starwood property trust, inc. · starwood property trust, inc. form 10-q (quarterly report) filed...

STARWOOD PROPERTY TRUST, INC.

FORM 10-Q(Quarterly Report)

Filed 11/08/19 for the Period Ending 09/30/19

Address C/O STARWOOD CAPITAL GROUP591 WEST PUTNAM AVENUEGREENWICH, CT, 06830

Telephone (203) 422-7700CIK 0001465128

Symbol STWDSIC Code 6798 - Real Estate Investment Trusts

Industry Specialized REITsSector Financials

Fiscal Year 12/31

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UNITED STATESSECURITIES 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 1934For the quarterly period ended September 30, 2019

OR

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

Commission file number 001-34436

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 AvenueGreenwich, Connecticut 06830

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code:(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 registeredCommon 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 1934during 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 filingrequirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation 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 ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, oran 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 anynew 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 November 4, 2019 was 281,929,348.

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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 madepursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements aredeveloped by combining currently available information with our beliefs and assumptions and are generally identified by thewords “believe,” “expect,” “anticipate” and other similar expressions. Forward-looking statements do not guarantee futureperformance, which may be materially different from that expressed in, or implied by, any such statements. Readers are cautionednot 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 futureperformance taking into account all information currently available to us. These beliefs, assumptions and expectations can changeas a result of many possible events or factors, not all of which are known to us or within our control, and which could materiallyaffect actual results, performance or achievements. Factors that may cause actual results to vary from our forward-lookingstatements include, but are not limited to:

● factors described in our Annual Report on Form 10-K for the year ended December 31, 2018, our Quarterly Reporton Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019 and this Quarterly Report on Form 10-Q,including those set forth under the captions “Risk Factors” and “Business”;

● 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 recently completed acquisition of the project finance origination, underwriting andcapital markets business of GE Capital Global Holdings, LLC into our business and to achieve the benefits that weanticipate from the acquisition;

● national and local economic and business conditions;

● 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-lookingstatements contained in this Quarterly Report on Form 10-Q will in fact occur. Except to the extent required by applicable law orregulation, we undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-lookingstatements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, changes to future results overtime or otherwise.

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TABLE OF CONTENTS

PagePart I Financial InformationItem 1. Financial Statements 4

Condensed Consolidated Balance Sheets 4Condensed Consolidated Statements of Operations 5Condensed Consolidated Statements of Comprehensive Income 6Condensed Consolidated Statements of Equity 7Condensed Consolidated Statements of Cash Flows 9Notes to Condensed Consolidated Financial Statements 11Note 1 Business and Organization 11Note 2 Summary of Significant Accounting Policies 12Note 3 Acquisitions and Divestitures 17Note 4 Loans 18Note 5 Investment Securities 23Note 6 Properties 27Note 7 Investment in Unconsolidated Entities 29Note 8 Goodwill and Intangibles 30Note 9 Secured Borrowings 32Note 10 Unsecured Senior Notes 35Note 11 Loan Securitization/Sale Activities 36Note 12 Derivatives and Hedging Activity 38Note 13 Offsetting Assets and Liabilities 40Note 14 Variable Interest Entities 40Note 15 Related-Party Transactions 42Note 16 Stockholders’ Equity and Non-Controlling Interests 44Note 17 Earnings per Share 46Note 18 Accumulated Other Comprehensive Income 47Note 19 Fair Value 48Note 20 Income Taxes 56Note 21 Commitments and Contingencies 56Note 22 Segment Data 58Note 23 Subsequent Events 64

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 65Item 3. Quantitative and Qualitative Disclosures about Market Risk 102Item 4. Controls and Procedures 105

Part II Other InformationItem 1. Legal Proceedings 106Item 1A. Risk Factors 106Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 107Item 3. Defaults Upon Senior Securities 107Item 4. Mine Safety Disclosures 107Item 5. Other Information 107Item 6. Exhibits 108

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PART I - FINANCIAL INFORMATIONItem 1. Financial Statements

Starwood Property Trust, Inc. and SubsidiariesCondensed Consolidated Balance Sheets

(Unaudited, amounts in thousands, except share data)As of As of

September 30, 2019 December 31, 2018Assets:

Cash and cash equivalents $ 284,117 $ 239,824Restricted cash 110,541 248,041Loans held-for-investment, net ($479,169 and $0 held at fair value) 8,919,653 8,532,356Loans held-for-sale ($1,170,193 and $671,282 held at fair value) 1,442,119 1,187,552Loans transferred as secured borrowings — 74,346Investment securities ($252,882 and $262,319 held at fair value) 809,137 906,468Properties, net 2,729,538 2,784,890Intangible assets ($18,249 and $20,557 held at fair value) 119,947 145,033Investment in unconsolidated entities 126,115 171,765Goodwill 259,846 259,846Derivative assets 81,483 52,691Accrued interest receivable 51,777 60,355Other assets 250,773 152,922Variable interest entity (“VIE”) assets, at fair value 59,249,054 53,446,364

Total Assets $ 74,434,100 $ 68,262,453Liabilities and Equity

Liabilities:Accounts payable, accrued expenses and other liabilities $ 234,120 $ 217,663Related-party payable 24,486 44,043Dividends payable 137,273 133,466Derivative liabilities 4,781 15,415Secured financing agreements, net 8,248,088 8,683,565Collateralized loan obligations, net 927,436 —Unsecured senior notes, net 1,926,693 1,998,831Secured borrowings on transferred loans, net — 74,239VIE liabilities, at fair value 58,018,209 52,195,042

Total Liabilities 69,521,086 63,362,264Commitments and contingencies (Note 21)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, 287,117,159 issued and 281,937,019outstanding as of September 30, 2019 and 280,839,692 issued and 275,659,552 outstanding as ofDecember 31, 2018 2,871 2,808

Additional paid-in capital 5,121,671 4,995,156Treasury stock (5,180,140 shares) (104,194) (104,194)Accumulated other comprehensive income 52,377 58,660Accumulated deficit (417,529) (348,998)Total Starwood Property Trust, Inc. Stockholders’ Equity 4,655,196 4,603,432

Non-controlling interests in consolidated subsidiaries 257,818 296,757Total Equity 4,913,014 4,900,189

Total Liabilities and Equity $ 74,434,100 $ 68,262,453

Note: In addition to the VIE assets and liabilities which are separately presented, our condensed consolidated balance sheet as of September 30, 2019 includesassets of $1.1 billion and liabilities of $0.9 billion related to a consolidated collateralized loan obligation (“CLO”), which is considered to be a VIE. The CLO’sassets can only be used to settle obligations of the CLO, and the CLO’s liabilities do not have recourse to Starwood Property Trust, Inc. Refer to Note 14 foradditional discussion of VIEs.

See notes to condensed consolidated financial statements.

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Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations(Unaudited, amounts in thousands, except per share data)

For the Three Months Ended For the Nine Months EndedSeptember 30, September 30,

2019 2018 2019 2018Revenues:

Interest income from loans $ 172,030 $ 154,501 $ 546,912 $ 443,825Interest income from investment securities 16,676 11,508 56,853 37,567Servicing fees 14,333 27,824 47,774 71,206Rental income 84,654 91,132 255,784 261,133Other revenues 637 754 2,668 2,131

Total revenues 288,330 285,719 909,991 815,862Costs and expenses:

Management fees 30,238 26,519 76,227 84,655Interest expense 123,156 102,658 387,954 281,433General and administrative 39,766 31,203 112,274 98,873Acquisition and investment pursuit costs 163 6,527 579 8,465Costs of rental operations 31,568 30,191 91,874 92,781Depreciation and amortization 28,269 34,293 86,075 103,187Loan loss provision, net (39) 929 3,242 27,726Other expense 123 76 1,777 677

Total costs and expenses 253,244 232,396 760,002 697,797Other income (loss):Change in net assets related to consolidated VIEs 61,767 33,289 164,761 129,888Change in fair value of servicing rights (625) (974) (2,308) (8,991)Change in fair value of investment securities, net 266 301 995 7,854Change in fair value of mortgage loans held-for-sale, net 32,521 3,940 65,678 26,573Earnings (loss) from unconsolidated entities 2,747 2,625 (31,636) 6,633Gain on sale of investments and other assets, net 21,157 1,462 28,157 25,559Gain on derivative financial instruments, net 21,933 11,735 19,694 27,498Foreign currency loss, net (15,664) (4,078) (17,134) (3,793)

Total other-than-temporary impairment (“OTTI”) (267) — (267) —Noncredit portion of OTTI recognized in other comprehensive income 267 — 267 —Net impairment losses recognized in earnings — — — —

Loss on extinguishment of debt (4,624) (2,540) (10,738) (2,726)Other loss, net (50) (1,421) (123) (815)

Total other income 119,428 44,339 217,346 207,680Income before income taxes 154,514 97,662 367,335 325,745Income tax provision (4,513) (8,281) (8,380) (14,480)Net income 150,001 89,381 358,955 311,265

Net income attributable to non-controlling interests (9,605) (4,845) (21,160) (17,567)Net income attributable to Starwood Property Trust, Inc. $ 140,396 $ 84,536 $ 337,795 $ 293,698

Earnings per share data attributable to Starwood Property Trust, Inc.:Basic $ 0.50 $ 0.31 $ 1.20 $ 1.11Diluted $ 0.49 $ 0.31 $ 1.19 $ 1.09


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Condensed Consolidated Statements of Comprehensive Income(Unaudited, amounts in thousands)


2019 2018 2019 2018Net income $ 150,001 $ 89,381 $ 358,955 $ 311,265Other comprehensive income (loss) (net change by component):

Cash flow hedges — (6) — (24)Available-for-sale securities (579) 737 (1,045) 2,923Foreign currency translation (4,168) (945) (5,238) (4,903)

Other comprehensive loss (4,747) (214) (6,283) (2,004)Comprehensive income 145,254 89,167 352,672 309,261

Less: Comprehensive income attributable to non-controllinginterests (9,605) (4,845) (21,160) (17,567)

Comprehensive income attributable to Starwood PropertyTrust, Inc. $ 135,649 $ 84,322 $ 331,512 $ 291,694


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Condensed Consolidated Statements of EquityFor the Three Months Ended September 30, 2019 and 2018

(Unaudited, amounts in thousands, except share data)

TotalStarwood

Accumulated PropertyCommon 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, July 1, 2019 286,451,361 $ 2,864 $ 5,103,771 5,180,140 $ (104,194) $ (421,858) $ 57,124 $ 4,637,707 $ 265,544 $ 4,903,251Proceeds from DRIP Plan 10,751 — 253 — — — — 253 — 253Redemption of Class A Units forcommon stock 219,831 2 4,695 — — — — 4,697 (4,697) —

Equity offering costs — — (19) — — — — (19) — (19)Share-based compensation 435,216 5 12,971 — — — — 12,976 — 12,976Net income — — — — — 140,396 — 140,396 9,605 150,001Dividends declared, $0.48 per share — — — — — (136,067) — (136,067) — (136,067)Other comprehensive loss, net — — — — — — (4,747) (4,747) — (4,747)VIE non-controlling interests — — — — — — — — (2,615) (2,615)Contributions from non-controllinginterests — — — — — — — — 658 658

Distributions to non-controllinginterests — — — — — — — — (10,677) (10,677)

Balance, September 30, 2019 287,117,159 $ 2,871 $ 5,121,671 5,180,140 $ (104,194) $ (417,529) $ 52,377 $ 4,655,196 $ 257,818 $ 4,913,014

Balance, July 1, 2018 267,541,825 $ 2,675 $ 4,738,969 5,180,140 $ (104,194) $ (260,762) $ 68,134 $ 4,444,822 $ 254,869 $ 4,699,691Proceeds from DRIP Plan 6,530 — 145 — — — — 145 — 145Equity offering costs — — (5) — — — — (5) — (5)Conversion of 2019 ConvertibleNotes 11,181,546 112 215,265 — — — — 215,377 — 215,377

Share-based compensation 441,315 4 5,845 — — — — 5,849 — 5,849Manager incentive fee paid in stock 131,179 2 2,842 — — — — 2,844 — 2,844Net income — — — — — 84,536 — 84,536 4,845 89,381Dividends declared, $0.48 per share — — — — — (132,117) — (132,117) — (132,117)Other comprehensive loss, net — — — — — — (214) (214) — (214)VIE non-controlling interests — — — — — — — — (1,267) (1,267)Contributions from non-controllinginterests — — — — — — — — 12,189 12,189

Distributions to non-controllinginterests — — — — — — — — (9,596) (9,596)



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Condensed Consolidated Statements of Equity (Continued)For the Nine Months Ended September 30, 2019 and 2018

(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, January 1, 2019 280,839,692 $ 2,808 $ 4,995,156 5,180,140 $ (104,194) $ (348,998) $ 58,660 $ 4,603,432 $ 296,757 $ 4,900,189Proceeds from DRIP Plan 27,887 — 632 — — — — 632 — 632Redemption of Class A Units for common stock 974,176 10 21,060 — — — — 21,070 (21,070) —Equity offering costs — — (27) — — — — (27) — (27)Conversion of 2019 Convertible Notes 3,611,918 36 67,526 — — — — 67,562 — 67,562Share-based compensation 1,168,123 12 26,352 — — — — 26,364 — 26,364Manager incentive fee paid in stock 495,363 5 10,972 — — — — 10,977 — 10,977Net income — — — — — 337,795 — 337,795 21,160 358,955Dividends declared, $1.44 per share — — — — — (406,326) — (406,326) — (406,326)Other comprehensive loss, net — — — — — — (6,283) (6,283) — (6,283)VIE non-controlling interests — — — — — — — — (2,792) (2,792)Contributions from non-controlling interests — — — — — — — — 5,294 5,294Distributions to non-controlling interests — — — — — — — — (41,531) (41,531)Balance, September 30, 2019 287,117,159 $ 2,871 $ 5,121,671 5,180,140 $ (104,194) $ (417,529) $ 52,377 $ 4,655,196 $ 257,818 $ 4,913,014

Balance, January 1, 2018 265,983,309 $ 2,660 $ 4,715,246 4,606,885 $ (92,104) $ (217,312) $ 69,924 $ 4,478,414 $ 100,787 $ 4,579,201Proceeds from DRIP Plan 21,512 — 459 — — — — 459 — 459Equity offering costs — — (22) — — — — (22) — (22)Conversion of 2019 Convertible Notes 11,181,546 112 215,265 — — — — 215,377 — 215,377Common stock repurchased — — — 573,255 (12,090) — — (12,090) — (12,090)Share-based compensation 1,215,137 12 16,442 — — — — 16,454 — 16,454Manager incentive fee paid in stock 900,891 9 18,633 — — — — 18,642 — 18,642Net income — — — — 293,698 — 293,698 17,567 311,265Dividends declared, $1.44 per share — — — — — (384,729) — (384,729) — (384,729)Other comprehensive loss, net — — — — — — (2,004) (2,004) — (2,004)VIE non-controlling interests — — — — — — — — (291) (291)Contributions from non-controlling interests — — — — — — — — 387,481 387,481Distributions to non-controlling interests — — (2,962) — — — — (2,962) (244,185) (247,147)Sale of controlling interest in majority ownedproperty asset — — — — — — — — (319) (319)



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Condensed Consolidated Statements of Cash Flows(Unaudited, amounts in thousands)

For the Nine Months EndedSeptember 30,

2019 2018Cash Flows from Operating Activities:

Net income $ 358,955 $ 311,265Adjustments to reconcile net income to net cash (used in) provided by operating activities:Amortization of deferred financing costs, premiums and discounts on secured borrowings 25,942 18,156Amortization of discounts and deferred financing costs on unsecured senior notes 5,830 9,674Accretion of net discount on investment securities (10,338) (12,013)Accretion of net deferred loan fees and discounts (24,193) (28,954)Share-based compensation 26,364 16,454Share-based component of incentive fees 10,977 18,642Change in fair value of investment securities (995) (7,854)Change in fair value of consolidated VIEs (32,984) (12,173)Change in fair value of servicing rights 2,308 8,991Change in fair value of loans held-for-sale (65,678) (26,573)Change in fair value of derivatives (16,043) (24,339)Foreign currency loss, net 17,134 3,734Gain on sale of investments and other assets (28,157) (25,559)Impairment charges on properties and related intangibles 1,392 1,864Loan loss provision, net 3,242 27,726Depreciation and amortization 86,172 101,760Loss (earnings) from unconsolidated entities 31,636 (6,633)Distributions of earnings from unconsolidated entities 9,730 5,001Loss on extinguishment of debt 10,738 2,726

Origination and purchase of loans held-for-sale, net of principal collections (2,549,697) (1,386,609)Proceeds from sale of loans held-for-sale 1,774,794 1,243,109Changes in operating assets and liabilities:Related-party payable, net (19,557) (17,083)Accrued and capitalized interest receivable, less purchased interest (71,906) (37,314)Other assets (112,723) (32,348)Accounts payable, accrued expenses and other liabilities (2,734) 22,997

Net cash (used in) provided by operating activities (569,791) 174,647Cash Flows from Investing Activities:

Origination and purchase of loans held-for-investment (2,987,685) (3,495,080)Proceeds from principal collections on loans 2,312,992 2,225,575Proceeds from loans sold 945,066 742,496Purchase of investment securities (5,165) (312,339)Proceeds from sales of investment securities 3,978 6,016Proceeds from principal collections on investment securities 118,892 355,757Infrastructure lending business combination — (2,011,428)Proceeds from sales and insurance recoveries on properties 52,336 105,548Purchases and additions to properties and other assets (22,977) (44,741)Investment in unconsolidated entities (8,365) (3,100)Distribution of capital from unconsolidated entities 12,455 21,448Payments for purchase or termination of derivatives (36,360) (18,210)Proceeds from termination of derivatives 12,979 15,521

Net cash provided by (used in) investing activities 398,146 (2,412,537)


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Condensed Consolidated Statements of Cash Flows (Continued)(Unaudited, amounts in thousands)


2019 2018Cash Flows from Financing Activities:

Proceeds from borrowings $ 6,084,209 $ 6,845,138Principal repayments on and repurchases of borrowings (5,549,756) (3,880,450)Payment of deferred financing costs (45,403) (63,219)Proceeds from common stock issuances 632 459Payment of equity offering costs (27) (22)Payment of dividends (402,519) (378,096)Contributions from non-controlling interests 5,294 9,066Distributions to non-controlling interests (41,531) (247,147)Purchase of treasury stock — (12,090)Issuance of debt of consolidated VIEs 149,949 26,849Repayment of debt of consolidated VIEs (158,315) (166,387)Distributions of cash from consolidated VIEs 38,607 76,294

Net cash provided by financing activities 81,140 2,210,395Net decrease in cash, cash equivalents and restricted cash (90,505) (27,495)Cash, cash equivalents and restricted cash, beginning of period 487,865 418,273Effect of exchange rate changes on cash (2,702) (757)Cash, cash equivalents and restricted cash, end of period $ 394,658 $ 390,021

Supplemental disclosure of cash flow information:Cash paid for interest $ 367,291 $ 241,173Income taxes paid 8,848 8,223

Supplemental disclosure of non-cash investing and financing activities:Dividends declared, but not yet paid $ 136,533 $ 132,408Consolidation of VIEs (VIE asset/liability additions) 6,103,915 3,438,933Deconsolidation of VIEs (VIE asset/liability reductions) 341,186 1,395,168Reclassification of residential loans held-for-sale to held-for-investment 340,948 —Settlement of 2019 Convertible Notes in shares 75,525 245,172Settlement of loans transferred as secured borrowings 74,692 —Net assets acquired through foreclosure 27,416 —Redemption of Class A Units for common stock 21,070 —Lease liabilities arising from obtaining right-of-use assets 9,626 —Net assets acquired from consolidated VIEs 8,613 27,737Fair value of assets acquired, net of cash and restricted cash — 2,020,037Fair value of liabilities assumed — 8,609Contribution of Woodstar II Portfolio net assets from non-controlling interests — 378,415


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Starwood Property Trust, Inc. and SubsidiariesNotes to Condensed Consolidated Financial Statements

As of September 30, 2019(Unaudited)

1. Business and Organization

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

We have four reportable business segments as of September 30, 2019 and we refer to the investments within thesesegments as our target assets:

● Real estate commercial and residential lending (the “Commercial and Residential Lending Segment”)—engagesprimarily in originating, acquiring, financing and managing commercial and residential first mortgages,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 inboth the U.S. and Europe (including distressed or non-performing loans).

● 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 instabilized commercial real estate properties, including multifamily properties and commercial properties subject tonet leases, that are held for investment.

● Real estate investing and servicing (the “Investing and Servicing Segment”)—includes (i) a servicing business inthe U.S. that manages and works out problem assets, (ii) an investment business that selectively acquires andmanages unrated, investment grade and non-investment grade rated CMBS, including subordinated interests ofsecuritization and resecuritization transactions, (iii) a mortgage loan business which originates conduit loans for theprimary purpose of selling these loans into securitization transactions and (iv) an investment business thatselectively 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 InternalRevenue Code of 1986, as amended (the “Code”). As such, we will generally not be subject to U.S. federal corporate income taxon that portion of our net income that is distributed to stockholders if we distribute at least 90% of our taxable income to ourstockholders 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-ownedsubsidiaries. We are externally managed and advised by SPT Management, LLC (our “Manager”) pursuant to the terms of amanagement agreement. Our Manager is controlled by Barry Sternlicht, our Chairman and Chief Executive Officer. Our Manageris 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 andRMBS. 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 anddistribute those payments to the certificate holders. Under accounting principles generally accepted in the United States ofAmerica (“GAAP”), SPEs typically qualify as VIEs. These are entities that, by design, either (1) lack sufficient equity to permitthe entity to finance its activities without additional subordinated financial support from other parties, or (2) have equity investorsthat do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not havethe 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 theability to remove and replace the special servicer without cause, consolidation of these structures is required pursuant to GAAPas 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 tous as the consolidator of these VIEs.

The VIE liabilities initially represent investment securities on our balance sheet (pre-consolidation). Upon consolidationof 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 theconsolidated VIEs are also eliminated. Finally, an allocable portion of the identified servicing intangible associated with theeliminated 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 consolidatedsubsidiaries and VIEs. Intercompany amounts have been eliminated in consolidation. In the opinion of management, alladjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results ofoperations, and cash flows have been included.

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidatedfinancial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018(our “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three andnine months ended September 30, 2019 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 Note2 regarding principles of consolidation and other accounting policies that (i) are required to be disclosed quarterly, (ii) we view ascritical, (iii) became significant since December 31, 2018 due to a corporate action or increase in the significance of theunderlying business activity or (iv) changed upon adoption of an Accounting Standards Update (“ASU”) issued by the FinancialAccounting Standards Board (“FASB”).

Variable Interest Entities

In addition to the securitization VIEs, we have financed a pool of our loans through a collateralized loan obligation (“CLO”) which is considered a VIE. 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, weassess whether we are deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required toconsolidate the VIE. Accounting Standards Codification (“ASC”) 810, Consolidation, defines the primary beneficiary as theparty 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. Weconsider our variable interests as well as any variable interests of our related parties in making this determination. Where both ofthese factors are present, we are deemed to be the primary beneficiary and we consolidate the VIE. Where either one of thesefactors 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 thatcould 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 applyjudgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factorsconsidered in assessing significance include: the design of the VIE, including its capitalization structure; subordination ofinterests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and thereasons why the interests are held by us.

Our purchased investment securities include unrated and non-investment grade rated securities issued by securitizationtrusts. In certain cases, we may contract to provide special servicing activities for these trusts, or, as holder of the controllingclass, we may have the right to name and remove the special servicer for these trusts. In our role as special servicer, we provideservices on defaulted loans within the trusts, such as foreclosure or work-out procedures, as permitted by the underlyingcontractual agreements. In exchange for these services, we receive a fee. These rights give us the ability to direct activities thatcould significantly impact the trust’s economic performance. However, in those instances where an unrelated third party has theright to unilaterally remove us as special servicer without cause, we do not have the power to direct activities that mostsignificantly 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, liabilitiesand equity of the structures are recorded on our books, and the initial investment, along with any associated unrealized holdinggains and losses, are eliminated in consolidation. Similarly, the interest income earned from these structures, as well as the feespaid by these trusts to us in our capacity as special servicer, are eliminated in consolidation. Further, an allocable portion of theidentified servicing intangible asset associated with the servicing fee streams, and the corresponding allocable amortization orchange 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 interestframework 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 conclusionregarding 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 nonperformance 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 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 theremaining 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 anirrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets andliabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. Thedecision to elect the fair value option is determined on an instrument by instrument basis and must be applied to an entireinstrument and is irrevocable once elected. Assets and liabilities measured at fair value pursuant to this guidance are required tobe 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 mortgage loans held-for-investment were made in order to maintain consistency across all our residential mortgage 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 assetand any assets or liabilities where we have elected the fair value option at fair value. When actively quoted observable prices arenot available, we either use implied pricing from similar assets and liabilities or valuation models based on net present values ofestimated 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 toour 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 thesecuritization VIEs, we maximize the use of observable inputs over unobservable inputs. Refer to Note 19 for further discussionregarding our fair value measurements.

Loans Held-for-Investment

Loans that are held for investment are carried at cost, net of unamortized acquisition premiums or discounts, loan fees,and origination costs as applicable, unless the loans are deemed impaired or we have elected to apply the fair value option atpurchase.

Loan Impairment

We evaluate each loan classified as held-for-investment not under the fair value option for impairment at least quarterly.Impairment occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractualterms of the loan. If a loan is considered to be impaired, we record an allowance through the provision for loan losses to reducethe carrying value of the loan to the present value of expected future cash flows discounted at the loan’s contractual effective rateor the fair value of the collateral, if repayment is expected solely from the collateral.

There may be circumstances where we modify a loan by granting the borrower a concession that we might not otherwiseconsider when a borrower is experiencing financial difficulty or is expected to experience financial difficulty in the foreseeablefuture. Such concessionary modifications are classified as troubled debt restructurings (“TDRs”) unless the modification solelyresults in a delay in payment that is insignificant. Loans classified as TDRs are considered impaired loans for reporting andmeasurement purposes.

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 lowerof amortized cost or fair value, unless we have elected to apply the fair value option at origination or purchase.

Leases

On January 1, 2019, ASC 842, Leases, became effective for the Company. ASC 842 establishes a right-of-use model for lessee accounting which results in the recognition of most leased assets and lease liabilities on the balance sheet of the lessee. Lessor accounting was not significantly affected by this ASC. We elected to apply the provisions of ASC 842 as of January 1, 2019 and not to retrospectively adjust prior periods presented. Such application did not result in any cumulative-effect adjustment as of January 1, 2019. We elected the “package of practical expedients” for transition purposes, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs for leases that commenced prior to January 1, 2019. We also elected not to apply the recognition provisions of ASC 842 to short-term leases, which have original lease terms of 12 months or less. As a lessor, we elected not to separate nonlease components, such as reimbursements from tenants for common area maintenance (“CAM”), from lease components for all classes of underlying assets, and continue to recognize such nonlease components ratably in rental income. We also elected to continue to exclude from rental income all sales, use and other similar taxes collected from lessees. As required by ASC 842, we no longer record as revenues and expenses lessor costs (such as property taxes) paid directly by the lessees. The application of ASC 842 has had no material effect on our consolidated financial statements, as all of our leases, as both lessor and lessee, are currently classified as operating leases, which are subject to essentially the same straight-line revenue and expense recognition as in the past. As a lessee, our only significant long-term lease as of January 1, 2019 resulted in the

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recognition of a $12.0 million lease liability and corresponding right-of-use asset, which are classified within “Accounts payable,accrued expenses and other liabilities” and “Other assets”, respectively, in our condensed consolidated balance sheet as ofSeptember 30, 2019.

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 outstanding convertible senior notes (the “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 areparticipating securities. In addition, the non-controlling interests that are redeemable with our common stock are consideredparticipating securities because they earn a preferred return indexed to the dividend rate on our common stock (see Note 16). Dueto the existence of these participating securities, the two-class method of computing EPS is required, unless another method isdetermined to be more dilutive. Under the two-class method, undistributed earnings are reallocated between shares of commonstock and participating securities. For the three and nine months ended September 30, 2019 and 2018, the two-class methodresulted in the most dilutive EPS calculation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements, as well as the reported amounts of revenues and expenses during the reporting periods. Actual results could differfrom those estimates. The most significant and subjective estimate that we make is the projection of cash flows we expect toreceive on our loans, investment securities and intangible assets, which has a significant impact on the amounts of interestincome, credit losses (if any) and fair values that we record and/or disclose. In addition, the fair value of financial assets andliabilities that are estimated using a discounted cash flows method is significantly impacted by the rates at which we estimatemarket participants would discount the expected cash flows.

Recent Accounting Developments

On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326) – Measurement ofCredit Losses on Financial Instruments, which mandates use of an “expected loss” credit model for estimating future credit losses of certain financial instruments instead of the “incurred loss” credit model that current GAAP requires. The “expected loss” 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 in accordance with the current “incurred loss” methodology. This ASU is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2019. Though we have not completed our assessment of this ASU, we expect this ASU to result in our recognition of higher levels of allowances for loan losses. Our assessment of the estimated amount of such increases remains in process.

On January 26, 2017, the FASB issued ASU 2017-04, Goodwill and Other (Topic 350) – Simplifying the Test forGoodwill Impairment, which simplifies the method applied for measuring impairment in cases where goodwill is impaired. ThisASU specifies that goodwill impairment will be measured as the excess of the reporting unit’s carrying value (inclusive ofgoodwill) over its fair value, eliminating the requirement that all assets and liabilities of the reporting unit be remeasuredindividually in connection with measurement of goodwill impairment. This ASU is effective for annual periods, and interimperiods therein, beginning after December 15, 2019 and is applied prospectively. Early application is permitted. We do notexpect the application of this ASU to materially impact the Company.

On August 28, 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) – Disclosure Framework,which adds new disclosure requirements and modifies or eliminates existing disclosure requirements of ASC 820. This ASU iseffective for annual periods, and interim periods therein, beginning after December 15, 2019.

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Early application is permitted. We do not expect the application of this ASU to materially impact the Company, as it only affectsfair value disclosures.

On October 31, 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810) – Targeted Improvements to RelatedParty Guidance for Variable Interest Entities, which requires reporting entities to consider indirect interests held through relatedparties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety fordetermining whether a decision-making fee is a variable interest. This ASU is effective for annual periods, and interim periodstherein, beginning after December 15, 2019. Early application is permitted. We are in the process of assessing the impact thisASU will have on the Company, but do not expect it to be material.

3. Acquisitions and Divestitures

Investing and Servicing Segment Property Portfolio

During the three and nine months ended September 30, 2019, our Investing and Servicing Segment acquired $8.6million in net assets of a commercial real estate property from a CMBS trust for a gross purchase price of $8.8 million. This property, aggregated with the controlling interests in 18 remaining commercial real estate properties acquired from CMBS trustsprior to December 31, 2018 for an aggregate acquisition price of $278.2 million, comprise the Investing and Servicing Segment Property Portfolio (the “REIS Equity Portfolio”). When the properties are acquired from CMBS trusts that are consolidated as VIEs on our balance sheet, the acquisitions are reflected as repayment of debt of consolidated VIEs in our condensed consolidated statements of cash flows.

During the three and nine months ended September 30, 2019, we sold a property within the Investing and ServicingSegment for $51.5 million. In connection with this sale, we recognized a gain of $20.7 million within gain on sale of investmentsand other assets in our condensed consolidated statements of operations, of which $4.0 million was attributable to non-controlling interests. During the three and nine months ended September 30, 2018, we sold one and six properties, respectively, within theInvesting and Servicing Segment for $8.7 million and $48.7 million, respectively, recognizing a total gain on sale of $1.4 millionand $18.2 million, respectively, within gain on sale of investments and other assets in our condensed consolidated statements ofoperations. One of these properties was acquired by a third party which already held a $0.3 million non-controlling interest in the property. During the nine months ended September 30, 2018, $3.7 million of the gain on sale was attributable to non-controllinginterests. None of the gain on sale was attributable to non-controlling interests during the three months ended September 30, 2018.

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4. Loans

Our loans held-for-investment are accounted for at amortized cost and our loans held-for-sale are accounted for at thelower of cost or fair value, unless we have elected the fair value option for either. The following tables summarize ourinvestments in mortgages and loans by subordination class as of September 30, 2019 and December 31, 2018 (dollars inthousands):

WeightedWeighted Average Life

Carrying Face Average (“WAL”)September 30, 2019 Value Amount Coupon (1) (years)(2)First mortgages (3) $ 6,532,017 $ 6,557,131 6.2 % 2.0First priority infrastructure loans 1,281,815 1,292,807 5.5 % 4.6Subordinated mortgages (4) 53,008 54,143 8.6 % 3.0Mezzanine loans (3) 545,494 546,434 11.2 % 1.8Residential loans, fair value option (5) 479,169 465,344 6.1 % 3.6Other 60,995 64,731 8.2 % 1.8

Total loans held-for-investment 8,952,498 8,980,590Loans held-for-sale, fair value option, residential (5) 701,610 677,548 6.4 % 3.5Loans held-for-sale, commercial ($468,583 under fair value option) 576,577 566,891 4.1 % 8.3Loans held-for-sale, infrastructure 164,122 168,445 3.4 % 1.8

Total gross loans 10,394,807 10,393,474Loan loss allowance (33,035) —

Total net loans $ 10,361,772 $ 10,393,474

December 31, 2018First mortgages (3) $ 6,607,117 $ 6,631,236 6.9 % 2.0First priority infrastructure loans 1,456,779 1,465,828 5.7 % 4.5Subordinated mortgages (4) 52,778 53,996 8.9 % 3.7Mezzanine loans (3) 393,832 394,739 10.6 % 2.0Other 61,001 64,658 8.2 % 2.5

Total loans held-for-investment 8,571,507 8,610,457Loans held-for-sale, fair value option, residential 623,660 609,571 6.3 % 6.6Loans held-for-sale, commercial ($47,622 under fair value option) 94,117 94,916 5.4 % 6.2Loans held-for-sale, infrastructure 469,775 486,909 3.5 % 0.3Loans transferred as secured borrowings 74,346 74,692 7.1 % 1.3

Total gross loans 9,833,405 9,876,545Loan loss allowance (39,151) —

Total net loans $ 9,794,254 $ 9,876,545

(1) Calculated using LIBOR or other applicable index rates as of September 30, 2019 and December 31, 2018 for variablerate loans

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

(3) First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, theexpected credit quality of these loans is more similar to that of a first mortgage loan. The application of thismethodology resulted in mezzanine loans with carrying values of $809.5 million and $1.0 billion being classified as firstmortgages as of September 30, 2019 and December 31, 2018, respectively.

(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.

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(5) During the three and nine months ended September 30, 2019, $340.9 million of residential loans held-for-sale werereclassified into residential loans held-for-investment.

During the three and nine months ended September 30, 2018, the Company received distributions totaling $2.8 millionand $15.1 million, respectively, from a profit participation in a mortgage loan that was repaid in 2016. The loan was secured by aretail and hospitality property located in the Times Square area of New York City. The profit participation is accounted for as aloan in accordance with the acquisition, development and construction accounting guidance within ASC 310-10, which resultedin distributions in excess of basis being recognized within interest income in our consolidated statements of operations. Therewere no distributions from profit participations received during the three and nine months ended September 30, 2019.

