Starwood Property Trust Inc. · NYSE:STWD
Starwood Property Trust — Q3 2022 Earnings Presentation
48 slides from Starwood Property Trust's earnings presentation, Nov 9, 2022
Slide 1: Q3 2022 Supplemental Reporting Information
Q3 SUPPLEMENTAL REPORTING 2022 INFORMATION
Slide 2: Table of Contents
Table of Contents Press Release Page 1 Highlights Page 9 Commercial and Residential Lending Segment Page 11 Infrastructure Lending Segment Page 19 Property Segment Page 20 Investing and Servicing Segment Page 23 Capitalization Page 25 Appendix Page 32 Cover photo: Scape Kingsford; Sydney, New South
Slide 3: Press Release
PRESS RELEASE
Slide 4: Starwood Property Trust Reports Results for Quarter Ended September 30, 2022
For Immediate Release Starwood Property Trust Reports Results for Quarter Ended September 30, 2022 – Quarterly GAAP Earnings of $0.61 and Distributable Earnings (DE) of $0.51 per Diluted Share – – $1.3 Billion of Investment Activity, Including $0.9 Billion in Commercial Lending – – Undepreciated Boo
Slide 5: Webcast and Conference Call Information
Webcast and Conference Call Information The Company will host a live webcast and conference call on Wednesday, November 9, 2022, 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
Slide 6: Contact: Zachary Tanenbaum
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 3
Slide 7: Condensed Consolidated Statement of Operations by Segment (Three Months)
Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Statement of Operations by Segment For the three months ended September 30, 2022 (Amounts in thousands) Commercial and Residential Infrastructure Investing Lending Lending Property and Servicing Securitization Segment Segment Segm
Slide 8: Definition of Distributable Earnings
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
Slide 9: Condensed Consolidated Statement of Operations by Segment (Nine Months)
Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Statement of Operations by Segment For the nine months ended September 30, 2022 (Amounts in thousands) Commercial and Residential Infrastructure Investing Lending Lending Property and Servicing Securitization Segment Segment Segme
Slide 10: Reconciliation of Net Income to Distributable Earnings
Reconciliation of Net Income to Distributable Earnings For the nine months ended September 30, 2022 (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
Slide 11: Condensed Consolidated Balance Sheet by Segment
Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Balance Sheet by Segment As of September 30, 2022 (Amounts in thousands) Commercial and Residential Infrastructure Investing Lending Lending Property and Servicing Securitization Segment Segment Segment Segment Corporate Subtotal
Slide 12: Highlights
HIGHLIGHTS
Slide 13: STWD Highlights
STWD Highlights Leading diverse global multi-cylinder platform Robust Capital Deployment $1.3B of new investments and fundings across business lines Record $27.5B of total assets with an Strong Balance Sheet adjusted debt-to-equity ratio of 2.4x and current liquidity of $1.3B Correlation to Rising R
Slide 14: Q3 2022 Highlights
Q3 2022 Highlights • GAAP book value per share increased by $0.14 to $20.82, with undepreciated book value increasing by $0.18 to $21.69 • Distributable Earnings ("DE") of $0.51 and GAAP earnings of $0.61 per diluted share; dividend of $0.48 • Originated or acquired $1.3B of assets across business l
Slide 15: Commercial and Residential Lending Segment
COMMERCIAL AND RESIDENTIAL LENDING SEGMENT
Slide 16: Commercial Lending Portfolio
Commercial Lending Portfolio Q3 Activity • $657M funded on new investments • $211M follow on fundings • $588M repayments and sales $16.4B Total Portfolio 61% W.A. LTV 4 5 Industrial Residential (3 loans) 1 5% 2% (4 loans) (3 loans) Mixed Use 9% 3 2 Multifamily Property Type (1) 34% (93 loans) (2) (7
Slide 17: Commercial Portfolio Collateral Mix Transformation
Commercial Portfolio Collateral Mix Transformation Ø 66% of our portfolio represents post-COVID originations, with an evolving collateral mix that has more multifamily and industrial and less retail and office December 31, 2019 POST-COVID TRANSFORMATION September 30, 2022 1% 8% 2% 5% 13% 13% Post-CO
Slide 18: Commercial Portfolio - Top Property Types
