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08/11/1999

Starwood Financial Reports 23% Increase in Second Quarter Earnings And $200 Million of Financing Transactions

Starwood Financial Reports 23% Increase in Second Quarter Earnings And $200 Million of Financing Transactions
    -- Second quarter 1999 earnings per share increased 23.4% to $0.46 from
       $0.38 for the second quarter of 1998.
    -- Net investment income grew 52.8% over second quarter 1998 to
       $35.2 million.
    -- Financing volume in the second quarter of 1999 totaled $199.8 million.

NEW YORK, Aug. 11 /PRNewswire/ -- Starwood Financial Trust (Amex: APT), the leading publicly traded finance company focused exclusively on the commercial real estate industry, reported that net income for the quarter ended June 30, 1999 increased 50.3% to $29.9 million from $19.9 million for the quarter ended June 30, 1998. Net income allocable to common shareholders for the second quarter (after preferred dividends) grew to $24.6 million, or $0.46 and $0.43 per basic and diluted Class A share, respectively, compared with $19.9 million, or $0.38 and $0.37 per basic and diluted share, in the 1998 period.

Funds from operations allocable to common shareholders for the quarter ended June 30, 1999 grew 22.8% to $0.49 and $0.46 per basic and diluted Class A share, respectively, from $0.40 and $0.39 per basic and diluted share for the 1998 period. Second quarter 1999 funds from operations allocable to common shareholders and revenue increased to $26.1 million and $59.3 million, respectively, from $21.3 million and $33.7 million for the second quarter 1998.

Net income attributable to common shareholders for the six months ended June 30, 1999, was $47.5 million, or $0.90 and $0.84 per basic and diluted Class A share, respectively, compared with $16.0 million, or $0.52 and $0.51 per basic and diluted Class A share for the same period in 1998. Funds from operations allocable to common shareholders were $50.6 million, or $0.95 and $0.89 per basic and diluted Class A share, respectively, for the first six months of 1999, compared with $17.6 million, or $0.57 and $0.56 per basic and diluted Class A share a year ago. Revenue for the 1999 six-month period totaled $114.7 million, versus $37.7 million a year ago. The Company's 1998 results reflect a partial period from its recapitalization transactions completed on March 18, 1998 through June 30, 1998.

Starwood Financial announced that during the second quarter, it closed five new financing commitments totaling $184.2 million, funded $15.6 million under five pre-existing commitments, and received $207.8 million in principal repayments. Starwood Financial's second quarter transactions continue to reflect the Company's core business strategy of originating and acquiring large balance, structured loans and credit tenant lease transactions secured by high-quality commercial real estate assets in major metropolitan markets across the United States.

Starwood Financial's new financing transactions during the quarter included another credit tenant lease transaction, in which Starwood Financial provided $64 million of first mortgage financing to the owner of an office/warehouse facility. The office component of this facility is 100% leased for 15 years to a AAA-rated credit tenant under a triple net, bond-type lease. Based on the value of the AAA lease, Starwood Financial obtained non-recourse, match funded financing for its investment from a commercial bank. As a result, Starwood Financial made a leveraged first mortgage investment, taking advantage of what the Company considered the most attractive portion of the property's capital structure and creating a match- funded return on equity in excess of 30%. In other credit lease transactions, Starwood Financial may choose to provide mezzanine financing or to own the property's equity subject to the credit lease.

    Selected Operating Results
    (Amounts in thousands, except per share data) (unaudited)

                                        Three months ended  Three months ended
                                           June 30, 1999      June 30, 1998

    Net investment income                       $35,174            $23,015
    Other income                                  3,525              1,291
    Non-interest expense                         (8,816)            (4,417)
    Net income                                  $29,883            $19,889
    Preferred dividends                          (5,308)                --
    Net income allocable to
     common shareholders                        $24,575            $19,889
    Net income allocable to
     Class A shares                             $24,329            $19,690
       Per basic share                            $0.46              $0.38
       Per diluted share                          $0.43              $0.37
    Funds from operations allocable
     to Class A shares                          $25,849            $21,050
       Per basic share                            $0.49              $0.40
       Per diluted share                          $0.46              $0.39
    Dividends                                     $0.43              $0.35
    Weighted average Class A shares
    outstanding *:
       Basic                                     52,471             52,390
       Diluted                                   56,602             54,178

    * As adjusted for a one-for-six reverse stock split effective
      June 19, 1998.

