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
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.
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.
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.
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 $2,059,616SOURCE Starwood Financial Trust