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11/12/1999

Starwood Financial Announces 24% Increase In Third Quarter Earnings Per Share

Starwood Financial Announces 24% Increase in Third Quarter Earnings Per Share

-- Third quarter 1999 earnings per share increased 23.7% to $0.49 from $0.40 for third quarter 1998. -- Net investment income grew 40.0% over third quarter 1998 to $36.1 million. -- Financing volume since beginning of third quarter 1999 totaled $84.5 million. -- Tangible book equity capital surpassed $1.0 billion.

NEW YORK, Nov. 12 /PRNewswire/ -- Starwood Financial Inc. (NYSE: SFI - news), the leading publicly traded finance company focused on the commercial real estate industry, reported that net income for the quarter ended September 30, 1999 increased 49.4% to $31.3 million from $20.9 million for the quarter ended September 30, 1998. Net income allocable to common shareholders for the third quarter (after preferred dividends) grew to $26.0 million, or $0.49 and $0.47 per basic and diluted Class A share, respectively, compared with $20.9 million, or $0.40 and $0.38 per basic and diluted share, in the 1998 period.

Funds from operations allocable to common shareholders for the quarter ended September 30, 1999 grew 23.3% to $0.52 and $0.50 per basic and diluted Class A share, respectively, from $0.42 and $0.41 per basic and diluted share for the 1998 period. Third quarter 1999 funds from operations allocable to common shareholders and revenue increased to $27.5 million and $60.6 million, respectively, from $22.3 million and $42.1 million for the third quarter of 1998.

Net income allocable to common shareholders for the nine months ended September 30, 1999, was $73.4 million, or $1.39 and $1.31 per basic and diluted Class A share, respectively, compared with $36.9 million, or $0.96 and $0.94 per basic and diluted Class A share, for the same period in 1998. Funds from operations allocable to common shareholders were $78.1 million, or $1.47 and $1.39 per basic and diluted Class A share, respectively, for the first nine months of 1999, compared with $39.9 million, or $1.04 and $1.01 per basic and diluted Class A share, for the first nine months of 1998. Revenue for the 1999 nine-month period totaled $175.3 million, versus $79.7 million in the nine-month period of 1998. The company's 1998 results reflect a partial period from the recapitalization transactions completed on March 18, 1998 through September 30, 1998.

Starwood Financial announced that during and subsequent to the third quarter, three new financing commitments totaling $52.9 million have been closed or are in escrow. Of the $52.9 million committed, $22.9 million has been funded to date. In addition, the company funded $31.6 million under seven pre-existing commitments and received $149.4 million in principal repayments. Starwood Financial's recent transactions continue to reflect the company's core business strategy of originating and acquiring large balance, structured financing transactions secured by high-quality commercial real estate assets in major metropolitan markets across the United States.

Jay Sugarman, Starwood Financial's chief executive officer, commented, ''This quarter, we continued to deliver strong, double-digit earnings growth while maintaining excess liquidity to take advantage of attractive lending opportunities we anticipate in the fourth quarter as the year comes to a close.''

Mr. Sugarman continued, ''Much of our focus this quarter was on the completion of the TriNet merger, which represented the successful $1.6 billion expansion of our existing credit tenant leasing business, a market niche in which we have already achieved some of our best risk-adjusted returns. This transaction, which closed on November 4, 1999, represents a significant step forward in our continuing drive to be the leading provider of flexible mortgage, mezzanine and lease financing to real estate owners and corporate customers nationwide.''

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

Three months ended Three months ended

Sept. 30, 1999 Sept. 30, 1998

     Net investment income                   $36,088                $25,770
     Other income                              3,448                  1,329
     Non-interest expense                     (8,265)                (6,164)
     Net income                              $31,271                $20,935
     Preferred dividends                      (5,308)                    --
     Net income allocable to
      common shareholders                    $25,963                $20,935

     Net income allocable to Class A shares  $25,703                $20,726
         Per basic share                       $0.49                  $0.40
         Per diluted share                     $0.47                  $0.38
     Funds from operations allocable
      to Class A shares                      $27,223                $22,086
         Per basic share                       $0.52                  $0.42
         Per diluted share                     $0.50                  $0.41
     Dividends                                 $0.44                  $0.38
     Weighted average Class A
      shares outstanding*:
         Basic                                52,471                 52,390
        Diluted                               55,327                 54,654

     * 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
                                        Sept. 30, 1999          Dec. 31, 1998
                                          (unaudited)
     Real estate loans and
      related investments, net            $2,056,330             $2,013,703
     Total assets                          2,108,378              2,059,616
     Debt obligations                      1,095,388              1,055,719
     Total liabilities                     1,103,016              1,088,888
     Total shareholders' equity            1,005,362                970,728

Transaction Volume

Since the beginning of the third quarter of 1999, Starwood Financial generated $52.9 million in new financing commitments, $22.9 million of which have been funded, in three separate transactions. The company's transactions included a mix of mortgage and mezzanine loans primarily backed by hotel, residential and office properties. The Company also funded an additional $31.6 million under seven pre-existing financing commitments.

Funding Activities

During the third quarter of 1999, Starwood Financial funded its origination and acquisition activities with cash on hand and borrowings under its revolving credit facilities. At quarter end, $646.4 million was outstanding under $1.2 billion of committed credit facilities.

