Starwood REIT Loses $1.1m in Q409
Starwood Property Trust (STWD) posted a net lost $1.1m, or $0.02 per share, in Q409, ending the real estate investment trust’s (REIT) less than five months in existence with a $3m, or $0.06 per share, net loss. The Starwood REIT was established on August 17, 2009 to focus on originating, investing in, and financing commercial mortgage loans and other commercial real estate-related debt investments. The company said its core loss since its inception was $596,000 at the end of 2009. Core earnings, or loss, are a non-general accepted accounting principal (GAAP) used to compute the company’s incentive fees to the manager. However, in Q409, core earnings were $501,000, or $0.01 per share. “We are encouraged by the Company's current portfolio, with investments now approaching $1bn in assets in less than six months, much of which occurred subsequent to year-end,” said chairman and CEO Barry Sternlicht. Since August, net interest generated from investments was $5m, and the REIT said it earned $1.7m in interest from its cash balances. Starwood paid out $2.4m in non-cash, stock-based compensation since August. In Q409, net interest from investments was $4.4m and interest from cash balances was $1.1m. Non-cash, stock-based compensation in Q409 was $1.6m. “Our pipeline of transactions has begun to accelerate in quantity as the markets have evolved, and we believe meaningful opportunities for us will continue to develop as the credit markets improve,” Sternlicht said. “The markets do not yet need to replace the significant lending capacity that has exited the market, with transaction volume down in excess of 80% year over year; this normalization process should provide a tremendous opportunity for us.” As HousingWire previously reported, Starwood announced it completed completed the purchase of a portfolio of 20 performing commercial mortgage loans and B notes from Teachers Insurance and Annuity Association of America (TIAA) on February 26, 2010. Starwood paid $512m for the loans, including $2.5m in accrued interest, all from cash reserves. The loans are secured by 4.5m square feet of retail and office assets across 10 states. All told, the real estate is 96% occupied. “We remain focused on safety and yield and have built a very solid foundation to deliver both. The TIAA acquisition will be levered as needed and we expect that this investment will produce a better than 12% levered cash on cash return with match funded debt on maturities exceeding 12 months,” Sternlicht said. Last Friday, Starwood announced its board of directors declared a dividend of $0.22 per common share for the quarter ending March 31, 2010. The dividend is payable on April 15, 2010 to common shareholders of record on March 31, 2010. “As we invest our remaining cash, we will apply appropriate leverage to our unlevered portfolio to free additional investment capital; which, when invested will further enhance our operating results,” Sternlicht continued. “We are optimistic that we can translate increased capacity and enhanced returns into strong EBITDA [earnings before interest, taxes, depreciation and amortization] to support a stable and growing dividend.” Write to Austin Kilgore. The author held no relevant investments.