As of September 30, 2019, our variable rate loans held-for-investment were as follows (dollars in thousands):

Carrying Weighted-averageSeptember 30, 2019 Value Spread Above IndexCommercial loans $ 6,716,670 4.4 % First priority infrastructure loans 1,281,815 3.4 %

Total variable rate loans held-for-investment $ 7,998,485 4.3 %

We regularly evaluate the extent and impact of any credit deterioration associated with the performance and/or value ofthe underlying collateral, as well as the financial and operating capability of the borrower. Specifically, the collateral’s operatingresults and any cash reserves are analyzed and used to assess (i) whether cash flow from operations is sufficient to cover the debtservice requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the collateral’sliquidation value. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency inmanaging 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 impairment analyses are completed and reviewed by assetmanagement and finance personnel who utilize various data sources, including (i) periodic financial data such as propertyoperating statements, occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization anddiscount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.

Our evaluation process, as described above, produces an internal risk rating between 1 and 5, which is a weightedaverage of the numerical ratings in the following categories: (i) sponsor capability and financial condition, (ii) loan and collateralperformance relative to underwriting, (iii) quality and stability of collateral cash flows and (iv) loan structure. We utilize theoverall risk ratings as a concise means to monitor any credit migration on a loan as well as on the whole portfolio. While theoverall risk rating is generally not the sole factor we use in determining whether a loan is impaired, a loan with a higher overallrisk rating would tend to have more adverse indicators of impairment and therefore would be more likely to experience a creditloss.

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The rating categories for commercial real estate loans generally include the characteristics described below, but theseare utilized as guidelines and therefore not every loan will have all of the characteristics described in each category:

Rating Characteristics1

● Sponsor capability and financial condition—Sponsor is highly rated or investment grade or, if private, the

equivalent thereof with significant management experience.● Loan collateral and performance relative to underwriting—The collateral has surpassed underwritten

expectations.● Quality and stability of collateral cash flows—Occupancy is stabilized, the property has had a history of

consistently high occupancy, and the property has a diverse and high quality tenant mix.● Loan structure—Loan to collateral value ratio (“LTV”) does not exceed 65%. The loan has structural features

that enhance the credit profile.

2 ● Sponsor capability and financial condition—Strong sponsorship with experienced management team and aresponsibly leveraged portfolio.

● Loan collateral and performance relative to underwriting—Collateral performance equals or exceedsunderwritten expectations and covenants and performance criteria are being met or exceeded.

● Quality and stability of collateral cash flows—Occupancy is stabilized with a diverse tenant mix.● Loan structure—LTV does not exceed 70% and unique property risks are mitigated by structural features.

3 ● Sponsor capability and financial condition—Sponsor has historically met its credit obligations, routinely paysoff loans at maturity, and has a capable management team.

● Loan collateral and performance relative to underwriting—Property performance is consistent withunderwritten expectations.

● Quality and stability of collateral cash flows—Occupancy is stabilized, near stabilized, or is on track withunderwriting.

● Loan structure—LTV does not exceed 80%.

4 ● Sponsor capability and financial condition—Sponsor credit history includes missed payments, past duepayment, and maturity extensions. Management team is capable but thin.

● Loan collateral and performance relative to underwriting—Property performance lags behind underwrittenexpectations. Performance criteria and loan covenants have required occasional waivers. A sale of the propertymay be necessary in order for the borrower to pay off the loan at maturity.

● Quality and stability of collateral cash flows—Occupancy is not stabilized and the property has a large amountof rollover.

● Loan structure—LTV is 80% to 90%.

5 ● Sponsor capability and financial condition—Credit history includes defaults, deeds-in-lieu, foreclosures,and/or bankruptcies.

● Loan collateral and performance relative to underwriting—Property performance is significantly worse thanunderwritten expectations. The loan is not in compliance with loan covenants and performance criteria andmay be in default. Sale proceeds would not be sufficient to pay off the loan at maturity.

● Quality and stability of collateral cash flows—The property has material vacancy and significant rollover ofremaining tenants.

● Loan structure—LTV exceeds 90%.

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The risk ratings for loans subject to our rating system, which excludes loans held-for-sale, by class of loan were asfollows as of September 30, 2019 and December 31, 2018 (dollars in thousands):

Balance Sheet ClassificationLoans Held-For-Investment Loans

First Priority Transferred % ofRisk Rating First Infrastructure Subordinated Mezzanine As Secured TotalCategory Mortgages Loans Mortgages Loans Other Borrowings Total LoansSeptember 30, 20191 $ 598 $ — $ — $ — $ 23,013 $ — $ 23,611 0.2 %2 3,640,565 — 37,999 207,997 — — 3,886,561 37.4 %3 2,695,552 — 3,032 337,497 31,141 — 3,067,222 29.5 %4 — — — — — — — — %5 59,866 — — — — — 59,866 0.6 %N/A 135,436 (1) 1,281,815 (2) 11,977 (1) — 6,841 (1) — 1,436,069 13.8 %

$ 6,532,017 $ 1,281,815 $ 53,008 $ 545,494 $ 60,995 $ — 8,473,329Residential loans held-for-investment, fair value option 479,169 4.6 %Loans held-for-sale 1,442,309 13.9 %Total gross loans $ 10,394,807 100.0 %

December 31, 20181 $ 6,538 $ — $ — $ — $ 23,767 $ — $ 30,305 0.3 %2 3,356,342 — 7,392 111,466 — 74,346 3,549,546 36.1 %3 2,987,296 — 33,410 282,366 31,039 — 3,334,111 33.9 %4 63,094 — — — — — 63,094 0.6 %5 — — — — — — — — %N/A 193,847 (1) 1,456,779 (2) 11,976 (1) — 6,195 (1) — 1,668,797 17.0 %

$ 6,607,117 $ 1,456,779 $ 52,778 $ 393,832 $ 61,001 $ 74,346 8,645,853Loans held-for-sale 1,187,552 12.1 %Total gross loans $ 9,833,405 100.0 %

(1) Principally represents loans individually evaluated for impairment in accordance with ASC 310-10.(2) First priority infrastructure loans were not risk rated as the Company is in the process of developing a risk rating policy

for these loans.

After completing our impairment evaluation process as of September 30, 2019, we concluded that no additional impairment charges or releases thereof were required. During the nine months ended September 30, 2019, we charged-off an allowance for impaired loans of $8.3 million relating to a first mortgage loan on a grocery distribution facility located inMontgomery, Alabama that we foreclosed on in March 2019 and obtained physical possession of the underlying collateralproperty. As of the foreclosure date, our carrying value of the loan totaled $9.0 million ($20.9 million unpaid principal balancenet of an $8.3 million allowance for impaired loan and $3.6 million of unamortized discount). In April 2019, we foreclosed on a first mortgage loan on a grocery distribution facility located in Orlando, Florida and obtained physical possession of the underlying collateral property. As of the foreclosure date, the appraised value of the property exceeded the $18.5 million carryingvalue of the loan ($21.9 million unpaid principal and interest balance net of a $3.4 million unamortized discount, and no reservefor impaired loan).

As of September 30, 2019, we had allowances for impaired loans of $29.9 million. Of this amount, $21.6 million relatesto a residential conversion project located in New York City, for which our recorded investment was as follows as of September30, 2019: (i) $135.4 million first mortgage and contiguous mezzanine loans ($107.2 million unpaid principal balance, which doesnot reflect $38.4 million of accrued interest and $21.6 million allowance for impaired loan) and (ii) $6.8 million unsecuredpromissory note ($7.7 million unpaid principal balance and no reserve for impaired loan).

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Also included in the allowance for impaired loans is $8.3 million related to two subordinated mortgages on departmentstores located in the Greater Chicago area. Our recorded investment in these loans totaled $12.2 million ($12.0 million unpaidprincipal balance and $8.3 million allowance for impaired loans) as of September 30, 2019.

We apply the cost recovery method of interest income recognition for these impaired loans. The average recordedinvestment in the impaired loans for the three and nine months ended September 30, 2019 was $156.5 million and $178.1 million,respectively.

As of September 30, 2019, we held TDRs with unfunded commitments of $4.3 million. There were no TDRs for whichinterest income was recognized during the three and nine months ended September 30, 2019.

As of September 30, 2019, the department store loans discussed above were 90 days or greater past due, as were $5.2million of residential loans and a $36.2 million infrastructure loan with a carrying value of $29.2 million, net of a $7.0 millionnon-accretable difference. In accordance with our interest income recognition policy, these loans were placed on non-accrualstatus.

In accordance with our policies, we record an allowance for loan losses equal to (i) 1.5% of the aggregate carryingamount of loans rated as a “4,” plus (ii) 5% of the aggregate carrying amount of loans rated as a “5,” plus (iii) allowance for infrastructure loans held-for-sale where amortized cost is in excess of fair value, plus (iv) impaired loan reserves, if any. The following table presents the activity in our allowance for loan losses (amounts in thousands):


2019 2018Allowance for loan losses at January 1 $ 39,151 $ 4,330Provision for (reversal of) loan losses 3,242 (2,127)Provision for impaired loans — 29,853Charge-offs (9,358) —Recoveries — —Allowance for loan losses at September 30 $ 33,035 $ 32,056Recorded investment in loans related to the allowance for loan loss $ 254,070 $ 287,242

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


2019 2018Balance at January 1 $ 9,794,254 $ 7,382,641Acquisitions/originations/additional funding 5,607,829 5,006,725Acquisition of Infrastructure Lending Portfolio — 1,826,423Capitalized interest (1) 79,869 44,293Basis of loans sold (2) (2,713,237) (1,985,388)Loan maturities/principal repayments (2,429,078) (2,383,658)Discount accretion/premium amortization 24,193 28,954Changes in fair value 65,678 26,573Unrealized foreign currency translation loss (37,191) (17,095)Loan loss provision, net (3,242) (27,726)Loan foreclosure (27,303) —Transfer to/from other asset classifications — 50Balance at September 30 $ 10,361,772 $ 9,901,792

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

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

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5. Investment Securities

Investment securities were comprised of the following as of September 30, 2019 and December 31, 2018 (amounts inthousands):

Carrying Value as ofSeptember 30, 2019 December 31, 2018

RMBS, available-for-sale $ 195,297 $ 209,079RMBS, fair value option (1) 111,122 87,879CMBS, fair value option (1) 1,127,637 1,157,508Held-to-maturity (“HTM”) debt securities, amortized cost 556,255 644,149Equity security, fair value 11,286 11,893Subtotal—Investment securities 2,001,597 2,110,508

VIE eliminations (1) (1,192,460) (1,204,040)Total investment securities $ 809,137 $ 906,468

(1) Certain fair value option CMBS and RMBS are eliminated in consolidation against VIE liabilities pursuant to ASC 810.

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

RMBS, RMBS, fair CMBS, fair HTM Equity Securitization available-for-sale value option value option Securities Security VIEs (1) Total

Three Months Ended September 30, 2019Purchases $ — $ 52,845 $ 10,214 $ — $ — $ (57,894) $ 5,165Sales — — 49,725 — — (49,725) —Principal collections 7,445 4,680 15,859 35,069 — (17,196) 45,857Three Months Ended September 30, 2018Purchases $ — $ 45,095 $ 26,258 $ 289,100 $ — $ (68,579) $ 291,874Acquisition of InfrastructureLending Portfolio — — — 65,060 — — 65,060Sales 2,046 — 22,065 — — (18,902) 5,209Principal collections 9,246 119 22,031 20,577 — (17,903) 34,070

RMBS, RMBS, fair CMBS, fair HTM Equity Securitization available-for-sale value option value option Securities Security VIEs (1) Total

Nine Months Ended September 30, 2019Purchases $ — $ 79,117 $ 62,427 $ — $ — $ (136,379) $ 5,165Sales — 41,501 112,426 — — (149,949) 3,978Principal collections 20,222 9,772 37,768 89,737 — (38,607) 118,892Nine Months Ended September 30, 2018Purchases $ — $ 45,095 $ 118,166 $ 289,100 $ — $ (140,022) $ 312,339Acquisition of InfrastructureLending Portfolio — — — 65,060 — — 65,060Sales 2,853 — 30,012 — — (26,849) 6,016Principal collections 27,432 119 82,812 323,061 — (77,667) 355,757

(1) Represents RMBS and CMBS, fair value option amounts eliminated due to our consolidation of securitization VIEs.These amounts are reflected as repayment of debt of consolidated VIEs in our condensed consolidated statements ofcash flows.

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RMBS, Available-for-Sale

The Company classified all of its RMBS not eliminated in consolidation as available-for-sale as of September 30, 2019 and December 31, 2018. These RMBS are reported at fair value in the balance sheet with changes in fair value recorded in accumulated other comprehensive income (“AOCI”).

The tables below summarize various attributes of our investments in available-for-sale RMBS as of September 30, 2019and December 31, 2018 (amounts in thousands):

Unrealized Gains or (Losses)Recognized in AOCI

Purchase Recorded Gross Gross Net Amortized Credit Amortized Non-Credit Unrealized Unrealized Fair Value

Cost OTTI Cost OTTI Gains Losses Adjustment Fair ValueSeptember 30, 2019RMBS $ 152,632 $ (9,805) $ 142,827 $ (333) $ 52,803 $ — $ 52,470 $ 195,297December 31, 2018RMBS $ 165,461 $ (9,897) $ 155,564 $ (31) $ 53,546 $ — $ 53,515 $ 209,079

Weighted Average

Coupon (1) Weighted Average

Rating WAL

(Years) (2)September 30, 2019 RMBS 3.3 % BB- 5.8December 31, 2018 RMBS 3.7 % CCC- 6.0

(1) Calculated using the September 30, 2019 and December 31, 2018 one-month LIBOR rate of 2.016% and 2.503%,respectively, for floating rate securities.

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

As of September 30, 2019, approximately $165.9 million, or 84.9%, of RMBS were variable rate and paid interest atLIBOR plus a weighted average spread of 1.24%. As of December 31, 2018, approximately $177.4 million, or 84.9%, of RMBSwere variable rate and paid interest at LIBOR plus a weighted average spread of 1.22%. We purchased all of the RMBS at adiscount, a portion of which will be accreted into income over the expected remaining life of the security. The majority of theincome from this strategy is earned from the accretion of this accretable discount.

The following table contains a reconciliation of aggregate principal balance to amortized cost for our RMBS as ofSeptember 30, 2019 and December 31, 2018 (amounts in thousands):

September 30, 2019 December 31, 2018Principal balance $ 286,717 $ 309,497Accretable yield (56,148) (54,779)Non-accretable difference (87,742) (99,154)Total discount (143,890) (153,933)Amortized cost $ 142,827 $ 155,564

The principal balance of credit deteriorated RMBS was $270.9 million and $290.8 million as of September 30, 2019 andDecember 31, 2018, respectively. Accretable yield related to these securities totaled $50.0 million and $49.5 million as ofSeptember 30, 2019 and December 31, 2018, respectively.

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The following table discloses the changes to accretable yield and non-accretable difference for our RMBS during thethree and nine months ended September 30, 2019 (amounts in thousands):

Non-AccretableThree Months Ended September 30, 2019 Accretable Yield DifferenceBalance as of July 1, 2019 $ 54,821 $ 92,570Accretion of discount (2,446) —Principal write-downs, net — (1,055)Transfer to/from non-accretable difference 3,773 (3,773)Balance as of September 30, 2019 $ 56,148 $ 87,742

Nine Months Ended September 30, 2019Balance as of January 1, 2019 $ 54,779 $ 99,154Accretion of discount (7,484) —Principal write-downs, net — (2,559)Transfer to/from non-accretable difference 8,853 (8,853)Balance as of September 30, 2019 $ 56,148 $ 87,742

We have engaged a third party manager who specializes in RMBS to execute the trading of RMBS, the cost of whichwas $0.3 million for both the three months ended September 30, 2019 and 2018, and $1.1 million and $1.3 million for the ninemonths ended September 30, 2019 and 2018, respectively, recorded as management fees in the accompanying condensedconsolidated statements of operations.

The following table presents the gross unrealized losses and estimated fair value of any available-for-sale securities thatwere in an unrealized loss position as of September 30, 2019 and December 31, 2018, and for which other-than-temporaryimpairments (“OTTI”) (full or partial) have not been recognized in earnings (amounts in thousands):

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 September 30, 2019RMBS $ 1,520 $ — $ (333) $ —As of December 31, 2018RMBS $ 2,148 $ — $ (31) $ —

As of both September 30, 2019 and December 31, 2018, there was one security with unrealized losses reflected in thetable above. After evaluating the security and recording adjustments for credit-related OTTI, we concluded that the remainingunrealized losses reflected above were noncredit-related and would be recovered from the security’s estimated future cash flows.We considered a number of factors in reaching this conclusion, including that we did not intend to sell the security, it was notconsidered more likely than not that we would be forced to sell the security prior to recovering our amortized cost, and there wereno material credit events that would have caused us to otherwise conclude that we would not recover our cost. Credit losses,which represent most of the OTTI we record on securities, are calculated by comparing (i) the estimated future cash flows of eachsecurity discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previouslyrevised, to (ii) our amortized cost basis. Significant judgment is used in projecting cash flows for our non-agency RMBS. As aresult, actual income and/or impairments could be materially different from what is currently projected and/or reported.

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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 andRMBS in an effort to eliminate accounting mismatches resulting from the current or potential consolidation of securitizationVIEs. As of September 30, 2019, the fair value and unpaid principal balance of CMBS where we have elected the fair valueoption, excluding the notional value of interest-only securities and before consolidation of securitization VIEs, were $1.1 billionand $2.8 billion, respectively. As of September 30, 2019, the fair value and unpaid principal balance of RMBS where we haveelected the fair value option, excluding the notional value of interest-only securities and before consolidation of securitizationVIEs, were $111.1 million and $61.7 million, respectively. The $1.2 billion total fair value balance of CMBS and RMBSrepresents our economic interests in these assets. However, as a result of our consolidation of securitization VIEs, the vastmajority of this fair value (all except $46.3 million at September 30, 2019) is eliminated against VIE liabilities before arriving atour GAAP balance for fair value option investment securities.

As of September 30, 2019, $118.4 million of our CMBS were variable rate and none of our RMBS were variable rate.

HTM Debt Securities, Amortized Cost

The table below summarizes unrealized gains and losses of our investments in HTM debt securities as of September 30,2019 and December 31, 2018 (amounts in thousands):

Net Carrying Amount Gross Unrealized Gross Unrealized (Amortized Cost) Holding Gains Holding Losses Fair Value

September 30, 2019 CMBS $ 360,640 $ 1,008 $ (2,968) $ 358,680Preferred interests 141,567 1,254 — 142,821Infrastructure bonds 54,048 122 (1,369) 52,801

Total $ 556,255 $ 2,384 $ (4,337) $ 554,302December 31, 2018CMBS $ 408,556 $ 2,435 $ (3,349) $ 407,642Preferred interests 174,825 703 — 175,528Infrastructure bonds 60,768 178 (168) 60,778

Total $ 644,149 $ 3,316 $ (3,517) $ 643,948

The table below summarizes the maturities of our HTM debt securities by type as of September 30, 2019 (amounts inthousands):

Preferred InfrastructureCMBS Interests Bonds Total

Less than one year $ 334,249 $ — $ — $ 334,249One to three years 26,391 — 9,013 35,404Three to five years — 141,567 — 141,567Thereafter — — 45,035 45,035

Total $ 360,640 $ 141,567 $ 54,048 $ 556,255

As of September 30, 2019 and December 31, 2018, $20.7 million and $21.2 million, respectively, of our infrastructurebonds with an aggregate principal balance of $33.7 million and $34.2 million, respectively, were originally acquired withdeteriorated credit quality and had no accretable yield and an aggregate non-accretable difference of $13.0 million.

Equity Security, Fair Value Option

During 2012, we acquired 9,140,000 ordinary shares from a related-party in Starwood European Real Estate FinanceLimited (“SEREF”), a debt fund that is externally managed by an affiliate of our Manager and is listed on the London StockExchange. The fair value of the investment remeasured in USD was $11.3 million and $11.9 million as of September 30, 2019and December 31, 2018, respectively. As of September 30, 2019, our shares represent an approximate 2% interest in SEREF.

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6. Properties

Our properties are held within the following portfolios:

Ireland Portfolio

The Ireland Portfolio is comprised of 11 net leased fully occupied office properties and one multifamily property all located in Dublin, Ireland, which we acquired during the year ended December 31, 2015. The Ireland Portfolio, which collectively is comprised of approximately 600,000 square feet, includes total gross properties and lease intangibles of $498.1million and debt of $343.3 million as of September 30, 2019.

Woodstar I Portfolio

The Woodstar I Portfolio is comprised of 32 affordable housing communities with 8,948 units concentrated primarily inthe Tampa, Orlando and West Palm Beach metropolitan areas. During the year ended December 31, 2015, we acquired 18 of the32 affordable housing communities of the Woodstar I Portfolio with the final 14 communities acquired during the year endedDecember 31, 2016. The Woodstar I Portfolio includes total gross properties and lease intangibles of $627.9 million and federal,state and county sponsored financing and other debt of $405.8 million as of September 30, 2019.

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. During the year ended December 31, 2017, we acquired eight of the 27 affordable housingcommunities of the Woodstar II Portfolio 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 $600.7 million and debt of $437.6 million as ofSeptember 30, 2019.

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. andprimarily affiliated with major hospitals or located on or adjacent to major hospital campuses. The Medical Office Portfolioincludes total gross properties and lease intangibles of $759.5 million and debt of $489.4 million as of September 30, 2019.

Master Lease Portfolio

The Master Lease Portfolio is comprised of 16 retail properties geographically dispersed throughout the U.S., with morethan 50% of the portfolio, by carrying value, located in Florida, Texas and Minnesota. These properties, which we acquired inSeptember 2017, collectively comprise 1.9 million square feet and were leased back to the seller under corporate guaranteedmaster net lease agreements with initial terms of 24.6 years and periodic rent escalations. The Master Lease Portfolio includestotal gross properties of $343.8 million and debt of $192.3 million as of September 30, 2019.

Investing and Servicing Segment Property Portfolio

The REIS Equity Portfolio is comprised of 19 commercial real estate properties and one equity interest in anunconsolidated commercial real estate property. The REIS Equity Portfolio includes total gross properties and lease intangibles of$337.5 million and debt of $225.4 million as of September 30, 2019. Refer to Note 3 for further discussion of the REIS Equity Portfolio.

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The table below summarizes our properties held as of September 30, 2019 and December 31, 2018 (dollars inthousands):

Depreciable Life September 30, 2019 December 31, 2018Property Segment

Land and land improvements 0 – 15 years $ 640,831 $ 648,972Buildings and building improvements 5 – 45 years 1,969,326 1,980,283Furniture & fixtures 3 – 7 years 51,148 46,048

Investing and Servicing SegmentLand and land improvements 0 – 15 years 69,640 82,332Buildings and building improvements 3 – 40 years 221,796 213,010Furniture & fixtures 2 – 5 years 2,752 2,158

Commercial and Residential Lending Segment (1)Land and land improvements 0 – 7 years 11,386 —Buildings 20 – 23 years 16,067 —

Properties, cost 2,982,946 2,972,803Less: accumulated depreciation (253,408) (187,913)

Properties, net $ 2,729,538 $ 2,784,890

(1) Represents properties acquired through loan foreclosure. Refer to Note 4 for further discussion.

During the three and nine months ended September 30, 2019, we sold one operating property for $51.5 million. In connection with this sale, we recognized a gain of $20.7 million within gain on sale of investments and other assets in ourcondensed consolidated statements of operations, of which $4.0 million was attributable to non-controlling interests. During thethree and nine months ended September 30, 2018, we sold one and nine operating properties for $8.7 million and $104.3 million,respectively, recognizing a gain on sale of $1.4 million and $25.1 million, respectively, within gain on sale of investments and other assets in our condensed consolidated statements of operations. One of these properties was acquired by a third party whichalready held a $0.3 million non-controlling interest in the property. During the nine months ended September 30, 2018, $3.7million of the gain on sale was attributable to non-controlling interests. None of the gain on sale was attributable to non-controlling interests during the three months ended September 30, 2018.

Future rental payments due to us from tenants under existing non-cancellable operating leases for each of the next fiveyears and thereafter are as follows (in thousands):

2019 (remainder of) $ 67,0512020 170,0562021 117,1152022 110,1992023 94,699Thereafter 818,876Total $ 1,377,996

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7. Investment in Unconsolidated Entities

The table below summarizes our investments in unconsolidated entities as of September 30, 2019 and December 31,2018 (dollars in thousands):

Participation / Carrying value as of Ownership % (1) September 30, 2019 December 31, 2018

Equity method:Retail Fund 33% $ 71,824 $ 114,362Investor entity which owns equity in an online real estatecompany 50% 9,441 9,372

Equity interests in commercial real estate 50% 2,165 6,294Equity interest in and advances to a residential mortgageoriginator (2) N/A 9,404 9,082

Various 25% - 50% 8,277 6,984 101,111 146,094

Other:Equity interest in a servicing and advisory business (3) 4% — 6,207Investment funds which own equity in a loan servicer andother real estate assets 4% - 6% 9,225 9,225

Various 0% - 3% 15,779 10,239 25,004 25,671

$ 126,115 $ 171,765

(1) None of these investments are publicly traded and therefore quoted market prices are not available.

(2) Includes a $2.0 million subordinated loan the Company funded in June 2018.

(3) During the nine months ended September 30, 2019, we received a capital distribution of $8.4 million and our equityinterest was reduced to 4%.

We own a 33% equity interest in a fund that owns four regional shopping malls (the “Retail Fund”), an investment company that measures its assets at fair value on a recurring basis. We report our interest in the Retail Fund on a three-month lag basis at its liquidation value. During the period included in our nine months ended September 30, 2019, the Retail Fund reported unrealized decreases in the fair value of its real estate properties, which resulted in a $46.0 million decrease to our investment. This amount was recognized within earnings (loss) from unconsolidated entities in our condensed consolidated statement of operations during the nine months ended September 30, 2019. Refer to Note 23 for further discussion.

As of September 30, 2019, the carrying value of our equity investment in a residential mortgage originator exceeded theunderlying 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 September 30, 2019.

During the three and nine months ended September 30, 2019, we did not become aware of any observable price changesin our other investments accounted for under the fair value practicability exception (whereby we measure those investments atcost, less impairment, plus or minus observable price changes) or any indicators of impairment.

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8. Goodwill and Intangibles

Goodwill

Infrastructure Lending Segment

The Infrastructure Lending Segment’s goodwill of $119.4 million at both September 30, 2019 and December 31, 2018represents the excess of consideration transferred over the fair value of net assets acquired on September 19, 2018 and October15, 2018. The goodwill recognized is attributable to value embedded in the acquired Infrastructure Lending Segment’s lendingplatform.

LNR Property LLC (“LNR”)

The Investing and Servicing Segment’s goodwill of $140.4 million at both September 30, 2019 and December 31, 2018represents the excess of consideration transferred over the fair value of net assets of LNR acquired on April 19, 2013. Thegoodwill recognized is attributable to value embedded in LNR’s existing platform, which includes a network of commercial realestate asset managers, work-out specialists, underwriters and administrative support professionals as well as proprietary historicalperformance 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, basedupon the expected future cash flows of the associated servicing contracts. At September 30, 2019 and December 31, 2018, thebalance of the domestic servicing intangible was net of $24.8 million and $24.1 million, respectively, which was eliminated inconsolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs. BeforeVIE consolidation, as of September 30, 2019 and December 31, 2018, the domestic servicing intangible had a balance of $43.0million and $44.6 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 andfavorable 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 leaseintangibles, as of September 30, 2019 and December 31, 2018 (amounts in thousands):

As of September 30, 2019 As of December 31, 2018 Gross Carrying Accumulated Net Carrying Gross Carrying Accumulated Net Carrying

Value Amortization Value Value Amortization ValueDomestic servicing rights, at fairvalue $ 18,249 $ — $ 18,249 $ 20,557 $ — $ 20,557In-place lease intangible assets 186,660 (109,145) 77,515 198,220 (100,873) 97,347Favorable lease intangible assets 35,917 (11,734) 24,183 36,895 (9,766) 27,129

Total net intangible assets $ 240,826 $ (120,879) $ 119,947 $ 255,672 $ (110,639) $ 145,033

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The following table summarizes the activity within intangible assets for the nine months ended September 30, 2019(amounts in thousands):

Domestic In-place Lease Favorable LeaseServicing Intangible Intangible

Rights Assets Assets TotalBalance as of January 1, 2019 $ 20,557 $ 97,347 $ 27,129 $ 145,033Acquisition of additional REIS Equity Portfolio property — 277 — 277Amortization — (15,284) (2,519) (17,803)Sales — (2,612) — (2,612)Foreign exchange loss — (1,160) (321) (1,481)Impairment (1) — (1,053) (106) (1,159)Changes in fair value due to changes in inputs and assumptions (2,308) — — (2,308)Balance as of September 30, 2019 $ 18,249 $ 77,515 $ 24,183 $ 119,947

(1) Impairment of intangible lease assets is recognized within other expense in our condensed consolidated statements ofoperations.

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

2019 (remainder of) $ 4,9352020 16,5022021 14,1972022 11,7272023 8,556Thereafter 45,781Total $ 101,698

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9. Secured Borrowings

Secured Financing Agreements

The following table is a summary of our secured financing agreements in place as of September 30, 2019 andDecember 31, 2018 (dollars in thousands):

Outstanding Balance atCurrent Extended Weighted Average Pledged Asset Maximum September 30, December 31,Maturity Maturity (a) Pricing Carrying Value Facility Size 2019 2018

Repurchase Agreements:

Commercial LoansAug 2020 toJan 2024 (b)

Aug 2021 toApr 2028 (b) (c) $ 4,458,046 $ 7,879,032 (d)$ 2,945,331 $ 3,598,311

Residential Loans Feb 2021 N/A LIBOR + 2.10% 16,332 400,000 13,190 —

Infrastructure LoansFeb 2020 toJul 2022

Feb 2021 toJul 2027 LIBOR + 1.75% 316,759 1,000,000 263,664 —

Conduit LoansFeb 2020 toJun 2022

Feb 2021 toJun 2023 LIBOR + 2.22% 358,405 363,225 234,025 35,034

CMBS/RMBSJun 2020 to Dec 2028 (e)

Sep 2020 toOct 2029 (e) (f) 1,069,948 778,025 676,648 656,405

Total Repurchase Agreements 6,219,490 10,420,282 4,132,858 4,289,750Other Secured Financing:

Borrowing Base Facility Apr 2022 Apr 2024 LIBOR + 2.25% 49,754 650,000 (g) 37,313 —Infrastructure Acquisition Facility Sep 2021 Sep 2022 (h) 1,062,553 1,086,201 883,173 1,551,148

Property Mortgages - Fixed rateNov 2024 toAug 2052 (i) N/A 3.41% 1,921,951 1,453,116 1,452,970 1,475,382

Property Mortgages - Variable rateMay 2020 toApr 2025 N/A LIBOR + 2.44% 831,275 694,351 643,261 645,344

Term Loan and Revolver (j) N/A (j) N/A (j) 500,000 400,000 300,000FHLB Feb 2021 N/A (k) 1,164,449 2,000,000 780,754 500,000

Total Other Secured Financing 5,029,982 6,383,668 4,197,471 4,471,874$ 11,249,472 $ 16,803,950 8,330,329 8,761,624

Unamortized net discount (2,920) (963)Unamortized deferred financing costs (79,321) (77,096)

$ 8,248,088 $ 8,683,565

(a) 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 $593.8 million as of September 30, 2019 are indexed to GBP LIBOR

and EURIBOR. The remainder have a weighted average rate of LIBOR + 1.93%.(d) The aggregate initial maximum facility size of $6.8 billion may be increased at our option, subject to certain conditions.

This amount includes such upsizes.(e) Certain facilities with an outstanding balance of $393.8 million as of September 30, 2019 carry a rolling 11-month or

12-month term which may reset monthly with the lender's consent. These facilities carry no maximum facility size.(f) A facility with an outstanding balance of $78.6 million as of September 30, 2019 has a fixed annual interest rate of

4.09%. All other facilities are variable rate with a weighted average rate of LIBOR + 1.55%.(g) The initial maximum facility size of $300.0 million may be increased to $650.0 million, subject to certain conditions.(h) Consists of an annual interest rate of the applicable currency benchmark index + 1.50%. The spread increases 25 bps in

each of the second and third years of the facility which was entered into in September 2018.(i) The weighted average maturity is 9.3 years as of September 30, 2019.(j) Consists of: (i) a $400.0 million term loan facility that matures in July 2026 with an annual interest rate of LIBOR +

2.50%; and (ii) a $100.0 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 $3.5 billion as ofSeptember 30, 2019.

(k) FHLB financing with an outstanding balance of $312.0 million as of September 30, 2019 has a weighted average fixedannual interest rate of 2.08%. The remainder is variable rate with a weighted average rate of LIBOR + 0.28%.

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

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In February 2019, we entered into a $500.0 million Infrastructure Loans repurchase facility. The facility carries a one-year initial term with a one-year extension option and an annual interest rate of LIBOR + 1.75%.

In February 2019, we amended a Residential Loans repurchase facility to increase available borrowings by $200.0million and extend the current maturity from June 2019 to February 2021.

In March 2019, we amended the FHLB facility to increase available borrowings from $500.0 million to $2.0 billion,subject to scheduled reductions to available capacity from September 2020 through maturity in February 2021.

In April 2019, we amended the Borrowing Base Facility to extend the current maturity from February 2021 to April2022 with two one-year extension options.

In July 2019, we entered into the following credit agreements: (i) a $400.0 million term loan facility that carries a seven-year term and an annual interest rate of LIBOR + 2.50%; and (ii) a $100.0 million revolving credit facility that carries a five-yearterm and an annual interest rate of LIBOR + 3.00%. A portion of the net proceeds from the term loan was used to repay theamount outstanding under our previous term loan. We recognized a loss on extinguishment of debt of $1.5 million in ourcondensed consolidated statements of operations in connection with the repayment of our previous term loan.

In July 2019, we entered into a $500.0 million Infrastructure Loans repurchase facility to finance loans within the Infrastructure Lending Segment. The facility carries a three-year revolving period with two one-year extension options, one of which is at our discretion. The facility also carries a term-match to the respective collateral for an additional five-year term after the last day of the revolving period, with such term-match not to exceed the eight-year life of the facility. The facility has an annual interest rate of 2.00% over the applicable currency benchmark index rate, plus fees associated with the facility as well aseach advance.

During the three and nine months ended September 30, 2019, we entered into and amended several Commercial Loansrepurchase facilities resulting in an aggregate upsize of $550.0 million and $1.6 billion, respectively, with weighted averagespreads over the applicable index rates of index + 2.33% and index + 2.21%, respectively.

Our secured financing agreements contain certain financial tests and covenants. As of September 30, 2019, we were incompliance 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 77% of these agreements, do not permit valuation adjustments based on capital markets activity. Instead, margin calls on these facilities are limited to collateral-specific credit marks. 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 repurchase agreements containing margin call provisions for general capital markets activity, approximately 23% 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 September 30, 2019, approximately $8.1 million and $24.9 million, respectively, ofamortization of deferred financing costs from secured financing agreements was included in interest expense on our condensedconsolidated statements of operations. For the three and nine months ended September 30, 2018, approximately $6.6 million and$17.5 million, respectively, of amortization of deferred financing costs from secured financing agreements was included ininterest expense on our condensed consolidated statements of operations.

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Collateralized Loan Obligations

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, of which $936.4 million was purchased by third partyinvestors. We retained $86.6 million of notes, along with preferred shares with a liquidation preference of $77.0 million. TheCLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participationinterests in loans to the CLO in exchange for cash. For the three months ended September 30, 2019, we utilized the reinvestmentfeature, contributing $1.8 million of additional interests into the CLO.

