Starwood Property Trust Inc. · NYSE:STWD
Starwood Property Trust — Q1 2018 Earnings Presentation
40 slides from Starwood Property Trust's earnings presentation, May 4, 2018
Slide 1: Q1 2018 Supplemental Reporting Information
Q1 SUPPLEMENTAL REPORTING 2018 INFORMATION
Slide 2: Table of Contents
Table of Contents Press Release Page 2 Highlights Page 8 Lending Segment Page 11 Property Segment Page 18 Investing and Servicing Segment Page 23 Capitalization Page 26 Appendix Page 33 Cover photo: 11 Hoyt Street, Brooklyn, NY - $170M mortgage loan. Rendering courtesy of Binyan Studios 1
Slide 3: Press Release
PRESS RELEASE
Slide 4: Starwood Property Trust Reports Results for the Quarter Ended March 31, 2018
For Immediate Release Starwood Property Trust Reports Results for the Quarter Ended March 31, 2018 – Quarterly GAAP Earnings of $0.38 and Core Earnings of $0.58 per Diluted Common Share – – Deploys $2.0 Billion of Capital – – Closes $405 Million of Previously Announced $595 Million Affordable Housin
Slide 5: Conference Call and Webcast Information
Conference Call and Webcast Information The Company will host a webcast and conference call on Friday, May 4, 2018, at 10:00 a.m. Eastern Time to discuss the quarter’s financial results and recent events. A webcast will be available on the Company’s website at www.starwoodpropertytrust.com. To liste
Slide 6: Condensed Consolidated Statement of Operations by Segment
Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Statement of Operations by Segment For the three months ended March 31, 2018 (Amounts in thousands) Investing Investing Lending Property and Servicing and Servicing Segment Segment Segment Corporate Subtotal VIEs Total Revenues: I
Slide 7: Definition of Core Earnings
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
Slide 8: Condensed Consolidated Balance Sheet by Segment
Starwood Property Trust, Inc. and Subsidiaries Condensed Consolidated Balance Sheet by Segment As of March 31, 2018 (Amounts in thousands) Investing Investing Lending Property and Servicing and Servicing Segment Segment Segment Corporate Subtotal VIEs Total Assets: Cash and cash equivalents $ 30,048
Slide 9: Highlights
HIGHLIGHTS
Slide 10: Business Highlights
Business Highlights First Quarter: Core Earnings of $0.58 and GAAP Earnings of $0.38 per diluted share Deployed $2B of capital, including $1.3B in Lending Segment Closed on 18, or $405M, of the 27-property affordable housing portfolio purchase we announced last quarter, bringing total proper
Slide 11: Segment Highlights
Segment Highlights Core and GAAP Earnings of $113M and $110M, respectively Commercial lending investment activity of $1.2B with an optimal asset-level return of 12.3%(3), of which $743M was funded Lending $169M of fundings on previously originated loans Commercial lending repayments of $1.5B
Slide 12: Lending Segment
LENDING SEGMENT
Slide 13: Commercial Loan Originations During the Quarter
Commercial Loan Originations During the Quarter Property Type Other Originated or acquired $1.2B 10% Office 34% Funded $743M of new loans Multifamily 89% senior loans 17% 100% floating rate Weighted average LTV of 63% Hotel Residential 18% 21% Average loan size: $103M Fundings under pr
Slide 14: Significant Activity During the Quarter
Significant Activity During the Quarter Commercial lending investment activity of $1.2B, including: $214M first mortgage and mezzanine loan for the acquisition of a 1.2M square foot Class A office tower located in Houston, Texas $170M first mortgage loan for the development of a 53-story resid
