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0001465128us-gaap:FairValueInputsLevel3Memberstwd:VariableInterestEntityLiabilitiesMember2021-01-012021-03-31

TableTable of Contents

​

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

​

FORM 10-Q

​

☒

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

​

For the quarterly period endedMarch 31,September 30, 2021

​

OR

​

☐

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

​

Commission file number001-34436

​

​

Starwood Property Trust, Inc.

(Exact name of registrant as specified in its charter)

​

​

​

​

Maryland

​

27-0247747

(State or Other Jurisdiction of
Incorporation or Organization)

​

(I.R.S. Employer
Identification No.)

​

​

​

591 West Putnam Avenue

​

​

Greenwich,, Connecticut

​

06830

(Address of Principal Executive Offices)

​

(Zip Code)

​

Registrant’s telephone number, including area code:

(203) 422-7700

(203) 422-7700

Securities registered pursuant to Section 12(b) of the Act:

​

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.01 par value per share

STWD

New York Stock Exchange

​

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻Yes

​

☒No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻Yes

​

☒No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

​

​

​

​

Large accelerated filer⌧

​☒

Accelerated filer

◻☐

Non-accelerated filer◻

​☐

Smaller reporting company

☐

​

​

Emerging growth company

☐

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻☐

​

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No⌧

​☒

The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of April 30,November 5, 2021 was 286,985,112.

​288,596,238.

​

​

​

​

TableTable of Contents

Special Note Regarding Forward-Looking Statements

​

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including without limitation, statements concerning our operations, economic performance and financial condition. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words “believe,” “expect,” “anticipate” and other similar expressions. Forward-looking statements do not guarantee future performance, which may be materially different from that expressed in, or implied by, any such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates.

​

These forward-looking statements are based largely on our current beliefs, assumptions and expectations of our future performance taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or within our control, and which could materially affect actual results, performance or achievements. Factors that may cause actual results to vary from our forward-looking statements include, but are not limited to:

​

●factors described in our Annual Report on Form 10-K for the year ended December 31, 2020 and this Quarterly Report on Form 10-Q, including those set forth under the captions “Risk Factors”, “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

​

●the severity and duration of the pandemic of the novel strain of coronavirus (“COVID-19”), actions that may be taken by governmental authorities to contain the COVID-19 outbreak or to treat its impact and the adverse impacts that the COVID-19 pandemic has had, and will likely continue to have, on the global economy, on the borrowersunderlying our real estate-related assets and infrastructure loans and tenants of our owned properties, including their ability to make payments on their loans or to pay rent, as the case may be, and on our operations and financial performance;

​

●defaults by borrowers in paying debt service on outstanding indebtedness;

​

●impairment in the value of real estate property securing our loans or in which we invest;

​

●availability of mortgage origination and acquisition opportunities acceptable to us;

​

●potential mismatches in the timing of asset repayments and the maturity of the associated financing agreements;

​

●our ability to integrate our prior acquisition of the project finance origination, underwriting and capital markets business of GE Capital Global Holdings, LLC into our business and to achieve the benefits that we anticipate from the acquisition;

​

●national and local economic and business conditions, including continued disruption from the COVID-19 pandemic;

​

●general and local commercial and residential real estate property conditions;

​

●changes in federal government policies;

​

●changes in federal, state and local governmental laws and regulations;

​

●increased competition from entities engaged in mortgage lending and securities investing activities;

​

●changes in interest rates; and

​

2

•factors described in our Annual Report on Form 10-K for the year ended December 31, 2020 and this Quarterly Report on Form 10-Q, including those set forth under the captions “Risk Factors”, “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
•the severity and duration of the pandemic of the novel strain of coronavirus (“COVID-19”), actions that may be taken by governmental authorities to contain the COVID-19 outbreak, including variants and resurgences, or to treat its impact and the adverse impacts that the COVID-19 pandemic has had, and will likely continue to have, on the global economy, on the borrowers underlying our real estate-related assets and infrastructure loans and tenants of our owned properties, including their ability to make payments on their loans or to pay rent, as the case may be, and on our operations and financial performance;
•defaults by borrowers in paying debt service on outstanding indebtedness;

Table•impairment in the value of Contentsreal estate property securing our loans or in which we invest;

●the availability of, and costs associated with, sources of liquidity.

​•

availability of mortgage origination and acquisition opportunities acceptable to us;

•potential mismatches in the timing of asset repayments and the maturity of the associated financing agreements;
•our ability to integrate our prior acquisition of the project finance origination, underwriting and capital markets business of GE Capital Global Holdings, LLC into our business and to achieve the benefits that we anticipate from the acquisition;
•national and local economic and business conditions, including continued disruption from the COVID-19 pandemic;
•general and local commercial and residential real estate property conditions;
•changes in federal government policies;
•changes in federal, state and local governmental laws and regulations;
•increased competition from entities engaged in mortgage lending and securities investing activities;
•changes in interest rates; and
•the availability of, and costs associated with, sources of liquidity.
In light of these risks and uncertainties, there can be no assurances that the results referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q will in fact occur. Except to the extent required by applicable law or regulation, we undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, changes to future results over time or otherwise.

​

3

2

TableTable of Contents

TABLE

OFCONTENTS

​

TABLE OF CONTENTS

​

Page

​Item 1.

4

​

​

Page

Part I

Financial Information

​

Item 1.

Financial Statements

5

​

Condensed Consolidated Balance Sheets

5

4

​

Condensed Consolidated Statements of Operations

6

5

​

Condensed Consolidated Statements of Comprehensive Income

7

6

​

Condensed Consolidated Statements of Equity

8

7

​

Condensed Consolidated Statements of Cash Flows

9

​

Notes to Condensed Consolidated Financial Statements

11

​

Note 1 Business and Organization

11

​

Note 2 Summary of Significant Accounting Policies

12

​

Note 3 Acquisitions and Divestitures

18

​

Note 4 Loans

19

​

Note 5 Investment Securities

24

​

Note 6 Properties

27

​

Note 7 Investment in Unconsolidated Entities

29

​

Note 8 Goodwill and Intangibles

30

​

Note 9 Secured Borrowings

32

​

Note 10 Unsecured Senior Notes

35

37

​

Note 11 Loan Securitization/Sale Activities

36

38

​

Note 12 Derivatives and Hedging Activity

37

40

​

Note 13 Offsetting Assets and Liabilities

39

41

​

Note 14 Variable Interest Entities

39

41

​

Note 15 Related-Party Transactions

41

43

​

Note 16 Stockholders’ Equity and Non-Controlling Interests

43

45

​

Note 17 Earnings per Share

45

47

​

Note 18 Accumulated Other Comprehensive Income

46

48

​

Note 19 Fair Value

46

48

​

Note 20 Income Taxes

53

56

​

Note 21 Commitments and Contingencies

54

57

​

Note 22 Segment Data

55

58

​

Note 23 Subsequent Events

59

64

Item 2.

60

65

Item 3.

97

103

Item 4.

99

105

​

Item 1.

100

106

Item 1A.

100

106

Item 2.

100

106

Item 3.

100

106

Item 4.

100

106

Item 5.

100

106

Item 6.

101

107

​

​

​

4

3

TableTable of Contents

PART I - FINANCIAL INFORMATION

​

Item 1. Financial Statements

​

Starwood Property Trust, Inc. and Subsidiaries

​

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands, except share data)

​

​

​

​

​

​

​

​

​

​

As of

​

As of

​

​

March 31, 2021

​

December 31, 2020

Assets:

​

​

​

​

​

​

Cash and cash equivalents

​

$

351,190

​

$

563,217

Restricted cash

​

 

118,724

​

 

158,945

Loans held-for-investment, net of credit loss allowances of $72,284 and $77,444 ($150,712 and $90,684 held at fair value)

​

 

12,321,493

​

 

11,087,073

Loans held-for-sale ($613,061 and $932,295 held at fair value)

​

 

844,631

​

 

1,052,835

Investment securities, net of credit loss allowances of $5,387 and $5,675 ($190,212 and $198,053 held at fair value)

​

 

678,287

​

 

736,658

Properties, net

​

​

2,244,748

​

​

2,271,153

Intangible assets ($12,406 and $13,202 held at fair value)

​

 

66,772

​

 

70,117

Investment in unconsolidated entities

​

 

100,907

​

 

108,054

Goodwill

​

 

259,846

​

 

259,846

Derivative assets

​

 

38,029

​

 

40,555

Accrued interest receivable

​

 

101,713

​

 

95,980

Other assets

​

 

208,873

​

 

190,748

Variable interest entity (“VIE”) assets, at fair value

​

 

62,367,110

​

 

64,238,328

Total Assets

​

$

79,702,323

​

$

80,873,509

Liabilities and Equity

​

​

​

​

​

​

Liabilities:

​

​

​

​

​

​

Accounts payable, accrued expenses and other liabilities

​

$

178,215

​

$

206,845

Related-party payable

​

 

36,135

​

 

39,170

Dividends payable

​

 

138,906

​

 

137,959

Derivative liabilities

​

 

34,805

​

 

41,324

Secured financing agreements, net

​

 

10,895,932

​

 

10,146,190

Collateralized loan obligations, net

​

​

931,178

​

​

930,554

Unsecured senior notes, net

​

 

1,735,658

​

 

1,732,520

VIE liabilities, at fair value

​

 

60,896,709

​

 

62,776,371

Total Liabilities

​

 

74,847,538

​

 

76,010,933

Commitments and contingencies (Note 21)

​

​

​

​

​

​

Equity:

​

​

​

​

​

​

Starwood Property Trust, Inc. Stockholders’ Equity:

​

​

​

​

​

​

Preferred stock, $0.01 per share, 100,000,000 shares authorized, 0 shares issued and outstanding

​

 

—

​

 

—

Common stock, $0.01 per share, 500,000,000 shares authorized, 294,300,251 issued and 286,851,560 outstanding as of March 31, 2021 and 292,091,601 issued and 284,642,910 outstanding as of December 31, 2020

​

 

2,943

​

 

2,921

Additional paid-in capital

​

 

5,225,037

​

 

5,209,739

Treasury stock (7,448,691 shares)

​

 

(138,022)

​

 

(138,022)

Accumulated other comprehensive income

​

 

41,654

​

 

43,993

Accumulated deficit

​

 

(654,750)

​

 

(629,733)

Total Starwood Property Trust, Inc. Stockholders’ Equity

​

 

4,476,862

​

 

4,488,898

Non-controlling interests in consolidated subsidiaries

​

 

377,923

​

 

373,678

Total Equity

​

 

4,854,785

​

 

4,862,576

Total Liabilities and Equity

​

$

79,702,323

​

$

80,873,509

As of
September 30,
2021
As of
December 31,
2020
Assets:
Cash and cash equivalents$273,316 $563,217 
Restricted cash110,472 158,945 
Loans held-for-investment, net of credit loss allowances of $57,573 and $77,444 ($91,499 and $90,684 held at fair value)13,292,998 11,087,073 
Loans held-for-sale ($2,099,266 and $932,295 held at fair value)2,183,519 1,052,835 
Investment securities, net of credit loss allowances of $6,389 and $5,675 ($184,153 and $198,053 held at fair value)670,887 736,658 
Properties, net2,228,862 2,271,153 
Intangible assets ($15,942 and $13,202 held at fair value)65,122 70,117 
Investment in unconsolidated entities94,000 108,054 
Goodwill259,846 259,846 
Derivative assets52,566 40,555 
Accrued interest receivable108,126 95,980 
Other assets294,670 190,748 
Variable interest entity (“VIE”) assets, at fair value62,346,480 64,238,328 
Total Assets$81,980,864 $80,873,509 
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities$210,080 $206,845 
Related-party payable23,378 39,170 
Dividends payable139,738 137,959 
Derivative liabilities15,615 41,324 
Secured financing agreements, net11,502,052 10,146,190 
Collateralized loan obligations and single asset securitization, net2,614,230 930,554 
Unsecured senior notes, net1,733,684 1,732,520 
VIE liabilities, at fair value60,894,975 62,776,371 
Total Liabilities77,133,752 76,010,933 
Commitments and contingencies (Note 21)00
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock, $0.01 per share, 100,000,000 shares authorized, no shares issued and outstanding— — 
Common stock, $0.01 per share, 500,000,000 shares authorized, 296,072,090 issued and 288,623,399 outstanding as of September 30, 2021 and 292,091,601 issued and 284,642,910 outstanding as of December 31, 20202,961 2,921 
Additional paid-in capital5,270,265 5,209,739 
Treasury stock (7,448,691 shares)(138,022)(138,022)
Accumulated other comprehensive income40,486 43,993 
Accumulated deficit(687,980)(629,733)
Total Starwood Property Trust, Inc. Stockholders’ Equity4,487,710 4,488,898 
Non-controlling interests in consolidated subsidiaries359,402 373,678 
Total Equity4,847,112 4,862,576 
Total Liabilities and Equity$81,980,864 $80,873,509 

Note: In addition to the VIE assets and liabilities which are separately presented, our condensed consolidated balance sheets as of March 31,September 30, 2021 and December 31, 2020 include assets of $3.1 billion and $1.1 billion, respectively, and liabilities of $2.6 billion and $0.9 billion, respectively, related to a consolidated collateralized loan obligationobligations (“CLO”CLOs”) and a single asset securitization ("SASB"), which isare considered to be a VIE.VIEs.  The CLO’sCLOs' and SASB's assets can only be used to settle obligations of the CLO,CLOs and SASB, and the CLO’sCLOs' and SASB's liabilities do not have recourse to Starwood Property Trust, Inc. Refer to Note 14 for additional discussion of VIEs.

​

See notes to condensed consolidated financial statements.

5

4

TableTable of Contents

Starwood Property Trust, Inc. and Subsidiaries

​

Condensed Consolidated Statements of Operations

(Unaudited, amounts in thousands, except per share data)

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31,

​

    

2021

    

2020

Revenues:

​

​

​

​

​

​

Interest income from loans

​

$

190,575

​

$

217,427

Interest income from investment securities

​

 

11,610

​

 

15,240

Servicing fees

​

 

8,402

​

 

4,793

Rental income

​

​

76,338

​

​

74,146

Other revenues

​

 

305

​

 

954

Total revenues

​

 

287,230

​

 

312,560

Costs and expenses:

​

​

​

​

​

​

Management fees

​

 

38,736

​

 

40,728

Interest expense

​

 

103,374

​

 

120,025

General and administrative

​

 

38,636

​

 

38,702

Acquisition and investment pursuit costs

​

 

185

​

 

909

Costs of rental operations

​

​

28,745

​

​

28,214

Depreciation and amortization

​

 

22,474

​

 

23,980

Credit loss provision, net

​

 

44

​

 

48,669

Other expense

​

 

685

​

 

388

Total costs and expenses

​

 

232,879

​

 

301,615

Other income (loss):

​

​

​

​

​

​

Change in net assets related to consolidated VIEs

​

 

39,745

​

 

(45,493)

Change in fair value of servicing rights

​

 

(796)

​

 

(393)

Change in fair value of investment securities, net

​

 

(306)

​

 

2,504

Change in fair value of mortgage loans, net

​

 

(9,478)

​

 

(16,134)

Earnings from unconsolidated entities

​

 

1,734

​

 

97

Gain on sale of investments and other assets, net

​

 

17,693

​

 

296

Gain on derivative financial instruments, net

​

 

33,989

​

 

9,710

Foreign currency loss, net

​

 

(11,681)

​

 

(34,486)

Loss on extinguishment of debt

​

​

(516)

​

​

(170)

Other income, net

​

 

21

​

 

126

Total other income (loss)

​

 

70,405

​

 

(83,943)

Income (loss) before income taxes

​

 

124,756

​

 

(72,998)

Income tax (provision) benefit

​

 

(2,230)

​

 

6,729

Net income (loss)

​

 

122,526

​

 

(66,269)

Net income attributable to non-controlling interests

​

 

(11,148)

​

 

(500)

Net income (loss) attributable to Starwood Property Trust, Inc.

​

$

111,378

​

$

(66,769)

​

​

​

​

​

​

​

Earnings (loss) per share data attributable to Starwood Property Trust, Inc.:

​

​

​

​

​

​

Basic

​

$

0.39

​

$

(0.24)

Diluted

​

$

0.38

​

$

(0.24)

For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021202020212020
Revenues:
Interest income from loans$203,252 $169,404 $583,099 $557,934 
Interest income from investment securities10,697 12,186 32,955 42,070 
Servicing fees10,473 9,548 29,739 20,999 
Rental income77,512 75,978 230,969 222,834 
Other revenues352 311 3,621 1,756 
Total revenues302,286 267,427 880,383 845,593 
Costs and expenses:
Management fees23,727 23,127 91,713 86,970 
Interest expense115,531 95,981 328,558 317,499 
General and administrative38,864 39,478 122,765 110,857 
Acquisition and investment pursuit costs214 884 806 3,383 
Costs of rental operations31,516 29,522 90,992 87,368 
Depreciation and amortization22,041 23,581 66,992 70,982 
Credit loss (reversal) provision, net(563)(3,587)(12,363)55,284 
Other expense23 172 708 662 
Total costs and expenses231,353 209,158 690,171 733,005 
Other income (loss):
Change in net assets related to consolidated VIEs28,049 58,585 80,303 64,353 
Change in fair value of servicing rights2,237 634 2,740 (2,328)
Change in fair value of investment securities, net(299)(199)903 3,132 
Change in fair value of mortgage loans, net31,727 61,384 68,116 79,700 
Earnings from unconsolidated entities2,042 3,192 6,002 32,065 
(Loss) gain on sale of investments and other assets, net(47)— 26,377 6,768 
Gain (loss) on derivative financial instruments, net41,812 (28,097)65,792 (34,485)
Foreign currency (loss) gain, net(27,003)25,452 (36,057)(1,861)
Loss on extinguishment of debt(499)— (2,197)(2,377)
Other (loss) income, net(964)357 (6,416)687 
Total other income77,055 121,308 205,563 145,654 
Income before income taxes147,988 179,577 395,775 258,242 
Income tax provision(7,501)(14,843)(6,378)(6,816)
Net income140,487 164,734 389,397 251,426 
Net income attributable to non-controlling interests(11,885)(12,900)(33,107)(26,705)
Net income attributable to Starwood Property Trust, Inc.$128,602 $151,834 $356,290 $224,721 
Earnings per share data attributable to Starwood Property Trust, Inc.:
Basic$0.44 $0.53 $1.23 $0.79 
Diluted$0.44 $0.52 $1.22 $0.79 
​

See notes to condensed consolidated financial statements.

​

​

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​

Starwood Property Trust, Inc. and Subsidiaries

​

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, amounts in thousands)

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31,

​

    

2021

​

2020

Net income (loss)

​

$

122,526

​

$

(66,269)

Other comprehensive (loss) income (net change by component):

​

​

​

​

​

​

Available-for-sale securities

​

 

(2,403)

​

 

(15,048)

Foreign currency translation

​

 

64

​

 

—

Other comprehensive loss

​

 

(2,339)

​

 

(15,048)

Comprehensive income (loss)

​

 

120,187

​

 

(81,317)

Less: Comprehensive income attributable to non-controlling interests

​

 

(11,148)

​

 

(500)

Comprehensive income (loss) attributable to Starwood Property Trust, Inc.

​

$

109,039

​

$

(81,817)

For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2021202020212020
Net income$140,487 $164,734 $389,397 $251,426 
Other comprehensive (loss) income (net change by component):
Available-for-sale securities(824)(581)(3,571)(8,647)
Foreign currency translation— — 64 — 
Other comprehensive loss(824)(581)(3,507)(8,647)
Comprehensive income139,663 164,153 385,890 242,779 
Less: Comprehensive income attributable to non-controlling interests(11,885)(12,900)(33,107)(26,705)
Comprehensive income attributable to Starwood Property Trust, Inc.
$127,778 $151,253 $352,783 $216,074 
​

See notes to condensed consolidated financial statements.

​

​

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​

Starwood Property Trust, Inc. and Subsidiaries

​

Condensed Consolidated Statements of Equity

For the Three Months Ended March 31,September 30, 2021 and 2020

(Unaudited, amounts in thousands, except share data)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Starwood

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Accumulated

​

Property

​

​

​

​

​

​

​

​

Common stock

​

Additional

​

​

​

​

​

​

​

​

Other

​

Trust, Inc.

​

Non-

​

​

​

​

​

​

​

Par

​

Paid-in

​

Treasury Stock

​

Accumulated

​

Comprehensive

​

Stockholders’

​

Controlling

​

Total

​

    

Shares

    

Value

    

Capital

    

Shares

    

Amount

    

Deficit

    

Income

    

Equity

    

Interests

    

Equity

Balance, December 31, 2020

 

292,091,601

​

$

2,921

​

$

5,209,739

 

7,448,691

​

$

(138,022)

​

$

(629,733)

​

$

43,993

​

$

4,488,898

​

$

373,678

​

$

4,862,576

Cumulative effect of convertible notes accounting standard update adopted January 1, 2021

​

—

​

​

—

​

​

(3,755)

​

—

​

​

—

​

​

2,219

​

​

—

​

​

(1,536)

​

​

—

​

​

(1,536)

Proceeds from DRIP Plan

​

12,234

​

​

—

​

​

262

​

—

​

​

—

​

​

—

​

​

—

​

​

262

​

​

—

​

​

262

Redemption of Class A Units

​

50,000

​

​

1

​

​

1,038

​

—

​

​

—

​

​

—

​

​

—

​

​

1,039

​

​

(1,039)

​

​

—

Equity offering costs

​

—

​

​

—

​

​

(22)

​

—

​

​

—

​

​

—

​

​

—

​

​

(22)

​

​

—

​

​

(22)

Share-based compensation

​

1,814,414

​

​

18

​

​

10,292

​

—

​

​

—

​

​

—

​

​

—

​

​

10,310

​

​

—

​

​

10,310

Manager fees paid in stock

 

332,002

​

​

3

​

​

7,483

​

—

​

​

—

​

​

—

​

​

—

​

​

7,486

​

​

—

​

​

7,486

Net income

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

111,378

​

​

—

​

​

111,378

​

​

11,148

​

​

122,526

Dividends declared, $0.48 per share

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

(138,614)

​

​

—

​

​

(138,614)

​

​

—

​

​

(138,614)

Other comprehensive loss, net

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

(2,339)

​

​

(2,339)

​

​

—

​

​

(2,339)

Contributions from non-controlling interests

​

—

​

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

2,969

​

​

2,969

Distributions to non-controlling interests

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(8,833)

​

​

(8,833)

Balance, March 31, 2021

 

294,300,251

​

$

2,943

​

$

5,225,037

 

7,448,691

​

$

(138,022)

​

$

(654,750)

​

$

41,654

​

$

4,476,862

​

$

377,923

​

$

4,854,785

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance, December 31, 2019

 

287,380,891

​

$

2,874

​

$

5,132,532

​

5,180,140

​

$

(104,194)

​

$

(381,719)

​

$

50,932

​

$

4,700,425

​

$

436,589

​

$

5,137,014

Cumulative effect of credit loss accounting standard effective January 1, 2020

​

—

​

​

—

​

​

—

​

—

​

​

—

​

​

(32,286)

​

​

—

​

​

(32,286)

​

​

—

​

​

(32,286)

Proceeds from DRIP Plan

​

7,718

​

​

—

​

​

153

​

—

​

​

—

​

​

—

​

​

—

​

​

153

​

​

—

​

​

153

Redemption of Class A Units

​

409,712

​

​

4

​

​

8,534

​

—

​

​

—

​

​

—

​

​

—

​

​

8,538

​

​

(8,538)

​

​

—

Equity offering costs

​

—

​

​

—

​

​

(14)

​

—

​

​

—

​

​

—

​

​

—

​

​

(14)

​

​

—

​

​

(14)

Common stock repurchased

 

—

​

​

—

​

​

—

​

1,925,421

​

​

(28,830)

​

​

—

​

​

—

​

​

(28,830)

​

​

—

​

​

(28,830)

Share-based compensation

 

1,195,208

​

​

12

​

​

8,788

​

—

​

​

—

​

​

—

​

​

—

​

​

8,800

​

​

—

​

 

8,800

Manager fees paid in stock

 

355,910

​

​

4

​

​

9,076

​

—

​

​

—

​

​

—

​

​

—

​

​

9,080

​

​

—

​

 

9,080

Net loss

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

(66,769)

​

​

—

​

​

(66,769)

​

​

500

​

 

(66,269)

Dividends declared, $0.48 per share

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

(135,991)

​

​

—

​

​

(135,991)

​

​

—

​

 

(135,991)

Other comprehensive loss, net

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

(15,048)

​

​

(15,048)

​

​

—

​

 

(15,048)

VIE non-controlling interests

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(2,188)

​

​

(2,188)

Contributions from non-controlling interests

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

9,406

​

​

9,406

Distributions to non-controlling interests

 

—

​

​

—

​

​

—

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(66,476)

​

 

(66,476)

Balance, March 31, 2020

 

289,349,439

​

$

2,894

​

$

5,159,069

 

7,105,561

​

$

(133,024)

​

$

(616,765)

​

$

35,884

​

$

4,448,058

​

$

369,293

​

$

4,817,351

Common stockAdditional
Paid-in
Capital		Treasury StockAccumulated
Deficit		Accumulated
Other
Comprehensive
Income		Total
Starwood Property
Trust, Inc.
Stockholders’
Equity		Non-
Controlling
Interests		Total
Equity
SharesPar
Value		SharesAmount
Balance, June 30, 2021295,257,898 $2,952 $5,248,490 7,448,691 $(138,022)$(677,375)$41,310 $4,477,355 $374,345 $4,851,700 
Proceeds from DRIP Plan8,161 — 209 — — — — 209 — 209 
Redemption of Class A Units465,679 5 9,617 — — — — 9,622 (9,622)— 
Equity offering costs— — (5)— — — — (5)— (5)
Share-based compensation243,201 3 9,449 — — — — 9,452 — 9,452 
Manager fees paid in stock97,151 1 2,505 — — — — 2,506 — 2,506 
Net income— — — — — 128,602 — 128,602 11,885 140,487 
Dividends declared, $0.48 per share— — — — — (139,207)— (139,207)— (139,207)
Other comprehensive loss, net— — — — — — (824)(824)— (824)
Contributions from non-controlling interests— — — — — — — — 52 52 
Distributions to non-controlling interests— — — — — — — — (17,258)(17,258)
Balance, September 30, 2021296,072,090 $2,961 $5,270,265 7,448,691 $(138,022)$(687,980)$40,486 $4,487,710 $359,402 $4,847,112 
Balance, June 30, 2020291,573,083 $2,916 $5,193,572 7,105,561 $(133,024)$(614,093)$42,866 $4,492,237 $372,559 $4,864,796 
Proceeds from DRIP Plan34,309 1 520 — — — — 521 — 521 
Redemption of Class A Units— — 418 — — — — 418 (1,703)(1,285)
Equity offering costs— — (54)— — — — (54)— (54)
Share-based compensation179,935 1 6,260 — — — — 6,261 — 6,261 
Net income— — — — — 151,834 — 151,834 12,900 164,734 
Dividends declared, $0.48 per share— — — — — (136,755)— (136,755)— (136,755)
Other comprehensive loss, net— — — — — — (581)(581)— (581)
VIE non-controlling interests— — — — — — — — 12 12 
Contributions from non-controlling interests— — — — — — — — 251 251 
Distributions to non-controlling interests— — — — — — — — (12,207)(12,207)
Balance, September 30, 2020291,787,327 $2,918 $5,200,716 7,105,561 $(133,024)$(599,014)$42,285 $4,513,881 $371,812 $4,885,693 
​

​

​

​

See notes to condensed consolidated financial statements.

​

​

​

​

8

7

TableTable of Contents

​

Starwood Property Trust, Inc. and Subsidiaries

​

Condensed Consolidated Statements of Cash Flows

Equity

For the Nine Months Ended September 30, 2021 and 2020 (Continued)
(Unaudited, amounts in thousands)

thousands, except share data)

Common stockAdditional
Paid-in
Capital		Treasury StockAccumulated
Deficit		Accumulated
Other
Comprehensive
Income		Total Starwood
Property
Trust, Inc.
Stockholders’
Equity		Non-
Controlling
Interests		Total
Equity
SharesPar
Value		SharesAmount
Balance, December 31, 2020292,091,601 $2,921 $5,209,739 7,448,691 $(138,022)$(629,733)$43,993 $4,488,898 $373,678 $4,862,576 
Cumulative effect of convertible notes accounting standard update adopted January 1, 2021— — (3,755)— — 2,219 — (1,536)— (1,536)
Proceeds from DRIP Plan29,331 — 697 — — — — 697 — 697 
Redemption of Class A Units853,681 9 17,729 — — — — 17,738 (17,738)— 
Equity offering costs— — (27)— — — — (27)— (27)
Share-based compensation2,400,946 24 29,335 — — — — 29,359 — 29,359 
Manager fees paid in stock696,531 7 16,547 — — — — 16,554 — 16,554 
Net income— — — — — 356,290 — 356,290 33,107 389,397 
Dividends declared, $1.44 per share— — — — — (416,756)— (416,756)— (416,756)
Other comprehensive loss, net— — — — — — (3,507)(3,507)— (3,507)
Contributions from non-controlling interests— — — — — — — — 5,590 5,590 
Distributions to non-controlling interests— — — — — — — — (35,235)(35,235)
Balance, September 30, 2021296,072,090 $2,961 $5,270,265 7,448,691 $(138,022)$(687,980)$40,486 $4,487,710 $359,402 $4,847,112 
Balance, December 31, 2019287,380,891 $2,874 $5,132,532 5,180,140 $(104,194)$(381,719)$50,932 $4,700,425 $436,589 $5,137,014 
Cumulative effect of credit loss accounting standard effective January 1, 2020
— — — — — (32,286)— (32,286)— (32,286)
Proceeds from DRIP Plan59,340 1 889 — — — — 890 — 890 
Redemption of Class A Units409,712 4 8,952 — — — — 8,956 (10,241)(1,285)
Equity offering costs— — (69)— — — — (69)— (69)
Common stock repurchased— — — 1,925,421 (28,830)— — (28,830)— (28,830)
Share-based compensation1,516,152 15 22,390 — — — — 22,405 — 22,405 
Manager fees paid in stock2,421,232 24 36,022 — — — — 36,046 — 36,046 
Net income— — — — — 224,721 — 224,721 26,705 251,426 
Dividends declared, $1.44 per share— — — — — (409,730)— (409,730)— (409,730)
Other comprehensive loss, net— — — — — — (8,647)(8,647)— (8,647)
VIE non-controlling interests— — — — — — — — (2,177)(2,177)
Contributions from non-controlling interests— — — — — — — — 9,657 9,657 
Distributions to non-controlling interests— — — — — — — — (88,721)(88,721)
Balance, September 30, 2020291,787,327 $2,918 $5,200,716 7,105,561 $(133,024)$(599,014)$42,285 $4,513,881 $371,812 $4,885,693 
​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31,

​

 

2021

    

2020

Cash Flows from Operating Activities:

​

​

​

​

​

​

Net income (loss)

​

$

122,526

​

$

(66,269)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

​

​

​

​

​

​

Amortization of deferred financing costs, premiums and discounts on secured borrowings

​

 

10,515

​

 

9,634

Amortization of discounts and deferred financing costs on unsecured senior notes

​

 

1,726

​

 

1,962

Accretion of net discount on investment securities

​

 

(3,476)

​

 

(2,783)

Accretion of net deferred loan fees and discounts

​

 

(16,745)

​

 

(12,080)

Share-based compensation

​

 

10,310

​

 

8,800

Manager fees paid in stock

​

 

7,486

​

 

9,080

Change in fair value of investment securities

​

 

306

​

 

(2,504)

Change in fair value of consolidated VIEs

​

 

(7,042)

​

 

80,683

Change in fair value of servicing rights

​

 

796

​

 

393

Change in fair value of loans

​

 

9,478

​

 

16,134

Change in fair value of derivatives

​

 

(34,768)

​

 

(7,617)

Foreign currency loss, net

​

 

11,681

​

 

34,486

Gain on sale of investments and other assets

​

 

(17,693)

​

 

(296)

Credit loss provision, net

​

 

44

​

 

48,669

Depreciation and amortization

​

 

22,528

​

 

23,864

Earnings from unconsolidated entities

​

 

(1,734)

​

 

(97)

Distributions of earnings from unconsolidated entities

​

 

17

​

 

27

Loss on extinguishment of debt

​

​

516

​

​

170

Origination and purchase of loans held-for-sale, net of principal collections

​

 

(327,352)

​

 

(621,832)

Proceeds from sale of loans held-for-sale

​

 

571,927

​

 

751,140

Changes in operating assets and liabilities:

​

​

​

​

​

​

Related-party payable, net

​

 

(3,035)

​

 

(1,659)

Accrued and capitalized interest receivable, less purchased interest

​

 

(41,833)

​

 

(31,465)

Other assets

​

 

(19,467)

​

 

(40,944)

Accounts payable, accrued expenses and other liabilities

​

 

(25,945)

​

 

(6,764)

Net cash provided by operating activities

​

 

270,766

​

 

190,732

Cash Flows from Investing Activities:

​

​

​

​

​

​

Origination, purchase and funding of loans held-for-investment

​

 

(2,296,124)

​

 

(1,252,745)

Proceeds from principal collections on loans

​

 

1,051,695

​

 

812,187

Proceeds from loans sold

​

 

—

​

 

39,019

Purchase and funding of investment securities

​

 

—

​

 

(5,729)

Proceeds from sales of investment securities

​

 

—

​

 

7,940

Proceeds from principal collections on investment securities

​

 

59,514

​

 

13,559

Proceeds from sales of real estate

​

 

30,566

​

 

—

Purchases and additions to properties and other assets

​

​

(3,512)

​

​

(7,056)

Investment in unconsolidated entities

​

​

—

​

​

(3,100)

Distribution of capital from unconsolidated entities

​

 

15,980

​

 

153

Payments for purchase or termination of derivatives

​

 

(851)

​

 

(67,323)

Proceeds from termination of derivatives

​

 

23,527

​

 

8,912

Net cash used in investing activities

​

 

(1,119,205)

​

 

(454,183)

​

See notes to condensed consolidated financial statements.

​

9

8

TableTable of Contents

Starwood Property Trust, Inc. and Subsidiaries

​

Condensed Consolidated Statements of Cash Flows
(Unaudited, amounts in thousands)
For the Nine Months Ended September 30,
20212020
Cash Flows from Operating Activities:
Net income$389,397 $251,426 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs, premiums and discounts on secured borrowings32,141 29,996 
Amortization of discounts and deferred financing costs on unsecured senior notes5,387 5,933 
Accretion of net discount on investment securities(10,090)(9,362)
Accretion of net deferred loan fees and discounts(44,523)(30,468)
Share-based compensation29,359 22,405 
Manager fees paid in stock16,554 36,046 
Change in fair value of investment securities(903)(3,132)
Change in fair value of consolidated VIEs26,990 41,008 
Change in fair value of servicing rights(2,740)2,328 
Change in fair value of loans(68,116)(79,700)
Change in fair value of derivatives(70,661)41,146 
Foreign currency loss, net36,057 1,861 
Gain on sale of investments and other assets(26,377)(6,768)
Credit loss (reversal) provision, net(12,363)55,284 
Depreciation and amortization67,653 70,626 
Earnings from unconsolidated entities(6,002)(32,065)
Distributions of earnings from unconsolidated entities1,623 2,334 
Loss on extinguishment of debt2,197 2,377 
Origination and purchase of loans held-for-sale, net of principal collections(3,027,235)(1,725,341)
Proceeds from sale of loans held-for-sale2,333,767 1,997,651 
Changes in operating assets and liabilities:
Related-party payable, net(15,792)(18,829)
Accrued and capitalized interest receivable, less purchased interest(105,039)(121,923)
Other assets(27,236)3,007 
Accounts payable, accrued expenses and other liabilities14,199 (9,691)
Net cash (used in) provided by operating activities(461,753)526,149 
Cash Flows from Investing Activities:
Origination, purchase and funding of loans held-for-investment(5,635,707)(2,368,931)
Proceeds from principal collections on loans3,173,764 1,357,445 
Proceeds from loans sold267,349 435,097 
Purchase and funding of investment securities— (22,408)
Proceeds from sales of investment securities— 7,940 
Proceeds from principal collections on investment securities77,855 67,957 
Proceeds from sales of real estate60,969 23,805 
Purchases and additions to properties and other assets(17,259)(17,923)
Investment in unconsolidated entities— (3,133)
Proceeds from sale of interest in unconsolidated entities— 10,313 
Distribution of capital from unconsolidated entities25,555 2,485 
Payments for purchase or termination of derivatives(14,699)(76,270)
Proceeds from termination of derivatives44,742 13,667 
Net cash used in investing activities(2,017,431)$(569,956)
See notes to condensed consolidated financial statements.
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Starwood Property Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited, amounts in thousands)

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31,

​

 

2021

    

2020

Cash Flows from Financing Activities:

​

​

​

​

​

​

Proceeds from borrowings

​

$

2,748,317

​

$

2,756,915

Principal repayments on and repurchases of borrowings

​

 

(2,001,336)

​

 

(1,923,754)

Payment of deferred financing costs

​

 

(5,052)

​

 

(3,577)

Proceeds from common stock issuances

​

 

262

​

 

153

Payment of equity offering costs

​

​

(22)

​

​

(14)

Payment of dividends

​

 

(137,667)

​

 

(135,889)

Contributions from non-controlling interests

​

​

2,969

​

​

9,406

Distributions to non-controlling interests

​

 

(8,833)

​

 

(66,476)

Purchase of treasury stock

​

 

—

​

 

(28,830)

Issuance of debt of consolidated VIEs

​

 

11,604

​

 

24,376

Repayment of debt of consolidated VIEs

​

 

(27,490)

​

 

(36,953)

Distributions of cash from consolidated VIEs

​

 

14,481

​

 

24,723

Net cash provided by financing activities

​

 

597,233

​

 

620,080

Net (decrease) increase in cash, cash equivalents and restricted cash

​

 

(251,206)

​

 

356,629

Cash, cash equivalents and restricted cash, beginning of period

​

 

722,162

​

 

574,031

Effect of exchange rate changes on cash

​

 

(1,042)

​

 

733

Cash, cash equivalents and restricted cash, end of period

​

$

469,914

​

$

931,393

Supplemental disclosure of cash flow information:

​

​

​

​

​

​

Cash paid for interest

​

$

80,624

​

$

109,341

Income taxes paid

​

 

425

​

 

569

Supplemental disclosure of non-cash investing and financing activities:

​

​

​

​

​

​

Dividends declared, but not yet paid

​

$

139,113

​

$

135,994

Consolidation of VIEs (VIE asset/liability additions)

​

 

393,373

​

 

2,477,422

Reclassification of loans held-for-investment to loans held-for-sale

​

​

166,901

​

​

422,691

Reclassification of loans held-for-sale to loans held-for-investment

​

​

124,935

​

​

—

Loan principal collections temporarily held at master servicer

​

​

31,965

​

​

9,779

Net assets acquired through conversion to equity interest

​

​

7,320

​

​

—

Redemption of Class A Units for common stock

​

​

1,039

​

​

8,538

For the Nine Months Ended September 30,
20212020
Cash Flows from Financing Activities:
Proceeds from borrowings$11,654,848 $4,935,556 
Principal repayments on and repurchases of borrowings(8,566,856)(4,221,999)
Payment of deferred financing costs(46,196)(17,978)
Proceeds from common stock issuances697 511 
Payment of equity offering costs(27)(69)
Payment of dividends(414,977)(408,893)
Contributions from non-controlling interests5,590 9,657 
Distributions to non-controlling interests(35,235)(90,006)
Purchase of treasury stock— (28,830)
Issuance of debt of consolidated VIEs69,399 24,376 
Repayment of debt of consolidated VIEs(608,435)(279,419)
Distributions of cash from consolidated VIEs83,785 57,174 
Net cash provided by (used in) financing activities2,142,593 (19,920)
Net decrease in cash, cash equivalents and restricted cash(336,591)(63,727)
Cash, cash equivalents and restricted cash, beginning of period722,162 574,031 
Effect of exchange rate changes on cash(1,783)902 
Cash, cash equivalents and restricted cash, end of period$383,788 $511,206 
Supplemental disclosure of cash flow information:
Cash paid for interest$276,783 $284,855 
Income taxes paid7,036 2,261 
Supplemental disclosure of non-cash investing and financing activities:
Dividends declared, but not yet paid$140,465 $138,737 
Consolidation of VIEs (VIE asset/liability additions)4,427,479 3,589,657 
Deconsolidation of VIEs (VIE asset/liability reductions)935,855 7,652 
Reclassification of loans held-for-investment to loans held-for-sale237,132 449,025 
Reclassification of loans held-for-sale to loans held-for-investment124,932 104,327 
Transfer of loans from VIE assets to residential loans upon redemption of consolidated RMBS trusts432,926 — 
Loan principal collections temporarily held at master servicer119,925 9,911 
Net assets acquired through conversion to equity interest and foreclosure36,308 — 
Redemption of Class A Units for common stock17,738 8,538 
Unsettled derivative transactions4,047 — 
Unsettled common stock issuances— 379 
​

See notes to condensed consolidated financial statements.

​

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Starwood Property Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31,September 30, 2021

(Unaudited)

​

1. Business and Organization

​

Organization

Starwood Property Trust, Inc. (“STWD” and, together with its subsidiaries, “we” or the “Company”) is a Maryland corporation that commenced operations in August 2009, upon the completion of our initial public offering. We are focused primarily on originating, acquiring, financing and managing mortgage loans and other real estate investments in both the United States (“U.S.”) and Europe. As market conditions change over time, we may adjust our strategy to take advantage of changes in interest rates and credit spreads as well as economic and credit conditions.

​

We have 4 reportable business segments as of March 31,September 30, 2021 and we refer to the investments within these segments as our target assets:

​•

●Real estate commercial and residential lending (the “Commercial and Residential Lending Segment”)—engages primarily in originating, acquiring, financing and managing commercial first mortgages, non-agency residential mortgages (“residential loans”), subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”) and other real estate and real estate-related debt investments in both the U.S. and Europe (including distressed or non-performing loans). Our residential loans are secured by a first mortgage lien on residential property and consist of non-agency residential loans that are not guaranteed by any U.S. Government agency or federally chartered corporation.

​Real estate commercial and residential lending (the “Commercial and Residential Lending Segment”)—engages primarily in originating, acquiring, financing and managing commercial first mortgages, non-agency residential mortgages (“residential loans”), subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”) and other real estate and real estate-related debt investments in both the U.S. and Europe (including distressed or non-performing loans). Our residential loans are secured by a first mortgage lien on residential property and primarily consist of non-agency residential loans that are not guaranteed by any U.S. Government agency or federally chartered corporation.

●Infrastructure lending (the “Infrastructure Lending Segment”)—engages primarily in originating, acquiring, financing and managing infrastructure debt investments.

​•

●Real estate property (the “Property Segment”)—engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, including multifamily properties and commercial properties subject to net leases, that are held for investment.

​Infrastructure lending (the “Infrastructure Lending Segment”)—engages primarily in originating, acquiring, financing and managing infrastructure debt investments.

●Real estate investing and servicing (the “Investing and Servicing Segment”)—includes (i) a servicing business in the U.S. that manages and works out problem assets, (ii) an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, including subordinated interests of securitization and resecuritization transactions, (iii) a mortgage loan business which originates conduit loans for the primary purpose of selling these loans into securitization transactions and (iv) an investment business that selectively acquires commercial real estate assets, including properties acquired from CMBS trusts.

​•

Real estate property (the “Property Segment”)—engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, including multifamily properties and commercial properties subject to net leases, that are held for investment.

•Real estate investing and servicing (the “Investing and Servicing Segment”)—includes (i) a servicing business in the U.S. that manages and works out problem assets, (ii) an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, including subordinated interests of securitization and resecuritization transactions, (iii) a mortgage loan business which originates conduit loans for the primary purpose of selling these loans into securitization transactions and (iv) an investment business that selectively acquires commercial real estate assets, including properties acquired from CMBS trusts.
Our segments exclude the consolidation of securitization variable interest entities (“VIEs”).

​

We are organized and conduct our operations to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). As such, we will generally not be subject to U.S. federal corporate income tax on that portion of our net income that is distributed to stockholders if we distribute at least 90% of our taxable income to our stockholders by prescribed dates and comply with various other requirements.

​

We are organized as a holding company and conduct our business primarily through our various wholly-owned subsidiaries. We are externally managed and advised by SPT Management, LLC (our “Manager”) pursuant to the terms of a management agreement. Our Manager is controlled by Barry Sternlicht, our Chairman and Chief Executive Officer. Our Manager is an affiliate of Starwood Capital Group, a privately-held private equity firm founded by Mr. Sternlicht.

​




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​

2. Summary of Significant Accounting Policies

​

Balance Sheet Presentation of Securitization Variable Interest Entities

​

We operate investment businesses that acquire unrated, investment grade and non-investment grade rated CMBS and RMBS. These securities represent interests in securitization structures (commonly referred to as special purpose entities, or “SPEs”). These SPEs are structured as pass through entities that receive principal and interest on the underlying collateral and distribute those payments to the certificate holders. Under accounting principles generally accepted in the United States of America (“GAAP”), SPEs typically qualify as VIEs. These are entities that, by design, either (1) lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity.

​

Because we often serve as the special servicer or servicing administrator of the trusts in which we invest, or we have the ability to remove and replace the special servicer without cause, consolidation of these structures is required pursuant to GAAP as outlined in detail below. This results in a consolidated balance sheet which presents the gross assets and liabilities of the VIEs. The assets and other instruments held by these VIEs are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the VIEs do not have any recourse to the general credit of any other consolidated entities, nor to us as the consolidator of these VIEs.

​

The VIE liabilities initially represent investment securities on our balance sheet (pre-consolidation). Upon consolidation of these VIEs, our associated investment securities are eliminated, as is the interest income related to those securities. Similarly, the fees we earn in our roles as special servicer of the bonds issued by the consolidated VIEs or as collateral administrator of the consolidated VIEs are also eliminated. Finally, a portion of the identified servicing intangible associated with the eliminated fee streams is eliminated in consolidation.

​

Refer to the segment data in Note 22 for a presentation of our business segments without consolidation of these VIEs.

​

Basis of Accounting and Principles of Consolidation

​

The accompanying condensed consolidated financial statements include our accounts and those of our consolidated subsidiaries and VIEs. Intercompany amounts have been eliminated in consolidation. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows have been included.

​

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (our “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three and nine months ended March 31,September 30, 2021 are not necessarily indicative of the operating results for the full year.

​

Refer to our Form 10-K for a description of our recurring accounting policies. We have included disclosure in this Note 2 regarding principles of consolidation and other accounting policies that (i) are required to be disclosed quarterly, (ii) we view as critical, (iii) became significant since December 31, 2020 due to a corporate action or increase in the significance of the underlying business activity or (iv) changed upon adoption of an Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”).

​

Variable Interest Entities

​

In addition to the securitization VIEs, we have financed a poolpools of our loans through a collateralized loan obligationobligations (“CLO”CLOs”) and a single asset securitization ("SASB"), which isare considered a VIE.VIEs. We also hold interests in certain other entities which are considered VIEs as the limited partners of those entities with equity at risk do not collectively possess (i) the right to remove the general partner or dissolve the partnership without cause or (ii) the right to participate in significant decisions made by the partnership.

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​

We evaluate all of our interests in VIEs for consolidation. When our interests are determined to be variable interests, we assess whether we are deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. Accounting Standards Codification (“ASC”) 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. We

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consider our variable interests as well as any variable interests of our related parties in making this determination. Where both of these factors are present, we are deemed to be the primary beneficiary and we consolidate the VIE. Where either one of these factors is not present, we are not the primary beneficiary and do not consolidate the VIE.

​

To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes: (i) identifying the activities that most significantly impact the VIE’s economic performance; and (ii) identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE. The right to remove the decision maker in a VIE must be exercisable without cause for the decision maker to not be deemed the party that has the power to direct the activities of a VIE.

​

To assess whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, we consider all of our economic interests, including debt and equity investments, servicing fees and other arrangements deemed to be variable interests in the VIE. This assessment requires that we apply judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by us.

​

Our purchased investment securities include unrated and non-investment grade rated securities issued by securitization trusts. In certain cases, we may contract to provide special servicing activities for these trusts, or, as holder of the controlling class, we may have the right to name and remove the special servicer for these trusts. In our role as special servicer, we provide services on defaulted loans within the trusts, such as foreclosure or work-out procedures, as permitted by the underlying contractual agreements. In exchange for these services, we receive a fee. These rights give us the ability to direct activities that could significantly impact the trust’s economic performance. However, in those instances where an unrelated third party has the right to unilaterally remove us as special servicer without cause, we do not have the power to direct activities that most significantly impact the trust’s economic performance. We evaluated all of our positions in such investments for consolidation.

​

For securitization VIEs in which we are determined to be the primary beneficiary, all of the underlying assets, liabilities and equity of the structures are recorded on our books, and the initial investment, along with any associated unrealized holding gains and losses, are eliminated in consolidation. Similarly, the interest income earned from these structures, as well as the fees paid by these trusts to us in our capacity as special servicer, are eliminated in consolidation. Further, a portion of the identified servicing intangible asset associated with the servicing fee streams, and the corresponding amortization or change in fair value of the servicing intangible asset, are also eliminated in consolidation.

​

We perform ongoing reassessments of: (i) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework, and (ii) whether changes in the facts and circumstances regarding our involvement with a VIE causes our consolidation conclusion regarding the VIE to change.

​

We elect the fair value option for initial and subsequent recognition of the assets and liabilities of our consolidated securitization VIEs. Interest income and interest expense associated with these VIEs are no longer relevant on a standalone basis because these amounts are already reflected in the fair value changes. We have elected to present these items in a single line on our condensed consolidated statements of operations. The residual difference shown on our condensed consolidated statements of operations in the line item “Change in net assets related to consolidated VIEs” represents our beneficial interest in the VIEs.

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​

We separately present the assets and liabilities of our consolidated securitization VIEs as individual line items on our condensed consolidated balance sheets. The liabilities of our consolidated securitization VIEs consist solely of obligations to the bondholders of the related trusts, and are thus presented as a single line item entitled “VIE liabilities.” The assets of our consolidated securitization VIEs consist principally of loans, but at times, also include foreclosed loans which have been temporarily converted into real estate owned (“REO”). These assets in the aggregate are likewise presented as a single line item entitled “VIE assets.”

​

Loans comprise the vast majority of our securitization VIE assets and are carried at fair value due to the election of the fair value option. When an asset becomes REO, it is due to non-performance of the loan. Because the loan is already at fair value, the carrying value of an REO asset is also initially at fair value. Furthermore, when we consolidate a trust, any existing
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REO would be consolidated at fair value. Once an asset becomes REO, its disposition time is relatively short. As a result, the carrying value of an REO generally approximates fair value under GAAP.

​

In addition to sharing a similar measurement method as the loans in a trust, the securitization VIE assets as a whole can only be used to settle the obligations of the consolidated VIE. The assets of our securitization VIEs are not individually accessible by the bondholders, which creates inherent limitations from a valuation perspective. Also creating limitations from a valuation perspective is our role as special servicer, which provides us very limited visibility, if any, into the performing loans of a trust.

​

REO assets generally represent a very small percentage of the overall asset pool of a trust. In new issue trusts there are no REO assets. We estimate that REO assets constitute approximately 1% of our consolidated securitization VIE assets, with the remaining 99% representing loans. However, it is important to note that the fair value of our securitization VIE assets is determined by reference to our securitization VIE liabilities as permitted under ASU 2014-13, Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity. In other words, our VIE liabilities are more reliably measurable than the VIE assets, resulting in our current measurement methodology which utilizes this value to determine the fair value of our securitization VIE assets as a whole. As a result, these percentages are not necessarily indicative of the relative fair values of each of these asset categories if the assets were to be valued individually.

​

Due to our accounting policy election under ASU 2014-13, separately presenting two different asset categories would result in an arbitrary assignment of value to each, with one asset category representing a residual amount, as opposed to its fair value. However, as a pool, the fair value of the assets in total is equal to the fair value of the liabilities.

​

For these reasons, the assets of our securitization VIEs are presented in the aggregate.

​

Fair Value Option

​

The guidance in ASC 825, Financial Instruments, provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument by instrument basis and must be applied to an entire instrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in our consolidated balance sheets from those instruments using another accounting method.

​

We have elected the fair value option for certain eligible financial assets and liabilities of our consolidated securitization VIEs, residential loans held-for-investment, loans held-for-sale originated or acquired for future securitization and purchased CMBS issued by VIEs we could consolidate in the future. The fair value elections for VIE and securitization related items were made in order to mitigate accounting mismatches between the carrying value of the instruments and the related assets and liabilities that we consolidate at fair value. The fair value elections for residential loans held-for-investment were made in order to maintain consistency across all our residential loans. The fair value elections for mortgage loans held-for-sale were made due to the expected short-term holding period of these instruments.

​

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Fair Value Measurements

​

We measure our mortgage-backed securities, derivative assets and liabilities, domestic servicing rights intangible asset and any assets or liabilities where we have elected the fair value option at fair value. When actively quoted observable prices are not available, we either use implied pricing from similar assets and liabilities or valuation models based on net present values of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors.

​

As discussed above, we measure the assets and liabilities of consolidated securitization VIEs at fair value pursuant to our election of the fair value option. The securitization VIEs in which we invest are “static”; that is, 0no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the securitization VIEs, we maximize the use of observable inputs over unobservable inputs. Refer to Note 19 for further discussion regarding our fair value measurements.

​

Loans Held-for-Investment

​

Loans that are held for investment (“HFI”) are carried at cost, net of unamortized acquisition premiums or discounts, loan fees and origination costs, as applicable, and net of credit loss allowances as discussed below, unless the loans are credit deteriorated or we have elected to apply the fair value option at purchase.

​

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Loans Held-For-Sale

​

Our loans that we intend to sell or liquidate in the short-term are classified as held-for-sale and are carried at the lower of amortized cost or fair value, unless we have elected to apply the fair value option at origination or purchase.

​

Investment Securities

​

We designate our debt investment securities as held-to-maturity (“HTM”), available-for-sale (“AFS”), or trading depending on our investment strategy and ability to hold such securities to maturity. HTM debt securities where we have not elected to apply the fair value option are stated at cost plus any premiums or discounts, which are amortized or accreted through the condensed consolidated statements of operations using the effective interest method. Debt securities we (i) do not hold for the purpose of selling in the near-term, or (ii) may dispose of prior to maturity, are classified as AFS and are carried at fair value in the accompanying financial statements. Unrealized gains or losses on AFS debt securities where we have not elected the fair value option are reported as a component of accumulated other comprehensive income (“AOCI”) in stockholders’ equity. Our HTM and AFS debt securities are also subject to credit loss allowances as discussed below.

​

Our only equity investment security is carried at fair value, with unrealized holding gains and losses recorded in earnings.

​

Credit Losses

​

Loans and Debt Securities Measured at Amortized Cost

​

ASC 326, Financial Instruments – Credit Losses, became effective for the Company on January 1, 2020. ASC 326 mandates the use of a current expected credit loss model (“CECL”) for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” credit model previously required under GAAP. The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to only estimating credit losses upon the occurrence of a discrete loss event under the previous “incurred loss” methodology. The CECL model applies to our HFI loans and our HTM debt securities which are carried at amortized cost, including future funding commitments and accrued interest receivable related to those loans and securities. However, as permitted by ASC 326, we have elected not to measure an allowance for credit losses on accrued interest receivable (which is classified separately on our condensed consolidated balance sheet), but rather write off in a timely manner by reversing interest income and/or cease accruing interest that would likely be uncollectible. Our adoption of the CECL model resulted in a $32.3$32.3 million increase to our total allowance for credit losses, which was recognized as a cumulative-effect adjustment to accumulated deficit as of January 1, 2020.

​

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As we do not have a history of realized credit losses on our HFI loans and HTM securities, we have subscribed to third party database services to provide us with historical industry losses for both commercial real estateand infrastructure loans. Using these losses as a benchmark, we determine expected credit losses for our loans and securities on a collective basis within our commercial real estate and infrastructure portfolios. See Note 4 for further discussion of our methodologies.

​

We also evaluate each loan and security measured at amortized cost for credit deterioration at least quarterly. Credit deterioration occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan or security. If a loan or security is considered to be credit deteriorated, we depart from the industry loss rate approach described above and determine the credit loss allowance as any excess of the amortized cost basis of the loan or security over (i) the present value of expected future cash flows discounted at the contractual effective interest rate or (ii) the fair value of the collateral, if repayment is expected solely from the collateral.

​

Available-for-Sale Debt Securities

​

Separate provisions of ASC 326 apply to our AFS debt securities, which are carried at fair value with unrealized gains and losses reported as a component of AOCI. We are required to establish an initial credit loss allowance for those securities that are purchased with credit deterioration (“PCD”) by grossing up the amortized cost basis of each security and providing an offsetting credit loss allowance for the difference between expected cash flows and contractual cash flows, both on a present value basis. As of the January 1, 2020 effective date, no such credit loss allowance gross-up was required on our AFS debt securities with PCD due to their individual unrealized gain positions as of that date.

​

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Subsequently, cumulative adverse changes in expected cash flows on our AFS debt securities are recognized currently as an increase to the allowance for credit losses. However, the allowance is limited to the amount by which the AFS debt security’s amortized cost exceeds its fair value. Favorable changes in expected cash flows are first recognized as a decrease to the allowance for credit losses (recognized currently in earnings). Such changes would be recognized as a prospective yield adjustment only when the allowance for credit losses is reduced to zero. A change in expected cash flows that is attributable solely to a change in a variable interest reference rate does not result in a credit loss and is accounted for as a prospective yield adjustment.