The following table is a summary of our CLO as of September 30, 2019 (amounts in thousands):

Face Carrying WeightedCount Amount Value Average Spread Maturity

Collateral assets 21 $ 1,098,817 $ 1,098,817 LIBOR + 3.23% (a) Aug 2023 (b)Financing 1 936,375 927,436 LIBOR + 1.65% (c) July 2038 (d)

(a) Represents the weighted-average coupon earned on variable rate loans during the three months ended September 30,2019. Of the loans financed by the CLO, 9% earned fixed weighted average interest of 6.84%.

(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 three months ended September 30, 2019,

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 million of issuance costs in connection with the CLO, which are amortized on an effective yield basisover the estimated life of the CLO. As of September 30, 2019, our unamortized issuance costs were $8.9 million.

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

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 ourprincipal repayments schedule for secured financings based on the earlier of (i) the extended contractual maturity of each creditfacility or (ii) the extended contractual maturity of each of the investments that have been pledged as collateral under therespective credit facility (amounts in thousands):

Repurchase Other Secured Agreements Financing CLO Total

2019 (remainder of) $ 53,273 $ 405,283 $ — $ 458,5562020 474,502 198,376 — 672,8782021 1,123,670 823,199 — 1,946,8692022 681,928 685,635 — 1,367,5632023 1,106,086 582,157 — 1,688,243Thereafter 693,399 1,502,821 936,375 (a) 3,132,595Total $ 4,132,858 $ 4,197,471 $ 936,375 $ 9,266,704

(a) Assumes utilization of the reinvestment feature.

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10. Unsecured Senior Notes

The following table is a summary of our unsecured senior notes outstanding as of September 30, 2019 and December31, 2018 (dollars in thousands):

RemainingCoupon Effective Maturity Period of Carrying Value at

Rate Rate (1) Date Amortization September 30, 2019 December 31, 20182019 Convertible Notes N/A N/A N/A N/A $ — $ 77,9692021 Senior Notes (February) 3.63 % 3.89 % 2/1/2021 1.3 years 500,000 500,0002021 Senior Notes (December) 5.00 % 5.32 % 12/15/2021 2.2 years 700,000 700,0002023 Convertible Notes 4.38 % 4.86 % 4/1/2023 3.5 years 250,000 250,0002025 Senior Notes 4.75 % 5.04 % 3/15/2025 5.5 years 500,000 500,000

Total principal amount 1,950,000 2,027,969Unamortized discount—Convertible Notes (3,865) (4,644)Unamortized discount—Senior Notes (13,216) (16,416)Unamortized deferred financing costs (6,226) (8,078)

Carrying amount of debt components $ 1,926,693 $ 1,998,831Carrying amount of conversion option equitycomponents recorded in additional paid-in capital for outstanding convertible notes $ 3,755 $ 3,755

(1) Effective rate includes the effects of underwriter purchase discount and the adjustment for the conversion option on ourConvertible Notes, the value of which reduced the initial liability and was recorded in additional paid-in capital.

Convertible Senior Notes

During the nine months ended September 30, 2019, we settled the remaining $78.0 million principal amount of the4.00% Convertible Senior Notes due 2019 (the “2019 Notes”) through the issuance of 3.6 million shares of common stock andcash payments of $12.0 million. During the three and nine months ended September 30, 2018, we received redemption notices related to the 2019 Notes with a par amount totaling $263.4 million, of which $235.5 million were settled during the three monthsended September 30, 2018 for total consideration of $266.0 million, which was paid via the issuance of 11.2 million shares andcash payments of $20.8 million. The $236.2 million of settlement consideration attributable to the liability component of the 2019Notes exceeded the proportionate net carrying amount of the liability component by $1.8 million, which was recognized as a losson extinguishment of debt in our condensed consolidated statements of operations for the three and nine months ended September30, 2018. The $29.8 million of settlement consideration attributable to the equity component of the 2019 Notes was recognized asa reduction of additional paid-in capital in our condensed consolidated statements of equity for the three and nine months endedSeptember 30, 2018, partially offsetting the $245.2 million fair value of the shares issued.

We recognized interest expense of $3.1 million and $9.3 million during the three and nine months ended September 30,2019, respectively, from our unsecured Convertible Notes. We recognized interest expense of $5.9 million and $24.8 millionduring the three and nine months ended September 30, 2018, respectively, from our unsecured Convertible Notes.

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The following table details the conversion attributes of our Convertible Notes outstanding as of September 30, 2019(amounts in thousands, except rates):

September 30, 2019 Conversion Spread Value - Shares (3)Conversion Conversion For the Three Months Ended September 30, For the Nine Months Ended September 30,

Rate (1) Price (2) 2019 2018 2019 20182019 Notes N/A N/A — 542 — 5592023 Notes 38.5959 $ 25.91 — — — —

— 542 — 559

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

(2) As of September 30, 2019 and 2018, the market price of the Company’s common stock was $24.22 and $21.52 pershare, respectively.

(3) The conversion spread value represents the portion of the Convertible Notes that are “in-the-money”, representing thevalue that would be delivered to investors in shares upon an assumed conversion.

The if-converted value of the 2023 Notes was less than their principal amount by $16.3 million at September 30, 2019as the closing market price of the Company’s common stock of $24.22 was less than the implicit conversion price of $25.91 pershare.

Effective June 30, 2018, the Company no longer asserts its intent to fully settle the principal amount of the ConvertibleNotes in cash upon conversion. The if-converted value of the principal amount of the 2023 Notes was $233.7 million as ofSeptember 30, 2019.

11. Loan Securitization/Sale Activities

As described below, we regularly sell loans and notes under various strategies. We evaluate such sales as to whetherthey meet the criteria for treatment as a sale—legal isolation, ability of transferee to pledge or exchange the transferred assetswithout constraint and transfer of control.

Conduit Loan Securitizations

Within the Investing and Servicing Segment, we originate commercial mortgage loans with the intent to sell thesemortgage loans to VIEs for the purposes of securitization. These VIEs then issue CMBS that are collateralized in part by theseassets, as well as other assets transferred to the VIE by third parties. In certain instances, we retain an interest in the VIE and/orserve as special servicer for the VIE. In these circumstances, we generally consolidate the VIE into which the loans were sold.The following summarizes the fair value and par value of loans sold from our conduit platform, as well as the amount of saleproceeds used in part to repay the outstanding balance of the repurchase agreements associated with these loans for the three andnine months ended September 30, 2019 and 2018 (amounts in thousands):

Repayment ofrepurchase

Face Amount Proceeds agreementsFor the Three Months Ended September 30,2019 $ 262,528 $ 274,714 $ 201,3632018 360,651 372,300 272,156For the Nine Months Ended September 30,2019 $ 787,160 $ 826,932 $ 608,3482018 825,610 854,065 623,538

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Securitization Financing Arrangements and Sales

Within the Commercial and Residential Lending Segment, we originate or acquire residential and 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. These loans may be sold directly or through a securitization. In certain instances, we retain an interest in the VIE and continue to act as servicer, special servicer or servicing administrator for the loan following its sale. In these circumstances, similar to the case of our Investing and Servicing Segment described above, we generally consolidate the VIE into which the loans were sold. During the three and nine months ended September 30, 2019, we consolidated the securitization VIEs into which our residential loans were sold. In these instances, we retained interests in the VIEs. The following table summarizes our loans sold and loans transferred as secured borrowings by the Commercial and Residential Lending Segment, net of expenses (amounts in thousands):

Loan TransfersLoan Transfers Accounted for as Sales Accounted for as Secured

Commercial Residential Borrowings Face Amount Proceeds Face Amount Proceeds Face Amount Proceeds

For the Three Months Ended September 30,2019 $ 53,288 $ 53,249 $ 547,660 $ 571,333 $ — $ —2018 550,000 547,776 374,071 389,044 — —For the Nine Months Ended September 30,2019 $ 554,710 $ 551,700 $ 911,713 $ 947,862 $ — $ —2018 746,400 742,496 374,071 389,044 — —

During the three and nine months ended September 30, 2019, we recognized a $6.4 million and $6.7 million,respectively, change in fair value of mortgage loans held-for-sale, net in our condensed consolidated statements of operations inconnection with residential mortgage loan securitizations. During the three and nine months ended September 30, 2018, werecognized a $2.4 million change in fair value of mortgage loans held-for-sale, net in our condensed consolidated statements ofoperations in connection with a residential mortgage loan securitization. During the three and nine months ended September 30,2019, gains recognized by the Commercial and Residential Lending Segment on sales of commercial loans were $0.5 million and$3.5 million, respectively. During the three and nine months ended September 30, 2018, gains (losses) recognized by theCommercial and Residential Lending Segment on sales of loans were not material.

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

Infrastructure Loan Sales

During the three and nine months ended September 30, 2019, the Infrastructure Lending Segment sold loans held-for-sale with an aggregate face amount of $47.3 million and $404.1 million, respectively, for proceeds of $47.0 million and $393.3million, respectively. A gain of $3.1 million was recognized during the nine months ended September 30, 2019. There was nogain recognized during the three months ended September 30, 2019. In connection with these sales, we sold an interest rate swapguarantee for cash payment of $3.1 million and recognized a decrease in fair value of $2.7 million within gain on derivativefinancial instruments, net in our condensed consolidated statement of operations during the nine months ended September 30,2019. Refer to Note 12 for further discussion of our interest rate swap guarantees. There were no sales of loans by theInfrastructure Lending Segment during the nine months ended September 30, 2018.

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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 tothe consolidated financial statements included in our Form 10-K for further discussion of our risk management objectives andpolicies.

Designated Hedges

The Company does not generally elect to apply the hedge accounting designation to its hedging instruments. As of September 30, 2019 and December 31, 2018, the Company did not have any designated hedges. As of September 30, 2018, the Company had one interest rate swap that had been designated as a cash flow hedge of the interest rate risk associated with forecasted interest payments. During the three and nine months ended September 30, 2018, the impact of this cash flow hedge on our net income was not material and we did not recognize any hedge ineffectiveness in earnings.

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 aspecified amount of USD at a future date, economically fixing the USD amounts of foreign denominated cash flows weexpect 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;● Forward loan purchase commitments whereby we agree to buy a specified amount of residential mortgage loans at a

future date for a specified price and the counterparty is contractually obligated to deliver such mortgage loans (see Note21); and

● Interest rate swap guarantees whereby we guarantee the interest rate swap obligations of certain Infrastructure Lendingborrowers. Our interest rate swap guarantees were assumed in connection with the acquisition of the InfrastructureLending Segment.

The following table summarizes our non-designated derivatives as of September 30, 2019 (notional amounts inthousands):

Type of Derivative Number ofContracts

AggregateNotionalAmount

NotionalCurrency Maturity

Fx contracts – Sell Euros ("EUR") 114 307,452 EUR November 2019 – November 2022Fx contracts – Sell Pounds Sterling ("GBP") 97 322,315 GBP October 2019 – April 2022Fx contracts – Sell Australian dollar ("AUD") 2 12,307 AUD October 2019 – November 2021Fx contracts – Buy GBP 1 921 GBP October 2019Interest rate swaps – Paying fixed rates 54 1,292,709 USD July 2022 – October 2029Interest rate swaps – Receiving fixed rates 2 970,000 USD January 2021 – March 2025Interest rate caps 9 127,528 USD January 2020 – August 2023Credit index instruments 5 89,000 USD November 2054 – August 2061Forward loan purchase commitments 1 46,486 USD October 2019Interest rate swap guarantees 6 390,970 USD March 2022 – June 2025Interest rate swap guarantees 1 10,263 GBP December 2024Total 292

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The table below presents the fair value of our derivative financial instruments as well as their classification on thecondensed consolidated balance sheets as of September 30, 2019 and December 31, 2018 (amounts in thousands):

Fair Value of Derivatives Fair Value of Derivativesin an Asset Position (1) as of in a Liability Position (2) as of

September 30, December 31, September 30, December 31, 2019 2018 2019 2018

Interest rate contracts $ 24,664 $ 30,791 $ 3,587 $ 14,457Interest rate swap guarantees — — 904 396Foreign exchange contracts 56,611 21,346 156 562Credit index instruments 208 554 134 —Total derivatives $ 81,483 $ 52,691 $ 4,781 $ 15,415

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

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

The tables below present the effect of our derivative financial instruments on the condensed consolidated statements ofoperations and of comprehensive income for the three and nine months ended September 30, 2019 and 2018 (amounts inthousands):

Amount of Gain (Loss) Amount of Gain (Loss)Recognized in Income for the Recognized in Income for the

Derivatives Not Designated Location of Gain (Loss) Three Months Ended September 30, Nine Months Ended September 30,as Hedging Instruments Recognized in Income 2019 2018 2019 2018

Interest rate contracts Gain on derivativefinancial instruments $ (7,898) $ 4,444 $ (21,733) $ 10,553

Interest rate swap guaranteesGain on derivativefinancial instruments (468) — (3,640) —

Foreign exchange contracts Gain on derivativefinancial instruments 30,426 8,073 46,116 17,748

Credit index instruments Gain on derivativefinancial instruments (127) (782) (1,049) (803)

$ 21,933 $ 11,735 $ 19,694 $ 27,498

Gain (Loss) Gain (Loss) Reclassified Gain (Loss)Recognized from AOCI Recognized

Derivatives Designated as Hedging Instruments in OCI into Income in Income Location of Gain (Loss)For the Three Months Ended September 30, (effective portion) (effective portion) (ineffective portion) Recognized in Income2019 $ — $ — $ — Interest expense2018 $ — $ 6 $ — Interest expense

For the Nine Months Ended September 30,2019 $ — $ — $ — Interest expense2018 $ 8 $ 32 $ — Interest expense

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13. Offsetting Assets and Liabilities

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

(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 September 30, 2019Derivative assets $ 81,483 $ — $ 81,483 $ 679 $ 20,727 $ 60,077Derivative liabilities $ 4,781 $ — $ 4,781 $ 679 $ 3,198 $ 904Repurchase agreements 4,132,858 — 4,132,858 4,132,858 — —

$ 4,137,639 $ — $ 4,137,639 $ 4,133,537 $ 3,198 $ 904As of December 31, 2018Derivative assets $ 52,691 $ — $ 52,691 $ 1,408 $ — $ 51,283Derivative liabilities $ 15,415 $ — $ 15,415 $ 1,408 $ 8,658 $ 5,349Repurchase agreements 4,289,750 — 4,289,750 4,289,750 — —

$ 4,305,165 $ — $ 4,305,165 $ 4,291,158 $ 8,658 $ 5,349

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 ourinvestments in CMBS, RMBS and our retained interests in securitization transactions we initiated, all of which are generallyconsidered to be variable interests in VIEs.

Securitization VIEs consolidated in accordance with ASC 810 are structured as pass through entities that receiveprincipal and interest on the underlying collateral and distribute those payments to the certificate holders. The assets and otherinstruments 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 consolidatedentities, 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 interestincome related to those securities. Similarly, the fees we earn in our roles as special servicer of the bonds issued by theconsolidated VIEs or as collateral administrator of the consolidated VIEs are also eliminated. Finally, an allocable portion of theidentified servicing intangible associated with the eliminated fee streams is eliminated in consolidation.

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 noeconomic effect on us. Our exposure to the obligations of securitization VIEs is generally limited to our investment in theseentities. We are not obligated to provide, nor have we provided, any financial support for any of these consolidated structures.

During the three months ended September 30, 2019, we refinanced a pool of our commercial loans held-for-investment through a CLO, which is considered to be a VIE. We are the primary beneficiary of, and therefore consolidate, the CLO in our financial statements as we have both (i) the power to direct the activities in our role as collateral manager that most significantly impact the CLO’s economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the CLO that could be potentially significant through the subordinate interests we own.

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The following table details the assets and liabilities of our consolidated CLO (amounts in thousands):

As ofSeptember 30, 2019

Assets:Loans held-for-investment $ 1,098,817Accrued interest receivable 2,384Other assets 1,183

Total Assets $ 1,102,384Liabilities

Accounts payable, accrued expenses and other liabilities $ 1,402Collateralized loan obligations, net 927,436

Total Liabilities $ 928,838

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

We also hold controlling interests in other non-securitization entities that are considered VIEs, most of which were established to facilitate the acquisition of certain properties. 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 net assets of $685.2 million and liabilities of $446.2 million as of September 30, 2019. In total, our other consolidated non-securitization VIEs, including SPT Dolphin described above, had net assets of $766.5 million and liabilities of$506.9 million as of September 30, 2019.

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

As of September 30, 2019, four of our 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. 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 September 30, 2019, none of these CDO structures were consolidated.

As noted above, we are not obligated to provide, nor have we provided, any financial support for any of oursecuritization VIEs, whether or not we are deemed to be the primary beneficiary. As such, the risk associated with ourinvolvement in these VIEs is limited to the carrying value of our investment in the entity. As of September 30, 2019, ourmaximum risk of loss related to securitization VIEs in which we were not the primary beneficiary was $46.3 million on a fairvalue basis.

As of September 30, 2019, the securitization VIEs which we do not consolidate had debt obligations to beneficialinterest holders with unpaid principal balances, excluding the notional value of interest-only securities, of $7.1 billion. Thecorresponding assets are comprised primarily of commercial mortgage loans with unpaid principal balances corresponding to theamounts of the outstanding debt obligations.

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We also hold passive non-controlling interests in certain unconsolidated entities that are considered VIEs. We are notthe primary beneficiaries of these VIEs as we do not possess the power to direct the activities of the VIEs that most significantlyimpact their economic performance and therefore report our interests, which totaled $90.5 million as of September 30, 2019, 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

Management Agreement

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

Base Management Fee. For the three months ended September 30, 2019 and 2018, approximately $19.2 million and$18.4 million, respectively, was incurred for base management fees. For the nine months ended September 30, 2019 and 2018,approximately $57.7 million and $53.9 million, respectively, was incurred for base management fees. As of both September 30,2019 and December 31, 2018, there were $19.2 million of unpaid base management fees included in related-party payable in ourcondensed consolidated balance sheets.

Incentive Fee. For the three months ended September 30, 2019 and 2018, approximately $1.8 million and $4.3 million,respectively, was incurred for incentive fees. For the nine months ended September 30, 2019 and 2018, approximately $2.0million and $19.6 million, respectively, was incurred for incentive fees. As of September 30, 2019 and December 31, 2018, therewere $1.8 million and $21.8 million, respectively, of unpaid incentive fees included in related-party payable in our condensedconsolidated balance sheets.

Expense Reimbursement. For both the three months ended September 30, 2019 and 2018, approximately $1.9 millionwas incurred for executive compensation and other reimbursable expenses and recognized within general and administrativeexpenses in our condensed consolidated statements of operations. For the nine months ended September 30, 2019 and 2018,approximately $5.8 million and $5.9 million, respectively, was incurred for executive compensation and other reimbursableexpenses. As of September 30, 2019 and December 31, 2018, approximately $3.4 million and $3.0 million, respectively, ofunpaid reimbursable executive compensation and other expenses were included in related-party payable in our condensedconsolidated 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 three months ended September 30, 2019 and 2018, there were no RSAs granted. Expenses related tothe vesting of awards to employees of affiliates of our Manager were $1.2 million and $0.8 million during the three months ended September 30, 2019 and 2018, respectively, and are reflected in general and administrative expenses in our condensed consolidated statements of operations. During the nine months ended September 30, 2019 and 2018, we granted 182,861 and189,813 RSAs, respectively, at grant date fair values of $4.1 million and $4.0 million, respectively. Expenses related to thevesting of awards to employees of affiliates of our Manager were $3.0 million and $2.1 million during the nine months ended September 30, 2019 and 2018, respectively. These shares generally vest over a three-year period.

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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 September 2019, we granted 1,200,000 RSUs to our Manager under the 2017 Manager Equity Plan. In April 2018, we granted775,000 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 May 2015, we granted 675,000 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 $8.8 million and $3.2million within management fees in our condensed consolidated statements of operations for the three months ended September30, 2019 and 2018, respectively. For the nine months ended September 30, 2019 and 2018, we recognized $15.2 million and $9.4million, respectively, related to these awards. Refer to Note 16 for further discussion of these grants.

Investments in Loans

In September 2019, the Company co-originated a €73.6 million first mortgage loan with SEREF, an affiliate of ourManager. The loan was to a third party borrower for the development of a Grade A office building and convention center inDublin, Ireland. The Company originated €58.9 million of the loan and SEREF originated €14.7 million. The loan matures inMay 2022.

In February 2019, the Company acquired a $60.0 million participation in a $1.0 billion first priority infrastructure termloan which bears interest at LIBOR plus 3.75%. In April 2019 and July 2019, the Company acquired participations of $5.0million and $16.0 million, respectively, in a $0.3 billion upsize to the term loan. The loan is secured by two domestic natural gas power plants. An affiliate of our Manager, Starwood Energy Group, is the borrower under the term loan.

In March 2019, the Company originated a $22.5 million loan to refinance the debt of a commercial real estatepartnership in which we hold a 50% equity interest.

During the three and nine months ended September 30, 2019, the Company acquired $97.4 million and $273.5 million,respectively, of loans from a residential mortgage originator in which it holds an equity interest. Also in September 2019, theCompany amended a $2.0 million subordinated loan to this residential mortgage originator to extend the maturity fromSeptember 2019 to September 2020. Refer to Note 7 for further discussion.

Other Related-Party Arrangements

During the nine months ended September 30, 2019, we engaged Highmark Residential (“Highmark”) (formerly knownas Milestone Management), an affiliate of our Manager, to provide property management services for 11 additional propertieswithin our Woodstar I Portfolio, bringing the total number of our properties managed by Highmark to 21. Fees paid to Highmark are calculated as a percentage of gross receipts and are at market terms. During the three and nine months ended September 30, 2019, property management fees paid to Highmark were $0.4 million and $1.1 million, respectively.

Acquisitions from Consolidated CMBS Trusts

Our Investing and Servicing Segment acquires interests in properties for its REIS Equity Portfolio from CMBS trusts, some of which are consolidated as VIEs on our balance sheet. Acquisitions from consolidated VIEs are reflected as repayment of debt of consolidated VIEs in our condensed consolidated statements of cash flows. During the three and nine months endedSeptember 30, 2019, we acquired $8.6 million of net real estate assets from a consolidated CMBS trust for a gross purchase priceof $8.8 million. Refer to Note 3 for further discussion of this acquisition. During the nine months ended September 30, 2018, weacquired $27.7 million of net real estate assets from consolidated CMBS trusts for a gross purchase price of $28.0 million. No real estate assets were acquired from consolidated CMBS trusts during the three months ended September 30, 2018.

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

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16. Stockholders’ Equity and Non-Controlling Interests

During the nine months ended September 30, 2019, our board of directors declared the following dividends:

Declaration Date Record Date Ex-Dividend Date Payment Date Amount Frequency8/7/19 9/30/19 9/27/19 10/15/19 $ 0.48 Quarterly5/8/19 6/28/19 6/27/19 7/15/19 0.48 Quarterly2/28/19 3/29/19 3/28/19 4/15/19 0.48 Quarterly

During the nine months ended September 30, 2019, we issued 3.6 million shares of common stock in connection withthe settlement of $78.0 million of our 2019 Notes. There were no shares of common stock issued in connection with the settlement of our 2019 Notes during the three months ended September 30, 2019. During the three and nine months ended September 30, 2018, we issued 11.2 million shares in connection with the settlement of $235.5 million of our 2019 Notes. Refer to Note 10 for further discussion.

During the nine months ended September 30, 2019 and 2018, there were no shares issued under our At-The-Market Equity Offering Sales Agreement. During the nine months ended September 30, 2019 and 2018, shares issued under the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) were not material.

In February 2017, our board of directors extended the term of our $500.0 million common stock and Convertible Note repurchase program through January 2019. Refer to Note 17 to the consolidated financial statements included in our Form 10-K for further information regarding the repurchase program. There were no share or Convertible Notes repurchases under the repurchase program during the nine months ended September 30, 2019. During the nine months ended September 30, 2018, we repurchased 573,255 shares of common stock for $12.1 million and no Convertible Notes under our repurchase program.

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, stockappreciation 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 theManager Equity Plan and the 2017 Equity Plan succeeds and replaces the Starwood Property Trust, Inc. Equity Plan (the “EquityPlan”) 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 ManagerEquity Plan during the nine months ended September 30, 2019 and 2018 (dollar amounts in thousands):

Grant Date Type Amount Granted Grant Date Fair Value Vesting Period September 2019 RSU 1,200,000 $ 29,484 (1)April 2018 RSU 775,000 16,329 3 yearsMarch 2017 RSU 1,000,000 22,240 3 yearsMay 2015 RSU 675,000 16,511 3 years

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

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Schedule of Non-Vested Shares and Share Equivalents

2017 Weighted Average2017 Manager Grant Date Fair

Equity Plan Equity Plan Total Value (per share)Balance as of January 1, 2019 1,436,445 997,920 2,434,365 $ 21.52Granted 520,236 1,200,000 1,720,236 24.01Vested (499,735) (662,648) (1,162,383) 22.10Forfeited (14,761) — (14,761) 22.07Balance as of September 30, 2019 1,442,185 1,535,272 2,977,457 22.72

As of September 30, 2019, there were 7.5 million shares of common stock available for future grants under the 2017Manager Equity Plan and the 2017 Equity Plan.

Non-Controlling Interests in Consolidated Subsidiaries

In connection with our Woodstar II Portfolio acquisitions, we issued 11.9 million Class A Units in SPT Dolphin andhave an obligation to issue an additional 0.2 million Class A Units if certain contingent events occur. The Class A Units are redeemable for consideration equal to the current share price of the Company’s common stock on a one-for-one basis, with theconsideration paid in either cash or the Company’s common stock, at the determination of the Company. During the three andnine months ended September 30, 2019, redemptions of 0.2 million and 1.0 million of the Class A Units, respectively, werereceived and settled in common stock. In consolidation, the issued Class A Units are reflected as non-controlling interests inconsolidated subsidiaries on our condensed consolidated balance sheets.

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 the three and ninemonths ended September 30, 2019, we recognized net income attributable to non-controlling interests of $5.2 million and $16.3million, respectively, associated with these Class A Units. During the three and nine months ended September 30, 2018, werecognized net income attributable to non-controlling interests of $4.8 million and $11.9 million, respectively, associated withthese Class A Units.

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17. Earnings per Share

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


2019 2018 2019 2018Basic EarningsIncome attributable to STWD common stockholders $ 140,396 $ 84,536 $ 337,795 $ 293,698Less: Income attributable to participating shares not alreadydeducted as non-controlling interests (1,205) (970) (2,779) (2,725)Basic earnings $ 139,191 $ 83,566 $ 335,016 $ 290,973

Diluted EarningsIncome attributable to STWD common stockholders $ 140,396 $ 84,536 $ 337,795 $ 293,698Less: Income attributable to participating shares not alreadydeducted as non-controlling interests (1,205) (970) (2,779) (2,725)Add: Interest expense on Convertible Notes (1) 3,071 * 9,306 21,102Add: Loss on extinguishment of Convertible Notes (1) — * — 1,810Add: Undistributed earnings to participating shares 188 — — —Less: Undistributed earnings reallocated to participatingshares (182) — — —Diluted earnings $ 142,268 $ 83,566 $ 344,322 $ 313,885

Number of Shares:Basic — Average shares outstanding 279,992 265,355 278,934 262,356Effect of dilutive securities — Convertible Notes (1) 9,649 * 9,857 25,675Effect of dilutive securities — Contingently issuable shares 38 99 38 99Effect of dilutive securities — Unvested non-participatingshares 233 2 192 —Diluted — Average shares outstanding 289,912 265,456 289,021 288,130

Earnings Per Share Attributable to STWD CommonStockholders:Basic $ 0.50 $ 0.31 $ 1.20 $ 1.11Diluted $ 0.49 $ 0.31 $ 1.19 $ 1.09

(1) Prior to June 30, 2018, the Company had asserted its intent and ability to settle the principal amount of the Convertible Notes in cash. Accordingly, under GAAP, the dilutive effect to EPS was previously determined using the treasury stock method by dividing only the “conversion spread value” of the “in-the-money” Convertible Notes by the Company’s average share price and including the resulting share amount in the diluted EPS denominator. The conversion value of the principal amount of the Convertible Notes was not included. Effective June 30, 2018, the Company no longer asserts its intent to fully settle the principal amount of the Convertible Notes in cash upon conversion. Accordingly, under GAAP, the dilutive effect to EPS for the periods presented above is determined using the “if-converted” method whereby interest expense or any loss on extinguishment of our Convertible Notes is added back to the diluted EPS numerator and the full number of potential shares contingently issuable upon their conversion is included in the diluted EPS denominator, if dilutive. Refer to Note 10 for further discussion.

* Our Convertible Notes were not dilutive for the three months ended September 30, 2018.

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As of September 30, 2019 and 2018, participating shares of 13.4 million and 12.2 million, respectively, were excludedfrom the computation of diluted shares as their effect was already considered under the more dilutive two-class method usedabove. Such participating shares at September 30, 2019 and 2018 included 10.9 million and 10.2 million potential shares,respectively, of our common stock issuable upon redemption of the Class A Units in SPT Dolphin, as discussed in Note 16.

18. Accumulated Other Comprehensive Income

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

Cumulative Unrealized Gain

Effective Portion of (Loss) on ForeignCumulative Loss on Available-for- CurrencyCash Flow Hedges Sale Securities Translation Total

Three Months Ended September 30, 2019Balance at July 1, 2019 $ — $ 53,049 $ 4,075 $ 57,124

OCI before reclassifications — (520) (4,168) (4,688)Amounts reclassified from AOCI — (59) — (59)

Net period OCI — (579) (4,168) (4,747)Balance at September 30, 2019 $ — $ 52,470 $ (93) $ 52,377Three Months Ended September 30, 2018Balance at July 1, 2018 $ 7 $ 60,075 $ 8,052 $ 68,134

OCI before reclassifications — 715 (945) (230)Amounts reclassified from AOCI (6) 22 — 16

Net period OCI (6) 737 (945) (214)Balance at September 30, 2018 $ 1 $ 60,812 $ 7,107 $ 67,920Nine Months Ended September 30, 2019Balance at January 1, 2019 $ — $ 53,515 $ 5,145 $ 58,660

OCI before reclassifications — (986) (5,238) (6,224)Amounts reclassified from AOCI — (59) — (59)

Net period OCI — (1,045) (5,238) (6,283)Balance at September 30, 2019 $ — $ 52,470 $ (93) $ 52,377Nine Months Ended September 30, 2018Balance at January 1, 2018 $ 25 $ 57,889 $ 12,010 $ 69,924

OCI before reclassifications 8 2,977 (4,903) (1,918)Amounts reclassified from AOCI (32) (54) — (86)

Net period OCI (24) 2,923 (4,903) (2,004)Balance at September 30, 2018 $ 1 $ 60,812 $ 7,107 $ 67,920

The reclassifications out of AOCI impacted the condensed consolidated statements of operations for the three and ninemonths ended September 30, 2019 and 2018 as follows (amounts in thousands):

Amounts Reclassified from Amounts Reclassified fromAOCI during the Three Months AOCI during the Nine Months Affected Line Item

Ended September 30, Ended September 30, in the StatementsDetails about AOCI Components 2019 2018 2019 2018 of OperationsGain (loss) on cash flow hedges:

Interest rate contracts $ — $ 6 $ — $ 32 Interest expenseUnrealized gains (losses) onavailable-for-sale securities:

Interest realized upon collection 59 — 59 46Interest income frominvestment securities

Net realized (loss) gain on saleof investment — (22) — 8

Gain on sale of investmentsand other assets, net

Total 59 (22) 59 54Total reclassifications for theperiod $ 59 $ (16) $ 59 $ 86

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19. Fair Value

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

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

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

Level III—Inputs reflect management’s best estimate of what market participants would use in pricing the assetor liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the riskinherent 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 liabilitiesmeasured at fair value including those derived from pricing models. These control processes are designed to assure that thevalues used for financial reporting are based on observable inputs wherever possible. In the event that observable inputs are notavailable, the control processes are designed to assure that the valuation approach utilized is appropriate and consistently appliedand 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 valuationmodels. Pricing data provided by approved external sources is evaluated using a number of approaches; for example, bycorroborating the external sources’ prices to executed trades, analyzing the methodology and assumptions used by the externalsource to generate a price and/or by evaluating how active the third party pricing source (or originating sources used by the thirdparty pricing source) is in the market.

Unobservable Inputs—Where inputs are not observable, we review the appropriateness of the proposed valuationmethodology to ensure it is consistent with how a market participant would arrive at the unobservable input. The valuationmethodologies utilized in the absence of observable inputs may include extrapolation techniques and the use of comparableobservable 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 fairvalues. 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 atthe 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 unlessobservable market data (i.e., securitized pricing) is available. A discounted cash flow analysis requires management to makeestimates regarding future interest rates and credit spreads. The most significant of these inputs relates to credit spreads and isunobservable. Thus, we have determined that the fair values of mortgage loans valued using a discounted cash flow analysisshould be classified in Level III of the fair value hierarchy, while mortgage loans

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valued using securitized pricing should be classified in Level II of the fair value hierarchy. Mortgage loans classified in Level IIIare 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 mortgage 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 mortgage 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 recenttransactions, broker quotes and vendor prices (“market data”). However, given the implied price dispersion amongst the marketdata, the fair value determination for RMBS has also utilized significant unobservable inputs in discounted cash flow modelsincluding prepayments, default and severity estimates based on the recent performance of the collateral, the underlying collateralcharacteristics, 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 fairvalue. However, given the significance of the unobservable inputs these securities have been classified within Level III.

CMBS

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

Equity security

The equity security is publicly registered and traded in the U.S. and its market price is listed on the London StockExchange. 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 requiremanagement to make estimates regarding future net servicing cash flows, including forecasted loan defeasance, controlmigration, 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 itsentirety should be classified in Level III of the fair value hierarchy.

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Derivatives

The valuation of derivative contracts are determined using widely accepted valuation techniques including discountedcash 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 forwardpoints and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology ofnetting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receiptsare 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 nonperformance risk and therespective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivativecontracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable creditenhancements, 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 IndexSwap (“OIS”) rates. Fully collateralized trades are discounted using OIS with no additional economic adjustments to arrive at fairvalue. Uncollateralized or partially collateralized trades are also discounted at OIS, but include appropriate economic adjustmentsfor funding costs (i.e., a LIBOR OIS basis adjustment to approximate uncollateralized cost of funds) and credit risk. For creditindex instruments, fair value is determined based on changes in the relevant indices from the date of initiation of the instrumentto 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 fairvalue hierarchy, the credit valuation adjustments associated with our derivatives utilize Level III inputs, such as estimates ofcurrent credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of September 30, 2019 andDecember 31, 2018, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuationof our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation ofour derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level II of the fairvalue 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 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.

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.

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Assets of consolidated VIEs

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

Fair Value on a Nonrecurring Basis

We determine the fair value of our financial assets and liabilities measured at fair value on a nonrecurring basis asfollows:

Loans held-for-sale, infrastructure

We measure the fair value of infrastructure loans held-for-sale, which are carried at the lower of amortized cost or fair value, utilizing bids periodically received from third parties to acquire these assets. As these bids represent observable market data, we have determined that the fair value of these assets would be classified in Level II 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, loans held-for-sale and loans transferred as secured borrowings

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

HTM debt securities

We estimate the fair value of our mandatorily redeemable preferred equity interests in commercial real estate companiesand infrastructure bonds using the same methodology described for our loans 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, CLO, unsecured senior notes not convertible and secured borrowings on transferred loans

The fair value of the secured financing agreements, CLO, unsecured senior notes not convertible and securedborrowings on transferred loans are determined by discounting the contractual cash flows at the interest rate we estimate sucharrangements would bear if executed in the current market. We have determined that our valuation of these instruments should beclassified in Level III of the fair value hierarchy.