Slide 15: Investment Portfolio Carrying Value
Investment Portfolio Carrying Value $ millions March 31, Dec 31, Sept 30, June 30, March 31, Asset Carrying Values 2018 2017 2017 2017 2017 First mortgage loans held for inv estment(4) $ 5,429 $ 5,811 $ 5,518 $ 5,303 $ 5,183 Subordinated mortgages held for inv estment 177 177 223 273 295 Mezzanine l
Slide 16: Target Portfolio Returns
Target Portfolio Returns As of March 31, 2018 As of December 31, 2017 As of March 31, 2017 Optimal Optimal Optimal Return on Return on Return on Asset Returns Asset-Level Asset-Level Asset-Level Asset Asset Asset Return (3) Return (3) Return (3) First mortgage loans held for inv estment(4) 6.9% 11.2
Slide 17: Target Portfolio Snapshot
Target Portfolio Snapshot $ millions Geographic Diversification Collateral Diversification PROPERTY TYPE Northeast Carrying Value as of: West March 31, 2018 March 31, 2017 Office $ 2,299 36% $ 2,279 34% Midwest 27% 21% Hotel 1,337 21% 1,281 19% Mixed-Use 652 10% 1,225 18% 6% Multifamily 610 10% 301
Slide 18: Migration of Weighted Average LTV or LTC
Migration of Weighted Average LTV or LTC (7) $ billions 80.0% 7.0 Weighted Average Ending LTV / LTC of Loan Portfolio First mortgages 6.0 held for sale at fair 75.0% value Dollar (Carrying values in billions) Preferred Equity 5.0 70.0% Mezzanine loans 4.0 held for investment 65.0% 63.8% 62.9% 63.4%
Slide 19: Property Segment
PROPERTY SEGMENT 25
Slide 20: Investment Portfolio
Investment Portfolio $ millions Closed on 18, or $405M, of the 27-property affordable housing portfolio purchase we announced last quarter, bringing total properties acquired to 26 for $561M Issued 7.0M OP units in connection with this purchase, plus 1.3M contingently issuable OP units Sold tw
Slide 21: Portfolio Snapshot
Portfolio Snapshot $ millions Geographic Diversification (11) Collateral Diversification Northeast Property Type Undepreciated Carrying Value as of: March 31, 2018 March 31, 2017 8% Wholly Owned: West Midwest Office $ 1,299 43% $ 1,233 66% 8% Multifamily 1,204 40% 627 34% Mid-Atlantic Retail 392 13%
Slide 22: Portfolio Snapshot: Medical Office and Master Lease
Portfolio Snapshot (11) $ millions, square footage in thousands Medical Office Portfolio Northeast Gross West Occupancy Sq. Ft. Investment Midwest 30% Midwest $ 108 87% 325 17% 15% Northeast 228 100% 430 Southeast 139 98% 366 Texas Southeast Texas 155 90% 457 West 130 86% 372 20% 18% Total $ 760 92%
Slide 23: Portfolio Snapshot: Woodstar and Ireland
Portfolio Snapshot (11) $ millions, square footage in thousands Woodstar Ireland Portfolio Gross Gross Florida Occupancy Units Occupancy Sq. Ft. Investment Investment North $ 75 95% 1,230 Total $ 558 100% 601 Central 905 99% 11,567 South 204 99% 1,948 Total $ 1,184 99% 14,745 North 6% Dublin Central
Slide 24: Investing and Servicing Segment
INVESTING AND SERVICING SEGMENT 21
Slide 25: Investment Portfolio
Investment Portfolio $ millions Significant Activity During the Quarter: Securitized $257M of conduit loans in one transaction Awarded special servicing on three new issue CMBS trusts totaling $2B of collateral Acquired a $30M new issue B-piece Sold three properties with an aggregate Core ca
Slide 26: CMBS and Special Servicing
CMBS and Special Servicing $ millions Owned CMBS by Vintage (13) LNR Special Servicer Portfolio Stats CMBS 2.0/3.0 86% Named SS: $250 # of CMBS Trusts 160 Unpaid Balance $ 72,906 $200 CMBS 1.0 Active SS: 14% SS Loan Balance $ 4,688 $150 REO Loan Balance $ 4,465 Total Active SS Balance $ 9,153 $100