​

Convertible Senior Notes

Effective January 1, 2021, the Company early adopted ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40), which removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation into a debt component and an equity or derivative component. Consequently, our convertible senior notes (the “Convertible Notes”), which were previously accounted for as having separate liability and equity components, are now accounted for as a single liability measured at amortized cost. The standard was adopted using the modified restrospectiveretrospective method of transition, which resulted in a cumulative decrease to additional paid-in capital of $3.7 million, partially offset by a cumulative decrease to accumulated deficit of $2.2 million as of January 1, 2021.

​

Revenue Recognition

Interest Income

Interest income on performing loans and financial instruments is accrued based on the outstanding principal amount and contractual terms of the instrument. For loans where we do not elect the fair value option, origination fees and direct loan origination costs are also recognized in interest income over the loan term as a yield adjustment using the effective interest method. When we elect the fair value option, origination fees and direct loan costs are recorded directly in income and are not deferred. Discounts or premiums associated with the purchase of non-performing loans and investment securities are amortized or accreted into interest income as a yield adjustment on the effective interest method, based on expected cash flows through the expected maturity date of the investment. On at least a quarterly basis, we review and, if appropriate, make adjustments to our cash flow projections.

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​

We cease accruing interest on non-performing loans at the earlier of (i) the loan becoming significantly past due or (ii) management concluding that a full recovery of all interest and principal is doubtful. Interest income on non-accrual loans in which management expects a full recovery of the loan’s outstanding principal balance is only recognized when received in cash. If a full recovery of principal is doubtful, the cost recovery method is applied whereby any cash received is applied to the outstanding principal balance of the loan. A non-accrual loan is returned to accrual status at such time as the loan becomes contractually current and management believes all future principal and interest will be received according to the contractual loan terms.

​

For loans acquired with deteriorated credit quality, interest income is only recognized to the extent that our estimate of undiscounted expected principal and interest exceeds our investment in the loan. Such excess, if any, is recognized as interest income on a level-yield basis over the life of the loan.

​

Upon the sale of loans or securities which are not accounted for pursuant to the fair value option, the excess (or deficiency) of net proceeds over the net carrying value of such loans or securities is recognized as a realized gain (loss).

Servicing Fees

We typically seek to be the special servicer on CMBS transactions in which we invest. When we are appointed to serve in this capacity, we earn special servicing fees from the related activities performed, which consist primarily of overseeing the workout of under-performing and non-performing loans underlying the CMBS transactions. These fees are recognized in income in the period in which the services are performed and the revenue recognition criteria have been met.

Rental Income

​

Rental income is recognized when earned from tenants. For leases that provide rent concessions or fixed escalations over the lease term, rental income is recognized on a straight-line basis over the noncancelable term of the lease. In net lease arrangements, costs reimbursable from tenants are recognized in rental income in the period in which the related expenses are
16
Table of Contents
incurred as we are generally the primary obligor with respect to purchasing goods and services for property operations. In instances where the tenant is responsible for property maintenance and repairs and contracts and settles such costs directly with third party service providers, we do not reflect those expenses in our consolidated statement of operations as the tenant is the primary obligor.

​

Earnings Per Share

​

We present both basic and diluted earnings per share (“EPS”) amounts in our financial statements. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from (i) our share-based compensation, consisting of unvested restricted stock (“RSAs”) and restricted stock units (“RSUs”), (ii) shares contingently issuable to our Manager, (iii) the conversion options associated with our Convertible Notes (see Notes 10 and 17) and (iv) non-controlling interests that are redeemable with our common stock (see Note 16). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.

​

Nearly all of the Company’s unvested RSUs and RSAs contain rights to receive non-forfeitable dividends and thus are participating securities. In addition, the non-controlling interests that are redeemable with our common stock are considered participating securities because they earn a preferred return indexed to the dividend rate on our common stock (see Note 16). Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. Under the two-class method, undistributed earnings are reallocated between shares of common stock and participating securities. For the three and nine months ended March 31,September 30, 2021 and 2020, the two-class method resulted in the most dilutive EPS calculation.

​

​

17

Table of Contents

Use of Estimates

​

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. The most significant and subjective estimate that we make is the projection of cash flows we expect to receive on our investments, which has a significant impact on the amount of income that we record and/or disclose. In addition, the fair value of financial assets and liabilities that are estimated using a discounted cash flows method is significantly impacted by the rates at which we estimate market participants would discount the expected cash flows.

​

The outbreak of COVID-19 beginning in the first quarter of 2020 has had, and is expected to continue to have, an adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of March 31,September 30, 2021. However, uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and our business in particular, makes any estimates and assumptions as of March 31,September 30, 2021 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates.

​

Recent Accounting Developments

​

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting,and on January 11, 2021, issued ASU 2021-01, Reference Rate Reform (Topic 848) – Scope,both of which provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. These ASUs are effective through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions through March 31,September 30, 2021, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period as circumstances evolve.

​






17
Tab

le of Contents

3. Acquisitionsand Divestitures

​

During the threenine months ended March 31,September 30, 2021, we sold a property within the Investing and Servicing Segment Property Portfolio ("REIS Equity Portfolio") for $30.9 million. In connection with this sale, we recognized a gain of $9.7 million within gain on sale of investments and other assets in our condensed consolidated statements of operations. During the nine months ended September 30, 2020, we sold a property within the REIS Equity Portfolio for $24.1 million. In connection with this sale, we recognized a gain of $7.4 million within gain on sale of investments and other assets in our condensed consolidated statements of operations.
During the nine months ended September 30, 2021, we sold an operating property within the Commercial and Residential Lending Segment relating to a grocery distribution facility located in Montgomery, Alabama that was previously acquired in March 2019 through foreclosure of a loan with a carrying value of $9.0 million ($20.9 million unpaid principal balance net of an $8.3 million allowance and $3.6 million of unamortized discount) at the foreclosure date. The operating property was sold for $30.6 million and we recognized a gain of $17.7 million within gain on sale of investments and other assets in our condensed consolidated statementstatements of operations.

​

During the three and nine months ended March 31,September 30, 2021 and 2020, we had no significant acquisitions of properties or businesses.


​

​

​

​

​

​

18

TableTable of Contents

4. Loans

​

Our loans held-for-investment are accounted for at amortized cost and our loans held-for-sale are accounted for at the lower of cost or fair value, unless we have elected the fair value option for either. The following tables summarize our investments in mortgages and loans as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

  

​

​

    

​

​

    

​

    

Weighted

 

​

​

​

​

​

​

​

​

Weighted

​

Average Life

 

​

​

Carrying

​

Face

​

Average

​

(“WAL”)

 

March 31, 2021

​

Value

​

Amount

​

Coupon (1)

​

(years)(2)

​

Loans held-for-investment:

​

​

​

​

​

​

​

​

​

​

​

Commercial loans:

​

​

​

​

​

​

​

​

​

​

​

First mortgages (3), (8)

​

$

9,955,674

​

$

10,003,057

​

5.1

%  

1.7

​

Subordinated mortgages (4)

​

 

70,457

​

​

71,428

​

8.8

%  

2.5

​

Mezzanine loans (3)

​

 

603,119

​

​

601,080

​

10.1

%  

1.4

​

Other

​

​

18,200

​

​

20,267

​

8.2

%  

2.6

​

Total commercial loans

​

​

10,647,450

​

​

10,695,832

​

​

​

​

​

Infrastructure first priority loans (5)

​

​

1,595,615

​

​

1,616,716

​

4.3

%  

4.1

​

Residential loans, fair value option (6)

​

​

150,712

​

​

149,404

​

6.2

%  

N/A

(7)

Total loans held-for-investment

​

 

12,393,777

​

​

12,461,952

​

​

​

​

​

Loans held-for-sale:

​

​

​

​

​

​

​

​

​

​

​

Residential, fair value option (6)

​

​

444,835

​

​

435,025

​

5.7

%  

N/A

(7)

Commercial, $168,226 under fair value option (8)

​

​

310,428

​

​

314,917

​

4.3

%  

5.7

​

Infrastructure, lower of cost or fair value (5)

​

​

89,368

​

​

89,601

​

2.9

%  

2.6

​

Total loans held-for-sale

​

​

844,631

​

​

839,543

​

​

​

​

​

Total gross loans

​

 

13,238,408

​

$

13,301,495

​

​

​

​

​

Credit loss allowances:

​

​

​

​

​

​

​

​

​

​

​

Commercial loans held-for-investment

​

​

(63,477)

​

​

​

​

​

​

​

​

Infrastructure loans held-for-investment

​

​

(8,807)

​

​

​

​

​

​

​

​

Total allowances

​

​

(72,284)

​

​

​

​

​

​

​

​

Total net loans

​

$

13,166,124

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

Loans held-for-investment:

​

​

​

​

​

​

​

​

​

​

​

Commercial loans:

​

​

​

​

​

​

​

​

​

​

​

First mortgages (3)

​

$

8,931,772

​

$

8,978,373

​

5.3

%  

1.5

​

Subordinated mortgages (4)

​

 

71,185

​

 

72,257

​

8.8

%  

2.8

​

Mezzanine loans (3)

​

 

620,319

​

 

619,352

​

10.1

%  

1.6

​

Other

​

​

30,284

​

​

33,626

​

8.9

%  

1.8

​

Total commercial loans

​

​

9,653,560

​

​

9,703,608

​

​

​

​

​

Infrastructure first priority loans

​

​

1,420,273

​

 

1,439,940

​

4.4

%  

4.3

​

Residential loans, fair value option

​

​

90,684

​

​

86,796

​

6.0

%  

N/A

(7)

Total loans held-for-investment

​

 

11,164,517

​

​

11,230,344

​

​

​

​

​

Loans held-for-sale:

​

​

​

​

​

​

​

​

​

​

​

Residential, fair value option

​

​

841,963

​

​

820,807

​

6.0

%  

N/A

(7)

Commercial, fair value option

​

​

90,332

​

​

90,789

​

3.9

%  

10.0

​

Infrastructure, lower of cost or fair value

​

​

120,540

​

​

120,900

​

3.1

%  

3.2

​

Total loans held-for-sale

​

​

1,052,835

​

​

1,032,496

​

​

​

​

​

Total gross loans

​

 

12,217,352

​

$

12,262,840

​

​

​

​

​

Credit loss allowances:

​

​

​

​

​

​

​

​

​

​

​

Commercial loans held-for-investment

​

​

(69,611)

​

​

​

​

​

​

​

​

Infrastructure loans held-for-investment

​

​

(7,833)

​

​

​

​

​

​

​

​

Total allowances

​

​

(77,444)

​

​

​

​

​

​

​

​

Total net loans

​

$

12,139,908

​

​

​

​

​

​

​

​

September 30, 2021Carrying
Value		Face
Amount		Weighted
Average
Coupon (1)		Weighted
Average Life
(“WAL”)
(years)(2)
Loans held-for-investment:
Commercial loans:
First mortgages (3)$10,984,936 $11,043,211 4.9 %1.8
Subordinated mortgages (4)81,159 82,916 9.6 %3.0
Mezzanine loans (3)477,227 474,105 9.6 %1.3
Other17,689 19,450 8.2 %2.3
Total commercial loans11,561,011 11,619,682 
Infrastructure first priority loans (5)1,698,061 1,719,931 4.3 %3.9
Residential loans, fair value option (6)91,499 91,280 6.1 %N/A(7)
Total loans held-for-investment13,350,571 13,430,893 
Loans held-for-sale:
Residential, fair value option (6)1,813,458 1,758,342 4.3 %N/A(7)
Commercial, fair value option285,808 278,736 3.6 %9.7
Infrastructure, lower of cost or fair value (5)84,253 84,457 2.8 %1.5
Total loans held-for-sale2,183,519 2,121,535 
Total gross loans15,534,090 $15,552,428 
Credit loss allowances:
Commercial loans held-for-investment(48,359)
Infrastructure loans held-for-investment(9,214)
Total allowances(57,573)
Total net loans$15,476,517 
December 31, 2020
Loans held-for-investment:
Commercial loans:
First mortgages (3)$8,931,772 $8,978,373 5.3 %1.5
Subordinated mortgages (4)71,185 72,257 8.8 %2.8
Mezzanine loans (3)620,319 619,352 10.1 %1.6
Other30,284 33,626 8.9 %1.8
Total commercial loans9,653,560 9,703,608 
Infrastructure first priority loans1,420,273 1,439,940 4.4 %4.3
Residential loans, fair value option90,684 86,796 6.0 %N/A(7)
Total loans held-for-investment11,164,517 11,230,344 
Loans held-for-sale:
Residential, fair value option841,963 820,807 6.0 %N/A(7)
Commercial, fair value option90,332 90,789 3.9 %10.0
Infrastructure, lower of cost or fair value120,540 120,900 3.1 %3.2
Total loans held-for-sale1,052,835 1,032,496 
Total gross loans12,217,352 $12,262,840 
Credit loss allowances:
Commercial loans held-for-investment(69,611)
Infrastructure loans held-for-investment(7,833)
Total allowances(77,444)
Total net loans$12,139,908 
19

19

TableTable of Contents

(1)

Calculated using LIBOR or other applicable index rates as of September 30, 2021 and December 31, 2020 for variable rate loans.
(1)Calculated using LIBOR or other applicable index rates as of March 31, 2021 and December 31, 2020 for variable rate loans.

​(2)

(2)Represents the WAL of each respective group of loans as of the respective balance sheet date. The WAL of each individual loan is calculated using amounts and timing of future principal payments, as projected at origination or acquisition.

​Represents the WAL of each respective group of loans as of the respective balance sheet date. The WAL of each individual loan is calculated using amounts and timing of future principal payments, as projected at origination or acquisition.

(3)First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan.  The application of this methodology resulted in mezzanine loans with carrying values of $917.8 million and $877.3 million being classified as first mortgages as of March 31, 2021 and December 31, 2020, respectively.

​(3)

(4)Subordinated mortgages include B-Notes and junior participation in first mortgages where we do not own the senior A-Note or senior participation. If we own both the A-Note and B-Note, we categorize the loan as a first mortgage loan.

​First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan.  The application of this methodology resulted in mezzanine loans with carrying values of $1.2 billion and $877.3 million being classified as first mortgages as of September 30, 2021 and December 31, 2020, respectively.

(5)During the three months ended March 31, 2021, $30.7 million of infrastructure loans held-for-sale were reclassified into loans held-for-investment.

​(4)

(6)During the three months ended March 31, 2021, a net amount of $69.5 million of residential loans held-for-sale were reclassified into loans held-for-investment.

​Subordinated mortgages include B-Notes and junior participation in first mortgages where we do not own the senior A-Note or senior participation. If we own both the A-Note and B-Note, we categorize the loan as a first mortgage loan.

(7)Residential loans have a weighted average remaining contractual life of 28.9 years and 27.9 years as of March 31, 2021 and December 31, 2020, respectively.

​(5)

(8)During the three months ended March 31, 2021, $142.2 million of commercial loans held-for-investment were reclassified into loans held-for-sale.

​During the nine months ended September 30, 2021, $30.7 million of infrastructure loans held-for-sale were reclassified into loans held-for-investment.

(6)During the nine months ended September 30, 2021, $94.2 million of residential loans held-for-sale were reclassified into loans held-for-investment and $94.9 million of residential loans held-for-investment were reclassified into loans held-for-sale.
(7)Residential loans have a weighted average remaining contractual life of 29.5 years and 27.9 years as of September 30, 2021 and December 31, 2020, respectively.
As of March 31,September 30, 2021, our variable rate loans held-for-investment were as follows (dollars in thousands):

September 30, 2021Carrying
Value		Weighted-average
Spread Above Index
Commercial loans$11,114,900 4.2 %
Infrastructure loans1,698,061 3.9 %
Total variable rate loans held-for-investment$12,812,961 4.2 %
​

​

​

​

​

​

​

​

​

​

Carrying

​

Weighted-average

​

March 31, 2021

​

Value

​

Spread Above Index

​

Commercial loans

​

$

9,969,387

​

4.3

%  

Infrastructure loans

​

​

1,595,615

​

3.8

%  

Total variable rate loans held-for-investment

​

$

11,565,002

​

4.2

%  

​

Credit Loss Allowances

​

As discussed in Note 2, we do not have a history of realized credit losses on our HFI loans and HTM securities, so we have subscribed to third party database services to provide us with industry losses for both commercial real estate and infrastructure loans. Using these losses as a benchmark, we determine expected credit losses for our loans and securities on a collective basis within our commercial real estate and infrastructure portfolios.

​

For our commercial loans, we utilize a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading CMBS data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. We provide specific loan-level inputs which include loan-to-stabilized-value (“LTV”) and debt service coverage ratio (DSCR) metrics, as well as principal balances, property type, location, coupon, origination year, term, subordination, expected repayment dates and future fundings. We also select from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. We categorize the results by LTV range, which we consider the most significant indicator of credit quality for our commercial loans, as set forth in the credit quality indicator table below. A lower LTV ratio typically indicates a lower credit loss risk.

​

The macroeconomic forecasts do not differentiate among property types or asset classes. Instead, these forecasts reference general macroeconomic growth factors which apply broadly across all assets. However, the COVID-19 pandemic has had a more negative impact on certain property types, principally retail and hospitality, which have

20

Table of Contents

withstood extended government mandated closures,were initially impacted by lockdowns and more recentlypartial reopenings and reduced consumer travel. The office which is experiencing lower demandsector has also been adversely affected due to the increase in remote working arrangements. The broad macroeconomic forecasts do not account for such differentiation. Accordingly, we have selected a more adverse macroeconomic recovery forecast related to these property types in determining our credit loss allowance.

20
Table of Contents

​

For our infrastructure loans, we utilize a database of historical infrastructure loan performance that is shared among a consortium of banks and other lenders and compiled by a major bond credit rating agency. The database is representative of industry-wide project finance activity dating back to 1983. We derive historical loss rates from the database filtered by industry, sub-industry, term and construction status for each of our infrastructure loans. Those historical loss rates reflect global economic cycles over a long period of time as well as average recovery rates. We categorize the results between the power and oil and gas industries, which we consider the most significant indicator of credit quality for our infrastructure loans, as set forth in the credit quality indicator table below.

​

As discussed in Note 2, we use a discounted cash flow or collateral value approach, rather than the industry loan loss approach described above, to determine credit loss allowances for any credit deteriorated loans.

​

We regularly evaluate the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral, as well as the financial and operating capability of the borrower. Specifically, the collateral’s operating results and any cash reserves are analyzed and used to assess (i) whether cash flow from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the collateral’s liquidation value. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the collateral. In addition, we consider the overall economic environment, real estate or industry sector, and geographic sub-market in which the borrower operates. Such analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as property operating statements, occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.

​

The significant credit quality indicators for our loans measured at amortized cost, which excludes loans held-for-sale, were as follows as of March 31,September 30, 2021 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

���

​

​

​

​

​

​

​

​

​

​

​

​

  

Term Loans

  

Revolving Loans

  

Total

  

Credit

​

​

Amortized Cost Basis by Origination Year

​

Amortized Cost

​

Amortized

​

Loss

As of March 31, 2021

​

2021

  

2020

  

2019

  

2018

  

2017

  

Prior

​

Total

​

Cost Basis

​

Allowance

Commercial loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Credit quality indicator:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

LTV < 60%

​

$

1,152,309

​

$

709,735

​

$

1,314,912

​

$

1,225,605

​

$

729,227

​

$

425,570

​

$

—

​

$

5,557,358

​

$

7,015

LTV 60% - 70%

​

​

859,035

​

​

480,542

​

​

1,530,002

​

​

825,212

​

​

39,916

​

​

82,088

​

​

—

​

​

3,816,795

​

​

31,535

LTV > 70%

​

​

—

​

​

240,217

​

​

599,518

​

​

312,972

​

​

—

​

​

61,426

​

​

—

​

​

1,214,133

​

​

16,661

Credit deteriorated

​

​

—

​

​

—

​

​

—

​

​

28,986

​

​

—

​

​

11,977

​

​

—

​

​

40,963

​

​

8,266

Defeased and other

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

​

​

18,201

​

​

—

​

​

18,201

​

​

—

Total commercial

​

$

2,011,344

​

$

1,430,494

​

$

3,444,432

​

$

2,392,775

​

$

769,143

​

$

599,262

​

$

—

​

$

10,647,450

​

$

63,477

Infrastructure loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Credit quality indicator:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Power

​

$

—

​

$

77,525

​

$

220,901

​

$

397,619

​

$

124,959

​

$

371,072

​

$

10,057

​

$

1,202,133

​

$

5,074

Oil and gas

​

​

—

​

​

19,902

​

​

267,727

​

​

100,803

​

​

—

​

​

—

​

​

5,050

​

​

393,482

​

​

3,733

Total infrastructure

​

$

—

​

$

97,427

​

$

488,628

​

$

498,422

​

$

124,959

​

$

371,072

​

$

15,107

​

$

1,595,615

​

$

8,807

Residential loans held-for-investment, fair value option

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

150,712

​

​

—

Loans held-for-sale

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

844,631

​

​

—

Total gross loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

$

13,238,408

​

$

72,284

​

​

21

Term Loans
Amortized Cost Basis by Origination Year		Revolving Loans
Amortized Cost
Total		Total
Amortized
Cost Basis		Credit
Loss
Allowance
As of September 30, 202120212020201920182017Prior
Commercial loans:
Credit quality indicator:
LTV < 60%$2,055,283 $758,931 $1,185,385 $595,145 $657,732 $287,335 $— $5,539,811 $8,226 
LTV 60% - 70%2,136,337 416,218 1,188,220 679,369 — 82,258 — 4,502,402 19,763 
LTV > 70%329,066 272,581 473,177 352,473 — 61,835 — 1,489,132 12,104 
Credit deteriorated— — — — — 11,977 — 11,977 8,266 
Defeased and other— — — — — 17,689 — 17,689 — 
Total commercial$4,520,686 $1,447,730 $2,846,782 $1,626,987 $657,732 $461,094 $— $11,561,011 $48,359 
Infrastructure loans:
Credit quality indicator:
Power$98,003 $52,343 $217,061 $410,610 $121,482 $305,241 $9,111 $1,213,851 $5,108 
Oil and gas64,547 17,376 254,266 98,924 45,113 — 3,984 484,210 4,106 
Total infrastructure$162,550 $69,719 $471,327 $509,534 $166,595 $305,241 $13,095 $1,698,061 $9,214 
Residential loans held-for-investment, fair value option91,499 — 
Loans held-for-sale2,183,519 — 
Total gross loans$15,534,090 $57,573 

Table of Contents

As of March 31,September 30, 2021, we had credit deteriorated commercial loans with an amortized cost basis of $41.0 million, of which $29.0 million had no credit loss allowance.$12.0 million. These loans were on nonaccrual status, with the cost recovery method of interest income recognition applied. In addition to these credit deteriorated loans, we had a $187.6$196.2 million commercial loan and $20.2$19.5 million of residential loans that were 90 days or greater past due at March 31,September 30, 2021. In March 2021, $7.3 million relating to the $187.6$196.2 million commercial loan that was 90 days or greater past due was converted to equity interests pursuant to a consensual transfer under pre-existing equity pledges of additional collateral (see Note 7). The $187.6$196.2 million commercial loan, along with a $14.8$13.1 million infrastructure loan in forbearance, were placed on nonaccrual status during the three months ended March 31,in January 2021, but are not considered credit deteriorated as we presently expect to recover all amounts due. Any loans which are modified to provide for the deferral of interest are not considered past due and are accounted for in accordance with our revenue recognition policy on interest income.

21
Table of Contents

​

In April 2021, we foreclosed on certain credit deteriorated loans related to a residential conversion project located in New York City, which resulted in our obtaining physical possession of the underlying collateral. The net carrying value of the loans related to this project totaled $100.5 million and consisted of: (i) a first mortgage and mezzanine loan with a net carrying value of $71.5 million, for which we consolidated the underlying property collateral in October 2020 when we obtained control over certain pledged equity interests of the borrower; and (ii) a first mortgage loan with a net carrying value of $29.0 million that was not subject to the pledged equity interests and thus continued to be reflected as a loan on our consolidated balance sheet until the April 2021 foreclosure. See Note 6 for further detail.
The following tables present the activity in our credit loss allowance for funded loans and unfunded commitments (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

Funded Commitments Credit Loss Allowance

​

​

Loans Held-for-Investment

​

Total

Three Months Ended March 31, 2021

​

Commercial

​

Infrastructure

​

Funded Loans

Credit loss allowance at December 31, 2020

​

$

69,611

​

$

7,833

​

$

77,444

Credit loss provision (reversal), net

​

 

1,880

​

 

717

​

 

2,597

Charge-offs

​

​

(7,757)

(1)

​

—

​

​

(7,757)

Recoveries

​

 

—

​

 

—

​

 

—

Transfers

​

 

(257)

​

 

257

​

 

—

Credit loss allowance at March 31, 2021

​

$

63,477

​

$

8,807

​

$

72,284

​

​

​

​

​

​

​

​

​

​

​

​

​

Unfunded Commitments Credit Loss Allowance (2)

​

​

Loans Held-for-Investment

​

​

Three Months Ended March 31, 2021

   

Commercial

   

Infrastructure

   

Total

Credit loss allowance at December 31, 2020

​

$

5,258

​

$

812

​

$

6,070

Credit loss reversal, net

​

 

(2,122)

​

 

(143)

​

 

(2,265)

Credit loss allowance at March 31, 2021

​

$

3,136

​

$

669

​

$

3,805

Memo: Unfunded commitments as of March 31, 2021 (3)

​

$

1,291,304

​

$

65,791

​

$

1,357,095

(1)Relates to an unsecured promissory note deemed uncollectible in connection with a residential conversion project located in New York City. The note was previously considered credit deteriorated and was fully reserved.

​

(2)Included in accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.

​

(3)Represents amounts expected to be funded (see Note 21).

​

​

22

Funded Commitments Credit Loss Allowance
Loans Held-for-InvestmentTotal
Funded Loans
Nine Months Ended September 30, 2021CommercialInfrastructure
Credit loss allowance at December 31, 2020$69,611 $7,833 $77,444 
Credit loss (reversal) provision, net(13,238)1,124 (12,114)
Charge-offs(7,757)(1)— (7,757)
Recoveries— — — 
Transfers(257)257 — 
Credit loss allowance at September 30, 2021$48,359 $9,214 $57,573 
Unfunded Commitments Credit Loss Allowance (2)
Loans Held-for-Investment
Nine Months Ended September 30, 2021CommercialInfrastructureTotal
Credit loss allowance at December 31, 2020$5,258 $812 $6,070 
Credit loss reversal, net(440)(523)(963)
Credit loss allowance at September 30, 2021$4,818 $289 $5,107 
Memo: Unfunded commitments as of September 30, 2021 (3)$1,352,772 $32,080 $1,384,852 

(1)Relates to an unsecured promissory note deemed uncollectible in connection with a residential conversion project located in New York City. The note was previously considered credit deteriorated and was fully reserved.

Table of Contents(2)Included in accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.

(3)Represents amounts expected to be funded (see Note 21).

Loan Portfolio Activity

​

The activity in our loan portfolio was as follows (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Held-for-Investment Loans

​

​

​

​

​

​

Three Months Ended March 31, 2021

​

Commercial

​

Infrastructure

​

Residential

​

Held-for-Sale Loans

​

Total Loans

Balance at December 31, 2020

​

$

9,583,949

​

$

1,412,440

​

$

90,684

​

$

1,052,835

​

$

12,139,908

Acquisitions/originations/additional funding

​

 

2,196,813

​

 

99,311

​

 

—

​

 

375,270

​

 

2,671,394

Capitalized interest (1)

​

 

36,646

​

 

—

​

 

—

​

 

—

​

 

36,646

Basis of loans sold (2)

​

 

—

​

 

—

​

 

—

​

 

(571,927)

​

 

(571,927)

Loan maturities/principal repayments

​

 

(1,021,393)

​

 

(18,055)

​

 

(9,210)

​

 

(44,326)

​

 

(1,092,984)

Discount accretion/premium amortization

​

 

15,824

​

 

921

​

 

—

​

 

—

​

 

16,745

Changes in fair value

​

 

—

​

 

—

​

 

(290)

​

 

(9,188)

​

 

(9,478)

Unrealized foreign currency translation loss

​

 

(14,082)

​

 

(181)

​

 

—

​

 

—

​

 

(14,263)

Credit loss provision, net

​

 

(1,880)

​

 

(717)

​

 

—

​

 

—

​

 

(2,597)

Transfer to/from other asset classifications or between segments

​

​

(211,904)

​

​

93,089

​

​

69,528

​

​

41,967

​

​

(7,320)

Balance at March 31, 2021

​

$

10,583,973

​

$

1,586,808

​

$

150,712

​

$

844,631

​

$

13,166,124

Held-for-Investment Loans
Nine Months Ended September 30, 2021CommercialInfrastructureResidentialHeld-for-Sale LoansTotal Loans
Balance at December 31, 2020$9,583,949 $1,412,440 $90,684 $1,052,835 $12,139,908 
Acquisitions/originations/additional funding5,242,378 393,329 — 3,151,361 8,787,068 
Capitalized interest (1)89,830 — 2,068 2,062 93,960 
Basis of loans sold (2)(243,378)— — (2,358,790)(2,602,168)
Loan maturities/principal repayments(2,897,747)(211,695)(26,341)(250,662)(3,386,445)
Discount accretion/premium amortization40,367 3,652 — 504 44,523 
Changes in fair value— — 1,837 66,279 68,116 
Foreign currency translation loss, net(75,094)(840)— — (75,934)
Credit loss reversal (provision), net13,238 (1,124)— — 12,114 
Loan foreclosure and conversion to equity interest(36,308)— — — (36,308)(3)
Transfer to/from other asset classifications or between segments(204,583)93,085 23,251 519,930 431,683 (4)
Balance at September 30, 2021$11,512,652 $1,688,847 $91,499 $2,183,519 $15,476,517 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Held-for-Investment Loans

​

​

​

​

​

​

Three Months Ended March 31, 2020

​

Commercial

​

Infrastructure

​

Residential

​

Held-for-Sale Loans

​

Total Loans

Balance at December 31, 2019

​

$

8,517,054

​

$

1,397,448

​

$

671,572

​

$

884,150

​

$

11,470,224

Cumulative effect of ASC 326 effective January 1, 2020

​

​

(10,112)

​

​

(10,328)

​

​

—

​

​

—

​

​

(20,440)

Acquisitions/originations/additional funding

​

 

1,089,096

​

 

62,929

​

 

100,720

​

 

646,160

​

 

1,898,905

Capitalized interest (1)

​

 

36,072

​

 

—

​

 

—

​

 

—

​

 

36,072

Basis of loans sold (2)

​

 

—

​

 

—

​

 

(604)

​

 

(789,259)

​

 

(789,863)

Loan maturities/principal repayments

​

 

(689,972)

​

 

(37,051)

​

 

(48,620)

​

 

(20,680)

​

 

(796,323)

Discount accretion/premium amortization

​

 

11,559

​

 

411

​

 

—

​

 

110

​

 

12,080

Changes in fair value

​

 

—

​

 

—

​

 

(25,619)

​

 

9,485

​

 

(16,134)

Unrealized foreign currency translation loss

​

 

(83,263)

​

 

—

​

 

—

​

 

(4,056)

​

 

(87,319)

Credit loss provision, net

​

 

(37,527)

​

 

(5,805)

​

 

—

​

 

—

​

 

(43,332)

Transfer to/from other asset classifications

​

​

—

​

​

(26,333)

​

​

(422,691)

​

​

449,024

​

​

—

Balance at March 31, 2020

​

$

8,832,907

​

$

1,381,271

​

$

274,758

​

$

1,174,934

​

$

11,663,870

22
Table of Contents
Held-for-Investment Loans
Nine Months Ended September 30, 2020CommercialInfrastructureResidentialHeld-for-Sale LoansTotal Loans
Balance at December 31, 2019$8,517,054 $1,397,448 $671,572 $884,150 $11,470,224 
Cumulative effect of ASC 326 effective January 1, 2020(10,112)(10,328)— — (20,440)
Acquisitions/originations/additional funding2,090,964 177,247 100,720 1,800,018 4,168,949 
Capitalized interest (1)105,329 48 — — 105,377 
Basis of loans sold (2)(397,038)— (604)(2,035,770)(2,433,412)
Loan maturities/principal repayments(1,148,317)(96,150)(76,025)(75,632)(1,396,124)
Discount accretion/premium amortization28,686 1,672 — 110 30,468 
Changes in fair value— — (16,565)96,265 79,700 
Foreign currency translation loss, net(15,279)(38)— (1,291)(16,608)
Credit loss (provision) reversal, net(53,110)(3,824)— 125 (56,809)
Transfer to/from other asset classifications— 77,993 (422,691)344,698 — 
Balance at September 30, 2020$9,118,177 $1,544,068 $256,407 $1,012,673 $11,931,325 

(1)Represents accrued interest income on loans whose terms do not require current payment of interest.

​(2)

(2)     See Note 11 for additional disclosure on these transactions.

​(3)

​Includes (i) a $29.0 million credit deteriorated loan related to a residential conversion project which was foreclosed in April 2021 and (ii) $7.3 million of a commercial loan that was converted to equity interests in March 2021 (see Note 7) pursuant to a consensual transfer under pre-existing equity pledges of additional collateral, both as described above.

​(4)

Net transfers represent residential loans transferred from VIE assets upon redemption of 2 consolidated RMBS trusts.

23

TableTable of Contents

5. Investment Securities

​

Investment securities were comprised of the following as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):
Carrying Value as of
September 30, 2021December 31, 2020
RMBS, available-for-sale$148,583 $167,349 
RMBS, fair value option (1)215,152 235,997 
CMBS, fair value option (1), (2)1,227,119 1,209,030 
HTM debt securities, amortized cost net of credit loss allowance of $6,389 and $5,675486,734 538,605 
Equity security, fair value12,067 11,247 
Subtotal—Investment securities
2,089,655 2,162,228 
VIE eliminations (1)(1,418,768)(1,425,570)
Total investment securities$670,887 $736,658 

​

​

​

​

​

​

​

​

​

Carrying Value as of

​

​

March 31, 2021

    

December 31, 2020

RMBS, available-for-sale

​

$

160,301

​

$

167,349

RMBS, fair value option (1)

​

​

249,005

​

​

235,997

CMBS, fair value option (1), (2)

​

 

1,202,883

​

 

1,209,030

HTM debt securities, amortized cost net of credit loss allowance of $5,387 and $5,675

​

 

488,075

​

 

538,605

Equity security, fair value

​

 

10,655

​

 

11,247

Subtotal—Investment securities

​

 

2,110,919

​

 

2,162,228

VIE eliminations (1)

​

 

(1,432,632)

​

​

(1,425,570)

Total investment securities

​

$

678,287

​

$

736,658

(1)Certain fair value option CMBS and RMBS are eliminated in consolidation against VIE liabilities pursuant to ASC 810.
(2)Includes $179.8 million and $179.5 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of September 30, 2021 and December 31, 2020, respectively.
(1)
Certain fair value option CMBS and RMBS are eliminated in consolidation against VIE liabilities pursuant to ASC 810.

​

(2)Includes $180.9 million and $179.5 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of March 31, 2021 and December 31, 2020, respectively.

​

Purchases, sales, and principal collections and redemptions for all investment securities were as follows (amounts in thousands):

RMBS,
available-for-sale		RMBS, fair
value option		CMBS, fair
value option		HTM
Securities		Securitization
VIEs (1)		Total
Three Months Ended September 30, 2021
Purchases$— $33,009 $8,383 $— $(41,392)$— 
Sales— — 27,111 — (27,111)— 
Principal collections7,881 14,204 706 752 (14,555)8,988 
Redemptions— 26,753 — — (26,753)— 
Three Months Ended September 30, 2020
Purchases/fundings$— $43,083 $— $6,288 $(43,083)$6,288 
Principal collections6,063 12,132 8,265 11,203 (20,185)17,478 
RMBS,
available-for-sale		RMBS, fair
value option		CMBS, fair
value option		HTM
Securities		Securitization
VIEs (1)		Total
Nine Months Ended September 30, 2021
Purchases$— $112,693 $62,465 $— $(175,158)$— 
Sales— 30,684 38,715 — (69,399)— 
Principal collections22,995 42,235 4,429 53,321 (45,125)77,855 
Redemptions— 38,729 — — (38,729)— 
Nine Months Ended September 30, 2020
Purchases/fundings$— $257,808 $7,661 $22,408 $(265,469)$22,408 
Sales— — 32,316 — (24,376)7,940 
Principal collections18,626 32,236 25,715 48,554 (57,174)67,957 

​(1)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

RMBS,

​

RMBS, fair

​

CMBS, fair

​

HTM

​

Securitization

​

​

​

​

    

available-for-sale

    

value option

    

value option

    

Securities

    

VIEs (1)

    

Total

Three Months Ended March 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Purchases

​

$

—

​

$

27,333

​

$

—

​

$

—

​

$

(27,333)

​

$

—

Sales

​

 

—

​

 

—

​

 

11,604

​

 

—

​

 

(11,604)

​

 

—

Principal collections

​

 

7,251

​

 

13,344

​

 

1,710

​

 

51,690

​

 

(14,481)

​

 

59,514

Three Months Ended March 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Purchases/fundings

​

$

—

​

$

29,292

​

$

7,661

​

$

5,729

​

$

(36,953)

​

$

5,729

Sales

​

 

—

​

 

—

​

 

32,316

​

 

—

​

 

(24,376)

​

 

7,940

Principal collections

​

 

6,549

​

 

8,572

​

 

16,523

​

 

6,638

​

 

(24,723)

​

 

13,559

Represents RMBS and CMBS, fair value option amounts eliminated due to our consolidation of securitization VIEs. These amounts are reflected as issuance or repayment of debt of, or distributions from, consolidated VIEs in our condensed consolidated statements of cash flows.



24
(1)Represents RMBS and CMBS, fair value option amounts eliminated dueto our consolidation of securitization VIEs. These amounts are reflected as issuance or repayment of debt of, or distributions from, consolidated VIEs in our condensed consolidated statements of cash flows.

​Table of Contents

RMBS, Available-for-Sale

​

The Company classified all of its RMBS not eliminated in consolidation as available-for-sale as of March 31,September 30, 2021 and December 31, 2020. These RMBS are reported at fair value in the balance sheet with changes in fair value recorded in accumulated other comprehensive income (“AOCI”).

​

​

24

Table of Contents

The tables below summarize various attributes of our investments in available-for-sale RMBS as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):

Unrealized Gains or (Losses)
Recognized in AOCI
Amortized
Cost		Credit
Loss
Allowance		Net
Basis		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Net
Fair Value
Adjustment		Fair Value
September 30, 2021
RMBS$108,097 $— $108,097 $40,486 $— $40,486 $148,583 
December 31, 2020
RMBS$123,292 $— $123,292 $44,123 $(66)$44,057 $167,349 
Weighted Average Coupon (1)WAL 
(Years) (2)
September 30, 2021
RMBS1.2 %5.4

​(1)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized Gains or (Losses)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Recognized in AOCI

​

​

​

​

   

​

   

Credit

   

​

   

Gross

   

Gross

   

Net

   

​

​

​

​

Amortized

​

Loss

​

Net

​

Unrealized

​

Unrealized

​

Fair Value

​

​

​

​

​

Cost

​

Allowance

​

Basis

​

Gains

​

Losses

​

Adjustment

​

Fair Value

March 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

RMBS

​

$

118,647

​

$

—

​

$

118,647

​

$

41,688

​

$

(34)

​

$

41,654

​

$

160,301

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

RMBS

​

$

123,292

​

$

—

​

$

123,292

​

$

44,123

​

$

(66)

​

$

44,057

​

$

167,349

​Calculated using the September 30, 2021 one-month LIBOR rate of 0.080% for floating rate securities.

​

​

​

​

​

​

    

Weighted Average Coupon (1)

    

WAL 
(Years) (2)

March 31, 2021

​

​

​

​

RMBS

    

1.2

%  

5.9

(2)Represents the remaining WAL of each respective group of securities as of the balance sheet date. The WAL of each individual security is calculated using projected amounts and projected timing of future principal payments.
(1)Calculated using the March 31, 2021 one-month LIBOR rate of 0.111% for floating rate securities.

​

(2)Represents the remaining WAL of each respective group of securities as of the balance sheet date. The WAL of each individual security is calculated using projected amounts and projected timing of future principal payments.

​

As of March 31,September 30, 2021, approximately $139.4$129.4 million, or 87.0%87%, of RMBS were variable rate. We purchased all of the RMBS at a discount, a portion of which is accreted into income over the expected remaining life of the security. The majority of the income from this strategy is earned from the accretion of this accretable discount.

​

We have engaged a third party manager who specializes in RMBS to execute the trading of RMBS, the cost of which was $0.3 million and $0.4$0.3 million for the three months ended March 31,September 30, 2021 and 2020, respectively, and $0.9 million and $1.0 million for the nine months ended September 30, 2021 and 2020, respectively, recorded as management fees in the accompanying condensed consolidated statements of operations.

​

The following table presents the gross unrealized losses and estimated fair value of any available-for-sale securities that were in an unrealized loss position as of March 31,September 30, 2021 and December 31, 2020, and for which an allowance for credit losses has not been recorded (amounts in thousands):

Estimated Fair ValueUnrealized Losses
Securities with a
loss less than
12 months		Securities with a
loss greater than
12 months		Securities with a
loss less than
12 months		Securities with a
loss greater than
12 months
As of September 30, 2021
RMBS$— $— $— $— 
As of December 31, 2020
RMBS$438 $1,195 $(25)$(41)
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Estimated Fair Value

​

Unrealized Losses

 

​

    

Securities with a

    

Securities with a

    

Securities with a

    

Securities with a

 

​

​

loss less than

​

loss greater than

​

loss less than

​

loss greater than

 

​

​

12 months

​

12 months

​

12 months

​

12 months

 

As of March 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

RMBS

​

$

—

​

$

1,170

​

$

—

​

$

(34)

​

As of December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

RMBS

​

$

438

​

$

1,195

​

$

(25)

​

$

(41)

​

​

As of March 31, 2021 and December 31, 2020, there were 1 and 2 securities respectively, with unrealized losses reflected in the table above.above (none as of September 30, 2021). After evaluating the securities and recording adjustments for credit losses, we concluded that the remaining unrealized losses reflected above were noncredit-related and would be recovered from the securities’ estimated future cash flows. We considered a number of factors in reaching this conclusion, including that we did not intend to sell the securities, it was not considered more likely than not that we would be forced to sell the securities prior to recovering our amortized cost, and there were no material credit events that would have caused us to otherwise conclude that we would not recover our cost. Credit losses are calculated by comparing (i) the estimated future cash flows of each security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to (ii) our net amortized cost basis. Significant judgment is used in projecting cash flows for our non-agency RMBS. As a result, actual income and/or credit losses could be materially different from what is currently projected and/or reported.

​

​

25

TableTable of Contents

CMBS and RMBS, Fair Value Option

​

As discussed in the “Fair Value Option” section of Note 2 herein, we elect the fair value option for certain CMBS and RMBS in an effort to eliminate accounting mismatches resulting from the current or potential consolidation of securitization VIEs. As of March 31,September 30, 2021, the fair value and unpaid principal balance of CMBS where we have elected the fair value option, excluding the notional value of interest-only securities and before consolidation of securitization VIEs, were $1.2 billion and $2.7$2.8 billion, respectively. As of March 31,September 30, 2021, the fair value and unpaid principal balance of RMBS where we have elected the fair value option, excluding the notional value of interest-only securities and before consolidation of securitization VIEs, were $249.0$215.2 million and $160.1$119.5 million, respectively. The $1.5$1.4 billion total fair value balance of CMBS and RMBS represents our economic interests in these assets. However, as a result of our consolidation of securitization VIEs, the vast majority of this fair value (all except $19.3$23.5 million at March 31,September 30, 2021) is eliminated against VIE liabilities before arriving at our GAAP balance for fair value option investment securities.

​

As of March 31,September 30, 2021, $96.9$98.2 million of our CMBS were variable rate and NaNnone of our RMBS were variable rate.

​

HTMDebt Securities, Amortized Cost

​

The table below summarizes our investments in HTM debt securities as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):

Amortized
Cost Basis		Credit Loss
Allowance		Net Carrying
Amount		Gross Unrealized
Holding Gains		Gross Unrealized
Holding Losses		Fair Value
September 30, 2021
CMBS$339,190 $(1,593)$337,597 $— $(23,490)$314,107 
Preferred interests117,692 (1,877)115,815 3,415 — 119,230 
Infrastructure bonds36,241 (2,919)33,322 498 — 33,820 
Total$493,123 $(6,389)$486,734 $3,913 $(23,490)$467,157 
December 31, 2020
CMBS$339,059 $— $339,059 $— $(23,286)$315,773 
Preferred interests166,614 (2,749)163,865 432 (913)163,384 
Infrastructure bonds38,607 (2,926)35,681 415 — 36,096 
Total$544,280 $(5,675)$538,605 $847 $(24,199)$515,253 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amortized

​

Credit Loss

​

Net Carrying

​

Gross Unrealized

​

Gross Unrealized

​

​

​

 

​

​

Cost Basis

​

Allowance

​

Amount

​

Holding Gains

​

Holding Losses

​

Fair Value

 

March 31, 2021

    

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

 

CMBS

​

$

339,120

​

$

—

​

$

339,120

​

$

—

​

$

(25,169)

​

$

313,951

​

Preferred interests

​

​

116,466

​

​

(2,462)

​

​

114,004

​

​

3,346

​

​

—

​

​

117,350

​

Infrastructure bonds

​

​

37,876

​

​

(2,925)

​

​

34,951

​

​

435

​

​

—

​

​

35,386

​

Total

​

$

493,462

​

$

(5,387)

​

$

488,075

​

$

3,781

​

$

(25,169)

​

$

466,687

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

CMBS

​

$

339,059

​

$

—

​

$

339,059

​

$

—

​

$

(23,286)

​

$

315,773

​

Preferred interests

​

​

166,614

​

​

(2,749)

​

​

163,865

​

​

432

​

​

(913)

​

​

163,384

​

Infrastructure bonds

​

​

38,607

​

​

(2,926)

​

​

35,681

​

​

415

​

​

—

​

​

36,096

​

Total

​

$

544,280

​

$

(5,675)

​

$

538,605

​

$

847

​

$

(24,199)

​

$

515,253

​

​

The following table presents the activity in our credit loss allowance for HTM debt securities (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total HTM

​

​

Preferred

​

Infrastructure

​

Credit Loss

​

​

Interests

​

Bonds

​

Allowance

Three Months Ended March 31, 2021

​

​

​

​

​

​

​

​

​

Credit loss allowance at December 31, 2020

​

$

2,749

​

$

2,926

​

$

5,675

Credit loss reversal, net

​

​

(287)

​

​

(1)

​

​

(288)

Credit loss allowance at March 31, 2021

​

$

2,462

​

$

2,925

​

$

5,387

CMBSPreferred
Interests		Infrastructure
Bonds		Total HTM
Credit Loss
Allowance
Nine Months Ended September 30, 2021
Credit loss allowance at December 31, 2020$— $2,749 $2,926 $5,675 
Credit loss provision (reversal), net1,593 (872)(7)714 
Credit loss allowance at September 30, 2021$1,593 $1,877 $2,919 $6,389 
​

The table below summarizes the maturities of our HTM debt securities by type as of March 31,September 30, 2021 (amounts in thousands):

CMBSPreferred
Interests		Infrastructure
Bonds		Total
Less than one year$313,928 $— $— $313,928 
One to three years23,669 115,815 — 139,484 
Three to five years— — 814 814 
Thereafter— — 32,508 32,508 
Total$337,597 $115,815 $33,322 $486,734 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Preferred

​

Infrastructure

​

​

​

​

CMBS

​

Interests

​

Bonds

​

Total

Less than one year

    

$

313,863

​

$

—

​

$

—

​

$

313,863

One to three years

​

​

25,257

​

​

114,004

​

​

—

​

​

139,261

Three to five years

​

​

—

​

​

—

​

​

—

​

​

—

Thereafter

​

 

—

​

​

—

​

​

34,951

​

​

34,951

Total

​

$

339,120

​

$

114,004

​

$

34,951

​

$

488,075

​

26

TableTable of Contents


Equity Security, Fair Value Option

​

During 2012, we acquired 9,140,000 ordinary shares from a related-party in Starwood European Real Estate Finance Limited (“SEREF”), a debt fund that is externally managed by an affiliate of our Manager and is listed on the London Stock Exchange. The fair value of the investment remeasured in USD was $10.7$12.1 million and $11.2 million as of March 31,September 30, 2021 and December 31, 2020, respectively. As of March 31,September 30, 2021, our shares represent an approximate 2% interest in SEREF.

​

6. Properties

Properties​

Our properties are held within the following portfolios:

​

Woodstar I Portfolio

​

The Woodstar I Portfolio is comprised of 32 affordable housing communities with 8,948 units concentrated primarily in the Tampa, Orlando and West Palm Beach metropolitan areas. During the year ended December 31, 2015, we acquired 18 of the 32 affordable housing communities of the Woodstar I Portfolio with the final 14 communities acquired during the year ended December 31, 2016. The Woodstar I Portfolio includes total gross properties and lease intangibles of $636.7$640.9 million and debt of $572.8$573.4 million as of March 31,September 30, 2021.

​

Woodstar II Portfolio

​

The Woodstar II Portfolio is comprised of 27 affordable housing communities with 6,109 units concentrated primarily in Central and South Florida. We acquired 8 of the 27 affordable housing communities in December 2017, with the final 19 communities acquired during the year ended December 31, 2018. The Woodstar II Portfolio includes total gross properties and lease intangibles of $610.6$611.8 million and debt of $512.6$512.9 million as of March 31,September 30, 2021.

​

Medical Office Portfolio

​

The Medical Office Portfolio is comprised of 34 medical office buildings acquired during the year ended December 31, 2016. These properties, which collectively comprise 1.9 million square feet, are geographically dispersed throughout the U.S. and primarily affiliated with major hospitals or located on or adjacent to major hospital campuses. The Medical Office Portfolio includes total gross properties and lease intangibles of $760.3$762.1 million and debt of $592.9$593.9 million as of March 31,September 30, 2021.

​

Master Lease Portfolio

​

The Master Lease Portfolio is comprised of 16 retail properties geographically dispersed throughout the U.S., with more than 50% of the portfolio, by carrying value, located in Florida, Texas and Minnesota. These properties, which we acquired in September 2017, collectively comprise 1.9 million square feet and were leased back to the seller under corporate guaranteed master net lease agreements with initial terms of 24.6 years and periodic rent escalations. The Master Lease Portfolio includes total gross properties of $343.8 million and debt of $192.8$193.0 million as of March 31,September 30, 2021.

​

Investing and Servicing Segment Property Portfolio

​

The Investing and Servicing Segment Property Portfolio (“REIS Equity Portfolio”)Portfolio is comprised of 1514 commercial real estate properties and 1 equity interest in an unconsolidated commercial real estate property which were acquired from CMBS trusts during the previous five years. The REIS Equity Portfolio includes total gross properties and lease intangibles of $270.4$250.3 million and debt of $192.6$176.7 million as of March 31,September 30, 2021.

27

TableTable of Contents

​

The table below summarizes our properties held as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):

Depreciable LifeSeptember 30, 2021December 31, 2020
Property Segment
Land and land improvements0 - 15 years$485,177 $484,846 
Buildings and building improvements0 - 45 years1,693,834 1,690,701 
Furniture & fixtures3 - 7 years65,575 59,632 
Investing and Servicing Segment
Land and land improvements0 - 15 years45,243 50,585 
Buildings and building improvements3 - 40 years167,271 179,014 
Furniture & fixtures2 - 5 years3,077 2,606 
Commercial and Residential Lending Segment (1)
Land and land improvements0 - 7 years9,691 11,416 
Buildings and building improvements10 - 20 years12,409 19,251 
Construction in progressN/A104,088 75,245 
Properties, cost2,586,365 2,573,296 
Less: accumulated depreciation(357,503)(302,143)
Properties, net$2,228,862 $2,271,153 

​(1)

​

​

​

​

​

​

​

​

​

​

    

Depreciable Life

    

March 31, 2021

    

December 31, 2020

Property Segment

​

​

​

​

​

​

​

​

Land and land improvements

​

0 – 15 years

​

$

485,026

​

$

484,846

Buildings and building improvements

​

5 – 45 years

​

​

1,691,423

​

​

1,690,701

Furniture & fixtures

​

3 – 7 years

​

​

60,926

​

​

59,632

Investing and Servicing Segment

​

​

​

​

​

​

​

​

Land and land improvements

​

0 – 15 years

​

​

50,617

​

​

50,585

Buildings and building improvements

​

3 – 40 years

​

​

179,813

​

​

179,014

Furniture & fixtures

​

2 – 5 years

​

​

2,804

​

​

2,606

Commercial and Residential Lending Segment (1)

​

​

​

​

​

​

​

​

Land and land improvements

​

0 – 7 years

​

​

9,691

​

​

11,416

Buildings and building improvements

​

10 – 20 years

​

​

9,927

​

​

19,251

Construction in progress

​

N/A

​

​

75,245

​

​

75,245

Properties, cost

​

​

​

​

2,565,472

​

​

2,573,296

Less: accumulated depreciation

​

​

​

​

(320,724)

​

​

(302,143)

Properties, net

​

​

​

$

2,244,748

​

$

2,271,153

Represents properties acquired through loan foreclosure. Refer to Note 4 with respect to the construction in progress properties relating to a residential conversion project.
(1)Represents properties acquired through loan foreclosure or exercise of control over loan borrower pledged equity interests.

​

During the threenine months ended March 31,September 30, 2021, we sold an operating property within the REIS Equity Portfolio for $30.9 million and recognized a gain of $9.7 million within gain on sale of investments and other assets in our condensed consolidated statements of operations. During the nine months ended September 30, 2020, we sold an operating property within the REIS Equity Portfolio for $24.1 million and recognized a gain of $7.4 million within gain on sale of investments and other assets in our condensed consolidated statements of operations.

During the nine months ended September 30, 2021, we sold an operating property within the Commercial and Residential Lending Segment for $30.6 million and recognized a gain of $17.7 million within gain on sale of investments and other assets in our condensed consolidated statementstatements of operations. Refer to Note 3 for further discussion. NaN operating properties were sold during the three months ended March 31, 2020.

​

​

​

​

​

28

TableTable of Contents

7. Investment in Unconsolidated Entities

​

The table below summarizes our investments in unconsolidated entities as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):
Participation /
Ownership % (1)		Carrying value as of
September 30, 2021December 31, 2020
Equity method investments:
Equity interest in a natural gas power plant10%$25,170 $25,095 
Investor entity which owns equity in an online real estate company (2)50%5,142 9,397 
Equity interests in commercial real estate50%975 1,543 
Equity interest in and advances to a residential mortgage originator (3)N/A19,376 17,852 
Various25% - 50%11,166 8,831 
61,829 62,718 
Other equity investments:
Equity interest in a servicing and advisory business2%17,584 17,584 
Investment funds which own equity in a loan servicer and other real estate assets4% - 6%7,267 7,267 
Investor entities which own equity interests in two entertainment and retail centers (4)15%7,320 — 
Federal Home Loan Bank stockN/A— 20,485 
32,171 45,336 
$94,000 $108,054 

​(1)

​

​

​

​

​

​

​

​

​

​

​

Participation /

​

Carrying value as of

​

    

Ownership % (1)

    

March 31, 2021

    

December 31, 2020

Equity method investments:

​

​

​

​

​

​

​

​

Equity interest in a natural gas power plant

​

10%

​

$

24,840

​

$

25,095

Investor entity which owns equity in an online real estate company

​

50%

​

​

9,573

​

​

9,397

Equity interests in commercial real estate

​

50%

​

​

1,368

​

​

1,543

Equity interest in and advances to a residential mortgage originator (2)

 

N/A

​

 

18,458

​

 

17,852

Various (3)

 

15% - 50%

​

 

16,896

​

 

8,831

​

​

​

​

 

71,135

​

 

62,718

Other equity investments:

​

​

​

​

​

​

​

​

Equity interest in a servicing and advisory business

​

2%

​

​

17,584

​

 

17,584

Investment funds which own equity in a loan servicer and other real estate assets

 

4% - 6%

​

 

7,267

​

 

7,267

Various, including Federal Home Loan Bank stock

 

0% - 2%

​

 

4,921

​

 

20,485

​

​

​

​

 

29,772

​

 

45,336

​

​

​

​

$

100,907

​

$

108,054

None of these investments are publicly traded and therefore quoted market prices are not available.
(2)During the three and nine months ended September 30, 2021, we received a capital distribution of $4.5 million, which reduced our carrying value.
(3)Includes a $4.5 million subordinated loan as of both September 30, 2021 and December 31, 2020.
(4)During the nine months ended September 30, 2021, we obtained equity interests in 2 investor entities that own interests in 2 entertainment and retail centers in satisfaction of $7.3 million principal amount of a commercial loan. The interests were obtained in order to facilitate repayment of a portion of that loan for which these interests represented underlying collateral. The interests are entitled to preferred treatment in the distribution waterfall and are intended to repay us the $7.3 million principal amount of the loan plus interest. See further discussion in Note 4.
(1)NaN of these investments are publicly traded and therefore quoted market prices are not available.

​

(2)Includes a $4.5 million subordinated loan as of both March 31, 2020 and December 31, 2020.