Convertible Notes

The fair value of the debt component of our Convertible Notes is estimated by discounting the contractual cash flows atthe interest rate we estimate such notes would bear if sold in the current market without the embedded conversion option which,in accordance with ASC 470, is reflected as a component of equity. We have determined that our valuation of our ConvertibleNotes should be classified in Level III of the fair value hierarchy.

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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 condensedconsolidated balance sheets by their level in the fair value hierarchy as of September 30, 2019 and December 31, 2018 (amountsin thousands):

September 30, 2019 Total Level I Level II Level III

Financial Assets:Loans under fair value option $ 1,649,362 $ — $ 225,813 $ 1,423,549RMBS 195,297 — — 195,297CMBS 46,299 — 10,419 35,880Equity security 11,286 11,286 — —Domestic servicing rights 18,249 — — 18,249Derivative assets 81,483 — 81,483 —VIE assets 59,249,054 — — 59,249,054Total $ 61,251,030 $ 11,286 $ 317,715 $ 60,922,029Financial Liabilities:Derivative liabilities $ 4,781 $ — $ 4,781 $ —VIE liabilities 58,018,209 — 55,748,104 2,270,105Total $ 58,022,990 $ — $ 55,752,885 $ 2,270,105

December 31, 2018 Total Level I Level II Level III

Financial Assets:Loans under fair value option $ 671,282 $ — $ — $ 671,282RMBS 209,079 — — 209,079CMBS 41,347 — 16,119 25,228Equity security 11,893 11,893 — —Domestic servicing rights 20,557 — — 20,557Derivative assets 52,691 — 52,691 —VIE assets 53,446,364 — — 53,446,364Total $ 54,453,213 $ 11,893 $ 68,810 $ 54,372,510Financial Liabilities:Derivative liabilities $ 15,415 $ — $ 15,415 $ —VIE liabilities 52,195,042 — 50,753,596 1,441,446Total $ 52,210,457 $ — $ 50,769,011 $ 1,441,446

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The changes in financial assets and liabilities classified as Level III are as follows for the three and nine months endedSeptember 30, 2019 and 2018 (amounts in thousands):

Domestic Loans at Servicing VIE

Three Months Ended September 30, 2019 Fair Value RMBS CMBS Rights VIE Assets Liabilities TotalJuly 1, 2019 balance $ 1,372,398 $ 200,874 $ 34,283 $ 18,874 $ 57,667,606 $ (2,374,002) $ 56,920,033Total realized and unrealized gains (losses):

Included in earnings:Change in fair value / gain on sale 32,512 — 432 (625) (380,973) 28,005 (320,649)Net accretion — 2,446 — — — — 2,446

Included in OCI — (578) — — — — (578)Purchases / Originations 1,123,553 — 5,165 — — — 1,128,718Sales (846,047) — — — — — (846,047)Issuances — — — — — (22,958) (22,958)Cash repayments / receipts (33,054) (7,445) (3,343) — — (12,516) (56,358)Transfers into Level III — — — — — (122,911) (122,911)Transfers out of Level III (225,813) — — — — 319,727 93,914Consolidation of VIEs — — — — 1,999,780 (85,450) 1,914,330Deconsolidation of VIEs — — (657) — (37,359) — (38,016)September 30, 2019 balance $ 1,423,549 $ 195,297 $ 35,880 $ 18,249 $ 59,249,054 $ (2,270,105) $ 58,651,924Amount of total gains (losses) included inearnings attributable to assets still held atSeptember 30, 2019 $ 4,537 $ 2,390 $ 434 $ (625) $ (380,973) $ 28,005 $ (346,232)


Three Months Ended September 30, 2018 Fair Value RMBS CMBS Rights VIE Assets Liabilities TotalJuly 1, 2018 balance $ 897,259 $ 235,796 $ 24,650 $ 22,742 $ 48,044,873 $ (2,002,115) $ 47,223,205Total realized and unrealized gains (losses):

Included in earnings:Change in fair value / gain on sale 4,036 100 63 (974) (1,261,314) 371,310 (886,779)Net accretion — 2,526 — — — — 2,526

Included in OCI — 737 — — — — 737Purchases / Originations 597,318 — — — — — 597,318Sales (565,990) (2,046) (3,163) — — — (571,199)Issuances — — — — — (18,901) (18,901)Cash repayments / receipts (19,118) (9,246) (6,815) — — (17,268) (52,447)Transfers into Level III — — 27,776 — — (259,701) (231,925)Transfers out of Level III — — — — — 108,123 108,123Consolidation of VIEs — — 3,304 — 1,623,863 (23,095) 1,604,072Deconsolidation of VIEs — — — — (372,812) 48,442 (324,370)September 30, 2018 balance $ 913,505 $ 227,867 $ 45,815 $ 21,768 $ 48,034,610 $ (1,793,205) $ 47,450,360Amount of total (losses) gains included inearnings attributable to assets still held atSeptember 30, 2018 $ (2,501) $ 2,526 $ (884) $ (974) $ (1,261,314) $ 371,310 $ (891,837)

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Nine Months Ended September 30, 2019 Fair Value RMBS CMBS Rights VIE Assets Liabilities TotalJanuary 1, 2019 balance $ 671,282 $ 209,079 $ 25,228 $ 20,557 $ 53,446,364 $ (1,441,446) $ 52,931,064Total realized and unrealized gains (losses):

Included in earnings:Change in fair value / gain on sale 65,669 — 1,153 (2,308) 39,961 51,907 156,382Net accretion — 7,484 — — — — 7,484

Included in OCI — (1,044) — — — — (1,044)Purchases / Originations 2,775,787 — 5,165 — — — 2,780,952Sales (1,774,794) — (3,978) — — — (1,778,772)Issuances — — — — — (81,681) (81,681)Cash repayments / receipts (88,582) (20,222) (8,933) — — (15,786) (133,523)Transfers into Level III — — 5,350 — — (1,374,505) (1,369,155)Transfers out of Level III (225,813) — — — — 750,546 524,733Consolidation of VIEs — — — — 6,103,915 (193,300) 5,910,615Deconsolidation of VIEs — — 11,895 — (341,186) 34,160 (295,131)September 30, 2019 balance $ 1,423,549 $ 195,297 $ 35,880 $ 18,249 $ 59,249,054 $ (2,270,105) $ 58,651,924Amount of total gains (losses) included inearnings attributable to assets still held atSeptember 30, 2019 $ 6,775 $ 7,397 $ 101 $ (2,308) $ 39,961 $ 51,907 $ 103,833


Nine Months Ended September 30, 2018 Fair Value RMBS CMBS Rights VIE Assets Liabilities TotalJanuary 1, 2018 balance $ 745,743 $ 247,021 $ 24,191 $ 30,759 $ 51,045,874 $ (2,188,937) $ 49,904,651Total realized and unrealized gains (losses):

Included in earnings:Change in fair value / gain on sale 26,669 241 76 (8,991) (5,055,029) 906,360 (4,130,674)Net accretion — 7,967 — — — — 7,967

Included in OCI — 2,923 — — — — 2,923Purchases / Originations 1,508,010 — 1,463 — — — 1,509,473Sales (1,047,755) (2,853) (3,163) — — — (1,053,771)Issuances — — — — — (26,849) (26,849)Cash repayments / receipts (123,652) (27,432) (7,832) — — (75,078) (233,994)Transfers into Level III — — 27,776 — — (950,660) (922,884)Transfers out of Level III (195,510) — — — — 425,973 230,463Consolidation of VIEs — — 3,304 — 3,438,933 (23,095) 3,419,142Deconsolidation of VIEs — — — — (1,395,168) 139,081 (1,256,087)September 30, 2018 balance $ 913,505 $ 227,867 $ 45,815 $ 21,768 $ 48,034,610 $ (1,793,205) $ 47,450,360Amount of total (losses) gains included inearnings attributable to assets still held atSeptember 30, 2018 $ (2,023) $ 7,913 $ (1,252) $ (8,991) $ (5,055,029) $ 906,360 $ (4,153,022)

Amounts were transferred from Level II to Level III due to a decrease in the observable relevant market activity andamounts were transferred from Level III to Level II due to an increase in the observable relevant market activity.

The following table presents the fair values, all of which are classified in Level III of the fair value hierarchy, of ourfinancial instruments not carried at fair value on the condensed consolidated balance sheets (amounts in thousands):

September 30, 2019 December 31, 2018 Carrying Fair Carrying Fair

Value Value Value ValueFinancial assets not carried at fair value:

Loans held-for-investment, loans held-for-sale and loanstransferred as secured borrowings $ 8,712,410 $ 8,772,670 $ 9,122,972 $ 9,178,709

HTM debt securities 556,255 554,302 644,149 643,948Financial liabilities not carried at fair value:

Secured financing agreements, CLO and secured borrowingson transferred loans $ 9,175,524 $ 9,155,331 $ 8,757,804 $ 8,662,548

Unsecured senior notes 1,926,693 2,027,863 1,998,831 1,945,160

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

Carrying Value at Valuation Unobservable Range as of (1) September 30, 2019 Technique Input September 30, 2019 December 31, 2018

Loans under fair valueoption $ 1,423,549 Discounted cash flow Yield (b) 3.4% - 6.1% 4.6% - 6.1%

Duration (c) 1.3 - 10.7 years 2.5 - 14.4 yearsRMBS 195,297 Discounted cash flow Constant prepayment rate (a) 3.3% - 19.9% 3.2% - 25.2%

Constant default rate (b) 1.1% - 4.5% 1.1% - 5.5%Loss severity (b) 0% - 96% (e) 0% - 73% (e)Delinquency rate (c) 4% - 31% 4% - 31%Servicer advances (a) 22% - 84% 21% - 83%Annual coupon deterioration (b) 0% - 1.8% 0% - 1.4%Putback amount per projectedtotal collateral loss (d) 0% - 28% 0% - 7%

CMBS 35,880 Discounted cash flow Yield (b) 0% - 715.4% 0% - 473.5%Duration (c) 0 - 9.7 years 0 - 9.7 years

Domestic servicing rights 18,249 Discounted cash flow Debt yield (a) 7.50% 7.75%Discount rate (b) 15% 15%Control migration (b) 0% - 80% 0% - 80%

VIE assets 59,249,054 Discounted cash flow Yield (b) 0% - 823.6% 0% - 290.9%Duration (c) 0 – 19.3 years 0 - 20.4 years

VIE liabilities (2,270,105) Discounted cash flow Yield (b) 0% - 823.6% 0% - 290.9%Duration (c) 0 - 11.5 years 0 - 13.7 years

(1) The ranges of significant unobservable inputs are represented in percentages and years.

Sensitivity of the Fair Value to Changes in the Unobservable Inputs

(a) Significant increase (decrease) in the unobservable input in isolation would result in a significantly higher (lower) fairvalue measurement.

(b) Significant increase (decrease) in the unobservable input in isolation would result in a significantly lower (higher) fairvalue measurement.

(c) Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower orhigher (higher or lower) fair value measurement depending on the structural features of the security in question.

(d) Any delay in the putback recovery date leads to a decrease in fair value for the majority of securities in our RMBSportfolio.

(e) 25% and 55% of the portfolio falls within a range of 45%-80% as of September 30, 2019 and December 31, 2018,respectively.

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20. Income Taxes

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

Our TRSs engage in various real estate related operations, including special servicing of commercial real estate,originating and securitizing commercial mortgage loans, and investing in entities which engage in real estate related operations.As of September 30, 2019 and December 31, 2018, approximately $2.1 billion and $553.5 million, respectively, of assets wereowned by TRS entities. Our TRSs are not consolidated for U.S. federal income tax purposes, but are instead taxed ascorporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earningsrecognized by us with respect to our interest in TRSs.

The following table is a reconciliation of our U.S. federal income tax determined using our statutory federal tax rate toour reported income tax provision for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):

For the Three Months Ended September 30, For the Nine Months Ended September 30, 2019 2018 2019 2018

Federal statutory tax rate $ 32,448 21.0 % $ 20,509 21.0 % $ 77,140 21.0 % $ 68,406 21.0 %REIT and other non-taxable income (28,870) (18.7)% (13,628) (13.9)% (71,042) (19.3)% (57,128) (17.6)%State income taxes 937 0.6 % 1,803 1.8 % 1,597 0.4 % 2,954 0.9 %Federal benefit of state taxdeduction (196) (0.1)% (378) (0.4)% (335) (0.1)% (620) (0.2)%Other 194 0.1 % (25) — % 1,020 0.3 % 868 0.3 %Effective tax rate $ 4,513 2.9 % $ 8,281 8.5 % $ 8,380 2.3 % $ 14,480 4.4 % 21. Commitments and Contingencies

As of September 30, 2019, our Commercial and Residential Lending Segment had future commercial loan fundingcommitments totaling $2.7 billion, of which we expect to fund $2.5 billion. These future funding commitments primarily relate toconstruction projects, capital improvements, tenant improvements and leasing commissions. Additionally, as of September 30,2019, our Commercial and Residential Lending Segment had outstanding residential mortgage loan purchase commitments of$46.5 million to a third party residential mortgage originator.

As of September 30, 2019, our Infrastructure Lending Segment had future infrastructure loan funding commitmentstotaling $189.8 million, including $155.0 million under revolvers and letters of credit (“LCs”), and $34.8 million under delayed draw term loans. As of September 30, 2019, $18.4 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 September 30, 2019, we had 7 outstanding guarantees on interest rateswaps maturing between March 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 constructiondraw 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 obligationsincurred in the normal course of business that would have a material adverse effect on our condensed consolidated financialstatements.

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Lease Commitment Disclosures

Our lease commitments consist of corporate office leases and ground leases for investment properties, all of which are classified as operating leases. We sublease some of the space within our corporate offices to third parties. Our lease costs and sublease income were as follows (in thousands):


2019 2018 2019 2018Operating lease costs $ 1,667 $ 1,245 $ 4,177 $ 3,721Short-term lease costs 29 40 92 116Sublease income (405) (396) (1,209) (1,231)

Total lease cost $ 1,291 $ 889 $ 3,060 $ 2,606

Information concerning our operating lease liabilities, which are classified within accounts payable, accrued expensesand other liabilities in our condensed consolidated balance sheet as of September 30, 2019, is as follows (dollars in thousands):

For the Three Months Ended For the Nine Months EndedSeptember 30, 2019 September 30, 2019

Cash paid for amounts included in the measurement of leaseliabilities—operating $ 1,310 $ 3,904

September 30, 2019Weighted-average remaining lease term 6.0 yearsWeighted-average discount rate 4.4 %

Future maturity of operating lease liabilities: 2019 (remainder of) $ 1,3102020 6,1632021 3,4802022 1,2722023 1,281Thereafter 7,208Total 20,714Less interest component (2,513)Operating lease liability $ 18,201

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22. Segment Data

In its operation of the business, management, including our chief operating decision maker, who is our Chief Executive Officer, reviewscertain financial information, including segmented internal profit and loss statements prepared on a basis prior to the impact of consolidatingsecuritization 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 September 30, 2019 by business segment (amounts inthousands):

Commercial andResidential Infrastructure Investing

Lending Lending Property and Servicing SecuritizationSegment Segment Segment Segment Corporate Subtotal VIEs Total

Revenues:Interest income from loans $ 145,290 $ 22,763 $ — $ 3,977 $ — $172,030 $ — $172,030Interest income from investment securities 18,163 810 — 32,556 — 51,529 (34,853) 16,676Servicing fees 97 — — 18,243 — 18,340 (4,007) 14,333Rental income — — 72,251 12,403 — 84,654 — 84,654Other revenues 258 39 125 218 — 640 (3) 637

Total revenues 163,808 23,612 72,376 67,397 — 327,193 (38,863) 288,330Costs and expenses:

Management fees 363 — — 18 29,829 30,210 28 30,238Interest expense 51,844 14,422 19,020 8,891 29,142 123,319 (163) 123,156General and administrative 7,104 4,315 2,170 22,915 3,184 39,688 78 39,766Acquisition and investment pursuit costs 506 21 — (364) — 163 — 163Costs of rental operations 765 — 24,784 6,019 — 31,568 — 31,568Depreciation and amortization 339 15 23,106 4,809 — 28,269 — 28,269Loan loss provision, net (39) — — — — (39) — (39)Other expense 77 — 46 — — 123 — 123

Total costs and expenses 60,959 18,773 69,126 42,288 62,155 253,301 (57) 253,244Other income (loss):Change in net assets related to consolidated VIEs — — — — — — 61,767 61,767Change in fair value of servicing rights — — — 57 — 57 (682) (625)Change in fair value of investment securities, net (303) — — 22,476 — 22,173 (21,907) 266Change in fair value of mortgage loans held-for-sale, net 10,088 — — 22,433 — 32,521 — 32,521Earnings from unconsolidated entities 2,507 — 223 253 — 2,983 (236) 2,747Gain (loss) on sale of investments and other assets, net 482 (25) — 20,700 — 21,157 — 21,157Gain (loss) on derivative financial instruments, net 15,729 (109) 5,900 (6,376) 6,789 21,933 — 21,933Foreign currency loss, net (15,337) (319) (8) — — (15,664) — (15,664)Loss on extinguishment of debt (857) (2,101) — (194) (1,472) (4,624) — (4,624)Other loss, net — (50) — — — (50) — (50)

Total other income (loss) 12,309 (2,604) 6,115 59,349 5,317 80,486 38,942 119,428Income (loss) before income taxes 115,158 2,235 9,365 84,458 (56,838) 154,378 136 154,514Income tax (provision) benefit (3,194) 475 — (1,794) — (4,513) — (4,513)Net income (loss) 111,964 2,710 9,365 82,664 (56,838) 149,865 136 150,001

Net income attributable to non-controlling interests — — (5,250) (4,219) — (9,469) (136) (9,605)Net income (loss) attributable to Starwood Property

Trust, Inc. $ 111,964 $ 2,710 $ 4,115 $ 78,445 $ (56,838) $ 140,396 $ — $ 140,396

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The table below presents our results of operations for the three months ended September 30, 2018 by business segment (amounts inthousands):



Revenues:Interest income from loans $ 147,913 3,053 $ — $ 3,535 $ — $154,501 $ — $154,501Interest income from investment securities 10,320 107 — 34,477 — 44,904 (33,396) 11,508Servicing fees 98 — — 34,100 — 34,198 (6,374) 27,824Rental income — — 76,067 15,065 — 91,132 — 91,132Other revenues 265 44 169 229 89 796 (42) 754

Total revenues 158,596 3,204 76,236 87,406 89 325,531 (39,812) 285,719Costs and expenses:

Management fees 453 — — 18 25,937 26,408 111 26,519Interest expense 43,322 2,258 19,483 7,396 30,475 102,934 (276) 102,658General and administrative 7,016 537 1,680 19,131 2,753 31,117 86 31,203Acquisition and investment pursuit costs 341 6,725 — (539) — 6,527 — 6,527Costs of rental operations — — 23,052 7,139 — 30,191 — 30,191Depreciation and amortization 17 — 28,448 5,828 — 34,293 — 34,293Loan loss provision, net 929 — — — — 929 — 929Other expense 76 — — — — 76 — 76

Total costs and expenses 52,154 9,520 72,663 38,973 59,165 232,475 (79) 232,396Other income (loss):Change in net assets related to consolidated VIEs — — — — — — 33,289 33,289Change in fair value of servicing rights — — — (1,994) — (1,994) 1,020 (974)Change in fair value of investment securities, net 238 — — (4,966) — (4,728) 5,029 301Change in fair value of mortgage loans held-for-sale, net 1,343 — — 2,597 — 3,940 — 3,940Earnings (loss) from unconsolidated entities 514 — 1,988 (134) — 2,368 257 2,625Gain on sale of investments and other assets, net 47 — — 1,415 — 1,462 — 1,462Gain (loss) on derivative financial instruments, net 7,278 455 5,895 3,076 (4,969) 11,735 — 11,735Foreign currency loss, net (3,546) (531) (1) — — (4,078) — (4,078)Loss on extinguishment of debt (730) — — — (1,810) (2,540) — (2,540)Other (loss) income, net (1) — 2 (1,422) — (1,421) — (1,421)

Total other income (loss) 5,143 (76) 7,884 (1,428) (6,779) 4,744 39,595 44,339Income (loss) before income taxes 111,585 (6,392) 11,457 47,005 (65,855) 97,800 (138) 97,662Income tax provision (314) — (125) (7,842) — (8,281) — (8,281)Net income (loss) 111,271 (6,392) 11,332 39,163 (65,855) 89,519 (138) 89,381

Net (income) loss attributable to non-controlling interests (365) — (4,769) 151 — (4,983) 138 (4,845)Net income (loss) attributable to Starwood Property

Trust, Inc. $ 110,906 (6,392) $ 6,563 $ 39,314 $ (65,855) $ 84,536 $ — $ 84,536

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The table below presents our results of operations for the nine months ended September 30, 2019 by business segment (amounts in thousands):



Revenues:Interest income from loans $ 462,956 $ 74,969 $ — $ 8,987 $ — $ 546,912 $ — $546,912Interest income from investment securities 62,438 2,563 — 88,012 — 153,013 (96,160) 56,853Servicing fees 310 — — 61,366 — 61,676 (13,902) 47,774Rental income — — 215,098 40,686 — 255,784 — 255,784Other revenues 714 732 291 929 26 2,692 (24) 2,668

Total revenues 526,418 78,264 215,389 199,980 26 1,020,077 (110,086) 909,991Costs and expenses:

Management fees 1,127 — — 54 74,924 76,105 122 76,227Interest expense 172,012 49,257 57,142 25,152 84,878 388,441 (487) 387,954General and administrative 20,626 13,624 5,394 61,943 10,429 112,016 258 112,274Acquisition and investment pursuit costs 915 51 — (387) — 579 — 579Costs of rental operations 1,525 — 70,846 19,503 — 91,874 — 91,874Depreciation and amortization 695 15 70,078 15,287 — 86,075 — 86,075Loan loss provision, net 2,046 1,196 — — — 3,242 — 3,242Other expense 230 — 1,353 194 — 1,777 — 1,777

Total costs and expenses 199,176 64,143 204,813 121,746 170,231 760,109 (107) 760,002Other income (loss):Change in net assets related to consolidated VIEs — — — — — — 164,761 164,761Change in fair value of servicing rights — — — (1,617) — (1,617) (691) (2,308)Change in fair value of investment securities, net (2,945) — — 56,431 — 53,486 (52,491) 995Change in fair value of mortgage loans held-for-sale, net 16,837 — — 48,841 — 65,678 — 65,678Earnings (loss) from unconsolidated entities 8,576 — (42,538) 3,601 — (30,361) (1,275) (31,636)Gain on sale of investments and other assets, net 3,476 3,041 — 21,640 — 28,157 — 28,157Gain (loss) on derivative financial instruments, net 12,024 (3,337) (3,957) (16,761) 31,725 19,694 — 19,694Foreign currency loss, net (17,025) (102) (7) — — (17,134) — (17,134)Loss on extinguishment of debt (857) (8,221) — (194) (1,466) (10,738) — (10,738)Other loss, net — (50) — — (73) (123) — (123)

Total other income (loss) 20,086 (8,669) (46,502) 111,941 30,186 107,042 110,304 217,346Income (loss) before income taxes 347,328 5,452 (35,926) 190,175 (140,019) 367,010 325 367,335Income tax (provision) benefit (4,778) 746 (258) (4,090) — (8,380) — (8,380)Net income (loss) 342,550 6,198 (36,184) 186,085 (140,019) 358,630 325 358,955

Net income attributable to non-controlling interests (392) — (16,322) (4,121) — (20,835) (325) (21,160)Net income (loss) attributable to Starwood Property

Trust, Inc. $ 342,158 $ 6,198 $ (52,506) $ 181,964 $ (140,019) $ 337,795 $ — $ 337,795

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The table below presents our results of operations for the nine months ended September 30, 2018 by business segment (amounts in thousands):



Revenues:Interest income from loans $ 431,153 3,053 $ — $ 9,619 $ — $443,825 $ — $443,825Interest income from investment securities 33,689 107 — 99,348 — 133,144 (95,577) 37,567Servicing fees 313 — — 92,221 — 92,534 (21,328) 71,206Rental income — — 217,178 43,955 — 261,133 — 261,133Other revenues 683 44 351 973 227 2,278 (147) 2,131

Total revenues 465,838 3,204 217,529 246,116 227 932,914 (117,052) 815,862Costs and expenses:

Management fees 1,396 — — 54 82,895 84,345 310 84,655Interest expense 110,169 2,258 55,397 18,298 96,132 282,254 (821) 281,433General and administrative 19,962 537 5,510 64,006 8,602 98,617 256 98,873Acquisition and investment pursuit costs 2,253 6,725 (46) (467) — 8,465 — 8,465Costs of rental operations — — 72,531 20,250 — 92,781 — 92,781Depreciation and amortization 50 — 86,655 16,482 — 103,187 — 103,187Loan loss provision, net 27,726 — — — — 27,726 — 27,726Other expense 230 — — 447 — 677 — 677

Total costs and expenses 161,786 9,520 220,047 119,070 187,629 698,052 (255) 697,797Other income (loss):Change in net assets related to consolidated VIEs — — — — — — 129,888 129,888Change in fair value of servicing rights — — — (14,417) — (14,417) 5,426 (8,991)Change in fair value of investment securities, net 16 — — 24,123 — 24,139 (16,285) 7,854Change in fair value of mortgage loans held-for-sale, net (165) — — 26,738 — 26,573 — 26,573Earnings from unconsolidated entities 3,761 — 1,406 2,916 — 8,083 (1,450) 6,633Gain on sale of investments and other assets, net 461 — 6,883 18,215 — 25,559 — 25,559Gain (loss) on derivative financial instruments, net 15,927 455 27,734 7,720 (24,338) 27,498 — 27,498Foreign currency loss, net (3,260) (531) — (2) — (3,793) — (3,793)Loss on extinguishment of debt (730) — — (186) (1,810) (2,726) — (2,726)Other income (loss), net 42 — 508 (1,365) — (815) — (815)

Total other income (loss) 16,052 (76) 36,531 63,742 (26,148) 90,101 117,579 207,680Income (loss) before income taxes 320,104 (6,392) 34,013 190,788 (213,550) 324,963 782 325,745Income tax provision (2,981) — (1,997) (9,502) — (14,480) — (14,480)Net income (loss) 317,123 (6,392) 32,016 181,286 (213,550) 310,483 782 311,265

Net income attributable to non-controlling interests (1,087) — (11,906) (3,792) — (16,785) (782) (17,567)Net income (loss) attributable to Starwood

Property Trust, Inc. $ 316,036 (6,392) $ 20,110 $ 177,494 $ (213,550) $ 293,698 $ — $ 293,698

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The table below presents our condensed consolidated balance sheet as of September 30, 2019 by business segment (amounts in thousands):



Assets:Cash and cash equivalents $ 64,343 $ 6,404 $ 35,940 $ 46,872 $ 129,369 $ 282,928 $ 1,189 $ 284,117Restricted cash 36,771 33,366 21,186 19,218 — 110,541 — 110,541Loans held-for-investment, net 7,636,475 1,281,815 — 1,363 — 8,919,653 — 8,919,653Loans held-for-sale 809,604 163,932 — 468,583 — 1,442,119 — 1,442,119Investment securities 938,300 54,048 — 1,009,249 — 2,001,597 (1,192,460) 809,137Properties, net 26,902 — 2,441,480 261,156 — 2,729,538 — 2,729,538Intangible assets — — 75,965 68,748 — 144,713 (24,766) 119,947Investment in unconsolidated entities 42,518 — 71,824 33,246 — 147,588 (21,473) 126,115Goodwill — 119,409 — 140,437 — 259,846 — 259,846Derivative assets 37,507 652 21,994 603 20,727 81,483 — 81,483Accrued interest receivable 43,747 4,015 245 1,321 3,125 52,453 (676) 51,777Other assets 98,664 5,978 72,932 64,068 9,129 250,771 2 250,773VIE assets, at fair value — — — — — — 59,249,054 59,249,054

Total Assets $ 9,734,831 $ 1,669,619 $ 2,741,566 $ 2,114,864 $ 162,350 $ 16,423,230 $ 58,010,870 $ 74,434,100Liabilities and Equity

Liabilities:Accounts payable, accrued expensesand other liabilities $ 25,836 $ 15,719 $ 69,550 $ 72,055 $ 50,868 $ 234,028 $ 92 $ 234,120Related-party payable — — — 44 24,442 24,486 — 24,486Dividends payable — — — — 137,273 137,273 — 137,273Derivative liabilities 2,336 904 — 1,541 — 4,781 — 4,781Secured financing agreements, net 4,061,849 1,168,166 1,868,416 771,618 391,989 8,262,038 (13,950) 8,248,088Collateralized loan obligations, net 927,436 — — — — 927,436 — 927,436Unsecured senior notes, net — — — — 1,926,693 1,926,693 — 1,926,693VIE liabilities, at fair value — — — — — — 58,018,209 58,018,209

Total Liabilities 5,017,457 1,184,789 1,937,966 845,258 2,531,265 11,516,735 58,004,351 69,521,086Equity:Starwood Property Trust, Inc.

Stockholders’ Equity:Common stock — — — — 2,871 2,871 — 2,871Additional paid-in capital 1,307,064 481,206 609,241 156,094 2,568,066 5,121,671 — 5,121,671Treasury stock — — — — (104,194) (104,194) — (104,194)Accumulated other comprehensive income(loss) 52,471 — (30) (64) — 52,377 — 52,377

Retained earnings (accumulated deficit) 3,357,839 3,624 (38,936) 1,095,602 (4,835,658) (417,529) — (417,529)Total Starwood Property Trust, Inc.Stockholders’ Equity 4,717,374 484,830 570,275 1,251,632 (2,368,915) 4,655,196 — 4,655,196

Non-controlling interests inconsolidated subsidiaries — — 233,325 17,974 — 251,299 6,519 257,818

Total Equity 4,717,374 484,830 803,600 1,269,606 (2,368,915) 4,906,495 6,519 4,913,014Total Liabilities and Equity $ 9,734,831 $ 1,669,619 $ 2,741,566 $ 2,114,864 $ 162,350 $ 16,423,230 $ 58,010,870 $ 74,434,100

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The table below presents our condensed consolidated balance sheet as of December 31, 2018 by business segment (amounts in thousands):


Lending Lending Property and Servicing Securitization Segment Segment Segment Segment Corporate Subtotal VIEs Total

Assets: Cash and cash equivalents $ 14,385 $ 13 $ 27,408 $ 31,449 $ 164,015 $ 237,270 $ 2,554 $ 239,824Restricted cash 28,324 175,659 25,144 11,679 7,235 248,041 — 248,041Loans held-for-investment, net 7,072,220 1,456,779 — 3,357 — 8,532,356 — 8,532,356Loans held-for-sale 670,155 469,775 — 47,622 — 1,187,552 — 1,187,552Loans transferred as secured borrowings 74,346 — — — — 74,346 — 74,346Investment securities 1,050,920 60,768 — 998,820 — 2,110,508 (1,204,040) 906,468Properties, net — — 2,512,847 272,043 — 2,784,890 — 2,784,890Intangible assets — — 90,889 78,219 — 169,108 (24,075) 145,033Investment in unconsolidated entities 35,274 — 114,362 44,129 — 193,765 (22,000) 171,765Goodwill — 119,409 — 140,437 — 259,846 — 259,846Derivative assets 18,174 1,066 32,733 718 — 52,691 — 52,691Accrued interest receivable 39,862 6,982 359 616 13,177 60,996 (641) 60,355Other assets 13,958 20,472 67,098 49,363 2,057 152,948 (26) 152,922VIE assets, at fair value — — — — — — 53,446,364 53,446,364

Total Assets $ 9,017,618 $ 2,310,923 $ 2,870,840 $ 1,678,452 $ 186,484 $ 16,064,317 $ 52,198,136 $ 68,262,453Liabilities and Equity

Liabilities:Accounts payable, accrued expensesand other liabilities $ 26,508 $ 26,476 $ 67,415 $ 75,655 $ 21,467 $ 217,521 $ 142 $ 217,663Related-party payable — — — 53 43,990 44,043 — 44,043Dividends payable — — — — 133,466 133,466 — 133,466Derivative liabilities 1,290 477 37 1,423 12,188 15,415 — 15,415Secured financing agreements, net 4,405,599 1,524,551 1,884,187 585,258 297,920 8,697,515 (13,950) 8,683,565Unsecured senior notes, net — — — — 1,998,831 1,998,831 — 1,998,831Secured borrowings on transferred loans 74,239 — — — — 74,239 — 74,239VIE liabilities, at fair value — — — — — — 52,195,042 52,195,042

Total Liabilities 4,507,636 1,551,504 1,951,639 662,389 2,507,862 11,181,030 52,181,234 63,362,264Equity:Starwood Property Trust, Inc.

Stockholders’ Equity:Common stock — — — — 2,808 2,808 — 2,808Additional paid-in capital 1,430,503 761,992 645,561 87,779 2,069,321 4,995,156 — 4,995,156Treasury stock — — — — (104,194) (104,194) — (104,194)Accumulated other comprehensive income(loss) 53,516 — 5,208 (64) — 58,660 — 58,660

Retained earnings (accumulated deficit) 3,015,676 (2,573) 13,570 913,642 (4,289,313) (348,998) — (348,998)Total Starwood Property Trust, Inc.Stockholders’ Equity 4,499,695 759,419 664,339 1,001,357 (2,321,378) 4,603,432 — 4,603,432

Non-controlling interests inconsolidated subsidiaries 10,287 — 254,862 14,706 — 279,855 16,902 296,757

Total Equity 4,509,982 759,419 919,201 1,016,063 (2,321,378) 4,883,287 16,902 4,900,189Total Liabilities and Equity $ 9,017,618 $ 2,310,923 $ 2,870,840 $ 1,678,452 $ 186,484 $ 16,064,317 $ 52,198,136 $ 68,262,453

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23. Subsequent Events

Our significant events subsequent to September 30, 2019 were as follows:

Secured Financing Agreements

In October 2019, we entered into a $500.0 million credit agreement to finance loans within the Infrastructure Lending Segment. The facility carries a three-year revolving term with two one-year revolving extension options and an annual interestrate of LIBOR + 1.75%.

In October 2019, we entered into a $600.0 million first mortgage and mezzanine loan to refinance our existing MedicalOffice Portfolio debt of $494.3 million. The facility carries a two-year term with three one-year extension options and a weightedaverage floating rate of interest of LIBOR + 2.07%, which we have swapped to fixed rate.

Residential Mortgage Loan Securitization

In October 2019, we securitized residential mortgage loans held-for-sale with a principal balance of $370.3 million.

The Retail Fund

On November 8, 2019, the secured financing of the Retail Fund, an investment in which we own a 33% equity interest(see Note 7), reached its maturity date. We believe the Retail Fund will not have the ability to repay the financing at maturity andsuch inability to repay may constitute an event of default under its financing facilities.

Dividend Declaration

On November 8, 2019, our board of directors declared a dividend of $0.48 per share for the fourth quarter of 2019,which is payable on January 15, 2020 to common stockholders of record as of December 31, 2019.

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

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read inconjunction with the information included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s Annual Reporton Form 10-K for the fiscal year ended December 31, 2018 (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 Marylandcorporation 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 September 30, 2019 and we refer to the investments within thesesegments 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 and residential first mortgages, 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).

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

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

● Real estate investing and servicing (the “Investing and Servicing Segment”)—includes (i) a servicing business in theU.S. that manages and works out problem assets, (ii) an investment business that selectively acquires and managesunrated, investment grade and non-investment grade rated CMBS, including subordinated interests of securitization andresecuritization transactions, (iii) a mortgage loan business which originates conduit loans for the primary purpose ofselling these loans into securitization transactions and (iv) an investment business that selectively acquires commercialreal 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 ConsolidatedFinancial Statements”) for further discussion of our business and organization.