    Selected Balance Sheet Data
    (Amounts in thousands)
                                                  As of              As of
                                          June 30, 1999  December 31, 1998
                                            (unaudited)
    Real estate loans and related
     investments, net                        $2,116,683         $2,013,703
    Total assets                              2,171,628          2,059,616
    Debt obligations                          1,160,885          1,055,719
    Total liabilities                         1,169,457          1,088,888
    Total shareholders' equity                1,002,171            970,728

Transaction Volume

During the second quarter of 1999, Starwood Financial generated $184.2 million in new financing commitments, $182.0 million of which have been funded, in five transactions. The Company's transactions included a mix of mortgage and mezzanine loans primarily backed by residential, office and hotel properties. The Company also funded an additional $15.6 million under five pre-existing financing commitments during the quarter.

Funding Activities

During the second quarter of 1999, Starwood Financial funded its origination and acquisition activities with cash on hand and borrowings under term loans and its revolving credit facilities. At quarter end, $711.0 million was outstanding under $1.2 billion of committed credit facilities. In addition, the Company completed a $54.0 million secured term loan with a commercial bank to match fund one of the loans it originated during the quarter.

Starwood Financial's ratio of consolidated debt obligations to book shareholders' equity was 1.2x as of June 30, 1999, based on debt obligations of $1.2 billion and shareholders' equity of $1.0 billion.

TriNet Transaction

On July 26, Starwood Financial and TriNet Corporate Realty Trust, Inc. filed, on a confidential basis with the Securities and Exchange Commission, a joint proxy and registration statement covering their proposed merger announced on June 16. The terms of the merger described in the proxy are identical to those detailed in the merger agreement filed as an exhibit to Starwood Financial's Form 8-K on June 21.

Starwood Financial and TriNet will circulate the joint proxy and registration statement to shareholders following its being declared effective by the SEC. The companies currently expect the merger to close, subject to shareholder approval, early in the fourth quarter of 1999.

Starwood Financial and TriNet have developed a preliminary plan to integrate the two organizations and are now implementing the integration process. In this regard, both companies have:


    -- Established integration task forces comprised of senior executives from
       Starwood Financial and TriNet in each of six key disciplines.
    -- Created a unified organizational chart and preliminary roles and
       responsibilities for key management personnel in the combined company.
    -- Begun aligning their investment, financing and asset management
       activities.

In the integration process, the companies have adopted a "best practices" policy to leverage the complementary strengths of both companies. The companies have also retained a third-party management consultant to assist in the integration process.

Other Developments

On July 1, 1999, Starwood Financial announced an increase in its regular quarterly cash dividend to $0.43 per Class A share for the quarter ended June 30, 1999. The dividend, which was paid on July 29 to holders of record as of July 15, represented approximately 87% of funds from operations for the second quarter.

Starwood Financial is the leading publicly traded finance company focused exclusively on the commercial real estate industry. The Company, which is taxed as a real estate investment trust, provides structured mortgage, mezzanine and lease financing through its proprietary origination, acquisition and servicing platform. The Company's mission is to maximize risk-adjusted returns on equity by providing innovative and value-added financing solutions to the real estate industry.

Note: Statements in this press release which are not historical fact may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Starwood Financial Trust believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from Starwood Financial Trust's expectations include completion of pending investments, continued availability to originate new investments, the availability and cost of capital for future investments, competition within the real estate industry, real estate and economic conditions, and other risks detailed from time to time in Starwood Financial Trust's SEC reports.