Commercial Portfolio - Top 3 Property Types $ millions MSA $ Loans US Regions (86%): Dallas, TX $ 689 16 • 26% Southeast Multifamily United Kingdom $ 593 4 • 26% Southwest $5.5B • 13% West Phoenix, AZ $ 582 8 • 13% Northeast 63% WA LTV Miami, FL $ 452 3 • 7% Mid-Atlantic Los Angeles, CA $ 376 4 • 1%
Slide 19: Commercial Portfolio Geographic Diversification
(3) Commercial Portfolio Geographic Diversification 2% Manhattan U.S. Southeast 17 % Northeast 16 % Southwest 16 % West 13 % Mid-Atlantic 9% Midwest 3% Europe Australia Bahamas / Bermuda Europe: International UK 13 % Ireland 2% Italy 1% Other Europe 1% Australia 7% Bahamas/Bermuda 2% NOTE: Amounts a
Slide 20: Commercial Portfolio Metrics
Commercial Portfolio Metrics $ millions Asset Carrying Values Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 (4) First mortgage loans held-for-investment $ 15,164 $ 15,104 $ 13,587 $ 12,981 $ 10,985 (4) Subordinated mortgages 70 69 71 71 81 (4) Mezzanine loans 438 434 425 418 477 C
Slide 21: Commercial Portfolio LTV
(6) Commercial Portfolio LTV $ billions First Mortgages Subordinated Mortgages Mezzanine Mortgages Preferred Equity 80% 17.0 Weighted Average Ending LTV / LTC of Loan Portfolio 16.0 75% 15.0 Dollar (Carrying values in billions) 14.0 70% 13.0 65% 12.0 64% 65% 11.0 61% 61% 61% 61% 61% 61% 61% 60% 60%
Slide 22: Top Commercial Lending Commitments
Top 10 Commercial Lending Commitments $ millions Origination Fully Extended Loan Loan Type Location Property Type UPB LTV Date Maturity Date Commitment Senior Jun 2022 Jun 2029 Various, Australia Other $ 881.6 $ 881.6 58% Senior/Mezz Dec 2021 Dec 2025 Various, Ireland Industrial 448.8 81.2 57% Senio
Slide 23: Residential Portfolio
Residential Portfolio $ millions Significant Activity During the Quarter: Ø Net unrealized fair value decreases of $46M, comprised of: (i) $92M of unrealized fair value decreases in loans; and (ii) $56M loss contingency related to an agency loan acquisition which closed in October 2022; offset by (i
Slide 24: Infrastructure Lending Segment
INFRASTRUCTURE LENDING SEGMENT 25
Slide 25: Infrastructure Portfolio Metrics and Activity
Portfolio Metrics and Activity Q3 Activity • $223M funded on new loans • $2M follow on fundings $2.5B • $99M repayments Total Portfolio Other Thermal 1% Northeast Midstream / Downstream 39% 37% Geographic Location Southwest 21% (8) Sector Other - Int'l 1% Midwest Mexico 2% 21% West Southeast Thermal
Slide 26: Property Segment
PROPERTY SEGMENT 25
Slide 27: Property Segment Investment Portfolio
Investment Portfolio $ millions Significant Activity During the Quarter: Ø Unrealized fair value increases of $103M (or $82M, net of 20.6% non-controlling interests) in the Woodstar I and Woodstar II affordable housing portfolios held by our Woodstar Fund, driven primarily by increased net operating
Slide 28: Woodstar Fund
Woodstar Fund (the "Fund") $ millions Ø The Fund, which was formed in Q4 2021, holds the 15,057 affordable housing units comprising the Woodstar I and Woodstar II portfolios and is accounted for under ASC 946, Financial Services – Investment Companies, with its investments reported on our consolidat
Slide 29: Portfolio Snapshot
Portfolio Snapshot $ millions, sq. ft. in thousands Woodstar Fund Medical Office Master Lease Gross Gross Region % Occupancy Units Region % Occupancy Sq. Ft. Region % Occupancy Sq. Ft. investment investment North 6% 92% 1,230 Northeast 30% $ 228 100% 430 Midwest 36% $ 123 100% 757 Central 76% 99% 11
Slide 30: Investing and Servicing Segment
INVESTING AND SERVICING SEGMENT 21
Slide 31: Investing and Servicing Investment Portfolio
Investment Portfolio $ millions Significant Activity During the Quarter: Ø Priced $71M of conduit loans in a single transaction Ø Obtained 8 new servicing assignments with a UPB of $5.7B, bringing our named portfolio to $107.4B Ø Sold a property for gross proceeds of $20M, a net DE gain of $12M, and
Slide 32: CMBS and Special Servicing
CMBS and Special Servicing (11) Owned CMBS by Vintage LNR Special Servicer $ millions $ billions Named SS: 186 $107.4B $250 CMBS Trusts Loan Balance $200 $150 Named SS Balance $150 $100 $100 $50 $50 $0 '18 '19 '14 '20 '15 '21 '16 '22 '17 '18 '19 '13 '20 '14 '21 '15 '22 '16 '17 08 11 12 13 14 15 16 1
Slide 33: Capitalization
CAPITALIZATION 27
Slide 34: Capitalization Overview