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Developments During the Third Quarter of 2019

Commercial and Residential Lending Segment

● In August 2019, we refinanced a pool of our commercial loans held-for-investment through a collateralized loanobligation (“CLO”), STWD 2019-FL1. The CLO has a contractual maturity of July 2038 and a weighted average cost offinancing of LIBOR + 1.65%, inclusive of the amortization of deferred issuance costs. On the closing date, the CLOissued $1.1 billion principal amount of notes, of which $936.4 million was purchased by third party investors. Weretained $86.6 million of notes, along with preferred shares with a liquidation preference of $77.0 million. The CLOcontains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans orparticipation interests in loans to the CLO in exchange for cash.

● Originated or acquired $1.2 billion of commercial loans during the quarter, including the following:

o $300.0 million first mortgage loan for the construction of the final phase of a 3.4 million square foot mixed use,waterfront property located in Washington D.C., of which the Company funded $5.3 million.

o £203.1 million ($249.6 million) first mortgage loan for the construction of 79 residential units and a 50-keyfive star hotel located in London, England, which was unfunded as of September 30, 2019.

o £185.0 million ($230.8 million) first mortgage loan for the acquisition and refurbishment of an office buildinglocated in London, England, which was unfunded as of September 30, 2019.

o $112.0 million first mortgage and mezzanine loan for the refinancing of a nine-story, 355-key hotel located inWashington D.C., of which the Company funded $86.1 million.

o $110.3 million first mortgage loan for the refinancing of 13 Class A and B office properties located in LongIsland, New York, of which the Company funded $101.3 million.

● Funded $276.1 million of previously originated commercial loan commitments.

● Received gross proceeds of $825.2 million (net proceeds of $405.5 million) from sales, maturities and principalrepayments on our commercial loans, preferred equity interests and single-borrower CMBS, of which $53.3 millionrelated to loan sales.

● Acquired $618.2 million of residential mortgage loans.

● Received proceeds of $569.6 million, including retained RMBS of $52.8 million, from the securitization of $546.0million of residential mortgage loans.


● Acquired $124.7 million of infrastructure loans and funded $30.3 million of pre-existing infrastructure loancommitments.

● Received proceeds of $47.0 million from sales of infrastructure loans and $237.4 million from maturities and principalrepayments on our infrastructure loans and bonds.

Investing and Servicing Segment

● Originated commercial conduit loans of $505.4 million. Separately, received proceeds of $274.7 million from sales ofpreviously originated commercial conduit loans.

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● Obtained five new special servicing assignments for CMBS trusts with a total unpaid principal balance of $3.2 billion.

● Acquired CMBS for a purchase price of $10.2 million, net of non-controlling interests, and sold CMBS for total grossproceeds of $23.0 million.

● Acquired commercial real estate from a CMBS trust for a gross purchase price of $8.8 million.

● Sold commercial real estate for gross proceeds of $51.5 million and recognized a net gain of $16.7 million.

Corporate Financing

● Entered into the following credit agreements: (i) a $400.0 million term loan facility that carries a seven-year term and anannual interest rate of LIBOR + 2.50%; and (ii) a $100.0 million revolving credit facility that carries a five-year termand an annual interest rate of LIBOR + 3.00%. A portion of the net proceeds from the term loan was used to repay theamount outstanding under our previous term loan.

Developments During the Nine Months Ended September 30, 2019


● Executed a $1.1 billion CLO as discussed above under “Developments During the Third Quarter of 2019”

● Originated or acquired $3.3 billion of commercial loans during the period, including the following:

o $379.0 million first mortgage and mezzanine loan for the acquisition and redevelopment of two office buildingslocated in New York, of which the Company funded $236.0 million.

o £249.9 million ($319.7 million) first mortgage loan to the owner of the United Kingdom’s market leadingconvention and exhibition center business. The loan is secured by five large conference facilities totaling overtwo million square feet and was fully funded.

o $300.0 million first mortgage loan for the construction of the final phase of a 3.4 million square foot mixed use,waterfront property located in Washington D.C., of which the Company funded $5.3 million.

o $257.5 million first mortgage loan for the construction of an 800,000 square foot office campus on 18.1 acreslocated in California that is pre-leased to an investment grade tenant, of which the Company funded $114.1million.

o £203.1 million ($249.6 million) first mortgage loan for the construction of 79 residential units and a 50-keyfive star hotel located in London, England, which was unfunded as of September 30, 2019.

● Funded $665.9 million of previously originated commercial loan commitments.

● Received gross proceeds of $2.3 billion (net proceeds of $1.2 billion) from sales, maturities and principal repayments onour commercial loans, preferred equity interests and single-borrower CMBS, of which $552.4 million related to loansales.

● Acquired $1.6 billion of residential mortgage loans.

● Received proceeds of $921.6 million, including retained RMBS of $79.1 million, from the securitization of $886.2million of residential mortgage loans.

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● Acquired $387.2 million of infrastructure loans and funded $115.2 million of pre-existing infrastructure loancommitments.

● Received proceeds of $393.3 million from sales of infrastructure loans and $600.8 million from maturities and principalrepayments on our infrastructure loans and bonds.


● Originated commercial conduit loans of $1.1 billion. Separately, received proceeds of $826.9 million from sales ofpreviously originated commercial conduit loans.

● Obtained 14 new special servicing assignments for CMBS trusts with a total unpaid principal balance of $10.6 billion.

● Acquired CMBS for a purchase price of $58.7 million, net of non-controlling interests, and sold CMBS for total grossproceeds of $85.7 million.

● Acquired commercial real estate from a CMBS trust for a gross purchase price of $8.8 million.

● Sold commercial real estate for gross proceeds of $51.5 million and recognized a net gain of $16.7 million.

Corporate Financing

● Settled the remaining $78.0 million of our 4.00% Convertible Senior Notes due 2019 (the “2019 Notes”) through theissuance of 3.6 million shares of common stock and cash payments of $12.0 million.

● Entered into the following credit agreements: (i) a $400.0 million term loan facility that carries a seven-year term and anannual interest rate of LIBOR + 2.50%; and (ii) a $100.0 million revolving credit facility that carries a five-year termand an annual interest rate of LIBOR + 3.00%. A portion of the net proceeds from the term loan was used to repay theamount outstanding under our previous term loan.

Subsequent Events

Refer to Note 23 to the Condensed Consolidated Financial Statements for disclosure regarding significant transactionsthat occurred subsequent to September 30, 2019.

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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 securitizationvariable interest entities (“VIEs”), particularly within revenues and other income, as discussed in Note 2 to the CondensedConsolidated Financial Statements. For a discussion of our results of operations excluding the impact of Accounting StandardsCodification (“ASC”) Topic 810 as it relates to the consolidation of securitization VIEs, refer to the section captioned “Non-GAAP Financial Measures”.

The following table compares our summarized results of operations for the three and nine months ended September 30,2019 and 2018 by business segment (amounts in thousands):


2019 2018 $ Change 2019 2018 $ ChangeRevenues:Commercial and Residential LendingSegment $ 163,808 $ 158,596 $ 5,212 $ 526,418 $ 465,838 $ 60,580Infrastructure Lending Segment 23,612 3,204 20,408 78,264 3,204 75,060Property Segment 72,376 76,236 (3,860) 215,389 217,529 (2,140)Investing and Servicing Segment 67,397 87,406 (20,009) 199,980 246,116 (46,136)Corporate — 89 (89) 26 227 (201)Securitization VIE eliminations (38,863) (39,812) 949 (110,086) (117,052) 6,966

288,330 285,719 2,611 909,991 815,862 94,129Costs and expenses:Commercial and Residential LendingSegment 60,959 52,154 8,805 199,176 161,786 37,390Infrastructure Lending Segment 18,773 9,520 9,253 64,143 9,520 54,623Property Segment 69,126 72,663 (3,537) 204,813 220,047 (15,234)Investing and Servicing Segment 42,288 38,973 3,315 121,746 119,070 2,676Corporate 62,155 59,165 2,990 170,231 187,629 (17,398)Securitization VIE eliminations (57) (79) 22 (107) (255) 148

253,244 232,396 20,848 760,002 697,797 62,205Other income (loss):Commercial and Residential LendingSegment 12,309 5,143 7,166 20,086 16,052 4,034Infrastructure Lending Segment (2,604) (76) (2,528) (8,669) (76) (8,593)Property Segment 6,115 7,884 (1,769) (46,502) 36,531 (83,033)Investing and Servicing Segment 59,349 (1,428) 60,777 111,941 63,742 48,199Corporate 5,317 (6,779) 12,096 30,186 (26,148) 56,334Securitization VIE eliminations 38,942 39,595 (653) 110,304 117,579 (7,275)

119,428 44,339 75,089 217,346 207,680 9,666Income (loss) before income taxes:Commercial and Residential LendingSegment 115,158 111,585 3,573 347,328 320,104 27,224Infrastructure Lending Segment 2,235 (6,392) 8,627 5,452 (6,392) 11,844Property Segment 9,365 11,457 (2,092) (35,926) 34,013 (69,939)Investing and Servicing Segment 84,458 47,005 37,453 190,175 190,788 (613)Corporate (56,838) (65,855) 9,017 (140,019) (213,550) 73,531Securitization VIE eliminations 136 (138) 274 325 782 (457)

154,514 97,662 56,852 367,335 325,745 41,590Income tax provision (4,513) (8,281) 3,768 (8,380) (14,480) 6,100Net income attributable to non-controlling interests (9,605) (4,845) (4,760) (21,160) (17,567) (3,593)

Net income attributable to StarwoodProperty Trust, Inc. $ 140,396 $ 84,536 $ 55,860 $ 337,795 $ 293,698 $ 44,097

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Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018


Revenues

For the three months ended September 30, 2019, revenues of our Commercial and Residential Lending Segmentincreased $5.2 million to $163.8 million, compared to $158.6 million for the three months ended September 30, 2018. Thisincrease was primarily due to an increase in interest income from investment securities of $7.8 million, partially offset by a decrease in interest income from loans of $2.6 million. The increase in interest income from investment securities was primarily due to higher average investment balances. The decrease in interest income from loans was principally due to (i) the recognition in the 2018 quarter of a $2.8 million profit participation in a mortgage loan that was repaid in 2016 and (ii) the compression of interest rate spreads in credit markets, partially offset by (iii) higher average balances of both commercial and residential loans.

Costs and Expenses

For the three months ended September 30, 2019, costs and expenses of our Commercial and Residential LendingSegment increased $8.8 million to $60.9 million, compared to $52.1 million for the three months ended September 30, 2018. Thisincrease was primarily due to an $8.5 million increase in interest expense associated with the various secured financing facilitiesused to fund a portion of this segment’s investment portfolio.

Net Interest Income (amounts in thousands)

For the Three Months EndedSeptember 30,

2019 2018 ChangeInterest income from loans $ 145,290 $ 147,913 $ (2,623)Interest income from investment securities 18,163 10,320 7,843Interest expense (51,844) (43,322) (8,522)

Net interest income $ 111,609 $ 114,911 $ (3,302)

For the three months ended September 30, 2019, net interest income of our Commercial and Residential Lending Segment decreased $3.3 million to $111.6 million, compared to $114.9 million for the three months ended September 30, 2018. This decrease reflects the net increase in interest income explained in the Revenues discussion above, which was more than offsetby the increase in interest expense on our secured financing facilities primarily due to increased utilization of our availableborrowing capacity.

During the three months ended September 30, 2019 and 2018, the weighted average unlevered yields on the Commercialand Residential Lending Segment’s loans and investment securities were as follows:


2019 2018Commercial 7.1 % 7.3 %Residential 6.5 % 6.7 %Overall 7.0 % 7.3 %

The overall weighted average unlevered yield was slightly lower due to (i) the recognition in the 2018 quarter of a $2.8million profit participation in a mortgage loan and (ii) the compression of interest rate spreads in credit markets.

During the three months ended September 30, 2019 and 2018, the Commercial and Residential Lending Segment’sweighted average secured borrowing rates, inclusive of interest rate hedging costs and the amortization of deferred financing fees,were 4.2% and 4.4%, respectively, and 4.2% and 4.3%, respectively, excluding the impact of bridge financing. The decreases inborrowing rates primarily reflect the compression of interest rate spreads in credit markets.

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Other Income

For the three months ended September 30, 2019, other income of our Commercial and Residential Lending Segment increased $7.2 million to $12.3 million compared to $5.1 million for the three months ended September 30, 2018. This increase was primarily due to (i) an $8.7 million favorable change in fair value of residential mortgage loans, (ii) an $8.4 million increased gain on derivatives and (iii) a $2.0 million increase in earnings from unconsolidated entities, all partially offset by (iv) an $11.8 million increase in foreign currency loss. The increased gain on derivatives reflects a $15.2 million higher gain on foreign currency hedges, partially offset by a $6.8 million unfavorable change in 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 higher gain on the foreign currency hedges and the increase in foreign currency loss reflect the overall strengthening of the U.S. dollar against the pound sterling (“GBP”) in the third quarter of 2019 versus a lesser strengthening of the U.S. dollar in the third quarter of 2018. The interest rate swaps are used primarily to fix our interest rate payments on certain variable rate borrowings which fund fixed rate investments.


The Infrastructure Lending Segment was acquired on September 19, 2018. Therefore, its results for the quarter and ninemonths ended September 30, 2018 reflect only the last 12 days of those periods and are not comparable to its results for the threeand nine months ended September 30, 2019. Accordingly, the following discussion attempts no comparison to the prior yearresults.

Revenues

For the three months ended September 30, 2019 and 2018, revenues of our Infrastructure Lending Segment were $23.6million and $3.2 million, respectively, which includes interest income from loans of $22.8 million and $3.1 million, respectively,and $0.8 million and $0.1 million, respectively, from investment securities.

Costs and Expenses

For the three months ended September 30, 2019 and 2018, costs and expenses of our Infrastructure Lending Segment were $18.8 million and $9.5 million, respectively, which includes interest expense on secured debt facilities used to finance this segment’s investment portfolio of $14.4 million and $2.3 million, respectively, and $4.3 million and $0.5 million, respectively, of general and administrative expenses. Also included in the three months ended September 2018 were $6.7 million of acquisition costs.



2019 2018Interest income from loans $ 22,763 $ 3,053Interest income from investment securities 810 107Interest expense (14,422) (2,258)

Net interest income $ 9,151 $ 902

Interest income from infrastructure loans and investment securities and interest expense on the secured financingfacilities reflect primarily variable LIBOR based rates.

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During the three months ended September 30, 2019 and 2018, the weighted average unlevered yields on theInfrastructure Lending Segment’s investments were as follows:


2019 2018Loans and investment securities held-for-investment 6.1 % 5.3 %Loans held-for-sale 4.2 % 3.5 %

During both the three months ended September 30, 2019 and 2018, the Infrastructure Lending Segment’s weightedaverage secured borrowing rate, inclusive of the amortization of deferred financing fees, was 4.7%.

Other Loss

For the three months ended September 30, 2019 and 2018, other loss of our Infrastructure Lending Segment was $2.6 million and $0.1 million, respectively. Other loss for the three months ended September 30, 2019 primarily reflects a $2.1 million loss on extinguishment of debt resulting from the write-off of deferred financing fees relating to partial debt prepayments from proceeds of loan repayments and sales.

Property Segment

Change in Results by Portfolio (amounts in thousands)

$ Change from prior periodCosts and Gain (loss) on derivative Income (loss) before

Revenues expenses financial instruments Other income (loss) income taxesMaster Lease Portfolio $ (4,842) $ (3,910) $ — $ (1) $ (933)Medical Office Portfolio (1,161) (1,314) (7,258) — (7,105)Ireland Portfolio (828) 463 7,263 (7) 5,965Woodstar I Portfolio 1,285 2,902 — — (1,617)Woodstar II Portfolio 1,686 (1,449) — (1) 3,134Investment in unconsolidated entities — — — (1,765) (1,765)Other/Corporate — (229) — — 229

Total $ (3,860) $ (3,537) $ 5 $ (1,774) $ (2,092)

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

Revenues

For the three months ended September 30, 2019, revenues of our Property Segment decreased $3.8 million to $72.4 million, compared to $76.2 million for the three months ended September 30, 2018. The decrease in revenues in the third quarter of 2019 was primarily due to (i) the sale of four properties within the Master Lease portfolio during the fourth quarter of 2018 and (ii) no longer recording as revenues and offsetting expenses property taxes paid directly by lessees, in accordance with the new lease accounting standard effective January 1, 2019 (see Note 2 to the Consolidated Financial Statements) in both the Master Lease and Medical Office Portfolios, partially offset by (iii) increased rental income in the Woodstar Portfolios due to rental rate increases.

Costs and Expenses

For the three months ended September 30, 2019, costs and expenses of our Property Segment decreased $3.5 million to$69.1 million, compared to $72.6 million for the three months ended September 30, 2018. The decrease in costs and expensesprimarily reflects (i) the sale of four properties within the Master Lease portfolio during the fourth quarter of 2018, (ii) no longerrecording as revenues and offsetting expenses property taxes paid directly by lessees, as discussed above, and (iii) decreasedexpenses in the Woodstar II Portfolio primarily due to in-place lease intangibles becoming fully amortized.

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Other Income

For the three months ended September 30, 2019, other income of our Property Segment decreased $1.8 million to $6.1 million, compared to $7.9 million for the three months ended September 30, 2018. The decrease in other income was primarily due to lower earnings from our equity investee that owns four regional shopping malls (the “Retail Fund”), which is an investment company that measures its assets at fair value. There was also a $7.3 million unfavorable change in interest rate swaps which primarily hedge the variable interest rate risk on borrowings secured by our Medical Office Portfolio, offset by a $7.3 million increased gain on foreign exchange contracts which economically hedge our Euro currency exposure with respect to the Ireland Portfolio.


Revenues

For the three months ended September 30, 2019, revenues of our Investing and Servicing Segment decreased $20.0million to $67.4 million, compared to $87.4 million for the three months ended September 30, 2018. The decrease in revenues inthe third quarter of 2019 was primarily due to decreases of (i) $15.9 million in servicing fees, (ii) $2.7 million in rental incomefrom our REIS Equity Portfolio (see Note 3 to the Condensed Consolidated Financial Statements) due to the sale of fourproperties since September 30, 2018 and (iii) $1.9 million in CMBS interest income.

Costs and Expenses

For the three months ended September 30, 2019, costs and expenses of our Investing and Servicing Segment increasedby $3.3 million to $42.3 million, compared to $39.0 million for the three months ended September 30, 2018, primarily due tovariable expenses related to conduit loan securitizations.

Other Income (Loss)

For the three months ended September 30, 2019, other income (loss) of our Investing and Servicing Segment improved $60.7 million to income of $59.3 million, from a loss of $1.4 million for the three months ended September 30, 2018. The increase in other income was primarily due to (i) a $27.4 million greater increase in fair value of our CMBS investments, (ii) a $19.8 million greater increase in fair value of conduit loans, (iii) a $19.3 million increase in gains on sales of operating properties, (iv) a $2.0 million lesser decrease in fair value of servicing rights primarily reflecting the expected reduction in amortization of this deteriorating asset net of increases in fair value due to the attainment of new servicing contracts, all partially offset by (v) a $9.5 million unfavorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans.

Corporate and Other Items

Corporate Costs and Expenses

For the three months ended September 30, 2019, corporate expenses increased $3.0 million to $62.2 million, comparedto $59.2 million for the three months ended September 30, 2018. The increase was primarily due to a $3.9 million increase inmanagement fees, partially offset by a $1.3 million decrease in interest expense principally on lower average outstanding balancesof our unsecured senior notes.

Corporate Other Income (Loss)

For the three months ended September 30, 2019, corporate other income (loss) improved $12.1 million to income of $5.3million, compared to a loss of $6.8 million for the three months ended September 30, 2018. The increase in corporate otherincome was primarily due to an $11.8 million favorable change in gain (loss) on interest rate swaps used to hedge a portion of ourunsecured senior notes used to repay variable-rate secured financing.

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Securitization VIE Eliminations

Securitization VIE eliminations primarily reclassify interest income and servicing fee revenues to other income for the CMBS and RMBS VIEs that we consolidate as primary beneficiary. Such eliminations have no overall effect on net income 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 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.

Income Tax Provision

Our consolidated income tax provision principally relates to the taxable nature of our loan servicing and loan conduit businesses and certain other real estate related investing activities which are housed in taxable REIT subsidiaries (“TRSs”). For the three months ended September 30, 2019, we had a tax provision of $4.5 million compared to $8.3 million in the three months ended September 30, 2018. The $3.8 million decrease primarily reflects lower taxable income of our TRSs.

Net Income Attributable to Non-controlling Interests

During the three months ended September 30, 2019, net income attributable to non-controlling interests increased $4.8 million to $9.6 million, compared to $4.8 million during the three months ended September 30, 2018. The increase was primarily due to the minority interests on the gain from an Investing and Servicing Segment operating property sold during the third quarter of 2019.

Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018


Revenues

For the nine months ended September 30, 2019, revenues of our Commercial and Residential Lending Segmentincreased $60.6 million to $526.4 million, compared to $465.8 million for the nine months ended September 30, 2018. Thisincrease was primarily due to increases in interest income from loans of $31.8 million and investment securities of $28.7 million. The increase in interest income from loans was principally due to (i) higher average LIBOR rates, (ii) higher average balances of both commercial and residential loans and (iii) higher levels of prepayment related income, partially offset by (iv) the compression of interest rate spreads in credit markets and (v) the recognition in the 2018 period of a $15.1 million profit participation in a mortgage loan that was repaid in 2016. The increase in interest income from investment securities was primarily due to higher average investment balances.

Costs and Expenses

For the nine months ended September 30, 2019, costs and expenses of our Commercial and Residential LendingSegment increased $37.4 million to $199.2 million, compared to $161.8 million for the nine months ended September 30, 2018.This increase was primarily due to a $61.8 million increase in interest expense associated with the various secured financingfacilities used to fund a portion of this segment’s investment portfolio, partially offset by a $25.7 million decrease in loan lossprovision principally relating to impairment charges on certain commercial loans in the 2018 second quarter.

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2019 2018 ChangeInterest income from loans $ 462,956 $ 431,153 $ 31,803Interest income from investment securities 62,438 33,689 28,749Interest expense (172,012) (110,169) (61,843)

Net interest income $ 353,382 $ 354,673 $ (1,291)

For the nine months ended September 30, 2019, net interest income of our Commercial and Residential Lending Segment decreased $1.3 million to $353.4 million, compared to $354.7 million for the nine months ended September 30, 2018. This decrease reflects the net increase in interest income explained in the Revenues discussion above, which was slightly morethan offset by the increase in interest expense on our secured financing facilities primarily due to increased utilization of ouravailable borrowing capacity.

During the nine months ended September 30, 2019 and 2018, the weighted average unlevered yields on the Commercialand Residential Lending Segment’s loans and investment securities were as follows:


2019 2018Commercial 7.5 % 7.7 %Residential 6.9 % 6.8 %Overall 7.4 % 7.6 %

The overall weighted average unlevered yield was slightly lower as higher average LIBOR rates and higher levels ofprepayment related income were more than offset by the compression of interest rate spreads in credit markets and the recognitionin the 2018 period of a $15.1 million profit participation in a mortgage loan.

During the nine months ended September 30, 2019 and 2018, the Commercial and Residential Lending Segment’sweighted average secured borrowing rates, inclusive of interest rate hedging costs and the amortization of deferred financing fees,were 4.4% and 4.3%, respectively, and 4.4% and 4.2%, respectively, excluding the impact of bridge financing. The increases inborrowing rates primarily reflect higher average LIBOR rates, partially offset by the compression of interest rate spreads in creditmarkets.

Other Income

For the nine months ended September 30, 2019, other income of our Commercial and Residential Lending Segment increased $4.0 million to $20.1 million, compared to $16.1 million for the nine months ended September 30, 2018. The increase was primarily due to (i) a $14.0 million net favorable change in fair value of residential mortgage loans and investment securities, (ii) a $4.8 million increase in earnings from unconsolidated entities and (iii) a $3.0 million increase in gain on sale of investments, all partially offset by (iv) a $13.8 million increase in foreign currency loss and (v) a $3.9 million decrease in net gains on derivatives. The decrease in net gains on derivatives reflects a $26.8 million unfavorable change in interest rate swaps, partially offset by a $22.9 million higher gain on foreign currency hedges. The interest rate swaps are used primarily to fix our interest rate payments on certain variable rate borrowings which fund fixed rate investments. 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 higher gain on the foreign currency hedges and the increase in foreign currency loss reflect the overall strengthening of the U.S. dollar against the pound sterling (“GBP”) in the first nine months of 2019 versus a lesser strengthening of the U.S. dollar in the first nine months of 2018.

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The Infrastructure Lending Segment was acquired on September 19, 2018. Therefore, its results for the quarter and ninemonths ended September 30, 2018 reflect only the last 12 days of those periods and are not comparable to its results for the threeand nine months ended September 30, 2019. Accordingly, the following discussion attempts no comparison to the prior yearresults.

Revenues

For the nine months ended September 30, 2019 and 2018, revenues of our Infrastructure Lending Segment were $78.3million and $3.2 million, respectively, which includes interest income from loans of $75.0 million and $3.1 million, respectively,and $2.6 million and $0.1 million, respectively, from investment securities.

Costs and Expenses

For the nine months ended September 30, 2019 and 2018, costs and expenses of our Infrastructure Lending Segment were $64.1 million and $9.5 million, respectively, which includes interest expense on secured debt facilities used to finance this segment’s investment portfolio of $49.3 million and $2.3 million, respectively, and $13.6 million and $0.5 million, respectively, of general and administrative expenses. Also included in the three months ended September 2018 were $6.7 million of acquisition costs.


For the Nine Months EndedSeptember 30, 2019

2019 2018Interest income from loans $ 74,969 $ 3,053Interest income from investment securities 2,563 107Interest expense (49,257) (2,258)

Net interest income $ 28,275 $ 902

Interest income from infrastructure loans and investment securities and interest expense on the secured financingfacilities reflect primarily variable LIBOR based rates.

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During the nine months ended September 30, 2019 and 2018, the weighted average unlevered yields on the Infrastructure Lending Segment’s investments were as follows:


2019 2018Loans and investment securities held-for-investment 6.2 % 5.3 %Loans held-for-sale 4.0 % 3.5 %

During both the nine months ended September 30, 2019 and 2018, the Infrastructure Lending Segment’s weightedaverage secured borrowing rate, inclusive of the amortization of deferred financing fees, was 4.7%.

Other Loss

For the nine months ended September 30, 2019 and 2018, other loss of our Infrastructure Lending Segment was $8.7 million and $0.1 million, respectively. Other loss for the nine months ended September 30, 2019 primarily reflects an $8.2 million loss on extinguishment of debt resulting from the write-off of deferred financing fees relating to partial debt prepayments from proceeds of loan repayments and sales.

Property Segment

Change in Results by Portfolio (amounts in thousands)

$ Change from prior yearCosts and Gain (loss) on derivative Income (loss) before

Revenues expenses financial instruments Other income (loss) income taxesMaster Lease Portfolio $ (15,249) $ (11,669) $ — $ (6,883) $ (10,463)Medical Office Portfolio (993) (1,244) (37,431) (490) (37,670)Ireland Portfolio (1,193) 261 5,740 (7) 4,279Woodstar I Portfolio 2,955 895 — — 2,060Woodstar II Portfolio 12,340 (2,615) — (18) 14,937Investment in unconsolidated entities — — — (43,944) (43,944)Other/Corporate — (862) — — 862

Total $ (2,140) $ (15,234) $ (31,691) $ (51,342) $ (69,939)

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

Revenues

For the nine months ended September 30, 2019, revenues of our Property Segment decreased $2.1 million to $215.4 million, compared to $217.5 million for the nine months ended September 30, 2018. The decrease in revenues in the nine months of 2019 was primarily due to a decrease in rental income from the Master Lease Portfolio due to (i) the sale of seven properties within the Master Lease portfolio during 2018 and (ii) no longer recording as revenues and offsetting expenses property taxes paid directly by lessees, in accordance with the new lease accounting standard effective January 1, 2019 (see Note 2 to the Consolidated Financial Statements) in both the Master Lease and Medical Office Portfolios, partially offset by (iii) the full period inclusion of rental income from the Woodstar II Portfolio, which was acquired over a period between December 2017 and September 2018, and (iv) rental rate increases in both Woodstar Portfolios.

Costs and Expenses

For the nine months ended September 30, 2019, costs and expenses of our Property Segment decreased $15.2 million to$204.8 million, compared to $220.0 million for the nine months ended September 30, 2018. The decrease in costs and expensesprimarily reflects (i) the sale of seven properties within the Master Lease portfolio during 2018, (ii) no longer recording asrevenues and offsetting expenses property taxes paid directly by lessees, as discussed above, and

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(iii) decreased expenses in the Woodstar II Portfolio primarily due to in-place lease intangibles becoming fully amortized,partially offset by (iv) the full period inclusion of the properties acquired in the Woodstar II Portfolio since January 2018.

Other Income (Loss)

For the nine months ended September 30, 2019, other income (loss) of our Property Segment decreased $83.0 million to a loss of $46.5 million, compared to income of $36.5 million for the nine months ended September 30, 2018. The decrease in other income was primarily due to (i) a $43.9 million unfavorable change in earnings (loss) from an unconsolidated entity, (ii) a $31.7 million unfavorable change in gain (loss) on derivatives and (iii) the non-recurrence of a $6.9 million net gain on sale of three properties in the Master Lease Portfolio during the nine months of 2018. The $43.9 million unfavorable change in earnings (loss) from an unconsolidated entity principally reflects the recognition in the 2019 first quarter of decreases in fair value of properties held by the Retail Fund (see Note 7 to the Consolidated Financial Statements). The $31.7 million unfavorable change in gain (loss) on derivatives consists of (i) a $37.4 million unfavorable change in interest rate swaps which primarily hedge the variable interest rate risk on borrowings secured by our Medical Office Portfolio, partially offset by (ii) a $5.7 million increased gain on foreign exchange contracts which economically hedge our Euro currency exposure with respect to the Ireland Portfolio.


Revenues

For the nine months ended September 30, 2019, revenues of our Investing and Servicing Segment decreased $46.1million to $200.0 million, compared to $246.1 million for the nine months ended September 30, 2018. The decrease in revenuesin the nine months of 2019 was primarily due to decreases of (i) $30.9 million in servicing fees, (ii) $11.3 million in CMBSinterest income principally due to lower interest recoveries and (iii) $3.3 million in rental income from our REIS Equity Portfoliodue to the sale of four properties since September 30, 2018.

Costs and Expenses

For the nine months ended September 30, 2019, costs and expenses of our Investing and Servicing Segment increased by$2.6 million to $121.7 million, compared to $119.1 million for the nine months ended September 30, 2018. The increase in costsand expenses was primarily due to a $6.9 million increase in interest expense principally related to the financing of our CMBSportfolio, partially offset by decreases of $2.1 million in general and administrative expenses primarily related to our specialservicing business and $1.2 million in depreciation and amortization related to our REIS Equity Portfolio.

Other Income

For the nine months ended September 30, 2019, other income of our Investing and Servicing Segment increased $48.2 million to $111.9 million, from $63.7 million for the nine months ended September 30, 2018. The increase in other income was primarily due to (i) a $32.3 million greater increase in fair value of our CMBS investments, (ii) a $22.1 million greater increase in fair value of conduit loans, (iii) a $12.8 million lesser decrease in fair value of servicing rights primarily reflecting the expected reduction in amortization of this deteriorating asset net of increases in fair value due to the attainment of new servicing contracts and (iv) a $3.4 million increase in gains on sales of operating properties, all partially offset by (v) a $24.5 million unfavorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans.

Corporate and Other Items

Corporate Costs and Expenses

For the nine months ended September 30, 2019, corporate expenses decreased $17.4 million to $170.2 million,compared to $187.6 million for the nine months ended September 30, 2018. The decrease was primarily due to an $11.3 milliondecrease in interest expense principally on lower average outstanding balances of our unsecured senior notes and an $8.0 milliondecrease in management fees.

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Corporate Other Income (Loss)

For the nine months ended September 30, 2019, corporate other income (loss) improved $56.3 million to income of$30.2 million, compared to a loss of $26.1 million for the nine months ended September 30, 2018. The increase in corporate otherincome was primarily due to a $56.1 million favorable change in gain (loss) on interest rate swaps used to hedge a portion of ourunsecured senior notes used to repay variable-rate secured financing.

Securitization VIE Eliminations

Refer to the preceding comparison of the three months ended September 30, 2019 to the three months ended September30, 2018 for a discussion of the nature of securitization VIE eliminations.

Income Tax Provision

Our consolidated income tax provision principally relates to the taxable nature of our loan servicing and loan conduitbusinesses and certain other real estate related investing activities which are housed in TRSs. For the nine months endedSeptember 30, 2019, we had a tax provision of $8.4 million compared to $14.5 million in the nine months ended September 30,2018. The $6.1 million decrease primarily reflects a decrease in the taxable income of our TRSs.

Net Income Attributable to Non-controlling Interests

During the nine months ended September 30, 2019, net income attributable to non-controlling interests increased $3.6 million to $21.2 million, compared to $17.6 million during the nine months ended September 30, 2018. The increase was primarily due to increased non-controlling interests in our Woodstar II Portfolio, which consists of properties acquired in and after December 2017.

Non-GAAP Financial Measures

Core Earnings is a non-GAAP financial measure. We calculate Core Earnings as GAAP net income (loss) excluding thefollowing:

(i) non-cash equity compensation expense;

(ii) incentive fees due under our management agreement;

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

(iv) acquisition costs associated with successful acquisitions;

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

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

We believe that Core Earnings provides an additional measure of our core operating performance by eliminating theimpact of certain non-cash expenses and facilitating a comparison of our financial results to those of other comparable REITswith fewer or no non-cash adjustments and comparison of our own operating results from period to period. Our management usesCore Earnings in this way, and also uses Core Earnings to compute the incentive fee due under our management agreement. TheCompany believes that its investors also use Core Earnings or a comparable supplemental performance measure to evaluate andcompare the performance of the Company and its peers, and as such, the Company believes that the disclosure of Core Earnings isuseful to (and expected by) its investors.

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However, the Company cautions that Core Earnings does not represent cash generated from operating activities inaccordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), oran indication of our cash flows from operating activities (determined in accordance with GAAP), a measure of our liquidity, or anindication of funds available to fund our cash needs, including our ability to make cash distributions. In addition, ourmethodology for calculating Core Earnings may differ from the methodologies employed by other REITs to calculate the same orsimilar supplemental performance measures, and accordingly, our reported Core Earnings may not be comparable to the CoreEarnings reported by other REITs.

The weighted average diluted share count applied to Core Earnings for purposes of determining Core 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 Core Earnings. In order to effectuate dilution from these awards in the Core Earnings computation, we adjust the GAAP diluted share count to include these shares.

(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 ofother unrealized adjustments to Core Earnings, we adjust the GAAP diluted share count to exclude the potentialshares 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.

The following table presents our diluted weighted average shares used in our GAAP EPS calculation reconciled to ourdiluted weighted average shares used in our Core EPS calculation (amounts in thousands):


2019 2018 2019 2018Diluted weighted average shares - GAAP 289,912 265,456 289,021 288,130Add: Unvested stock awards 2,043 2,447 2,128 2,210Add: Woodstar II Class A Units 11,001 9,939 11,491 8,298Less: Convertible Notes dilution (9,649) — (9,857) (25,675)Diluted weighted average shares - Core 293,307 277,842 292,783 272,963

The definition of Core 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 Core Earnings to be calculated in a manner consistent with its definition and objective. No adjustments to the definition of Core Earnings became effective during the nine months ended September 30, 2019.

