During the three weeks or so of each quarterly earnings season, I either listen to or read the transcripts of 100+ earnings conference calls. The calls can be invaluable to learn about management team goals, plans, and how well those plans are working out. My top “don't miss” call each quarter comes from a high-yield finance REIT with a CEO that is not afraid to speak his mind. This quarter he had a lot to say about why his company is a step above its competitors.
He always covers a variety of topics and speaks bluntly on each matter. I have gone ahead and collected some of my favorite quotes from the call this quarter about his thoughts on the market, their business valuation, and their long-term growth prospects. Not only are his quotes entertaining, but they show that this company has great growth potential in the long-term that the market does not fully see.
Starwood CEO Barry Sternlicht is very open about sharing his thoughts and beliefs on a wide range of topics. This is a big contrast to the majority of CEOs, who stay close to the Wall Street version of politically correct when discussing their companies or answering questions. Sternlicht's comments in the 2015 second quarter conference call did not disappoint and the stock should not disappoint investors as a long-term income investment.
“Our Yield is a Joke”
Starwood Property Trust (NYSE:STWD) currently yields 8.8%. and Sternlich has trouble with the high yield in comparison to STWD's peers for a couple of reasons. He notes that the company's commercial mortgage book is at just 61% loan-to-value. There is tremendous equity protection of loan principal values. Starwood also carries a very low debt ratio to produce the cash flow and yield investors earn. Starwood debt level represents 1.2 times leverage on capital and the business generates a 14% return on capital. The other major commercial mortgage REIT, Blackstone Mortgage Trust Inc (NYSE:BXMT) is half the size of Starwood and yields 7.2%.