​

(3)In March 2021, we obtained 15% equity interests in 2 investor entities that own 49% equity interests in 2 entertainment and retail centers in satisfaction of $7.3 million principal amount of a commercial loan. As discussed in Note 4, the equity interests in the entertainment and retail centers were transferred under pre-existing equity pledges of additional collateral for the commercial loan.

​

As of March 31,September 30, 2021, the carrying value of our equity investment in a residential mortgage originator exceeded the underlying equity in net assets of such investee by $1.6 million. This difference is the result of the Company recording its investment in the investee at its acquisition date fair value, which included certain non-amortizing intangible assets not recognized by the investee. Should the Company determine these intangible assets held by the investee are impaired, the Company will recognize such impairment loss through earnings from unconsolidated entities in our consolidated statement of operations, otherwise, such difference between the carrying value of our equity investment in the residential mortgage originator and the underlying equity in the net assets of the residential mortgage originator will continue to exist.

​

Other than our equity interest in the residential mortgage originator, there were no differences between the carrying value of our equity method investments and the underlying equity in the net assets of the investees as of March 31,September 30, 2021.

​

During the three and nine months ended March 31,September 30, 2021, we did not become aware of (i) any observable price changes in our other equity investments accounted for under the fair value practicability election or (ii) any indicators of impairment.

​

29

TableTable of Contents

8. GoodwillGoodwill and Intangibles

​

Goodwill

​

Goodwill
Goodwill is tested for impairment annually in the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Management considered the general economic decline and the impact of the COVID-19 pandemic, but did not identify any such event or circumstances. However, future changes in the expectations of the impact of COVID-19 on our operations, financial performance and cash flows could cause our goodwill to be impaired.

​

Infrastructure Lending Segment

​

The Infrastructure Lending Segment’s goodwill of $119.4 million at both March 31,September 30, 2021 and December 31, 2020 represents the excess of consideration transferred over the fair value of net assets acquired on September 19, 2018 and October 15, 2018. The goodwill recognized is attributable to value embedded in the acquired Infrastructure Lending Segment’s lending platform.

​

LNR Property LLC (“LNR”)

​

The Investing and Servicing Segment’s goodwill of $140.4 million at both March 31,September 30, 2021 and December 31, 2020 represents the excess of consideration transferred over the fair value of net assets of LNR acquired on April 19, 2013. The goodwill recognized is attributable to value embedded in LNR’s existing platform, which includes a network of commercial real estate asset managers, work-out specialists, underwriters and administrative support professionals as well as proprietary historical performance data on commercial real estate assets.

​

Intangible Assets

​

Servicing Rights Intangibles

​

In connection with the LNR acquisition, we identified domestic servicing rights that existed at the purchase date, based upon the expected future cash flows of the associated servicing contracts. As of March 31,September 30, 2021 and December 31, 2020, the balance of the domestic servicing intangible was net of $42.9$39.4 million and $41.4 million, respectively, which was eliminated in consolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs. Before VIE consolidation, as of March 31,September 30, 2021 and December 31, 2020, the domestic servicing intangible had a balance of $55.3$55.4 million and $54.6 million, respectively, which represents our economic interest in this asset.

​

Lease Intangibles

​

In connection with our acquisitions of commercial real estate, we recognized in-place lease intangible assets and favorable lease intangible assets associated with certain non-cancelable operating leases of the acquired properties.

​

The following table summarizes our intangible assets, which are comprised of servicing rights intangibles and lease intangibles, as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

As of March 31, 2021

​

As of December 31, 2020

​

  

Gross Carrying

​

Accumulated

   

Net Carrying

  

Gross Carrying

   

Accumulated

   

Net Carrying

​

​

Value

​

Amortization

​

Value

​

Value

​

Amortization

​

Value

Domestic servicing rights, at fair value

​

$

12,406

​

$

—

​

$

12,406

​

$

13,202

​

$

—

​

$

13,202

In-place lease intangible assets

​

 

133,203

​

 

(94,726)

​

 

38,477

​

 

133,203

​

 

(92,540)

​

 

40,663

Favorable lease intangible assets

​

​

24,181

​

​

(8,292)

​

​

15,889

​

​

24,181

​

​

(7,929)

​

​

16,252

Total net intangible assets

​

$

169,790

​

$

(103,018)

​

$

66,772

​

$

170,586

​

$

(100,469)

​

$

70,117

​

As of September 30, 2021As of December 31, 2020
Gross Carrying
Value		Accumulated
Amortization		Net Carrying
Value		Gross Carrying
Value		Accumulated
Amortization		Net Carrying
Value
Domestic servicing rights, at fair value$15,942 $— $15,942 $13,202 $— $13,202 
In-place lease intangible assets131,418 (97,365)34,053 133,203 (92,540)40,663 
Favorable lease intangible assets23,862 (8,735)15,127 24,181 (7,929)16,252 
Total net intangible assets$171,222 $(106,100)$65,122 $170,586 $(100,469)$70,117 

30

TableTable of Contents

The following table summarizes the activity within intangible assets for the threenine months ended March 31,September 30, 2021 (amounts in thousands):

Domestic
Servicing
Rights		In-place Lease
Intangible
Assets		Favorable Lease
Intangible
Assets		Total
Balance as of January 1, 2021$13,202 $40,663 $16,252 $70,117 
Amortization— (6,250)(1,056)(7,306)
Sales— (360)(69)(429)
Changes in fair value due to changes in inputs and assumptions2,740 — — 2,740 
Balance as of September 30, 2021$15,942 $34,053 $15,127 $65,122 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Domestic

​

In-place Lease

​

Favorable Lease

​

​

​

​

Servicing

​

Intangible

​

Intangible

​

​

​

  

Rights

    

Assets

    

Assets

   

Total

Balance as of January 1, 2021

​

$

13,202

​

$

40,663

​

$

16,252

​

$

70,117

Amortization

​

​

—

​

​

(2,186)

​

​

(363)

​

​

(2,549)

Changes in fair value due to changes in inputs and assumptions

​

​

(796)

​

​

—

​

​

—

​

​

(796)

Balance as of March 31, 2021

​

$

12,406

​

$

38,477

​

$

15,889

​

$

66,772

​

The following table sets forth the estimated aggregate amortization of our in-place lease intangible assets and favorable lease intangible assets for the next five years and thereafter (amounts in thousands):

​

​

​

​

​

2021 (remainder of)

    

$

7,094

2022

​

 

7,862

2023

​

 

6,115

2024

​

 

4,722

2025

​

 

3,846

Thereafter

​

 

24,727

Total

​

$

54,366

​

​

​

​

​

​

​

​

​

2021 (remainder of)$2,231 
20227,783 
20236,043 
20244,650 
20253,775 
Thereafter24,698 
Total$49,180 

31

TableTable of Contents

9. Secured Borrowings

​

Secured Financing Agreements

​

The following table is a summary of our secured financing agreements in place as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):
Outstanding Balance at
Current
Maturity		   Extended
Maturity (a)		   Weighted Average
Pricing		Pledged Asset
Carrying Value		Maximum
Facility Size		   September 30, 2021December 31, 2020
Repurchase Agreements:
Commercial LoansMar 2022 to Jul 2026(b)Jun 2025 to Mar 2029(b)(c)$7,750,853 $9,980,380 (d)$5,294,281 $4,878,939 
Residential LoansJun 2022 to Oct 2023N/ALIBOR + 2.01%1,755,161 2,550,000 1,440,018 22,590 
Infrastructure LoansSep 2024Sep 2026LIBOR + 2.00%467,921 650,000 368,442 232,961 
Conduit LoansFeb 2022 to Jun 2024Feb 2023 to Jun 2025LIBOR + 1.99%259,155 350,000 192,829 53,554 
CMBS/RMBSDec 2021 to May 2031(e)Sep 2022 to Nov 2031(e)(f)1,193,808 835,850 709,340 (g)620,763 
Total Repurchase Agreements11,426,898 14,366,230 8,004,910 5,808,807 
Other Secured Financing:
Borrowing Base FacilityApr 2022Apr 2024LIBOR + 2.25%73,502 650,000 (h)2,000 43,014 
Commercial Financing FacilityMar 2022Mar 2029GBP LIBOR + 1.75%177,424 142,872 142,872 81,218 
Residential Financing FacilitySep 2022Sep 20253.50%149,604 250,000 2,018 215,024 
Infrastructure Acquisition FacilityN/AN/AN/A— — — 467,450 
Infrastructure Financing FacilitiesJul 2022 to Oct 2022Oct 2024 to Jul 2027LIBOR + 2.03%688,488 1,250,000 544,582 538,645 
Property Mortgages - Fixed rateNov 2024 to Aug 2052(i)N/A4.03%1,254,141 1,154,763 1,154,763 1,077,528 
Property Mortgages - Variable rateNov 2021 to Jul 2030N/A(j)898,634 969,790 945,311 960,903 
Term Loan and Revolver(k)N/A(k)N/A(k)940,750 790,750 645,000 
Federal Home Loan BankN/AN/AN/A— — — 396,000 
Total Other Secured Financing3,241,793 5,358,175 3,582,296 4,424,782 
$14,668,691 $19,724,405 11,587,206 10,233,589 
Unamortized net discount(14,603)(13,569)
Unamortized deferred financing costs(70,551)(73,830)
$11,502,052 $10,146,190 

​(a)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Outstanding Balance at

​

​

Current

​

Extended

​

Weighted Average

​

Pledged Asset

​

Maximum

​

March 31,

​

December 31,

​

 

Maturity

   

Maturity (a)

   

Pricing

  

Carrying Value

   

Facility Size

   

2021

   

2020

Repurchase Agreements:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial Loans

​

May 2021 to Aug 2025

(b)

May 2023 to Mar 2029

(b)

(c)

​

$

8,088,081

​

$

9,164,525

(d)

$

5,592,652

​

$

4,878,939

Residential Loans

​

Jan 2022 to Oct 2023

​

N/A

​

LIBOR + 2.09%

​

​

428,877

​

​

1,750,000

​

​

328,620

​

​

22,590

Infrastructure Loans

​

Feb 2022

​

N/A

​

LIBOR + 2.00%

​

​

295,516

​

​

500,000

​

​

246,136

​

​

232,961

Conduit Loans

​

Feb 2022 to Jun 2023

​

Feb 2023 to Jun 2024

​

LIBOR + 2.15%

​

​

147,523

​

​

350,000

​

​

111,087

​

​

53,554

CMBS/RMBS

​

Dec 2021 to Oct 2030

(e)

Mar 2022 to Apr 2031

(e)

(f)

​

​

1,112,819

​

​

823,365

​

​

668,993

(g)

​

620,763

Total Repurchase Agreements

​

​

​

​

​

​

​

​

10,072,816

​

​

12,587,890

​

​

6,947,488

​

​

5,808,807

Other Secured Financing:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Borrowing Base Facility

​

Apr 2022

​

Apr 2024

​

LIBOR + 2.25%

​

​

304,076

​

​

650,000

(h)

​

223,302

​

​

43,014

Commercial Financing Facility

​

Mar 2022

​

Mar 2029

​

GBP LIBOR + 1.75%

​

​

101,559

​

​

81,847

​

​

81,847

​

​

81,218

Residential Financing Facility

​

Sep 2022

​

Sep 2025

​

3.50%

​

​

163,545

​

​

250,000

​

​

1,515

​

​

215,024

Infrastructure Acquisition Facility

​

Sep 2021

​

Sep 2022

​

(i)

​

​

525,611

​

​

517,498

​

​

414,503

​

​

467,450

Infrastructure Financing Facilities

​

Jul 2022 to Oct 2022

​

Oct 2024 to Jul 2027

​

LIBOR + 2.04%

​

​

699,684

​

​

1,250,000

​

​

548,956

​

​

538,645

Property Mortgages - Fixed rate

​

Nov 2024 to Aug 2052

(j)

N/A

​

4.03%

​

​

1,271,385

​

​

1,155,306

​

​

1,155,306

​

​

1,077,528

Property Mortgages - Variable rate

​

Nov 2021 to Jul 2030

​

N/A

​

(k)

​

​

929,800

​

​

985,453

​

​

960,901

​

​

960,903

Term Loan and Revolver

​

(l)

​

N/A

​

(l)

​

​

N/A

(l)

​

763,375

​

​

643,375

​

​

645,000

Federal Home Loan Bank

​

N/A

​

N/A

​

N/A

​

​

—

​

​

—

​

​

—

​

​

396,000

Total Other Secured Financing

​

​

​

​

​

​

​

​

3,995,660

​

​

5,653,479

​

​

4,029,705

​

​

4,424,782

​

​

​

​

​

​

​

​

$

14,068,476

​

$

18,241,369

​

​

10,977,193

​

​

10,233,589

Unamortized net discount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(13,149)

​

​

(13,569)

Unamortized deferred financing costs

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(68,112)

​

​

(73,830)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

$

10,895,932

​

$

10,146,190

Subject to certain conditions as defined in the respective facility agreement.
(b)For certain facilities, borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions.
(c)Certain facilities with an outstanding balance of $1.9 billion as of September 30, 2021 are indexed to GBP LIBOR, EURIBOR, BBSY and SONIA. The remainder have a weighted average rate of LIBOR + 1.94%.
(d)Certain facilities with an aggregate initial maximum facility size of $9.1 billion may be increased to $10.0 billion, subject to certain conditions. The $10.0 billion amount includes such upsizes.
(a)Subject to certain conditions as defined in the respective facility agreement.
(e)Certain facilities with an outstanding balance of $292.8 million as of September 30, 2021 carry a rolling 11-month or 12-month term which may reset monthly or quarterly with the lender's consent. These facilities carry no maximum facility size.
(f)A facility with an outstanding balance of $243.0 million as of September 30, 2021 has a weighted average fixed annual interest rate of 3.21%. All other facilities are variable rate with a weighted average rate of LIBOR + 1.76%.
(g)Includes: (i) $243.0 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $35.8 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 14).
(h)The initial maximum facility size of $300.0 million may be increased to $650.0 million, subject to certain conditions.
(i)The weighted average maturity is 6.0 years as of September 30, 2021.
(j)Includes a $600.0 million first mortgage and mezzanine loan secured by our Medical Office Portfolio. This debt has a weighted average interest rate of LIBOR + 2.07% that we swapped to a fixed rate of 3.34%. The remainder have a weighted average rate of LIBOR + 2.61%.
(k)Consists of: (i) a $790.8 million term loan facility that matures in July 2026, of which $392.0 million (the "Initial Borrowings") has an annual interest rate of LIBOR + 2.50% and $398.8 million (the "Incremental Borrowings") has an annual interest rate of LIBOR + 3.25%, subject to a 0.75% LIBOR floor, and (ii) a $150.0 million revolving credit
(b)For certain facilities, borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions.
(c)Certain facilities with an outstanding balance of $1.9 billion as of March 31, 2021 are indexed to GBP LIBOR and EURIBOR. The remainder have a weighted average rate of LIBOR + 2.01%.
(d)The aggregate initial maximum facility size may be increased at our option, subject to certain conditions. The $9.2 billion amount includes such upsizes.
(e)Certain facilities with an outstanding balance of $280.3 million as of March 31, 2021 carry a rolling 11-month or 12-month term which may reset monthly or quarterly with the lender's consent. These facilities carry no maximum facility size.
(f)A facility with an outstanding balance of $212.0 million as of March 31, 2021 has a weighted average fixed annual interest rate of 3.29%. All other facilities are variable rate with a weighted average rate of LIBOR + 1.92%.
(g)Includes: (i) $212.0 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $38.3 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 14).
(h)The initial maximum facility size of $300.0 million may be increased to $650.0 million, subject to certain conditions.
(i)Consists of an annual interest rate of the applicable currency benchmark index + 2.00%.
(j)The weighted average maturity is 6.5 years as of March 31, 2021.

32

TableTable of Contents

(k)Includes a $600.0 million first mortgage and mezzanine loan secured by our Medical Office Portfolio. This debt has a weighted average interest rate of LIBOR + 2.07% that we swapped to a fixed rate of 3.34%. The remainder have a weighted average rate of LIBOR + 2.59%.
(l)Consists of: (i) a 643.4 million term loan facility that matures in July 2026, of which $394.0 million has an annual interest rate of LIBOR + 2.50% and $249.4 million has an annual interest rate of LIBOR + 3.50%, subject to a 75 bps LIBOR floor, and (ii) a $120.0 million revolving credit facility that matures in July 2024 with an annual interest rate of LIBOR + 3.00%. These facilities are secured by the equity interests in certain of our subsidiaries which totaled $4.2 billion as of March 31, 2021.

​

facility that matures in April 2026 with an annual interest rate of SOFR + 2.50%. These facilities are secured by the equity interests in certain of our subsidiaries which totaled $4.7 billion as of September 30, 2021.

In the normal course of business, the Company is in discussions with its lenders to extend, amend or replace any financing facilities which contain near term expirations.

​

In January 2021, we entered into a Residential Loans repurchase facility to finance residential loans. The facility carries a one-year term, which we intend to extend every three months, and an annual interest rate of one-month LIBOR + 2.00% to 2.50%, subject to a 25 bps0.25% LIBOR floor. The maximum facility size was initially $375.0 million and was increased to $1.0 billion in March 2021.

​

In March 2021, we entered into mortgage loans with total borrowings of $82.9 million to refinance our Woodstar II Portfolio. The loans carry seven-year terms and a weighted average fixed annual interest rate of 4.36%. A portion of the net proceeds from the mortgage loans was used to repay $4.9 million of outstanding government sponsored mortgage loans.

​

In May 2021, we entered into a Residential Loans repurchase facility to finance residential loans. The facility carries a 15-month term, which renews to a new 15-month term every three months, and an annual interest rate of one-month LIBOR + 2.25%, subject to a 0.15% LIBOR floor. The maximum facility size was initially $150.0 million and was increased to $300.0 million during the three months ended September 30, 2021.
In August 2021, we amended a Residential Loans repurchase facility to increase the available borrowings from $1.0 billion to $1.5 billion. The margin call provisions under this facility do not permit valuation adjustments based on capital market events and are limited to collateral-specific credit marks.
In August 2021, we entered into a Commercial Loans repurchase facility to provide short-term bridge financing for loans denominated in foreign currency. The facility carries a three-year term, with a one-year extension option, and has a maximum facility size of £250.0 million and an interest rate of the applicable index + 1.50%. The margin call provisions under this facility do not permit valuation adjustments based on capital market events and are limited to collateral-specific credit marks.
In September 2021, we amended an Infrastructure Loans repurchase facility. The amendment provides for a temporary increase to available borrowings from $500.0 million to $650.0 million, with available capacity decreasing to $600.0 million in September 2022, $550.0 million in December 2022 and back to $500.0 million in March 2023. The amendment also extends the current maturity from February 2022 to September 2024, with 2 one-year extension options. In connection with this amendment, we terminated the Infrastructure Acquisition Facility and transferred the related financing to the amended repurchase facility. The facility carries an annual interest rate of LIBOR + 2.00%.
In September 2021, we amended the Term Loan facility to increase the Incremental Borrowings by $150.0 million and reduce the annual interest rate by 0.25% to LIBOR + 3.25% on all the Incremental Borrowings, subject to a 0.75% LIBOR floor. Additionally, we increased the maximum facility size of the revolver by $30.0 million to $150.0 million, reduced the annual rate by 0.50% to SOFR + 2.50% and extended the maturity from July 2024 to April 2026.
Our secured financing agreements contain certain financial tests and covenants. As of March 31,September 30, 2021, we were in compliance with all such covenants.

​

We seek to mitigate risks associated with our repurchase agreements by managing risk related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value. The margin call provisions under the majority of our repurchase facilities, consisting of 72%64% of these agreements, do not permit valuation adjustments based on capital markets activity. Instead, margin calls on these facilitiesmarket events and are limited to collateral-specific credit marks.marks generally determined on a commercially reasonable basis. To monitor credit risk associated with the performance and value of our loans and investments, our asset management team regularly reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary. For the 28%36% of repurchase agreements containing margin call provisions for generalwhich do permit valuation adjustments based on capital markets activity,market events, approximately 15%7% of these pertain to our loans held-for-sale, for which we manage credit risk through the purchase of credit index instruments. We further seek to manage risks associated with our repurchase agreements by matching the maturities and interest rate characteristics of our loans with the related repurchase agreement.

​

For the three and nine months ended March 31,September 30, 2021, and 2020, approximately $9.5$8.6 million and $8.8$26.9 million, respectively, of amortization of deferred financing costs from secured financing agreements was included in interest expense on our condensed consolidated statements of operations.

For the three and nine months ended September 30, 2020, approximately

33
​Table of Contents

$9.5 million and $27.3 million, respectively, of amortization of deferred financing costs from secured financing agreements was included in interest expense on our condensed consolidated statements of operations.
As of September 30, 2021, JPMorgan Chase Bank, N.A. and Morgan Stanley Bank, N.A. held collateral sold under certain of our repurchase agreements with carrying values that exceeded the respective repurchase obligations by $785.7 million and $579.5 million, respectively. The weighted average extended maturities of those repurchase agreements were 4.0 and 4.1 years, respectively.
Collateralized Loan Obligations

​

and Single Asset Securitization

Commercial and Residential Lending Segment
In July 2021, we contributed into a single asset securitization, STWD 2021-HTS, a previously originated $230.0 million first mortgage and mezzanine loan on a portfolio of 41 extended stay hotels with $210.1 million of third party financing at an average coupon of LIBOR + 2.22%.
In May 2021, we refinanced a pool of our commercial loans held-for-investment through a CLO, STWD 2021-FL2. On the closing date, the CLO issued $1.3 billion of notes and preferred shares, of which $1.1 billion of notes was purchased by third party investors. We retained $70.1 million of notes, along with preferred shares with a liquidation preference of $127.5 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash. During the nine months ended September 30, 2021, we utilized the reinvestment feature, contributing $1.0 million of additional interests into the CLO.
In August 2019, we refinanced a pool of our commercial loans held-for-investment through a CLO, STWD 2019-FL1. On the closing date, the CLO issued $1.1 billion principal amount of notes and preferred shares, of which $936.4 million of notes was purchased by third party investors. We retained $86.6 million of notes, along with preferred shares with a liquidation preference of $77.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash. During the threenine months ended March 31,September 30, 2021, we utilized the reinvestment feature, contributing $98.6$163.7 million of additional interests into the CLO.

​

Infrastructure Lending Segment
In April 2021, we refinanced a pool of our infrastructure loans held-for-investment through a CLO, STWD 2021-SIF1. On the closing date, the CLO issued $500.0 million of notes and preferred shares, of which $410.0 million of notes was purchased by third party investors. We retained preferred shares with a liquidation preference of $90.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash. During the nine months ended September 30, 2021, we utilized the reinvestment feature, contributing $37.0 million of additional interests into the CLO.

33

34

TableTable of Contents

​

The following table is a summary of our CLOCLOs and our SASB as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):
September 30, 2021CountFace
Amount		Carrying
Value		Weighted
Average Spread		Maturity
STWD 2019-FL1
Collateral assets25 $1,034,361 $1,103,259 LIBOR + 4.23%(a)September 2024(b)
Financing1 936,375 932,425 SOFR + 1.63%(c)July 2038(d)
STWD 2021-FL2
Collateral assets25 1,269,744 1,279,245 LIBOR + 4.23%(a)January 2025(b)
Financing1 1,077,375 1,069,014 LIBOR + 1.78%(c)April 2038(d)
STWD 2021-SIF1
Collateral assets31 494,065 510,592 LIBOR + 3.94%(a)March 2026(b)
Financing1 410,000 404,960 LIBOR + 2.15%(c)April 2032(d)
STWD 2021-HTS
Collateral assets1 230,000 230,562 LIBOR + 4.34%(a)April 2026(b)
Financing1 210,091 207,831 LIBOR + 2.47%(c)April 2034(d)
Total
Collateral assets$3,028,170 $3,123,658 
Financing$2,633,841 $2,614,230 
December 31, 2020
STWD 2019-FL1
Collateral assets23 $1,002,445 $1,099,439 LIBOR + 3.93%(a)April 2024(b)
Financing1 936,375 930,554 LIBOR + 1.64%(c)July 2038(d)

​(a)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Face

​

Carrying

​

Weighted

​

​

​

March 31, 2021

​

Count

​

Amount

​

Value

​

Average Spread

​

Maturity

​

Collateral assets

​

25

​

$

1,099,693

​

$

1,099,639

​

LIBOR + 4.21%

(a)

May 2024

(b)

Financing

​

1

​

 

936,375

​

​

931,178

​

LIBOR + 1.63%

(c)

July 2038

(d)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

Collateral assets

​

23

​

$

1,002,445

​

$

1,099,439

​

LIBOR + 3.93%

(a)

Apr 2024

(b)

Financing

​

1

​

 

936,375

​

​

930,554

​

LIBOR + 1.64%

(c)

July 2038

(d)

Represents the weighted-average coupon earned on variable rate loans during the respective year-to-date period. Of the loans financed by the STWD 2021-FL2 CLO as of September 30, 2021, 7% earned fixed-rate weighted average interest of 7.55%. Of the loans financed by the STWD 2021-SIF1 CLO as of September 30, 2021, 2% earned fixed-rate weighted average interest of 5.62%.
(b)Represents the weighted-average maturity, assuming the extended contractual maturity of the collateral assets.
(c)Represents the weighted-average cost of financing incurred during the respective year-to-date period, inclusive of deferred issuance costs.
(d)Repayments of the CLO and SASB are tied to timing of the related collateral asset repayments. The term of the CLO and SASB financing obligation represents the legal final maturity date.
(a)Represents the weighted-average coupon earned on variable rate loans during the respective year-to-date period. There were no fixed-rate loans financed by the CLO as of March 31, 2021 and December 31, 2020.
(b)Represents the weighted-average maturity, assuming the extended contractual maturity of the collateral assets.
(c)Represents the weighted-average cost of financing incurred during the respective year-to-date period, inclusive of deferred issuance costs.
(d)Repayments of the CLO are tied to timing of the related collateral asset repayments. The term of the CLO financing obligation represents the legal final maturity date.

​

We incurred $9.2$26.9 million of issuance costs in connection with the CLO,CLOs and SASB, which are amortized on an effective yield basis over the estimated life of the CLO.CLOs and SASB. For both the three and nine months ended March 31,September 30, 2021, approximately $1.8 million and 2020, approximately $0.6$3.9 million, respectively, of amortization of deferred financing costs was included in interest expense on our condensed consolidated statements of operations. For the three and nine months ended September 30, 2020, approximately $0.7 million and $1.9 million, respectively, of amortization of deferred financing costs was included in interest expense. As of March 31,September 30, 2021 and December 31, 2020, our unamortized issuance costs were $5.2$19.6 million and $5.8 million, respectively.

​

The CLO isCLOs and SASB are considered a VIE,VIEs, for which we are deemed the primary beneficiary. We therefore consolidate the CLO.CLOs and SASB. Refer to Note 14 for further discussion.

​

35
Table of Contents
Maturities

​

Our credit facilities generally require principal to be paid down prior to the facilities’ respective maturities if and when we receive principal payments on, or sell, the investment collateral that we have pledged. The following table sets forth our principal repayments schedule for secured financings based on the earlier of (i) the extended contractual maturity of each credit facility or (ii) the extended contractual maturity of each of the investments that have been pledged as collateral under the respective credit facility (amounts in thousands):
Repurchase
Agreements		Other Secured
Financing		CLOs and SASB (a)Total
2021 (remainder of)$273,583 $15,751 $4,103 $293,437 
20221,998,566 35,189 125,338 2,159,093 
2023860,568 821,810 638,036 2,320,414 
2024824,181 214,086 485,408 1,523,675 
20252,585,446 264,934 513,671 3,364,051 
Thereafter1,462,566 2,230,526 867,285 4,560,377 
Total$8,004,910 $3,582,296 $2,633,841 $14,221,047 

(a)

​For the CLOs, the above does not assume utilization of their reinvestment features. The SASB does not have a reinvestment feature.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Repurchase

    

Other Secured

    

​

​

​

​

​

Agreements

​

Financing

​

CLO

​

Total

2021 (remainder of)

    

$

302,200

    

$

58,768

    

$

—

​

$

360,968

2022

​

 

1,548,791

​

 

419,128

​

​

—

​

 

1,967,919

2023

​

 

1,450,262

​

 

803,315

​

​

—

​

 

2,253,577

2024

​

 

1,480,044

​

 

475,383

​

​

—

​

 

1,955,427

2025

​

 

1,510,607

​

 

248,376

​

​

—

​

 

1,758,983

Thereafter

​

 

655,584

​

 

2,024,735

​

​

936,375

(a)

 

3,616,694

Total

​

$

6,947,488

​

$

4,029,705

​

$

936,375

​

$

11,913,568

(a)Assumes utilization of the reinvestment feature.

​

​

​

​

34

36

TableTable of Contents

10. Unsecured Senior Notes

​

The following table is a summary of our unsecured senior notes outstanding as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):
Coupon
Rate		Effective
Rate (1)		Maturity
Date		Remaining
Period of
Amortization		Carrying Value at
September 30, 2021December 31, 2020
2021 Senior Notes (2)5.00 %5.32 %12/15/20210.2 years$300,000 $700,000 
2023 Senior Notes5.50 %5.71 %11/1/20232.1 years300,000 300,000 
2023 Convertible Notes4.38 %4.57 %4/1/20231.5 years250,000 250,000 
2025 Senior Notes4.75 %(3)5.04 %3/15/20253.5 years500,000 500,000 
2026 Senior Notes3.63 %3.77 %7/15/20264.8 years400,000 — 
Total principal amount1,750,000 1,750,000 
Unamortized discount—Convertible Notes(690)(2,559)
Unamortized discount—Senior Notes(8,666)(9,332)
Unamortized deferred financing costs(6,960)(5,589)
Carrying amount of debt components$1,733,684 $1,732,520 
Carrying amount of conversion option equity components recorded in additional paid-in capital for outstanding convertible notesN/A$3,755 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Remaining

​

​

​

​

​

​

​

​

Coupon

​

​

Effective

​

Maturity

​

Period of

​

Carrying Value at

​

​

Rate

​

​

Rate (1)

​

Date

​

Amortization

​

March 31, 2021

​

December 31, 2020

2021 Senior Notes

​

5.00

%  

​

5.32

%  

12/15/2021

​

0.7

years

​

$

700,000

​

$

700,000

2023 Senior Notes

​

5.50

%  

​

5.71

%  

11/1/2023

 

2.6

years

 

​

300,000

 

​

300,000

2023 Convertible Notes

​

4.38

%  

​

4.57

%  

4/1/2023

​

2.0

years

​

​

250,000

​

​

250,000

2025 Senior Notes

​

4.75

%  

(2)

5.04

%  

3/15/2025

​

4.0

years

​

​

500,000

​

​

500,000

Total principal amount

​

​

​

​

​

​

​

​

​

​

​

​

1,750,000

​

​

1,750,000

Unamortized discount—Convertible Notes

​

​

​

​

​

​

​

​

​

​

​

​

(910)

​

​

(2,559)

Unamortized discount—Senior Notes

​

​

​

​

​

​

​

​

​

​

​

​

(8,356)

​

​

(9,332)

Unamortized deferred financing costs

​

​

​

​

​

​

​

​

​

​

​

 

(5,076)

​

 

(5,589)

Carrying amount of debt components

​

​

​

​

​

​

​

​

​

​

​

$

1,735,658

​

$

1,732,520

Carrying amount of conversion option equity components recorded in additional paid-in capital for outstanding convertible notes

​

​

​

​

​

​

​

​

​

​

​

​

N/A

​

$

3,755

(1)Effective rate includes the effects of underwriter purchase discount.
(2)On September 15, 2021, we redeemed $400.0 million of our 2021 Senior Notes and the remaining $300.0 million matures on December 15, 2021.
(3)The coupon on the 2025 Senior Notes is 4.75%.  At closing, we swapped $470.0 million of the notes to a floating rate of LIBOR + 2.53%.
(1)Effective rate includes the effects of underwriter purchase discount.
(2)The coupon on the 2025 Senior Notes is 4.75%.  At closing, we swapped $470.0 million of the notes to a floating rate of LIBOR + 2.53%.  

​

Our unsecured senior notes contain certain financial tests and covenants. As of March 31,September 30, 2021, we were in compliance with all such covenants.

​

Senior Notes
On July 14, 2021, we issued $400.0 million of 3.625% Senior Notes due 2026 (the “2026 Senior Notes”). The 2026 Senior Notes mature on July 15, 2026. Prior to January 15, 2026, we may redeem some or all of the 2026 Senior Notes at a price equal to 100% of the principal amount thereof, plus the applicable “make-whole” premium as of the applicable date of redemption. On and after January 15, 2026, we may redeem some or all of the 2026 Senior Notes at a price equal to 100% of the principal amount thereof. In addition, prior to July 15, 2023, we may redeem up to 40% of the 2026 Senior Notes at the applicable redemption price using the proceeds of certain equity offerings.
Convertible Senior Notes

​

On March 29, 2017, we issued $250.0 million of 4.375%4.375% Convertible Senior Notes due 2023 (the “2023 Convertible Notes”) which remain outstanding at March 31,September 30, 2021 and mature on April 1, 2023.

​

We recognized interest expense of $2.9 million and $3.0$8.7 million during the three and nine months ended March 31,September 30, 2021, respectively, from our Convertible Notes. We recognized interest expense of $3.1 million and $9.2 million during the three and nine months ended September 30, 2020, respectively, from our Convertible Notes.

​

The following table details the conversion attributes of our Convertible Notes outstanding as of March 31,September 30, 2021 (amounts in thousands, except rates):
September 30, 2021
ConversionConversion
Rate (1)Price (2)
2023 Convertible Notes38.5959$25.91

​

​

​

​

​

​

​

​

​

March 31, 2021

​

​

Conversion

​

Conversion

​

​

Rate (1)

​

Price (2)

2023 Convertible Notes

​

38.5959

 

$

25.91

37
(1)The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of 2023 Convertible Notes converted, as adjusted in accordance with the indenture governing the 2023 Convertible Notes (including the applicable supplemental indenture).

​Table of Contents

(2)As of March 31, 2021, the market price of the Company’s common stock was $24.74.

​(1)

The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of 2023 Convertible Notes converted, as adjusted in accordance with the indenture governing the 2023 Convertible Notes (including the applicable supplemental indenture).

(2)As of September 30, 2021, the market price of the Company’s common stock was $24.41.
The if-converted value of the 2023 Convertible Notes was less than their principal amount by $11.3$14.5 million at March 31,September 30, 2021 as the closing market priceof the Company’s common stock of $24.74$24.41 was less than the implicit conversion price of $25.91 per share. The if-converted value of the principal amount of the 2023 Convertible Notes was $238.7$235.5 million as of March 31,September 30, 2021. As of March 31,September 30, 2021, the net carrying amount and fair value of the 2023 Convertible Notes was $248.6$249.0 million and $255.8$255.6 million, respectively.

​

35

Table of Contents

Upon conversion of the 2023 Convertible Notes, settlement may be made in common stock, cash or a combination of both, at the option of the Company.

​

Conditions for Conversion

​

Prior to October 1, 2022, the 2023 Convertible Notes will be convertible only upon satisfaction of 1 or more of the following conditions: (1) the closing market price of the Company’s common stock is at least 110% of the conversion price of the 2023 Convertible Notes for at least 20 out of 30 trading days prior to the end of the preceding fiscal quarter, (2) the trading price of the 2023 Convertible Notes is less than 98% of the product of (i) the conversion rate and (ii) the closing price of the Company’s common stock during any five consecutive trading day period, (3) the Company issues certain equity instruments at less than the 10-day average closing market price of its common stock or the per-share value of certain distributions exceeds the market price of the Company’s common stock by more than 10% or (4) certain other specified corporate events (significant consolidation, sale, merger, share exchange, fundamental change, etc.) occur.

​

On or after October 1, 2022, holders of the 2023 Convertible Notes may convert each of their notes at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date.

​

11. Loan Securitization/Sale Activities

​

As described below, we regularly sell loans and notes under various strategies. We evaluate such sales as to whether they meet the criteria for treatment as a sale—legal isolation, ability of transferee to pledge or exchange the transferred assets without constraint and transfer of control.

​

Loan Securitizations

​

Within the Investing and Servicing Segment, we originate commercial mortgage loans with the intent to sell these mortgage loans to VIEs for the purposes of securitization. These VIEs then issue CMBS that are collateralized in part by these assets, as well as other assets transferred to the VIE by third parties. Within the Commercial and Residential Lending Segment, we acquire residential loans with the intent to sell these mortgage loans to VIEs for the purpose of securitization. These VIEs then issue RMBS that are collateralized by these assets.

​

In certain instances, we retain an interest in the CMBS or RMBS VIE and serve as special servicer or servicing administrator for the VIE. In these circumstances, we generally consolidate the VIE into which the loans were sold. The securitizations are subject to optional redemption after a certain period of time or when the pool balance falls below a specified threshold.

​





38
Table of Contents
The following summarizes the face amount and proceeds of commercial and residential loans securitized for the three and nine months ended March 31,September 30, 2021 and 2020 (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial Loans

​

Residential Loans

​

    

Face Amount

    

Proceeds

    

Face Amount

    

Proceeds

For the Three Months Ended March 31,

​

​

​

​

​

​

​

​

​

​

​

​

2021

​

$

85,037

​

$

89,710

​

$

383,549

​

$

389,798

2020

​

 

335,835

​

​

352,393

​

 

381,279

​

 

398,747

​

Commercial LoansResidential Loans
Face AmountProceedsFace AmountProceeds
For the Three Months Ended September 30,
2021$349,225 $364,287 $469,663 $491,901 
2020151,295 157,497 478,911 499,321 
For the Nine Months Ended September 30,
2021$738,866 $775,374 $1,417,641 $1,465,576 
2020487,130 509,890 1,443,691 1,487,761 
The securitization of these commercial and residential loans does not result in a discrete gain or loss since they are carried under the fair value option.

​

Our securitizations have each been structured as bankruptcy-remote entities whose assets are not intended to be available to the creditors of any other party.

​

​

36

Table of Contents

Commercial and Residential Loan Sales

​

Within the Commercial and Residential Lending Segment, we originate or acquire commercial mortgage loans, subsequently selling all or a portion thereof. Typically, our motivation for entering into these transactions is to effectively create leverage on the subordinated position that we will retain and hold for investment. We also may sell certain of our previously-acquired residential loans to third parties outside a securitization. The following table summarizes our loans sold by the Commercial and Residential Lending Segment, net of expenses (amounts in thousands):
Loan Transfers Accounted for as Sales
Commercial LoansResidential Loans
Face amount (1)Proceeds (1)Face AmountProceeds
For the Three Months Ended September 30,
2021$35,700 $35,356 $— $— 
2020— — — — 
For the Nine Months Ended September 30,
2021$268,370 $264,846 $89,801 $92,817 
2020399,132 396,078 550 604 

​(1)

​

​

​

​

​

​

​

​

​

Residential

​

    

Face Amount

    

Proceeds

For the Three Months Ended March 31,

​

​

​

​

​

​

2021

​

$

89,418

​

$

92,419

2020

​

​

550

​

​

604

​During the nine months ended September 30, 2021, we sold $245.8 million of senior interests in first mortgage loans and $22.6 million of whole loan interests for proceeds of $243.3 million and $21.5 million, respectively. During the three months ended September 30, 2021, we sold $35.7 million of senior interests in first mortgage loans for proceeds of $35.4 million. During the nine months ended September 30, 2020, we sold $230.9 million of senior interests in first mortgage loans and $168.2 million of whole loan interests for proceeds of $224.1 million and $172.0 million, respectively.

During the nine months ended September 30, 2021, losses recognized by the Commercial and Residential Lending Segment on sales of commercial loans were $1.1 million. During the three months ended September 30, 2021, losses recognized by the Commercial and Residential Lending Segment on sales of commercial loans were not material. During the nine months ended September 30, 2020, losses recognized by the Commercial and Residential Lending Segment on sales of commercial loans were $1.0 million. There were no sales of commercial loans within the Commercial and Residential Lending Segment during the three months ended March 31, 2021 andSeptember 30, 2020.

​

Infrastructure Loan Sales

​

During the threenine months ended March 31,September 30, 2021, the Infrastructure Lending Segment sold loans held-for-sale with an aggregate face amount of $2.5 million, for proceeds of $2.5 million, recognizing immaterial gains. During the nine months ended September 30, 2020, the Infrastructure Lending Segment sold loans held-for-sale with an aggregate face amount of $38.7 million for proceeds of $38.4 million, recognizing gains of $0.3 million. There were no sales of loans withinby the Infrastructure Lending Segment during the three months ended March 31, 2021.

September 30, 2021 or 2020.

39
​Table of Contents

​

​

​

​

​

​

​

12. Derivatives and Hedging Activity

​

Risk Management Objective of Using Derivatives

​

We are exposed to certain risks arising from both our business operations and economic conditions. Refer to Note 13 to the consolidated financial statements included in our Form 10-K for further discussion of our risk management objectives and policies.

​

Designated Hedges

​

The Company does not generally elect to apply the hedge accounting designation to its hedging instruments. As of March 31,September 30, 2021 and December 31, 2020, the Company did not have any designated hedges.

​

Non-designated Hedges and Derivatives

​

We have entered into the following types of non-designated hedges and derivatives:

​

●Foreign exchange (“Fx”) forwards whereby we agree to buy or sell a specified amount of foreign currency for a specified amount of USD at a future date, economically fixing the USD amounts of foreign denominated cash flows we expect to receive or pay related to certain foreign denominated loan investments and properties;
●Interest rate contracts which hedge a portion of our exposure to changes in interest rates;
●Credit index instruments which hedge a portion of our exposure to the credit risk of our commercial loans held-for-sale; and
●Interest rate swap guarantees whereby we guarantee the interest rate swap obligations of certain Infrastructure Lending borrowers. Our interest rate swap guarantees were assumed in connection with the acquisition of the Infrastructure Lending Segment.

​

37

•Foreign exchange (“Fx”) forwards whereby we agree to buy or sell a specified amount of foreign currency for a specified amount of USD at a future date, economically fixing the USD amounts of foreign denominated cash flows we expect to receive or pay related to certain foreign denominated loan investments and properties;
•Interest rate contracts which hedge a portion of our exposure to changes in interest rates;

Table•Credit index instruments which hedge a portion of Contentsour exposure to the credit risk of our commercial loans held-for-sale; and

•Interest rate swap guarantees whereby we guarantee the interest rate swap obligations of certain Infrastructure Lending borrowers. Our interest rate swap guarantees were assumed in connection with the acquisition of the Infrastructure Lending Segment.

The following table summarizes our non-designated derivatives as of March 31,September 30, 2021 (notional amounts in thousands):

Type of DerivativeNumber of ContractsAggregate Notional AmountNotional CurrencyMaturity
Fx contracts – Buy Euros ("EUR")1752,389 EUROctober 2021 - March 2023
Fx contracts – Buy Pounds Sterling ("GBP")139,935 GBPNovember 2021 - October 2024
Fx contracts – Sell EUR131255,128 EUROctober 2021 - November 2025
Fx contracts – Sell GBP131534,811 GBPOctober 2021 - February 2025
Fx contracts – Sell Australian dollar ("AUD")51259,803 AUDOctober 2021 - October 2024
Interest rate swaps – Paying fixed rates442,469,098 USDMay 2023 - October 2031
Interest rate swaps – Receiving fixed rates2473,200 USDMarch 2025 - October 2031
Interest rate caps20939,893 USDNovember 2021 - April 2025
Interest rate caps161,000 GBPApril 2024
Credit index instruments349,000 USDSeptember 2058 - August 2061
Interest rate swap guarantees5309,443 USDMay 2022 - June 2025
Total418
​

​

​

​

​

​

​

​

​

​

Type of Derivative

    

Number of Contracts

    

Aggregate Notional Amount

    

Notional Currency

    

Maturity

Fx contracts – Buy Euros ("EUR")

​

2

​

3,973

​

EUR

​

November 2022

Fx contracts – Buy Pounds Sterling ("GBP")

​

8

​

16,675

​

GBP

​

April 2021 – July 2022

Fx contracts – Sell EUR

​

208

​

252,796

​

EUR

​

April 2021 – November 2025

Fx contracts – Sell GBP

​

156

​

556,798

​

GBP

​

April 2021 – May 2024

Fx contracts – Sell Australian dollar ("AUD")

​

19

​

188,554

​

AUD

​

August 2021 – June 2022

Interest rate swaps – Paying fixed rates

​

46

​

1,791,332

​

USD

​

May 2023 – April 2031

Interest rate swaps – Receiving fixed rates

​

1

​

470,000

​

USD

​

March 2025

Interest rate caps

​

22

​

985,635

​

USD

​

April 2021 – April 2025

Credit index instruments

​

3

​

49,000

​

USD

​

September 2058 – August 2061

Interest rate swap guarantees

​

6

​

371,890

​

USD

​

March 2022 – June 2025

Total

​

471

​

​

​

​

​

​

​

The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):
Fair Value of Derivatives
in an Asset Position (1) as of		Fair Value of Derivatives
in a Liability Position (2) as of
September 30,
2021		December 31,
2020		September 30,
2021		December 31,
2020
Interest rate contracts$22,684 $33,841 $2,054 $4 
Interest rate swap guarantees— — 417 849 
Foreign exchange contracts29,882 6,585 12,896 39,951 
Credit index instruments— 129 248 520 
Total derivatives$52,566 $40,555 $15,615 $41,324 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Fair Value of Derivatives

​

Fair Value of Derivatives

​

​

in an Asset Position (1) as of

​

in a Liability Position (2) as of

​

​

March 31,

​

December 31,

​

March 31,

​

December 31,

​

    

2021

​

2020

​

2021

​

2020

Interest rate contracts

​

$

25,331

​

$

33,841

​

$

4

​

$

4

Interest rate swap guarantees

​

​

—

​

​

—

​

​

498

​

​

849

Foreign exchange contracts

​

 

12,617

​

 

6,585

​

 

34,002

​

 

39,951

Credit index instruments

​

 

81

​

 

129

​

 

301

​

 

520

Total derivatives

​

$

38,029

​

$

40,555

​

$

34,805

​

$

41,324

40
(1)Classified as derivative assets in our condensed consolidated balance sheets.

​Table of Contents

(2)Classified as derivative liabilities in our condensed consolidated balance sheets.

​(1)

Classified as derivative assets in our condensed consolidated balance sheets.

(2)Classified as derivative liabilities in our condensed consolidated balance sheets.
The table below presents the effect of our derivative financial instruments on the condensed consolidated statements of operations for the three and nine months ended March 31,September 30, 2021 and 2020 (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Amount of Gain (Loss)

​

​

​

​

Recognized in Income for the

Derivatives Not Designated

​

Location of Gain (Loss)

​

Three Months Ended March 31,

as Hedging Instruments

    

Recognized in Income

    

2021

    

2020

Interest rate contracts

 

Gain on derivative financial instruments

​

$

20,158

​

$

(45,125)

Interest rate swap guarantees

​

Gain on derivative financial instruments

​

​

351

​

​

(675)

Foreign exchange contracts

 

Gain on derivative financial instruments

​

 

13,602

​

 

53,265

Credit index instruments

 

Gain on derivative financial instruments

​

 

(122)

​

 

2,245

​

​

​

​

$

33,989

​

$

9,710

​

​

38

Derivatives Not Designated
as Hedging Instruments		Location of Gain (Loss)
Recognized in Income
Amount of Gain (Loss)
Recognized in Income for the
Three Months Ended September 30,
Amount of Gain (Loss)
Recognized in Income for the
Nine Months Ended September 30,
2021202020212020
Interest rate contractsGain (loss) on derivative financial instruments$7,993 $259 $20,808 $(52,129)
Interest rate swap guaranteesGain (loss) on derivative financial instruments(65)260 431 (345)
Foreign exchange contractsGain (loss) on derivative financial instruments33,796 (28,514)44,857 17,644 
Credit index instrumentsGain (loss) on derivative financial instruments88 (102)(304)345 
$41,812 $(28,097)$65,792 $(34,485)

Table of Contents

​

13. Offsetting Assets and Liabilities

​

The following tables present the potential effects of netting arrangements on our financial position for financial assets and liabilities within the scope of ASC 210-20, Balance Sheet—Offsetting, which for us are derivative assets and liabilities as well as repurchase agreement liabilities (amounts in thousands):

(ii)  
Gross Amounts
Offset in the
Statement of
Financial Position		(iii) = (i) - (ii)
Net Amounts
Presented in
the Statement of
Financial Position		(iv)
Gross Amounts Not
Offset in the Statement
of Financial Position
(i)
Gross Amounts
Recognized		Financial
Instruments		Cash Collateral
Received / Pledged		(v) = (iii) - (iv)
Net Amount
As of September 30, 2021
Derivative assets$52,566 $— $52,566 $12,912 $30,023 $9,631 
Derivative liabilities$15,615 $— $15,615 $12,912 $2,286 $417 
Repurchase agreements8,004,910 — 8,004,910 8,004,910 — — 
$8,020,525 $— $8,020,525 $8,017,822 $2,286 $417 
As of December 31, 2020
Derivative assets$40,555 $— $40,555 $6,716 $33,772 $67 
Derivative liabilities$41,324 $— $41,324 $6,716 $27,416 $7,192 
Repurchase agreements5,808,807 — 5,808,807 5,808,807 — — 
$5,850,131 $— $5,850,131 $5,815,523 $27,416 $7,192 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(iv)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross Amounts Not

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Offset in the Statement

​

​

​

​

​

​

​

​

(ii)  

​

(iii) = (i) - (ii)

​

of Financial Position

​

​

​

​

    

​

​

​

Gross Amounts

   

Net Amounts

   

​

​

   

Cash

   

​

​

​

​

(i)

​

Offset in the

​

Presented in

​

​

​

​

Collateral

​

​

​

​

​

Gross Amounts

​

Statement of

​

the Statement of

​

Financial

​

Received /

​

(v) = (iii) - (iv)

​

​

Recognized

​

Financial Position

​

Financial Position

​

Instruments

​

Pledged

​

Net Amount

As of March 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivative assets

​

$

38,029

​

$

—

​

$

38,029

​

$

11,491

​

$

24,235

​

$

2,303

Derivative liabilities

​

$

34,805

​

$

—

​

$

34,805

​

$

11,491

​

$

22,618

​

$

696

Repurchase agreements

​

 

6,947,488

​

 

—

​

 

6,947,488

​

 

6,947,488

​

 

—

​

 

—

​

​

$

6,982,293

​

$

—

​

$

6,982,293

​

$

6,958,979

​

$

22,618

​

$

696

As of December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Derivative assets

​

$

40,555

​

$

—

​

$

40,555

​

$

6,716

​

$

33,772

​

$

67

Derivative liabilities

​

$

41,324

​

$

—

​

$

41,324

​

$

6,716

​

$

27,416

​

$

7,192

Repurchase agreements

​

 

5,808,807

​

 

—

​

 

5,808,807

​

 

5,808,807

​

 

—

​

 

—

​

​

$

5,850,131

​

$

—

​

$

5,850,131

​

$

5,815,523

​

$

27,416

​

$

7,192

​

​

14. Variable Interest Entities

​

Investment Securities

​

As discussed in Note 2, we evaluate all of our investments and other interests in entities for consolidation, including our investments in CMBS, RMBS and our retained interests in securitization transactions we initiated, all of which are generally considered to be variable interests in VIEs.

​

Securitization VIEs consolidated in accordance with ASC 810 are structured as pass through entities that receive principal and interest on the underlying collateral and distribute those payments to the certificate holders. The assets and other instruments held by these securitization entities are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the securitization entities do not have any recourse to the general credit of any other consolidated entities, nor to us as the primary beneficiary. The VIE liabilities initially represent investment securities on our balance sheet (pre-consolidation). Upon consolidation of these VIEs, our associated investment securities are eliminated, as is the interest income related to those securities. Similarly, the fees we earn in our roles as special servicer of the bonds issued by the consolidated VIEs or as collateral administrator of the consolidated VIEs are also eliminated. Finally, a portion of the identified servicing intangible associated with the eliminated fee streams is eliminated in consolidation.

​

41
Table of Contents
VIEs in which we are the Primary Beneficiary

​

The inclusion of the assets and liabilities of securitization VIEs in which we are deemed the primary beneficiary has no economic effect on us. Our exposure to the obligations of securitization VIEs is generally limited to our investment in these entities. We are not obligated to provide, nor have we provided, any financial support for any of these consolidated structures.

​

During the year ended December 31, 2019,

As discussed in Note 9, we have refinanced a poolvarious pools of our commercial and infrastructure loans held-for-investment through a CLO,3 CLOs and 1 SASB, which isare considered to be a VIE.VIEs. We are the primary beneficiary of, and therefore consolidate, the CLOCLOs and SASB in our financial statements as we have both (i) the power to direct the activities in our role as collateral manager, collateral advisor, or controlling class representative that most significantly impact the CLO’sCLOs’ and SASB's economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the CLOCLOs and SASB that could be potentially significant through the subordinate interests we own.

​

39

Table of Contents

The following table details the assets and liabilities of our consolidated CLOCLOs and SASB as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):

September 30, 2021December 31, 2020
Assets:
Cash and cash equivalents$22,018 $96,998 
Loans held-for-investment3,014,891 1,002,441 
Investment securities11,950 — 
Accrued interest receivable8,796 5,454 
Other assets66,003 557 
Total Assets$3,123,658 $1,105,450 
Liabilities
Accounts payable, accrued expenses and other liabilities$5,501 $663 
Collateralized loan obligations and single asset securitization, net2,614,230 930,554 
Total Liabilities$2,619,731 $931,217 
​

​

​

​

​

​

​

​

​

​

March 31, 2021

​

December 31, 2020

Assets:

​

​

​

​

​

​

Cash and cash equivalents

​

$

—

​

$

96,998

Loans held-for-investment

​

​

1,099,639

​

 

1,002,441

Accrued interest receivable

​

 

4,068

​

​

5,454

Other assets

​

​

307

​

 

557

Total Assets

​

$

1,104,014

​

$

1,105,450

Liabilities

​

​

​

​

​

​

Accounts payable, accrued expenses and other liabilities

​

$

640

​

$

663

Collateralized loan obligations, net

​

 

931,178

​

 

930,554

Total Liabilities

​

$

931,818

​

$

931,217

​

Assets held by this CLOthe CLOs and SASB are restricted and can be used only to settle obligations of the CLO,CLOs and SASB, including the subordinate interests owned by us. The liabilities of this CLOthe CLOs and SASB are non-recourse to us and can only be satisfied from the assets of the CLO.CLOs and SASB.

​

We also hold controlling interests in other non-securitization entities that are considered VIEs. SPT Dolphin Intermediate LLC (“SPT Dolphin”), the entity which holds the Woodstar II Portfolio, is a VIE because the third party interest holders do not carry kick-out rights or substantive participating rights. We were deemed to be the primary beneficiary of the VIE because we possess both the power to direct the activities of the VIE that most significantly impact its economic performance and a significant economic interest in the entity. This VIE had total assets of $685.4$659.6 million and liabilities of $520.6$523.1 million as of March 31,September 30, 2021.

​

We also hold a 51%51% controlling interest in a joint venture (the “CMBS JV”) within our Investing and Servicing Segment, which is considered a VIE because the third party interest holder does not carry kick-out rights or substantive participating rights. We are deemed the primary beneficiary of the CMBS JV. This VIE had total assets of $335.4$326.5 million and liabilities of $78.9$73.6 million as of March 31,September 30, 2021. Refer to Note 16 for further discussion.

​

In addition to the above non-securitization entities, we have smaller VIEs with total assets of $98.7$102.0 million and liabilities of $53.8$53.5 million as of March 31,September 30, 2021.

​

VIEs in which we are not the Primary Beneficiary

​

In certain instances, we hold a variable interest in a VIE in the form of CMBS, but either (i) we are not appointed, or do not serve as, special servicer or servicing administrator or (ii) an unrelated third party has the rights to unilaterally remove us as special servicer without cause. In these instances, we do not have the power to direct activities that most significantly impact the VIE’s economic performance. In other cases, the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive benefits from the VIE which could potentially be significant. For these structures, we are not deemed to be the primary beneficiary of the VIE, and we do not consolidate these VIEs.

42
​

AsTable of March 31, 2021, 5 of our 6 collateralized debt obligation (“CDO”) structures within our Investing and Servicing Segment were in default or imminent default, which, pursuant to the underlying indentures, changes the rights of the variable interest holders. NaN of the 5 CDOs defaulted during the year ended December 31, 2020. Upon default of a CDO, the trustee or senior note holders are allowed to exercise certain rights, including liquidation of the collateral, which at that time, is the activity which would most significantly impact the CDO’s economic performance. Further, when the CDO is in default, the collateral administrator no longer has the option to purchase securities from the CDO. In cases where the CDO is in default and we do not have the ability to exercise rights which would most significantly impact the CDO’s economic performance, we do not consolidate the VIE. As of March 31, 2021, NaN of these 5 CDO structures were consolidated.

​Contents

​

40

Table of Contents

As noted above, we are not obligated to provide, nor have we provided, any financial support for any of our securitization VIEs, whether or not we are deemed to be the primary beneficiary. As such, the risk associated with our involvement in these VIEs is limited to the carrying value of our investment in the entity. As of March 31,September 30, 2021, our maximum risk of loss related to securitization VIEs in which we were not the primary beneficiary was $19.3$23.5 million on a fair value basis.

​

As of March 31,September 30, 2021, the securitization VIEs which we do not consolidate had debt obligations to beneficial interest holders with unpaid principal balances, excluding the notional value of interest-only securities, of $3.9$4.9 billion. The corresponding assets are comprised primarily of commercial mortgage loans with unpaid principal balances corresponding to the amounts of the outstanding debt obligations.