As a reminder, in 2015, we adjusted the calculation of Core Earnings related to the equity component of our Convertible Notes. We previously amortized the equity component of these instruments through interest expense for Core Earnings purposes, consistent with our GAAP treatment. However, for Core Earnings purposes, the amount is not considered realized until the earlier of (a) the entire issuance of the notes has been extinguished; or (b) the equity portion has been fully amortized via repurchases of the notes.

In January 2019, our 2019 Notes were fully repaid in shares of common stock and cash. The equity portion of the 2019 Notes had been fully amortized. In March 2018, our 4.55% Convertible Senior Notes due 2018 (the “2018 Notes”) matured and were fully repaid in cash. The equity portion of the 2018 Notes had not been fully amortized. As a result, we reflected $10.0 million as a positive adjustment to Core Earnings, representing the $28.1 million equity

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balance recognized upon issuance of the 2018 Notes, net of $18.1 million in adjustments related to cumulative repurchases through the maturity date.

The following table summarizes our quarterly Core Earnings per weighted average diluted share for the nine monthsended September 30, 2019 and 2018:

Core Earnings For the Three-Month Periods Ended March 31 June 30 September 30

2019 $ 0.28 $ 0.52 $ 0.522018 0.58 0.54 0.53

Core Earnings per weighted average diluted share for the nine months ended September 30, 2019 and 2018 does notequal the sum of the individual quarters due to rounding and other computational factors.

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Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018

The following table presents our summarized results of operations and reconciliation to Core Earnings for the threemonths ended September 30, 2019, by business segment (amounts in thousands, except per share data):

Commercial and

Residential Infrastructure InvestingLending Lending Property and ServicingSegment Segment Segment Segment Corporate Total

Revenues $ 163,808 $ 23,612 $ 72,376 $ 67,397 $ — $ 327,193Costs and expenses (60,959) (18,773) (69,126) (42,288) (62,155) (253,301)Other income (loss) 12,309 (2,604) 6,115 59,349 5,317 80,486Income (loss) before income taxes 115,158 2,235 9,365 84,458 (56,838) 154,378Income tax (provision) benefit (3,194) 475 — (1,794) — (4,513)Income attributable to non-controllinginterests — — (5,250) (4,219) — (9,469)

Net income (loss) attributable toStarwood Property Trust, Inc. 111,964 2,710 4,115 78,445 (56,838) 140,396

Add / (Deduct):Non-controlling interests attributable toWoodstar II Class A Units — — 5,250 — — 5,250Non-cash equity compensation expense 1,140 577 83 1,765 9,411 12,976Management incentive fee — — — — 1,875 1,875Acquisition and investment pursuit costs 6 — (89) (146) — (229)Depreciation and amortization 339 15 23,440 4,444 — 28,238Loan loss provision, net (39) — — — — (39)Interest income adjustment for securities (194) — — 5,345 — 5,151Extinguishment of debt, net — — — — (247) (247)Other non-cash items — — 321 191 152 664Reversal of GAAP unrealized (gains) /losses on:Loans held-for-sale (10,088) — — (22,433) — (32,521)Securities 303 — — (22,476) — (22,173)Derivatives (15,749) 109 (4,576) 6,590 (6,913) (20,539)Foreign currency 15,337 319 8 — — 15,664Earnings from unconsolidated entities (2,507) — (223) (253) — (2,983)

Recognition of Core realized gains /(losses) on:Loans held-for-sale 8,383 (230) — 22,134 — 30,287Securities 373 — — 4,593 — 4,966Derivatives 977 64 406 (7,875) — (6,428)Foreign currency (3,911) (171) (8) — — (4,090)Earnings from unconsolidated entities 2,298 — — 1,324 — 3,622Sales of properties — — — (7,221) — (7,221)Core Earnings (Loss) $ 108,632 $ 3,393 $ 28,727 $ 64,427 $ (52,560) $ 152,619Core Earnings (Loss) per Weighted

Average Diluted Share $ 0.37 $ 0.01 $ 0.10 $ 0.22 $ (0.18) $ 0.52

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The following table presents our summarized results of operations and reconciliation to Core Earnings for the threemonths ended September 30, 2018, by business segment (amounts in thousands, except per share data):

Commercial and


Revenues $ 158,596 $ 3,204 $ 76,236 $ 87,406 $ 89 $ 325,531Costs and expenses (52,154) (9,520) (72,663) (38,973) (59,165) (232,475)Other income (loss) 5,143 (76) 7,884 (1,428) (6,779) 4,744Income (loss) before income taxes 111,585 (6,392) 11,457 47,005 (65,855) 97,800Income tax provision (314) — (125) (7,842) — (8,281)(Income) loss attributable to non-controlling interests (365) — (4,769) 151 — (4,983)

Net income (loss) attributable toStarwood Property Trust, Inc. 110,906 (6,392) 6,563 39,314 (65,855) 84,536

Add / (Deduct):Non-controlling interests attributable toWoodstar II Class A Units — — 4,769 — — 4,769Non-cash equity compensation expense 750 13 98 1,321 3,769 5,951Management incentive fee — — — — 4,299 4,299Acquisition and investment pursuit costs 45 3,770 (89) (129) — 3,597Depreciation and amortization 17 — 28,780 5,456 — 34,253Loan loss provision, net 929 — — — — 929Interest income adjustment for securities (137) — — 6,573 — 6,436Extinguishment of debt, net — — — — (922) (922)Other non-cash items — — (632) 1,622 986 1,976Reversal of GAAP unrealized (gains) /losses on:Loans held-for-sale (1,343) — — (2,597) — (3,940)Securities (338) — — 4,966 — 4,628Derivatives (7,497) (455) (4,779) (3,424) 5,248 (10,907)Foreign currency 3,546 531 1 — — 4,078(Earnings) loss from unconsolidatedentities (514) — (1,988) 134 — (2,368)

Recognition of Core realized gains /(losses) on:Loans held-for-sale 3,558 — — 4,415 — 7,973Securities 100 — — 1,673 — 1,773Derivatives 6 — (230) 1,048 — 824Foreign currency 225 (8) — — — 217Earnings from unconsolidated entities 581 — — 613 — 1,194Sales of properties — — — (928) — (928)Core Earnings (Loss) $ 110,834 $ (2,541) $ 32,493 $ 60,057 $ (52,475) $ 148,368Core Earnings (Loss) per Weighted

Average Diluted Share $ 0.40 $ (0.01) $ 0.12 $ 0.21 $ (0.19) $ 0.53


The Commercial and Residential Lending Segment’s Core Earnings decreased by $2.2 million, from $110.8 millionduring the third quarter of 2018 to $108.6 million in the third quarter of 2019. After making adjustments for the

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calculation of Core Earnings, revenues were $163.6 million, costs and expenses were $59.5 million and other income was $7.7million.

Core revenues, consisting principally of interest income on loans, increased by $5.2 million in the third quarter of 2019,primarily due to an increase in interest income from investment securities of $7.8 million, partially offset by a decrease in interest income from loans of $2.6 million. The increase in interest income from investment securities was primarily due to higher average investment balances. The decrease in interest income from loans was principally due to (i) the recognition in the 2018 quarter of a $2.8 million profit participation in a mortgage loan that was repaid in 2016 and (ii) the compression of interest rate spreads in credit markets, partially offset by (iii) higher average balances of both commercial and residential loans.

Core costs and expenses increased by $9.1 million in the third quarter of 2019, primarily due to an $8.5 million increasein interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investmentportfolio.

Core other income increased by $4.2 million primarily due to a $2.4 million favorable change in net gains (losses)resulting from prepayments and sales of commercial loans and a $1.7 million increase in earnings from unconsolidated entities.


The Infrastructure Lending Segment had Core Earnings of $3.4 million in the third quarter of 2019 compared to a loss of$2.5 million during the 12-day post-acquisition period included in our third quarter of 2018. After making adjustments for thecalculation of Core Earnings, revenues were $23.6 million, costs and expenses were $18.2 million and other loss was $2.5million.

Revenues of $23.6 million primarily consisted of interest income of $22.8 million from loans and $0.8 million frominvestment securities.

Costs and expenses of $18.2 million consisted of $14.4 million of interest expense on the secured debt facilities used tofinance this segment’s investment portfolio and $3.8 million of general and administrative expenses.

Other loss of $2.5 million principally reflects a $2.1 million loss on extinguishment of debt resulting from the write-offof deferred financing fees relating to partial debt prepayments from proceeds of loan repayments and sales.

Property Segment

Core Earnings by Portfolio (amounts in thousands)


2019 2018 ChangeMaster Lease Portfolio $ 4,311 $ 6,334 $ (2,023)Medical Office Portfolio 5,994 6,452 (458)Ireland Portfolio 5,798 5,949 (151)Woodstar I Portfolio 7,333 8,679 (1,346)Woodstar II Portfolio 6,245 6,247 (2)Other/Corporate (954) (1,168) 214

Core Earnings $ 28,727 $ 32,493 $ (3,766)

The Property Segment’s Core Earnings decreased by $3.8 million, from $32.5 million during the third quarter of 2018 to$28.7 million in the third quarter of 2019. After making adjustments for the calculation of Core Earnings, revenues were $72.3million, costs and expenses were $45.3 million and other income was $1.7 million.

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Core revenues decreased by $3.6 million in the third quarter of 2019, primarily due to (i) the sale of four propertieswithin the Master Lease portfolio during the fourth quarter of 2018 and (ii) no longer recording as revenues and offsettingexpenses property taxes paid directly by lessees, in accordance with the new lease accounting standard effective January 1, 2019in both the Master Lease and Medical Office Portfolios, partially offset by (iii) increased rental income in the Woodstar Portfoliosdue to rental rate increases.

Core costs and expenses increased by $0.8 million in the third quarter of 2019.

Core other income increased by $0.6 million in the third quarter of 2019 due to higher realized gains on derivativeswhich hedge the variable interest rate risk on borrowings secured by the Medical Office Portfolio and our Euro currency exposurewith respect to the Ireland Portfolio.


The Investing and Servicing Segment’s Core Earnings increased by $4.3 million, from $60.1 million during the third quarter of 2018 to $64.4 million in the third quarter of 2019. After making adjustments for the calculation of Core Earnings, revenues were $73.0 million, costs and expenses were $36.3 million, other income was $32.9 million, income tax provision was $1.8 million and the deduction of income attributable to non-controlling interests was $3.4 million.

Core revenues decreased by $21.2 million in the third quarter of 2019, primarily due to decreases of $15.9 million inservicing fees, $3.1 million in interest income from our CMBS portfolio and $2.6 million in rental income from our REIS EquityPortfolio due to the sale of four properties since September 30, 2018. The treatment of CMBS interest income on a GAAP basis iscomplicated by our application of the ASC 810 consolidation rules. In an attempt to treat these securities similar to the trust’sother investment securities, we compute core interest income pursuant to an effective yield methodology. In doing so, wesegregate the portfolio into various categories based on the components of the bonds’ cash flows and the volatility related to eachof these components. We then accrete interest income on an effective yield basis using the components of cash flows that arereliably estimable. Other minor adjustments are made to reflect management’s expectations for other components of the projectedcash flow stream.

Core costs and expenses increased by $3.9 million in the third quarter of 2019 primarily due to higher variable expensesrelated to conduit loan securitizations.

Core 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. 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 Core Earnings outlined above are also applied to the GAAP earnings of our unconsolidated entities. Core other income increased by $27.0 million principally due to (i) a $17.7 million increase in realized gains on conduit loans, (ii) a $12.2 million increase in gains on sales of operating properties and (iii) a $2.0 million lesser decrease in fair value of servicing rights, all partially offset by (iv) an $8.4 million unfavorable change in realized gains (losses) on derivatives.

Income taxes, which principally relate to the taxable nature of our loan servicing and loan conduit businesses and certainother real estate related investing activities which are housed in TRSs, decreased $6.0 million due to a decrease in the taxableincome of our TRSs.

Income attributable to non-controlling interests increased $3.6 million primarily due to minority interests on the gainfrom an operating property sold during the third quarter of 2019.

Corporate

Core corporate costs and expenses remained level at $52.5 million in the third quarters of 2019 and 2018.

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Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018

The following table presents our summarized results of operations and reconciliation to Core Earnings for the ninemonths ended September 30, 2019, by business segment (amounts in thousands, except per share data):

Commercialand


Revenues $ 526,418 $ 78,264 $ 215,389 $ 199,980 $ 26 $ 1,020,077Costs and expenses (199,176) (64,143) (204,813) (121,746) (170,231) (760,109)Other income (loss) 20,086 (8,669) (46,502) 111,941 30,186 107,042Income (loss) before income taxes 347,328 5,452 (35,926) 190,175 (140,019) 367,010Income tax (provision) benefit (4,778) 746 (258) (4,090) — (8,380)Income attributable to non-controllinginterests (392) — (16,322) (4,121) — (20,835)

Net income (loss) attributable toStarwood Property Trust, Inc. 342,158 6,198 (52,506) 181,964 (140,019) 337,795

Add / (Deduct):Non-controlling interests attributable toWoodstar II Class A Units — — 16,322 — — 16,322Non-cash equity compensation expense 2,757 1,691 229 4,817 16,909 26,403Management incentive fee — — — — 2,048 2,048Acquisition and investment pursuit costs (56) 2 (266) (451) (356) (1,127)Depreciation and amortization 695 15 71,067 14,181 — 85,958Loan loss provision, net 2,046 1,196 — — — 3,242Interest income adjustment for securities (585) — — 14,698 — 14,113Extinguishment of debt, net — — — — (1,704) (1,704)Other non-cash items — — (565) 699 470 604Reversal of GAAP unrealized (gains) /losses on:Loans held-for-sale (16,837) — — (48,841) — (65,678)Securities 2,945 — — (56,431) — (53,486)Derivatives (11,763) 3,337 8,457 16,841 (32,915) (16,043)Foreign currency 17,025 102 7 — — 17,134(Earnings) loss from unconsolidatedentities (8,576) — 42,538 (3,601) — 30,361

Recognition of Core realized gains /(losses) on:Loans held-for-sale 7,180 (985) — 49,719 — 55,914Securities 970 — — 11,702 — 12,672Derivatives 1,800 (1,396) 2,257 (17,114) — (14,453)Foreign currency (4,725) (998) (7) 9 — (5,721)Earnings (loss) from unconsolidatedentities 7,078 — (68,905) 14,194 — (47,633)

Sales of properties — — — (7,297) — (7,297)Core Earnings (Loss) $ 342,112 $ 9,162 $ 18,628 $ 175,089 $ (155,567) $ 389,424Core Earnings (Loss) per Weighted

Average Diluted Share $ 1.17 $ 0.03 $ 0.06 $ 0.60 $ (0.53) $ 1.33

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The following table presents our summarized results of operations and reconciliation to Core Earnings for the ninemonths ended September 30, 2018, by business segment (amounts in thousands, except per share data):

Commercial and


Revenues $ 465,838 $ 3,204 $ 217,529 $ 246,116 $ 227 $ 932,914Costs and expenses (161,786) (9,520) (220,047) (119,070) (187,629) (698,052)Other income (loss) 16,052 (76) 36,531 63,742 (26,148) 90,101Income (loss) before income taxes 320,104 (6,392) 34,013 190,788 (213,550) 324,963Income tax provision (2,981) — (1,997) (9,502) — (14,480)Income attributable to non-controllinginterests (1,087) — (11,906) (3,792) — (16,785)

Net income (loss) attributable toStarwood Property Trust, Inc. 316,036 (6,392) 20,110 177,494 (213,550) 293,698

Add / (Deduct):Non-controlling interests attributable toWoodstar II Class A Units — — 11,906 — — 11,906Non-cash equity compensation expense 2,079 13 228 3,613 10,635 16,568Management incentive fee — — — — 19,620 19,620Acquisition and investment pursuit costs 1,430 3,770 (249) (215) — 4,736Depreciation and amortization 50 — 87,648 15,253 — 102,951Loan loss provision, net 27,726 — — — — 27,726Interest income adjustment for securities (531) — — 8,206 — 7,675Extinguishment of debt, net — — — — 8,586 8,586Other non-cash items — — (2,406) 2,194 2,762 2,550Reversal of GAAP unrealized (gains) /losses on:Loans held-for-sale 165 — — (26,738) — (26,573)Securities (259) — — (24,123) — (24,382)Derivatives (16,665) (455) (25,228) (8,788) 26,797 (24,339)Foreign currency 3,260 531 — 2 — 3,793Earnings from unconsolidated entities (3,761) — (1,406) (2,916) — (8,083)

Recognition of Core realized gains / (losses)on:Loans held-for-sale 1,487 — — 28,285 — 29,772Securities 242 — — (4,419) — (4,177)Derivatives (5,848) — (938) 7,197 — 411Foreign currency 8,136 (8) — (42) — 8,086Earnings from unconsolidated entities 3,986 — — 2,875 — 6,861Sales of properties — — (365) (4,374) — (4,739)Core Earnings (Loss) $ 337,533 $ (2,541) $ 89,300 $ 173,504 $ (145,150) $ 452,646Core Earnings (Loss) per Weighted

Average Diluted Share $ 1.24 $ (0.01) $ 0.33 $ 0.63 $ (0.53) $ 1.66

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The Commercial and Residential Lending Segment’s Core Earnings increased by $4.6 million, from $337.5 millionduring the nine months of 2018 to $342.1 million in the nine months of 2019. After making adjustments for the calculation ofCore Earnings, revenues were $525.8 million, costs and expenses were $193.7 million and other income was $15.2 million.

Core revenues, consisting principally of interest income on loans, increased by $60.5 million in the nine months of 2019,primarily due to increases in interest income from loans of $31.8 million and investment securities of $28.7 million. The increase in interest income from loans was principally due to (i) higher average LIBOR rates, (ii) higher average balances of both commercial and residential loans and (iii) higher levels of prepayment related income, partially offset by (iv) the compression of interest rate spreads in credit markets and (v) the recognition in the 2018 period of a $15.1 million profit participation in a mortgage loan that was repaid in 2016. The increase in interest income from investment securities was primarily due to higher average investment balances.

Core costs and expenses increased by $63.2 million in the nine months of 2019, primarily due to a $61.8 million increasein interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investmentportfolio.

Core other income increased by $8.4 million primarily due to a $5.3 million increase in net gains resulting fromprepayments and sales of commercial and residential loans and a $3.1 million increase in earnings from unconsolidated entities.


The Infrastructure Lending Segment had Core Earnings of $9.2 million during the nine months of 2019 compared to aloss of $2.5 million during the 12-day post-acquisition period included in the nine months of 2018. After making adjustments forthe calculation of Core Earnings, revenues were $78.3 million, costs and expenses were $61.2 million and other loss was $8.6million.

Revenues of $78.3 million primarily consisted of interest income of $75.0 million from loans and $2.6 million frominvestment securities.

Costs and expenses of $61.2 million consisted of $49.3 million of interest expense on the secured debt facilities used tofinance this segment’s investment portfolio and $11.9 million of general and administrative expenses.

Other loss of $8.6 million principally reflects an $8.2 million loss on extinguishment of debt resulting from the write-off of deferred financing fees relating to partial debt prepayments from proceeds of loan repayments and sales.

Property Segment

Core Earnings by Portfolio (amounts in thousands)


2019 2018 ChangeMaster Lease Portfolio $ 12,663 $ 24,732 $ (12,069)Medical Office Portfolio 19,329 19,120 209Ireland Portfolio 18,801 17,208 1,593Woodstar I Portfolio 22,489 19,639 2,850Woodstar II Portfolio 17,208 12,420 4,788Investment in unconsolidated entities (68,905) — (68,905)Other/Corporate (2,957) (3,819) 862

Core Earnings $ 18,628 $ 89,300 $ (70,672)

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The Property Segment’s Core Earnings decreased by $70.7 million, from $89.3 million during the nine months of 2018to $18.6 million in the nine months of 2019. After making adjustments for the calculation of Core Earnings, revenues were $214.9million, costs and expenses were $133.9 million and other loss was $62.1 million.

Core revenues decreased by $1.6 million in the nine months of 2019, primarily due to a decrease in rental income fromthe Master Lease Portfolio due to (i) the sale of seven properties within the Master Lease portfolio during 2018 and (ii) no longerrecording as revenues and offsetting expenses property taxes paid directly by lessees, in accordance with the new leaseaccounting standard effective January 1, 2019 in both the Master Lease and Medical Office Portfolios, partially offset by (iii) thefull period inclusion of rental income from the Woodstar II Portfolio, which was acquired over a period between December 2017and September 2018, and (iv) rental rate increases in both Woodstar Portfolios.

Core costs and expenses decreased by $0.1 million in the nine months of 2019, primarily due to the sale of sevenproperties from the Master Lease Portfolio in 2018 and no longer recording property taxes paid directly by lessees, both asdiscussed above, mostly offset by the full period inclusion of the Woodstar II Portfolio.

Core other income (loss) decreased by $70.9 million in the nine months of 2019, primarily due to a $68.9 million loss onour investment in the Retail Fund. This loss reflects the recognition in the 2019 first quarter of decreases in fair value ofproperties held by the Retail Fund which management determined to be other than temporary. Additionally, the decrease in Coreother income was due to the non-recurrence of a $6.6 million net realized gain on sale of three properties in the Master LeasePortfolio during the nine months of 2018, partially offset by a $4.6 million increase in realized gains on derivatives principallyattributable to interest rate swaps which hedge the variable interest rate risk on borrowings secured by our Medical OfficePortfolio and foreign exchange contracts which economically hedge our Euro currency exposure with respect to the IrelandPortfolio.


The Investing and Servicing Segment’s Core Earnings increased by $1.6 million, from $173.5 million during the nine months of 2018 to $175.1 million in the nine months of 2019. After making adjustments for the calculation of Core Earnings, revenues were $215.5 million, costs and expenses were $103.3 million, other income was $70.3 million, income tax provision was $4.1 million and the deduction of income attributable to non-controlling interests was $3.3 million.

Core revenues decreased by $39.3 million in the nine months of 2019, primarily due to decreases of $30.9 million inservicing fees, $4.8 million in interest income from our CMBS portfolio and $2.9 million in rental income from our REIS EquityPortfolio due to the sale of four properties since September 30, 2018.

Core costs and expenses increased by $3.2 million in the nine months of 2019 primarily due to a $6.9 million increase ininterest expense principally related to the financing of our CMBS portfolio, partially offset by a $3.3 million decrease in generaland administrative expenses primarily related to our special servicing business.

Core other income increased by $38.2 million principally due to (i) a $21.4 million increase in realized gains on conduit loans, (ii) a $13.4 million increase in net recognized gains on CMBS investments, (iii) a $12.8 million lesser decrease in fair value of servicing rights and (iv) an $11.3 million increase in earnings from unconsolidated entities, all partially offset by (v) a $23.2 million unfavorable change in realized gains (losses) on derivatives.

Income taxes, which principally relate to the taxable nature of our loan servicing and loan conduit businesses and certainother real estate related investing activities which are housed in TRSs, decreased $5.4 million due to a decrease in the taxableincome of our TRSs.

Income attributable to non-controlling interests decreased $0.5 million, primarily with respect to minority investors’share of gains from operating properties sold during the nine months of 2019 compared with 2018.

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Corporate

Core corporate costs and expenses increased by $10.4 million, from $145.2 million in the nine months of 2018 to $155.6million in the nine months of 2019, primarily due to (i) a $9.9 million unfavorable change in gain (loss) on extinguishment of debtprimarily due to the $10.0 million positive adjustment to Core Earnings during the nine months of 2018 upon the repayment atmaturity of the 2018 Notes, as described above, (ii) a $3.8 million increase in base management fees and (iii) a $3.6 millionunfavorable change in gain (loss) on interest rate swaps, all partially offset by (iv) a $9.0 million decrease in interest expenseprincipally on lower average outstanding balances of our unsecured senior notes.

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, 2018. Refer to our Form 10-K for a description of these strategies. Our primary sources of liquidity are as follows:

Cash Flows for the Nine Months Ended September 30, 2019 (amounts in thousands)

VIE Excluding InvestingGAAP Adjustments and Servicing VIEs

Net cash used in operating activities $ (569,791) $ (6,551) $ (576,342)Cash Flows from Investing Activities:

Origination and purchase of loans held-for-investment (2,987,685) — (2,987,685)Proceeds from principal collections and sale of loans 3,258,058 — 3,258,058Purchase of investment securities (5,165) (136,379) (141,544)Proceeds from sales and collections of investment securities 122,870 188,556 311,426Proceeds from sales and insurance recoveries on properties 52,336 — 52,336Purchases and additions to properties and other assets (22,977) (8,613) (31,590)Investment in unconsolidated entities (8,365) (13,323) (21,688)Net cash flows from other investments and assets (10,926) — (10,926)

Net cash provided by investing activities 398,146 30,241 428,387Cash Flows from Financing Activities:

Proceeds from borrowings 6,084,209 — 6,084,209Principal repayments on and repurchases of borrowings (5,549,756) — (5,549,756)Payment of deferred financing costs (45,403) — (45,403)Proceeds from common stock issuances, net of offering costs 605 — 605Payment of dividends (402,519) — (402,519)Contributions from non-controlling interests 5,294 — 5,294Distributions to non-controlling interests (41,531) 7,916 (33,615)Issuance of debt of consolidated VIEs 149,949 (149,949) —Repayment of debt of consolidated VIEs (158,315) 158,315 —Distributions of cash from consolidated VIEs 38,607 (38,607) —

Net cash provided by financing activities 81,140 (22,325) 58,815Net decrease in cash, cash equivalents and restricted cash (90,505) 1,365 (89,140)Cash, cash equivalents and restricted cash, beginning of period 487,865 (2,554) 485,311Effect of exchange rate changes on cash (2,702) — (2,702)Cash, cash equivalents and restricted cash, end of period $ 394,658 $ (1,189) $ 393,469

The discussion below is on a non-GAAP basis, after removing adjustments principally resulting from the consolidationof the securitization VIEs under ASC 810. These adjustments principally relate to (i) purchase of CMBS, RMBS, loans and realestate from consolidated VIEs, which are reflected as repayments of VIE debt on a GAAP basis

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and (ii) principal collections of CMBS and RMBS related to consolidated VIEs, which are reflected as VIE distributions on aGAAP basis. There is no significant net impact to cash flows from operations or to overall cash resulting from theseconsolidations. Refer to Note 2 to the Condensed Consolidated Financial Statements for further discussion.

Cash and cash equivalents decreased by $89.1 million during the nine months ended September 30, 2019, reflecting netcash used in operating activities of $576.3 million, partially offset by net cash provided by investing activities of $428.4 millionand net cash provided by financing activities of $58.8 million.

Net cash used in operating activities of $576.3 million during the nine months ended September 30, 2019 relatedprimarily to $774.9 million in originations and purchases of loans held-for-sale, net of sales and principal collections, cashinterest expense of $367.3 million, general and administrative expenses of $111.7 million, a net change in operating assets andliabilities of $95.6 million and management fees of $69.5 million. Offsetting these cash outflows was cash interest income of$450.2 million from our loan origination and conduit programs and cash interest income on investment securities of $142.3million. Net rental income provided cash of $161.3 million, servicing fees provided cash of $66.4 million and distributions ofearnings from unconsolidated entities provided $24.9 million.

Net cash provided by investing activities of $428.4 million during the nine months ended September 30, 2019 relatedprimarily to proceeds received from principal collections and sales of loans of $3.3 billion and investment securities of $311.4million and proceeds from sales and insurance recoveries of properties of $52.3 million, partially offset by the origination andacquisition of new loans held-for-investment of $3.0 billion, the purchase of investment securities of $141.5 million, net additionsto properties and other assets of $31.6 million and investments in unconsolidated entities of $21.7 million.

Net cash provided by financing activities of $58.8 million during the nine months ended September 30, 2019 related primarily to borrowings on our secured debt, net of repayments and deferred loan costs, of $499.4 million, partially offset by dividend distributions of $402.5 million, net distributions to non-controlling interests of $28.3 million and the settlement of the 2019 Notes of $10.4 million.

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Our Investment Portfolio


The following table sets forth the amount of each category of investments we owned across various property typeswithin our Commercial and Residential Lending Segment as of September 30, 2019 and December 31, 2018 (dollars inthousands):

Unlevered Face Carrying Asset Specific Net Return on

Amount Value Financing Investment Vintage AssetSeptember 30, 2019First mortgages (1) $ 6,555,768 $ 6,530,654 $ 3,835,922 $ 2,694,732 1997-2019 6.7 %Subordinated mortgages 54,143 53,008 — 53,008 1998-2018 9.2 %Mezzanine loans (1) 546,434 545,494 — 545,494 2013-2019 12.3 %Residential loans, fair value option 465,344 479,169 324,712 154,457 2013-2019 5.9 %Other loans 64,731 60,995 — 60,995 1999-2018 8.9 %Loans held-for-sale, fair value option,residential 677,548 701,610 469,160 232,450 2015-2019 6.2 %Loans held-for-sale, commercial 108,750 107,994 — 107,994 2018-2019 5.2 %Loan loss allowance — (32,845) — (32,845) N/ARMBS, available-for-sale 286,717 195,297 113,524 81,773 2003-2007 11.6 %RMBS, fair value option 61,661 111,122 (2) 19,588 91,534 2019 10.5 %CMBS, fair value option 118,249 118,388 (2) 58,801 59,587 2018 5.7 %HTM debt securities (3) 504,022 502,207 167,578 334,629 2014-2018 7.2 %Equity security 11,230 11,286 — 11,286 N/AInvestment in unconsolidated entities N/A 42,518 — 42,518 N/AProperties, net N/A 26,902 — 26,902 N/A

$ 9,454,597 $ 9,453,799 $ 4,989,285 $ 4,464,514

December 31, 2018First mortgages (1) $ 6,627,879 $ 6,603,760 $ 3,542,214 $ 3,061,546 1997-2018 7.0 %Subordinated mortgages 53,996 52,778 — 52,778 1998-2018 9.4 %Mezzanine loans (1) 394,739 393,832 — 393,832 2005-2018 11.6 %Other loans 64,658 61,001 — 61,001 1999-2018 9.1 %Loans held-for-sale, fair value option,residential 609,571 623,660 499,756 123,904 2013-2018 6.1 %Loans held-for-sale, commercial 48,667 46,495 30,525 15,970 2018 6.3 %Loans transferred as securedborrowings 74,692 74,346 74,239 107 N/ALoan loss allowance — (39,151) — (39,151) N/ARMBS, available-for-sale 309,497 209,079 44,070 165,009 2003-2007 11.7 %RMBS, fair value option 62,397 87,879 (2) 13,179 74,700 2018 8.0 %CMBS, fair value option 160,198 158,688 (2) 83,864 74,824 2018 6.7 %HTM debt securities (3) 585,017 583,381 191,991 391,390 2014-2018 7.5 %Equity security 11,660 11,893 — 11,893 N/AInvestment in unconsolidated entities N/A 35,274 — 35,274 N/A

$ 9,002,971 $ 8,902,915 $ 4,479,838 $ 4,423,077

(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 $809.5 million and $1.0 billion being classified as first mortgages as of September 30, 2019 and December 31, 2018, respectively.

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

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

As of September 30, 2019 and December 31, 2018, our Commercial and Residential Lending Segment’s investmentportfolio, excluding residential loans, RMBS, properties and other investments, had the following characteristics based oncarrying values:

Collateral Property Type September 30, 2019 December 31, 2018Office 34.2 % 35.0 %Hotel 23.0 % 23.5 %Mixed Use 13.7 % 11.9 %Multifamily 13.6 % 15.4 %Residential 7.1 % 4.9 %Retail 3.6 % 2.4 %Industrial 0.8 % 1.7 %Other 4.0 % 5.2 %

100.0 % 100.0 %

Geographic Location September 30, 2019 December 31, 2018North East 28.6 % 28.7 %West 19.5 % 22.7 %International 15.4 % 11.0 %South West 13.6 % 14.0 %South East 9.6 % 9.9 %Mid Atlantic 7.2 % 6.8 %Midwest 6.1 % 6.9 %

100.0 % 100.0 %

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The following table sets forth the amount of each category of investments we owned within our Infrastructure LendingSegment as of September 30, 2019 and December 31, 2018 (dollars in thousands):

Unlevered Face Carrying Asset Specific Net Return on

Amount Value Financing Investment AssetSeptember 30, 2019First priority infrastructure loans and HTM securities $ 1,358,206 $ 1,335,863 $ 1,033,716 $ 302,147 6.1 %Loans held-for-sale, infrastructure 168,445 164,122 134,450 29,672 4.2 %Loan loss allowance N/A (190) — (190)

$ 1,526,651 $ 1,499,795 $ 1,168,166 $ 331,629

December 31, 2018First priority infrastructure loans and HTM securities $ 1,537,412 $ 1,517,547 $ 1,130,567 $ 386,980 5.9 %Loans held-for-sale, infrastructure 486,909 469,775 393,984 75,791 3.6 %

$ 2,024,321 $ 1,987,322 $ 1,524,551 $ 462,771

As of September 30, 2019 and December 31, 2018, our Infrastructure Lending Segment’s investment portfolio had thefollowing characteristics based on carrying values:

Collateral Type September 30, 2019 December 31, 2018Natural gas power 74.7 % 54.3 %Renewable power 15.4 % 30.8 %Other thermal power 6.2 % 5.1 %Midstream/downstream oil & gas 3.7 % 9.3 %Upstream oil & gas — % 0.5 %

100.0 % 100.0 %

Geographic Location September 30, 2019 December 31, 2018U.S. Regions:

North East 46.6 % 32.8 %Midwest 25.0 % 15.9 %South West 6.8 % 12.9 %Mid-Atlantic 4.5 % 4.6 %South East 3.9 % 3.4 %West 3.8 % 4.7 %

International: Mexico 7.1 % 12.5 %United Kingdom 0.9 % 4.7 %Ireland — % 2.4 %Other 1.4 % 6.1 %

100.0 % 100.0 %

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Property Segment

The following table sets forth the amount of each category of investments, which are comprised of properties, intangiblelease assets and liabilities and our equity investment in the Retail Fund held within our Property Segment as of September 30,2019 and December 31, 2018 (amounts in thousands):

September 30, 2019 December 31, 2018Properties, net $ 2,441,480 $ 2,512,847Lease intangibles, net 73,478 87,729Investment in unconsolidated entities 71,824 114,362

$ 2,586,782 $ 2,714,938

The following table sets forth our net investment and other information regarding the Property Segment’s properties andintangible lease assets and liabilities as of September 30, 2019 (dollars in thousands):

Asset Weighted AverageCarrying Specific Net Occupancy Remaining

Value Financing Investment Rate Lease TermOffice—Medical Office Portfolio $ 759,468 $ 489,404 $ 270,064 92.2 % 6.3 yearsOffice—Ireland Portfolio 479,724 331,992 147,732 98.8 % 8.9 yearsMultifamily residential—Ireland Portfolio 18,407 11,296 7,111 81.0 % 0.2 yearsMultifamily residential—Woodstar I Portfolio 627,926 405,808 222,118 98.3 % 0.5 yearsMultifamily residential—Woodstar II Portfolio 600,676 437,600 163,076 99.3 % 0.5 yearsRetail—Master Lease Portfolio 343,790 192,316 151,474 100.0 % 22.6 years

Subtotal—undepreciated carrying value 2,829,991 1,868,416 961,575Accumulated depreciation and amortization (315,033) — (315,033)

Net carrying value $ 2,514,958 $ 1,868,416 $ 646,542

As of September 30, 2019 and December 31, 2018, our Property Segment’s investment portfolio had the followinggeographic characteristics based on carrying values:

Geographic Location September 30, 2019 December 31, 2018Ireland 17.0 % 17.7 %U.S. Regions:

South East 51.3 % 50.8 %South West 8.6 % 8.6 %Midwest 8.4 % 8.3 %North East 8.1 % 8.1 %West 6.6 % 6.5 %

100.0 % 100.0 %

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The following table sets forth the amount of each category of investments we owned within our Investing and ServicingSegment as of September 30, 2019 and December 31, 2018 (amounts in thousands):

Asset Face Carrying Specific Net

Amount Value Financing Investment September 30, 2019CMBS, fair value option $ 2,697,712 $ 1,009,249 (1) $ 313,114 $ 696,135Intangible assets - servicing rights N/A 43,015 (2) — 43,015Lease intangibles, net N/A 23,265 — 23,265Loans held-for-sale, fair value option, commercial 458,141 468,583 233,142 235,441Loans held-for-investment 1,363 1,363 — 1,363Investment in unconsolidated entities N/A 33,246 (3) — 33,246Properties, net N/A 261,156 225,362 35,794

$ 3,157,216 $ 1,839,877 $ 771,618 $ 1,068,259December 31, 2018CMBS, fair value option $ 2,872,381 $ 998,820 (1) $ 320,158 $ 678,662Intangible assets - servicing rights N/A 44,632 (2) — 44,632Lease intangibles, net N/A 29,327 — 29,327Loans held-for-sale, fair value option, commercial 46,249 47,622 34,105 13,517Loans held-for-investment 3,357 3,357 — 3,357Investment in unconsolidated entities N/A 44,129 (3) — 44,129Properties, net N/A 272,043 230,995 41,048

$ 2,921,987 $ 1,439,930 $ 585,258 $ 854,672

(1) Includes $962.9 million and $957.5 million of CMBS eliminated in consolidation against VIE liabilities pursuant to ASC810 as of September 30, 2019 and December 31, 2018, respectively.