For more information about Starwood Financial Trust, please call 1-800-PRO-INFO and enter ticker symbol APT.


                           Starwood Financial Trust
                    Consolidated Statements of Operations
                (Amounts in thousands, except per share data)
                                 (unaudited)

                                        Three months ended  Three months ended
                                           June 30, 1999       June 30, 1998

    Revenue:
      Interest income                           $52,007            $28,663
      Operating lease income                      3,723              3,750
      Other income                                3,525              1,291
        Total revenue                            59,255             33,704

    Costs and expenses:
      Interest expense                           20,556              9,398
      Operating lease depreciation                1,365              1,374
      Corporate and other                         6,201              2,293
      Provision for possible credit losses        1,250                750
        Total costs and expenses                 29,372             13,815

    Net income                                  $29,883            $19,889

    Preferred dividends                          (5,308)                --

    Net income allocable to
     common shareholders                        $24,575            $19,889

    Net income - Class A shares                 $24,329            $19,690

    Net income per Class A share:
      Basic                                       $0.46              $0.38
      Diluted                                     $0.43              $0.37

    Weighted average Class A shares
     outstanding(A):
      Basic                                      52,471             52,390
      Diluted                                    56,602             54,178

    (A) As adjusted for a one-for-six reverse stock split effective
        June 19, 1998.


                           Starwood Financial Trust
                    Consolidated Statements of Operations
                (Amounts in thousands, except per share data)
                                 (unaudited)

                                         Six months ended    Six months ended
                                           June 30, 1999       June 30, 1998
    Revenue:
      Interest income                          $101,926            $31,956
      Operating lease income                      7,450              4,274
      Other income                                5,303              1,440
        Total revenue                           114,679             37,670

    Costs and expenses:
      Interest expense                           40,249             10,494
      Operating lease depreciation                2,730              1,569
      Corporate and other                        11,350              2,804
      Provision for possible credit losses        2,250                750
      Stock option compensation expense              --              5,985
        Total costs and expenses                 56,579             21,602

    Net income before minority interest          58,100             16,068

    Minority interest                                --                (54)

    Net income                                  $58,100            $16,014

    Preferred dividends                         (10,615)                --

    Net income allocable to
     common shareholders                        $47,485            $16,014

    Net income - Class A shares                 $47,010            $15,854

    Net income per Class A share:
      Basic                                       $0.90              $0.52
      Diluted                                     $0.84              $0.51

    Weighted average Class A shares
     outstanding(A):
      Basic                                      52,459             30,637
      Diluted                                    56,588             31,665

    (A) As adjusted for a one-for-six reverse stock split effective
        June 19, 1998.


                             Starwood Financial Trust
                              Balance Sheet Data
                            (Amounts in thousands)

                                                  As of              As of
                                          June 30, 1999  December 31, 1998
                                            (unaudited)
    ASSETS

    Loans and other
     investments, net                        $2,116,683         $2,013,703
    Investment in corporations                      409                522
    Cash and cash equivalents                    19,518             10,110
    Restricted cash                               3,497              5,699
    Marketable securities                         4,862              5,406
    Accrued interest and rent
     receivable                                  12,333             13,122
    Other assets                                 14,326             11,054
        Total assets                         $2,171,628         $2,059,616

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Accounts payable, accrued expenses
     and other liabilities                       $8,572            $10,536
    Dividends payable                                --             22,633
    Debt obligations
      Revolving credit facilities               711,017            640,945
      Term loans                                410,268            368,683
      Other debt obligations                     39,600             46,091
        Total liabilities                     1,169,457          1,088,888
    Minority interest                                --                 --
    Shareholders' equity                      1,002,171            970,728
        Total liabilities and
         shareholders' equity                $2,171,628         $2,059,616

SOURCE Starwood Financial Trust
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