​

We also hold passive non-controlling interests in certain unconsolidated entities that are considered VIEs. We are not the primary beneficiaries of these VIEs as we do not possess the power to direct the activities of the VIEs that most significantly impact their economic performance and therefore report our interests, which totaled $25.7$26.6 million as of March 31,September 30, 2021, within investment in unconsolidated entities on our condensed consolidated balance sheet. Our maximum risk of loss is limited to our carrying value of the investments.

​

15. Related-Party Transactions

Transactions​

Management Agreement

​

We are party to a management agreement (the “Management Agreement”) with our Manager. Under the Management Agreement, our Manager, subject to the oversight of our board of directors, is required to manage our day to day activities, for which our Manager receives a base management fee and is eligible for an incentive fee and stock awards. Our Manager’s personnel perform certain due diligence, legal, management and other services that outside professionals or consultants would otherwise perform. As such, in accordance with the terms of our Management Agreement, our Manager is paid or reimbursed for the documented costs of performing such tasks, provided that such costs and reimbursements are in amounts no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis. Refer to Note 16 to the consolidated financial statements included in our Form 10-K for further discussion of this agreement.

​

Base Management Fee. For both the three months ended March 31,September 30, 2021 and 2020, approximately $19.2 million was incurred for base management fees. For the nine months ended September 30, 2021 and $19.12020, approximately $57.5 million and $57.4 million, respectively, was incurred for base management fees. As of both March 31,September 30, 2021 and December 31, 2020, there were $19.2 million of unpaid base management fees included in related-party payable in our condensed consolidated balance sheets.

​

Incentive Fee. For the three months ended March 31,September 30, 2021, approximately $1.0 million was incurred for incentive fees. There were no incentive fees incurred during the three months ended September 30, 2020. For the nine months ended September 30, 2021 and 2020, approximately $13.1$19.1 million and $15.8 million, respectively, was incurred for incentive fees. As of March 31,September 30, 2021 and December 31, 2020, there were $13.1$1.0 million and $15.0 million of unpaid incentive fees included in related-party payable in our condensed consolidated balance sheets.

​

Expense Reimbursement. For the three months ended March 31,September 30, 2021 and 2020, approximately $1.5$1.8 million and $2.2$1.5 million, respectively, was incurred for executive compensation and other reimbursable expenses and recognized within general and administrative expenses in our condensed consolidated statements of operations. For the nine months ended September 30, 2021 and 2020, approximately $4.8 million and $5.2 million, respectively, was incurred for executive compensation and other reimbursable expenses. As of March 31,September 30, 2021 and December 31, 2020, there were $3.8$3.2 million and $5.0 million, respectively, of unpaid reimbursable executive compensation and other expenses included in related-party payable in our condensed consolidated balance sheets.

​

Equity Awards. In certain instances, we issue RSAs to certain employees of affiliates of our Manager who perform services for us. During the threenine months ended March 31,September 30, 2021 and 2020, we granted 981,951 and 341,635 RSAs, respectively, at grant date fair values of $19.6 million and $3.9 million, respectively. There were no RSAs granted during the three months ended September 30, 2021 or 2020. Expenses related to the vesting of awards to employees of affiliates of our Manager were $2.4$2.2 million and $1.1$0.1 million during the three months ended March 31,September 30, 2021 and 2020, respectively, and are reflected in general and administrative expenses in our condensed consolidated statements of operations. Expenses related to the vesting of such awards were $6.7 million and $2.5 million during the nine months ended September 30, 2021 and 2020, respectively. These shares generally vest over a three-year period.

​

41

43

TableTable of Contents

Manager Equity Plan

​

In May 2017, the Company’s shareholders approved the Starwood Property Trust, Inc. 2017 Manager Equity Plan (the “2017 Manager Equity Plan”), which replaced the Starwood Property Trust, Inc. Manager Equity Plan (“Manager Equity Plan”). In November 2020, we granted 1,800,000 RSUs to our Manager under the 2017 Manager Equity Plan. In September 2019, we granted 1,200,000 RSUs to our Manager under the 2017 Manager Equity Plan. In April 2018, we granted 775,000 RSUs to our Manager under the 2017 Manager Equity Plan. In March 2017, we granted 1,000,000 RSUs to our Manager under the Manager Equity Plan. In connection with these grants and prior similar grants, we recognized share-based compensation expense of $5.9$4.5 million and $5.2$3.4 million within management fees in our condensed consolidated statements of operations for the three months ended March 31,September 30, 2021 and 2020, respectively. For the nine months ended September 30, 2021 and 2020, we recognized $14.9 million and $12.0 million, respectively, related to these awards. Refer to Note 16 for further discussion of these grants.

​

Investments in Loans
In June 2021, collateral was released from an existing loan which was originated in November 2019 with SEREF, an affiliate of our Manager, for the acquisition of an office portfolio located in Spain. Financing for the released collateral was provided by the Company and Securities

the proceeds were used to partially repay €11.5 million of the existing loan, of which SEREF's portion was €5.7 million.

In July 2021, a €55.0 million loan participation acquired in March 2018 from SEREF, an affiliate of our Manager, which was secured by a luxury resort in Estepona, Spain, was paid in full.
​

During the three and nine months ended March 31,September 30, 2021, the Company acquired $141.6$395.3 million and $719.9 million, respectively, of loans from a residential mortgage originator in which it holds an equity interest. Additionally, as of March 31,September 30, 2021, the Company had outstanding residential mortgage loan purchase commitments of $27.4$144.0 million to this residential mortgage originator. Refer to Note 7 for further discussion.

​

Lease Arrangements

​

In March 2020, we entered into an office lease agreement with an entity which is controlled by our Chairman and CEO through majority equity ownership of the entity. The leased premises are currently under construction and will serve as our new Miami Beach office when our existing lease in Miami Beach expires on December 31, 2021. The lease will commence after delivery of the office space to us, but no earlier than July 30, 2021.us. The lease is for approximately 74,000 square feet of office space, has an initial term of 15 years and requires monthly lease payments starting in the tenth month after lease commencement. The lease payments are based on an annual base rate of $52.00 per square foot that increases by 3% each anniversary following commencement, plus our pro rata share of building operating expenses. In April 2020, we provided a $1.9 million cash security deposit to the landlord. Prior to the execution of this lease, we engaged an independent third party leasing firm and external counsel to advise the independent directors of our board of directors on market terms for the lease.  The terms of the lease were approved by our independent directors.

​

In April 2020 we provided a $1.9 million cash security deposit to the landlord. During the three and nine months ended September 30, 2021, we made payments to the landlord of $3.0 million and $7.8 million, respectively, for reimbursements relating to tenant improvements under the terms of the lease.

Other Related-Party Arrangements

​

Highmark Residential (“Highmark”), an affiliate of our Manager, provides property management services for the properties within our Woodstar I Portfolio.and Woodstar II Portfolios. Fees paid to Highmark are calculated as a percentage of gross receipts and are at market terms. During the three months ended March 31,September 30, 2021 and 2020, property management fees to Highmark of $0.7$1.3 million and $0.5$0.4 million, respectively, were recognized in our condensed consolidated statements of operations.

​

During the nine months ended September 30, 2021 and 2020, property management fees to Highmark were $2.8 million and $1.4 million, respectively.

Refer to Note 16 to the consolidated financial statements included in our Form 10-K for further discussion of related-party agreements.

​

​

​

42

44

TableTable of Contents

16. Stockholders’ Equityand Non-Controlling Interests

​

During the threenine months ended March 31,September 30, 2021, our board of directors declared the following dividends:

​

​

​

​

​

​

​

​

​

​

​

​

​

Declaration Date

Record Date

Ex-Dividend Date

Payment Date

Amount

Frequency

9/15/21

9/30/219/29/2110/15/21$0.48 Quarterly
6/14/216/30/216/29/217/15/210.48 Quarterly
3/11/21

3/31/21

3/30/21

​

4/15/21

​

​0.48 

0.48

Quarterly

​

During the threenine months ended March 31,September 30, 2021 and 2020, there were 0no shares issued under our At-The-Market Equity Offering Sales Agreement. During the threenine months ended March 31,September 30, 2021 and 2020, shares issued under the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) were not material.

​

Equity Incentive Plans

​

In May 2017, the Company’s shareholders approved the 2017 Manager Equity Plan and the Starwood Property Trust, Inc. 2017 Equity Plan (the “2017 Equity Plan”), which allow for the issuance of up to 11,000,000 stock options, stock appreciation rights, RSAs, RSUs or other equity-based awards or any combination thereof to the Manager, directors, employees, consultants or any other party providing services to the Company. The 2017 Manager Equity Plan succeeds and replaces the Manager Equity Plan and the 2017 Equity Plan succeeds and replaces the Starwood Property Trust, Inc. Equity Plan (the “Equity Plan”) and the Starwood Property Trust, Inc. Non-Executive Director Stock Plan (the “Non-Executive Director Stock Plan”).

​

The table below summarizes our share awards granted or vested under the Manager Equity Plan and the 2017 Manager Equity Plan during the threenine months ended March 31,September 30, 2021 and 2020 (dollar amounts in thousands):
Grant DateTypeAmount GrantedGrant Date Fair ValueVesting Period
November 2020RSU1,800,000 $30,078 3 years
September 2019RSU1,200,000 29,484 (1)
April 2018RSU775,000 16,329 3 years
March 2017RSU1,000,000 22,240 3 years

​(1)

​

​

​

​

​

​

​

​

​

​

​

Grant Date

    

Type

    

Amount Granted

    

Grant Date Fair Value

    

Vesting Period

 

November 2020

​

RSU

​

1,800,000

​

$

30,078

​

3 years

​

September 2019

​

RSU

​

1,200,000

​

​

29,484

​

(1)

​

April 2018

​

RSU

​

775,000

​

​

16,329

​

3 years

​

March 2017

​

RSU

​

1,000,000

​

​

22,240

​

3 years

​

Of the amount granted, 218,898 vested immediately on the grant date and the remaining amount vests over a three-year period.
(1)Of the amount granted, 218,898 vested immediately on the grant date and the remaining amount vests over a three-year period.

​

Schedule of Non-Vested Shares and Share Equivalents

2017
Equity Plan		2017
Manager
Equity Plan		TotalWeighted Average
Grant Date Fair
Value (per share)
Balance as of January 1, 20211,594,605 2,286,896 3,881,501 $17.26 
Granted1,677,654 — 1,677,654 22.09 
Vested(733,500)(759,860)(1,493,360)18.14 
Forfeited(36,568)— (36,568)19.79 
Balance as of September 30, 20212,502,191 1,527,036 4,029,227 18.93 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

2017

​

​

​

Weighted Average

​

​

2017

​

Manager

​

​

​

Grant Date Fair

​

​

Equity Plan

​

Equity Plan

​

Total

​

Value (per share)

Balance as of January 1, 2021

 

1,594,605

 

2,286,896

 

3,881,501

 

$

17.26

Granted

​

1,518,072

​

—

 

1,518,072

​

 

21.81

Vested

 

(633,893)

​

(296,342)

 

(930,235)

​

 

17.48

Balance as of March 31, 2021

 

2,478,784

 

1,990,554

 

4,469,338

 

​

18.76

​

As of March 31,September 30, 2021, there were 3.23.1 million shares of common stock available for future grants under the 2017 Manager Equity Plan and the 2017 Equity Plan.

​

43

45

TableTable of Contents

Non-Controlling Interests in Consolidated Subsidiaries

​

In connection with our Woodstar II Portfolio acquisitions, we issued 10.2 million Class A Units in our consolidated subsidiary, SPT Dolphin, and rights to receive an additional 1.9 million Class A Units if certain contingent events occur. As of March 31,September 30, 2021, all of the 1.9 million contingent Class A Units were issued. The Class A Units are redeemable for consideration equal to the current share price of the Company’s common stock on a 1-for-oneone-for-one basis, with the consideration paid in either cash or the Company’s common stock, at the determination of the Company. During the threenine months ended March 31,September 30, 2021, redemptions of 0.10.9 million of the Class A Units were received and settled in common stock, leaving 10.69.8 million Class A Units outstanding as of March 31,September 30, 2021. In consolidation, the outstanding Class A Units are reflected as non-controlling interests in consolidated subsidiaries on our condensed consolidated balance sheets, the balance of which was $225.6$208.5 million and $226.7 million as of March 31,September 30, 2021 and December 31, 2020, respectively.

To the extent SPT Dolphin has sufficient cash available, the Class A Units earn a preferred return indexed to the dividend rate of the Company’s common stock. Any distributions made pursuant to this waterfall are recognized within net income attributable to non-controlling interests in our condensed consolidated statements of operations. During both the three and nine months ended March 31,September 30, 2021, we recognized net income attributable to non-controlling interests of $4.7 million and $14.7 million, respectively, associated with these Class A Units. During the three and nine months ended September 30, 2020, we recognized net income attributable to non-controlling interests of $5.1 million and $15.3 million, respectively, associated with these Class A Units.

As discussed in Note 14, we hold a 51% controlling interest in the CMBS JV within our Investing and Servicing Segment. Because the CMBS JV is deemed a VIE for which we are the primary beneficiary, the 49% interest of our joint venture partner is reflected as a non-controlling interest in consolidated subsidiaries on our condensed consolidated balance sheets, and any net income attributable to this 49% joint venture interest is reflected within net income attributable to non-controlling interests in our consolidated statement of operations. The non-controlling interests in the CMBS JV were $132.4$129.6 million and $126.7 million as of March 31,September 30, 2021 and December 31, 2020, respectively. During the three and nine months ended March 31,September 30, 2021, and 2020, net income (loss) attributable to non-controlling interests was $5.4$6.7 million and $(6.0)$16.7 million, respectively.

​

​

​

During the three and nine months ended September 30, 2020, net income attributable to non-controlling interests was $6.8 million and $7.6 million, respectively.

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17. Earnings per Share

​

The following table provides a reconciliation of net income (loss) and the number of shares of common stock used in the computation of basic EPS and diluted EPS (amounts in thousands, except per share amounts):

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31,

​

    

2021

    

2020

Basic Earnings (Loss)

​

​

​

​

​

​

Income (loss) attributable to STWD common stockholders

​

$

111,378

​

$

(66,769)

Less: Income attributable to participating shares not already deducted as non-controlling interests

​

 

(1,925)

​

 

(1,222)

Basic earnings (loss)

​

$

109,453

​

$

(67,991)

​

​

​

​

​

​

​

Diluted Earnings (Loss)

​

​

​

​

​

​

Income (loss) attributable to STWD common stockholders

​

$

111,378

​

$

(66,769)

Less: Income attributable to participating shares not already deducted as non-controlling interests

​

 

(1,925)

​

 

(1,222)

Add: Interest expense on Convertible Notes

​

​

2,916

​

​

*

Diluted earnings (loss)

​

$

112,369

​

$

(67,991)

​

​

​

​

​

​

​

Number of Shares:

​

​

​

​

​

​

Basic — Average shares outstanding

​

 

283,319

​

 

280,990

Effect of dilutive securities — Convertible Notes

​

 

9,649

​

 

*

Effect of dilutive securities — Contingently issuable shares

​

 

263

​

 

—

Diluted — Average shares outstanding

​

 

293,231

​

 

280,990

​

​

​

​

​

​

​

Earnings (Loss) Per Share Attributable to STWD Common Stockholders:

​

​

​

​

​

​

Basic

​

$

0.39

​

$

(0.24)

Diluted

​

$

0.38

​

$

(0.24)

For the Three Months Ended
September 30,		For the Nine Months Ended
September 30,
2021202020212020
Basic Earnings
Income attributable to STWD common stockholders$128,602 $151,834 $356,290 $224,721 
Less: Income attributable to participating shares not already deducted as non-controlling interests(1,635)(1,721)(5,351)(3,422)
Basic earnings$126,967 $150,113 $350,939 $221,299 
Diluted Earnings
Income attributable to STWD common stockholders$128,602 $151,834 $356,290 $224,721 
Less: Income attributable to participating shares not already deducted as non-controlling interests(1,635)(1,721)(5,351)(3,422)
Add: Interest expense on Convertible Notes2,901 3,055 8,717 *
Add: Undistributed earnings to participating shares— 663 $— — 
Less: Undistributed earnings reallocated to participating shares— (642)$— — 
Diluted earnings$129,868 $153,189 $359,656 $221,299 
Number of Shares:
Basic — Average shares outstanding285,676 282,596 284,577 281,686 
Effect of dilutive securities — Convertible Notes9,649 9,649 9,649 *
Effect of dilutive securities — Contingently issuable shares19 — 19 — 
Effect of dilutive securities — Unvested non-participating shares104 213 148 182 
Diluted — Average shares outstanding295,448 292,458 294,393 281,868 
Earnings Per Share Attributable to STWD Common Stockholders:
Basic$0.44 $0.53 $1.23 $0.79 
Diluted$0.44 $0.52 $1.22 $0.79 

*Our Convertible Notes were not dilutive for the threenine months ended March 31,September 30, 2020.

​

As of March 31,September 30, 2021 and 2020, participating shares of 14.613.3 million and 13.212.8 million, respectively, were excluded from the computation of diluted shares as their effect was already considered under the more dilutive two-class method used above. Such participating shares at both March 31,September 30, 2021 and 2020 included 10.69.8 million and 10.5 million potential shares, respectively, of our common stock issuable upon redemption of the Class A Units in SPT Dolphin, as discussed in Note 16.

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18. Accumulated Other Comprehensive Income

​

The changes in AOCI by component are as follows (amounts in thousands):

Cumulative
Unrealized Gain
(Loss) on
Available-for-
Sale Securities		Foreign
Currency
Translation		Total
Three Months Ended September 30, 2021
Balance at July 1, 2021$41,310 $— $41,310 
OCI before reclassifications(822)— (822)
Amounts reclassified from AOCI(2)— (2)
Net period OCI(824)— (824)
Balance at September 30, 2021$40,486 $— $40,486 
Three Months Ended September 30, 2020
Balance at July 1, 2020$42,930 $(64)$42,866 
OCI before reclassifications(581)— (581)
Amounts reclassified from AOCI— — — 
Net period OCI(581)— (581)
Balance at September 30, 2020$42,349 $(64)$42,285 
Nine Months Ended September 30, 2021
Balance at January 1, 2021$44,057 $(64)$43,993 
OCI before reclassifications(3,569)— (3,569)
Amounts reclassified from AOCI(2)64 62 
Net period OCI(3,571)64 (3,507)
Balance at September 30, 2021$40,486 $— $40,486 
Nine Months Ended September 30, 2020
Balance at January 1, 2020$50,996 $(64)$50,932 
OCI before reclassifications(8,647)— (8,647)
Amounts reclassified from AOCI— — — 
Net period OCI(8,647)— (8,647)
Balance at September 30, 2020$42,349 $(64)$42,285 
​

​

​

​

​

​

​

​

​

​

​

​

    

Cumulative

    

​

​

    

​

​

​

​

Unrealized Gain

​

​

​

​

​

​

​

​

(Loss) on

​

Foreign

​

​

​

​

​

Available-for-

​

Currency

​

​

​

​

​

Sale Securities

​

Translation

​

Total

Three Months Ended March 31, 2021

​

​

​

​

​

​

​

​

​

Balance at January 1, 2021

​

$

44,057

​

$

(64)

​

$

43,993

OCI before reclassifications

​

 

(2,403)

​

 

—

​

 

(2,403)

Amounts reclassified from AOCI

​

 

—

​

 

64

​

 

64

Net period OCI

​

 

(2,403)

​

 

64

​

 

(2,339)

Balance at March 31, 2021

​

$

41,654

​

$

—

​

$

41,654

Three Months Ended March 31, 2020

​

​

​

​

​

​

​

​

​

Balance at January 1, 2020

​

$

50,996

​

$

(64)

​

$

50,932

OCI before reclassifications

​

 

(15,048)

​

 

—

​

 

(15,048)

Amounts reclassified from AOCI

​

 

—

​

 

—

​

 

—

Net period OCI

​

 

(15,048)

​

 

—

​

 

(15,048)

Balance at March 31, 2020

​

$

35,948

​

$

(64)

​

$

35,884

​

​

​

​

​

19. Fair Value

​

GAAP establishes a hierarchy of valuation techniques based on the observability of inputs utilized in measuring financial assets and liabilities at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:

​

Level I—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

​

Level II—Inputs (other than quoted prices included in Level I) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

​

Level III—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

​

Valuation Process

​

We have valuation control processes in place to validate the fair value of the Company’s financial assets and liabilities measured at fair value including those derived from pricing models. These control processes are designed to assure that the
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values used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are not available, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and the assumptions are reasonable.

Pricing Verification—We use recently executed transactions, other observable market data such as exchange data, broker/dealer quotes, third party pricing vendors and aggregation services for validating the fair values generated using valuation models. Pricing data provided by approved external sources is evaluated using a number of approaches; for example, by corroborating the external sources’ prices to executed trades, analyzing the methodology and assumptions used by the external source to generate a price and/or by evaluating how active the third party pricing source (or originating sources used by the third party pricing source) is in the market.

​

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Unobservable Inputs—Where inputs are not observable, we review the appropriateness of the proposed valuation methodology to ensure it is consistent with how a market participant would arrive at the unobservable input. The valuation methodologies utilized in the absence of observable inputs may include extrapolation techniques and the use of comparable observable inputs.

Any changes to the valuation methodology will be reviewed by our management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while we anticipate that our valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value could result in a different estimate of fair value at the reporting date.

Fair Value on a Recurring Basis

We determine the fair value of our financial assets and liabilities measured at fair value on a recurring basis as follows:

Loans held-for-sale, commercial

We measure the fair value of our commercial mortgage loans held-for-sale using a discounted cash flow analysis unless observable market data (i.e., securitized pricing) is available. A discounted cash flow analysis requires management to make estimates regarding future interest rates and credit spreads. The most significant of these inputs relates to credit spreads and is unobservable. Thus, we have determined that the fair values of mortgage loans valued using a discounted cash flow analysis should be classified in Level III of the fair value hierarchy, while mortgage loans valued using securitized pricing should be classified in Level II of the fair value hierarchy. Mortgage loans classified in Level III are transferred to Level II if securitized pricing becomes available.

Loans held-for-sale and loans held-for-investment, residential

​

We measure the fair value of our residential loans held-for-sale and held-for-investment based on the net present value of expected future cash flows using a combination of observable and unobservable inputs. Observable market participant assumptions include pricing related to trades of residential loans with similar characteristics. Unobservable inputs include the expectation of future cash flows, which involves judgments about the underlying collateral, the creditworthiness of the borrower, estimated prepayment speeds, estimated future credit losses, forward interest rates, investor yield requirements and certain other factors. At each measurement date, we consider both the observable and unobservable valuation inputs in the determination of fair value. However, given the significance of the unobservable inputs, these loans have been classified within Level III.

​

RMBS

RMBS are valued utilizing observable and unobservable market inputs. The observable market inputs include recent transactions, broker quotes and vendor prices (“market data”). However, given the implied price dispersion amongst the market data, the fair value determination for RMBS has also utilized significant unobservable inputs in discounted cash flow models including prepayments, default and severity estimates based on the recent performance of the collateral, the underlying collateral characteristics, industry trends, as well as expectations of macroeconomic events (e.g., housing price curves, interest rate curves, etc.). At each measurement date, we consider both the observable and unobservable valuation inputs in the determination of fair value. However, given the significance of the unobservable inputs these securities have been classified within Level III.


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CMBS

CMBS are valued utilizing both observable and unobservable market inputs. These factors include projected future cash flows, ratings, subordination levels, vintage, remaining lives, credit issues, recent trades of similar securities and the spreads used in the prior valuation. We obtain current market spread information where available and use this information in evaluating and validating the market price of all CMBS. Depending upon the significance of the fair value inputs used in determining these fair values, these securities are classified in either Level II or Level III of the fair value hierarchy. CMBS may shift between Level II and Level III of the fair value hierarchy if the significant fair value inputs used to price the CMBS become or cease to be observable.

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Equity security

The equity security is publicly registered and traded in the U.S. and its market price is listed on the London Stock Exchange. The security has been classified within Level I.

Domestic servicing rights

The fair value of this intangible is determined using discounted cash flow modeling techniques which require management to make estimates regarding future net servicing cash flows, including forecasted loan defeasance, control migration, delinquency and anticipated maturity defaults which are calculated assuming a debt yield at which default occurs. Since the most significant of these inputs are unobservable, we have determined that the fair values of this intangible in its entirety should be classified in Level III of the fair value hierarchy.

Derivatives

The valuation of derivative contracts are determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market based inputs, including interest rate curves, spot and market forward points and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

We incorporate credit valuation adjustments to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of non-performance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

The valuation of over the counter derivatives are determined using discounted cash flows based on Overnight Index Swap (“OIS”) rates. Fully collateralized trades are discounted using OIS with no additional economic adjustments to arrive at fair value. Uncollateralized or partially collateralized trades are also discounted at OIS, but include appropriate economic adjustments for funding costs (i.e., a LIBOR OIS basis adjustment to approximate uncollateralized cost of funds) and credit risk. For credit index instruments, fair value is determined based on changes in the relevant indices from the date of initiation of the instrument to the reporting date, as these changes determine the amount of any future cash settlement between us and the counterparty. These indices are considered Level II inputs as they are directly observable.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level II of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level III inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of March 31,September 30, 2021 and December 31, 2020, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level II of the fair value hierarchy.

Liabilities of consolidated VIEs

Our consolidated VIE liabilities generally represent bonds that are not owned by us. The majority of these are either traded in the marketplace or can be analogized to similar securities that are traded in the marketplace. For these liabilities, pricing is considered to be Level II, where the valuation is based upon quoted prices for similar instruments traded in active
50
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markets. We generally utilize third party pricing service providers for valuing these liabilities. In order to determine whether to utilize the valuations provided by third parties, we conduct an ongoing evaluation of their valuation methodologies and processes, as well as a review of the individual valuations themselves. In evaluating third party pricing for reasonableness, we consider a variety of factors, including market transaction information for the particular bond, market transaction information for bonds within the same trust, market transaction information for similar bonds, the bond’s ratings and the bond’s subordination levels.

​

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Table of Contents

For the minority portion of our consolidated VIE liabilities which consist of unrated or non-investment grade bonds that are not owned by us, pricing may be either Level II or Level III. If independent third party pricing similar to that noted above is available, we consider the valuation to be Level II. If such third party pricing is not available, the valuation is generated from model-based techniques that use significant unobservable assumptions, and we consider the valuation to be Level III. For VIE liabilities classified as Level III, valuation is determined based on discounted expected future cash flows which take into consideration expected duration and yields based on market transaction information, ratings, subordination levels, vintage and current market spread. VIE liabilities may shift between Level II and Level III of the fair value hierarchy if the significant fair value inputs used to price the VIE liabilities become or cease to be observable.

​

Assets of consolidated VIEs

The securitization VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets of the VIE, we maximize the use of observable inputs over unobservable inputs. The individual assets of a VIE are inherently incapable of precise measurement given their illiquid nature and the limitations on available information related to these assets. Because our methodology for valuing these assets does not value the individual assets of a VIE, but rather uses the value of the VIE liabilities as an indicator of the fair value of VIE assets as a whole, we have determined that our valuations of VIE assets in their entirety should be classified in Level III of the fair value hierarchy.

Fair Value Only Disclosed

We determine the fair value of our financial instruments and assets where fair value is disclosed as follows:

Loans held-for-investment and loans held-for-sale

We estimate the fair values of our loans not carried at fair value on a recurring basis by discounting their expected cash flows at a rate we estimate would be demanded by the market participants that are most likely to buy our loans. The expected cash flows used are generally the same as those used to calculate our level yield income in the financial statements. Since these inputs are unobservable, we have determined that the fair value of these loans in their entirety would be classified in Level III of the fair value hierarchy.

HTM debt securities

We estimate the fair value of our mandatorily redeemable preferred equity interests in commercial real estate companies and infrastructure bonds using the same methodology described for our loans held-for-investment.held-for-investment. We estimate the fair value of our HTM CMBS using the same methodology described for our CMBS carried at fair value on a recurring basis.

Secured financing agreements, CLOs and CLO

SASB

The fair value of the secured financing agreements, CLOs and CLOSASB are determined by discounting the contractual cash flows at the interest rate we estimate such arrangements would bear if executed in the current market. We have determined that our valuation of these instruments should be classified in Level III of the fair value hierarchy.

Unsecured senior notes

The fair value of our unsecured senior notes is determined based on the last available bid price for the respective notes in the current market. As these prices represent observable market data, we have determined that the fair value of these instruments would be classified in Level II of the fair value hierarchy.

49

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Fair Value Disclosures

​

The following tables present our financial assets and liabilities carried at fair value on a recurring basis in the condensed consolidated balance sheets by their level in the fair value hierarchy as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):

September 30, 2021
TotalLevel ILevel IILevel III
Financial Assets:
Loans under fair value option$2,190,765 $— $384,549 $1,806,216 
RMBS148,583 — — 148,583 
CMBS23,503 — — 23,503 
Equity security12,067 12,067 — — 
Domestic servicing rights15,942 — — 15,942 
Derivative assets52,566 — 52,566 — 
VIE assets62,346,480 — — 62,346,480 
Total$64,789,906 $12,067 $437,115 $64,340,724 
Financial Liabilities:
Derivative liabilities$15,615 $— $15,615 $— 
VIE liabilities60,894,975 — 56,364,386 4,530,589 
Total$60,910,590 $— $56,380,001 $4,530,589 
December 31, 2020
TotalLevel ILevel IILevel III
Financial Assets:
Loans under fair value option$1,022,979 $— $— $1,022,979 
RMBS167,349 — — 167,349 
CMBS19,457 — — 19,457 
Equity security11,247 11,247 — — 
Domestic servicing rights13,202 — — 13,202 
Derivative assets40,555 — 40,555 — 
VIE assets64,238,328 — — 64,238,328 
Total$65,513,117 $11,247 $40,555 $65,461,315 
Financial Liabilities:
Derivative liabilities$41,324 $— $41,324 $— 
VIE liabilities62,776,371 — 60,756,495 2,019,876 
Total$62,817,695 $— $60,797,819 $2,019,876 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2021

​

    

Total

    

Level I

    

Level II

    

Level III

Financial Assets:

​

​

​

​

​

​

​

​

​

​

​

​

Loans under fair value option

​

$

763,773

​

$

—

​

$

—

​

$

763,773

RMBS

​

 

160,301

​

 

—

​

 

—

​

 

160,301

CMBS

​

 

19,256

​

 

—

​

 

—

​

 

19,256

Equity security

​

 

10,655

​

 

10,655

​

 

—

​

 

—

Domestic servicing rights

​

 

12,406

​

 

—

​

 

—

​

 

12,406

Derivative assets

​

 

38,029

​

 

—

​

 

38,029

​

 

—

VIE assets

​

 

62,367,110

​

 

—

​

 

—

​

 

62,367,110

Total

​

$

63,371,530

​

$

10,655

​

$

38,029

​

$

63,322,846

Financial Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

Derivative liabilities

​

$

34,805

​

$

—

​

$

34,805

​

$

—

VIE liabilities

​

 

60,896,709

​

 

—

​

 

58,669,281

​

 

2,227,428

Total

​

$

60,931,514

​

$

—

​

$

58,704,086

​

$

2,227,428

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2020

​

    

Total

    

Level I

    

Level II

    

Level III

Financial Assets:

​

​

​

​

​

​

​

​

​

​

​

​

Loans under fair value option

​

$

1,022,979

​

$

—

​

$

—

​

$

1,022,979

RMBS

​

 

167,349

​

 

—

​

 

—

​

 

167,349

CMBS

​

 

19,457

​

 

—

​

 

—

​

 

19,457

Equity security

​

 

11,247

​

 

11,247

​

 

—

​

 

—

Domestic servicing rights

​

 

13,202

​

 

—

​

 

—

​

 

13,202

Derivative assets

​

 

40,555

​

 

—

​

 

40,555

​

 

—

VIE assets

​

 

64,238,328

​

 

—

​

 

—

​

 

64,238,328

Total

​

$

65,513,117

​

$

11,247

​

$

40,555

​

$

65,461,315

Financial Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

Derivative liabilities

​

$

41,324

​

$

—

​

$

41,324

​

$

—

VIE liabilities

​

 

62,776,371

​

 

—

​

 

60,756,495

​

 

2,019,876

Total

​

$

62,817,695

​

$

—

​

$

60,797,819

​

$

2,019,876

​

​

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The changes in financial assets and liabilities classified as Level III are as follows for the three and nine months ended March 31,September 30, 2021 and 2020 (amounts in thousands):

Three Months Ended September 30, 2021Loans at
Fair Value		RMBSCMBSDomestic
Servicing
Rights		VIE AssetsVIE
Liabilities		Total
July 1, 2021 balance$767,821 $154,704 $18,965 $13,705 $63,493,796 $(4,836,192)$59,612,799 
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale31,727 — (790)2,237 (1,601,734)580,581 (987,979)
Net accretion— 2,584 — — — — 2,584 
Included in OCI— (824)— — — — (824)
Purchases / Originations1,783,772 — — — — — 1,783,772 
Sales(856,187)— — — — — (856,187)
Issuances— — — — — (27,112)(27,112)
Cash repayments / receipts(50,395)(7,881)(356)— — (351)(58,983)
Transfers into Level III4,414 — — — — (112,562)(108,148)
Transfers out of Level III(133,863)— — — — 349,922 216,059 
Transfers within Level III258,927 — — — (258,927)— — 
Consolidation of VIEs— — — — 1,649,200 (520,325)1,128,875 
Deconsolidation of VIEs balance— — 5,684 — (935,855)35,450 (894,721)
September 30, 2021 balance$1,806,216 $148,583 $23,503 $15,942 $62,346,480 $(4,530,589)$59,810,135 
Amount of unrealized gains (losses) attributable to
    assets still held at September 30, 2021:
Included in earnings$12,571 $2,582 $409 $2,237 $(1,601,734)$580,581 $(1,003,354)
Included in OCI$— $(822)$— $— $— $— $(822)
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

Domestic

    

​

​

    

​

​

    

​

​

​

​

Loans at

​

​

​

​

​

​

​

Servicing

​

​

​

​

VIE

​

​

​

Three Months Ended March 31, 2021

​

Fair Value

​

RMBS

​

CMBS

​

Rights

​

VIE Assets

​

Liabilities

​

Total

January 1, 2021 balance

​

$

1,022,979

​

$

167,349

​

$

19,457

​

$

13,202

​

$

64,238,328

​

$

(2,019,876)

​

$

63,441,439

Total realized and unrealized gains (losses):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Included in earnings:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Change in fair value / gain on sale

​

 

(9,478)

​

 

—

​

 

372

​

​

(796)

​

 

(2,264,591)

​

 

65,681

​

 

(2,208,812)

Net accretion

​

 

—

​

 

2,606

​

 

—

​

 

—

​

 

—

​

 

—

​

 

2,606

Included in OCI

​

 

—

​

 

(2,403)

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(2,403)

Purchases / Originations

​

 

375,270

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

375,270

Sales

​

 

(571,927)

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(571,927)

Issuances

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(11,604)

​

 

(11,604)

Cash repayments / receipts

​

 

(53,071)

​

 

(7,251)

​

 

(573)

​

 

—

​

 

—

​

 

(1,137)

​

 

(62,032)

Transfers into Level III

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(409,267)

​

 

(409,267)

Transfers out of Level III

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

148,775

​

 

148,775

Consolidation of VIEs

​

 

—

​

 

—

​

 

—

​

 

—

​

 

393,373

​

 

—

​

 

393,373

March 31, 2021 balance

​

$

763,773

​

$

160,301

​

$

19,256

​

$

12,406

​

$

62,367,110

​

$

(2,227,428)

​

$

61,095,418

Amount of unrealized gains (losses) attributable to assets still held at March 31, 2021:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Included in earnings

​

$

(7,708)

​

$

2,606

​

$

372

​

$

(796)

​

$

(2,264,591)

​

$

65,681

​

$

(2,204,436)

Included in OCI

​

$

—

​

$

(2,403)

​

$

—

​

$

—

​

$

—

​

$

—

​

$

(2,403)

Three Months Ended September 30, 2020Loans at
Fair Value		RMBSCMBSDomestic
Servicing
Rights		VIE AssetsVIE
Liabilities		Total
July 1, 2020 balance$894,613 $174,281 $21,891 $13,955 $64,175,387 $(2,129,529)$63,150,598 
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale61,384 — (56)634 (202,560)(30,577)(171,175)
Net accretion— 2,633 — — — — 2,633 
Included in OCI— (581)— — — — (581)
Purchases / Originations1,013,158 — — — — — 1,013,158 
Sales(656,818)— — — — — (656,818)
Cash repayments / receipts(43,257)(6,063)(213)— — (329)(49,862)
Transfers into Level III— — — — — (485,332)(485,332)
Transfers out of Level III— — — — — 322,888 322,888 
Consolidation of VIEs— — — — 512,300 — 512,300 
Deconsolidation of VIEs— — 227 — (7,652)7,573 148 
September 30, 2020 balance$1,269,080 $170,270 $21,849 $14,589 $64,477,475 $(2,315,306)$63,637,957 
Amount of unrealized gains (losses) attributable to
    assets still held at September 30, 2020:
Included in earnings$8,864 $2,633 $(56)$634 $(194,147)$(30,577)$(212,649)
Included in OCI$— $(581)$— $— $— $— $(581)
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

Domestic

    

​

​

    

​

​

    

​

​

​

​

Loans at

​

​

​

​

​

​

​

Servicing

​

​

​

​

VIE

​

​

​

Three Months Ended March 31, 2020

​

Fair Value

​

RMBS

​

CMBS

​

Rights

​

VIE Assets

​

Liabilities

​

Total

January 1, 2020 balance

​

$

1,436,194

​

$

189,576

​

$

25,008

​

$

16,917

​

$

62,187,175

​

$

(2,537,392)

​

$

61,317,478

Total realized and unrealized gains (losses):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Included in earnings:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Change in fair value / gain on sale

​

 

(16,134)

​

 

—

​

 

5,738

​

​

(393)

​

 

(3,506,792)

​

 

146,282

​

 

(3,371,299)

Net accretion

​

 

—

​

 

2,661

​

 

—

​

 

—

​

 

—

​

 

—

​

 

2,661

Included in OCI

​

 

—

​

 

(15,048)

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(15,048)

Purchases / Originations

​

​

746,880

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

​

746,880

Sales

​

 

(751,746)

​

 

—

​

 

(7,940)

​

 

—

​

 

—

​

 

—

​

 

(759,686)

Issuances

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(24,376)

​

 

(24,376)

Cash repayments / receipts

​

​

(67,397)

​

 

(6,549)

​

 

(371)

​

 

—

​

 

—

​

 

(8,916)

​

 

(83,233)

Transfers into Level III

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(101,265)

​

 

(101,265)

Transfers out of Level III

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

1,090,325

​

 

1,090,325

Consolidation of VIEs

​

 

—

​

 

—

​

 

—

​

 

—

​

 

2,477,422

​

 

(71,095)

​

 

2,406,327

March 31, 2020 balance

​

$

1,347,797

​

$

170,640

​

$

22,435

​

$

16,524

​

$

61,157,805

​

$

(1,506,437)

​

$

61,208,764

Amount of unrealized (losses) gains attributable to assets still held at March 31, 2020:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Included in earnings

​

$

(39,070)

​

$

2,661

​

$

(647)

​

$

(393)

​

$

(3,506,792)

​

$

146,282

​

$

(3,397,959)

Included in OCI

​

$

—

​

$

(15,048)

​

$

—

​

$

—

​

$

—

​

$

—

​

$

(15,048)

53
​Table of Contents

Nine Months Ended September 30, 2021Loans at
Fair Value		RMBSCMBSDomestic
Servicing
Rights		VIE AssetsVIE
Liabilities		Total
January 1, 2021 balance$1,022,979 $167,349 $19,457 $13,202 $64,238,328 $(2,019,876)$63,441,439 
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale68,116 — (98)2,740 (4,952,071)647,555 (4,233,758)
Net accretion— 7,800 — — — — 7,800 
Included in OCI— (3,571)— — — — (3,571)
Purchases / Originations3,151,346 — — — — — 3,151,346 
Sales(2,333,767)— — — — — (2,333,767)
Issuances— — — — — (38,715)(38,715)
Cash repayments / receipts(153,723)(22,995)(1,540)— — (2,889)(181,147)
Transfers into Level III4,413 — — — — (2,953,709)(2,949,296)
Transfers out of Level III(384,549)— — — — 864,153 479,604 
Transfers within Level III431,401 — — — (431,401)— — 
Consolidation of VIEs— — — — 4,427,479 (1,062,558)3,364,921 
Deconsolidation of VIEs— — 5,684 — (935,855)35,450 (894,721)
September 30, 2021 balance$1,806,216 $148,583 $23,503 $15,942 $62,346,480 $(4,530,589)$59,810,135 
Amount of unrealized gains (losses) attributable to
    assets still held at September 30, 2021:
Included in earnings$13,234 $7,793 $1,102 $2,740 $(4,952,071)$647,555 $(4,279,647)
Included in OCI$— $(3,563)$— $— $— $— $(3,563)
Nine Months Ended September 30, 2020Loans at
Fair Value		RMBSCMBSDomestic
Servicing
Rights		VIE AssetsVIE
Liabilities		Total
January 1, 2020 balance$1,436,194 $189,576 $25,008 $16,917 $62,187,175 $(2,537,392)$61,317,478 
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale79,700 — 5,331 (2,328)(1,291,705)107,019 (1,101,983)
Net accretion— 7,967 — — — — 7,967 
Included in OCI— (8,647)— — — — (8,647)
Purchases / Originations1,900,738 — — — — — 1,900,738 
Sales(1,998,255)— (7,940)— — — (2,006,195)
Issuances— — — — — (24,376)(24,376)
Cash repayments / receipts(149,297)(18,626)(777)— — (9,589)(178,289)
Transfers into Level III— — — — — (1,242,539)(1,242,539)
Transfers out of Level III— — — — — 1,455,093 1,455,093 
Consolidation of VIEs— — — — 3,589,657 (71,095)3,518,562 
Deconsolidation of VIEs— — 227 — (7,652)7,573 148 
September 30, 2020 balance$1,269,080 $170,270 $21,849 $14,589 $64,477,475 $(2,315,306)$63,637,957 
Amount of unrealized gains (losses) attributable to
    assets still held at September 30, 2020:
Included in earnings$8,551 $7,967 $(1,055)$(2,328)$(1,213,498)$107,019 $(1,093,344)
Included in OCI$— $(8,647)$— $— $— $— $(8,647)
Amounts were transferred from Level II to Level III due to a decrease in the observable relevant market activity and amounts were transferred from Level III to Level II due to an increase in the observable relevant market activity.

54
​Table of Contents

The following table presents the fair values of our financial instruments not carried at fair value on the condensed consolidated balance sheets (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

March 31, 2021

​

December 31, 2020

​

   

Carrying

   

Fair

​

Carrying

  

Fair

​

​

Value

​

Value

​

Value

​

Value

Financial assets not carried at fair value:

​

​

​

​

​

​

​

​

​

​

​

​

Loans held-for-investment and loans held-for-sale

​

$

12,402,351

​

$

12,460,388

​

$

11,116,929

​

$

11,107,316

HTM debt securities

​

 

488,075

​

 

466,687

​

 

538,605

​

 

515,253

Financial liabilities not carried at fair value:

​

​

​

​

​

​

​

​

​

​

​

​

Secured financing agreements and CLO

​

$

11,827,110

​

$

11,900,381

​

$

11,076,744

​

$

11,108,364

Unsecured senior notes

​

 

1,735,658

​

 

1,803,224

​

 

1,732,520

​

 

1,786,667

​

51

September 30, 2021December 31, 2020
Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Financial assets not carried at fair value:
Loans held-for-investment and loans held-for-sale$13,285,752 $13,355,441 $11,116,929 $11,107,316 
HTM debt securities486,734 467,157 538,605 515,253 
Financial liabilities not carried at fair value:
Secured financing agreements, CLOs and SASB$14,116,282 $14,220,699 $11,076,744 $11,108,364 
Unsecured senior notes1,733,684 1,805,826 1,732,520 1,786,667 

Table of Contents

The following is quantitative information about significant unobservable inputs in our Level III measurements for those assets and liabilities measured at fair value on a recurring basis (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Carrying Value at

​

Valuation

​

Unobservable

​

Range (Weighted Average) as of (1)

​

 

March 31, 2021

  

Technique

  

Input

​

March 31, 2021

​

December 31, 2020

Loans under fair value option

​

$

763,773

​

Discounted cash flow, market pricing

​

Coupon (d)

​

3.4% - 9.5% (5.5%)

​

3.3% - 9.7% (5.9%)

​

​

​

​

​

​

​

Remaining contractual term (d)

​

7.0 - 39.0 years (24.7 years)

​

7.3 - 39.3 years (26.3 years)

​

​

​

​

​

​

​

FICO score (a)

​

519 - 823 (732)

​

519 - 823 (727)

​

​

​

​

​

​

​

LTV (b)

​

15% - 94% (66%)

​

5% - 94% (68%)

​

​

​

​

​

​

​

Purchase price (d)

​

85.6% - 104.8% (101.7%)

​

84.4% - 104.8% (99.8%)

RMBS

​

 

160,301

​

Discounted cash flow

​

Constant prepayment rate (a)

​

3.5% - 17.3% (7.4%) 

​

3.6% - 19.4% (7.6%) 

​

​

​

​

​

​

​

Constant default rate (b)

​

0.7% - 5.0% (2.2%)

​

0.7% - 5.4% (2.4%)

​

​

​

​

​

​

​

Loss severity (b)

​

0% - 84% (17%) (f) 

​

0% - 85% (20%) (f) 

​

​

​

​

​

​

​

Delinquency rate (c)

​

9% - 32% (18%) 

​

10% - 32% (19%) 

​

​

​

​

​

​

​

Servicer advances (a)

​

23% - 84% (53%) 

​

23% - 82% (54%) 

​

​

​

​

​

​

​

Annual coupon deterioration (b)

​

0.0% - 1.2% (0.1%)

​

0.0% - 0.9% (0.1%)

​

​

​

​

​

​

​

Putback amount per projected total collateral loss (e)

​

0% -17% (0.8%)  

​

0% -17% (0.8%)  

CMBS

​

 

19,256

​

Discounted cash flow

​

Yield (b)

​

0% - 298.5% (5.9%) 

​

0% - 536.6% (7.1%) 

​

​

​

​

​

​

​

Duration (c)

​

0 - 7.6 years (6.0 years)

​

0 - 7.6 years (5.3 years)

Domestic servicing rights

​

 

12,406

​

Discounted cash flow

​

Debt yield (a)

​

7.25% (7.25%) 

​

7.50% (7.50%) 

​

​

​

​

​

​

​

Discount rate (b)

​

15% (15%) 

​

15% (15%) 

VIE assets

​

 

62,367,110

​

Discounted cash flow

​

Yield (b)

​

0% - 752.4% (16.9%)

​

0% - 312.2% (14.3%)

​

​

​

​

​

​

​

Duration (c)

​

0 - 20.6 years (3.8 years)

​

0 - 16.3 years (3.8 years)

VIE liabilities

​

 

(2,227,428)

​

Discounted cash flow

​

Yield (b)

​

0% - 752.4% (17.3%)

​

0% - 312.2% (14.4%)

​

​

​

​

​

​

​

Duration (c)

​

0 - 11.0 years (3.7 years)

​

0 - 10.8 years (3.8 years)

(1)
Carrying Value at
September 30, 2021
Valuation
Technique		Unobservable inputs were weighted by the relative carrying value of the instruments
Input		Range (Weighted Average) as of March 31,(1)
September 30, 2021 and December 31, 2020.2020
Loans under fair value option$1,806,216 Discounted cash flow, market pricingCoupon (d)3.3% - 6.1% (4.4%)3.3% - 9.7% (5.9%)
Remaining contractual term (d)5.0 - 39.9 years - (29.0 years)7.3 - 39.3 years (26.3 years)
FICO score (a)582 - 823 (746)519 - 823 (727)
LTV (b)7% - 94% (67%)5% - 94% (68%)
Purchase price (d)80.0% - 106.8% (99.4%)84.4% - 104.8% (99.8%)
RMBS148,583 Discounted cash flowConstant prepayment rate (a)4.1% - 17.3% (8.8%)3.6% - 19.4% (7.6%)
Constant default rate (b)0.5% - 5.2% (2.2%)0.7% - 5.4% (2.4%)
Loss severity (b)0% - 83% (11%) (f)0% - 85% (20%) (f)
Delinquency rate (c)7% - 35% (19%)10% - 32% (19%)
Servicer advances (a)21% - 83% (52%)23% - 82% (54%)
Annual coupon deterioration (b)0% - 1.5% (0.1%)0% - 0.9% (0.1%)
Putback amount per projected total collateral loss (e)0% - 8% (0.4%)0% - 17% (0.8%)
CMBS23,503 Discounted cash flowYield (b)0% - 301.3% (8.5%)0% - 536.6% (7.1%)
Duration (c)0 - 8.0 years (5.3 years)0 - 7.6 years (5.3 years)
Domestic servicing rights15,942 Discounted cash flowDebt yield (a)7.25% (7.25%)7.50% (7.50%)
Discount rate (b)15% (15%)15% (15%)
VIE assets62,346,480 Discounted cash flowYield (b)0% - 340.7% (12.1%)0% - 312.2% (14.3%)
Duration (c)0 - 19.1 years (3.3 years)0 - 16.3 years (3.8 years)
VIE liabilities4,530,589 Discounted cash flowYield (b)0% - 340.7% (6.3%)0% - 312.2% (14.4%)
Duration (c)0 - 13.4 years (2.6 years)0 - 10.8 years (3.8 years)

​(1)

Unobservable inputs were weighted by the relative carrying value of the instruments as of September 30, 2021 and December 31, 2020.

Information about Uncertainty of Fair Value Measurements

​

(a)Significant increase (decrease) in the unobservable input in isolation would result in a significantly higher (lower) fair value measurement.
(b)Significant increase (decrease) in the unobservable input in isolation would result in a significantly lower (higher) fair value measurement.
(c)Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (higher or lower) fair value measurement depending on the structural features of the security in question.
(d)This unobservable input is not subject to variability as of the respective reporting dates.
(e)Any delay in the putback recovery date leads to a decrease in fair value for the majority of securities in our RMBS portfolio.
(f)14% and 23% of the portfolio falls within a range of 45% - 80% as of March 31,
(a)Significant increase (decrease) in the unobservable input in isolation would result in a significantly higher (lower) fair value measurement.
(b)Significant increase (decrease) in the unobservable input in isolation would result in a significantly lower (higher) fair value measurement.
(c)Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (higher or lower) fair value measurement depending on the structural features of the security in question.
(d)This unobservable input is not subject to variability as of the respective reporting dates.
(e)Any delay in the putback recovery date leads to a decrease in fair value for the majority of securities in our RMBS portfolio.
55
(f)9% and 23% of the portfolio falls within a range of 45% - 80% as of September 30, 2021 and December 31, 2020, respectively.

​

​

​

52

Table of Contents

20. Income Taxes

​

Certain of our domestic subsidiaries have elected to be treated as taxable REIT subsidiaries (“TRSs”). TRSs permit us to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Code and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, we will continue to maintain our qualification as a REIT.

​

Our TRSs engage in various real estate related operations, including special servicing of commercial real estate, originating and securitizing mortgage loans, and investing in entities which engage in real estate-related operations. As of March 31,September 30, 2021 and December 31, 2020, approximately $959.6 million$2.5 billion and $1.4 billion, respectively, of assets were owned by TRS entities. Our TRSs are not consolidated for U.S. federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earnings recognized by us with respect to our interest in TRSs.

​

The following table is a reconciliation of our U.S. federal income tax provision (benefit) determined using our statutory federal tax rate to our reported income tax (benefit) provision for the three and nine months ended March 31,September 30, 2021 and 2020 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

For the Three Months Ended March 31,

​

​

2021

​

2020

Federal statutory tax rate

​

$

26,199

  

21.0

%

  

$

(15,329)

  

21.0

%

REIT and other non-taxable loss

​

 

(24,501)

​

(19.6)

%

​

 

9,914

​

(13.6)

%

State income taxes

​

 

558

​

0.4

%

​

 

(1,779)

​

2.4

%

Federal benefit of state tax deduction

​

 

(117)

​

(0.1)

%

​

 

374

​

(0.5)

%

Other

​

 

91

​

0.1

%

​

 

91

​

(0.1)

%

Effective tax rate

​

$

2,230

​

1.8

%

​

$

(6,729)

​

9.2

%

​

​

For the Three Months Ended September 30,For the Nine Months Ended September 30,
2021202020212020
Federal statutory tax rate$31,078 21.0 %$37,711 21.0 %$83,113 21.0 %$54,231 21.0 %
REIT and other non-taxable loss(24,527)(16.6)%(24,688)(13.7)%(73,046)(18.5)%(41,697)(16.2)%
State income taxes2,153 1.5 %4,278 2.4 %3,308 0.8 %4,118 1.6 %
Federal benefit of state tax deduction(452)(0.3)%(899)(0.5)%(695)(0.2)%(865)(0.3)%
Net operating loss carryback rate differential— — %(1,569)(0.9)%— — %(5,286)(2.0)%
Intra-entity transfers(312)(0.2)%— — %(6,364)(1.5)%(3,781)(1.5)%
Other(439)(0.3)%10 — %62 — %96 — %
Effective tax rate$7,501 5.1 %$14,843 8.3 %$6,378 1.6 %$6,816 2.6 %
In response to the COVID-19 pandemic, the U.S. and many other governments have enacted, or are contemplating enacting, measures to provide aid and economic stimulus.  These measures included deferring the due dates of tax payments and other changes to their income and non-income-based tax laws.  The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020 in the U.S., included measures to assist companies, including temporary changes to income and non-income-based tax laws, and allowed companies to carry back tax net operating losses (“NOLs”) generated in 2018 to 2020 to the five preceding tax years. The Company plans to carry back its NOL generated in 2020 to a year in which the federal tax rate was 35%35%. We continue to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.

​

The Company used the discrete tax approach in calculating the tax benefitprovision for the three and nine months ended March 31,September 30, 2020 due to the fact that a relatively small change in the Company’s projected pre-tax net lossincome could have resulted in a volatile effective tax rate. Under the discrete method, the tax benefitprovision was determined based upon actual results as if the interim period was an annual period.

​

​

​

​

53

56

TableTable of Contents

21. Commitments and Contingencies

Contingencies​

As of March 31,September 30, 2021, our Commercial and Residential Lending Segment had future commercial loan funding commitments totaling $1.5$1.6 billion, of which we expect to fund $1.3$1.4 billion. These future funding commitments primarily relate to construction projects, capital improvements, tenant improvements and leasing commissions. Additionally, as of March 31,September 30, 2021, our Commercial and Residential Lending Segment had outstanding residential mortgage loan purchase commitments of $82.7$877.7 million.

​

As of March 31,September 30, 2021, our Infrastructure Lending Segment had future infrastructure loan funding commitments totaling $192.5$150.4 million, including $126.7$118.3 million under revolvers and letters of credit (“LCs”), and $65.8$32.1 million under delayed draw term loans. As of March 31,September 30, 2021, $15.6$13.5 million of revolvers and LCs were outstanding.

​

In connection with the Infrastructure Lending Segment acquisition, we assumed guarantees of certain borrowers’ performance under existing interest rate swaps. As of March 31,September 30, 2021, we had 65 outstanding guarantees on interest rate swaps maturing between MarchMay 2022 and June 2025. Refer to Note 12 for further discussion.

​

Generally, funding commitments are subject to certain conditions that must be met, such as customary construction draw certifications, minimum debt service coverage ratios or executions of new leases before advances are made to the borrower.

​

Management is not aware of any other contractual obligations, legal proceedings, or any other contingent obligations incurred in the normal course of business that would have a material adverse effect on our condensed consolidated financial statements.


​

​

​

​

​

54

57

TableTable of Contents

22. Segment Data

Data

​

In its operation of the business, management, including our chief operating decision maker, who is our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis prior to the impact of consolidating securitization VIEs under ASC 810. The segment information within this Note is reported on that basis.