(2) Includes $24.8 million and $24.1 million of servicing rights intangibles eliminated in consolidation against VIE assetspursuant to ASC 810 as of September 30, 2019 and December 31, 2018, respectively.

(3) Includes $21.5 million and $22.0 million of investment in unconsolidated entities eliminated in consolidation againstVIE assets pursuant to ASC 810 as of September 30, 2019 and December 31, 2018, respectively.

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Our REIS Equity Portfolio, as described in Note 6 to the Condensed Consolidated Financial Statements, had thefollowing characteristics based on carrying values of $268.6 million and $284.7 million as of September 30, 2019 and December31, 2018, respectively:

Property Type September 30, 2019 December 31, 2018Office 49.3 % 56.5 %Retail 27.8 % 24.1 %Multifamily 11.1 % 7.8 %Mixed Use 5.2 % 5.1 %Self-storage 4.7 % 4.5 %Hotel 1.9 % 2.0 %

100.0 % 100.0 %

Geographic Location September 30, 2019 December 31, 2018South East 32.6 % 37.9 %North East 23.4 % 22.4 %South West 18.3 % 18.0 %West 10.5 % 9.8 %Midwest 8.3 % 6.8 %Mid Atlantic 6.9 % 5.1 %

100.0 % 100.0 %

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New Credit Facilities and Amendments

Refer to Notes 9 and 10 of our Condensed Consolidated Financial Statements for a detailed discussion of new creditfacilities and amendments to existing credit facilities executed since December 31, 2018.

Secured Borrowings

The following table is a summary of our secured borrowings as of September 30, 2019 (dollars in thousands):

Pledged ApprovedWeighted 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 LoansAug 2020 toJan 2024 (d)

Aug 2021 toApr 2028 (d) (e) $ 4,458,046 $ 7,879,032 (f) $ 2,945,331 $ 220,384 $ 4,713,317

Residential Loans Feb 2021 N/A LIBOR + 2.10% 16,332 400,000 13,190 — 386,810

Infrastructure LoansFeb 2020 toJul 2022

Feb 2021 toJul 2027 LIBOR + 1.75% 316,759 1,000,000 263,664 — 736,336

Conduit LoansFeb 2020 toJun 2022

Feb 2021 toJun 2023 LIBOR + 2.22% 358,405 363,225 234,025 32,000 97,200

CMBS/RMBSJun 2020 to Dec 2028 (g)

Sep 2020 to Oct 2029 (g) (h) 1,069,948 778,025 676,648 15,785 85,592

Total RepurchaseAgreements 6,219,490 10,420,282 4,132,858 268,169 6,019,255

Other Secured Financing:Borrowing Base Facility Apr 2022 Apr 2024 LIBOR + 2.25% 49,754 650,000 (i) 37,313 — 612,687Infrastructure AcquisitionFacility Sep 2021 Sep 2022 (j) 1,062,553 1,086,201 883,173 — 203,028

Property Mortgages - Fixedrate

Mar 2021 toAug 2052 (k) N/A 3.41% 1,921,951 1,453,116 1,452,970 — 146

Property Mortgages - Variablerate

May 2020 toApr 2025 N/A LIBOR + 2.44% 831,275 694,351 643,261 — 51,090

Term Loan and Revolver (l) N/A (l) N/A (l) 500,000 400,000 100,000 —FHLB Feb 2021 N/A (m) 1,164,449 2,000,000 780,754 — 1,219,246Collateralized LoanObligation Jul 2038 N/A LIBOR + 1.34% 1,098,817 936,375 936,375 — —Total Other Secured

Financing 6,128,799 7,320,043 5,133,846 100,000 2,086,197$ 12,348,289 $ 17,740,325 $ 9,266,704 $ 368,169 $ 8,105,452

Unamortized net discount (2,920)Unamortized deferred financingcosts (88,260)

$ 9,175,524

(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 $593.8 million as of September 30, 2019 are indexed to GBP LIBOR and EURIBOR. The

remainder have a weighted average rate of LIBOR + 1.93%.(f) The aggregate initial maximum facility size of $6.8 billion may be increased at our option, subject to certain conditions. This amount includes

such upsizes.(g) Certain facilities with an outstanding balance of $393.8 million as of September 30, 2019 carry a rolling 11-month or 12-month term which may

reset monthly with the lender's consent. These facilities carry no maximum facility size.(h) A facility with an outstanding balance of $78.6 million as of September 30, 2019 has a fixed annual interest rate of 4.09%. All other facilities are

variable rate with a weighted average rate of LIBOR + 1.55%.(i) The initial maximum facility size of $300.0 million may be increased to $650.0 million, subject to certain conditions.(j) Consists of an annual interest rate of the applicable currency benchmark index + 1.50%. The spread increases 25 bps in each of the second and

third years of the facility which was entered into in September 2018.(k) The weighted average maturity is 9.3 years as of September 30, 2019.

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(l) Consists of: (i) a $400.0 million term loan facility that matures in July 2026 with an annual interest rate of LIBOR + 2.50%; and (ii) a $100.0million revolving credit facility that matures in July 2024 with an annual interest rate of LIBOR + 3.00%. These facilities are secured by theequity interests in certain of our subsidiaries which totaled $3.5 billion as of September 30, 2019.

(m) FHLB financing with an outstanding balance of $312.0 million as of September 30, 2019 has a weighted average fixed annual interest rate of 2.08%. The remainder is variable rate with a weighted average rate of LIBOR + 0.28%.

Refer to Note 9 of the Condensed Consolidated Financial Statements for further disclosure regarding the terms of oursecured 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 eachquarter and the amount outstanding as of the end of each quarter, together with an explanation of significant variances (amountsin thousands):

Weighted-Average ExplanationsQuarter-End Balance During for Significant

Quarter Ended Balance Quarter Variance VariancesDecember 31, 2018 $ 8,761,624 $ 8,885,381 $ (123,757) (a)March 31, 2019 9,305,605 9,766,206 (460,601) (b)June 30, 2019 9,359,610 9,503,479 (143,869) (c)September 30, 2019 9,266,704 9,116,755 149,949 (d)

(a) Variance primarily due to $120.0 million repaid on Commercial Loans repurchase facilities in December 2018.

(b) Variance primarily due to the late quarter timing of commercial loan sales and loan repayments, all of which resulted inpaydowns of the corresponding credit facilities which financed these assets.

(c) Variance primarily due to loan repayments on the Infrastructure Acquisition Facility and Commercial Loans repurchasefacilities.

(d) Variance primarily due to the net increase in debt related to the CLO issuance in August 2019.

Borrowings under Unsecured Senior Notes

During both the three months ended September 30, 2019 and 2018, the weighted average effective borrowing rate on ourunsecured senior notes was 4.9%. During the nine months ended September 30, 2019 and 2018, the weighted average effectiveborrowing rate on our unsecured senior notes was 4.9% and 5.0%, respectively. The effective borrowing rate includes the effectsof underwriter purchase discount and the adjustment for the conversion option on the Convertible Notes, the initial value of whichreduced the balance of the notes.

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

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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 September 30, 2019. 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 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

Fourth Quarter 2019 364,723 13,434 (458,556)(1) (80,399)First Quarter 2020 177,647 10,109 (44,947) 142,809Second Quarter 2020 353,336 22,992 (86,414) 289,914Third Quarter 2020 258,271 9,381 (467,925)(2) (200,273)Total $ 1,153,977 $ 55,916 $ (1,057,842) $ 152,051

(1) Includes $380.0 million of maturities associated with the financing of residential loans held-for-sale under the FHLBfacility. Expected proceeds from sales of loans are not reflected in this table.

(2) Includes $393.8 million of repayments associated with a secured financing facility that carries a rolling 12-month termwhich may reset monthly with the lender’s consent.

In the normal course of business, the Company is in discussions with its lenders to extend or amend any financingfacilities 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 authorized100,000,000 shares of preferred stock and 500,000,000 shares of common stock. At September 30, 2019, we had 100,000,000shares of preferred stock available for issuance and 218,062,981 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, including othersecured as well as unsecured forms of borrowing and sale of senior loan interests and other assets.

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Off-Balance Sheet Arrangements

We have relationships with unconsolidated entities and financial partnerships, such as entities often referred to as VIEs.Our maximum risk of loss associated with our involvement in VIEs is limited to the carrying value of our investment in the entityand any unfunded capital commitments. Refer to Note 14 of the Condensed Consolidated Financial Statements for furtherdiscussion.

Dividends

We intend to continue to make regular quarterly distributions to holders of our common stock. U.S. federal income taxlaw generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deductionfor dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annuallydistributes less than 100% of its net taxable income. We intend to continue to pay regular quarterly dividends to our stockholdersin an amount approximating our net taxable income, if and to the extent authorized by our board of directors. Before we pay anydividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating and debt servicerequirements. If our cash available for distribution is less than our net taxable income, we could be required to sell assets orborrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stockdistribution or distribution of debt securities. Refer to our Form 10-K for a detailed dividend history.

The Company’s board of directors declared the following dividends during the nine months ended September 30, 2019:

Declare Date Record Date Payment Date Amount Frequency8/7/19 9/30/19 10/15/19 $ 0.48 Quarterly5/8/19 6/28/19 7/15/19 $ 0.48 Quarterly2/28/19 3/29/19 4/15/19 $ 0.48 Quarterly

On November 8, 2019, our board of directors declared a dividend of $0.48 per share for the fourth quarter of 2019,which is payable on January 15, 2020 to common stockholders of record as of December 31, 2019.

Leverage Policies

Our strategies with regards to use of leverage have not changed significantly since December 31, 2018. Refer to our Form 10-K for a description of our strategies regarding use of leverage.

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Contractual Obligations and Commitments

Contractual obligations as of September 30, 2019 are as follows (amounts in thousands):

Less than More than Total 1 year 1 to 3 years 3 to 5 years 5 years

Secured financings (a) $ 8,330,329 $ 897,211 $ 2,256,616 $ 2,505,566 $ 2,670,936Collateralized loan obligations 936,375 — — — 936,375Unsecured senior notes 1,950,000 — 1,200,000 250,000 500,000Loan funding commitments (b) 2,479,728 1,697,817 698,765 83,146 —Infrastructure Lending Segment commitments (c) 189,776 189,776 — — —Loan purchase commitments (d) 46,486 46,486 — — —Future lease commitments 34,862 6,399 7,418 3,223 17,822Total $ 13,967,556 $ 2,837,689 $ 4,162,799 $ 2,841,935 $ 4,125,133

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

(b) Excludes $223.3 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 $155.0 million under revolvers and letters of credit and $34.8 million under delayeddraw term loans.

(d) Represents the Company’s contractual commitments to purchase residential mortgage loans from a third party residentialmortgage originator.

The table above does not include interest payable, amounts due under our management agreement, amounts due underour derivative agreements or amounts due under guarantees as those contracts do not have fixed and determinable payments.

Critical Accounting Estimates

Refer to the section of our Form 10-K entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” for a full discussion of our critical accounting estimates. Our critical accounting estimates have not materially changed since December 31, 2018.

Item 3. Quantitative and Qualitative Disclosures 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 have not changed materially since December 31, 2018. Refer to our Form 10-K, Item 7A for further discussion.

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Credit Risk

Our loans and investments are subject to credit risk. The performance and value of our loans and investments dependupon the owners’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to payinterest and principal due to us. To monitor this risk, our Manager’s asset management team reviews our investment portfoliosand 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 September 30, 2019 and December 31, 2018 (dollars in thousands):

Face Value of Aggregate Notional Value of Number of Loans Held-for-Sale Credit Index Instruments Credit Index Instruments

September 30, 2019 $ 242,275 $ 89,000 5December 31, 2018 $ 46,249 $ 24,000 3

Capital Market Risk

We are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuanceof our common stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our relatedability to finance our business through borrowings under repurchase obligations or other debt instruments. As a REIT, we arerequired to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operatingcash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks bymonitoring the debt and equity capital markets to inform our decisions on the amount, timing and terms of capital we raise.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and internationaleconomic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk inconnection with our investments and the related financing obligations. In general, we seek to match the interest ratecharacteristics of our investments with the interest rate characteristics of any related financing obligations such as repurchaseagreements, bank credit facilities, term loans, revolving facilities and securitizations. In instances where the interest ratecharacteristics of an investment and the related financing obligation are not matched, we mitigate such interest rate risk throughthe utilization of interest rate derivatives of the same duration. The following table presents financial instruments where we haveutilized interest rate derivatives to hedge interest rate risk and the related interest rate derivatives as of September 30, 2019 andDecember 31, 2018 (dollars in thousands):

Aggregate Notional Face Value of Value of Interest Number of Interest

Hedged Instruments Rate Derivatives Rate Derivatives Instrument hedged as of September 30, 2019Loans held-for-investment, residential $ 465,344 $ 94,400 6Loans held-for-sale 784,753 533,630 42RMBS, available-for-sale 286,717 85,000 2Secured financing agreements 640,242 707,207 13Unsecured senior notes 1,000,000 970,000 2

$ 3,177,056 $ 2,390,237 65Instrument hedged as of December 31, 2018Loans held-for-sale $ 346,300 $ 337,700 10RMBS, available-for-sale 309,497 109,000 3Secured financing agreements 1,085,717 1,029,376 16Unsecured senior notes 1,000,000 970,000 2

$ 2,741,514 $ 2,446,076 31

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The following table summarizes the estimated annual change in net investment income for our variable rate investmentsand our variable rate debt assuming increases or decreases in LIBOR or other applicable index rates and adjusted for the effects ofour interest rate hedging activities (amounts in thousands, except per share data):

Variable rate investments and 2.0% 1.0% 1.0% 2.0%

Income (Expense) Subject to Interest Rate Sensitivity indebtedness (1) Increase Increase Decrease (2) Decrease (2)Investment income from variable rate investments $ 8,561,874 $ 163,168 $ 78,441 $ (53,416) $ (83,996)Interest expense from variable rate debt, net of interestrate derivatives (6,955,649) (140,664) (70,341) 68,500 131,966Net investment income from variable rate instruments $ 1,606,225 $ 22,504 $ 8,100 $ 15,084 $ 47,970Impact per diluted shares outstanding $ 0.08 $ 0.03 $ 0.05 $ 0.17

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

(2) Assumes LIBOR or other applicable index rates do not go below 0%.

Foreign Currency Risk

We intend to hedge our currency exposures in a prudent manner. However, our currency hedging strategies may noteliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amount of payments received onthe 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 hedgecounterparty, 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.

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The following table represents our current currency hedge exposure as it relates to our investments denominated inforeign currencies, along with the aggregate notional amount of the hedges in place (amounts in thousands except for number ofcontracts) using the September 30, 2019 GBP closing rate of 1.2287, Euro (“EUR”) closing rate of 1.0902 and Australian Dollar(“AUD”) closing rate of 0.6749.

Carrying Value ofNet Investment Local Currency

Number of Foreign

ExchangeContracts

AggregateNotional Value

of Hedges Applied Expiration Range of Contracts$ 5,208 EUR 48 $ 6,140 August 2020 – July 2021

2,203 GBP 2 5,097 October 2019 13,132 GBP 3 10,549 November 2019 – June 2020 25,059 GBP 17 120,459 October 2019 – July 2021 31,783 EUR 8 35,880 May 2020 – March 2022 17,708 EUR 36 29,847 November 2019 – August 2022 88,098 GBP 14 105,541 October 2019- January 2022 39,029 GBP 6 39,369 April 2021 2,996 AUD 1 4,751 October 2019 55,950 EUR 13 69,651 November 2019 – November 2022 153,314 EUR 9 193,654 December 2019 – June 2020 26,391 GBP 9 (1) 32,814 December 2019 – December 2021

818 AUD 1 3,556 November 2021 53,941 GBP 36 70,276 November 2019 – November 2021 11,286 GBP 11 13,055 December 2019 – April 2022

$ 526,916 214 $ 740,639

(1) These foreign exchange contracts hedge our EUR currency exposure created by our acquisition of the Ireland Portfolio.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure thatinformation 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 andExchange 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 theparticipation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and ChiefFinancial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by thisreport.

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 September 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

Except as set forth below, there have been no material changes to the risk factors previously disclosed in our Form 10-K.

Risks Related to Our Investments

We may sponsor, or purchase the more junior securities of collateralized loan obligations (“CLO”s) and such instrumentsinvolve significant risks, including that these securities receive distributions from the CLO only if the CLO generates enoughincome to first pay all the investors holding senior tranches and all CLO expenses.

In August 2019, we entered into a CLO, and in the future we may enter into additional CLOs. In CLOs, investors purchase specific tranches, or slices, of debt instruments that are secured or backed by a pool of loans. The CLO debt classes have a specific seniority structure and priority of payments. The most junior securities of a CLO are generally retained by the sponsor of the CLO and are usually entitled to all of the income generated by the pool of loans after the payment of debt service on all the more senior classes of debt and the payment of all expenses. Defaults on the pool of loans therefore first affect the most junior tranches. The subordinate tranches of CLO debt may also experience a lower recovery and greater risk of loss, including risk of deferral or non-payment of interest than more senior tranches of the CLO debt because they bear the bulk of defaults from the loans held in the CLO and serve to protect the other, more senior tranches from default in all but the most severe circumstances. Despite the protection provided by the subordinate tranches, even more senior CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, decline in market value due to market anticipation of defaults and aversion to CLO securities as a class. Further, the transaction documents relating to the issuance of CLO securities may impose eligibility criteria on the assets of the CLO, restrict the ability of the CLO’s sponsor to trade investments and impose certain portfolio-wide asset quality requirements. Finally, the credit risk retention rules of the Securities and Exchange Commission (the “Risk Retention Rules”) impose a retention requirement of 5% of the issued debt classes by the sponsor of the CLO. These criteria, restrictions and requirements may limit the ability of the CLO’s sponsor (or collateral manager) to maximize returns on the CLO securities.

In addition, CLOs are not actively traded and are relatively illiquid investments and volatility in CLO trading marketsmay cause the value of these investments to decline. The market value of CLO securities may be affected by, among other things,changes in the market value of the underlying loans held by the CLO, changes in the distributions on the underlying loans,defaults and recoveries on the underlying loans, capital gains and losses on the underlying losses (or foreclosure assets),prepayments on the underlying loans and the availability, prices and interest rate of underlying loans. Furthermore, the leveragednature of each subordinated tranche may magnify the adverse impact on such class of changes in the value of the loans, changesin the distributions on the loans, defaults and recoveries on the loans, capital gains and losses on the loans (or foreclosure assets),prepayment on loans and availability, price and interest rates of the loans.

A CLO may include certain interest coverage tests, overcollateralization coverage tests or other tests that, if not met,may result in a change in the priority of distributions, which may result in the reduction or elimination of distributions to thesubordinate debt and equity tranches until the tests have been met or certain senior classes of securities have been paid in full.Accordingly, if we hold subordinate debt interests in a CLO that contains such tests and such tests are not satisfied, we mayexperience a significant reduction in our cash flow from those interests.

Furthermore, if any CLO that we sponsor or in which we hold interests fails to meet certain tests relevant to the mostsenior debt issued and outstanding by the CLO issuer, an event of default may occur under that CLO. If that occurs, (i) if we wereserving as manager of the CLO, our ability to manage the CLO may be terminated and (ii) our ability to

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attempt to cure any defaults in the CLO may be limited, which would increase the likelihood of a reduction or elimination of cashflow and returns to us in the CLOs for an indefinite time.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

There were no unregistered sales of securities during the three months ended September 30, 2019.

Issuer Purchases of Equity Securities

There were no purchases of common stock during the three months ended September 30, 2019.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

(a) Index to Exhibits

INDEX TO EXHIBITS

Exhibit No. Description10.1 Indenture, dated as of August 15, 2019, by and among STWD 2019-FL1, Ltd., as Issuer, STWD 2019-FL1,

LLC, as Co-Issuer, Starwood Property Mortgage, L.L.C., as Advancing Agent, Wilmington Trust, NationalAssociation, as Trustee, and Wells Fargo Bank, National Association, as Note Administrator and Custodian(Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed August 21,2019)

10.2 Restricted Stock Unit Award Agreement (Starwood Property Trust, Inc. 2017 Manager Equity Plan)

10.3 Form of Restricted Stock Award Agreement for Independent Directors (Starwood Property Trust, Inc. 2017Equity Plan)

10.4 Guarantee Agreement, dated as of December 10, 2015, made by Starwood Property Trust, Inc. in favor ofJPMorgan Chase Bank, National Association (the “Guarantee”)

10.5 First Amendment to Guarantee Agreement, dated as of September 15, 2017, made by Starwood Property Trust,Inc. for the benefit of JPMorgan Chase Bank, National Association (the “First Amendment to Guarantee”)

10.6 Second Amendment to Guarantee Agreement dated as of March 15, 2019, between Starwood Property Trust,Inc. and JPMorgan Chase Bank, National Association (collectively with the Guarantee Agreement, dated as ofDecember 10, 2015, and the First Amendment to Guarantee, the “Guarantee Agreement”)

10.7 Letter Agreement, dated September 17, 2019, between Starwood Property Trust, Inc. and JPMorgan ChaseBank, National Association with respect to the Guarantee Agreement

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

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

32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS XBRL Instance Document – the instance document does not appear in the Interactive Data File because itsXBRL 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)

https://content.edgar-online.com/ExternalLink/EDGAR/0001410578-19-000870.html?hash=4f96133c28cb630c5adb479cbda80fc2f537f75960439b79caeb1d021edf6230&dest=TV527992_EX10-1_HTM





Table of Contents

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SIGNATURES

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

STARWOOD PROPERTY TRUST, INC.

Date: November 8, 2019 By: /s/ BARRY S. STERNLICHTBarry S. Sternlicht

Chief Executive Officer Principal Executive Officer

Date: November 8, 2019 By: /s/ RINA PANIRYRina Paniry

Chief Financial Officer, Treasurer, Chief AccountingOfficer and Principal Financial Officer

Exhibit 10.2

STARWOOD PROPERTY TRUST INC.2017 MANAGER EQUITY PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (the “Agreement”), dated as ofSeptember 24, 2019(the “Grant Date”), is made by and between Starwood Property Trust, Inc., aMaryland corporation (the “Company”), and SPT Management, LLC, a Delaware limited liabilitycompany (the “Grantee”).

WHEREAS, the Company has adopted the Starwood Property Trust Inc. 2017 Manager EquityPlan (the “Plan”), pursuant to which the Company may grant to the Grantee Restricted Stock Units, thepayment of which may be subject to vesting and forfeiture conditions (“Restricted Stock Units”);

WHEREAS, the Company desires to grant to the Grantee the number of Restricted Stock Unitsprovided for herein;

NOW, THEREFORE, in consideration of the recitals and the mutual agreements herein contained,the parties hereto agree as follows:

Section 1. Grant of Restricted Stock Unit Award

(a) Grant of Restricted Stock Units. The Company hereby grants to the Grantee 1,200,000Restricted Stock Units on the terms and conditions set forth in this Agreement and as otherwise providedin the Plan.

(b) Incorporation of Plan. The provisions of the Plan are hereby incorporated herein byreference. Except as otherwise expressly set forth herein, this Agreement shall be construed in accordancewith the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shallhave the definitions set forth in the Plan. The Board of Directors of the Company (the “Board”)(references hereinafter to the Board shall be deemed references to the Committee, as applicable and to theextent based on any delegation by the Board to the Committee in effect as of the applicable time) shallhave final authority to interpret and construe the Plan and this Agreement and to make any and alldeterminations thereunder, and its decision shall be binding and conclusive upon the Grantee and itsrepresentatives in respect of any questions arising under the Plan or this Agreement.

Section 2. Terms and Conditions of Award

The grant of Restricted Stock Units provided in Section 1(a) shall be subject to the followingterms, conditions and restrictions:

(a) Restrictions. The Restricted Stock Units and any interest therein, may not be sold,assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of

descent and distribution, prior to the lapse of restrictions set forth in this Agreement applicable thereto, asset forth in Section 2(d). The Board may, in its discretion, cancel all or any portion of any outstandingrestrictions prior to the expiration of the periods provided under Section 2(d). The period from the date ofgrant of a Restricted Stock Unit to the date it becomes vested and payable shall be referred to herein asthe “Restricted Period.”

(b) Form of Payment. Unless otherwise determined by the Board at the time of payment,each Restricted Stock Unit granted hereunder shall represent the right to receive one share of Stockfollowing the date on which such Restricted Stock Unit vests, as provided herein.

(c) Dividend/Distribution Equivalents. The Grantee shall be paid as of each date (a“Dividend Date”) on which cash dividends and cash distributions are paid with respect to shares of Stockunderlying as yet unpaid Restricted Stock Units an amount equal to the amount paid to each Companystockholder with respect to the same number of shares of Stock, provided that the record date with respectto such dividend or distribution occurs within the Restricted Period. Additional Restricted Stock Unitsshall be credited to the Grantee’s account as of each Dividend Date on which dividends and distributionsand/or special dividends and distributions that are paid in a form other than cash are paid with respect toStock, provided that the record date with respect to such dividend or distribution occurs within theRestricted Period. The number of Restricted Stock Units to be credited to the Grantee’s account withrespect to this Award as of any Dividend Date shall equal the quotient obtained by dividing (i) theproduct of (1) the number of the Restricted Stock Units credited to such account on the record date forsuch dividend or distribution and (2) the per share dividend (or distribution value) payable on suchDividend Date, by (ii) the Fair Market Value of a share of Stock as of such Dividend Date.

(d) Lapse of Restrictions; Forfeiture. Except as may otherwise be provided herein, therestrictions on transfer set forth in Section 2(a) shall lapse with respect to 218,898 Restricted Stock Unitson the Grant Date and shall lapse with respect to the remaining 981,102 Restricted Stock United at therate of eight and one-third percent (8 1/3%) of such Restricted Stock Units on the last day of eachcalendar quarter, commencing on December 31, 2019, subject to the Grantee’s continuing to provideservice to the Company pursuant to the Management Agreement as of each such vesting date.

Notwithstanding the foregoing, the Restricted Stock Units granted hereunder and any thenaccumulated but unpaid dividend equivalents and distribution equivalents thereon shall becomeimmediately vested, payable and free of transfer restrictions upon a Change in Control.

Upon termination of the Management Agreement either (i) by the Company for “cause” (asdefined in the Management Agreement) or (ii) by the Grantee for any reason other than for “cause” (asdefined in the Management Agreement) or other than due to an adverse change in the Grantee’scompensation thereunder, all as yet unvested Restricted Stock Units and any accumulated but unpaiddividend equivalents and distribution equivalents thereon shall be immediately cancelled and forfeitedwithout consideration. Upon termination of the Management Agreement under any circumstances otherthan as described in the immediately preceding sentence, all as yet unvested or vested but unsettledRestricted Stock Units granted hereunder and any accumulated but unpaid

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dividend equivalents and distribution equivalents thereon shall become immediately vested and payable.

Restricted Stock Units and any accumulated but unpaid dividend or distribution equivalentsforfeited pursuant to this Section 2(d) shall be transferred to, and reacquired by, the Company withoutpayment of any consideration by the Company, and neither the Grantee nor any of the Grantee’ssuccessors or assigns shall thereafter have any further rights or interests in such units and unitequivalents.

(e) Settlement of Restricted Stock Units.

RSUs which vest as provided under Section 2(d) shall be paid to the Grantee in a lump sumpromptly, but in no event later than 30 days, following the vesting date.

In the event that shares of Stock are to be issued upon any lapse of restrictions relating to theRestricted Stock Units, the Company shall issue to the Grantee a stock certificate representing suchshares of Stock.

Section 3. Miscellaneous

(a) Section 409A. It is intended that the grant of Restricted Stock Units comply with, or asapplicable, constitute a short-term deferral or otherwise be exempt from, the provisions of Section 409Aof the Code. Any provision herein shall be interpreted in a manner consistent with the Plan and/or asrequired by Section 409A of the Code. If applicable, any provision herein that would cause such grant tofail to satisfy Section 409A of the Code will have no force and effect until amended to comply therewith(which amendment may be retroactive to the extent permitted by Section 409A of the Code).

(b) Notices. Any and all notices, designations, consents, offers, acceptances and any othercommunications provided for herein shall be given in writing and shall be delivered either personally orby registered or certified mail, postage prepaid, which shall be addressed, in the case of the Company tothe Corporate Counsel of the Company at the principal office of the Company and, in the case of theGrantee, at the Corporate Counsel of the Grantee.

(c) No Right to Continued Service. Nothing in the Plan or in this Agreement shall conferupon the Grantee any right to continue in the service of the Company or shall interfere with or restrict inany way the right of the Company, which is hereby expressly reserved, to terminate the ManagementAgreement at any time for any reason whatsoever, with or without “cause” (as defined in theManagement Agreement).

(d) Bound by Plan. By signing this Agreement, the Grantee acknowledges that its authorizedrepresentative has received a copy of the Plan and has had an opportunity to review the Plan and hasagreed to bind the Grantee with respect to all the terms and provisions of the Plan.

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(e) Successors. The terms of this Agreement shall be binding upon and inure to the benefit ofthe Company, its successors and assigns, and of the Grantee and its successors and permitted assigns.

(f) Invalid Provision. If any provision of this Agreement is determined by a court ofcompetent jurisdiction not to be enforceable in the manner set forth in this Agreement, the Grantee agreesthat it is the intention of the parties to this Agreement that such provision should be enforceable to themaximum extent possible under applicable law and that such provision shall be reformed to make itenforceable in accordance with the intent of the parties. If any provisions of this Agreement are held to beinvalid or unenforceable, such invalidation or unenforceability shall not affect the validity orenforceability of the other portions hereof.

(g) Modifications. No change, modification or waiver of any provision of this Agreementshall be valid unless the same be in writing and signed by the parties hereto.

(h) Entire Agreement. This Agreement and the Plan contain the entire agreement andunderstanding of the parties hereto with respect to the subject matter contained herein and therein andsupersede all prior communications, representations and negotiations in respect thereto.

(i) Governing Law. This Agreement and the rights of the Grantee hereunder shall beconstrued and determined in accordance with the laws of the State of Maryland.

(j) Headings. The headings of the Sections hereof are provided for convenience only and arenot to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.

(k) Counterparts. This Agreement may be executed in counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the same instrument.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties heretoas of the 24 day of September, 2019.

STARWOOD PROPERTY TRUST, INC. By: _ /s/ Andrew Sossen______________________ Its: Chief Operating Officer

SPT MANAGEMENT, LLC By: /s/ Andrew J. Sossen Its: Authorized Signatory

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Exhibit 10.3

STARWOOD PROPERTY TRUST, INC.2017 EQUITY PLAN

RESTRICTED STOCK AWARD AGREEMENT

THIS RESTRICTED STOCK AWARD AGREEMENT, (the “Agreement”), dated as of

September 24, 2019 (the “Grant Date”), is made by and between Starwood Property Trust, Inc., aMaryland corporation (the “Company”), and [●] (the “Grantee”).

WHEREAS, the Company has adopted the Starwood Property Trust, Inc. 2017 EquityPlan (the “Plan”), pursuant to which the Company may grant to eligible persons, including the Grantee, shares of Stock that are restricted as to transfer (shares so restricted hereinafter referred to as “RestrictedStock”);

WHEREAS, the Grantee is a member of the Board of Directors of the Company (the

“Board”) who is not an executive officer of the Company;

WHEREAS, the Company desires to grant to the Grantee the number of shares ofRestricted Stock provided for herein;

NOW, THEREFORE, in consideration of the recitals and the mutual agreements hereincontained, the parties hereto agree as follows: Section 1. Grant of Restricted Stock Award

(a) Grant of Restricted Stock. The Company hereby grants to the Grantee 4,861 shares ofRestricted Stock on the terms and conditions set forth in this Agreement and as otherwise provided in thePlan.

(b) Incorporation of Plan. The provisions of the Plan are hereby incorporated herein by

reference. Except as otherwise expressly set forth herein, this Agreement shall be construed inaccordance with the provisions of the Plan and any capitalized terms not otherwise defined in thisAgreement shall have the definitions set forth in the Plan. The Board shall have final authority tointerpret and construe the Plan and this Agreement and to make any and all determinations thereunder,and its decision shall be binding and conclusive upon the Grantee and its representatives in respect of anyquestions arising under the Plan or this Agreement. Section 2. Terms and Conditions of Award

The grant of Restricted Stock provided in Section 1(a) shall be subject to the following terms,conditions and restrictions:

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(a) Ownership of Shares. Subject to the restrictions set forth in the Plan and this Agreement,

the Grantee shall possess all incidents of ownership of the Restricted Stock granted hereunder, includingthe right to receive dividends and distributions with respect to such Stock, as set forth in Section 2(b)below, and the right to vote such Stock.

(b) Payment of Dividends/Distributions. The Grantee shall be entitled to receive dividends

and distributions that become payable on the Restricted Stock at the time such dividends or distributionsare paid to other holders of Stock. Stock or other property (other than cash) distributed in connectionwith a dividend or distribution payable with respect to the Restricted Stock shall be subject to restrictionsand a risk of forfeiture to the same extent as such Restricted Stock.

(c) Restrictions. Restricted Stock and any interest therein, may not be sold, assigned,transferred, pledged, hypothecated or otherwise disposed of prior to the lapse of restrictions set forth inthis Agreement applicable thereto, as set forth in Section 2(e). The Board may in its discretion, cancel allor any portion of any outstanding restrictions prior to the expiration of the periods provided under Section2(e).

(d) Certificate; Restrictive Legend. The Grantee agrees that any certificate issued forRestricted Stock prior to the lapse of any outstanding restrictions relating thereto shall be inscribed withthe following legend:

This certificate and the shares of stock represented hereby are subject to the terms and conditions,including forfeiture provisions and restrictions against transfer (the “Restrictions”), contained inthe Starwood Property Trust, Inc. 2017 Equity Plan and an agreement entered into between theregistered owner and Starwood Property Trust, Inc. Any attempt to dispose of these shares incontravention of the Restrictions, including by way of sale, assignment, transfer, pledge,hypothecation or otherwise, shall be null and void and without effect.