Slide 27: Capitalization
CAPITALIZATION 27
Slide 28: Capitalization Highlights
Capitalization Highlights During the Quarter Issued $500M of 3.625% senior unsecured notes due 2021 swapped to L + 128 bps Repurchased 573k shares of common stock for $12M Issued 7.0M OP units and 1.3M contingently issuable OP units which are redeemable for common stock in connection with th
Slide 29: Capitalization Overview
Capitalization Overview Credit Metrics Net Debt-to-Equity Ratios (1) Total capitalization of $13.3B 2.0x Interest coverage ratio of 2.7x 1.5x Current corporate issuer rating of Ba2/BB; Outlook Stable Total unencumbered assets of $3.6B Unencumbered assets to unsecured debt ratio of 1.59x Ex
Slide 30: Financing Facilities
Financing Facilities $ millions Debt Obligations Maximum Available Type Facility Size (14) Drawn (15) Capacity Asset Specific Financing: Large Loans $ 5,590 $ 2,338 $ 3,252 Properties 2,223 2,160 63 Residential Loans 645 445 200 Conduit Loans 450 32 418 MBS 540 322 218 Subtotal - Asset Specific Fina
Slide 31: Interest Rate Sensitivity
Interest Rate Sensitivity The Company will continue to benefit from a rising interest rate environment 92.9% of the Lending Segment’s commercial loan portfolio is indexed to LIBOR Net Interest Income Per Share Sensitivity to LIBOR $0.21 $0.20 $0.14 $0.13 $0.07 $0.06 $0.00 1.0% Increase 2.0% Incr
Slide 32: Financial Capacity
Financial Capacity ($ millions) Capacity to originate or acquire up to an additional $2.9B of new investments $3,500 $709 ($230) ($225) $3,000 $2,851 $1,930 $2,500 $2,000 $1,500 $1,000 $415 $500 $99 $153 $0 Cash and Net equity Approved Unallocated 90-day 90-day Cash Capacity to equivalents investe
Slide 33: Share Count
Share Count (shares in thousands) 2018 Prior Year - 2017 2017 Q1 Q1 Q2 Q3 Q4 Full Year Number of Shares, GAAP: Basic — Av erage shares outstanding 260,664 258,997 259,472 259,759 260,236 259,620 Effect of dilutiv e securities — Conv ertible Notes Conv ersion Spread 1,209 3,220 3,142 2,313 1,942 1,89
Slide 34: Appendix
APPENDIX 34
Slide 35: Company Information
Company Information Starwood Property Trust, an affiliate of global private investment firm Starwood Capital Group, is the largest commercial mortgage real estate investment trust in the United States. Additional information may be found on the Company’s website, www.starwoodpropertytrust.com Contac
Slide 36: Footnotes
Footnotes 1. Debt represents $7.9B of secured and unsecured financing agreements at March 31, 2018. Equity represents undepreciated equity, which equals $4.7B of GAAP equity including non-controlling interests and increased for $205.1M of accumulated depreciation and amortization at March 31, 2018.
Slide 37: Footnotes, continued
Footnotes, continued 12. Differences between face amount and carrying value are principally attributable to purchase discounts and changes in fair value. Face amounts of $4,142M, $4,132M, $4,075M, $4,131M and $4,256M as of March 31, 2018, December 31, 2017, September 30, 2017, June 30, 2017 and Marc
Slide 38: Calculation Methodologies
Calculation Methodologies Lending Segment LTV & LTC For loans which utilize property value as the denominator, value is determined by reference to either appraisals, desk underwriting, discussions with brokers and other experts, or any combination thereof. To the extent that a loan has been newl
Slide 39: 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 40: NYSE: STWD
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Starwood Property Trust — Q1 2018 Earnings Presentation on 6ix