​

The table below presents our results of operations for the three months ended March 31,September 30, 2021 by business segment (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential

​

Infrastructure

​

​

​

Investing

​

​

​

​

​

​

​

​

​

​

Lending

​

Lending

​

Property

​

and Servicing

​

​

​

​

​

Securitization

​

​

​

​

Segment

​

Segment

​

Segment

​

Segment

​

Corporate

​

Subtotal

​

VIEs

​

Total

Revenues:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest income from loans

​

$

170,593

​

$

18,808

​

$

—

​

$

1,174

​

$

—

​

$

190,575

​

$

—

​

$

190,575

Interest income from investment securities

​

 

18,385

​

 

564

​

 

—

​

 

20,940

​

​

—

​

 

39,889

​

 

(28,279)

​

 

11,610

Servicing fees

​

 

124

​

 

—

​

 

—

​

 

12,456

​

​

—

​

 

12,580

​

 

(4,178)

​

 

8,402

Rental income

​

​

1,339

​

​

—

​

​

65,104

​

​

9,895

​

​

—

​

​

76,338

​

​

—

​

​

76,338

Other revenues

​

 

90

​

 

93

​

 

40

​

 

82

​

​

—

​

 

305

​

 

—

​

 

305

Total revenues

​

 

190,531

​

 

19,465

​

 

65,144

​

 

44,547

​

 

—

​

 

319,687

​

 

(32,457)

​

 

287,230

Costs and expenses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Management fees

​

 

315

​

 

—

​

 

—

​

 

222

​

 

38,188

​

 

38,725

​

 

11

​

 

38,736

Interest expense

​

 

44,295

​

 

8,841

​

 

15,832

​

 

5,449

​

​

29,148

​

 

103,565

​

 

(191)

​

 

103,374

General and administrative

​

 

11,333

​

 

3,442

​

 

1,023

​

 

18,440

​

​

4,311

​

 

38,549

​

 

87

​

 

38,636

Acquisition and investment pursuit costs

​

 

185

​

 

—

​

 

—

​

 

—

​

​

—

​

 

185

​

 

—

​

 

185

Costs of rental operations

​

​

477

​

​

—

​

​

23,960

​

​

4,308

​

​

—

​

​

28,745

​

​

—

​

​

28,745

Depreciation and amortization

​

 

307

​

 

100

​

 

18,100

​

 

3,967

​

​

—

​

 

22,474

​

 

—

​

 

22,474

Credit loss (reversal) provision, net

​

 

(529)

​

 

573

​

 

—

​

 

—

​

​

—

​

 

44

​

 

—

​

 

44

Other expense

​

 

31

​

 

—

​

 

583

​

 

71

​

​

—

​

 

685

​

 

—

​

 

685

Total costs and expenses

​

 

56,414

​

 

12,956

​

 

59,498

​

 

32,457

​

​

71,647

​

 

232,972

​

 

(93)

​

 

232,879

Other income (loss):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Change in net assets related to consolidated VIEs

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

39,745

​

 

39,745

Change in fair value of servicing rights

​

 

—

​

 

—

​

 

—

​

 

745

​

​

—

​

 

745

​

 

(1,541)

​

 

(796)

Change in fair value of investment securities, net

​

 

(2,050)

​

 

—

​

 

—

​

 

7,170

​

​

—

​

 

5,120

​

 

(5,426)

​

 

(306)

Change in fair value of mortgage loans, net

​

 

(10,714)

​

 

—

​

 

—

​

 

1,236

​

​

—

​

 

(9,478)

​

 

—

​

 

(9,478)

Earnings (loss) from unconsolidated entities

​

 

1,753

​

 

(254)

​

 

—

​

 

589

​

​

—

​

 

2,088

​

 

(354)

​

 

1,734

Gain on sale of investments and other assets, net

​

 

17,693

​

 

—

​

 

—

​

 

—

​

​

—

​

 

17,693

​

 

—

​

 

17,693

Gain (loss) on derivative financial instruments, net

​

 

26,141

​

 

684

​

 

4,724

​

 

9,283

​

​

(6,843)

​

 

33,989

​

 

—

​

 

33,989

Foreign currency (loss) gain, net

​

 

(11,594)

​

 

(49)

​

 

25

​

 

(63)

​

​

—

​

 

(11,681)

​

 

—

​

 

(11,681)

Loss on extinguishment of debt

​

​

(68)

​

​

(307)

​

​

(141)

​

​

—

​

​

—

​

​

(516)

​

​

—

​

​

(516)

Other income, net

​

 

—

​

 

21

​

 

—

​

 

—

​

​

—

​

 

21

​

 

—

​

 

21

Total other income (loss)

​

 

21,161

​

 

95

​

 

4,608

​

 

18,960

​

​

(6,843)

​

 

37,981

​

 

32,424

​

 

70,405

Income (loss) before income taxes

​

 

155,278

​

 

6,604

​

 

10,254

​

 

31,050

​

​

(78,490)

​

 

124,696

​

 

60

​

 

124,756

Income tax provision

​

 

(1,505)

​

 

(92)

​

 

—

​

 

(633)

​

​

—

​

 

(2,230)

​

 

—

​

 

(2,230)

Net income (loss)

​

 

153,773

​

 

6,512

​

 

10,254

​

 

30,417

​

​

(78,490)

​

 

122,466

​

 

60

​

 

122,526

Net income attributable to non-controlling interests

​

 

(3)

​

 

—

​

 

(5,077)

​

 

(6,008)

​

​

—

​

 

(11,088)

​

 

(60)

​

 

(11,148)

Net income (loss) attributable to Starwood Property Trust, Inc.

​

$

153,770

​

$

6,512

​

$

5,177

​

$

24,409

​

$

(78,490)

​

$

111,378

​

$

—

​

$

111,378

​

55

Commercial and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateSubtotalSecuritization
VIEs		Total
Revenues:
Interest income from loans$179,486 $21,566 $— $2,200 $— $203,252 $— $203,252 
Interest income from investment securities16,043 540 — 25,140 — 41,723 (31,026)10,697 
Servicing fees99 — — 15,447 — 15,546 (5,073)10,473 
Rental income1,358 — 66,673 9,481 — 77,512 — 77,512 
Other revenues59 66 54 173 — 352 — 352 
Total revenues197,045 22,172 66,727 52,441 — 338,385 (36,099)302,286 
Costs and expenses:
Management fees286 — — (1,239)24,680 23,727 — 23,727 
Interest expense52,066 9,381 17,002 5,652 31,651 115,752 (221)115,531 
General and administrative9,178 3,307 913 21,022 4,372 38,792 72 38,864 
Acquisition and investment pursuit costs158 — — 56 — 214 — 214 
Costs of rental operations438 — 26,634 4,444 — 31,516 — 31,516 
Depreciation and amortization312 101 17,882 3,746 — 22,041 — 22,041 
Credit loss provision (reversal), net19 (582)— — — (563)— (563)
Other expense— — — 23 — 23 — 23 
Total costs and expenses62,457 12,207 62,431 33,704 60,703 231,502 (149)231,353 
Other income (loss):
Change in net assets related to consolidated VIEs— — — — — — 28,049 28,049 
Change in fair value of servicing rights— — — (410)— (410)2,647 2,237 
Change in fair value of investment securities, net(8,682)— — 2,870 — (5,812)5,513 (299)
Change in fair value of mortgage loans, net22,464 — — 9,263 — 31,727 — 31,727 
Earnings (loss) from unconsolidated entities1,666 399 — 153 — 2,218 (176)2,042 
Loss on sale of investments and other assets, net(47)— — — — (47)— (47)
Gain (loss) on derivative financial instruments, net38,016 87 (318)3,992 35 41,812 — 41,812 
Foreign currency (loss) gain, net(26,820)(168)(16)1 — (27,003)— (27,003)
Loss on extinguishment of debt— (18)— — (481)(499)— (499)
Other loss, net(964)— — — — (964)— (964)
Total other income (loss)25,633 300 (334)15,869 (446)41,022 36,033 77,055 
Income (loss) before income taxes160,221 10,265 3,962 34,606 (61,149)147,905 83 147,988 
Income tax (provision) benefit(5,652)488 — (2,337)— (7,501)— (7,501)
Net income (loss)154,569 10,753 3,962 32,269 (61,149)140,404 83 140,487 
Net income attributable to non-controlling interests(3)— (4,691)(7,108)— (11,802)(83)(11,885)
Net income (loss) attributable to Starwood Property Trust, Inc.
$154,566 $10,753 $(729)$25,161 $(61,149)$128,602 $— $128,602 
58
Table of Contents

Table of Contents

The table below presents our results of operations for the three months ended March 31,September 30, 2020 by business segment (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential

​

Infrastructure

​

​

​

Investing

​

​

​

​

​

​

​

​

​

​

Lending

​

Lending

​

Property

​

and Servicing

​

​

​

​

​

Securitization

​

​

​

​

Segment

​

Segment

​

Segment

​

Segment

​

Corporate

​

Subtotal

​

VIEs

​

Total

Revenues:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest income from loans

​

$

192,381

​

$

22,413

​

$

—

​

$

2,633

​

$

—

​

$

217,427

​

$

—

​

$

217,427

Interest income from investment securities

​

 

18,628

​

​

701

​

 

—

​

 

24,800

​

​

—

​

 

44,129

​

 

(28,889)

​

 

15,240

Servicing fees

​

 

172

​

​

—

​

 

—

​

 

6,442

​

​

—

​

 

6,614

​

 

(1,821)

​

 

4,793

Rental income

​

​

78

​

​

—

​

​

63,961

​

​

10,107

​

​

—

​

 

74,146

​

 

—

​

 

74,146

Other revenues

​

 

178

​

​

143

​

 

122

​

 

513

​

​

—

​

 

956

​

 

(2)

​

 

954

Total revenues

​

 

211,437

​

​

23,257

​

 

64,083

​

 

44,495

​

 

—

​

 

343,272

​

 

(30,712)

​

 

312,560

Costs and expenses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Management fees

​

 

351

​

​

—

​

 

—

​

 

239

​

 

40,107

​

 

40,697

​

 

31

​

 

40,728

Interest expense

​

 

53,950

​

​

13,117

​

 

17,121

​

 

7,194

​

​

28,805

​

 

120,187

​

 

(162)

​

 

120,025

General and administrative

​

 

8,132

​

​

4,423

​

 

1,078

​

 

20,684

​

​

4,301

​

 

38,618

​

 

84

​

 

38,702

Acquisition and investment pursuit costs

​

 

860

​

​

17

​

 

12

​

 

20

​

​

—

​

 

909

​

 

—

​

 

909

Costs of rental operations

​

​

778

​

​

—

​

​

22,852

​

​

4,584

​

​

—

​

 

28,214

​

 

—

​

 

28,214

Depreciation and amortization

​

 

415

​

​

70

​

 

19,288

​

 

4,207

​

​

—

​

 

23,980

​

 

—

​

 

23,980

Credit loss provision, net

​

 

40,217

​

​

8,452

​

 

—

​

 

—

​

​

—

​

 

48,669

​

 

—

​

 

48,669

Other expense

​

 

77

​

​

—

​

 

311

​

 

—

​

​

—

​

 

388

​

 

—

​

 

388

Total costs and expenses

​

 

104,780

​

​

26,079

​

 

60,662

​

 

36,928

​

​

73,213

​

 

301,662

​

 

(47)

​

 

301,615

Other income (loss):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Change in net assets related to consolidated VIEs

​

 

—

​

​

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(45,493)

​

 

(45,493)

Change in fair value of servicing rights

​

 

—

​

​

—

​

 

—

​

 

318

​

​

—

​

 

318

​

 

(711)

​

 

(393)

Change in fair value of investment securities, net

​

 

(27,879)

​

​

—

​

 

—

​

 

(47,216)

​

​

—

​

 

(75,095)

​

 

77,599

​

 

2,504

Change in fair value of mortgage loans, net

​

 

(35,517)

​

​

—

​

 

—

​

 

19,383

​

​

—

​

 

(16,134)

​

 

—

​

 

(16,134)

Earnings (loss) from unconsolidated entities

​

 

51

​

​

—

​

 

—

​

 

620

​

​

—

​

 

671

​

 

(574)

​

 

97

Gain on sale of investments and other assets, net

​

 

—

​

​

296

​

 

—

​

 

—

​

​

—

​

 

296

​

 

—

​

 

296

Gain (loss) on derivative financial instruments, net

​

 

30,805

​

​

(1,001)

​

 

(30,223)

​

 

(19,106)

​

​

29,235

​

 

9,710

​

 

—

​

 

9,710

Foreign currency (loss) gain, net

​

 

(34,001)

​

​

(473)

​

 

(19)

​

 

7

​

​

—

​

 

(34,486)

​

 

—

​

 

(34,486)

Loss on extinguishment of debt

​

​

—

​

​

(170)

​

​

—

​

​

—

​

​

—

​

​

(170)

​

​

—

​

​

(170)

Other income, net

​

 

—

​

​

—

​

 

50

​

 

76

​

​

—

​

 

126

​

 

—

​

 

126

Total other income (loss)

​

 

(66,541)

​

​

(1,348)

​

 

(30,192)

​

 

(45,918)

​

​

29,235

​

 

(114,764)

​

 

30,821

​

 

(83,943)

Income (loss) before income taxes

​

 

40,116

​

​

(4,170)

​

 

(26,771)

​

 

(38,351)

​

​

(43,978)

​

​

(73,154)

​

 

156

​

 

(72,998)

Income tax benefit

​

 

4,422

​

​

145

​

​

—

​

 

2,162

​

​

—

​

 

6,729

​

 

—

​

 

6,729

Net income (loss)

​

 

44,538

​

​

(4,025)

​

 

(26,771)

​

 

(36,189)

​

​

(43,978)

​

 

(66,425)

​

 

156

​

 

(66,269)

Net (income) loss attributable to non-controlling interests

​

 

(3)

​

​

—

​

 

(5,111)

​

 

4,770

​

​

—

​

 

(344)

​

 

(156)

​

 

(500)

Net income (loss) attributable to Starwood Property Trust, Inc.

​

$

44,535

​

$

(4,025)

​

$

(31,882)

​

$

(31,419)

​

$

(43,978)

​

$

(66,769)

​

$

—

​

$

(66,769)

​

​

56

Commercial and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateSubtotalSecuritization
VIEs		Total
Revenues:
Interest income from loans$149,972 $17,835 $— $1,597 $— $169,404 $— $169,404 
Interest income from investment securities21,385 635 — 23,587 — 45,607 (33,421)12,186 
Servicing fees110 — — 13,749 — 13,859 (4,311)9,548 
Rental income2,014 — 63,925 10,039 — 75,978 — 75,978 
Other revenues66 101 48 98 — 313 (2)311 
Total revenues173,547 18,571 63,973 49,070 — 305,161 (37,734)267,427 
Costs and expenses:
Management fees297 — — 221 22,596 23,114 13 23,127 
Interest expense38,422 8,914 16,180 5,425 27,040 95,981 — 95,981 
General and administrative12,483 3,568 1,094 18,813 3,436 39,394 84 39,478 
Acquisition and investment pursuit costs757 62 — 65 — 884 — 884 
Costs of rental operations643 — 24,302 4,577 — 29,522 — 29,522 
Depreciation and amortization430 87 19,130 3,934 — 23,581 — 23,581 
Credit loss provision (reversal), net782 (4,369)— — — (3,587)— (3,587)
Other expense77 — 95 — — 172 — 172 
Total costs and expenses53,891 8,262 60,801 33,035 53,072 209,061 97 209,158 
Other income (loss):
Change in net assets related to consolidated VIEs— — — — — — 58,585 58,585 
Change in fair value of servicing rights— — — 3,960 — 3,960 (3,326)634 
Change in fair value of investment securities, net13,611 — — 3,249 — 16,860 (17,059)(199)
Change in fair value of mortgage loans, net59,402 — — 1,982 — 61,384 — 61,384 
Earnings (loss) from unconsolidated entities3,253 (80)— 358 — 3,531 (339)3,192 
(Loss) gain on derivative financial instruments, net(28,577)110 (313)38 645 (28,097)— (28,097)
Foreign currency gain, net25,302 110 14 26 — 25,452 — 25,452 
Other (loss) income, net— — (1)358 — 357 — 357 
Total other income (loss)72,991 140 (300)9,971 645 83,447 37,861 121,308 
Income (loss) before income taxes192,647 10,449 2,872 26,006 (52,427)179,547 30 179,577 
Income tax (provision) benefit(16,700)(86)— 1,943 — (14,843)— (14,843)
Net income (loss)175,947 10,363 2,872 27,949 (52,427)164,704 30 164,734 
Net income attributable to non-controlling interests(3)— (5,072)(7,795)— (12,870)(30)(12,900)
Net income (loss) attributable to Starwood Property Trust, Inc.
$175,944 $10,363 $(2,200)$20,154 $(52,427)$151,834 $— $151,834 
59
Table of Contents
The table below presents our results of operations for the nine months ended September 30, 2021 by business segment (amounts in thousands):
Commercial and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateSubtotalSecuritization
VIEs		Total
Revenues:
Interest income from loans$515,776 $61,545 $— $5,778 $— $583,099 $— $583,099 
Interest income from investment securities51,618 1,659 — 71,748 — 125,025 (92,070)32,955 
Servicing fees333 — — 44,268 — 44,601 (14,862)29,739 
Rental income4,116 — 197,187 29,666 — 230,969 — 230,969 
Other revenues223 228 138 3,032 — 3,621 — 3,621 
Total revenues572,066 63,432 197,325 154,492 — 987,315 (106,932)880,383 
Costs and expenses:
Management fees901 — — (793)91,584 91,692 21 91,713 
Interest expense144,717 27,916 49,697 16,890 89,970 329,190 (632)328,558 
General and administrative30,922 10,281 2,964 65,182 13,172 122,521 244 122,765 
Acquisition and investment pursuit costs522 249 — 35 — 806 — 806 
Costs of rental operations1,348 — 76,516 13,128 — 90,992 — 90,992 
Depreciation and amortization930 301 53,883 11,878 — 66,992 — 66,992 
Credit loss (reversal) provision, net(12,957)594 — — — (12,363)— (12,363)
Other expense31 — 583 94 — 708 — 708 
Total costs and expenses166,414 39,341 183,643 106,414 194,726 690,538 (367)690,171 
Other income (loss):
Change in net assets related to consolidated VIEs— — — — — — 80,303 80,303 
Change in fair value of servicing rights— — — 795 — 795 1,945 2,740 
Change in fair value of investment securities, net(20,134)— — (2,545)— (22,679)23,582 903 
Change in fair value of mortgage loans, net24,079 — — 44,037 — 68,116 — 68,116 
Earnings from unconsolidated entities5,415 75 — 235 — 5,725 277 6,002 
Gain on sale of investments and other assets, net16,627 27 — 9,723 — 26,377 — 26,377 
Gain (loss) on derivative financial instruments, net59,212 883 4,034 7,544 (5,881)65,792 — 65,792 
Foreign currency loss, net(35,699)(279)(16)(63)— (36,057)— (36,057)
Loss on extinguishment of debt(289)(1,264)(141)(22)(481)(2,197)— (2,197)
Other (loss) income, net(6,468)23 — 29 — (6,416)— (6,416)
Total other income (loss)42,743 (535)3,877 59,733 (6,362)99,456 106,107 205,563 
Income (loss) before income taxes448,395 23,556 17,559 107,811 (201,088)396,233 (458)395,775 
Income tax benefit (provision)886 338 — (7,602)— (6,378)— (6,378)
Net income (loss)449,281 23,894 17,559 100,209 (201,088)389,855 (458)389,397 
Net (income) loss attributable to non-controlling interests(10)— (14,682)(18,873)— (33,565)458 (33,107)
Net income (loss) attributable to Starwood Property Trust, Inc.
$449,271 $23,894 $2,877 $81,336 $(201,088)$356,290 $— $356,290 





60
Table of Contents
The table below presents our results of operations for the nine months ended September 30, 2020 by business segment (amounts in thousands):
Commercial and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateSubtotalSecuritization
VIEs		Total
Revenues:
Interest income from loans$492,489 $59,374 $— $6,071 $— $557,934 $— $557,934 
Interest income from investment securities57,358 2,019 — 73,311 — 132,688 (90,618)42,070 
Servicing fees424 — — 28,782 — 29,206 (8,207)20,999 
Rental income2,782 — 191,452 28,600 — 222,834 — 222,834 
Other revenues298 344 228 891 — 1,761 (5)1,756 
Total revenues553,351 61,737 191,680 137,655 — 944,423 (98,830)845,593 
Costs and expenses:
Management fees987 — — 680 85,257 86,924 46 86,970 
Interest expense134,243 31,709 49,243 18,796 83,670 317,661 (162)317,499 
General and administrative29,230 12,328 3,453 54,490 11,105 110,606 251 110,857 
Acquisition and investment pursuit costs2,195 1,179 12 (3)— 3,383 — 3,383 
Costs of rental operations2,409 — 71,857 13,102 — 87,368 — 87,368 
Depreciation and amortization1,275 246 57,571 11,890 — 70,982 — 70,982 
Credit loss provision, net52,293 2,991 — — — 55,284 — 55,284 
Other expense230 — 432 — — 662 — 662 
Total costs and expenses222,862 48,453 182,568 98,955 180,032 732,870 135 733,005 
Other income (loss):
Change in net assets related to consolidated VIEs— — — — — — 64,353 64,353 
Change in fair value of servicing rights— — — 9,606 — 9,606 (11,934)(2,328)
Change in fair value of investment securities, net(8,814)— — (36,026)— (44,840)47,972 3,132 
Change in fair value of mortgage loans, net56,895 — — 22,805 — 79,700 — 79,700 
Earnings (loss) from unconsolidated entities3,975 (1,198)— 30,504 — 33,281 (1,216)32,065 
(Loss) gain on sale of investments and other assets, net(961)296 — 7,433 — 6,768 — 6,768 
(Loss) gain on derivative financial instruments, net(9,508)(1,328)(35,150)(22,896)34,397 (34,485)— (34,485)
Foreign currency (loss) gain, net(1,757)(53)(53)2 — (1,861)— (1,861)
Loss on extinguishment of debt(22)(170)(2,185)— — (2,377)— (2,377)
Other income, net— — 240 447 — 687 — 687 
Total other income (loss)39,808 (2,453)(37,148)11,875 34,397 46,479 99,175 145,654 
Income (loss) before income taxes370,297 10,831 (28,036)50,575 (145,635)258,032 210 258,242 
Income tax (provision) benefit(15,535)3 — 8,716 — (6,816)— (6,816)
Net income (loss)354,762 10,834 (28,036)59,291 (145,635)251,216 210 251,426 
Net income attributable to non-controlling interests(10)— (15,294)(11,191)— (26,495)(210)(26,705)
Net income (loss) attributable to Starwood Property Trust, Inc.
$354,752 $10,834 $(43,330)$48,100 $(145,635)$224,721 $— $224,721 





61
TableTable of Contents

The table below presents our condensed consolidated balance sheet as of March 31,September 30, 2021 by business segment (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential

​

Infrastructure

​

​

​

Investing

​

​

​

​

​

​

​

​

​

​

Lending

​

Lending

​

Property

​

and Servicing

​

​

​

​

​

Securitization

​

​

​

​

Segment

​

Segment

​

Segment

​

Segment

​

Corporate

​

Subtotal

​

VIEs

​

Total

Assets:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Cash and cash equivalents

​

$

56,629

​

$

7,873

​

$

39,791

​

$

29,064

​

$

217,049

​

$

350,406

​

$

784

​

$

351,190

Restricted cash

​

 

69,882

​

 

27,973

​

 

6,672

​

 

14,197

​

 

—

​

 

118,724

​

 

—

​

 

118,724

Loans held-for-investment, net

​

 

10,733,752

​

 

1,586,808

​

 

—

​

 

933

​

 

—

​

 

12,321,493

​

 

—

​

 

12,321,493

Loans held-for-sale

​

 

587,037

​

 

89,368

​

 

—

​

 

168,226

​

 

—

​

 

844,631

​

 

—

​

 

844,631

Investment securities

​

 

969,968

​

 

34,951

​

 

—

​

 

1,106,000

​

 

—

​

 

2,110,919

​

 

(1,432,632)

​

 

678,287

Properties, net

​

​

93,718

​

​

—

​

​

1,954,880

​

​

196,150

​

​

—

​

​

2,244,748

​

​

—

​

​

2,244,748

Intangible assets

​

 

—

​

 

—

​

 

38,833

​

 

70,857

​

 

—

​

 

109,690

​

 

(42,918)

​

 

66,772

Investment in unconsolidated entities

​

 

47,514

​

 

24,840

​

 

—

​

 

44,435

​

 

—

​

 

116,789

​

 

(15,882)

​

 

100,907

Goodwill

​

 

—

​

 

119,409

​

 

—

​

 

140,437

​

 

—

​

 

259,846

​

 

—

​

 

259,846

Derivative assets

​

 

13,088

​

 

—

​

 

162

​

 

320

​

 

24,459

​

 

38,029

​

 

—

​

 

38,029

Accrued interest receivable

​

 

97,853

​

 

3,310

​

 

—

​

 

274

​

 

408

​

 

101,845

​

 

(132)

​

 

101,713

Other assets

​

 

61,677

​

 

7,107

​

 

85,740

​

 

44,719

​

 

9,646

​

 

208,889

​

 

(16)

​

 

208,873

VIE assets, at fair value

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

62,367,110

​

 

62,367,110

Total Assets

​

$

12,731,118

​

$

1,901,639

​

$

2,126,078

​

$

1,815,612

​

$

251,562

​

$

18,826,009

​

$

60,876,314

​

$

79,702,323

Liabilities and Equity

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Accounts payable, accrued expenses and other liabilities

​

$

37,206

​

$

16,010

​

$

44,184

​

$

24,110

​

$

56,614

​

$

178,124

​

$

91

​

$

178,215

Related-party payable

​

 

—

​

 

—

​

 

—

​

 

—

​

 

36,135

​

 

36,135

​

 

—

​

 

36,135

Dividends payable

​

 

—

​

 

—

​

 

—

​

 

—

​

 

138,906

​

 

138,906

​

 

—

​

 

138,906

Derivative liabilities

​

 

33,190

​

 

1,310

​

 

—

​

 

305

​

 

—

​

 

34,805

​

 

—

​

 

34,805

Secured financing agreements, net

​

 

6,502,059

​

 

1,259,813

​

 

1,871,026

​

 

653,222

​

 

631,655

​

 

10,917,775

​

 

(21,843)

​

 

10,895,932

Collateralized loan obligations, net

​

​

931,178

​

​

—

​

​

—

​

 

—

​

 

—

​

 

931,178

​

​

—

​

​

931,178

Unsecured senior notes, net

​

 

—

​

 

—

​

 

—

​

 

—

​

 

1,735,658

​

 

1,735,658

​

 

—

​

 

1,735,658

VIE liabilities, at fair value

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

60,896,709

​

 

60,896,709

Total Liabilities

​

 

7,503,633

​

 

1,277,133

​

 

1,915,210

​

 

677,637

​

 

2,598,968

​

 

13,972,581

​

 

60,874,957

​

 

74,847,538

Equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Starwood Property Trust, Inc. Stockholders’ Equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Common stock

​

 

—

​

 

—

​

 

—

​

 

—

​

 

2,943

​

 

2,943

​

 

—

​

 

2,943

Additional paid-in capital

​

 

1,074,553

​

 

599,666

​

 

25,905

​

 

(298,098)

​

 

3,823,011

​

 

5,225,037

​

 

—

​

 

5,225,037

Treasury stock

​

 

—

​

 

—

​

 

—

​

 

—

​

 

(138,022)

​

 

(138,022)

​

 

—

​

 

(138,022)

Accumulated other comprehensive income

​

 

41,654

​

 

—

​

 

—

​

 

—

​

 

—

​

 

41,654

​

 

—

​

 

41,654

Retained earnings (accumulated deficit)

​

 

4,111,160

​

 

24,840

​

 

(40,641)

​

 

1,285,229

​

 

(6,035,338)

​

 

(654,750)

​

 

—

​

 

(654,750)

Total Starwood Property Trust, Inc. Stockholders’ Equity

​

 

5,227,367

​

 

624,506

​

 

(14,736)

​

 

987,131

​

 

(2,347,406)

​

 

4,476,862

​

 

—

​

 

4,476,862

Non-controlling interests in consolidated subsidiaries

​

 

118

​

 

—

​

 

225,604

​

 

150,844

​

 

—

​

 

376,566

​

 

1,357

​

 

377,923

Total Equity

​

 

5,227,485

​

 

624,506

​

 

210,868

​

 

1,137,975

​

 

(2,347,406)

​

 

4,853,428

​

 

1,357

​

 

4,854,785

Total Liabilities and Equity

​

$

12,731,118

​

$

1,901,639

​

$

2,126,078

​

$

1,815,612

​

$

251,562

​

$

18,826,009

​

$

60,876,314

​

$

79,702,323

​

57

Commercial and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateSubtotalSecuritization
VIEs		Total
Assets:
Cash and cash equivalents$19,626 $16,695 $32,162 $29,027 $175,197 $272,707 $609 $273,316 
Restricted cash60,183 23,628 6,807 19,854 — 110,472 — 110,472 
Loans held-for-investment, net11,603,370 1,688,847 — 781 — 13,292,998 — 13,292,998 
Loans held-for-sale1,813,458 84,253 — 285,808 — 2,183,519 — 2,183,519 
Investment securities927,411 33,323 — 1,128,921 — 2,089,655 (1,418,768)670,887 
Properties, net124,691 — 1,928,853 175,318 — 2,228,862 — 2,228,862 
Intangible assets— — 35,958 68,596 — 104,554 (39,432)65,122 
Investment in unconsolidated entities45,129 25,170 — 38,239 — 108,538 (14,538)94,000 
Goodwill— 119,409 — 140,437 — 259,846 — 259,846 
Derivative assets31,835 36 96 78 20,521 52,566 — 52,566 
Accrued interest receivable101,539 4,372 — 1,887 447 108,245 (119)108,126 
Other assets159,296 4,186 77,928 34,054 19,298 294,762 (92)294,670 
VIE assets, at fair value— — — — — — 62,346,480 62,346,480 
Total Assets$14,886,538 $1,999,919 $2,081,804 $1,923,000 $215,463 $21,106,724 $60,874,140 $81,980,864 
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities$55,572 $10,064 $48,663 $44,405 $51,321 $210,025 $55 $210,080 
Related-party payable— — — — 23,378 23,378 — 23,378 
Dividends payable— — — — 139,738 139,738 — 139,738 
Derivative liabilities14,924 419 — 272 — 15,615 — 15,615 
Secured financing agreements, net7,206,946 905,343 1,873,053 763,555 774,812 11,523,709 (21,657)11,502,052 
Collateralized loan obligations and single asset securitization, net2,209,270 404,960 — — — 2,614,230 — 2,614,230 
Unsecured senior notes, net— — — — 1,733,684 1,733,684 — 1,733,684 
VIE liabilities, at fair value— — — — — — 60,894,975 60,894,975 
Total Liabilities9,486,712 1,320,786 1,921,716 808,232 2,722,933 16,260,379 60,873,373 77,133,752 
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock— — — — 2,961 2,961 — 2,961 
Additional paid-in capital929,932 636,911 17,137 (377,386)4,063,671 5,270,265 — 5,270,265 
Treasury stock— — — — (138,022)(138,022)— (138,022)
Accumulated other comprehensive income40,486 — — — — 40,486 — 40,486 
Retained earnings (accumulated deficit)4,429,290 42,222 (65,568)1,342,156 (6,436,080)(687,980)— (687,980)
Total Starwood Property Trust, Inc. Stockholders’ Equity5,399,708 679,133 (48,431)964,770 (2,507,470)4,487,710 — 4,487,710 
Non-controlling interests in consolidated subsidiaries118 — 208,519 149,998 — 358,635 767 359,402 
Total Equity5,399,826 679,133 160,088 1,114,768 (2,507,470)4,846,345 767 4,847,112 
Total Liabilities and Equity$14,886,538 $1,999,919 $2,081,804 $1,923,000 $215,463 $21,106,724 $60,874,140 $81,980,864 
62
Table of Contents

Table of Contents

The table below presents our condensed consolidated balance sheet as of December 31, 2020 by business segment (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential

​

Infrastructure

​

​

​

Investing

​

​

​

​

​

​

​

​

​

    

Lending

​

Lending

​

Property

​

and Servicing

​

​

​

​

​

Securitization

​

​

​

    

Segment

​

Segment

​

Segment

​

Segment

​

Corporate

​

Subtotal

​

VIEs

​

Total

Assets:

    

​

​

    

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

​

​

Cash and cash equivalents

    

$

160,007

    

$

4,440

​

$

32,080

    

$

19,546

    

$

346,372

    

$

562,445

    

$

772

    

$

563,217

Restricted cash

​

 

93,445

​

​

45,113

​

 

7,192

​

 

13,195

​

 

—

​

 

158,945

​

 

—

​

 

158,945

Loans held-for-investment, net

​

 

9,673,625

​

​

1,412,440

​

 

—

​

 

1,008

​

 

—

​

 

11,087,073

​

 

—

​

 

11,087,073

Loans held-for-sale

​

 

841,963

​

​

120,540

​

 

—

​

 

90,332

​

 

—

​

 

1,052,835

​

 

—

​

 

1,052,835

Investment securities

​

 

1,014,402

​

​

35,681

​

 

—

​

 

1,112,145

​

 

—

​

 

2,162,228

​

 

(1,425,570)

​

 

736,658

Properties, net

​

​

103,896

​

​

—

​

​

1,969,414

​

​

197,843

​

​

—

​

 

2,271,153

​

 

—

​

 

2,271,153

Intangible assets

​

 

—

​

​

—

​

 

40,370

​

 

71,123

​

 

—

​

 

111,493

​

 

(41,376)

​

 

70,117

Investment in unconsolidated entities

​

 

54,407

​

​

25,095

​

 

—

​

 

44,664

​

 

—

​

 

124,166

​

 

(16,112)

​

 

108,054

Goodwill

​

 

—

​

​

119,409

​

 

—

​

 

140,437

​

 

—

​

 

259,846

​

 

—

​

 

259,846

Derivative assets

​

 

6,595

​

​

—

​

 

41

​

 

147

​

 

33,772

​

 

40,555

​

 

—

​

 

40,555

Accrued interest receivable

​

 

87,922

​

​

2,091

​

 

—

​

 

123

​

 

5,978

​

 

96,114

​

 

(134)

​

 

95,980

Other assets

​

 

61,638

​

​

4,531

​

 

69,859

​

 

44,579

​

 

10,148

​

 

190,755

​

 

(7)

​

 

190,748

VIE assets, at fair value

​

 

—

​

​

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

64,238,328

​

 

64,238,328

Total Assets

​

$

12,097,900

​

$

1,769,340

​

$

2,118,956

​

$

1,735,142

​

$

396,270

​

$

18,117,608

​

$

62,755,901

​

$

80,873,509

Liabilities and Equity

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Accounts payable, accrued expenses and other liabilities

​

$

41,104

​

$

12,144

​

$

43,630

​

$

45,309

​

$

64,583

​

$

206,770

​

$

75

​

$

206,845

Related-party payable

​

 

—

​

​

—

​

 

—

​

 

5

​

 

39,165

​

 

39,170

​

 

—

​

 

39,170

Dividends payable

​

 

—

​

​

—

​

 

—

​

 

—

​

 

137,959

​

 

137,959

​

 

—

​

 

137,959

Derivative liabilities

​

 

39,082

​

​

1,718

​

 

—

​

 

524

​

 

—

​

 

41,324

​

 

—

​

 

41,324

Secured financing agreements, net

​

 

5,893,999

​

​

1,240,763

​

 

1,794,609

​

 

606,100

​

 

632,719

​

 

10,168,190

​

 

(22,000)

​

 

10,146,190

Collateralized loan obligations, net

​

​

930,554

​

​

—

​

 

—

​

 

—

​

 

—

​

 

930,554

​

 

—

​

 

930,554

Unsecured senior notes, net

​

 

—

​

​

—

​

 

—

​

 

—

​

 

1,732,520

​

 

1,732,520

​

 

—

​

 

1,732,520

VIE liabilities, at fair value

​

 

—

​

​

—

​

 

—

​

 

—

​

 

—

​

 

—

​

 

62,776,371

​

 

62,776,371

Total Liabilities

​

 

6,904,739

​

​

1,254,625

​

 

1,838,239

​

 

651,938

​

 

2,606,946

​

 

13,256,487

​

 

62,754,446

​

 

76,010,933

Equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Starwood Property Trust, Inc. Stockholders’ Equity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Common stock

​

 

—

​

​

—

​

 

—

​

 

—

​

 

2,921

​

 

2,921

​

 

—

​

 

2,921

Additional paid-in capital

​

 

1,192,584

​

​

496,387

​

 

98,882

​

 

(322,992)

​

 

3,744,878

​

 

5,209,739

​

 

—

​

 

5,209,739

Treasury stock

​

 

—

​

​

—

​

 

—

​

 

—

​

 

(138,022)

​

 

(138,022)

​

 

—

​

 

(138,022)

Accumulated other comprehensive income (loss)

​

 

44,057

​

​

—

​

 

—

​

 

(64)

​

 

—

​

 

43,993

​

 

—

​

 

43,993

Retained earnings (accumulated deficit)

​

 

3,956,405

​

​

18,328

​

 

(44,832)

​

 

1,260,819

​

 

(5,820,453)

​

 

(629,733)

​

 

—

​

 

(629,733)

Total Starwood Property Trust, Inc. Stockholders’ Equity

​

 

5,193,046

​

​

514,715

​

 

54,050

​

 

937,763

​

 

(2,210,676)

​

 

4,488,898

​

 

—

​

 

4,488,898

Non-controlling interests in consolidated subsidiaries

​

 

115

​

​

—

​

 

226,667

​

 

145,441

​

 

—

​

 

372,223

​

 

1,455

​

 

373,678

Total Equity

​

 

5,193,161

​

​

514,715

​

 

280,717

​

 

1,083,204

​

 

(2,210,676)

​

 

4,861,121

​

 

1,455

​

 

4,862,576

Total Liabilities and Equity

​

$

12,097,900

​

$

1,769,340

​

$

2,118,956

​

$

1,735,142

​

$

396,270

​

$

18,117,608

​

$

62,755,901

​

$

80,873,509

​

​

​

​

58

Commercial and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateSubtotalSecuritization
VIEs		Total
Assets:
Cash and cash equivalents$160,007 $4,440 $32,080 $19,546 $346,372 $562,445 $772 $563,217 
Restricted cash93,445 45,113 7,192 13,195 — 158,945 — 158,945 
Loans held-for-investment, net9,673,625 1,412,440 — 1,008 — 11,087,073 — 11,087,073 
Loans held-for-sale841,963 120,540 — 90,332 — 1,052,835 — 1,052,835 
Investment securities1,014,402 35,681 — 1,112,145 — 2,162,228 (1,425,570)736,658 
Properties, net103,896 — 1,969,414 197,843 — 2,271,153 — 2,271,153 
Intangible assets— — 40,370 71,123 — 111,493 (41,376)70,117 
Investment in unconsolidated entities54,407 25,095 — 44,664 — 124,166 (16,112)108,054 
Goodwill— 119,409 — 140,437 — 259,846 — 259,846 
Derivative assets6,595 — 41 147 33,772 40,555 — 40,555 
Accrued interest receivable87,922 2,091 — 123 5,978 96,114 (134)95,980 
Other assets61,638 4,531 69,859 44,579 10,148 190,755 (7)190,748 
VIE assets, at fair value— — — — — — 64,238,328 64,238,328 
Total Assets$12,097,900 $1,769,340 $2,118,956 $1,735,142 $396,270 $18,117,608 $62,755,901 $80,873,509 
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities$41,104 $12,144 $43,630 $45,309 $64,583 $206,770 $75 $206,845 
Related-party payable— — — 5 39,165 39,170 — 39,170 
Dividends payable— — — — 137,959 137,959 — 137,959 
Derivative liabilities39,082 1,718 — 524 — 41,324 — 41,324 
Secured financing agreements, net5,893,999 1,240,763 1,794,609 606,100 632,719 10,168,190 (22,000)10,146,190 
Collateralized loan obligations, net930,554 — — — — 930,554 — 930,554 
Unsecured senior notes, net— — — — 1,732,520 1,732,520 — 1,732,520 
VIE liabilities, at fair value— — — — — — 62,776,371 62,776,371 
Total Liabilities6,904,739 1,254,625 1,838,239 651,938 2,606,946 13,256,487 62,754,446 76,010,933 
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock— — — — 2,921 2,921 — 2,921 
Additional paid-in capital1,192,584 496,387 98,882 (322,992)3,744,878 5,209,739 — 5,209,739 
Treasury stock— — — — (138,022)(138,022)— (138,022)
Accumulated other comprehensive income (loss)44,057 — — (64)— 43,993 — 43,993 
Retained earnings (accumulated deficit)3,956,405 18,328 (44,832)1,260,819 (5,820,453)(629,733)— (629,733)
Total Starwood Property Trust, Inc. Stockholders’ Equity5,193,046 514,715 54,050 937,763 (2,210,676)4,488,898 — 4,488,898 
Non-controlling interests in consolidated subsidiaries115 — 226,667 145,441 — 372,223 1,455 373,678 
Total Equity5,193,161 514,715 280,717 1,083,204 (2,210,676)4,861,121 1,455 4,862,576 
Total Liabilities and Equity$12,097,900 $1,769,340 $2,118,956 $1,735,142 $396,270 $18,117,608 $62,755,901 $80,873,509 

63

TableTable of Contents

23. Subsequent Events

​

Our significant events subsequent to March 31,September 30, 2021 were as follows:

​

Collateralized Loan Obligations

​

Woodstar Refinancing
In AprilOctober 2021, we refinancedentered into a poolloan agreement with total borrowings of $380.0 million, secured by mortgages on certain properties within our infrastructure loans held-for-investment throughWoodstar I Portfolio. The loan carries a $500.0 million new issue CLO, STWD 2021-SIF1,two-year term, with $410.0 million of third party financing at3 one-year extension options, and has an average couponannual interest rate of LIBOR + 181 bps. The CLO contains2.11%. A portion of the net proceeds was used to repay $217.1 million of outstanding mortgage loans on those properties with a reinvestment feature that,weighted average annual interest rate of LIBOR + 2.71%.
Sale of Non-Controlling Interests in Woodstar Fund

Subsequent to quarter end, we established Woodstar Portfolio Holdings, LLC (the “Fund”), an investment fund which holds the Woodstar I and Woodstar II affordable housing portfolios. As managing member of the Fund, we manage interests purchased by third party investors seeking capital appreciation and an ongoing return, for which we earn (i) a management fee based on each investor’s share of total Fund equity; and (ii) an incentive distribution if the Fund’s returns exceed an established threshold. On November 5, 2021, we entered into subscription and other related agreements with certain third-party institutional investors to sell, through a feeder fund structure, an aggregate 20.6% interest in the Fund for an aggregate subscription price of $216.0 million, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO for a period of three years.

​

In May 2021, we refinanced a pool of our commercial loans held-for-investment through a $1.3 billion CLO, STWD 2021-FL2, with $1.1 billion of third party financing atpost-closing adjustments. The Fund carries an average coupon of LIBOR + 150 bps. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO for a period of two years.

​

​

​

​

​

​

​

​

​

​

​

​

​

initial eight-year term.

59

64

TableTable of Contents

Item 2. Management’s Discussion and AnalysisAnalysis of Financial Condition and Results of Operations

​

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the information included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (our “Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from the results discussed in the forward-looking statements. See “Special Note Regarding Forward-Looking Statements” at the beginning of this Quarterly Report on Form 10-Q.

​

Overview

​

Starwood Property Trust, Inc. (“STWD” and, together with its subsidiaries, “we” or the “Company”) is a Maryland corporation that commenced operations in August 2009, upon the completion of our initial public offering. We are focused primarily on originating, acquiring, financing and managing mortgage loans and other real estate investments in both the United States (“U.S.”) and Europe. As market conditions change over time, we may adjust our strategy to take advantage of changes in interest rates and credit spreads as well as economic and credit conditions.

​

We have four reportable business segments as of March 31,September 30, 2021 and we refer to the investments within these segments as our target assets:

​•

●Real estate commercial and residential lending (the “Commercial and Residential Lending Segment”)—engages primarily in originating, acquiring, financing and managing commercial first mortgages, non-agency residential mortgages (“residential loans”), subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”) and other real estate and real estate-related debt investments in both the U.S. and Europe (including distressed or non-performing loans). Our residential loans are secured by a first mortgage lien on residential property and consist of non-agency residential loans that are not guaranteed by any U.S. Government agency or federally chartered corporation.

​Real estate commercial and residential lending (the “Commercial and Residential Lending Segment”)—engages primarily in originating, acquiring, financing and managing commercial first mortgages, non-agency residential mortgages (“residential loans”), subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (“CMBS”), residential mortgage-backed securities (“RMBS”) and other real estate and real estate-related debt investments in both the U.S. and Europe (including distressed or non-performing loans). Our residential loans are secured by a first mortgage lien on residential property and primarily consist of non-agency residential loans that are not guaranteed by any U.S. Government agency or federally chartered corporation.

●Infrastructure lending (the “Infrastructure Lending Segment”)—engages primarily in originating, acquiring, financing and managing infrastructure debt investments.

​•

●Real estate property (the “Property Segment”)—engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, including multifamily properties and commercial properties subject to net leases, that are held for investment.

​Infrastructure lending (the “Infrastructure Lending Segment”)—engages primarily in originating, acquiring, financing and managing infrastructure debt investments.

●Real estate investing and servicing (the “Investing and Servicing Segment”)—includes (i) a servicing business in the U.S. that manages and works out problem assets, (ii) an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, including subordinated interests of securitization and resecuritization transactions, (iii) a mortgage loan business which originates conduit loans for the primary purpose of selling these loans into securitization transactions and (iv) an investment business that selectively acquires commercial real estate assets, including properties acquired from CMBS trusts.

​•

Real estate property (the “Property Segment”)—engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, including multifamily properties and commercial properties subject to net leases, that are held for investment.

•Real estate investing and servicing (the “Investing and Servicing Segment”)—includes (i) a servicing business in the U.S. that manages and works out problem assets, (ii) an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, including subordinated interests of securitization and resecuritization transactions, (iii) a mortgage loan business which originates conduit loans for the primary purpose of selling these loans into securitization transactions and (iv) an investment business that selectively acquires commercial real estate assets, including properties acquired from CMBS trusts.
Our segments exclude the consolidation of securitization variable interest entities (“VIEs”).

​

Refer to Note 1 of our condensed consolidated financial statements included herein (the “Condensed Consolidated Financial Statements”) for further discussion of our business and organization.

​

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COVID-19 Pandemic

​

The outbreak of the COVID-19 pandemic beginning in the first quarter of 2020 and its continuing impact on the financial, economic and capital markets environment, and future developments in these and other areas, present uncertainty and risk with respect to our financial condition, results of operations, liquidity, and ability to pay distributions. We expect that these impacts are likely to continue to some extent as the outbreak persists and potentially even longer. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions, and, as a result, present material uncertainty and risk with respect to us and the performance of our investments.

The full extent of the impact and effects of COVID-19 will depend on future developments, including, among other factors, the duration, spread and spreadresurgences of the outbreak,virus, including certain variants thereof, along with related travel advisories quarantines and restrictions, the recovery time of the disrupted supply chains and industries, the impact of labor market interruptions, the impact of government interventions, the pace, scope and efficacy of vaccination programs, and general uncertainty with respectas to the durationimpact of COVID-19, including related variants, on the global economy.
Goodwill is tested for impairment annually in the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.  Future changes in the expectations of the global economic slowdown.impact of COVID-19 on our operations, financial performance and cash flows could cause our goodwill to be impaired.
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​

Further discussion of the potential impacts on our business, financial condition, results of operations, liquidity, the market price of our common stock and our ability to make distributions to our stockholders from the COVID-19 pandemic is provided in the section entitled “Risk Factors” in Part I, Item 1A of our Form 10-K.

​

Asset Performance and Collections

​

We maintain an in-house team of asset management professionals who oversee our commercial loans and are in regular communication with these borrowers. We have utilized these relationships to address the potential impacts of the COVID-19 pandemic on the assets which secure our loans, particularly hospitality assets. Some of our borrowers have indicated that due to the impact of the COVID-19 pandemic, they will be unable to timely execute their business plans, have had to temporarily close their businesses, or have experienced other negative business consequences which have led to cash flow pressures at the underlying properties. In some cases, these borrowers have requested temporary interest deferral or forbearance, or other modifications of their loans.

​

Since the outbreak of the COVID-19 pandemic, we have granted certain payment related loan modifications to our commercial borrowers, consisting principally of partial and temporary deferrals of interest and the repurposing of reserves, many of which were coupled with additional equity commitments from sponsors. We are generally encouraged by our borrowers’ response to the COVID-19 pandemic’s impacts on their properties. While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain investments. As of March 31, 2021, we had one commercial loan held-for-investment with an aggregate principal balance of $40.8 million which remained on its post-COVID partial interest deferral.

​

In response to the impact of COVID-19 on certain of our residential borrowers, we began offering short-term relief starting in the first quarter of 2020. Under the terms of these plans, borrowers were granted up to a three to six-month “zero pay” forbearance with payments required to resume at the conclusion of the plan.  Since their peak last summer, we have seen the majority of these borrowers resume making payments, with some fully prepaying their loans.  We continue to see loans in forbearance decrease, with strong home price appreciation keeping any estimated credit losses low.  For those loans which have not yet resumed payments, we continue to evaluate loss mitigation options, including forbearance, repayment plans, loan modification and foreclosure.  In accordance with our policies, we placed any residential loans that were more than 90 days delinquent on nonaccrual.  

​

In our property segment, we collected 98% of rents due during the three months ended March 31, 2021. Collections were particularly strong in our Woodstar I and Woodstar II affordable housing portfolios, where 98% of rent due was collected. Given current demographic trends, which tend to favor flexible rental arrangements, we continue to see sustained demand in multifamily properties and decreased turnover.

​

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In our infrastructure segment, during the three months ended March 31, 2021, we collected 100% of interest due and did not grant any payment related loan modifications.

​

Goodwill and Intangible Assets

​

Goodwill is tested for impairment annually in the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.  Management considered the general economic decline and the impact of the COVID-19 pandemic, but did not identify any such event or circumstances.  However, future changes in the expectations of the impact of COVID-19 on our operations, financial performance and cash flows could cause our goodwill to be impaired.

​

Developments During the FirstThird Quarter of 2021

​

Commercial and Residential Lending Segment

​

●Originated $2.2 billion of commercial loans during the quarter, including the following:

​

o£360.0 million ($504.5 million) first mortgage loan to finance the acquisition of a portfolio of vacation cottages, caravan homes and resorts across the United Kingdom, which the Company fully funded.

​

o£227.6 million ($317.5 million) first mortgage loan for the refinancing of 14 assisted living facilities located across the United Kingdom, which the Company fully funded.

​

o$295.0 million first mortgage and mezzanine loan for the refinancing of a 666 unit Class A high-rise multifamily property and 70,873 square foot office building located in California, of which the Company funded $280.0 million.

​

o$230.0 million first mortgage and mezzanine loan on a 41 property extended stay portfolio located across the U.S., which the Company fully funded.

​

o$155.0 million first mortgage and mezzanine loan for the refinancing of a 4.7 acre, industrially-zoned development parcel located in New York, of which the Company funded $104.3 million.

​

o$151.0 million first mortgage loan for the refinancing of a 368 unit student housing property located in Pennsylvania, which the Company fully funded.

​

o$120.0 million first mortgage loan for the refinancing of a 369,852 square foot Class A office building located in Washington, DC, which the Company fully funded.

​

o$109.8 million first mortgage and mezzanine loan for the acquisition of four 6-story office buildings located in Georgia, of which the Company funded $95.9 million.

​

●Funded $174.9 million of previously originated commercial loan commitments.

​

●Received gross proceeds of $1.1 billion ($354.0 million, net of debt repayments) from maturities and principal repayments on our commercial loans and preferred equity.

​

●Sold commercial real estate in Montgomery, Alabama that was previously acquired through foreclosure in March 2019 for gross proceeds of $30.6 million and recognized a gain of $17.7 million. At the foreclosure date, the loan had a carrying value of $9.0 million ($20.9 million unpaid principal balance net of an $8.3 million allowance and $3.6 million of unamortized discount).

​

●Acquired $208.8 million of residential loans.

​

62

•In July 2021, we contributed into a single asset securitization ("SASB"), STWD 2021-HTS, a previously originated $230.0 million first mortgage and mezzanine loan on a portfolio of 41 extended stay hotels with $210.1 million of third party financing at a weighted average cost of financing of LIBOR + 2.47%, inclusive of the amortization of deferred issuance costs.
•Originated $1.7 billion of commercial loans during the quarter, including the following:

Table◦$245.1 million first mortgage loan for the refinancing of Contentsan existing construction loan for a mixed-use property located in Texas, of which the Company funded $229.1 million.

●◦$235.1 million first mortgage and mezzanine loan for the refinancing of a 55-story office property located in Texas, of which the Company funded $200.3 million.
◦AU$240.3 million ($178.4 million) first mortgage loan for the acquisition and development of industrial and logistics assets located in Australia, of which the Company funded $102.8 million.
◦£122.0 million ($168.9 million) first mortgage loan for the acquisition and refurbishment of an office building located in the United Kingdom, of which the Company funded $80.7 million.
◦$148.3 million first mortgage loan for the refinancing of a 455-unit multifamily property located in Virginia, of which the Company funded $138.0 million.
◦$125.0 million first mortgage and mezzanine loan for the refinancing of an existing loan on a 26-story, multifamily building located in Pennsylvania, which the Company fully funded.
•Funded $171.9 million of previously originated commercial loan commitments.
•Received gross proceeds of $872.0 million ($399.5 million, net of debt repayments) from maturities and principal repayments on our commercial loans.
•Received gross proceeds of $35.4 million ($9.1 million, net of debt repayments) from sales of senior interests in first mortgage loans.
•Acquired $1.8 billion of residential loans, of which $262.2 million related to principal acquired upon redemption of a consolidated RMBS trust.
•Received proceeds of $491.9 million, including retained RMBS of $33.0 million, from the securitization of $469.7 million of residential loans.
•Amended residential loan repurchase facilities to increase the available borrowings by $650.0 million.
Received proceeds of $389.8 million, including retained RMBS of $27.3 million, from the securitization of $383.5 million of residential loans. Also received proceeds of $92.4 million from the sale of $89.4 million of residential loans outside of securitization.

​

Infrastructure Lending Segment

​

●Acquired $86.3 million of infrastructure loans and funded $13.8 million of pre-existing infrastructure loan commitments.

​

●Received proceeds of $19.2 million from principal repayments on our infrastructure loans and bonds.

​

Property Segment

​•

●Refinanced our Woodstar II Portfolio by entering into mortgage loans with total borrowings of $82.9 million. The loans carry seven-year terms and a weighted average fixed annual interest rate of 4.36%. A portion of the net proceeds from the mortgage loans was used to repay $4.9 million of outstanding government sponsored mortgage loans.

​Amended a repurchase facility that provides for a temporary increase to available borrowings from $500.0 million to $650.0 million, with available capacity decreasing to $600.0 million in September 2022, $550.0 million in December 2022 and back to $500.0 million in March 2023. The amendment also extends the current maturity from February 2022 to September 2024, with two one-year extension options. In connection with this amendment, we terminated the Infrastructure Acquisition Facility and transferred the related financing to the amended repurchase facility. The facility carries an annual interest rate of LIBOR + 2.00%.