Starwood Financial's ratio of consolidated debt obligations to book shareholders' equity was 1.1x as of September 30, 1999, based on debt obligations of $1.1 billion and shareholders' equity of $1.0 billion.

TriNet Transaction

On November 3, 1999, Starwood Financial and TriNet Corporate Realty Trust, Inc. each held a special shareholders meeting to approve their proposed merger announced on June 16, 1999. After receiving shareholder approval and satisfying the other conditions to closing, Starwood Financial and TriNet closed the merger on November 4, 1999. Future quarterly financial results will reflect the combined performance of Starwood Financial and TriNet.

Other Developments

On October 1, 1999, Starwood Financial announced an increase in its regular quarterly cash dividend to $0.44 per Class A share for the quarter ended September 30, 1999. The dividend, which was paid on October 29, 1999 to holders of record as of October 15, 1999, represented approximately 85% of funds from operations for the third quarter.

Starwood Financial is the leading publicly traded finance company focused 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 Inc. 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 Inc.'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 Inc.'s SEC reports.)

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

        Financial Tables Follow
    
                               Starwood Financial Inc.
                        Consolidated Statements of Operations
                    (Amounts in thousands, except per share data)
                                     (unaudited)
    
                                                       Three months ended
                                               Sept. 30, 1999      Sept. 30, 1998
    
         Revenue:
             Interest income                     $52,911                $36,398
             Operating lease income                4,276                  4,350
             Other income                          3,448                  1,329
                Total revenue                     60,635                 42,077
    
         Costs and expenses:
            Interest expense                      21,099                 14,978
            Operating lease depreciation           1,365                  1,374
            Corporate and other                    5,650                  3,790
            Provision for possible credit losses   1,250                  1,000
                Total costs and expenses          29,364                 21,142
    
         Net income                              $31,271                $20,935
    
         Preferred dividends                      (5,308)                    --
    
         Net income allocable to
          common shareholders                    $25,963                $20,935
    
         Net income - Class A shares             $25,703                $20,726
    
         Net income per Class A share:
             Basic                                 $0.49                  $0.40
             Diluted                               $0.47                  $0.38
    
         Weighted average Class A
          shares outstanding(A):
             Basic                                52,471                 52,390
             Diluted                              55,327                 54,654
    
        (A) As adjusted for a one-for-six reverse stock split effective
            June 19, 1998.
    
                               Starwood Financial Inc.
                        Consolidated Statements of Operations
                    (Amounts in thousands, except per share data)
                                     (unaudited)
    
                                                        Nine months ended
                                              Sept. 30, 1999       Sept. 30, 1998
         Revenue:
             Interest income                    $154,837                $68,910
             Operating lease income               11,726                  8,624
             Other income                          8,751                  2,213
                Total revenue                    175,314                 79,747
    
         Costs and expenses:
             Interest expense                     61,348                 25,472
             Operating lease depreciation          4,095                  2,943
             Corporate and other                  17,000                  6,594
             Provision for possible
              credit losses                        3,500                  1,750
             Stock option compensation expense        --                  5,985
                Total costs and expenses          85,943                 42,744
    
         Net income before minority interest      89,371                 37,003
    
         Minority interest                            --                    (54)
    
         Net income                              $89,371                $36,949
    
         Preferred dividends                     (15,923)                    --
    
         Net income allocable to
          common shareholders                    $73,448                $36,949
    
         Net income - Class A shares             $72,714                $36,580
    
         Net income per Class A share:
             Basic                                 $1.39                  $0.96
             Diluted                               $1.31                  $0.94
    
         Weighted average Class A
          shares outstanding(A)
             Basic                                52,463                 37,968
             Diluted                              56,206                 39,459
    
        (A) As adjusted for a one-for-six reverse stock split effective
            June 19, 1998.
    
                               Starwood Financial Inc.
                                  Balance Sheet Data
                                (Amounts in thousands)
    
                                                       As of            As of
                                                   Sept. 30, 1999   Dec. 31, 1998
                                                    (unaudited)
         ASSETS
    
         Loans and other investments, net          $1,870,485        $1,823,761
         Real estate subject to
           operating leases, net                      185,845           189,942
         Investment in corporations                       457               522
         Cash and cash equivalents                     13,907            10,110
         Restricted cash                                3,498             5,699
         Marketable securities                          4,597             5,406
         Accrued interest and rent receivable          14,006            13,122
         Other assets                                  15,583            11,054
             Total assets                          $2,108,378        $2,059,616
    
        LIABILITIES AND SHAREHOLDERS' EQUITY
         Accounts payable, accrued expenses
          and other liabilities                        $7,628           $10,536
         Dividends payable                                 --            22,633
         Debt obligations
           Revolving credit facilities                646,384           640,945
           Term loans                                 409,605           368,683
           Other debt obligations                      39,399            46,091
             Total liabilities                      1,103,016         1,088,888
         Minority interest                                 --                --
         Shareholders' equity                       1,005,362           970,728
           Total liabilities and
            shareholders' equity                   $2,108,378        $2,059,616
    

    SOURCE: Starwood Financial Inc.

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