4,488,898
Non-controlling interests in consolidated subsidiaries		115		—		226,667		145,441		—		372,223		1,455		373,678
Total Equity		5,193,161		514,715		280,717		1,083,204		(2,210,676)		4,861,121		1,455		4,862,576
Total Liabilities and Equity	$	12,097,900	$	1,769,340	$	2,118,956	$	1,735,142	$	396,270	$	18,117,608	$	62,755,901	$	80,873,509

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