66
•Acquired $89.9 million of infrastructure loans and funded $16.2 million of pre-existing infrastructure loan commitments.
•Received gross proceeds of $113.2 million from principal repayments on our infrastructure loans and bonds.
Investing and Servicing Segment

​•

●Originated commercial conduit loans of $259.3 million.
•Received proceeds of $364.3 million from sales of previously originated commercial conduit loans and priced $239.4 million of previously originated commercial conduit loans in a securitization that settled subsequent to September 30, 2021.
•Sold CMBS for total gross proceeds of $27.1 million, of which $10.6 million related to non-controlling interests, and acquired CMBS for a purchase price of $8.4 million.
•Obtained 17 new special servicing assignments for CMBS trusts with a total unpaid principal balance of $14.9 billion, bringing our total named special servicing portfolio to $91.4 billion.
Corporate
•Issued $400.0 million of 3.625% Senior Notes due 2026 (the “2026 Senior Notes”).
•Redeemed $400.0 million of 5.00% Senior Notes due December 2021 (the "2021 Senior Notes").
•Amended the term loan facility to increase the incremental borrowings by $150.0 million and reduce the annual interest rate by 0.25% to LIBOR + 3.25% on all the incremental borrowings, subject to a 0.75% LIBOR floor. Additionally, we increased the maximum facility size of the revolver by $30.0 million to $150.0 million, reduced the annual interest rate by 0.50% to SOFR + 2.50% and extended the maturity from July 2024 to April 2026.
Developments During the Nine Months Ended September 30, 2021
Commercial and Residential Lending Segment
•In May 2021, we refinanced a pool of our commercial loans held-for-investment through a collateralized loan obligation (“CLO”), STWD 2021-FL2. The CLO has a contractual maturity of April 2038 and a weighted average cost of financing of LIBOR + 1.78%, inclusive of the amortization of deferred issuance costs. On the closing date, the CLO issued $1.3 billion of notes and preferred shares, of which $1.1 billion of notes was purchased by third party investors. We retained $70.1 million of notes, along with preferred shares with a liquidation preference of $127.5 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash.
•Originated or acquired $5.6 billion of commercial loans during the period, including the following:
◦£360.0 million ($504.5 million) first mortgage loan to finance the acquisition of a portfolio of vacation cottages, caravan homes and resorts across the United Kingdom, which the Company fully funded.
◦$460.0 million first mortgage, mezzanine loan and preferred equity interest for the refinancing of a five asset portfolio that includes four multifamily properties ($298.0 million) and an office property ($162.0 million) located in New York and Connecticut, of which the Company funded $297.9 million.
◦£227.6 million ($317.5 million) first mortgage loan for the refinancing of 14 assisted living facilities located across the United Kingdom, which the Company fully funded.
◦$295.0 million first mortgage and mezzanine loan for the refinancing of a 666 unit Class A high-rise multifamily property and 70,873 square foot office building located in California, of which the Company funded $280.0 million.
67
◦$253.0 million first mortgage and mezzanine loan for the refinancing of a 495 unit, three tower multifamily property located in Florida, of which the Company funded $211.6 million.
◦$245.1 million first mortgage loan for the refinancing of an existing construction loan for a mixed-use property located in Texas, of which the Company funded $229.1 million.
◦$235.1 million first mortgage and mezzanine loan for the refinancing of a 55-story office property located in Texas, of which the Company funded $200.3 million.
◦$230.0 million first mortgage and mezzanine loan on a 41 property extended stay portfolio located across the U.S., which the Company fully funded. In July 2021, we contributed this loan into a single asset securitization, STWD 2021-HTS, with $210.1 million of third party financing at a weighted average cost of financing of LIBOR + 2.47%, inclusive of the amortization of deferred issuance costs.
◦$231.1 million first mortgage and mezzanine loan for the refinancing of a luxury residential project located in California, of which the Company funded $181.6 million and sold the $147.9 million senior interest in the first mortgage.
•Funded $468.9 million of previously originated commercial loan commitments.
•Received gross proceeds of $3.1 billion ($1.2 billion, net of debt repayments) from maturities and principal repayments on our commercial loans.
•Received gross proceeds of $243.3 million and $21.5 million ($39.0 million and $2.5 million, net of debt repayments) from sales of senior interests in first mortgage loans and whole loan interests, respectively.
•Sold commercial real estate in Montgomery, Alabama that was previously acquired through foreclosure in March 2019 for gross proceeds of $30.6 million and recognized a gain of $17.7 million. At the foreclosure date, the loan had a carrying value of $9.0 million ($20.9 million unpaid principal balance net of an $8.3 million allowance and $3.6 million of unamortized discount).
•Acquired $2.7 billion of residential loans, of which $434.6 million related to principal acquired upon redemption of two consolidated RMBS trusts.
•Received proceeds of $1.5 billion, including retained RMBS of $112.7 million, from the securitization of $1.4 billion of residential loans.
•Received proceeds of $30.7 million from the sale of retained RMBS.
•Entered into or amended residential loan repurchase facilities to increase the available borrowings by $1.8 billion.
Infrastructure Lending Segment
•In April 2021, we refinanced a pool of our infrastructure loans held-for-investment through a CLO, STWD 2021-SIF1. The CLO has a contractual maturity of April 2032 and a weighted average cost of financing of LIBOR + 2.15%, inclusive of the amortization of deferred issuance costs. On the closing date, the CLO issued $500.0 million of notes and preferred shares, of which $410.0 million of notes was purchased by third party investors. We retained preferred shares with a liquidation preference of $90.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash.
•Amended a repurchase facility that provides for a temporary increase to available borrowings from $500.0 million to $650.0 million, with available capacity decreasing to $600.0 million in September 2022, $550.0 million in December 2022 and back to $500.0 million in March 2023. The amendment also extends the current maturity from February 2022 to September 2024, with two one-year extension options. In connection with this amendment, we terminated the Infrastructure Acquisition Facility and transferred the related financing to the amended repurchase facility. The facility carries an annual interest rate of LIBOR + 2.00%.
•Acquired $344.3 million of infrastructure loans and funded $53.4 million of pre-existing infrastructure loan commitments.
68
•Received $217.1 million from principal repayments on our infrastructure loans and bonds.
Property Segment
•Refinanced our Woodstar II Portfolio by entering into mortgage loans with total borrowings of $82.9 million. The loans carry seven-year terms and a weighted average fixed annual interest rate of 4.36%. A portion of the net proceeds from the mortgage loans was used to repay $4.9 million of outstanding government sponsored mortgage loans.
Investing and Servicing Segment
•Originated commercial conduit loans of $927.2 million.
•Received proceeds of $775.4 million from sales of previously originated commercial conduit loans and priced $239.4 million of previously originated commercial conduit loans in a securitization that settled subsequent to September 30, 2021.
•Acquired CMBS for a purchase price of $62.5 million, of which $2.5 million related to non-controlling interests, and sold CMBS for total gross proceeds of $38.7 million, of which $10.6 million related to non-controlling interests.
•Obtained 20 new special servicing assignments for CMBS trusts with a total unpaid principal balance of $16.1 billion, bringing our total named special servicing portfolio to $91.4 billion.
•Sold commercial real estate for gross proceeds of $30.9 million and recognized a gain of $9.7 million.
Corporate
•Issued $400.0 million of 3.625% Senior Notes due 2026.
•Redeemed $400.0 million of 5.00% Senior Notes due December 2021.
•Amended the term loan facility to increase the incremental borrowings by $150.0 million and reduce the annual interest rate by 0.25% to LIBOR + 3.25% on all the incremental borrowings, subject to a 0.75% LIBOR floor. Additionally, we increased the maximum facility size of the revolver by $30.0 million to $150.0 million, reduced the annual interest rate by 0.50% to SOFR + 2.50% and extended the maturity from July 2024 to April 2026.
Originated commercial conduit loans of $166.5 million. Separately, received proceeds of $89.7 million from sales of previously originated commercial conduit loans.

​

●Sold CMBS for total gross proceeds of $11.6 million.

​

●Obtained two new special servicing assignments for CMBS trusts with a total unpaid principal balance of $381.0 million.

​

Subsequent Events

​

Refer to Note 23 to the Condensed Consolidated Financial Statements for disclosure regarding significant transactions that occurred subsequent to March 31,September 30, 2021.

​

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Results of Operations

​

The discussion below is based on accounting principles generally accepted in the United States of America (“GAAP”) and therefore reflects the elimination of certain key financial statement line items related to the consolidation of securitization variable interest entities (“VIEs”), particularly within revenues and other income, as discussed in Note 2 to the Condensed Consolidated Financial Statements. For a discussion of our results of operations excluding the impact of Accounting Standards Codification (“ASC”) Topic 810 as it relates to the consolidation of securitization VIEs, refer to the section captioned “Non-GAAP Financial Measures”.

​

We have elected to present a comparison of our results of operations for the current quarter with that of the immediately preceding quarter, as permitted under the recently amended SEC disclosure guidelines. Because our business is not seasonal, we believe this results in a more meaningful comparison of quarterly results than a comparison to the same quarter of the prior year. We continue to present the required comparison of current year-to-date results with the same period of the prior year. The following table compares our summarized results of operations for the three months ended March 31,September 30, 2021 December 31, 2020 and March 31,June 30, 2021 and for the nine months ended September 30, 2021 and 2020 by business segment (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

$ Change

​

$ Change

​

​

For the Three Months Ended

​

March 31, 2021 vs.

​

March 31, 2021 vs.

Revenues:

​

March 31, 2021

​

December 31, 2020

​

March 31, 2020

​

December 31, 2020

​

March 31, 2020

Commercial and Residential Lending Segment

​

$

190,531

​

$

196,309

​

$

211,437

​

$

(5,778)

​

$

(20,906)

Infrastructure Lending Segment

​

​

19,465

​

​

19,250

​

​

23,257

​

​

215

​

​

(3,792)

Property Segment

​

​

65,144

​

​

64,065

​

​

64,083

​

​

1,079

​

​

1,061

Investing and Servicing Segment

​

 

44,547

​

 

45,372

​

 

44,495

​

​

(825)

​

 

52

Corporate

​

​

—

​

​

—

​

 

—

​

​

—

​

​

—

Securitization VIE eliminations

​

 

(32,457)

​

 

(34,434)

​

 

(30,712)

​

​

1,977

​

 

(1,745)

​

​

 

287,230

​

 

290,562

​

 

312,560

​

 

(3,332)

​

 

(25,330)

Costs and expenses:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and Residential Lending Segment

​

 

56,414

​

 

50,999

​

 

104,780

​

​

5,415

​

 

(48,366)

Infrastructure Lending Segment

​

​

12,956

​

​

5,555

​

​

26,079

​

​

7,401

​

​

(13,123)

Property Segment

​

​

59,498

​

​

61,289

​

​

60,662

​

​

(1,791)

​

​

(1,164)

Investing and Servicing Segment

​

 

32,457

​

 

39,722

​

 

36,928

​

​

(7,265)

​

 

(4,471)

Corporate

​

​

71,647

​

​

73,965

​

 

73,213

​

​

(2,318)

​

​

(1,566)

Securitization VIE eliminations

​

 

(93)

​

 

(127)

​

 

(47)

​

​

34

​

 

(46)

​

​

 

232,879

​

 

231,403

​

 

301,615

​

 

1,476

​

 

(68,736)

Other income (loss):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and Residential Lending Segment

​

 

21,161

​

 

13,318

​

 

(66,541)

​

​

7,843

​

 

87,702

Infrastructure Lending Segment

​

​

95

​

​

(259)

​

​

(1,348)

​

​

354

​

​

1,443

Property Segment

​

​

4,608

​

​

391

​

​

(30,192)

​

​

4,217

​

​

34,800

Investing and Servicing Segment

​

 

18,960

​

 

22,349

​

 

(45,918)

​

​

(3,389)

​

 

64,878

Corporate

​

​

(6,843)

​

​

(1,239)

​

​

29,235

​

​

(5,604)

​

​

(36,078)

Securitization VIE eliminations

​

 

32,424

​

 

34,317

​

 

30,821

​

​

(1,893)

​

 

1,603

​

​

 

70,405

​

 

68,877

​

 

(83,943)

​

 

1,528

​

 

154,348

Income (loss) before income taxes:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial and Residential Lending Segment

​

 

155,278

​

 

158,628

​

 

40,116

​

​

(3,350)

​

 

115,162

Infrastructure Lending Segment

​

​

6,604

​

​

13,436

​

​

(4,170)

​

​

(6,832)

​

​

10,774

Property Segment

​

​

10,254

​

​

3,167

​

​

(26,771)

​

​

7,087

​

​

37,025

Investing and Servicing Segment

​

 

31,050

​

 

27,999

​

 

(38,351)

​

​

3,051

​

 

69,401

Corporate

​

​

(78,490)

​

​

(75,204)

​

​

(43,978)

​

​

(3,286)

​

​

(34,512)

Securitization VIE eliminations

​

 

60

​

 

10

​

 

156

​

​

50

​

 

(96)

​

​

 

124,756

​

 

128,036

​

 

(72,998)

​

 

(3,280)

​

 

197,754

Income tax provision

​

 

(2,230)

​

 

(13,381)

​

 

6,729

​

​

11,151

​

 

(8,959)

Net income attributable to non-controlling interests

​

 

(11,148)

​

 

(7,687)

​

 

(500)

​

​

(3,461)

​

 

(10,648)

Net income attributable to Starwood Property Trust, Inc.

​

$

111,378

​

$

106,968

​

$

(66,769)

​

$

4,410

​

$

178,147

​

64


For the Three Months EndedFor the Nine Months Ended
Revenues:September 30, 2021June 30, 2021$ ChangeSeptember 30, 2021September 30, 2020$ Change
Commercial and Residential Lending Segment$197,045 $184,490 $12,555 $572,066 $553,351 $18,715 
Infrastructure Lending Segment22,172 21,795 377 63,432 61,737 1,695 
Property Segment66,727 65,454 1,273 197,325 191,680 5,645 
Investing and Servicing Segment52,441 57,504 (5,063)154,492 137,655 16,837 
Corporate— — — — — — 
Securitization VIE eliminations(36,099)(38,376)2,277 (106,932)(98,830)(8,102)
302,286 290,867 11,419 880,383 845,593 34,790 
Costs and expenses:
Commercial and Residential Lending Segment62,457 47,543 14,914 166,414 222,862 (56,448)
Infrastructure Lending Segment12,207 14,178 (1,971)39,341 48,453 (9,112)
Property Segment62,431 61,714 717 183,643 182,568 1,075 
Investing and Servicing Segment33,704 40,253 (6,549)106,414 98,955 7,459 
Corporate60,703 62,376 (1,673)194,726 180,032 14,694 
Securitization VIE eliminations(149)(125)(24)(367)135 (502)
231,353 225,939 5,414 690,171 733,005 (42,834)
Other income (loss):
Commercial and Residential Lending Segment25,633 (4,051)29,684 42,743 39,808 2,935 
Infrastructure Lending Segment300 (930)1,230 (535)(2,453)1,918 
Property Segment(334)(397)63 3,877 (37,148)41,025 
Investing and Servicing Segment15,869 24,904 (9,035)59,733 11,875 47,858 
Corporate(446)927 (1,373)(6,362)34,397 (40,759)
Securitization VIE eliminations36,033 37,650 (1,617)106,107 99,175 6,932 
77,055 58,103 18,952 205,563 145,654 59,909 
Income (loss) before income taxes:
Commercial and Residential Lending Segment160,221 132,896 27,325 448,395 370,297 78,098 
Infrastructure Lending Segment10,265 6,687 3,578 23,556 10,831 12,725 
Property Segment3,962 3,343 619 17,559 (28,036)45,595 
Investing and Servicing Segment34,606 42,155 (7,549)107,811 50,575 57,236 
Corporate(61,149)(61,449)300 (201,088)(145,635)(55,453)
Securitization VIE eliminations83 (601)684 (458)210 (668)
147,988 123,031 24,957 395,775 258,242 137,533 
Income tax (provision) benefit(7,501)3,353 (10,854)(6,378)(6,816)438 
Net income attributable to non-controlling interests(11,885)(10,074)(1,811)(33,107)(26,705)(6,402)
Net income attributable to Starwood Property Trust, Inc.$128,602 $116,310 $12,292 $356,290 $224,721 $131,569 

70

TableTable of Contents

Three Months Ended March 31,September 30, 2021 Compared to the Three Months Ended December 31, 2020

​

June 30, 2021

Commercial and Residential Lending Segment

​

Revenues

​

For the three months ended March 31,September 30, 2021, revenues of our Commercial and Residential Lending Segment decreased $5.8increased $12.5 million to $190.5$197.0 million, compared to $196.3$184.5 million for the three months ended December 31, 2020.June 30, 2021. This decreaseincrease was primarily due to decreasesan increase in interest income from loans of $2.4$13.8 million, andslightly offset by a decrease in interest income from investment securities of $2.7 million and a decrease in rental income from foreclosed properties of $0.6 million due to the sale of a property in the first quarter of 2021.$1.1 million. The decreaseincrease in interest income from loans was principally due to lower(i) higher prepayment related income on commercial loans and (ii) higher average balances of both commercial and residential loans, reflecting for residential loans the timing of purchases and securitizations. The decrease in interest income from investment securities was primarily due to lower average RMBS investment balances reflecting sales of RMBS late in the fourth quarter of 2020.net repayments and liquidations.

​

Costs and Expenses

​

For the three months ended March 31,September 30, 2021, costs and expenses of our Commercial and Residential Lending Segment increased $5.4$14.9 million to $56.4$62.4 million, compared to $51.0$47.5 million for the three months ended December 31, 2020.June 30, 2021. This increase was primarily due to the nonrecurrence of a $4.5$12.4 million decrease in credit loss reversal in the second quarter of 2021 and a $2.3$3.7 million increase in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio, partially offset by a $1.4$1.2 million decrease in general and administrative expenses reflecting lower professional fees.expenses. The $12.4 million credit loss reversal decreased from $5.0 million in the fourthsecond quarter of 2020 to $0.5 million in the first quarter of 2021. The larger reversal in the fourth quarter of 20202021 was primarily due to an improvement in macroeconomic forecasts and the effect on our then estimate of current expected credit losses (“CECL”). In comparison, there was a nominal credit loss provision in the third quarter of 2021. The increase in interest expense was primarily due to higher average borrowings outstanding, partially offset by lower average LIBOR rates.outstanding.

​

Net Interest Income (amounts in thousands)

For the Three Months Ended
September 30, 2021June 30, 2021Change
Interest income from loans$179,486 $165,697 $13,789 
Interest income from investment securities16,043 17,190 (1,147)
Interest expense(52,066)(48,356)(3,710)
Net interest income$143,463 $134,531 $8,932 
​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

​

    

March 31, 2021

    

December 31, 2020

    

Change

Interest income from loans

​

$

170,593

​

$

173,014

​

$

(2,421)

Interest income from investment securities

​

 

18,385

​

 

21,132

​

 

(2,747)

Interest expense

​

 

(44,295)

​

 

(41,987)

​

 

(2,308)

Net interest income

​

$

144,683

​

$

152,159

​

$

(7,476)

​

For the three months ended March 31,September 30, 2021, net interest income of our Commercial and Residential Lending Segment decreased $7.5increased $8.9 million to $144.7$143.4 million, compared to $152.2$134.5 million for the three months ended December 31, 2020.June 30, 2021. This decreaseincrease reflects the decreasesnet increase in interest income, andpartially offset by the increasedecrease in interest expense on our secured financing facilities, both as discussed in the sections above.

​

During the three months ended March 31,September 30, 2021 and December 31, 2020,June 30, 2021, the weighted average unlevered yields on the Commercial and Residential Lending Segment’s loans and investment securities, excluding retained RMBS, were as follows:

For the Three Months Ended
September 30, 2021June 30, 2021
Commercial5.5 %5.6 %
Residential5.0 %5.5 %
Overall5.5 %5.7 %
​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

March 31, 2021

​

December 31, 2020

​

Commercial

​

5.9

%

6.3

%

Residential

​

7.5

%

7.2

%

Overall

​

6.1

%

6.4

%

​

The overall weighted average unlevered yield was slightly lower primarily due to a $142.2 million commercial loan which was reclassified as held-for-sale, a $187.6 million commercial loan placedlower average interest rates on nonaccrual and slightly lower LIBOR rates affecting our commercial yields, partiallynewer loans, partially offset by a shift in the relative mix of loans and investment securities toward higher-yielding RMBS affecting our residential yields.

​higher prepayment related income on commercial loans.

65


Table of Contents

During the three months ended March 31,September 30, 2021 and December 31, 2020,June 30, 2021, the Commercial and Residential Lending Segment’s weighted average secured borrowing rates, inclusive of interest rate hedging costs and the amortization of deferred financing fees, were 2.6%2.4% and 2.5%, respectively.

​

Other Income

(Loss)

​

For the three months ended March 31,September 30, 2021, other income (loss) of our Commercial and Residential Lending Segment increased $7.9improved $29.7 million to $21.2income of $25.6 million compared to $13.3a loss of $4.1 million for the three months ended December 31, 2020.June 30, 2021. This increaseimprovement was primarily due to (i) a $75.3$42.9 million favorable change in gain (loss) on derivatives, and (ii) a $17.7 $10.1
71
Table of Contents
million gain on salefavorable change in fair value of residential loans and (iii) the nonrecurrence of $4.6 million of transfer taxes related to the foreclosure of a foreclosed property,residential conversion project in the second quarter of 2021, all partially offset by (iii)(iv) a $55.6$29.5 million unfavorable change in foreign currency gain (loss) and (iv) a $30.7 million unfavorable change in fair value of residential loans.. The favorable change in gain (loss) on derivatives in the firstthird quarter of 2021 reflects a $63.4$36.2 million favorable change in gain (loss) on foreign currency hedges and an $11.9a $6.7 million increasedfavorable change in gain (loss) on interest rate swaps. The foreign currency hedges are used to fix the U.S. dollar amounts of cash flows (both interest and principal payments) we expect to receive from our foreign currency denominated loans and investments. The favorable change in gain (loss) on foreign currency hedges and the unfavorable change in foreign currency gain (loss) reflect the strengthening of the U.S. dollar against the pound sterling (“GBP”), Euro (“EUR”) and Australian dollar (“AUD”), partially offset by a weakening against the pound sterling (“GBP”), in the firstthird quarter of 2021 compared to a weakening of the U.S. dollar against those currenciesthe GBP and EUR, partially offset by a strengthening against the AUD, in the fourthsecond quarter of 2020.2021. The interest rate swaps are used primarily to fix our interest rate payments on certain variable rate borrowings which fund fixed rate investments and to hedge our interest rate risk on residential loans held-for-sale.

​

Infrastructure Lending Segment

​

Revenues

​

For the three months ended March 31,September 30, 2021, revenues of our Infrastructure Lending Segment increased $0.2$0.4 million to $19.5$22.2 million, compared to $19.3$21.8 million for the three months ended December 31, 2020.June 30, 2021. This was primarily due to a slightan increase in interest income from loans.loans reflecting higher prepayment related income.

​

Costs and Expenses

​

For the three months ended March 31,September 30, 2021, costs and expenses of our Infrastructure Lending Segment increased $7.4decreased $2.0 million to $13.0$12.2 million, compared to $5.6$14.2 million for the three months ended December 31, 2020.June 30, 2021. The increasedecrease was primarily due to a $7.7$1.2 million increasedecrease in credit loss provision partially offset byand a $0.4$0.3 million decrease in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio. TheThere was a $0.6 million credit loss provision was $0.6 millionreversal in the firstthird quarter of 2021 compared to a reversalprovision of $7.1$0.6 million in the fourthsecond quarter of 2020. The reversal in the fourth quarter of 2020 was primarily due to an improvement in macroeconomic forecasts and the effect on our estimate of CECL allowances.2021. The decrease in interest expense was primarily due to lower average LIBOR rates.borrowings outstanding.

​

Net Interest Income (amounts in thousands)

For the Three Months Ended
September 30, 2021June 30, 2021Change
Interest income from loans$21,566 $21,171 $395 
Interest income from investment securities540 555 (15)
Interest expense(9,381)(9,694)313 
Net interest income$12,725 $12,032 $693 
​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

​

    

March 31, 2021

    

December 31, 2020

    

Change

Interest income from loans

​

$

18,808

​

$

18,477

​

$

331

Interest income from investment securities

​

 

564

​

 

618

​

 

(54)

Interest expense

​

 

(8,841)

​

 

(9,204)

​

 

363

Net interest income

​

$

10,531

​

$

9,891

​

$

640

​

For the three months ended March 31,September 30, 2021, net interest income of our Infrastructure Lending Segment increased $0.6$0.7 million to $10.5$12.7 million, compared to $9.9$12.0 million for the three months ended December 31, 2020.June 30, 2021. The increase reflects the net increase in interest income from loans and the decrease in interest expense on the secured financing facilities, both as discussed in the sections above.

​

66


Table of Contents

​

During the three months ended March 31,September 30, 2021 and 2020,June 30, 2021, the weighted average unlevered yields on the Infrastructure Lending Segment’s investments were as follows:

For the Three Months Ended
September 30, 2021June 30, 2021
Loans and investment securities held-for-investment4.9 %4.9 %
Loans held-for-sale2.8 %2.9 %
​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

March 31, 2021

​

December 31, 2020

​

Loans and investment securities held-for-investment

​

4.8

%

4.8

%

Loans held-for-sale

​

3.2

%

3.7

%

​

During the three months ended March 31,September 30, 2021 and December 31, 2020,June 30, 2021, the Infrastructure Lending Segment’s weighted average secured borrowing rate,rates, inclusive of the amortization of deferred financing fees, waswere 2.8% and 2.9% and 3.0%, respectively.


​

Other Income (Loss)

​

For the three months ended March 31,September 30, 2021, and December 31, 2020, other income (loss) of our Infrastructure Lending Segment increased $0.4improved $1.2 million to $0.1income of $0.3 million, compared to a loss of $0.3$0.9 million for the three months ended December 31, 2020.

June 30, 2021. This improvement was primarily due to a $0.9 million lower loss on extinguishment of debt.

​

72
Property Segment

​

Change in Results by Portfolio (amounts in thousands)

$ Change from prior period
RevenuesCosts and
 expenses		Gain (loss) on derivative
financial instruments		Other income (loss)Income (loss) before
 income taxes
Master Lease Portfolio$— $— $— $— $— 
Medical Office Portfolio423 359 44 — 108 
Woodstar I Portfolio682 107 10 — 585 
Woodstar II Portfolio168 297 — — (129)
Other/Corporate— (46)— 9 55 
Total$1,273 $717 $54 $9 $619 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

$ Change from prior period

​

​

​

​

Costs and

​

Gain (loss) on derivative

​

​

​

Income (loss) before

​

​

Revenues

    

expenses

    

financial instruments

    

Other income (loss)

    

income taxes

Master Lease Portfolio

​

$

—

​

$

(13)

​

$

—

​

$

—

​

$

13

Medical Office Portfolio

​

​

125

​

​

(61)

​

​

3,833

​

​

—

​

​

4,019

Woodstar I Portfolio

​

​

524

​

​

(1,471)

​

​

133

​

​

—

​

​

2,128

Woodstar II Portfolio

​

​

449

​

​

(287)

​

​

—

​

​

(141)

​

​

595

Ireland Portfolio

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Investment in unconsolidated entities

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Other/Corporate

​

​

(19)

​

​

41

​

​

—

​

​

392

​

​

332

Total

​

$

1,079

​

$

(1,791)

​

$

3,966

​

$

251

​

$

7,087

​

See Note 6 to the Condensed Consolidated Financial Statements for a description of the above-referenced Property Segment portfolios.

Revenues
​

Revenues

​

For the three months ended March 31,September 30, 2021, revenues of our Property Segment increased $1.0$1.3 million to $65.1$66.7 million, compared to $64.1$65.4 million for the three months ended December 31, 2020.June 30, 2021.

​

Costs and Expenses

​

For the three months ended March 31,September 30, 2021, costs and expenses of our Property Segment decreased $1.8increased $0.7 million to $59.5$62.4 million, compared to $61.3$61.7 million for the three months ended December 31, 2020.

June 30, 2021.

​

Other Income

Loss

​

For the three months ended March 31,September 30, 2021, other incomeloss of our Property Segment increased $4.2decreased $0.1 million to $4.6$0.3 million, compared to $0.4 million for the three months ended December 31, 2020. The improvement in other income was primarily due to a $4.0 million increased gain on derivatives which primarily hedge our interest rate risk on borrowings secured by our Medical Office Portfolio.

​

June 30, 2021.

67


Table of Contents

Investing and Servicing Segment

​

Revenues

​

For the three months ended March 31,September 30, 2021, revenues of our Investing and Servicing Segment decreased $0.8$5.1 million to $44.5$52.4 million, compared to $45.3$57.5 million for the three months ended December 31, 2020.June 30, 2021. The decrease primarily reflects (i) the nonrecurrence of a $1.3$2.3 million origination fee on a loan that we co-originated in the second quarter of 2021 for the purpose of contributing into a single-asset single-borrower CMBS transaction, (ii) a $0.9 million decrease in servicing fees, (iii) a $0.8 million decrease in rental income primarily due to the sale of a property in the second quarter of 2021 and (iv) a $0.7 million decrease in interest income from CMBS and conduit loans, partially offset by a $0.4 million increase in interest income from CMBS.

loans.

​

Costs and Expenses

​

For the three months ended March 31,September 30, 2021, costs and expenses of our Investing and Servicing Segment decreased $7.2$6.6 million to $32.5$33.7 million, compared to $39.7$40.3 million for the three months ended December 31, 2020.June 30, 2021. The decrease in costs and expenses was primarily due to a $4.7 million decrease of $7.1 million in general and administrative expenses reflecting lowerdecreased incentive compensation principally due to lower securitization volume.

​

Other Income

​

For the three months ended March 31,September 30, 2021, other income of our Investing and Servicing Segment decreased $3.3$9.0 million to $19.0$15.9 million, compared to $22.3$24.9 million for the three months ended December 31, 2020.June 30, 2021. The decrease in other income was primarily due to (i) a $32.2$24.3 million lesser increase in fair value of conduit loans and (ii) the nonrecurrence of a $9.7 million gain on sale of an operating property in the second quarter of 2021, partially offset by (ii)(iii) a $22.5$15.5 million favorable change in fair value of CMBS investments and (iii) a $7.7$9.7 million increasedfavorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans.loans and CMBS investments.

73
​Table of Contents

Corporate and Other Items

​

Corporate Costs and Expenses

​

For the three months ended March 31,September 30, 2021, corporate expenses decreased $2.3$1.7 million to $71.6$60.7 million, compared to $73.9$62.4 million for the three months ended December 31, 2020.June 30, 2021. This was primarily due to a decrease of $1.9$4.1 million in incentive management fees.fees, partially offset by a $2.5 million increase in interest expense primarily due to our issuance of the 2026 Senior Notes during the third quarter of 2021.

​

Corporate Other Loss

Income (Loss)

​

For the three months ended March 31,September 30, 2021, corporate other loss increased $5.6income decreased $1.3 million to $6.8a loss of $0.4 million, compared to $1.2income of $0.9 million for the three months ended December 31, 2020.June 30, 2021. This was due to (i) a $6.1$0.9 million increased losslesser gain on interest rate swaps which hedge a portion of our unsecured senior notes used to repay variable-rate secured financing partially offset by the non-recurrence ofand (ii) a $0.5$0.4 million loss on extinguishment of debt ina portion of our 2021 Senior Notes during the fourththird quarter of 2020.2021.

​

Securitization VIE Eliminations

​

Securitization VIE eliminations primarily reclassify interest income and servicing fee revenues to other income (loss) for the CMBS and RMBS VIEs that we consolidate as primary beneficiary. Such eliminations have no overall effect on net income (loss) attributable to Starwood Property Trust. The reclassified revenues, along with applicable changes in fair value of investment securities and servicing rights, comprise the other income (loss) caption “Change in net assets related to consolidated VIEs,” which represents our beneficial interest in those consolidated VIEs. The magnitude of the securitization VIE eliminations is merely a function of the number of CMBS and RMBS trusts consolidated in any given period, and as such, is not a meaningful indicator of operating results. The eliminations primarily relate to CMBS trusts for which the Investing and Servicing Segment is deemed the primary beneficiary and, to a much lesser extent, some CMBS and RMBS trusts for which the Commercial and Residential Lending Segment is deemed the primary beneficiary.

​

​

68


Table of Contents

Income Tax Provision

(Provision) Benefit​


Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in taxable REIT subsidiaries (“TRSs”). For the three months ended March 31,September 30, 2021 our income tax provision decreased $11.2increased $10.9 million to $2.2a provision of $7.5 million compared to $13.4a benefit of $3.4 million for the three months ended December 31, 2020June 30, 2021 due to a decrease in taxable income of our TRSs in the firstthird quarter of 2021 compared to a loss in the second quarter of 2021.

​

Net Income Attributable to Non-controlling Interests

​

During the three months ended March 31,September 30, 2021, net income attributable to non-controlling interests increased $3.4$1.8 million to $11.1$11.9 million, compared to $7.7$10.1 million during the three months ended December 31, 2020.June 30, 2021. The increase was primarily due to non-controlling interests in increased earnings of a consolidated CMBS joint venture in which we hold a 51% interest.

​

Three

Nine Months Ended March 31,September 30, 2021 Compared to the ThreeNine Months Ended March 31,September 30, 2020

​

Commercial and Residential Lending Segment

​

Revenues

​

For the threenine months ended March 31,September 30, 2021, revenues of our Commercial and Residential Lending Segment decreased $20.9increased $18.7 million to $190.5$572.1 million, compared to $211.4$553.4 million for the threenine months ended March 31,September 30, 2020. This decreaseincrease was primarily due to decreasesincreases in interest income from loans of $21.8$23.3 million and investment securities of $0.2 million, partially offset by an increase in rental income from foreclosed properties of $1.2 million. The$1.3 million, partially offset by a decrease in interest income from investment securities of $5.7 million. The increase in interest income from loans was principally due toreflects a $29.7 million increase from commercial loans reflecting higher average balances partially offset by lower prepayment related income lower average balances of residential loans and lower average LIBOR rates (partially(partly mitigated by the LIBOR floors on most of our commercial loans), partially offset by higher and a $6.4 million decrease from residential loans principally due to lower average balances reflecting the timing of commercial loans.purchases and securitizations. The slight decrease in interest income from investment securities was primarily due to lower commercial and residential average investment balances, reflecting net repayments and liquidations, and lower average LIBOR rates and investment balances affecting interest income from ourcertain commercial investment securities, partially offset by higher average RMBS investment balances.investments.

​


74
Costs and Expenses

​

For the threenine months ended March 31,September 30, 2021, costs and expenses of our Commercial and Residential Lending Segment decreased $48.4$56.5 million to $56.4$166.4 million, compared to $104.8$222.9 million for the threenine months ended March 31,September 30, 2020. This decrease was primarily due to a $40.7$65.3 million decrease in credit loss provision, andpartially offset by a $9.7$10.5 million decreaseincrease in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio. The credit loss provision decreased from $40.2a provision of $52.3 million in the first quarternine months of 2020 to a $0.5$13.0 million reversal in the first quarternine months of 2021. The large provision in the first quarternine months of 2020 was due to the significant deterioration in macroeconomic forecasts due to the initial disruption caused by the COVID-19 pandemic and its effect on our then estimate of CECL. The decreasecredit loss reversal in the nine months of 2021 was primarily due to an improvement in macroeconomic forecasts. The increase in interest expense was primarily due to higher average borrowings outstanding, partially offset by lower average LIBOR rates partially offset by higher average borrowings outstanding.rates.

​

Net Interest Income (amounts in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

​

​

March 31,

​

​

​

​

    

2021

    

2020

    

Change

Interest income from loans

​

$

170,593

​

$

192,381

​

$

(21,788)

Interest income from investment securities

​

 

18,385

​

 

18,628

​

 

(243)

Interest expense

​

 

(44,295)

​

 

(53,950)

​

 

9,655

Net interest income

​

$

144,683

​

$

157,059

​

$

(12,376)

For the Nine Months Ended September 30,
20212020Change
Interest income from loans$515,776 $492,489 $23,287 
Interest income from investment securities51,618 57,358 (5,740)
Interest expense(144,717)(134,243)(10,474)
Net interest income$422,677 $415,604 $7,073 
​


For the threenine months ended March 31,September 30, 2021, net interest income of our Commercial and Residential Lending Segment decreased $12.4increased $7.1 million to $144.7$422.7 million, compared to $157.1$415.6 million for the threenine months ended March 31,September 30, 2020. This decreaseincrease reflects the decreasesnet increase in interest income, partially offset by the decreaseincrease in interest expense on our secured financing facilities, both as discussed in the sections above.

​

69


Table of Contents

During the threenine months ended March 31,September 30, 2021 and 2020, the weighted average unlevered yields on the Commercial and Residential Lending Segment’s loans and investment securities, excluding retained RMBS, were as follows:

For the Nine Months Ended September 30,
20212020
Commercial5.8 %6.5 %
Residential5.0 %5.7 %
Overall5.8 %6.5 %
​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

March 31,

​

​

​

2021

​

2020

​

Commercial

​

5.9

%

6.8

%

Residential

​

7.5

%

6.8

%

Overall

​

6.1

%

6.8

%

​

The overall weighted average unlevered yield was lower primarily due to lower prepayment related income and LIBOR rates affecting our commercial yields partially offset by the increased investment in higher-yielding RMBS affectingas well as lower average interest rates on our residential yields.

newer loans.

​

During the threenine months ended March 31,September 30, 2021 and 2020, the Commercial and Residential Lending Segment’s weighted average secured borrowing rates, inclusive of interest rate hedging costs and the amortization of deferred financing fees, were 2.6%2.5% and 3.5%2.9%, respectively. The decrease in borrowing rates primarily reflects decreases in LIBOR.

​

Other Income (Loss)

​

For the threenine months ended March 31,September 30, 2021, other income of our Commercial and Residential Lending Segment increased $87.7$2.9 million to $21.2$42.7 million, compared to a loss of $66.5$39.8 million for the threenine months ended March 31,September 30, 2020. This increase was primarily due toreflects (i) a $25.8 million lesser decrease$68.7 favorable change in fair value of investment securities,gain (loss) on derivatives and (ii) a $24.8 million lesser decrease in fair value of residential loans, (iii) a $22.4 million decrease in foreign currency loss and (iv) a $17.7 million gain on sale of a foreclosed property allin the first quarter of 2021, partially offset by (iii) a $33.9 million increase in foreign currency loss, (iv) a $32.8 million lesser increase in fair value of residential loans, (v) a $4.7an $11.3 million lower gain on derivatives. The greater decreasesdecrease in fair value of investment securities and (vi) $4.6 million of transfer taxes related to the foreclosure of a residential loansconversion project. The favorable change in the first quarter of 2020 were primarily attributable to widening credit spreads resulting from market disruption and dislocation caused by the initial impacts of COVID-19. The lower gain (loss) on derivatives in the first quarternine months of 2021 reflects a $39.2 million lower gain on foreign currency hedges, partially offset by a $34.5$41.8 million favorable change in gain (loss) on interest rate swaps.swaps and a $26.9 million higher gain on foreign currency hedges. The foreign currency hedges are used to fix the U.S. dollar amounts of cash flows (both interest and principal payments) we expect to receive from our foreign currency denominated loans and investments. The decreasesincreases in foreign currency loss and foreign currency hedge gains reflect the strengthening of the U.S. dollar against the GBP, EUR and AUD in the nine months of 2021 compared to a strengthening of the U.S. dollar against the GBP, partially offset by a weakening against the GBP,EUR and AUD, in the first quarter of 2021 compared to a greater overall strengthening of the U.S. dollar against those currencies in the first quarternine months of 2020. The interest rate swaps are used primarily to fix our interest rate payments on certain variable rate borrowings which fund fixed rate investments and to hedge our interest rate risk on residential loans held-for-sale.

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​Table of Contents

Infrastructure Lending Segment

​

Revenues

​

For the threenine months ended March 31,September 30, 2021, revenues of our Infrastructure Lending Segment decreased $3.8increased $1.7 million to $19.5$63.4 million, compared to $23.3$61.7 million for the threenine months ended March 31,September 30, 2020. This was primarily due to a decreasean increase in interest income from loans of $3.6$2.2 million principally due to higher average balances outstanding, partially offset by lower average LIBOR rates.

​

Costs and Expenses

​

For the threenine months ended March 31,September 30, 2021, costs and expenses of our Infrastructure Lending Segment decreased $13.1$9.1 million to $13.0$39.3 million, compared to $26.1$48.4 million for the threenine months ended March 31,September 30, 2020. The decrease was primarily due to (i) a $7.9 million decrease in credit loss provision and a $4.3$3.8 million decrease in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio.portfolio, (ii) a $2.4 million decrease in credit loss provision and (iii) a $2.0 million decrease in general and administrative expenses. The credit loss provision in the first quarternine months of 2020 was magnified by the significant deterioration of macroeconomic forecasts due to the initial economic disruption caused by the COVID-19 pandemic. The decrease in interest expense was primarily due to lower average LIBOR rates.

70


Table of Contents

Net Interest Income (amounts in thousands)

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

​

​

March 31,

​

​

​

​

    

2021

    

2020

    

Change

Interest income from loans

​

$

18,808

​

$

22,413

​

$

(3,605)

Interest income from investment securities

​

 

564

​

 

701

​

 

(137)

Interest expense

​

 

(8,841)

​

 

(13,117)

​

 

4,276

Net interest income

​

$

10,531

​

$

9,997

​

$

534

For the Nine Months Ended September 30,
20212020Change
Interest income from loans$61,545 $59,374 $2,171 
Interest income from investment securities1,659 2,019 (360)
Interest expense(27,916)(31,709)3,793 
Net interest income$35,288 $29,684 $5,604 
​


For the threenine months ended March 31,September 30, 2021, net interest income of our Infrastructure Lending Segment increased $0.5$5.6 million to $10.5$35.3 million, compared to $10.0$29.7 million for the threenine months ended March 31,September 30, 2020. The increase reflects the increase in interest income from loans and the decrease in interest expense on the secured financing facilities, partially offset by the decrease in interest income, both as discussed in the sections above.

​

During the threenine months ended March 31,September 30, 2021 and 2020, the weighted average unlevered yields on the Infrastructure Lending Segment’s investments were as follows:

For the Nine Months Ended September 30,
20212020
Loans and investment securities held-for-investment4.9 %5.3 %
Loans held-for-sale2.8 %3.7 %
​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

March 31,

​

​

​

2021

​

2020

​

Loans and investment securities held-for-investment

​

4.8

%

6.1

%

Loans held-for-sale

​

3.2

%

3.6

%

​

During the threenine months ended March 31,September 30, 2021 and 2020, the Infrastructure Lending Segment’s weighted average secured borrowing rate,rates, inclusive of the amortization of deferred financing fees, was 2.9%were 2.8% and 4.4%3.5%, respectively.


​

Other Income (Loss)

Loss

​

For the threenine months ended March 31,September 30, 2021 and 2020, other incomeloss of our Infrastructure Lending Segment increased $1.4decreased $1.9 million to $0.1$0.5 million, compared to a loss of $1.3$2.4 million for the threenine months ended March 31,September 30, 2020. The improvementdecrease in other income (loss)loss primarily reflects a $1.7$2.2 million favorable change in gain (loss) on derivatives consisting of a $2.2 million favorable change on interest rate swaps and swap guarantees, partially offset by a $0.5 million decrease in gains on foreign currency hedges.other derivatives.

76
​Table of Contents

Property Segment

​

Change in Results by Portfolio (amounts in thousands)

$ Change from prior period
RevenuesCosts and
 expenses		Gain (loss) on derivative
 financial instruments		Other income (loss)Income (loss) before
 income taxes
Master Lease Portfolio$(11)$(125)$— $— $114 
Medical Office Portfolio799 (3,037)38,846 — 42,682 
Woodstar I Portfolio2,848 255 338 1,702 4,633 
Woodstar II Portfolio2,023 4,535 — (141)(2,653)
Other/Corporate(14)(553)— 280 819 
Total$5,645 $1,075 $39,184 $1,841 $45,595 
​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

$ Change from prior period

​

​

​

​

Costs and

​

Gain (loss) on derivative

​

​

​

Income (loss) before

​

​

Revenues

    

expenses

    

financial instruments

    

Other income (loss)

    

income taxes

Master Lease Portfolio

​

$

—

​

$

(4)

​

$

—

​

$

—

​

$

4

Medical Office Portfolio

​

​

388

​

​

(753)

​

​

34,825

​

​

—

​

​

35,966

Woodstar I Portfolio

​

​

305

​

​

(139)

​

​

122

​

​

—

​

​

566

Woodstar II Portfolio

​

​

368

​

​

284

​

​

—

​

​

(141)

​

​

(57)

Ireland Portfolio

​

​

—

​

​

—

​

​

—

​

​

—

​

​

—

Investment in unconsolidated entities

​

 

—

​

 

—

​

 

—

​

 

—

​

 

—

Other/Corporate

​

​

—

​

​

(552)

​

​

—

​

​

(6)

​

​

546

Total

​

$

1,061

​

$

(1,164)

​

$

34,947

​

$

(147)

​

$

37,025

​

Revenues

​

For the threenine months ended March 31,September 30, 2021, revenues of our Property Segment increased $5.6 million to $197.3 million, compared to $191.7 million for the nine months ended September 30, 2020, primarily reflecting increased rental rates in the Woodstar Portfolios.

Costs and Expenses

For the nine months ended September 30, 2021, costs and expenses of our Property Segment increased $1.0 million to $65.1$183.6 million, compared to $64.1$182.6 million for the threenine months ended March 31,September 30, 2020.

​

71


Other Income (Loss)

Table of Contents

Costs and Expenses

​

For the threenine months ended March 31,September 30, 2021, costs and expensesother income (loss) of our Property Segment decreased $1.2improved $41.0 million to $59.5 million, compared to $60.7 million for the three months ended March 31, 2020. The decrease in costs and expenses primarily reflects a $1.3 million decrease in interest expense.

​

Other Income (Loss)

​

For the three months ended March 31, 2021, other income of our Property Segment increased $34.8 million to $4.6$3.9 million, compared to a loss of $30.2$37.1 million for the threenine months ended March 31,September 30, 2020. The improvement in other income (loss) was primarily due to a $34.9$39.2 million favorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on borrowings secured by our Medical Office Portfolio.

​

Investing and Servicing Segment

​

Revenues

​

For the threenine months ended March 31,September 30, 2021, and 2020, revenues of our Investing and Servicing Segment were level at $44.5 million. A $6.0increased $16.8 million to $154.5 million, compared to $137.7 million for the nine months ended September 30, 2020. The increase in revenues was primarily due to a $15.5 million increase in servicing fees was offset by decreases in interest income from CMBS and conduit loans and, to a lesser extent, other revenues.

reflecting an increased volume of COVID-19 related loan resolutions.

​

Costs and Expenses

​

For the threenine months ended March 31,September 30, 2021, costs and expenses of our Investing and Servicing Segment decreased $4.4increased $7.4 million to $32.5$106.4 million, compared to $36.9$99.0 million for the threenine months ended March 31,September 30, 2020. The decreaseincrease in costs and expenses was primarily due to decreasesan increase of $2.2$10.7 million in general and administrative expenses reflecting lowerincreased incentive compensation costs and $1.7principally due to higher securitization volume, partially offset by a $1.9 million decrease in interest expense on borrowings related to CMBS, conduit loans CMBS and properties held.

​

Other Income (Loss)

​

For the threenine months ended March 31,September 30, 2021, other income of our Investing and Servicing Segment increased $64.9$47.8 million to $19.0$59.7 million, compared to a loss of $45.9$11.9 million for the threenine months ended March 31,September 30, 2020. The improvementincrease in other income (loss) was primarily due to (i) a $54.4$33.5 million favorable changelesser decrease in fair value of CMBS investments, and (ii) a $28.4$30.4 million favorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments and (iii) a $21.2 million greater increase in fair value of conduit loans, partially offset by (iii)(iv) a $30.3 million decrease in earnings of unconsolidated entities and (v) an $18.1$8.8 million lesser increase in fair value of conduit loans.servicing rights. The fair value of our CMBS investments was adversely affected in the first quarternine months of 2020 by widening credit spreads resulting from market disruption and dislocation caused by the initial impacts of COVID-19. The decrease in earnings of unconsolidated entities reflects the nonrecurrence of realized and unrealized gains totaling $27.9 million resulting from the sale in April 2020 of a portion of our unconsolidated equity interest in a servicing and advisory business.

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​Table of Contents


Corporate and Other Items

​

Corporate Costs and Expenses

​

For the threenine months ended March 31,September 30, 2021, corporate expenses decreased $1.6increased $14.7 million to $71.6$194.7 million, compared to $73.2$180.0 million for the threenine months ended March 31,September 30, 2020. This increase was primarily due to increases of $6.3 million in interest expense on higher average outstanding term loan and unsecured senior note balances, $6.2 million in incentive management fees and amortization of manager equity plan awards and $2.1 million in general and administrative expenses.

Corporate Other Income (Loss)

For the nine months ended September 30, 2021, corporate other income decreased $40.8 million to a loss of $6.4 million, compared to income of $34.4 million for the nine months ended September 30, 2020. This decrease was primarily due to a decrease of $1.9$40.3 million in incentive management fees.

​

​

72

Table of Contents

Corporate Other Income (Loss)

​

For the three months ended March 31, 2021, corporate other income decreased $36.0 million to a loss of $6.8 million, compared to income of $29.2 million for the three months ended March 31, 2020. This was due to an unfavorable change in gain (loss) on interest rate swaps which hedge a portion of our unsecured senior notes used to repay variable-rate secured financing.


​

Securitization VIE Eliminations

​

Refer to the preceding comparison of the three months ended March 31,September 30, 2021 to the three months ended December 31, 2020June 30, 2021 for a discussion of the effect of securitization VIE eliminations.

​

Income Tax Provision

​

Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in TRSs. For the threenine months ended March 31,September 30, 2021, our income taxes increased $8.9tax provision decreased $0.4 million to $2.2$6.4 million, compared to a benefit of $6.7$6.8 million for the threenine months ended March 31,September 30, 2020 due to an increasea decrease in overall taxable income of our TRSs in the first quarternine months of 2021.

​

Net Income Attributable to Non-controlling Interests

​

During the threenine months ended March 31,September 30, 2021, net income attributable to non-controlling interests increased $10.6$6.4 million to $11.1$33.1 million, compared to $0.5$26.7 million during the threenine months ended March 31,September 30, 2020. The increase was primarily due to non-controlling interests in increased earnings of a consolidated CMBS joint venture in which we hold a 51% interest.
78
Table of Contents

​

​

​

Non-GAAP Financial Measures

​

Distributable Earnings is a non-GAAP financial measure. We calculate Distributable Earnings as GAAP net income (loss) excluding the following:

​(i)

(i)non-cash equity compensation expense;

​non-cash equity compensation expense;

(ii)incentive fees due under our management agreement;

​(ii)

(iii)depreciation and amortization of real estate and associated intangibles;

​incentive fees due under our management agreement;

(iv)acquisition costs associated with successful acquisitions;

​(iii)

(v)any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss); and

​depreciation and amortization of real estate and associated intangibles;

(vi)any deductions for distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein.

​(iv)

acquisition costs associated with successful acquisitions;

(v)any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss); and
(vi)any deductions for distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein.
The CECL reserve has been excluded from Distributable Earnings consistent with other unrealized gains (losses) pursuant to our existing policy for reporting Distributable Earnings. We expect to only recognize such potential credit losses in Distributable Earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but non-recoverability may also be determined if, in our determination, it is nearly certain that all amounts due will not be collected. The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received, or expected to be received, and the book value of the asset, and is reflective of our economic experience as it relates to the ultimate realization of the loan.

​

73

Table of Contents

We believe that Distributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flow from operating activities determined in accordance with GAAP. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our common stock as historically, over time, Distributable Earnings has been a strong indicator of our dividends per share. As a REIT, we generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock. Further, Distributable Earnings helps us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations, and is a performance metric we consider when declaring our dividends. We also use Distributable Earnings (previously defined as “Core Earnings”) to compute the incentive fee due under our management agreement.

​

Distributable Earnings does not represent net income (loss) or cash generated from operating activities and should not be considered as an alternative to GAAP net income (loss), or an indication of our GAAP cash flows from operations, a measure of our liquidity, taxable income, or an indication of funds available for our cash needs. In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Distributable Earnings may not be comparable to the Distributable Earnings reported by other companies.

​

The weighted average diluted share count applied to Distributable Earnings for purposes of determining Distributable Earnings per share (“EPS”) is computed using the GAAP diluted share count, adjusted for the following:
(i)

​Unvested stock awards – Currently, unvested stock awards are excluded from the denominator of GAAP EPS. The related compensation expense is also excluded from Distributable Earnings. In order to effectuate dilution from these awards in the Distributable Earnings computation, we adjust the GAAP diluted share count to include these shares.

(i)Unvested stock awards – Currently, unvested stock awards are excluded from the denominator of GAAP EPS. The related compensation expense is also excluded from Distributable Earnings. In order to effectuate dilution from these awards in the Distributable Earnings computation, we adjust the GAAP diluted share count to include these shares.

​(ii)

(ii)Convertible Notes – Conversion of our Convertible Notes is an event that is contingent upon numerous factors, none of which are in our control, and is an event that may or may not occur. Consistent with the treatment of other unrealized adjustments to Distributable Earnings, we adjust the GAAP diluted share count to exclude the potential shares issuable upon conversion until a conversion occurs.

​Convertible Notes – Conversion of our Convertible Notes is an event that is contingent upon numerous factors, none of which are in our control, and is an event that may or may not occur. Consistent with the treatment of other unrealized adjustments to Distributable Earnings, we adjust the GAAP diluted share count to exclude the potential shares issuable upon conversion until a conversion occurs.

(iii)Subsidiary equity – The intent of a February 2018 amendment to our management agreement (the “Amendment”) is to treat subsidiary equity in the same manner as if parent equity had been issued. The Class A Units issued in connection with the acquisition of assets in our Woodstar II Portfolio are currently excluded from our GAAP diluted share count, with the subsidiary equity represented as non-controlling interests in consolidated subsidiaries on our GAAP balance sheet. Consistent with the Amendment, we adjust GAAP diluted share count to include these subsidiary units.

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​Table of Contents

(iii)Subsidiary equity – The intent of a February 2018 amendment to our management agreement (the “Amendment”) is to treat subsidiary equity in the same manner as if parent equity had been issued. The Class A Units issued in connection with the acquisition of assets in our Woodstar II Portfolio are currently excluded from our GAAP diluted share count, with the subsidiary equity represented as non-controlling interests in consolidated subsidiaries on our GAAP balance sheet. Consistent with the Amendment, we adjust GAAP diluted share count to include these subsidiary units.    
The following table presents our diluted weighted average shares used in our GAAP EPS calculation reconciled to our diluted weighted average shares used in our Distributable EPS calculation (amounts in thousands):

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

March 31, 2021

​

December 31, 2020

​

March 31, 2020

Diluted weighted average shares - GAAP EPS

​

293,231

​

292,900

​

280,990

Add: Unvested stock awards

​

4,484

​

3,361

​

2,723

Add: Woodstar II Class A Units

​

10,622

​

10,598

​

10,738

Add: Other dilutive securities not included above

​

—

​

—

​

685

Less: Convertible Notes dilution

​

(9,649)

​

(9,649)

​

—

Diluted weighted average shares - Distributable EPS

 

298,688

 

297,210

 

295,136

​

For the Three Months EndedFor the Nine Months Ended September 30,
September 30, 2021June 30, 202120212020
Diluted weighted average shares - GAAP EPS295,448 294,571 294,393 281,868 
Add: Unvested stock awards4,167 4,398 4,274 2,587 
Add: Woodstar II Class A Units9,849 10,383 10,282 10,676 
Less: Convertible Notes dilution(9,649)(9,649)(9,649)— 
Diluted weighted average shares - Distributable EPS299,815 299,703 299,300 295,131 
The definition of Distributable Earnings allows management to make adjustments, subject to the approval of a majority of our independent directors, in situations where such adjustments are considered appropriate in order for Distributable Earnings to be calculated in a manner consistent with its definition and objective. No adjustments to the definition of Distributable Earnings became effective during the threenine months ended March 31,September 30, 2021.

​

74

The following table summarizes our quarterly Distributable Earnings per weighted average diluted share for the nine months ended September 30, 2021 and 2020:
Distributable Earnings For the Three-Month Periods Ended
March 31,June 30,September 30,
2021$0.50 $0.51 $0.52 
20200.55 0.43 0.50 


80

TableTable of Contents

The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended March 31,September 30, 2021, by business segment (amounts in thousands, except per share data):

​

Commercial
and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateTotal
Revenues$197,045 $22,172 $66,727 $52,441 $— $338,385 
Costs and expenses(62,457)(12,207)(62,431)(33,704)(60,703)(231,502)
Other income (loss)25,633 300 (334)15,869 (446)41,022 
Income (loss) before income taxes160,221 10,265 3,962 34,606 (61,149)147,905 
Income tax (provision) benefit(5,652)488 — (2,337)— (7,501)
Income attributable to non-controlling interests(3)— (4,691)(7,108)— (11,802)
Net income (loss) attributable to Starwood Property Trust, Inc.154,566 10,753 (729)25,161 (61,149)128,602 
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units— — 4,691 — — 4,691 
Non-cash equity compensation expense1,787 423 54 1,108 6,080 9,452 
Management incentive fee— — — — 953 953 
Acquisition and investment pursuit costs(98)— (89)— — (187)
Depreciation and amortization252 91 17,950 3,884 — 22,177 
Credit loss provision (reversal), net19 (582)— — — (563)
Interest income adjustment for securities(171)— — 3,748 — 3,577 
Extinguishment of debt, net— — — — (246)(246)
Other non-cash items3 — (282)173 (2)(108)
Reversal of GAAP unrealized (gains) / losses on:
Loans(22,464)— — (9,263)— (31,727)
Securities8,682 — — (2,870)— 5,812 
Derivatives(40,473)(150)(1,495)(4,660)2,406 (44,372)
Foreign currency26,820 168 16 (1)— 27,003 
(Earnings) loss from unconsolidated entities(1,666)(399)— (153)— (2,218)
Sales of properties— — — — — — 
Recognition of Distributable realized gains / (losses) on:
Loans19,010 — — 9,141 — 28,151 
Securities(11,093)— — 3,642 — (7,451)
Derivatives6,129 — (35)4,183 — 10,277 
Foreign currency(1,171)(13)(16)1 — (1,199)
Earnings (loss) from unconsolidated entities1,806 399 — 261 — 2,466 
Sales of properties— — — — — — 
Distributable Earnings (Loss)$141,938 $10,690 $20,065 $34,355 $(51,958)$155,090 
Distributable Earnings (Loss) per Weighted Average Diluted Share$0.47 $0.04 $0.07 $0.11 $(0.17)$0.52 
81
Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

Commercial

    

​

    

​

    

​

    

​

    

​

​

​

and

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential

​

Infrastructure

​

​

​

Investing

​

​

​

​

​

​

Lending

​

Lending

​

Property

​

and Servicing

​

​

​

​

​

​

Segment

​

Segment

​

Segment

​

Segment

​

Corporate

​

Total

Revenues

​

$

190,531

​

$

19,465

​

$

65,144

​

$

44,547

​

$

—

​

$

319,687

Costs and expenses

​

 

(56,414)

​

 

(12,956)

​

 

(59,498)

​

 

(32,457)

​

​

(71,647)

​

 

(232,972)

Other income (loss)

​

 

21,161

​

 

95

​

 

4,608

​

 

18,960

​

 

(6,843)

​

 

37,981

Income (loss) before income taxes

​

 

155,278

​

 

6,604

​

 

10,254

​

 

31,050

​

​

(78,490)

​

 

124,696

Income tax provision

​

 

(1,505)

​

 

(92)

​

 

—

​

 

(633)

​

​

—

​

 

(2,230)

Income attributable to non-controlling interests

​

 

(3)

​

 

—

​

 

(5,077)

​

 

(6,008)

​

 

—

​

 

(11,088)

Net income (loss) attributable to Starwood Property Trust, Inc.