Capitalization Overview Credit Metrics Adjusted Debt-to-Equity Ratios 3.8x Ba2 / BB / BB+ Current Corporate Issuer Rating Off-Balance Sheet $3.9B Total Unencumbered Assets 2.4x 1.7x On-Balance Interest Coverage Ratio Sheet 1.7x Unencumbered Assets to Unsecured Debt (12) Adjusted On Balance Sheet Lev
Slide 35: Capitalization Overview, continued
Capitalization Overview, continued $ billions Ø 89% of our outstanding debt does not permit valuation adjustments based on capital market events Total Debt Outstanding Margin Call Provisions (including off-balance sheet) (including off-balance sheet) Secured Debt Spread and Credit $13.6 $3.0 Unsecur
Slide 36: Book Value and Fair Value per Share Bridge
Book Value and Fair Value per Share Bridge $0.74 $22.43 $0.87 $21.69 $20.82 Q3'22 Q3'22 Q3'22 Current Current GAAP Accumulated Undepreciated FMV Adjustment* FMV Book Value Depreciation Book Value • Represents the difference between our cost basis and our estimate of fair value. The determination of
Slide 37: Interest Rate Sensitivity
Interest Rate Sensitivity Ø Our commercial and infrastructure lending portfolios are positively correlated to rising rates Annual Net Interest Income $ millions Commercial Lending Portfolio is 99% Floating $80 Infrastructure Lending Portfolio is 97% Floating $63 $60 $42 $40 $21 $20 $0 $(10) $(20) 1.
Slide 38: Financing Facilities
Financing Facilities $ millions $24.4B $8.5B 24 Max Facility Size Available Capacity Counterparties Debt Obligations Maximum Facility (14) Available Type (14) Drawn Size Capacity Asset Specific Financing: Large Loans, Commercial $ 13,485 $ 8,243 $ 5,242 Infrastructure Lending Segment 2,202 1,110 1,0
Slide 39: Financial Capacity
Financial Capacity Total Available Capital + Available On-BS Financing (15) $ $ 1,209 7,599 $ millions Total Potential Liquidity $ 8,808 $1,800 $368 $(221) $1,500 $(225) $582 $1,287 $1,209 $1,200 $900 $451 $600 $300 $254 $0 Cash & Approved New Term Current 90-day 90-day Working Total equivalents and
Slide 40: Share Count
Share Count shares in thousands 2022 2022 Q3 Q2 Q1 YTD Number of Shares, GAAP EPS: Basic — Average shares outstanding 306,704 305,035 302,944 304,908 Effect of dilutive securities — Convertible Notes 9,649 9,649 9,649 9,649 Effect of dilutive securities — Other 222 278 736 184 Diluted — Average shar
Slide 41: Appendix
APPENDIX 34
Slide 42: Company Information
Company Information Starwood Property Trust, an affiliate of global private investment firm Starwood Capital Group Global L.P., is the largest commercial mortgage real estate investment trust in the United States. Additional information may be found on the Company’s website, www.starwoodpropertytrus
Slide 43: Footnotes
Footnotes 1. Excludes $776M of commercial portfolio which are classfied as CMBS and preferred equity investments. 2. Includes other property types not specifically identified in the applicable table, including gaming resorts, exhibition centers, land development, and car wash. 3. Excludes <1.0% of C
Slide 44: Footnotes, continued
Footnotes, continued 11. Excludes non-controlling JV interests. CMBS 1.0 deals were originated prior to 2008. CMBS 2.0 / 3.0 deals were originated from 2009 forward. Different credit underwriting and regulatory requirements are applied to CMBS 2.0 / 3.0. 12. Represents (i) total outstanding secured
Slide 45: Calculation Methodologies
Calculation Methodologies Ø Commercial and Residential Lending Segment LTV ▪ In order to determine LTV, we utilize the GAAP hierarchy of valuation techniques based on the observability of inputs utilized in measuring fair value. In doing so, market-based or observable inputs are the preferred source
Slide 46: Ratings Criteria
Ratings Criteria Rating Characteristics 1 ▪ Sponsor capability and financial condition – Sponsor is highly rated or investment grade or, if private, the equivalent thereof with significant management experience. ▪ Loan collateral and performance relative to underwriting – The collateral has surpasse
Slide 47: Special Note Regarding Forward-Looking Statements
Special Note Regarding Forward-Looking Statements This presentation contains certain forward-looking statements, including without limitation, statements concerning the Company’s operations, economic performance and financial condition. These forward-looking statements are made pursuant to the safe
Slide 48: NYSE: STWD
NYSE : STWD
Starwood Property Trust — Q3 2022 Earnings Presentation on 6ix