​

​

153,770

​

 

6,512

​

 

5,177

​

 

24,409

​

​

(78,490)

​

 

111,378

Add / (Deduct):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Non-controlling interests attributable to Woodstar II Class A Units

​

​

—

​

​

—

​

​

5,077

​

​

—

​

​

—

​

 

5,077

Non-cash equity compensation expense

​

​

1,781

​

​

300

​

​

31

​

​

881

​

​

7,317

​

 

10,310

Management incentive fee

​

​

—

​

​

—

​

​

—

​

​

—

​

​

13,123

​

 

13,123

Acquisition and investment pursuit costs

​

​

(164)

​

​

—

​

​

(89)

​

​

—

​

​

—

​

 

(253)

Depreciation and amortization

​

​

247

​

​

91

​

​

18,161

​

​

3,603

​

​

—

​

 

22,102

Credit loss (reversal) provision, net

​

​

(529)

​

​

573

​

​

—

​

​

—

​

​

—

​

 

44

Interest income adjustment for securities

​

​

(1,300)

​

​

—

​

​

—

​

​

3,995

​

​

—

​

 

2,695

Extinguishment of debt, net

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(246)

​

​

(246)

Income tax (provision) benefit associated with realized (gains) losses

​

​

(6,495)

​

​

—

​

​

—

​

​

405

​

​

—

​

​

(6,090)

Other non-cash items

​

​

3

​

​

—

​

​

(337)

​

​

207

​

​

415

​

 

288

Reversal of GAAP unrealized (gains) / losses on:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

10,714

​

​

—

​

​

—

​

​

(1,236)

​

​

—

​

 

9,478

Securities

​

​

2,050

​

​

—

​

​

—

​

​

(7,170)

​

​

—

​

​

(5,120)

Derivatives

​

​

(27,171)

​

​

(745)

​

​

(6,446)

​

​

(9,719)

​

​

9,313

​

 

(34,768)

Foreign currency

​

​

11,594

​

​

49

​

​

(25)

​

​

63

​

​

—

​

 

11,681

(Earnings) loss from unconsolidated entities

​

​

(1,753)

​

​

254

​

​

—

​

​

(589)

​

​

—

​

 

(2,088)

Sales of properties

​

​

(17,693)

​

​

—

​

​

—

​

​

—

​

​

—

​

 

(17,693)

Recognition of Distributable realized gains / (losses) on:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

14,553

​

​

—

​

​

—

​

​

4,672

​

​

—

​

​

19,225

Realized credit loss

​

​

(7,757)

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(7,757)

Securities

​

​

(2,861)

​

​

—

​

​

—

​

​

1,776

​

​

—

​

 

(1,085)

Derivatives

​

​

1,950

​

​

—

​

​

(35)

​

​

1,595

​

​

—

​

 

3,510

Foreign currency

​

​

4,784

​

​

(10)

​

​

25

​

​

(63)

​

​

—

​

 

4,736

Earnings (loss) from unconsolidated entities

​

​

3,218

​

​

(254)

​

​

—

​

​

964

​

​

—

​

 

3,928

Sales of properties

​

​

8,298

​

​

—

​

​

—

​

​

—

​

​

—

​

 

8,298

Distributable Earnings (Loss)

​

$

147,239

​

$

6,770

​

$

21,539

​

$

23,793

​

$

(48,568)

​

$

150,773

Distributable Earnings (Loss) per Weighted Average Diluted Share

​

$

0.49

​

$

0.02

​

$

0.07

​

$

0.08

​

$

(0.16)

​

$

0.50

​

75

Table of Contents

The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended December 31, 2020,June 30, 2021, by business segment (amounts in thousands, except per share data):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Commercial

    

​

​

    

​

    

​

    

​

    

​

​

​

and

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential

​

Infrastructure

​

​

​

Investing

​

​

​

​

​

​

Lending

​

Lending

​

Property

​

and Servicing

​

​

​

​

​

​

Segment

​

Segment

​

Segment

​

Segment

​

Corporate

​

Total

Revenues

​

$

196,309

​

$

19,250

​

$

64,065

​

$

45,372

​

$

—

​

$

324,996

Costs and expenses

​

 

(50,999)

​

​

(5,555)

​

​

(61,289)

​

​

(39,722)

​

​

(73,965)

​

​

(231,530)

Other income (loss)

​

 

13,318

​

​

(259)

​

​

391

​

​

22,349

​

​

(1,239)

​

​

34,560

Income (loss) before income taxes

​

 

158,628

​

​

13,436

​

​

3,167

​

​

27,999

​

​

(75,204)

​

​

128,026

Income tax provision

​

 

(5,556)

​

​

(120)

​

​

—

​

​

(7,705)

​

​

—

​

​

(13,381)

(Income) loss attributable to non-controlling interests

​

 

(4)

​

​

—

​

​

(5,100)

​

​

(2,573)

​

​

—

​

​

(7,677)

Net income (loss) attributable to Starwood Property Trust, Inc.

​

​

153,068

​

​

13,316

​

​

(1,933)

​

​

17,721

​

​

(75,204)

​

​

106,968

Add / (Deduct):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Non-controlling interests attributable to Woodstar II Class A Units

​

​

—

​

​

—

​

​

5,100

​

​

—

​

​

—

​

​

5,100

Non-cash equity compensation expense

​

​

891

​

​

299

​

​

34

​

​

869

​

​

6,707

​

​

8,800

Management incentive fee

​

​

—

​

​

—

​

​

—

​

​

—

​

​

14,974

​

​

14,974

Acquisition and investment pursuit costs

​

​

(278)

​

​

—

​

​

(89)

​

​

—

​

​

—

​

​

(367)

Depreciation and amortization

​

​

372

​

​

86

​

​

18,736

​

​

3,832

​

​

—

​

​

23,026

Credit loss reversal, net

​

​

(5,037)

​

​

(7,094)

​

​

—

​

​

—

​

​

—

​

​

(12,131)

Interest income adjustment for securities

​

​

(1,102)

​

​

—

​

​

—

​

​

5,245

​

​

—

​

​

4,143

Extinguishment of debt, net

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(247)

​

​

(247)

Income tax provision associated with fair value adjustments

​

​

4,883

​

​

—

​

​

—

​

​

550

​

​

—

​

​

5,433

Other non-cash items

​

​

4

​

​

—

​

​

(374)

​

​

239

​

​

161

​

​

30

Reversal of GAAP unrealized (gains) / losses on:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

(20,002)

​

​

—

​

​

—

​

​

(33,422)

​

​

—

​

​

(53,424)

Securities

​

​

6,294

​

​

—

​

​

—

​

​

15,377

​

​

—

​

​

21,671

Derivatives

​

​

48,046

​

​

105

​

​

(2,480)

​

​

(2,218)

​

​

3,945

​

​

47,398

Foreign currency

​

​

(43,962)

​

​

(260)

​

​

(39)

​

​

5

​

​

—

​

​

(44,256)

Earnings from unconsolidated entities

​

​

(4,804)

​

​

(431)

​

​

—

​

​

(341)

​

​

—

​

​

(5,576)

Recognition of Distributable realized gains / (losses) on:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

2,461

​

​

—

​

​

—

​

​

32,528

​

​

—

​

​

34,989

Securities

​

​

398

​

​

—

​

​

—

​

​

(9,389)

​

​

—

​

​

(8,991)

Derivatives

​

​

(3,858)

​

​

—

​

​

(34)

​

​

20

​

​

—

​

​

(3,872)

Foreign currency

​

​

631

​

​

14

​

​

39

​

​

(5)

​

​

—

​

​

679

Earnings from unconsolidated entities

​

​

2,914

​

​

431

​

​

—

​

​

745

​

​

—

​

​

4,090

Distributable Earnings (Loss)

​

$

140,919

​

$

6,466

​

$

18,960

​

$

31,756

​

$

(49,664)

​

$

148,437

Distributable Earnings (Loss) per Weighted Average Diluted Share

​

$

0.47

​

$

0.02

​

$

0.07

​

$

0.11

​

$

(0.17)

​

$

0.50

76

Commercial
and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateTotal
Revenues$184,490 $21,795 $65,454 $57,504 $— $329,243 
Costs and expenses(47,543)(14,178)(61,714)(40,253)(62,376)(226,064)
Other income (loss)(4,051)(930)(397)24,904 927 20,453 
Income (loss) before income taxes132,896 6,687 3,343 42,155 (61,449)123,632 
Income tax benefit (provision)8,043 (58)— (4,632)— 3,353 
Income attributable to non-controlling interests(4)— (4,914)(5,757)— (10,675)
Net income (loss) attributable to Starwood Property Trust, Inc.140,935 6,629 (1,571)31,766 (61,449)116,310 
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units— — 4,914 — — 4,914 
Non-cash equity compensation expense1,859 440 57 1,190 6,051 9,597 
Management incentive fee— — — — 5,031 5,031 
Acquisition and investment pursuit costs(196)— (88)(58)— (342)
Depreciation and amortization251 90 17,969 3,812 — 22,122 
Credit loss (reversal) provision, net(12,447)603 — — — (11,844)
Interest income adjustment for securities(861)— — 3,662 — 2,801 
Extinguishment of debt, net— — — — (247)(247)
Other non-cash items6 — (262)205 — (51)
Reversal of GAAP unrealized (gains) / losses on:
Loans(12,329)— — (33,538)— (45,867)
Securities9,402 — — 12,585 — 21,987 
Derivatives3,594 (173)(1,401)4,927 1,532 8,479 
Foreign currency(2,715)62 25 1 — (2,627)
(Earnings) loss from unconsolidated entities(1,996)70 — 507 — (1,419)
Sales of properties— — — (9,723)— (9,723)
Recognition of Distributable realized gains / (losses) on:
Loans11,062 — — 30,623 — 41,685 
Securities(18,088)— — (2,779)— (20,867)
Derivatives(2,546)— (34)(718)— (3,298)
Foreign currency6,518 (31)(25)(1)— 6,461 
Earnings (loss) from unconsolidated entities4,444 (70)— 776 — 5,150 
Sales of properties— — — 4,975 — 4,975 
Distributable Earnings (Loss)$126,893 $7,620 $19,584 $48,212 $(49,082)$153,227 
Distributable Earnings (Loss) per Weighted Average Diluted Share$0.42 $0.02 $0.07 $0.16 $(0.16)$0.51 

Table of Contents

The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended March 31, 2020, by business segment (amounts in thousands, except per share data):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Commercial

    

​

​

    

​

    

​

    

​

    

​

​

​

and

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential

​

Infrastructure

​

​

​

Investing

​

​

​

​

​

​

Lending

​

Lending

​

Property

​

and Servicing

​

​

​

​

​

​

Segment

​

Segment

​

Segment

​

Segment

​

Corporate

​

Total

Revenues

​

$

211,437

​

$

23,257

​

$

64,083

​

$

44,495

​

$

—

​

$

343,272

Costs and expenses

​

 

(104,780)

​

​

(26,079)

​

​

(60,662)

​

​

(36,928)

​

​

(73,213)

​

​

(301,662)

Other income (loss)

​

 

(66,541)

​

​

(1,348)

​

​

(30,192)

​

​

(45,918)

​

​

29,235

​

​

(114,764)

Income (loss) before income taxes

​

 

40,116

​

​

(4,170)

​

​

(26,771)

​

​

(38,351)

​

​

(43,978)

​

​

(73,154)

Income tax benefit

​

 

4,422

​

​

145

​

​

—

​

​

2,162

​

​

—

​

​

6,729

(Income) loss attributable to non-controlling interests

​

 

(3)

​

​

—

​

​

(5,111)

​

​

4,770

​

​

—

​

​

(344)

Net income (loss) attributable to Starwood Property Trust, Inc.

​

​

44,535

​

​

(4,025)

​

​

(31,882)

​

​

(31,419)

​

​

(43,978)

​

​

(66,769)

Add / (Deduct):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Non-controlling interests attributable to Woodstar II Class A Units

​

​

—

​

​

—

​

​

5,111

​

​

—

​

​

—

​

​

5,111

Non-cash equity compensation expense

​

​

1,112

​

​

466

​

​

73

​

​

1,263

​

​

5,886

​

​

8,800

Management incentive fee

​

​

—

​

​

—

​

​

—

​

​

—

​

​

15,799

​

​

15,799

Acquisition and investment pursuit costs

​

​

358

​

​

—

​

​

(89)

​

​

—

​

​

—

​

​

269

Depreciation and amortization

​

​

355

​

​

51

​

​

19,381

​

​

3,807

​

​

—

​

​

23,594

Credit loss provision, net

​

​

40,217

​

​

8,452

​

​

—

​

​

—

​

​

—

​

​

48,669

Interest income adjustment for securities

​

​

124

​

​

—

​

​

—

​

​

6,315

​

​

—

​

​

6,439

Extinguishment of debt, net

​

​

—

​

​

—

​

​

—

​

​

—

​

​

(246)

​

​

(246)

Income tax benefit associated with fair value adjustments

​

​

(5,821)

​

​

—

​

​

—

​

​

(1,442)

​

​

—

​

​

(7,263)

Other non-cash items

​

​

3

​

​

—

​

​

(491)

​

​

248

​

​

156

​

​

(84)

Reversal of GAAP unrealized (gains) / losses on:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

35,517

​

​

—

​

​

—

​

​

(19,383)

​

​

—

​

​

16,134

Securities

​

​

27,879

​

​

—

​

​

—

​

​

47,216

​

​

—

​

​

75,095

Derivatives

​

​

(30,563)

​

​

1,013

​

​

30,569

​

​

19,013

​

​

(27,649)

​

​

(7,617)

Foreign currency

​

​

34,001

​

​

473

​

​

19

​

​

(7)

​

​

—

​

​

34,486

Earnings from unconsolidated entities

​

​

(51)

​

​

—

​

​

—

​

​

(620)

​

​

—

​

​

(671)

Recognition of Distributable realized gains / (losses) on:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans

​

​

2,164

​

​

(62)

​

​

—

​

​

16,559

​

​

—

​

​

18,661

Securities

​

​

—

​

​

—

​

​

—

​

​

(4,212)

​

​

—

​

​

(4,212)

Derivatives

​

​

3,250

​

​

118

​

​

(35)

​

​

(6,087)

​

​

—

​

​

(2,754)

Foreign currency

​

​

(4,271)

​

​

(194)

​

​

(19)

​

​

7

​

​

—

​

​

(4,477)

(Loss) earnings from unconsolidated entities

​

​

(556)

​

​

—

​

​

—

​

​

3,738

​

​

—

​

​

3,182

Distributable Earnings (Loss)

​

$

148,253

​

$

6,292

​

$

22,637

​

$

34,996

​

$

(50,032)

​

$

162,146

Distributable Earnings (Loss) per Weighted Average Diluted Share

​

$

0.50

​

$

0.02

​

$

0.08

​

$

0.12

​

$

(0.17)

​

$

0.55

​

77

Table of Contents

Three Months Ended March 31,September 30, 2021 Compared to the Three Months Ended December 31, 2020June 30, 2021


​

Commercial and Residential Lending Segment

​

The Commercial and Residential Lending Segment’s Distributable Earnings increased by $6.3$15.0 million, from $140.9$126.9 million during the fourthsecond quarter of 20202021 to $147.2$141.9 million in the firstthird quarter of 2021. After making adjustments for the calculation of Distributable Earnings, revenues were $189.2$196.9 million, costs and expenses were $62.8$60.5 million, other income was $28.8$11.2 million and income tax provision was $8.0$5.7 million.

​

Revenues, consisting principally of interest income on loans, decreasedincreased by $6.0$13.2 million in the firstthird quarter of 2021, primarily due to decreasesan increase in interest income from loans of $2.4$13.8 million, andslightly offset by a decrease in interest income from investment securities of $2.9 million and a decrease in rental income from foreclosed properties of $0.6 million due to the sale of a property in the first quarter of 2021.$0.5 million. The decreaseincrease in interest income from loans was principally due to lower(i) higher prepayment related income on commercial loans and (ii) higher average balances of both commercial and residential loans, reflecting for
82
residential loans the timing of purchases and securitizations. The decrease in interest income from investment securities was primarily due to lower average RMBS investment balances reflecting sales of RMBS late in the fourth quarter of 2020.net repayments and liquidations.

​

Costs and expenses increased by $7.8$2.4 million in the firstthird quarter of 2021, primarily due to a $7.8 million write-off of an unsecured commercial loan and a $2.3$3.7 million increase in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio, partially offset by a $2.3$1.2 million decrease in general and administrative expenses reflecting lower professional fees.

expenses.

​

Other income increased by $27.4$17.9 million in the firstthird quarter of 2021, primarily due to (i) a $12.1$14.5 million decrease in recognized losses on RMBS investments, (ii) a $4.7 million increase in residential loan sale and securitization gains, including an $8.3unfavorable change in realized gains (losses) on related interest rate derivatives, (iii) the nonrecurrence of $4.6 million gain on saleof transfer taxes related to the foreclosure of a foreclosed propertyresidential conversion project in the firstsecond quarter of 2021 and (iv) a $5.9$3.1 million favorable change in realized gains (losses) on interest rate and foreign currency derivatives.

derivatives, net of related foreign currency gains (losses), associated with commercial loan activity, all partially offset by (v) the nonrecurrence of $7.5 million of gains on sales of RMBS in the second quarter of 2021.

​

Income taxes, which principally relate to the taxable nature of this segment’s residential loan securitization activities which are housed in TRSs, increased $7.3$13.7 million from a benefit of $8.0 million to a provision of $5.7 million primarily due to an increasetaxable income of those TRSs in realized gains from the securitization and salethird quarter of residential loans.  The majority2021 compared to losses in the second quarter of the GAAP income tax provision related to these loans was recorded in 2020 when the loans were marked to their fair values.  2021.
Because the net fair value increases were unrealized, they along with their corresponding income tax provision were previously adjusted in our reconciliation to Distributable Earnings. Upon recognition of the realized gains this quarter for Distributable Earnings purposes, the corresponding income tax provision was likewise recognized.  

​

Infrastructure Lending Segment

​

The Infrastructure Lending Segment’s Distributable Earnings increased by $0.3$3.1 million, from $6.5$7.6 million during the second quarter of 2021 to $10.7 million in the fourth quarter of 2020 to $6.8 million in the firstthird quarter of 2021. After making adjustments for the calculation of Distributable Earnings, revenues were $19.5$22.2 million, costs and expenses were $12.0$12.3 million and other lossincome was $0.6$0.3 million.

​

Revenues, consisting principally of interest income on loans, increased by $0.2$0.4 million in the firstthird quarter of 2021, primarily due to an increase in interest income from loans reflecting higher prepayment related income.

Costs and expenses decreased by $0.8 million in the third quarter of 2021, primarily due to a slight increase in interest income from loans.

​

Costs and expenses decreased by $0.3 million in the first quarter of 2021, primarily due to a slight decrease in interest expense on the secured debt facilities used to finance this segment’s investments.

​

Other loss increasedincome (loss) improved by $0.2$1.4 million in the firstthird quarter of 2021.

​

​

2021 primarily due to a $0.9 million lower loss on extinguishment of debt.

78


Table of Contents

Property Segment

​

Distributable Earnings by Portfolio (amounts in thousands)

For the Three Months Ended
September 30, 2021June 30, 2021Change
Master Lease Portfolio$4,307 $4,306 $1 
Medical Office Portfolio4,902 4,968 (66)
Woodstar I Portfolio6,449 5,846 603 
Woodstar II Portfolio5,156 5,262 (106)
Other/Corporate(749)(798)49 
Distributable Earnings$20,065 $19,584 $481 
​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

​

    

March 31, 2021

    

December 31, 2020

    

Change

Master Lease Portfolio

​

$

4,312

​

$

4,300

​

$

12

Medical Office Portfolio

​

​

5,513

​

​

5,339

​

​

174

Woodstar I Portfolio

​

​

6,338

​

​

4,907

​

​

1,431

Woodstar II Portfolio

​

​

6,100

​

​

5,470

​

​

630

Other/Corporate

​

​

(724)

​

​

(1,056)

​

​

332

Distributable Earnings

​

$

21,539

​

$

18,960

​

$

2,579

​

The Property Segment’s Distributable Earnings increased by $2.6$0.5 million, from $18.9$19.6 million during the fourthsecond quarter of 20202021 to $21.5$20.1 million in the firstthird quarter of 2021. After making adjustments for the calculation of Distributable Earnings, revenues were $64.8$66.5 million, costs and expenses were $41.5$44.6 million and other loss was $1.8 million.

​

Revenues increased by $1.1 million in the first quarter of 2021.

​

Costs and expenses decreased by $1.2 million in the firstthird quarter of 2021.

​

Other loss decreased

Costs and expenses increased by $0.3$0.7 million in the firstsecond quarter of 2021.

​

Other loss was relatively unchanged in the third quarter of 2021.

Investing and Servicing Segment

​

The Investing and Servicing Segment’s Distributable Earnings decreased by $8.0$13.8 million, from $31.8$48.2 million during the fourthsecond quarter of 20202021 to $23.8$34.4 million in the firstthird quarter of 2021. After making adjustments for the calculation of
83
Distributable Earnings, revenues were $48.8$56.5 million, costs and expenses were $28.0$28.8 million, other income was $6.8$15.6 million, income tax provision was $0.2$2.3 million and the deduction of income attributable to non-controlling interests was $3.6$6.6 million.

​

Revenues decreased by $2.1$5.0 million in the firstthird quarter of 2021, primarily due to (i) the nonrecurrence of a $2.3 million origination fee on a loan that we co-originated in the second quarter of 2021 for the purpose of contributing into a single-asset single-borrower CMBS transaction, (ii) a $0.9 million decrease in servicing fees, (iii) a $0.8 million decrease in rental income primarily due to the sale of a property in the second quarter of 2021 and (iv) a $0.6 million decrease in interest income from CMBS and conduit loans. The treatment of CMBS interest income on a GAAP basis is complicated by our application of the ASC 810 consolidation rules. In an attempt to treat these securities similar to the trust’s other investment securities, we compute distributable interest income pursuant to an effective yield methodology. In doing so, we segregate the portfolio into various categories based on the components of the bonds’ cash flows and the volatility related to each of these components. We then accrete interest income on an effective yield basis using the components of cash flows that are reliably estimable. Other minor adjustments are made to reflect management’s expectations for other components of the projected cash flow stream. The decrease in interest income reflects decreases of $1.3$0.4 million from CMBS and $0.8$0.2 million from conduit loans held-for-sale.

​

Costs and expenses decreased by $7.0$6.6 million in the firstthird quarter of 2021, primarily due to a decrease in general and administrative expenses reflecting lowerdecreased incentive compensation, principally due to lower securitization volume.

​

Other income includes profit realized upon securitization of loans by our conduit business, gains on sales of CMBS and operating properties, gains and losses on derivatives that were either effectively terminated or novated, and earnings from unconsolidated entities. These items are typically offset by a decrease in the fair value of our domestic servicing rights intangible which reflects the expected amortization of this deteriorating asset, net of increases in fair value due to the attainment of new servicing contracts. Derivatives include instruments which hedge interest rate risk and credit risk on our conduit loans.loans and CMBS investments. For GAAP purposes, the loans, CMBS and derivatives are accounted for at fair value, with all changes in fair value (realized or unrealized) recognized in earnings. The adjustments to Distributable Earnings outlined above are also applied to the GAAP earnings of our unconsolidated entities. Other income decreased by $19.7$14.6 million in the firstthird quarter of 2021 primarily due to a decrease in realized gains on conduit loans of $27.9$21.5 million, partially offset by a $10.2$5.0 million decreasefavorable change in recognized lossesrealized gains (losses) on CMBS.

​

related interest rate derivatives.

79


Table of Contents

Income taxes, which principally relate to the taxable nature of this segment’s loan servicing and loan securitization businesses which are housed in TRSs, decreased $6.9$2.3 million due to lower taxable income of those TRSs in the firstthird quarter of 2021.

​

Income attributable to non-controlling interests increased $0.1$3.1 million in the firstthird quarter of 2021.

2021, primarily due to non-controlling interests in increased distributable earnings of a consolidated CMBS joint venture in which we hold a 51% interest.

​

Corporate

​

Corporate costs and expenses decreasedloss increased by $1.1$2.9 million, from $49.7$49.1 million during the fourthsecond quarter of 20202021 to $48.6$52.0 million in the firstthird quarter of 2021, primarily due to a $2.5 million increase in interest expense mainly due to our issuance of the 2026 Senior Notes during the third quarter of 2021.

​

Three


84
The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the nine months ended September 30, 2021, by business segment (amounts in thousands, except per share data):
Commercial
and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateTotal
Revenues$572,066 $63,432 $197,325 $154,492 $— $987,315 
Costs and expenses(166,414)(39,341)(183,643)(106,414)(194,726)(690,538)
Other income (loss)42,743 (535)3,877 59,733 (6,362)99,456 
Income (loss) before income taxes448,395 23,556 17,559 107,811 (201,088)396,233 
Income tax benefit (provision)886 338 — (7,602)— (6,378)
Income attributable to non-controlling interests(10)— (14,682)(18,873)— (33,565)
Net income (loss) attributable to Starwood Property Trust, Inc.449,271 23,894 2,877 81,336 (201,088)356,290 
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units— — 14,682 — — 14,682 
Non-cash equity compensation expense5,427 1,163 142 3,179 19,448 29,359 
Management incentive fee— — — — 19,107 19,107 
Acquisition and investment pursuit costs(458)— (266)(58)— (782)
Depreciation and amortization750 272 54,080 11,299 — 66,401 
Credit loss (reversal) provision, net(12,957)594 — — — (12,363)
Interest income adjustment for securities(2,332)— — 11,405 — 9,073 
Extinguishment of debt, net— — — — (739)(739)
Income tax (provision) benefit associated with realized (gains) losses(6,495)— — 405 — (6,090)
Other non-cash items12 — (881)585 413 129 
Reversal of GAAP unrealized (gains) / losses on:
Loans(24,079)— — (44,037)— (68,116)
Securities20,134 — — 2,545 — 22,679 
Derivatives(64,050)(1,068)(9,342)(9,452)13,251 (70,661)
Foreign currency35,699 279 16 63 — 36,057 
(Earnings) loss from unconsolidated entities(5,415)(75)— (235)— (5,725)
Sales of properties(17,693)— — (9,723)— (27,416)
Recognition of Distributable realized gains / (losses) on:
Loans44,625 — — 44,436 — 89,061 
Realized credit loss(7,757)— — — — (7,757)
Securities(32,042)— — 2,639 — (29,403)
Derivatives5,533 — (104)5,060 — 10,489 
Foreign currency10,131 (54)(16)(63)— 9,998 
Earnings (loss) from unconsolidated entities9,468 75 — 2,001 — 11,544 
Sales of properties8,298 — — 4,975 — 13,273 
Distributable Earnings (Loss)$416,070 $25,080 $61,188 $106,360 $(149,608)$459,090 
Distributable Earnings (Loss) per Weighted Average Diluted Share$1.39 $0.08 $0.20 $0.36 $(0.50)$1.53 
85
The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the nine months ended September 30, 2020, by business segment (amounts in thousands, except per share data):
Commercial
and
Residential
Lending
Segment		Infrastructure
Lending
Segment		Property
Segment		Investing
and Servicing
Segment		CorporateTotal
Revenues$553,351 $61,737 $191,680 $137,655 $— $944,423 
Costs and expenses(222,862)(48,453)(182,568)(98,955)(180,032)(732,870)
Other (loss) income39,808 (2,453)(37,148)11,875 34,397 46,479 
Income (loss) before income taxes370,297 10,831 (28,036)50,575 (145,635)258,032 
Income tax (provision) benefit(15,535)3 — 8,716 — (6,816)
Income attributable to non-controlling interests(10)— (15,294)(11,191)— (26,495)
Net income (loss) attributable to Starwood Property Trust, Inc.354,752 10,834 (43,330)48,100 (145,635)224,721 
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units— — 15,294 — — 15,294 
Non-cash equity compensation expense3,563 821 185 3,725 14,147 22,441 
Management incentive fee— — — — 15,799 15,799 
Acquisition and investment pursuit costs401 — (266)(72)— 63 
Depreciation and amortization1,095 208 57,808 10,669 — 69,780 
Credit loss provision, net51,252 2,991 — — — 54,243 
Interest income adjustment for securities238 — — 9,856 — 10,094 
Extinguishment of debt, net— — — — (739)(739)
Income tax provision (benefit) associated with fair value adjustments1,612 — — (955)— 657 
Other non-cash items10 — (1,689)703 470 (506)
Reversal of GAAP unrealized (gains) / losses on:
Loans(56,895)— — (22,805)— (79,700)
Securities8,814 — — 36,026 — 44,840 
Derivatives8,816 1,260 32,593 21,986 (23,509)41,146 
Foreign currency1,757 53 53 (2)— 1,861 
(Earnings) loss from unconsolidated entities(3,975)1,198 — (30,504)— (33,281)
Recognition of Distributable realized gains / (losses) on:
Loans45,742 (62)— 22,759 — 68,439 
Securities— — — (8,711)— (8,711)
Derivatives(3,853)118 (439)(13,438)— (17,612)
Foreign currency(5,441)(147)(53)2 — (5,639)
Earnings (loss) from unconsolidated entities2,772 (813)— 17,502 — 19,461 
Sales of properties— — — (5,789)— (5,789)
Distributable Earnings (Loss)$410,660 $16,461 $60,156 $89,052 $(139,467)$436,862 
Distributable Earnings (Loss) per Weighted Average Diluted Share$1.39 $0.06 $0.20 $0.30 $(0.47)$1.48 

Nine Months Ended March 31,September 30, 2021 Compared to the ThreeNine Months Ended March 31,September 30, 2020

​

Commercial and Residential Lending Segment

​

The Commercial and Residential Lending Segment’s Distributable Earnings decreasedincreased by $1.1$5.4 million, from $148.3$410.7 million during the first quarternine months of 2020 to $147.2$416.1 million in the first quarternine months of 2021. After making adjustments for the
86
calculation of Distributable Earnings, revenues were $189.2$569.7 million, costs and expenses were $62.8$181.4 million, other income was $28.8$33.4 million and income tax provision was $8.0$5.6 million.

​

Revenues, consisting principally of interest income on loans, decreasedincreased by $22.4$16.1 million in the first quarternine months of 2021, primarily due to decreasesincreases in interest income from loans of $21.8$23.3 million and investment securities of $1.7 million, partially offset by an increase in rental income from foreclosed properties of $1.2 million. The$1.3 million, partially offset by a decrease in interest income from investment securities of $8.3 million. The increase in interest income from loans was principally due toreflects a $29.7 million increase from commercial loans reflecting higher average balances partially offset by lower prepayment related income lower average balances of residential loans and lower average LIBOR rates (partially(partly mitigated by the LIBOR floors on most of our commercial loans), partially offset by higher and a $6.4 million decrease from residential loans principally due to lower average balances reflecting the timing of commercial loans.purchases and securitizations. The decrease in interest income from investment securities was primarily due to lower LIBOR ratescommercial and residential average investment balances, reflecting net repayments and liquidations, and lower average LIBOR rates affecting interest income from ourcertain commercial investment securities, partially offset by higher average RMBS investment balances.investments.

​

Costs and expenses increased by $0.1$14.8 million in the first quarternine months of 2021, primarily due to (i) a $7.8 million write-off of an unsecured commercial loan and a $2.5$10.5 million increase in general and administrative expenses, partially offset by a $9.7 million decrease in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio and (ii) a $7.8 million write-off of an unsecured commercial loan. The increase in interest expense was primarily due to higher average borrowings outstanding, partially offset by lower average LIBOR rates partially offset by higher average borrowings outstanding.

rates.

​

Other income increaseddecreased by $28.0$4.2 million in the first quarternine months of 2021, primarily due to (i) recognized losses of $39.5 million on RMBS investments primarily due to higher than projected prepayment rates on the underlying residential loan securitization gains, includingloans, (ii) $4.6 million of transfer taxes relating to the foreclosure of a residential conversion project, both partially offset by (iii) a $20.8 million favorable change in realized gains (losses) on related interest rate derivatives and foreign currency transactions, (iv) an $8.3 million gain on sale of a foreclosed property.

property, (v) gains of $7.5 million on sales of RMBS and (vi) a $6.7 million increase in earnings from unconsolidated entities primarily reflecting equity in higher distributable earnings of a residential mortgage originator.

​

Income taxes, which principally relate to the taxable nature of this segment’s residential loan securitization activities which are housed in TRSs, increased $6.6decreased $8.3 million primarily due to an increaselower taxable income of those TRSs in realized gains from the securitization and salenine months of residential loans.  In2021 compared to the first quarternine months of 2020. During 2020, we recorded a GAAP net tax benefitprovision related to unrealized fair value decreasesincreases in our residential loans. This benefit was deducted from GAAP earningsBecause the net fair value increases were unrealized in 2020, they along with their corresponding income tax provision were previously adjusted in our reconciliation to arrive at Distributable Earnings until a gain or loss on these loans was ultimately realized.  In the first quarter of 2021, we realized gains from the sale and securitization of loans which had been previously marked to their fair values, mostly in 2020.Earnings. Upon recognition of the realized gains thisin the first quarter of 2021 for Distributable Earnings purposes, the corresponding income tax provision was likewise recognized.


Infrastructure Lending Segment

​

The Infrastructure Lending Segment’s Distributable Earnings increased by $0.5$8.6 million, from $6.3$16.5 million during the nine months of 2020 to $25.1 million in the first quarter of 2020 to $6.8 million in the first quarternine months of 2021. After making adjustments for the calculation of

80

Table of Contents

Distributable Earnings, revenues were $19.5$63.4 million, costs and expenses were $12.0$37.3 million and other loss was $0.6$1.4 million.

​

Revenues, consisting principally of interest income on loans, decreasedincreased by $3.8$1.7 million in the first quarternine months of 2021, primarily due to a decreasean increase in interest income from loans of $3.6$2.2 million principally due to higher average balances outstanding, partially offset by lower average LIBOR rates.

​

Costs and expenses decreased by $5.1$7.1 million in the first quarternine months of 2021, primarily due to (i) a $4.3$3.8 million decrease in interest expense on the secured debt facilities used to finance this segment’s investment portfolio principally due to lower average LIBOR rates.

rates and (ii) a $2.4 million decrease in general and administrative expenses reflecting lower compensation costs and professional fees.

​

Other loss increased by $0.6$0.5 million in the first quarternine months of 2021.

2021, primarily due to an increased loss on extinguishment of debt resulting from the write-off of deferred financing fees relating to partial debt prepayments from CLO and other loan refinancings.

​











87
Property Segment

​

Distributable Earnings by Portfolio (amounts in thousands)

For the Nine Months Ended September 30,
20212020Change
Master Lease Portfolio$12,925 $12,811 $114 
Medical Office Portfolio15,382 14,526 856 
Woodstar I Portfolio18,633 17,129 1,504 
Woodstar II Portfolio16,518 18,736 (2,218)
Other/Corporate(2,270)(3,046)776 
Distributable Earnings$61,188 $60,156 $1,032 
​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

​

​

March 31,

​

​

​

​

    

2021

    

2020

    

Change

Master Lease Portfolio

​

$

4,312

​

$

4,308

​

$

4

Medical Office Portfolio

​

​

5,513

​

​

6,765

​

​

(1,252)

Woodstar I Portfolio

​

​

6,338

​

​

6,784

​

​

(446)

Woodstar II Portfolio

​

​

6,100

​

​

6,009

​

​

91

Other/Corporate

​

​

(724)

​

​

(1,229)

​

​

505

Distributable Earnings

​

$

21,539

​

$

22,637

​

$

(1,098)

​

The Property Segment’s Distributable Earnings decreasedincreased by $1.1$1.0 million, from $22.6$60.2 million during the first quarternine months of 2020 to $21.5$61.2 million in the first quarternine months of 2021. After making adjustments for the calculation of Distributable Earnings, revenues were $64.8$196.6 million, costs and expenses were $41.5$129.9 million and other loss was $1.8$5.5 million.

​

Revenues increased by $1.2$6.1 million in the first quarternine months of 2021.

2021, primarily reflecting increased rental rates in the Woodstar Portfolios.

​

Costs and expenses increased by $0.1$4.2 million in the first quarter of 2021.

​

Other income decreased by $2.2 million to a loss in the first quarternine months of 2021, primarily due to an unfavorable changea $2.5 million increase in repairs and maintenance.


Other loss increased by $0.9 million in the nine months of 2021 primarily due to a $2.8 million increase in realized gains (losses)losses on certain interest rate derivatives.

derivatives, partially offset by a $2.0 million decreased loss on extinguishment of debt.

​

Investing and Servicing Segment

​

The Investing and Servicing Segment’s Distributable Earnings decreasedincreased by $11.2$17.3 million from $35.0$89.1 million during the first quarternine months of 2020 to $23.8$106.4 million in the first quarternine months of 2021. After making adjustments for the calculation of Distributable Earnings, revenues were $48.8$166.8 million, costs and expenses were $28.0$92.3 million, other income was $6.8$52.9 million, income tax provision was $0.2$7.2 million and the deduction of income attributable to non-controlling interests was $3.6$13.8 million.

​

Revenues decreasedincreased by $2.3$18.3 million in the first quarternine months of 2021, primarily due to decreases of $7.6 million in interest income from CMBS and conduit loans, partially offset by(i) a $6.0$15.5 million increase in servicing fees. The decrease in interest income reflects decreasesfees reflecting an increased volume of $6.2COVID-19 related loan resolutions and (ii) a $2.3 million fromorigination fee on a loan that we co-originated for the purpose of contributing into a single-asset single-borrower CMBS and $1.4 million from conduit loans held-for-sale.

transaction.

​

Costs and expenses decreasedincreased by $3.9$7.4 million in the first quarternine months of 2021, primarily due to decreasesan increase of $1.8$10.7 million in general and administrative expenses reflecting lowerincreased incentive compensation costs and $1.7principally due to higher securitization volume, partially offset by a $1.9 million decrease in interest expense on borrowings related to CMBS, conduit loans CMBS and properties held.

​

81


Table of Contents

Other income decreasedincreased by $15.4$20.7 million in the first quarternine months of 2021, primarily due to decreases(i) a $21.7 million increase in realized gains of $11.9 million on conduit loans, and $11.5 million on CMBS, partially offset by(ii) a $7.3$17.8 million favorable change in gain (loss)realized gains (losses) on related interest rate derivatives and (iii) a $5.6 million decrease in recognized losses on CMBS, all partially offset by (iv) a $15.5 million decrease in distributable earnings of unconsolidated entities, mostly related torepresenting nonrecurring gains in the conduit loans.

nine months of 2020, and (v) an $8.8 million lesser increase in fair value of servicing rights.

​

Income taxes, which principally relate to the taxable nature of this segment’s loan servicing and loan securitization businesses which are housed in TRSs, increased $0.9$15.0 million from a benefit of $0.7$7.8 million to a provision of $0.2$7.2 million due to taxable income of those TRSs in the first quarternine months of 2021.

2021 compared to losses in the nine months of 2020.

​

Income attributable to non-controlling interests decreased $3.5$0.7 million primarily relating to lower distributable earnings of a consolidated CMBS joint venture in which we hold a 51% interest.

​

Corporate

​

Corporate costs and expenses decreasedloss increased by $1.4$10.1 million, from $50.0$139.5 million during the first quarternine months of 2020 to $48.6$149.6 million in the first quarternine months of 2021, primarily due to (i) a $0.9$6.4 million increase in interest expense on higher average outstanding term loan and unsecured senior note balances and (ii) a $3.5 million decrease in realized gains on interest rate swaps which hedge a portion of our unsecured senior notes used to repay variable-rate secured financing and (ii) a $0.7 million decrease in professional fees.

financing.

88

Liquidity and Capital Resources

​

Liquidity is a measure of our ability to meet our cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make new investments where appropriate, pay dividends to our stockholders, and other general business needs. We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next 12 months. Our strategy for managing liquidity and capital resources has not changed since December 31, 2020. Refer to our Form 10-K for a description of these strategies.

​

COVID-19 Pandemic

​

We are continuing to monitor the COVID-19 pandemic, including its variants and itsresurgences, along with the resulting impact on us, the borrowers underlying our commercial and residential real estate-related loans and infrastructure loans (and their tenants), the tenants in the properties we own, our financing sources, and the economy as a whole. Because the ultimate severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing and difficult to predict, the pandemic’s impact on our operations and liquidity remains uncertain and difficult to predict. Further discussion of the potential impacts on us from the COVID-19 pandemic is provided in the section entitled “Risk Factors” in Part I, Item 1A of our Form 10-K.

​

Credit Facilities

​

Shortly after the initial outbreak of the COVID-19 pandemic, we entered into agreements with certain of our secured credit facility lenders in our commercial lending portfolio to temporarily suspend credit mark provisions on certain of their portfolio assets in exchange for: (i) cash repayments; (ii) pledges of additional collateral; and (iii) reductions of available borrowings. 

​

We are in frequent, consistent dialogue with the providers of our secured credit facilities regarding our management of their collateral assets in light of the impacts of the COVID-19 pandemic, including the determination of whether any extensions to these agreements are necessary as these temporary suspensions expire. Our in-house asset management team, along with an experienced team of workout professionals within our special servicer, are skilled in managing loans throughout cycles, which we believe will assist us in achieving maximum resolution on any assets impacted by the COVID-19 pandemic.

​

No such modifications or agreements were made with lenders on credit facilities related to our property, residential lending or infrastructure lending portfolios.

​

​

82


89

Sources of Liquidity

​

Our primary sources of liquidity are as follows:

​

Cash Flows for the ThreeNine Months ended March 31,Ended September 30, 2021 (amounts in thousands)

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

VIE

    

Excluding Investing

​

​

GAAP

​

Adjustments

​

and Servicing VIEs

Net cash provided by operating activities

​

$

270,766

​

$

(353)

​

$

270,413

Cash Flows from Investing Activities:

​

​

​

​

​

​

​

​

​

Origination, purchase and funding of loans held-for-investment

​

 

(2,296,124)

​

 

—

​

 

(2,296,124)

Proceeds from principal collections and sale of loans

​

 

1,051,695

​

 

—

​

 

1,051,695

Purchase and funding of investment securities

​

 

—

​

 

(27,333)

​

 

(27,333)

Proceeds from sales and collections of investment securities

​

 

59,514

​

 

26,085

​

 

85,599

Proceeds from sales of real estate

​

​

30,566

​

​

—

​

​

30,566

Purchases and additions to properties and other assets

​

​

(3,512)

​

​

—

​

​

(3,512)

Net cash flows from other investments and assets

​

 

38,656

​

 

183

​

 

38,839

Net cash used in investing activities

​

 

(1,119,205)

​

 

(1,065)

​

 

(1,120,270)

Cash Flows from Financing Activities:

​

​

​

​

​

​

​

​

​

Proceeds from borrowings

​

 

2,748,317

​

 

—

​

 

2,748,317

Principal repayments on and repurchases of borrowings

​

 

(2,001,336)

​

 

(157)

​

 

(2,001,493)

Payment of deferred financing costs

​

 

(5,052)

​

 

—

​

 

(5,052)

Proceeds from common stock issuances, net of offering costs

​

 

240

​

 

—

​

 

240

Payment of dividends

​

 

(137,667)

​

 

—

​

 

(137,667)

Contributions from non-controlling interests

​

​

2,969

​

​

—

​

 

2,969

Distributions to non-controlling interests

​

 

(8,833)

​

 

158

​

 

(8,675)

Issuance of debt of consolidated VIEs

​

 

11,604

​

 

(11,604)

​

 

—

Repayment of debt of consolidated VIEs

​

 

(27,490)

​

 

27,490

​

 

—

Distributions of cash from consolidated VIEs

​

 

14,481

​

 

(14,481)

​

 

—

Net cash provided by financing activities

​

 

597,233

​

 

1,406

​

 

598,639

Net decrease in cash, cash equivalents and restricted cash

​

 

(251,206)

​

 

(12)

​

 

(251,218)

Cash, cash equivalents and restricted cash, beginning of period

​

 

722,162

​

 

(772)

​

 

721,390

Effect of exchange rate changes on cash

​

 

(1,042)

​

 

—

​

 

(1,042)

Cash, cash equivalents and restricted cash, end of period

​

$

469,914

​

$

(784)

​

$

469,130

​

GAAPVIE
Adjustments		Excluding Investing
and Servicing VIEs
Net cash used in operating activities$(461,753)$(409,435)$(871,188)
Cash Flows from Investing Activities:
Origination, purchase and funding of loans held-for-investment(5,635,707)(23,874)(5,659,581)
Proceeds from principal collections and sale of loans3,441,113 — 3,441,113 
Purchase and funding of investment securities— (175,158)(175,158)
Proceeds from sales and collections of investment securities77,855 153,183 231,038 
Proceeds from sales of real estate60,969 — 60,969 
Purchases and additions to properties and other assets(17,259)— (17,259)
Net cash flows from other investments and assets55,598 308 55,906 
Net cash used in investing activities(2,017,431)(45,541)(2,062,972)
Cash Flows from Financing Activities:
Proceeds from borrowings11,654,848 — 11,654,848 
Principal repayments on and repurchases of borrowings(8,566,856)(343)(8,567,199)
Payment of deferred financing costs(46,196)— (46,196)
Proceeds from common stock issuances, net of offering costs670 — 670 
Payment of dividends(414,977)— (414,977)
Contributions from non-controlling interests5,590 — 5,590 
Distributions to non-controlling interests(35,235)231 (35,004)
Issuance of debt of consolidated VIEs69,399 (69,399)— 
Repayment of debt of consolidated VIEs(608,435)608,435 — 
Distributions of cash from consolidated VIEs83,785 (83,785)— 
Net cash provided by financing activities2,142,593 455,139 2,597,732 
Net decrease in cash, cash equivalents and restricted cash(336,591)163 (336,428)
Cash, cash equivalents and restricted cash, beginning of period722,162 (772)721,390 
Effect of exchange rate changes on cash(1,783)— (1,783)
Cash, cash equivalents and restricted cash, end of period$383,788 $(609)$383,179 
The discussion below is on a non-GAAP basis, after removing adjustments principally resulting from the consolidation of the securitization VIEs under ASC 810. These adjustments principally relate to (i) the purchase of CMBS, RMBS, loans and real estate from consolidated VIEs, which are reflected as repayments of VIE debt on a GAAP basis and (ii) sales and principal collections of CMBS and RMBS related to consolidated VIEs, which are reflected as VIE distributions on a GAAP basis. There is no significant net impact to overall cash resulting from these consolidations. Refer to Note 2 to the Condensed Consolidated Financial Statements for further discussion.

​

Cash and cash equivalents decreased by $251.2$336.4 million during the threenine months ended March 31,September 30, 2021, reflecting net cash used in investing activities of $1.1$2.1 billion, and operating activities of $871.2 million, partially offset by net cash provided by financing activities of $2.6 billion.
Net cash used in operating activities of $270.4 million and net cash provided by financing activities of $598.6 million.

​

Net cash provided by operating activities of $270.4$871.2 million during the threenine months ended March 31,September 30, 2021 related primarily to proceeds from sales$1.1 billion in originations and purchases of loans held-for-sale, net of originationssales and purchases,principal collections, cash interest expense of $244.6$276.8 million, general and administrative expenses of $83.2 million, management fees of $74.8 million and a net change in operating assets and liabilities of $55.2 million. Offsetting these cash outflows was cash interest income of $131.9$432.4 million from our loans and $36.1$115.5 million from our investment securities. Net rental income provided cash of $48.9$142.6 million and servicing fees provided cash of $12.9$44.3 million. Offsetting these cash inflows was cash interest expense of $80.6 million, general and administrative expenses of $29.0 million, management fees of $27.4 million and a net change in operating assets and liabilities of $66.3 million.

​

​

83

Table of Contents

Net cash used in investing activities of $1.1$2.1 billion for the threenine months ended March 31,September 30, 2021 related primarily to the origination and acquisition of loans held-for-investment of $2.3$5.7 billion and the purchase and funding of investment

90
securities of $27.3$175.2 million, partially offset by proceeds received from principal collections and sales of loans of $1.1$3.4 billion and investment securities of $85.6$231.0 million and salesales of an operating propertyproperties for $30.6$61.0 million.

​

Net cash provided by financing activities of $598.6 million$2.6 billion for the threenine months ended March 31,September 30, 2021 related primarily to borrowings on our debt, net of repayments and deferred loan costs, of $741.8 million,$3.0 billion, partially offset by dividend distributions of $137.7$415.0 million.

​

​

​

84

Table of Contents

Our Investment Portfolio

​

The following is a review of our investment portfolio by segment.

​

Commercial and Residential Lending Segment

​

The following table sets forth the amount of each category of investments we owned across various property types within our Commercial and Residential Lending Segment as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):
Face
Amount		Carrying
Value		Asset Specific
Financing		Net
Investment		Unlevered
Return on
Asset
September 30, 2021
First mortgages (1)$11,042,430 $10,984,155 $7,622,692 $3,361,463 5.6 %
Subordinated mortgages (2)82,916 81,159 — 81,159 9.9 %
Mezzanine loans (1)474,105 477,227 — 477,227 11.1 %
Residential loans, fair value option91,280 91,499 46,130 45,369 6.1 %
Other loans19,450 17,689 — 17,689 13.3 %
Loans held-for-sale, fair value option, residential1,758,342 1,813,458 1,394,585 418,873 4.2 %
RMBS, available-for-sale229,843 148,583 102,868 45,715 11.3 %
RMBS, fair value option119,472 215,152 (3)37,672 177,480 10.6 %
CMBS, fair value option102,900 98,197 (3)49,798 48,399 5.5 %
HTM debt securities (4)454,283 456,882 113,143 343,739 6.6 %
Credit loss allowance— (51,829)— (51,829)
Equity security12,313 12,067 — 12,067 
Investment in unconsolidated entities N/A45,129 — 45,129 
Properties, net N/A124,691 49,328 75,363 
$14,387,334 $14,514,059 $9,416,216 $5,097,843 
December 31, 2020
First mortgages (1)$8,977,365 $8,930,764 $5,892,684 $3,038,080 6.4 %
Subordinated mortgages (2)72,257 71,185 — 71,185 8.7 %
Mezzanine loans (1)619,352 620,319 — 620,319 11.5 %
Residential loans, fair value option86,796 90,684 58,885 31,799 5.8 %
Other loans33,626 30,284 — 30,284 9.8 %
Loans held-for-sale, fair value option, residential820,807 841,963 573,584 268,379 5.9 %
RMBS, available-for-sale252,738 167,349 110,724 56,625 11.0 %
RMBS, fair value option142,288 235,997 (3)30,267 205,730 6.3 %
CMBS, fair value option102,900 96,885 (3)25,313 71,572 5.6 %
HTM debt securities (4)505,247 505,673 84,233 421,440 6.8 %
Credit loss allowance— (72,360)— (72,360)
Equity security12,497 11,247 — 11,247 
Investment in unconsolidated entitiesN/A54,407 — 54,407 
Properties, netN/A103,896 48,863 55,033 
$11,625,873 $11,688,293 $6,824,553 $4,863,740 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unlevered

​

​

    

Face

    

Carrying

    

Asset Specific

    

Net

    

Return on

​

​

​

Amount

​

Value

​

Financing

​

Investment

​

Asset

​

March 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

First mortgages (1)

​

$

10,002,124

​

$

9,954,741

​

$

6,665,879

​

$

3,288,862

 

6.1

%

Subordinated mortgages

​

 

71,428

​

 

70,457

​

 

—

​

 

70,457

 

8.7

%

Mezzanine loans (1)

​

 

601,080

​

 

603,119

​

 

—

​

 

603,119

 

11.6

%

Residential loans, fair value option

​

​

149,404

​

 

150,712

​

 

58,656

​

 

92,056

​

6.1

%

Other loans

​

​

20,267

​

 

18,200

​

 

—

​

 

18,200

 

13.3

%

Loans held-for-sale, fair value option, residential

​

​

435,025

​

 

444,835

​

 

270,096

​

 

174,739

 

5.6

%

Loans held-for-sale, commercial

​

​

142,798

​

 

142,202

​

 

80,500

​

 

61,702

 

5.9

%

RMBS, available-for-sale

​

 

245,472

​

 

160,301

​

 

106,447

​

 

53,854

 

10.9

%

RMBS, fair value option

​

​

160,124

​

​

249,005

(2)

​

39,700

​

​

209,305

​

9.2

%

CMBS, fair value option

​

​

102,900

​

​

96,883

(2)

​

49,798

​

​

47,085

​

5.5

%

HTM debt securities (3)

​

 

454,283

​

 

455,586

​

 

113,143

​

 

342,443

 

6.6

%

Credit loss allowance

​

 

—

​

 

(65,939)

​

 

—

​

 

(65,939)

 

​

​

Equity security

​

 

12,594

​

 

10,655

​

 

—

​

 

10,655

 

​

​

Investment in unconsolidated entities

​

 

N/A

​

 

47,514

​

 

—

​

 

47,514

 

​

​

Properties, net

​

​

N/A

​

 

93,718

​

 

49,018

​

 

44,700

​

​

​

​

​

$

12,397,499

​

$

12,431,989

​

$

7,433,237

​

$

4,998,752

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

First mortgages (1)

​

$

8,977,365

​

$

8,930,764

​

$

5,892,684

​

$

3,038,080

 

6.4

%

Subordinated mortgages

​

 

72,257

​

 

71,185

​

 

—

​

 

71,185

 

8.7

%

Mezzanine loans (1)

​

 

619,352

​

 

620,319

​

 

—

​

 

620,319

 

11.5

%

Residential loans, fair value option

​

​

86,796

​

 

90,684

​

 

58,885

​

 

31,799

​

5.9

%

Other loans

​

​

33,626

​

 

30,284

​

 

—

​

 

30,284

​

9.8

%

Loans held-for-sale, fair value option, residential

​

​

820,807

​

 

841,963

​

 

573,584

​

 

268,379

 

6.1

%

RMBS, available-for-sale

​

​

252,738

​

 

167,349

​

 

110,724

​

 

56,625

​

11. 0

%

RMBS, fair value option

​

 

142,288

​

​

235,997

(2)

​

30,267

​

​

205,730

 

6.3

%

CMBS, fair value option

​

 

102,900

​

​

96,885

(2)

​

25,313

​

​

71,572

 

5.6

%

HTM debt securities (3)

​

 

505,247

​

 

505,673

​

 

84,233

​

 

421,440

 

6.8

%

Credit loss allowance

​

 

—

​

 

(72,360)

​

 

—

​

 

(72,360)

 

​

​

Equity security

​

 

12,497

​

 

11,247

​

 

—

​

 

11,247

 

​

​

Investment in unconsolidated entities

​

 

N/A

​

 

54,407

​

 

—

​

 

54,407

 

​

​

Properties, net

​

​

N/A

​

 

103,896

​

 

48,863

​

 

55,033

​

​

​

​

​

$

11,625,873

​

$

11,688,293

​

$

6,824,553

​

$

4,863,740

​

​

​

(1)First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan. The application of this
91
(1)First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan. The application of this methodology resulted in mezzanine loans with carrying values of $917.8 million and $877.3 million being classified as first mortgages as of March 31, 2021 and December 31, 2020, respectively.

​

(2)Eliminated in consolidation against VIE liabilities pursuant to ASC 810.

​

85

methodology resulted in mezzanine loans with carrying values of $1.2 billion and $877.3 million being classified as first mortgages as of September 30, 2021 and December 31, 2020, respectively.

Table of Contents

(3)CMBS held-to-maturity (“HTM”) and mandatorily redeemable preferred equity interests in commercial real estate entities.

​(2)

Subordinated mortgages include B-Notes and junior participation in first mortgages where we do not own the senior A-Note or senior participation. If we own both the A-Note and B-Note, we categorize the loan as a first mortgage loan.

(3)Eliminated in consolidation against VIE liabilities pursuant to ASC 810.
(4)CMBS held-to-maturity (“HTM”) and mandatorily redeemable preferred equity interests in commercial real estate entities.
As of March 31,September 30, 2021 and December 31, 2020, our Commercial and Residential Lending Segment’s investment portfolio, excluding residential loans, RMBS, properties and other investments, had the following characteristics based on carrying values:

​

​

​

​

​

​

​

Collateral Property Type

    

March 31, 2021

    

December 31, 2020

​

Office

 

32.1

%  

35.2

%

Hotel

 

19.6

%  

21.6

%

Multifamily

 

19.1

%  

16.1

%

Mixed Use

​

12.2

%  

8.2

%

Residential

 

5.7

%  

6.7

%

Retail

 

2.6

%  

2.8

%

Industrial

 

2.5

%  

3.0

%

Other

​

6.2

%  

6.4

% 

​

 

100.0

%  

100.0

%

​

​

​

​

​

​

​

Geographic Location

    

March 31, 2021

    

December 31, 2020

​

U.S. Regions:

 

​

​

​

​

North East

 

20.5

%  

22.7

%

West

 

20.0

%  

19.0

%

South West

 

10.3

%  

11.1

%

Mid Atlantic

 

9.7

%  

9.5

%

South East

 

6.9

%  

7.3

%

Midwest

 

4.5

%  

4.4

%

International:

 

​

​

​

​

Europe/Australia

 

25.5

%  

23.3

%

Bahamas/Bermuda

 

2.6

%  

2.7

%

​

 

100.0

%  

100.0

%

​

​

​

​

86

Collateral Property TypeSeptember 30, 2021December 31, 2020
Office29.6 %35.2 %
Multifamily23.3 %16.1 %
Hotel19.7 %21.6 %
Mixed Use13.1 %8.2 %
Residential3.0 %6.7 %
Industrial3.7 %3.0 %
Retail2.5 %2.8 %
Other5.1 %6.4 %
100.0 %100.0 %

Geographic LocationSeptember 30, 2021December 31, 2020
U.S. Regions:
North East18.9 %22.7 %
West16.8 %19.0 %
South West12.4 %11.1 %
South East10.5 %7.3 %
Mid Atlantic10.7 %9.5 %
Midwest4.4 %4.4 %
International:
United Kingdom18.3 %17.5 %
Other Europe3.4 %4.7 %
Bahamas/Bermuda2.5 %2.7 %
Australia2.1 %1.1 %
100.0 %100.0 %
92

Table of Contents

Infrastructure Lending Segment

​

The following table sets forth the amount of each category of investments we owned within our Infrastructure Lending Segment as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Unlevered

​

​

  

Face

   

Carrying

   

Asset Specific

   

Net

   

Return on

​

​

​

Amount

​

Value

​

Financing

​

Investment

​

Asset

​

March 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

First priority infrastructure loans and HTM securities

​

$

1,664,665

​

$

1,633,491

​

$

1,186,526

​

$

446,965

 

4.8

%

Loans held-for-sale, infrastructure

​

​

89,601

​

 

89,368

​

 

73,287

​

 

16,081

 

3.2

%

Credit loss allowance

​

​

N/A

​

​

(11,732)

​

​

—

​

​

(11,732)

​

​

​

Investment in unconsolidated entities

​

​

N/A

​

​

24,840

​

​

—

​

​

24,840

​

​

​

​

​

$

1,754,266

​

$

1,735,967

​

$

1,259,813

​

$

476,154

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

First priority infrastructure loans and HTM securities

​

$

1,488,614

​

$

1,458,880

​

$

1,140,608

​

$

318,272

 

5.2

%

Loans held-for-sale, infrastructure

​

 

120,900

​

 

120,540

​

 

100,155

​

 

20,385

 

3.5

%

Credit loss allowance

​

​

N/A

​

​

(10,759)

​

​

—

​

​

(10,759)

​

​

​

Investment in unconsolidated entities

​

​

N/A

​

​

25,095

​

​

—

​

​

25,095

​

​

​

​

​

$

1,609,514

​

$

1,593,756

​

$

1,240,763

​

$

352,993

​

​

​

​

Face
Amount		Carrying
Value		Asset Specific
Financing		Net
Investment		Unlevered
Return on
Asset
September 30, 2021
First priority infrastructure loans and HTM securities$1,766,259 $1,734,303 $1,239,412 $494,891 4.9 %
Loans held-for-sale, infrastructure84,457 84,253 70,891 13,362 2.8 %
Credit loss allowanceN/A(12,133)— (12,133)
Investment in unconsolidated entitiesN/A25,170 — 25,170 
$1,850,716 $1,831,593 $1,310,303 $521,290 
December 31, 2020
First priority infrastructure loans and HTM securities$1,488,614 $1,458,880 $1,140,608 $318,272 5.2 %
Loans held-for-sale, infrastructure120,900 120,540 100,155 20,385 3.5 %
Credit loss allowanceN/A(10,759)— (10,759)
Investment in unconsolidated entitiesN/A25,095 — 25,095 
$1,609,514 $1,593,756 $1,240,763 $352,993 
As of March 31,September 30, 2021 and December 31, 2020, our Infrastructure Lending Segment’s investment portfolio had the following characteristics based on carrying values:

​

​

​

​

​

​

​

Collateral Type

    

March 31, 2021

    

December 31, 2020

​

Natural gas power

 

62.7

%  

65.8

%

Midstream

 

20.8

%  

21.9

%

Renewable power

 

9.4

%  

9.0

%

Other thermal power

​

6.6

%  

3.3

%

Downstream

​

0.5

%  

—

%

​

 

100.0

%  

100.0

%

​

​

​

​

​

​

​

Geographic Location

​

March 31, 2021

​

December 31, 2020

​

U.S. Regions:

​

​

​

​

​

North East

 

41.4

%  

43.1

%

Midwest

 

22.5

%  

20.8

%

South West

 

14.5

%  

15.3

%

South East

​

9.5

%  

9.6

%

West

​

5.9

%  

4.3

%

Mid-Atlantic

​

2.8

%  

3.2

%

International:

 

​

​

​

​

Mexico

 

2.5

%  

2.7

%

Other

 

0.9

%  

1.0

%

​

 

100.0

%  

100.0

%

​

​

​

​

​

​

​

87

Collateral TypeSeptember 30, 2021December 31, 2020
Natural gas power62.5 %65.8 %
Midstream/downstream oil & gas25.3 %21.9 %
Renewable power6.5 %9.0 %
Other thermal power5.7 %3.3 %
100.0 %100.0 %

Geographic LocationSeptember 30, 2021December 31, 2020
U.S. Regions:
North East42.2 %43.1 %
Midwest22.5 %20.8 %
South West13.2 %15.3 %
South East9.4 %9.6 %
West5.7 %4.3 %
Mid-Atlantic1.5 %3.2 %
Other2.5 %— %
International:
Mexico2.3 %2.7 %
Other0.7 %1.0 %
100.0 %100.0 %
93

Table of Contents

Property Segment

​

The following table sets forth the amount of each category of investments held within our Property Segment as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):

​

​

​

​

​

​

​

​

​

    

March 31, 2021

    

December 31, 2020

Properties, net

​

$

1,954,880

​

$

1,969,414

Lease intangibles, net

​

 

37,080

​

 

38,511

​

​

$

1,991,960

​

$

2,007,925

September 30, 2021December 31, 2020
Properties, net$1,928,853 $1,969,414 
Lease intangibles, net34,399 38,511 
$1,963,252 $2,007,925 
​

The following table sets forth our net investment and other information regarding the Property Segment’s properties and lease intangibles as of March 31,September 30, 2021 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

    

Asset

    

​

    

​

    

Weighted Average

​

​

Carrying

​

Specific

​

Net

​

Occupancy

​

Remaining

​

​

Value

​

Financing

​

Investment

​

Rate

​

Lease Term

Office—Medical Office Portfolio

​

$

760,266

​

$

592,853

​

$

167,413

​

93.6

%

​

5.8 years

Multifamily residential—Woodstar I Portfolio

​

​

636,740

​

​

572,784

​

​

63,956

​

98.8

%

​

0.5 years

Multifamily residential—Woodstar II Portfolio

​

​

610,558

​

​

512,588

​

​

97,970

​

99.1

%

​

0.5 years

Retail—Master Lease Portfolio

​

​

343,790

​

 

192,801

​

 

150,989

​

100.0

%

​

21.1 years

Subtotal—undepreciated carrying value

​

​

2,351,354

​

​

1,871,026

​

​

480,328

​

​

​

​

​

Accumulated depreciation and amortization

​

​

(359,394)

​

​

—

​

​

(359,394)

​

​

​

​

​

Net carrying value

​

$

1,991,960

​

$

1,871,026

​

$

120,934

​

​

​

​

​

Carrying
Value		Asset
Specific
Financing		Net
Investment		Occupancy
Rate		Weighted Average
Remaining
Lease Term
Office—Medical Office Portfolio$762,071 $593,852 $168,219 93.9 %5.4 years
Multifamily residential—Woodstar I Portfolio640,886 573,368 67,518 98.1 %0.5 years
Multifamily residential—Woodstar II Portfolio611,819 512,870 98,949 97.8 %0.5 years
Retail—Master Lease Portfolio343,790 192,963 150,827 100.0 %20.6 years
Subtotal—undepreciated carrying value2,358,566 1,873,053 485,513 
Accumulated depreciation and amortization(395,313)— (395,313)
Net carrying value$1,963,253 $1,873,053 $90,200 
​

As of March 31,September 30, 2021 and December 31, 2020, our Property Segment’s investment portfolio had the following geographic characteristics based on carrying values:

​

​

​

​

​

​

​

Geographic Location

​

March 31, 2021

​

December 31, 2020

​

South East

​

62.1

%  

62.1

%

South West

 

10.3

%  

10.3

%

Midwest

 

10.1

%  

10.1

%

North East

 

9.6

%  

9.6

%

West

 

7.9

%  

7.9

%

​

 

100.0

%  

100.0

%

​

​

88

Geographic LocationSeptember 30, 2021December 31, 2020
South East62.2 %62.1 %
South West10.3 %10.3 %
Midwest10.0 %10.1 %
North East9.6 %9.6 %
West7.9 %7.9 %
100.0 %100.0 %
94

Table of Contents

Investing and Servicing Segment

​

The following table sets forth the amount of each category of investments we owned within our Investing and Servicing Segment as of March 31,September 30, 2021 and December 31, 2020 (amounts in thousands):
Face
Amount		Carrying
Value		Asset
Specific
Financing		Net
Investment
September 30, 2021
CMBS, fair value option$2,678,039 $1,128,921 (1)$394,886 (2)$734,035 
Intangible assets - servicing rightsN/A55,374 (3)— 55,374 
Lease intangibles, netN/A12,362 — 12,362 
Loans held-for-sale, fair value option, commercial278,736 285,808 191,947 93,861 
Loans held-for-investment781 781 — 781 
Investment in unconsolidated entitiesN/A38,239 (4)— 38,239 
Properties, netN/A175,318 176,722 (1,404)
$2,957,556 $1,696,803 $763,555 $933,248 
December 31, 2020
CMBS, fair value option$2,652,459 $1,112,145 (1)$360,221 (2)$751,924 
Intangible assets - servicing rightsN/A54,578 (3)— 54,578 
Lease intangibles, netN/A15,548 — 15,548 
Loans held-for-sale, fair value option, commercial90,789 90,332 53,040 37,292 
Loans held-for-investment1,008 1,008 — 1,008 
Investment in unconsolidated entitiesN/A44,664 (4)— 44,664 
Properties, netN/A197,843 192,839 5,004 
$2,744,256 $1,516,118 $606,100 $910,018 

​(1)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

Asset

    

​

​

 

​

​

Face

​

Carrying

​

Specific

​

Net

 

​

​

Amount

​

Value

​

Financing

​

Investment

 

March 31, 2021

​

​

​

​

​

​

​

​

​

​

​

​

​

CMBS, fair value option

​

$

2,632,996

​

$

1,106,000

(1)  

$

350,187

(2)  

$

755,813

​

Intangible assets - servicing rights

​

 

N/A

​

 

55,324

(3)  

 

—

​

 

55,324

​

Lease intangibles, net

​

​

N/A

​

​

14,583

​

​

—

​

​

14,583

​

Loans held-for-sale, fair value option, commercial

​

 

172,119

​

 

168,226

​

 

110,424

​

 

57,802

​

Loans held-for-investment

​

​

933

​

​

933

​

​

—

​

​

933

​

Investment in unconsolidated entities

​

​

N/A

​

​

44,435

(4)  

​

—

​

​

44,435

​

Properties, net

​

 

N/A

​

 

196,150

​

 

192,611

​

 

3,539

​

​

​

$

2,806,048

​

$

1,585,651

​

$

653,222

​

$

932,429

​

December 31, 2020

​

​

​

​

​

​

​

​

​

​

​

​

​

CMBS, fair value option

​

$

2,652,459

​

$

1,112,145

(1)  

$

360,221

(2)  

$

751,924

​

Intangible assets - servicing rights

​

 

N/A

​

 

54,578

(3)  

 

—

​

 

54,578

​

Lease intangibles, net

​

​

N/A

​

​

15,548

​

​

—

​

 

15,548

​

Loans held-for-sale, fair value option, commercial

​

 

90,789

​

 

90,332

​

 

53,040

​

 

37,292

​

Loans held-for-investment

​

​

1,008

​

​

1,008

​

​

—

​

​

1,008

​

Investment in unconsolidated entities

​

​

N/A

​

​

44,664

(4)  

​

—

​

​

44,664

​

Properties, net

​

 

N/A

​

 

197,843

​

 

192,839

​

 

5,004

​

​

​

$

2,744,256

​

$

1,516,118

​

$

606,100

​

$

910,018

​

Includes $1.11 billion and $1.09 billion of CMBS eliminated in consolidation against VIE liabilities pursuant to ASC 810 as of September 30, 2021 and December 31, 2020. Also includes $179.8 million and $179.5 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of September 30, 2021 and December 31, 2020, respectively.
(2)Includes $35.8 million and $41.3 million of non-controlling interests in the consolidated entities which hold certain debt balances as of September 30, 2021 and December 31, 2020, respectively.
(3)Includes $39.4 million and $41.4 million of servicing rights intangibles eliminated in consolidation against VIE assets pursuant to ASC 810 as of September 30, 2021 and December 31, 2020, respectively.
(4)Includes $14.5 million and $16.1 million of investment in unconsolidated entities eliminated in consolidation against VIE assets pursuant to ASC 810 as of September 30, 2021 and December 31, 2020, respectively.
95
(1)Includes $1.09 billion of CMBS eliminated in consolidation against VIE liabilities pursuant to ASC 810 as of both March 31, 2021 and December 31, 2020. Also includes $180.9 million and $179.5 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of March 31, 2021 and December 31, 2020, respectively.

​

(2)Includes $38.3 million and $41.3 million of non-controlling interests in the consolidated entities which hold certain debt balances as of March 31, 2021 and December 31, 2020, respectively.

​

(3)Includes $42.9 million and $41.4 million of servicing rights intangibles eliminated in consolidation against VIE assets pursuant to ASC 810 as of March 31, 2021 and December 31, 2020, respectively.

​

(4)Includes $15.9 million and $16.1 million of investment in unconsolidated entities eliminated in consolidation against VIE assets pursuant to ASC 810 as of March 31, 2021 and December 31, 2020, respectively.

​

​

​

89

Table of Contents

Our REIS Equity Portfolio, as described in Note 6 to the Condensed Consolidated Financial Statements, had the following characteristics based on carrying values of $195.6$172.8 million and $198.2 million as of March 31,September 30, 2021 and December 31, 2020, respectively:

​

​

​

​

​

​

​

Property Type

​

March 31, 2021

​

December 31, 2020

​

Office

​

50.5

%  

50.6

%

Retail

 

29.9

%  

29.9

%

Mixed Use

 

7.0

%  

6.9

%

Self-storage

 

6.2

%  

6.2

%

Multifamily

 

4.3

%  

4.2

%

Hotel

​

2.1

%  

2.2

%  

​

 

100.0

%  

100.0

%

​

​

​

​

​

​

​

Geographic Location

​

March 31, 2021

​

December 31, 2020

​

South West

 

24.9

%  

25.1

%

North East

 

25.4

%  

24.8

%

South East

 

15.2

%  

15.4

%

West

 

14.8

%  

14.8

%

Mid Atlantic

 

11.4

%  

11.5

%

Midwest

 

8.3

%  

8.4

%

​

 

100.0

%  

100.0

%

​

​

​

​

​

​

90

Property TypeSeptember 30, 2021December 31, 2020
Office45.1 %50.6 %
Retail33.1 %29.9 %
Mixed Use7.9 %6.9 %
Self-storage7.0 %6.2 %
Multifamily4.8 %4.2 %
Hotel2.1 %2.2 %
100.0 %100.0 %

Geographic LocationSeptember 30, 2021December 31, 2020
North East28.1 %24.8 %
South West17.4 %25.1 %
South East16.6 %15.4 %
West16.2 %14.8 %
Mid Atlantic12.7 %11.5 %
Midwest9.0 %8.4 %
100.0 %100.0 %

96

New Credit Facilities and Amendments

​

Refer to Note 9 of our Condensed Consolidated Financial Statements for a detailed discussion of new credit facilities and amendments to existing credit facilities executed since December 31, 2020.

​

Secured Borrowings

​

The following table is a summary of our secured borrowings as of March 31,September 30, 2021 (dollars in thousands):
Current
Maturity		Extended
Maturity (a)		Weighted
Average
Pricing		Pledged
Asset
Carrying
Value		Maximum
Facility
Size		Outstanding
Balance		Approved
but
Undrawn
Capacity (b)		Unallocated
Financing
Amount (c)
Repurchase Agreements:
Commercial LoansMar 2022 to Jul 2026(d)Jun 2025 to Mar 2029(d)(e)$7,750,853 $9,980,380 (f)$5,294,281 $213,935 $4,472,164 
Residential LoansJun 2022 to Oct 2023N/ALIBOR + 2.01%1,755,161 2,550,000 1,440,018 28,719 1,081,263 
Infrastructure LoansSep 2024Sep 2026LIBOR + 2.00%467,921 650,000 368,442 — 281,558 
Conduit LoansFeb 2022 to Jun 2024Feb 2023 to Jun 2025LIBOR + 1.99%259,155 350,000 192,829 — 157,171 
CMBS/RMBSDec 2021 to May 2031(g)Sep 2022 to Nov 2031(g)(h)1,193,808 835,850 709,340 (i)— 126,510 
Total Repurchase Agreements11,426,898 14,366,230 8,004,910 242,654 6,118,666 
Other Secured Financing:
Borrowing Base FacilityApr 2022Apr 2024LIBOR + 2.25%73,502 650,000 (j)2,000 53,125 594,875 
Commercial Financing FacilityMar 2022Mar 2029GBP LIBOR + 1.75%177,424 142,872 142,872 — — 
Residential Financing FacilitySep 2022Sep 20253.50%149,604 250,000 2,018 103,229 144,753 
Infrastructure Financing FacilitiesJul 2022 to Oct 2022Oct 2024 to Jul 2027LIBOR + 2.03%688,488 1,250,000 544,582 — 705,418 
Property Mortgages - Fixed rateNov 2024 to Aug 2052(k)N/A4.03%1,254,141 1,154,763 1,154,763 — — 
Property Mortgages - Variable rateNov 2021 to Jul 2030N/A(l)898,634 969,790 945,311 — 24,479 
Term Loan and Revolver(m)N/A(m)N/A(m)940,750 790,750 150,000 — 
STWD 2019-FL1 CLOJul 2038N/ALIBOR + 1.34%1,103,259 936,375 936,375 — — 
STWD 2021-FL2 CLOApr 2038N/ALIBOR + 1.50%1,279,245 1,077,375 1,077,375 — — 
STWD 2021-SIF1 CLOApr 2032N/ALIBOR + 1.81%510,592 410,000 410,000 — — 
STWD 2021-HTS SASBApr 2034N/ALIBOR + 2.22%230,562 210,091 210,091 — — 
Total Other Secured Financing6,365,451 7,992,016 6,216,137 306,354 1,469,525 
$17,792,349 $22,358,246 $14,221,047 $549,008 $7,588,191 
Unamortized net discount(14,603)
Unamortized deferred financing costs(90,162)
$14,116,282 

​(a)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pledged

​

​

​

​

​

​

Approved

​

​

​

​

​

​

​

​

Weighted

​

Asset

​

Maximum

​

​

​

but

​

Unallocated

​

​

Current

​

Extended

​

Average

​

Carrying

​

Facility

​

Outstanding

​

Undrawn

​

Financing

​

   

Maturity

   

Maturity (a)

   

Pricing

   

Value

   

Size

   

Balance

   

Capacity (b)

   

Amount (c)

Repurchase Agreements:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial Loans

​

May 2021 to Aug 2025

(d)

May 2023 to Mar 2029

(d)

(e)

​

$

8,088,081

​

$

9,164,525

(f)

$

5,592,652

​

$

144,018

​

$

3,427,855

Residential Loans

​

Jan 2022 to Oct 2023

​

N/A

​

LIBOR + 2.09%

​

​

428,877

​

​

1,750,000

​

​

328,620

​

​

—

​

​

1,421,380

Infrastructure Loans

​

Feb 2022

​

N/A

​

LIBOR + 2.00%

​

​

295,516

​

​

500,000

​

​

246,136

​

​

—

​

​

253,864

Conduit Loans

​

Feb 2022 to Jun 2023

​

Feb 2023 to Jun 2024

​

LIBOR + 2.15%

​

​

147,523

​

​

350,000

​

​

111,087

​

​

—

​

​

238,913

CMBS/RMBS

​

Dec 2021 to Oct 2030

(g)

Mar 2022 to Apr 2031

(g)

(h)

​

​

1,112,819

​

​

823,365

​

​

668,993

(i)

​

—

​

​

154,372

Total Repurchase Agreements

​

​

​

​

​

​

​

​

10,072,816

​

​

12,587,890

​

​

6,947,488

​

​

144,018

​

​

5,496,384

Other Secured Financing:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Borrowing Base Facility

​

Apr 2022

​

Apr 2024

​

LIBOR + 2.25%

​

​

304,076

​

​

650,000

(j)

​

223,302

​

​

—

​

​

426,698

Commercial Financing Facility

​

Mar 2022

​

Mar 2029

​

GBP LIBOR + 1.75%

​

​

101,559

​

​

81,847

​

​

81,847

​

​

—

​

​

—

Residential Financing Facility

​

Sep 2022

​

Sep 2025

​

3.50%

​

​

163,545

​

​

250,000

​

​

1,515

​

​

120,129

​

​

128,356

Infrastructure Acquisition Facility

​

Sep 2021

​

Sep 2022

​

(k)

​

​

525,611

​

​

517,498

​

​

414,503

​

​

—

​

​

102,995

Infrastructure Financing Facilities

​

Jul 2022 to Oct 2022

​

Oct 2024 to Jul 2027

​

LIBOR + 2.04%

​

​

699,684

​

​

1,250,000

​

​

548,956

​

​

—

​

​

701,044

Property Mortgages - Fixed rate

​

Nov 2024 to Aug 2052

(l)

N/A

​

4.03%

​

​

1,271,385

​

​

1,155,306

​

​

1,155,306

​

​

—

​

​

—

Property Mortgages - Variable rate

​

Nov 2021 to Jul 2030

​

N/A

​

(m)

​

​

929,800

​

​

985,453

​

​

960,901

​

​

—

​

​

24,552

Term Loan and Revolver

​

(n)

​

N/A

​

(n)

​

​

N/A

(n)

​

763,375

​

​

643,375

​

​

120,000

​

​

—

Collateralized Loan Obligation

​

Jul 2038

​

N/A

​

LIBOR + 1.34%

​

​

1,099,639

​

​

936,375

​

​

936,375

​

​

—

​

​

—

Total Other Secured Financing

​

​

​

​

​

​

​

​

5,095,299

​

​

6,589,854

​

​

4,966,080

​

​

240,129

​

​

1,383,645

​

​

​

​

​

​

​

​

$

15,168,115

​

$

19,177,744

​

$

11,913,568

​

$

384,147

​

$

6,880,029

Unamortized net discount

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(13,149)

​

​

​

​

​

​

Unamortized deferred financing costs

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(73,309)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

$

11,827,110

​

​

​

​

​

​

Subject to certain conditions as defined in the respective facility agreement.
(b)Approved but undrawn capacity represents the total draw amount that has been approved by the lenders related to those assets that have been pledged as collateral, less the drawn amount.
(c)Unallocated financing amount represents the maximum facility size less the total draw capacity that has been approved by the lenders.
(d)For certain facilities, borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions.
(e)Certain facilities with an outstanding balance of $1.9 billion as of September 30, 2021 are indexed to GBP LIBOR, EURIBOR, BBSY and SONIA. The remainder have a weighted average rate of LIBOR + 1.94%.
(f)Certain facilities with an aggregate initial maximum facility size of $9.1 billion may be increased to $10.0 billion, subject to certain conditions. The $10.0 billion amount includes such upsizes.
(g)Certain facilities with an outstanding balance of $292.8 million as of September 30, 2021 carry a rolling 11-month or 12-month term which may reset monthly or quarterly with the lender's consent. These facilities carry no maximum facility size.
(h)A facility with an outstanding balance of $243.0 million as of September 30, 2021 has a weighted average fixed annual interest rate of 3.21%. All other facilities are variable rate with a weighted average rate of LIBOR + 1.76%.
(i)Includes: (i) $243.0 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $35.8 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 14 to the Condensed Consolidated Financial Statements).
(j)The initial maximum facility size of $300.0 million may be increased to $650.0 million, subject to certain conditions.
97
(a)Subject to certain conditions as defined in the respective facility agreement.

​

(b)Approved but undrawn capacity represents the total draw amount that has been approved by the lenders related to those assets that have been pledged as collateral, less the drawn amount.

​

(c)Unallocated financing amount represents the maximum facility size less the total draw capacity that has been approved by the lenders.

​

(d)For certain facilities, borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions.

​

(e)Certain facilities with an outstanding balance of $1.9 billion as of March 31, 2021 are indexed to GBP LIBOR and EURIBOR. The remainder have a weighted average rate of LIBOR + 2.01%.

​

(f)The aggregate initial maximum facility size may be increased at our option, subject to certain conditions. The $9.2 billion amount includes such upsizes.

​

(g)Certain facilities with an outstanding balance of $280.3 million as of March 31, 2021 carry a rolling 11-month or 12-month term which may reset monthly or quarterly with the lender's consent. These facilities carry no maximum facility size.

​

(h)A facility with an outstanding balance of $212.0 million as of March 31, 2021 has a weighted average fixed annual interest rate of 3.29%. All other facilities are variable rate with a weighted average rate of LIBOR + 1.92%.

​

91

(k)The weighted average maturity is 6.0 years as of September 30, 2021.

Table(l)Includes a $600.0 million first mortgage and mezzanine loan secured by our Medical Office Portfolio. This debt has a weighted average interest rate of ContentsLIBOR + 2.07% that we swapped to a fixed rate of 3.34%. The remainder have a weighted average rate of LIBOR + 2.61%.

(i)(m)Consists of: (i) a $790.8 million term loan facility that matures in July 2026, of which $392.0 million (the "Initial Borrowings") has an annual interest rate of LIBOR + 2.50% and $398.8 million (the "Incremental Borrowings") has an annual interest rate of LIBOR + 3.25%, subject to a 0.75% LIBOR floor, and (ii) a $150.0 million revolving credit facility that matures in April 2026 with an annual interest rate of SOFR + 2.50%. These facilities are secured by the equity interests in certain of our subsidiaries which totaled $4.7 billion as of September 30, 2021.
Includes: (i) $212.0 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $38.3 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 14 to the Condensed Consolidated Financial Statements).

​

(j)The initial maximum facility size of $300.0 million may be increased to $650.0 million, subject to certain conditions.

​

(k)Consists of an annual interest rate of the applicable currency benchmark index + 2.00%.

​

(l)The weighted average maturity is 6.5 years as of March 31, 2021.

​

(m)Includes a $600.0 million first mortgage and mezzanine loan secured by our Medical Office Portfolio. This debt has a weighted average interest rate of LIBOR + 2.07% that we swapped to a fixed rate of 3.34%. The remainder have a weighted average rate of LIBOR + 2.59%.

​

(n)Consists of: (i) a $643.4 million term loan facility that matures in July 2026, of which $394.0 million has an annual interest rate of LIBOR + 2.50% and $249.4 million has an annual interest rate of LIBOR + 3.50%, subject to a 75 bps LIBOR floor, and (ii) a $120.0 million revolving credit facility that matures in July 2024 with an annual interest rate of LIBOR + 3.00%. These facilities are secured by the equity interests in certain of our subsidiaries which totaled $4.2 billion as of March 31, 2021.

​

Refer to Note 9 of the Condensed Consolidated Financial Statements for further disclosure regarding the terms of our secured financing arrangements.

​

Variance between Average and Quarter-End Credit Facility Borrowings Outstanding

​

The following table compares the average amount outstanding under our secured financing agreements during each quarter and the amount outstanding as of the end of each quarter, together with an explanation of significant variances (amounts in thousands):
Quarter EndedQuarter-End
Balance		Weighted-Average
Balance During
Quarter		VarianceExplanations
for Significant
Variances
December 31, 202011,169,964 10,945,199 224,765 (a)
March 31, 202111,913,568 11,274,970 638,598 (b)
June 30, 202112,436,034 12,403,163 32,871 (c)
September 30, 202114,221,047 13,099,170 1,121,877 (d)

​(a)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Weighted-Average

​

​

​

​

Explanations

​

​

Quarter-End

​

Balance During

​

​

​

for Significant

Quarter Ended

    

Balance

    

Quarter

    

Variance

    

Variances

December 31, 2020

​

​

11,169,964

​

​

10,945,199

​

​

224,765

​

(a)

March 31, 2021

​

​

11,913,568

​

​

11,274,970

​

​

638,598

​

(b)

Variance primarily due to the following: (i) late quarter timing of fundings on commercial loan facilities and (ii) borrowings on the Residential Financing Facility.
(b)Variance primarily due to late quarter timing of fundings on commercial loan facilities and the Borrowing Base Facility.
(c)Variance primarily due to the net increase in debt related to CLO issuances in April and May 2021.
(d)Variance primarily due to draws: (i) on approved undrawn capacity in our commercial loan portfolio in order to early redeem a portion of our 2021 Senior Notes on September 15, 2021; (ii) on commercial loan facilities due to loan closings which occurred during the last month of the quarter; and (iii) on residential loan facilities to fund loan purchases which occurred during the last month of the quarter.
(a)

Variance primarily due to the following: (i) late quarter timing of fundings on commercial loan facilities and (ii) borrowings on the Residential Financing Facility.

​

(b)Variance primarily due to late quarter timing of fundings on commercial loan facilities and the Borrowing Base Facility.

​

Borrowings under Unsecured Senior Notes

​

​

During the three months ended March 31,September 30, 2021 and 2020, the weighted average effective borrowing rate on our unsecured senior notes was 5.4%5.0% and 4.9%, respectively. During the nine months ended September 30, 2021 and 2020, the weighted average effective borrowing rate on our unsecured senior notes was 5.2% and 5.0%, respectively. The effective borrowing rate includes the effects of underwriter purchase discount and, during the 2020 period, the adjustment for the conversion option on the Convertible Notes, the initial value of which reduced the balance of the notes.

​

Refer to Note 10 of ourthe Condensed Consolidated Financial Statements for further disclosure regarding the terms of our unsecured senior notes.

​

​

​

92

98

Table of Contents

Scheduled Principal Repayments on Investments and Overhang on Financing Facilities

​

The following scheduled and/or projected principal repayments on our investments were based on amounts outstanding and extended contractual maturities of those investments as of March 31,September 30, 2021. The projected and/or required repayments of financing were based on the earlier of (i) the extended contractual maturity of each credit facility or (ii) the extended contractual maturity of each of the investments that have been pledged as collateral under the respective credit facility (amounts in thousands):
Scheduled Principal
Repayments on Loans
and HTM Securities		Scheduled/Projected
Principal Repayments
on RMBS and CMBS		Projected/Required
Repayments of
Financing		Scheduled Principal
Inflows Net of
Financing Outflows
Fourth Quarter 2021$710,058 $7,920 $(593,437)$124,541 
First Quarter 2022421,401 6,677 (268,503)159,575 
Second Quarter 2022242,599 10,628 (345,472)(92,245)(1)
Third Quarter 2022218,028 13,000 (1,332,689)(1,101,661)(2)
Total$1,592,086 $38,225 $(2,540,101)$(909,790)

(1)

​Shortfall primarily relates to: (i) $290.9 million of repayments under a Residential Loans repurchase facility that we intend to extend with the lender's consent, the current balance of which will be repaid with securitization proceeds.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Scheduled Principal

    

Scheduled/Projected

    

Projected/Required

    

Scheduled Principal

 

​

​

Repayments on Loans

​

Principal Repayments

​

Repayments of

​

Inflows Net of

 

​

​

and HTM Securities

​

on RMBS and CMBS

​

Financing

​

Financing Outflows

 

Second Quarter 2021

 

$

731,009

 

$

10,927

 

$

(91,314)

​

$

650,622

​

Third Quarter 2021

 

​

55,560

 

​

9,598

 

​

(15,264)

​

​

49,894

​

Fourth Quarter 2021

​

​

295,918

​

​

7,085

​

​

(954,390)

​

​

(651,386)

(1)

First Quarter 2022

​

​

631,041

​

​

5,965

​

​

(1,000,898)

​

​

(363,892)

(2)

Total

​

$

1,713,528

​

$

33,575

​

$

(2,061,866)

​

$

(314,762)

​

(2)Shortfall primarily relates to: (i) $981.7 million of repayments under a Residential Loans repurchase facility that carries a one-year term which we can extend every three months, the current balance of which will be repaid with securitization proceeds; and (ii) $264.1 million of repayments under a securities facility which carries a rolling 12-month term that we have historically extended, and intend to continue to extend with lender’s consent.
(1)Shortfall primarily relates to $700.0 million on the maturity of our Senior Notes due December 2021, which we expect to fund using a combination of available cash on hand, approved but undrawn capacity under our secured financing agreements and/or other potential sources of financing, as discussed below.

​

(2)Shortfall primarily relates to: (i) $275.6 million of repayments under a Residential Loans repurchase facility that carries a one-year term which we can extend every three months, the current balance of which will be repaid with securitization proceeds; and (ii)  $277.5 million of repayments under a securities facility which carries a rolling 12-month term that we have historically extended, and intend to continue to extend with lender’s consent.

​

In the normal course of business, the Company is in discussions with its lenders to extend, amend or replace any financing facilities which contain near term expirations.

​

Issuances of Equity Securities

​

We may raise funds through capital market transactions by issuing capital stock. There can be no assurance, however, that we will be able to access the capital markets at any particular time or on any particular terms. We have authorized 100,000,000 shares of preferred stock and 500,000,000 shares of common stock. At March 31,September 30, 2021, we had 100,000,000 shares of preferred stock available for issuance and 213,148,440211,376,601 shares of common stock available for issuance.

​

Other Potential Sources of Financing

​

In the future, we may also use other sources of financing to fund the acquisition of our target assets and maturities of our unsecured senior notes, including other secured as well as unsecured forms of borrowing and sale of senior loan interests and other assets.

​

Leverage Policies

​

Our strategies with regards to use of leverage have not changed significantly since December 31, 2020. Refer to our Form 10-K for a description of our strategies regarding use of leverage.

​

Cash Requirements

​

Dividends

​

U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular

93

Table of Contents

corporate rates to the extent that it annually distributes less than 100% of its net taxable income. We generally intend to distribute substantially all of our taxable income (which does not necessarily equal our GAAP net income) to our stockholders each year, if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating and debt service requirements. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. Refer to our Form 10-K for a detailed dividend history.

99
The Company’s board of directors declared the following dividends during the threenine months ended March 31,September 30, 2021:

Declare DateRecord DatePayment DateAmountFrequency
9/15/20219/30/202110/15/2021$0.48 Quarterly
6/14/20216/30/20217/15/20210.48 Quarterly
3/11/20213/31/20214/15/20210.48 Quarterly
​

​

​

​

​

​

​

​

​

​

​

Declare Date

    

Record Date

    

Payment Date

    

Amount

    

Frequency

3/11/21

​

3/31/21

​

4/15/21

​

$

0.48

​

Quarterly

​

​

Contractual Obligations and Commitments

​

Our material contractual obligations and commitments as of March 31,September 30, 2021 are as follows (amounts in thousands):
TotalLess than
1 year		1 to 3 years3 to 5 yearsMore than
5 years
Secured financings (a)$11,587,206 $1,653,932 $1,525,361 $5,830,378 $2,577,535 
CLOs and SASB (b)2,633,841 125,998 993,829 1,494,263 19,751 
Unsecured senior notes1,750,000 300,000 550,000 900,000 — 
Future loan commitments:
Commercial Lending (c)1,352,772 1,000,526 342,434 9,812 — 
Residential Lending (d)877,689 877,689 — — — 
Infrastructure Lending (e)150,432 144,484 5,948 — — 

​(a)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

Less than

    

​

​

    

​

​

    

More than

 

​

​

Total

​

1 year

​

1 to 3 years

​

3 to 5 years

​

5 years

 

Secured financings (a)

​

$

10,977,193

​

$

675,327

​

$

1,960,570

​

$

5,355,964

​

$

2,985,332

​

Collateralized loan obligations

​

​

936,375

​

​

—

​

​

—

​

​

—

​

​

936,375

​

Unsecured senior notes

​

 

1,750,000

​

 

700,000

​

 

550,000

​

 

500,000

​

 

—

​

Future loan funding commitments:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial Lending (b)

​

 

1,291,304

​

 

928,429

​

 

336,975

​

 

25,900

​

 

—

​

Infrastructure Lending (c)

​

​

192,515

​

​

163,211

​

​

29,304

​

​

—

​

​

—

​

Represents the contractual maturity of the respective credit facility, inclusive of available extension options.  If investments that have been pledged as collateral repay earlier than the contractual maturity of the debt, the related portion of the debt would likewise require earlier repayment. Refer to Note 9 to the Condensed Consolidated Financial Statements for the expected maturities by year.

(b)Represents the fully extended maturity of the underlying collateral.

(a)Represents the contractual maturity of the respective credit facility, inclusive of available extension options.  If investments that have been pledged as collateral repay earlier than the contractual maturity of the debt, the related portion of the debt would likewise require earlier repayment. Refer to Note 9 to the Condensed Consolidated Financial Statements for the expected maturities by year.

​(c)

(b)Excludes $201.7 million of loan funding commitments in which management projects the Company will not be obligated to fund in the future due to repayments made by the borrower earlier than, or in excess of, expectations.

​Excludes $234.1 million of loan funding commitments in which management projects the Company will not be obligated to fund in the future due to repayments made by the borrower earlier than, or in excess of, expectations.

(c)Represents contractual commitments of $126.7 million under revolvers and letters of credit and $65.8 million under delayed draw term loans.

​

(d)Represents outstanding residential loan purchase commitments.

(e)Represents contractual commitments of $118.3 million under revolvers and letters of credit and $32.1 million under delayed draw term loans.
The table above does not include interest payable, amounts due under our management agreement, amounts due under our derivative agreements or amounts due under guarantees as those contracts do not have fixed and determinable payments.

​

Our secured financings, CLOs and collateralized loan obligationsSASB consist primarily of matched-term funding for our loans and investment securities and long-term mortgages on our owned properties. Repayments of such facilities are generally made from proceeds from maturities, prepayments or sales of such investments and operating cash flows from owned properties. In the normal course of business, the Company iswe are in discussions with itsour lenders to extend, amend or replace any financing facilities which contain near term expirations.

​

Our unsecured senior notes are expected to be repaid from a combination of available cash on hand, approved but undrawn capacity under our secured financing agreements, and/or equity issuances or other potential sources of financing, as discussed above.

​

above, including issuances of new unsecured senior notes.

Our future fundingloan commitments are expected to be primarily matched-term funded under secured financing agreements with any difference funded from available cash on hand or other potential sources of financing discussed above.

94




100

Table of Contents

​

Critical Accounting Estimates

​

Our financial statements are prepared in accordance with GAAP, which requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We believe that all of the decisions and assessments upon which our financial statements are based were reasonable at the time made, based upon information available to us at that time. The following discussion describes the critical accounting estimates that apply to our operations and require complex management judgment. This summary should be read in conjunction with a more complete discussion of our accounting policies included in Note 2 to the Condensed Consolidated Financial Statements.

Credit Losses

​

Loans and Debt Securities Measured at Amortized Cost

​

As discussed in Note 2 to the Condensed Consolidated Financial Statements, ASC 326, Financial Instruments – Credit Losses, became effective for the Company on January 1, 2020. ASC 326 mandates the use of a current expected credit loss model (“CECL”) for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” credit model previously required under GAAP. The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to only estimating credit losses upon the occurrence of a discrete loss event under the previous “incurred loss” methodology. The CECL model applies to our loans held-for-investment (“HFI”) and our held-to-maturity (“HTM”) debt securities which are carried at amortized cost, including future funding commitments and accrued interest receivable related to those loans and securities.

​

As we do not have a history of realized credit losses on our HFI loans and HTM securities, we have subscribed to third party database services to provide us with historical industry losses for both commercial real estateand infrastructure loans. Using these losses as a benchmark, we determine expected credit losses for our loans and securities on a collective basis within our commercial real estate and infrastructure portfolios. Such determination also incorporates significant assumptions and estimates regarding, among other things, prepayments, future fundings and economic forecasts. See Note 4 to the Condensed Consolidated Financial Statements for further discussion of our methodologies.

​

We also evaluate each loan and security measured at amortized cost for credit deterioration at least quarterly. Credit deterioration occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan or security. If a loan or security is considered to be credit deteriorated, we depart from the industry loss rate approach described above and determine the credit loss allowance as any excess of the amortized cost basis of the loan or security over (i) the present value of expected future cash flows discounted at the contractual effective interest rate or (ii) the fair value of the collateral, if repayment is expected solely from the collateral.

​

Significant judgment is required when estimating future credit losses; therefore, actual results over time could be materially different. As of March 31,September 30, 2021, we held $12.7$13.8 billion of loans and HTM securities measured at amortized cost with expected future funding commitments of $1.4 billion. During the threenine months ended March 31,September 30, 2021, we recognized an immateriala $12.4 million credit loss provisionreversal and the related credit loss allowance was $81.5$69.1 million as of March 31,September 30, 2021. During the nine months ended September 30, 2020 and the year ended December 31, 2020, we recognized a credit loss provisionprovisions of $55.3 million and $43.2 million, respectively, and the related credit loss allowance was $89.2 million as of December 31, 2020.

​

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Table of Contents

Available-for-Sale Debt Securities

​

Separate provisions of ASC 326 apply to our available-for-sale (“AFS”) debt securities which are carried at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive income (“AOCI”). We are required to establish an initial credit loss allowance for those securities that are purchased with credit deterioration by grossing up the amortized cost basis of each security and providing an offsetting credit loss allowance for the difference between expected cash flows and contractual cash flows, both on a present value basis.

​

Subsequently, cumulative adverse changes in expected cash flows on our available-for-sale debt securities are recognized currently as an increase to the credit loss allowance. However, the allowance is limited to the amount by which the AFS debt security’s amortized cost exceeds its fair value. Favorable changes in expected cash flows are first recognized as a decrease to the allowance for credit losses (recognized currently in earnings). Such changes would be recognized as a prospective yield adjustment only when the allowance for credit losses is reduced to zero. A change in expected cash flows that
101
is attributable solely to a change in a variable interest reference rate does not result in a credit loss and is accounted for as a prospective yield adjustment.

​

Significant judgment is required when estimating expected cash flows used in determining the credit loss allowance for AFS debt securities; therefore, actual results over time could be materially different. As of March 31,September 30, 2021, we held $160.3$148.6 million of AFS debt securities. We did not recognize any provision for credit losses with respect to our AFS debt securities during the threenine months ended March 31,September 30, 2021 or during the year ended December 31, 2020. There was no related credit loss allowance as of March 31,September 30, 2021 and December 31, 2020.

​

Valuation of Financial Assets and Liabilities Carried at Fair Value

We measure our VIE assets and liabilities, mortgage-backed securities, derivative assets and liabilities, domestic servicing rights intangible asset and any assets or liabilities where we have elected the fair value option at fair value. When actively quoted observable prices are not available, we either use implied pricing from similar assets and liabilities or valuation models based on net present values of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors. See Note 19 to the Condensed Consolidated Financial Statements for details regarding the various methods and inputs we use in measuring the fair value of our financial assets and liabilities. As of March 31,September 30, 2021, we had $63.4$64.8 billion and $60.9 billion of financial assets and liabilities, respectively, that are measured at fair value, including $62.4$62.3 billion of VIE assets and $60.9 billion of VIE liabilities we consolidate pursuant to ASC 810.

We measure the assets and liabilities of consolidated securitization VIEs at fair value pursuant to our election of the fair value option. The securitization VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the VIE, we maximize the use of observable inputs over unobservable inputs. As a result, the methods and inputs we use in measuring the fair value of the assets and liabilities of our VIEs affect our earnings only to the extent of their impact on our direct investment in the VIEs.

Goodwill Impairment

Our goodwill at March 31,September 30, 2021 of $259.8 million represents the excess of consideration transferred over the fair value of net assets acquired in connection with the acquisitions of LNR in April 2013 and the Infrastructure Lending Segment in September 2018 and October 2018. In testing goodwill for impairment, we follow ASC 350, Intangibles—Goodwill and Other, which permits a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill. If the qualitative assessment determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill, then no impairment is determined to exist for the reporting unit. However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill, or we choose not to perform the qualitative assessment, then we compare the fair value of that reporting unit with its carrying value, including goodwill, in a quantitative assessment. If the carrying value of a reporting unit exceeds its fair value, goodwill is considered impaired with the impairment loss measured as the excess of the reporting unit’s carrying value (inclusive of goodwill) over its fair value.

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Table of Contents

Based on our qualitative assessment during the fourth quarter of 2020, we believe that the Investing and Servicing Segment reporting unit to which the LNR acquisition goodwill was attributed is not currently at risk of failing a quantitative assessment. This qualitative assessment required judgment to be applied in evaluating the effects of multiple factors, including actual and projected financial performance of the reporting unit, macroeconomic conditions, industry and market conditions, and relevant entity specific events in determining whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount, including goodwill.

Based on our quantitative assessment during the fourth quarter of 2020, we determined that the fair value of the Infrastructure Lending Segment reporting unit to which goodwill is attributed exceeded its carrying value including goodwill. This quantitative assessment required judgment to be applied in determining the fair value of our equity in the Infrastructure Lending Segment, which included estimates of future cash flows, terminal equity multiple and market discount rate.

102
Recent Accounting Developments

Refer to Note 2 to the Condensed Consolidated Financial Statements for a discussion of recent accounting developments and the expected impact to the Company.

​

Item 3.Quantitative and QualitativeDisclosures About Market Risk

​

We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake. Our strategies for managing risk and our exposure to such risks, as described in Item 7A of our Form 10-K, have not changed materially since December 31, 2020 except as described below.

​

Credit Risk

​

Our loans and investments are subject to credit risk. The performance and value of our loans and investments depend upon the owners’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our asset management team reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.

​

We seek to further manage credit risk associated with our Investing and Servicing Segment loans held-for-sale through the purchase of credit index instruments. The following table presents our credit index instruments as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

    

Face Value of

    

Aggregate Notional Value of

    

Number of

​

​

Loans Held-for-Sale

​

Credit Index Instruments

​

Credit Index Instruments

March 31, 2021

​

$

172,119

​

$

49,000

 

3

December 31, 2020

​

$

90,789

​

$

69,000

 

4

​

Face Value of
Loans Held-for-Sale		Aggregate Notional Value of
Credit Index Instruments		Number of
Credit Index Instruments
September 30, 2021$39,300 $49,000 3
December 31, 2020$90,789 $69,000 4
Interest Rate Risk

​

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our investments and the related financing obligations. In general, we seek to match the interest rate characteristics of our investments with the interest rate characteristics of any related financing obligations such as repurchase agreements, bank credit facilities, term loans, revolving facilities and securitizations. In instances where the interest rate characteristics of an investment and the related financing obligation are not matched, we mitigate such interest rate risk through the utilization of interest rate derivatives of the same duration. The following

97

Table of Contents

table presents financial instruments where we have utilized interest rate derivatives to hedge interest rate risk and the related interest rate derivatives as of March 31,September 30, 2021 and December 31, 2020 (dollars in thousands):

103
​Table of Contents

​

​

​

​

​

​

​

​

​

​

​

    

​

    

Aggregate Notional

    

​

 

​

​

Face Value of

​

Value of Interest

​

Number of Interest

 

​

​

Hedged Instruments

​

Rate Derivatives

​

Rate Derivatives

 

Instrument hedged as of March 31, 2021

​

​

​

​

​

​

​

​

​

Loans held-for-sale

​

$

607,144

​

$

977,600

 

39

​

RMBS, available-for-sale

​

 

245,472

​

 

85,000

 

2

​

CMBS, fair value option

​

​

115,867

​

​

71,000

​

2

​

HTM debt securities

​

​

16,015

​

​

16,015

​

1

​

Secured financing agreements

​

 

992,927

​

​

1,627,352

 

24

​

Unsecured senior notes

​

 

500,000

​

​

470,000

 

1

​

​

​

$

2,477,425

​

$

3,246,967

 

69

​

Instrument hedged as of December 31, 2020

​

​

​

​

​

​

​

​

​

Loans held-for-sale

​

$

911,596

​

$

557,000

 

25

​

RMBS, available-for-sale

​

 

252,738

​

 

421,000

 

4

​

CMBS, fair value option

​

​

125,985

​

​

71,000

​

2

​

HTM debt securities

​

​

16,554

​

​

16,554

​

1

​

Secured financing agreements

​

 

1,008,909

​

​

1,633,357

 

24

​

Unsecured senior notes

​

 

500,000

​

​

470,000

 

1

​

​

​

$

2,815,782

​

$

3,168,911

 

57

​

​

Face Value of
Hedged Instruments		Aggregate Notional Value of
Credit Index Instruments		Number of
Credit Index Instruments
Instrument hedged as of September 30, 2021
Loans held-for-sale$1,797,642 $1,660,200 38
RMBS, available-for-sale229,843 85,000 2
CMBS, fair value option126,864 71,000 2
HTM debt securities14,937 14,937 1
Secured financing agreements995,657 1,663,233 23
Unsecured senior notes500,000 470,000 1
$3,664,943 $3,964,370 67
Instrument hedged as of December 31, 2020
Loans held-for-sale$911,596 $557,000 25
RMBS, available-for-sale252,738 421,000 4
CMBS, fair value option125,985 71,000 2
HTM debt securities16,554 16,554 1
Secured financing agreements1,008,909 1,633,357 24
Unsecured senior notes500,000 470,000 1
$2,815,782 $3,168,911 57
The following table summarizes the estimated annual change in net investment income for our variable rate investments and our variable rate debt assuming increases or decreases in LIBOR or other applicable index rates and adjusted for the effects of our interest rate hedging activities (amounts in thousands, except per share data):
Income (Expense) Subject to Interest Rate SensitivityVariable rate
investments and
indebtedness (1)		1.0%
Increase		0.5%
Increase		0.5%
Decrease		1.0%
Decrease
Investment income from variable rate investments$13,244,542 $75,698 $32,159 $(3,482)$(3,609)
Interest expense from variable rate debt, net of interest rate derivatives(9,646,375)(97,853)(46,840)1,991 (3,599)
Net investment income from variable rate instruments$3,598,167 $(22,155)$(14,681)$(1,491)$(7,208)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

Variable rate

    

​

​

    

​

​

    

​

​

    

​

​

​

​

investments and

​

1.0%

​

0.5%

​

0.5%

​

1.0%

Income (Expense) Subject to Interest Rate Sensitivity

​

indebtedness (1)

​

Increase

​

Increase

​

Decrease

​

Decrease

Investment income from variable rate investments

​

$

11,974,667

​

$

57,992

​

$

24,502

​

$

(4,237)

​

$

(4,364)

Interest expense from variable rate debt, net of interest rate derivatives

​

 

(8,276,358)

​

 

(86,390)

​

 

(41,759)

​

 

6,817

​

 

5,184

Net investment income from variable rate instruments

​

$

3,698,309

​

$

(28,398)

​

$

(17,257)

​

$

2,580

​

$

820

Impact per diluted shares outstanding

​

​

​

​

$

(0.10)

��

$

(0.06)

​

$

0.01

​

$

0.00

(1)Includes the notional value of interest rate derivatives.

​

Foreign Currency Risk

​

We intend to hedge our currency exposures in a prudent manner. However, our currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amount of payments received on the related investments, and/or unequal, inaccurate, or unavailable hedges to perfectly offset changes in future exchange rates. Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.

​

Consistent with our strategy of hedging foreign currency exposure on certain investments, we typically enter into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income, rental income and principal payments) we expect to receive from our foreign currency denominated investments. Accordingly, the notional values and expiration dates of our foreign currency hedges approximate the amounts and timing of future payments we expect to receive on the related investments.

​

98


104

The following table represents our current currency hedge exposure as it relates to our investments denominated in foreign currencies, along with the aggregate notional amount of the hedges in place (amounts in thousands except for number of contracts) using the March 31,September 30, 2021 GBP closing rate of 1.3779,1.3472, EUR closing rate of 1.17321.15848 and AUD closing rate of 0.7596.

0.7226.

Carrying Value of Net InvestmentLocal CurrencyNumber of
Foreign Exchange Contracts		Aggregate Notional Value of Hedges AppliedExpiration Range of Contracts
$19,401 GBP5$25,942 October 2021 - December 2023
36,733 GBP441,571 July 2022 - July 2023
14,508 GBP1423,329 October 2021 - February 2025
25,055 EUR1324,967 October 2021 - October 2022
20,519 EUR930,892 November 2021 - November 2023
102,888 GBP21103,711 October 2021 - August 2022
52,422 GBP1562,804 November 2021 - May 2024
28,248 GBP1036,496 October 2021 - January 2024
3,124 GBP13,583 October 2021
28,222 EUR2427,389 November 2021 - August 2022
18,115 GBP1124,431 November 2021 - May 2024
115,376 GBP35153,977 October 2021 - January 2024
5,232 EUR46,480 November 2021 - July 2022
353 GBP1226,933 November 2021 - July 2022
117,048 GBP9155,375 November 2021 - November 2023
5,914 AUD24,092 August 2022 - August 2023
17,731 EUR1620,266 November 2021 - June 2023
32,333 EUR1361,782 November 2021 - November 2022
36,386 EUR1843,321 December 2021 - November 2025
11,825 EUR314,346 November 2021 - November 2023
61,311 GBP463,016 November 2021
27,381 AUD2633,856 October 2021 - October 2024
148,635 AUD23149,786 November 2021 - June 2022
24,091 EUR1624,108 June 2022 - April 2023
12,067 GBP312,714 December 2021 - April 2022
— EUR32102,704 October 2021 - March 2023
$964,918 343$1,277,871 
​

​

​

​

​

​

​

​

​

​

​

​

Carrying Value of Net Investment

​

Local Currency

​

Number of
Foreign Exchange Contracts

​

Aggregate Notional Value of Hedges Applied

​

Expiration Range of Contracts

$

19,711

​

GBP

​

7

​

$

27,815

​

April 2021 – December 2023

​

92,555

​

GBP

​

21

​

​

90,654

​

April 2021 – August 2022

​

28,028

​

EUR

​

60

​

​

23,894

​

April 2021 – April 2022

​

33,842

​

GBP

​

1

​

​

39,181

​

July 2023

​

63,112

​

EUR

​

38

​

​

66,784

​

May 2021 – March 2023

​

52,105

​

GBP

​

21

​

​

66,054

​

May 2021 – May 2024

​

29,268

​

GBP

​

12

​

​

39,214

​

April 2021 – January 2024

​

3,742

​

GBP

​

5

​

​

7,991

​

April 2021 – October 2021

​

28,394

​

EUR

​

36

​

​

29,689

​

May 2021 – August 2022

​

117,487

​

GBP

​

39

​

​

163,832

​

April 2021 – January 2024

​

60,286

​

GBP

​

19

​

​

84,765

​

April 2021 – August 2021

​

5,249

​

EUR

​

6

​

​

6,836

​

May 2021 – July 2022

​

4,126

​

GBP

​

12

​

​

23,430

​

May 2021 – July 2022

​

119,154

​

GBP

​

10

​

​

165,834

​

August 2021 – November 2023

​

3,981

​

AUD

​

1

​

​

4,301

​

August 2021

​

24,876

​

EUR

​

20

​

​

30,283

​

May 2021 – June 2023

​

34,983

​

EUR

​

10

​

​

60,459

​

May 2021 – November 2022

​

40,898

​

EUR

​

22

​

​

49,445

​

June 2021 – November 2025

​

11,633

​

EUR

​

5

​

​

14,745

​

May 2021 – November 2023

​

62,708

​

GBP

​

12

​

​

68,007

​

May 2021 – November 2021

​

131,211

​

AUD

​

18

​

​

138,925

​

November 2021 – June 2022

​

17,218

​

EUR

​

13

​

​

19,097

​

June 2022 – April 2023

​

10,655

​

GBP

​

5

​

​

13,413

​

June 2021 – April 2022

$

995,222

​

​

​

393

​

$

1,234,648

​

​

​

​

Item 4. Controls and Procedures.

Procedures.​

Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosures.

​

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

​

Changes in Internal Control Over Financial Reporting. No change in internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the quarter ended March 31,September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

​

99

105

PART II—OTHER INFORMATION

​

INFORMATION

Item 1.    Legal Proceedings.

​

Currently, no material legal proceedings are pending or, to our knowledge, threatened or contemplated against us, that could have a material adverse effect on our business, financial position or results of operations.

​

Item 1A. Risk Factors.

​

Factors.

There have been no material changes to the risk factors previously disclosed in our Form 10-K.

​

Item 2.    Unregistered Sales of EquitySecurities and Use of Proceeds.

​

There were no unregistered sales of securities during the three months ended March 31,September 30, 2021.

​

Issuer Purchases of Equity Securities

​

There were no purchases of common stock during the three months ended March 31,September 30, 2021.

​

Item 3.    Defaults Upon Senior Securities.

​

Securities.

None.

​

Item 4.    Mine Safety Disclosures.

​

Disclosures.

Not applicable.

​

Item 5.    Other Information.

​

None.

​

Information.

100

None.
106

TableTable of Contents

Item 6.    Exhibits.

​(a)

Index to Exhibits
INDEX TO EXHIBITS

(a)

Index to Exhibits

​

INDEX TO EXHIBITS

​

Exhibit No.		Description
4.1 

Exhibit No.

​

Description

​31.1 

​

​

31.1

​

Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002

​

​

​

31.2

​

​

​

​

32.1

​

​

​

​

32.2

​

​

​

​

101.INS

​

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

​

​

​

101.SCH

​

Inline XBRL Taxonomy Extension Schema Document

​

​

​

101.CAL

​

Inline XBRL Taxonomy Extension Calculation Linkbase Document

​

​

​

101.DEF

​

Inline XBRL Taxonomy Extension Definition Linkbase Document

​

​

​

101.LAB

​

Inline XBRL Taxonomy Extension Label Linkbase Document

​

​

​

101.PRE

​

Inline XBRL Taxonomy Extension Presentation Linkbase Document

​

​

​

104

​

Cover Page Interactive Data File (embedded within the Inline XBRL document)

​

​

​

​

101


107

SIGNATURES

​

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

​

​

​

​

​

STARWOOD PROPERTY TRUST, INC.

​

​

​

Date: May 6,November 9, 2021

By:

/s/ BARRY S. STERNLICHT

​

​

Barry S. Sternlicht
Chief Executive Officer
Principal Executive Officer

​

​

​

Date: May 6,November 9, 2021

By:

/s/ RINA PANIRY

​

​

Rina Paniry
Chief Financial Officer, Treasurer, Chief Accounting Officer and Principal Financial Officer

​

​

102


108