(e) Lapse of Restrictions; Forfeiture. Except as may otherwise be provided herein, the

restrictions on transfer set forth in Section 2(c) shall lapse on the first anniversary of the date hereof, subject to the Grantee’s continuing to provide service to the Company as of such vesting date.

Notwithstanding the foregoing, the Restricted Stock granted hereunder (and any then-unvested

dividends and distributions thereon) shall become immediately vested and free of transfer restrictionsupon a Change in Control.

Upon each lapse of restrictions relating to Restricted Stock, the Company shall issue to theGrantee a stock certificate representing a number of shares of Stock, free of the restrictive legenddescribed in Section 2(d), equal to the number of shares subject to this Restricted Stock award withrespect to which such restrictions have lapsed. If certificates representing such

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Restricted Stock shall have theretofore been delivered to the Grantee, such certificates shall be returned tothe Company, complete with any necessary signatures or instruments of transfer prior to the issuance bythe Company of such unlegended shares of Stock.

Upon termination of the Grantee’s service as a member of the Board, any as yet unvestedRestricted Stock and dividends or distributions thereon shall be immediately forfeited. Such RestrictedStock and any unpaid dividends or distributions with respect to Restricted Stock forfeited pursuant to thisSection 2(e) shall be transferred to, and reacquired by, the Company without payment of anyconsideration by the Company, and neither the Grantee nor any of the Grantee’s successors or assignsshall thereafter have any further rights or interests in such shares, certificates, dividends anddistributions. If certificates containing restrictive legends shall have theretofore been delivered to theGrantee, such certificates shall be returned to the Company, complete with any necessary signatures orinstruments of transfer.

Section 3. Miscellaneous

(a) Notices. Any and all notices, designations, consents, offers, acceptances and any othercommunications provided for herein shall be given in writing and shall be delivered either personally orby registered or certified mail, postage prepaid, which shall be addressed, in the case of the Company tothe Corporate Counsel of the Company at the principal office of the Company and, in the case of theGrantee, at the address most recently on file with the Company.

(b) Bound by Plan. By signing this Agreement, the Grantee acknowledges that the Granteehas received a copy of the Plan and has had an opportunity to review the Plan and has agreed to be boundwith respect to all the terms and provisions of the Plan.

(c) Successors. The terms of this Agreement shall be binding upon and inure to the benefit ofthe Company, its successors and assigns, and of the Grantee and the Grantee’s successors and permittedassigns.

(d) Invalid Provision. If any provision of this Agreement is determined by a court ofcompetent jurisdiction not to be enforceable in the manner set forth in this Agreement, the Grantee agreesthat it is the intention of the parties to this Agreement that such provision should be enforceable to themaximum extent possible under applicable law and that such provision shall be reformed to make itenforceable in accordance with the intent of the parties. If any provisions of this Agreement are held tobe invalid or unenforceable, such invalidation or unenforceability shall not affect the validity orenforceability of the other portions hereof.

(e) Modifications. No change, modification or waiver of any provision of this Agreementshall be valid unless the same be in writing and signed by the parties hereto.

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(f) Entire Agreement. This Agreement and the Plan contain the entire agreement and

understanding of the parties hereto with respect to the subject matter contained herein and therein andsupersede all prior communications, representations and negotiations in respect thereto.

(g) Governing Law. This Agreement and the rights of the Grantee hereunder shall beconstrued and determined in accordance with the laws of the State of Maryland, without giving effect toany choice or conflict of law provision or rule (whether of the State of Maryland or any other jurisdiction)that would cause the laws of any other jurisdiction other than the State of Maryland to be applied.

(h) Headings. The headings of the Sections hereof are provided for convenience only and arenot to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.

(i) Counterparts. This Agreement may be executed in counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the same instrument.

(j) Acceptance of Agreement. This Agreement must be acknowledged and accepted by theGrantee not more than 14 days after the date on which it is delivered to the Grantee. If the Grantee failsto acknowledge and accept this Agreement within such 14-day period, then this Agreement and the grantof Restricted Stock contemplated hereunder shall be void and of no force or effect.

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IN WITNESS WHEREOF, this Agreement has been executed and delivered by the

Company as of the first date written above.

STARWOOD PROPERTY TRUST, INC. By: ______ Its: Authorized Signatory

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Exhibit 10.4Execution Version

GUARANTEE AGREEMENT

GUARANTEE AGREEMENT, dated as of December 10, 2015 (as amended, restated, supplemented,or otherwise modified from time to time, this “Guarantee”), made by Starwood Property Trust Inc., a Marylandcorporation (“Guarantor”) in favor of JPMorgan Chase Bank, National Association, a national banking associationorganized under the laws of the United States (“Buyer”).

RECITALS

Pursuant to that certain Master Repurchase Agreement, dated as of December 10, 2015 (as amended,supplemented or otherwise modified from time to time, the “Repurchase Agreement”), by and among Buyer andSTARWOOD PROPERTY MORTGAGE SUB-14, L.L.C. and STARWOOD PROPERTY MORTGAGE SUB-14-A, L.L.C. (each a “Seller” and, collectively, “Sellers”), each Seller has agreed to sell, from time to time, to Buyercertain Eligible Assets (as defined in the Repurchase Agreement, upon purchase by Buyer, each a “Purchased Asset”and, collectively, the “Purchased Assets”), upon the terms and subject to the conditions as set forth therein. Pursuantto the terms of that certain Custodial Agreement dated December 10, 2015 (the “Custodial Agreement”) by andamong Buyer, Sellers and Wells Fargo Bank, National Association (the “Custodian”), Custodian is required to takepossession of the Purchased Assets, along with certain other documents specified in the Custodial Agreement, asCustodian of Buyer and any future purchaser, on several delivery dates, in accordance with the terms and conditionsof the Custodial Agreement. Pursuant to the terms of that certain Pledge Agreement dated as of December 10, 2015(the “SPM Pledge Agreement”) made by Starwood Property Mortgage, L.L.C. (“SPM”) in favor of Buyer, and thatcertain Pledge Agreement dated as of December 10, 2015 (the “SPM BC Pledge Agreement” and, together with theSPM Pledge Agreement, the “Pledge Agreements”) made by Starwood Property Mortgage BC, L.L.C. (“SPM BC”and, together with SPM, each a “Parent” and, collectively, the “Parents” ) in favor of Buyer, each Parent has pledgedto Buyer all of the Pledged Collateral (as defined in the Pledge and Security Agreement). The RepurchaseAgreement, the Custodial Agreement, the Depository Agreement, the Servicing Agreement, the Fee Letter, thisGuarantee and any other agreements executed in connection with the Repurchase Agreement shall be referred toherein as the “Governing Agreements”.

It is a condition precedent to the purchase by Buyer of the Purchased Assets pursuant to theRepurchase Agreement that Guarantor shall have executed and delivered this Guarantee with respect to the due andpunctual payment and performance when due, whether at stated maturity, by acceleration of the Repurchase Date orotherwise, of all of the following, in each case, subject to the terms and conditions of this Guarantee: (a) all paymentobligations owing by each Seller to Buyer under the Repurchase Agreement or any other Governing Agreements; (b)any and all extensions, renewals, modifications, amendments or substitutions of the foregoing; (c) all fees andexpenses, including, without limitation, reasonable attorneys’ fees and disbursements, that are incurred by Buyer inthe enforcement of any of the foregoing or any obligation of Guarantor hereunder; and (d) any other obligations ofany Seller and any Parent with respect to Buyer under each of the Governing Agreements (collectively, the“Obligations”).

NOW, THEREFORE, in consideration of the foregoing premises, to induce Buyer to enter into theGoverning Agreements and to enter into the transaction contemplated thereunder, Guarantor hereby agrees withBuyer, as follows:

1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein shall have therespective meanings given them in the Repurchase Agreement.

“Cash Liquidity” shall mean, at any time and with respect to any Person and its consolidated Subsidiaries, theamount of cash and cash equivalents (other than restricted cash) held by such Person and its consolidatedSubsidiaries as of such date.

“CMBS” shall mean mortgage pass-through certificates or other securities issued pursuant to a securitizationof commercial real estate loans.

“Consolidated Net Income” shall mean, with respect to any Person, for any period, the amount ofconsolidated net income (or loss) of such Person and its consolidated Subsidiaries for such period determined on aconsolidated basis in accordance with GAAP.

“Contingent Liabilities” shall mean, with respect to any Person as of any date of determination, all of thefollowing as of such date: (a) liabilities and obligations (including any Guarantee Obligations) of such Person inrespect of “off-balance sheet arrangements” (as defined in the Off-Balance Sheet Rules defined below in thisdefinition), (b) obligations, including Guarantee Obligations, whether or not required to be disclosed in the footnotesto such Person’s financial statements, guaranteeing in whole or in part any Non-Recourse Indebtedness, lease,dividend or other obligation, excluding, however, (i) contractual indemnities (including any indemnity or price-adjustment provision relating to the purchase or sale of securities or other assets), and (ii) guarantees of non-monetary obligations that have not yet been called on or quantified, of such Person or any other Person, and(c) forward commitments or obligations to fund or provide proceeds with respect to any loan or other financing thatis obligatory and non-discretionary on the part of the lender. The amount of any Contingent Liabilities described inthe preceding clause (b) shall be deemed to be (i) with respect to a guarantee of interest or interest and principal, oroperating income guarantee, the sum of all payments required to be made thereunder (which, in the case of anoperating income guarantee, shall be deemed to be equal to the debt service for the note secured thereby), through(x) in the case of an interest or interest and principal guarantee, the stated date of maturity of the obligation (andcommencing on the date interest could first be payable thereunder), or (y) in the case of an operating incomeguarantee, the date through which such guarantee will remain in effect, and (ii) with respect to all guarantees notcovered by the preceding clause (i), an amount equal to the stated or determinable amount of the primary obligationin respect of which such guarantee is made or, if not stated or determinable, the maximum reasonably anticipatedliability in respect thereof (assuming such Person is required to perform thereunder) as recorded on the balance sheetand in the footnotes to the most recent financial statements of such Person. “Off-Balance Sheet Rules” means theDisclosure in Management’s Discussion and Analysis About Off-Balance Sheet Arrangements and AggregateContractual Obligations, Securities Act Release Nos. 33-8182; 34-47264; FR-67 International

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Series Release No. 1266 File No. S7-42-02, 68 Fed. Reg. 5982 (Feb. 5, 2003) (codified at 17 CFR Parts 228, 229 and249).

“Convertible Debt Securities” shall mean any debt securities of Guarantor, the terms of which provide forconversion into Capital Stock, cash by reference to such Capital Stock, or a combination thereof.

“EBITDA” shall mean, with respect to any Person and its consolidated Subsidiaries, for any period, anamount equal to the sum of (a) Consolidated Net Income, of such Person (prior to any impact from minority interestsor joint venture net income and before deduction of any dividends on preferred stock of such Person), plus thefollowing (but only to the extent actually included in determination of such Consolidated NetIncome): (i) depreciation and amortization expense, (ii) Interest Expense, (iii) income tax expense, and(iv) extraordinary or non‑recurring gains and losses, plus (b) such Person’s proportionate share of Consolidated NetIncome of the joint venture investments and unconsolidated Affiliates of such Person, all with respect to such period,plus (c) amounts deducted in accordance with GAAP in respect of other non-cash expenses in determining suchConsolidated Net Income for such Person.

“Fixed Charges” shall mean, with respect to any Person and its consolidated Subsidiaries, for any period, thesum of (a) all debt service, (b) all preferred dividends, (c) Capitalized Lease Obligations paid or accrued during suchperiod, (d) capital expenditures (if any), and (e) any amounts payable under any Ground Lease.

“Guarantee Obligation” shall mean, with respect to any Person (the “guaranteeing person”), any obligation of(a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce thecreation of the obligations for which the guaranteeing person has issued a reimbursement, counterindemnity orsimilar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends,contractual obligation, derivatives contract or other obligations or Indebtedness (the “primary obligations”) of anyother third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation ofthe guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any propertyconstituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of anysuch primary obligation, or (2) to maintain working capital or equity capital of the primary obligor or otherwise tomaintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarilyfor the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to makepayment of such primary obligation, or (iv) otherwise to assure or hold harmless the owner of any such primaryobligation against loss in respect thereof; provided, however, that the term “Guarantee Obligation” shall not includeendorsements of instruments for deposit or collection in the ordinary course of business. The amount of anyGuarantee Obligation of any guaranteeing person shall be deemed to be the maximum stated amount of the primaryobligation relating to such Guarantee Obligation (or, if less, the maximum stated liability set forth in the instrumentembodying such Guarantee Obligation); and provided, further, that in the absence of any such stated amount orstated liability, the amount of such Guarantee Obligation shall be such

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guaranteeing person’s maximum anticipated liability in respect thereof as reasonably determined by such Person ingood faith.

“Interest Expense” shall mean, with respect to any Person and its consolidated Subsidiaries, for any period,the amount of total interest expense incurred by such Person, including capitalized or accruing interest (but excludinginterest funded under a construction loan), all with respect to such period.

“Liquidity” shall mean, at any time and with respect to any Person and its consolidated Subsidiaries, withoutduplication, the amount equal to the sum of Cash Liquidity and Near Cash Liquidity of such Person and itsconsolidated Subsidiaries.

“Near Cash Liquidity” shall mean, at any time and with respect to any Person and its consolidatedSubsidiaries, the market value of Near Cash Securities held by such Person and its consolidated Subsidiaries as ofsuch date.

“Near Cash Securities” shall mean (i) CMBS having, at all times, a maturity or weighted average life oftwelve (12) months or less, as determined by the applicable servicer, (ii) RMBS having a duration of twelve (12)months or less as determined by Tilden Park Capital Management (and, at Buyer’s request, the assumptions used insuch determination shall be provided to Buyer for Buyer’s review), in each case, having a rating of Baa3 or BBB (orthe equivalent) or higher by at least one Rating Agency (it being acknowledged that such securities may also have alower rating from one or more Rating Agencies) or (iii) other public or privately placed securities approved byBuyer.

“Non-Recourse Indebtedness” shall mean, with respect to any Person and any date, indebtedness of suchPerson as of such date for borrowed money in respect of which recourse for payment (except for customaryexceptions for fraud, misapplication of funds, environmental indemnities, Acts of Insolvency, non‑approved transfersor other events) is contractually limited to specific assets of such Person encumbered by a Lien securing suchIndebtedness.

“REIT” shall mean a Person satisfying the conditions and limitations set forth in Section 856(b), Section856(c) and Section 857(a) of the Code and qualifying as a real estate investment trust, as defined in Section 856(a) ofthe Code.

“RMBS” shall mean mortgage pass-through certificates or other securities issued pursuant to a securitizationof residential mortgage loans.

“Tangible Net Worth” shall mean with respect to any Person and its consolidated Subsidiaries, and as of aparticular date (a) all amounts which would be included under capital or shareholders’ equity of such Person and itsconsolidated Subsidiaries on a balance sheet of such Person and its consolidated Subsidiaries at such date,determined in accordance with GAAP, less (b) (i) amounts owing to such Person or any such consolidated Subsidiaryfrom any Affiliates or from officers, employees, partners, members, directors, shareholders or other Persons similarly

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affiliated with such Person or any Affiliate thereof, (ii) intangible assets (other than Hedging Transactions to theextent related to any Purchased Asset and excluding mortgage loan servicing and/or special servicing rights of suchPerson and its consolidated Subsidiaries) of such Person and its consolidated Subsidiaries, if any, and (iii) prepaidtaxes and/or expenses.

“Total Assets” shall mean, with respect to any Person on any date, (i) an amount equal to the aggregate bookvalue of all assets owned by such Person and its Subsidiaries on a consolidated basis and the proportionate share ofassets owned by non‑consolidated Subsidiaries of such Person, less (ii) (A) amounts owing to such Person or any ofits Subsidiaries from any Affiliate thereof, or from officers, employees, partners, members, directors, shareholders orother Persons similarly affiliated with such Person or any Affiliate thereof, (B) intangible assets (other than HedgingTransactions specifically related to the Purchased Assets and excluding mortgage loan servicing and/or specialservicing rights of such Person and its consolidated Subsidiaries) and (C) prepaid taxes and expenses, plus (iii) theamount of any future funding obligations of such Person and its Subsidiaries under any loans or financings(including any construction loans) outstanding as of any date, all on or as of such date and determined in accordancewith GAAP.

“Total Indebtedness” shall mean with respect to any Person and its consolidated Subsidiaries, and as of aparticular date, all amounts of Indebtedness (other than Contingent Liabilities not reflected on such Person’sconsolidated balance sheet), plus the proportionate share of all Indebtedness (other than Contingent Liabilities notreflected on such Person’s consolidated balance sheet) of all non-consolidated Affiliates of such Person, on or as ofsuch date.

2. Guarantee. (a) Guarantor hereby unconditionally and irrevocably guarantees to Buyer theprompt and complete payment and performance of the Obligations by each Seller and each Parent when due (whetherat the stated maturity, by acceleration or otherwise).

(b) Notwithstanding anything in Section 2(a) to the contrary, but subject in all cases to Sections2(c), and (d) below, the maximum liability of the Guarantor hereunder and under the Transaction Documents as ofany date of determination shall in no event exceed twenty-five percent (25%) of the then-currently unpaid aggregateRepurchase Price of all Purchased Assets subject to Transaction as of such date of determination.

(c) Notwithstanding the foregoing, the limitation on recourse liability as set forth in Section 2(b)above SHALL BECOME NULL AND VOID and shall be of no force and effect and the Obligations shall be fullyrecourse to Guarantor upon the occurrence of any of the following:

(i) a voluntary bankruptcy or insolvency proceeding is commenced by any Seller or any Parentunder the Bankruptcy Code or any similar federal or state law or any law of any other jurisdiction;

(ii) an involuntary bankruptcy or insolvency proceeding is commenced against any Seller or anyParent in connection with which any Seller, any Parent or Guarantor or any Affiliate of any of the foregoing(alone or in any combination) has or have colluded in any way with the creditors commencing or filing suchproceeding;

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(iii) any material breach of the separateness covenants set forth in Articles 11(v) or (w) of the

Repurchase Agreement that results in a legal or equitable consolidation of any Seller with Guarantor or anySubsidiary of Guarantor that is also a direct or indirect parent of such Seller in connection with anybankruptcy or insolvency proceeding of Guarantor or such parent of Seller; or

(d) In addition to the foregoing and notwithstanding the limitation on recourse liability set forth inSection 2(b) above, Guarantor shall be liable for any actual losses, costs, claims, expenses or other liabilities actuallyincurred by Buyer arising out of or attributable to the following items:

(i) fraud or intentional misrepresentation by any Seller, any Parent, Guarantor, or any otherAffiliate of any Seller, any Parent or Guarantor in connection with the execution and the delivery of thisGuarantee, the Repurchase Agreement, or any other Transaction Document, or any certificate, report,financial statement or other instrument or document furnished to Buyer by any such parties at the time of theclosing of the Repurchase Agreement or during the term of the Repurchase Agreement;

(ii) any material breach of the separateness covenants set forth in Articles 11(v) or (w) of theRepurchase Agreement (other than as set forth in Section 2(c)(iii) above);

(iii) any material breach of any representations and warranties relating to Environmental Laws byany Seller, Guarantor or any of their respective Affiliates, or any indemnity for costs incurred by Buyer inconnection with the violation of any Environmental Law, the correction of any environmental condition, orthe removal of any Materials of Environmental Concern, in each case in any way affecting any Seller’s orGuarantor’s properties or any of the Purchased Assets.

(e) Guarantor further agrees to pay any and all reasonable out-of-pocket expenses (including,without limitation, all reasonable fees and disbursements of counsel) that may be paid or incurred by Buyer inconnection with (i) enforcing any of its rights hereunder, (ii) obtaining advice of counsel with respect to theenforcement, potential enforcement or analysis of its rights hereunder, and (iii) collecting any amounts owed to ithereunder. This Guarantee shall remain in full force and effect and be fully enforceable against Guarantor in allrespects until the later of (i) the date upon which the Obligations are paid in full and (ii) the termination of theRepurchase Agreement, notwithstanding that from time to time prior thereto, Sellers and/or Parents may be free fromany Obligations.

(f) No payment or payments made by any Seller, any Parent or any other Person or received orcollected by Buyer from any Seller, any Parent or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligationsshall be deemed to modify, reduce, release or otherwise affect the liability of Guarantor hereunder, and Guarantorshall, notwithstanding any such payment or payments, remain liable for the full amount of the Obligations under thisGuarantee until the Obligations are paid in full, but subject to the limitations on Guarantor’s liability under Section2(b) above.

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(g) Guarantor agrees that whenever, at any time, or from time to time, Guarantor shall make any

payment to Buyer on account of any liability hereunder, Guarantor will notify Buyer in writing that such payment ismade under this Guarantee for such purpose.

3. Subrogation. Upon making any payment hereunder, Guarantor shall be subrogated to therights of Buyer against any Seller and any Parent and in any collateral for any Obligations with respect to suchpayment; provided, that Guarantor shall not seek to enforce any right or receive any payment by way of subrogation,or seek any contribution or reimbursement from any Seller, until all amounts then due and payable by Sellers orParents to Buyer or any of its Affiliates under the Governing Agreements have been paid in full; provided, further,that such subrogation rights shall be subordinate in all respects to all amounts owing to Buyer under the GoverningAgreements. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all ofthe Repurchase Obligations shall not have been paid in full, such amount shall be held by Guarantor in trust forBuyer, segregated from other funds of Guarantor, and shall, forthwith upon receipt by Guarantor, be turned over toBuyer in the exact form received by Guarantor (duly indorsed by Guarantor to Buyer, if required), to be appliedagainst the Repurchase Obligations, whether matured or unmatured, in such order as Buyer may determine.

4. Amendments, etc. with Respect to the Obligations. Guarantor shall remain obligatedhereunder notwithstanding that, without any reservation of rights against Guarantor, and without notice to or furtherassent by Guarantor, any demand for payment of any of the Obligations made by Buyer may be rescinded by Buyerand any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any partthereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time,in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered orreleased by Buyer, and any Governing Agreement and any other document in connection therewith may be amended,modified, supplemented or terminated, in whole or in part, as Buyer may deem advisable from time to time, and anycollateral security, guarantee or right of offset at any time held by Buyer for the payment of the Obligations may besold, exchanged, waived, surrendered or released. Buyer shall have no obligation to protect, secure, perfect or insureany lien at any time held by it as security for the Obligations or for this Guarantee or any property subjectthereto. When making any demand hereunder against Guarantor, Buyer may, but shall be under no obligation to,make a similar demand on any Seller, any Parent or any other Person, and any failure by Buyer to make any suchdemand or to collect any payments from any Seller, any Parent or any such other Person or any release of any Seller, any Parent or such other Person shall not relieve Guarantor of its Obligations or liabilities hereunder, and shall notimpair or affect the rights and remedies, express or implied, or as a matter of law, of Buyer against Guarantor. Forthe purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

5. Guarantee Absolute and Unconditional. (a) Guarantor hereby agrees that its obligations underthis Guarantee constitute a guarantee of payment when due and not of collection. Guarantor waives any and allnotice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance byBuyer upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively bedeemed to have been created, contracted or incurred in reliance upon this Guarantee; and all dealings between

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Sellers, Parents and Guarantor, on the one hand, and Buyer, on the other hand, shall likewise be conclusivelypresumed to have been had or consummated in reliance upon this Guarantee. Guarantor waives promptness,diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon any Seller, anyParent or this Guarantee with respect to the Obligations. This Guarantee shall be construed as a continuing, absoluteand unconditional guarantee of payment without regard to (i) the validity, regularity or enforceability of anyGoverning Agreement, any of the Obligations or any collateral security therefor or guarantee or right of offset withrespect thereto at any time or from time to time held by Buyer, (ii) any defense, set-off or counterclaim (other than adefense of payment or performance) that may at any time be available to or be asserted by any Seller or any Parentagainst Buyer, (iii) any requirement that Buyer exhaust any right to take any action against any Seller, any Parent orany other Person prior to or contemporaneously with proceeding to exercise any right against Guarantor under thisGuarantee or (iv) any other circumstance whatsoever (with or without notice to, or knowledge of, any Seller, anyParent or Guarantor) that constitutes, or might be construed to constitute, an equitable or legal discharge of any Sellerand/or any Parent for the Obligations or of Guarantor under this Guarantee, in bankruptcy or in any otherinstance. When pursuing its rights and remedies hereunder against Guarantor, Buyer may, but shall be under noobligation, to pursue such rights and remedies that Buyer may have against any Seller, any Parent or any otherPerson or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto,and any failure by Buyer to pursue such other rights or remedies or to collect any payments from any Seller, anyParent or any such other Person or to realize upon any such collateral security or guarantee or to exercise any suchright of offset, or any release of any Seller, Parent or any such other Person or any such collateral security, guaranteeor right of offset, shall not relieve Guarantor of any liability hereunder, and shall not impair or affect the rights andremedies, whether express, implied or available as a matter of law, of Buyer against Guarantor. This Guarantee shallremain in full force and effect and be binding in accordance with and to the extent of its terms upon Guarantor and itssuccessors and assigns thereof, and shall inure to the benefit of Buyer, and its permitted successors, endorsees,transferees and assigns, until all the Obligations and the obligations of Guarantor under this Guarantee shall havebeen satisfied by payment in full, notwithstanding that from time to time during the term of the GoverningAgreements, Sellers or Parents may be free from any Obligations.

(b) Without limiting the generality of the foregoing, Guarantor hereby agrees, acknowledges, andrepresents and warrants to Buyer as follows:

(i) Guarantor hereby waives any defense arising by reason of, and any and all right to assertagainst Buyer any claim or defense based upon, an election of remedies by Buyer that in any manner impairs, affects,reduces, releases, destroys and/or extinguishes Guarantor’s subrogation rights, rights to proceed against any Seller, any Parent or any other guarantor for reimbursement or contribution, and/or any other rights of Guarantor to proceedagainst any Seller, any Parent, any other guarantor or any other person or security.

(ii) Guarantor is presently informed of the financial condition of each Seller and each Parent andof all other circumstances that diligent inquiry would reveal and that bear upon the risk of nonpayment of theObligations. Guarantor hereby covenants that it will make its own investigation and will continue to keep itselfinformed about the financial condition of each Seller and each Parent and of all other circumstances that bear uponthe risk of nonpayment and that it

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will continue to rely upon sources other than Buyer for such information and will not rely upon Buyer for any suchinformation. Guarantor hereby waives the right, if any, to require Buyer to disclose to Guarantor any informationthat Buyer may now or hereafter acquire concerning such condition or circumstances.

(iii) Guarantor has independently reviewed the Governing Agreements and related agreements andhas made an independent determination as to the validity and enforceability thereof, and in executing and deliveringthis Guarantee to Buyer, Guarantor is not in any manner relying upon the validity, and/or enforceability, and/orattachment, and/or perfection of any liens or security interests of any kind or nature granted by any Seller or anyParent to Buyer, now or at any time and from time to time in the future.

6. Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case maybe, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored orreturned by Buyer upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Seller or anyParent or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similarofficer for any Seller or any Parent or any substantial part of the property of any Seller or any Parent, or otherwise,all as though such payments had not been made.

7. Payments. Guarantor hereby agrees that the Obligations will be paid to Buyer without set-offor counterclaim in U.S. Dollars at the address specified in writing by Buyer.

8. Representations and Warranties. Guarantor represents and warrants as of the date hereof andas of each Purchase Date under the Repurchase Agreement that:

(a) Guarantor is duly organized, validly existing and in good standing under the laws andregulations of its jurisdiction of incorporation or organization, as the case may be. Guarantor is duly licensed,qualified, and in good standing in every state where such licensing or qualification is necessary for the transaction ofits business. Guarantor has the power to own and hold the assets it purports to own and hold, and to carry on itsbusiness as now being conducted and proposed to be conducted, and has the power to execute, deliver, and performits obligations under this Guarantee and the other Governing Agreements.

(b) This Guarantee has been duly executed and delivered by Guarantor, for good and valuableconsideration. This Guarantee constitutes the legal, valid and binding obligations of Guarantor, enforceable againstGuarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency,reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and bygeneral principles of equity (whether enforcement is sought in proceedings in equity or at law).

(c) Neither the execution and delivery of this Guarantee nor compliance by Guarantor with theterms, conditions and provisions of this Guarantee will conflict with or result in a breach of any of the terms,conditions or provisions of (A) its organizational documents, (B) any contractual obligation to which it is now a partyor constitute a default thereunder, or result thereunder in the creation or imposition of any lien upon any of its assets,(C) any judgment or

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order, writ, injunction, decree or demand of any court applicable to it, or (D) any applicable Requirement of Law.

(d) There is no action, suit, proceeding, investigation, or arbitration pending or, to the Knowledgeof Guarantor, threatened against Guarantor or any of its assets (A) with respect to any of the Transaction Documentsor any of the transactions contemplated hereby or thereby, or (b) which if adversely determined with respect toGuarantor, would reasonably be expected to have a Material Adverse Effect.

(e) No consent, approval, authorization, or order of any third party including any GovernmentalAuthority is required that has not already been obtained in connection with (A) the execution and delivery byGuarantor of this Guarantee or to consummate the transactions contemplated hereby, (B) the legality, validity,binding effect or enforceability of this Guarantee against Guarantor or (C) the consummation of the transactionscontemplated by this Guarantee.

(f) Guarantor has timely filed (taking into account all applicable extensions) all required federalincome tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid alltaxes, assessments, fees, and other governmental charges payable by it, or with respect to any of its properties orassets, that have become due and payable except to the extent such amounts are being contested in good faith byappropriate proceedings for which appropriate reserves have been established in accordance with GAAP, and there isno claim relating to any such taxes now pending that was made in writing by any Governmental Authority and that isnot being contested in good faith as provided above.

(g) There are no judgments against Guarantor unsatisfied of record or docketed in any courtlocated in the United States of America which would reasonably be expected to have a Material Adverse Effect andno Act of Insolvency has ever occurred with respect to it.

9. Financial and other Covenants. Guarantor (on a consolidated basis, but adjusted to remove theimpact of consolidating any variable interest entities under the requirements of Accounting Standards Codification(“ASC”) Section 810 and/or transfers of financial assets accounted for as secured borrowings under ASC Section860, as both of such ASC sections are amended, modified and/or supplemented from time to time) shall satisfy eachof the following financial covenants:

(a) Guarantor shall not permit its Liquidity to be less than $125,000,000; of which not less than$50,000,000 shall be comprised of Cash Liquidity;

(b) Guarantor shall not permit its Tangible Net Worth to be less than the sum of (A)$2,967,415,000, plus (B) seventy-five percent (75%) of the aggregate net cash proceeds (net of underwritingdiscounts and commissions, and other out-of-pocket expenses incurred by Guarantor in connection any issuance orsale) received by Guarantor from any issuance or sale of Capital Stock (other than Capital Stock constitutingConvertible Debt Securities) occurring after the Closing Date, plus (C) seventy-five percent (75%) of any increase incapital or shareholders’ equity (or like caption however denominated) on the balance sheet of Guarantor resultingfrom the settlement, conversion or repayment of any Convertible Debt Security occurring after the Closing Date;

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(c) Guarantor shall not permit the ratio of its Total Indebtedness to Total Assets at any time to be

greater than 0.75 to 1.00;

(d) Guarantor shall not permit the ratio of Guarantor’s EBITDA for any fiscal quarter toGuarantor’s Interest Expense for such fiscal quarter to be less than 2.00 to 1.00;

(e) Guarantor shall not permit the ratio of Guarantor’s EBITDA for any fiscal quarter toGuarantor’s Fixed Charges for such fiscal quarter to be less than 1.5 to 1.00; and

(f) Guarantor shall not permit at any time Guarantor to fail to maintain its status as a REIT.

10. Further Covenants of Guarantor.

(a) Taxes. As of the date hereof and as of each Purchase Date, each Future Funding Date andeach Additional Advance Date under the Repurchase Agreement, no liens for material amounts of Taxes have beenfiled against Guarantor or any of Guarantor’s assets, and no claims have been asserted in writing with respect to anysuch Taxes (except for liens and with respect to Taxes not yet due and payable, liens or claims with respect to Taxesthat are being contested in good faith and for which adequate reserves have been established in accordance withGAAP).(b) PATRIOT Act.

(i) Guarantor is in compliance, in all material respects, with (A) the Trading with the Enemy Act,as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR,Subtitle B, Chapter V, as amended) and any other applicable enabling legislation or executive order relating thereto,and (B) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and ObstructTerrorism (USA Patriot Act of 2001). No part of the proceeds of any Transaction will be used, directly or indirectly,for any payments to any governmental official or employee, political party, official of a political party, candidate forpolitical office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain anyimproper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

(ii) Guarantor agrees that, from time to time upon the prior written request of Buyer, it shall (A)execute and deliver such further documents, provide such additional information and reports and perform such otheracts as Buyer may reasonably request in order to insure compliance with the provisions hereof (including, withoutlimitation, compliance with the USA PATRIOT Act of 2001 and to fully effectuate the purposes of this Guaranteeand (B) provide such opinions of counsel as Buyer may reasonably request due to any change in Requirements ofLaw or Buyer Compliance Policy concerning matters described in this Section 10(b) or in Article 9(b)(xxxi) orArticle 9(b)(xxxiii) of the Repurchase Agreement; provided, however, that nothing in this Section 10(b) shall beconstrued as requiring Buyer to conduct any inquiry or decreasing Guarantor’s responsibility for its statements,representations, warranties or covenants hereunder. In order to enable Buyer and its Affiliates to comply with anyanti-money laundering program and related responsibilities including, but not limited to, any obligations under theUSA Patriot Act of 2001 and regulations thereunder, Guarantor on behalf of itself and its Affiliates represents toBuyer and its Affiliates that neither Guarantor, nor any of its Affiliates, is a Prohibited Investor, and

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Guarantor is not acting on behalf of or for the benefit of any Prohibited Investor. Guarantor agrees to promptlynotify Buyer or a person appointed by Buyer to administer their anti-money laundering program, if applicable, of anychange in information affecting this representation and covenant.

(c) Financial Reporting. Guarantor shall provide, or cause to be provided, to Buyer the followingfinancial and reporting information:

(i) Within forty-five (45) calendar days after the last day of each of the first three fiscal quartersin any fiscal year, a quarterly reporting package substantially in the form of Exhibit III-B attached to the RepurchaseAgreement;

(ii) Within ninety (90) calendar days after the last day of its fiscal year, an annual reportingpackage substantially in the form of Exhibit III-C attached to the Repurchase Agreement; and

(iii) Upon Buyer’s request, copies of Guarantor’s consolidated Federal Income Tax returns, if any,delivered within thirty (30) days after the filing thereof.

11. Right of Set-off. Guarantor hereby irrevocably authorizes Buyer and its Affiliates, withoutnotice to Guarantor, any such notice being expressly waived by Guarantor, to set‑off and appropriate and apply anyand all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits,indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured orunmatured, at any time held or owing by Buyer to or for the credit or the account of Guarantor, or any part thereof insuch amounts as Buyer may elect, against and on account of the obligations and liabilities of Guarantor to Buyerhereunder and claims of every nature and description of Buyer against Guarantor, in any currency, arising under anyGoverning Agreement, as Buyer may elect, whether or not Buyer has made any demand for payment. Buyer shallnotify Guarantor promptly of any such set‑off and the application made by Buyer, provided that the failure to givesuch notice shall not affect the validity of such set‑off and application. The rights of Buyer under this Section 11 arein addition to other rights and remedies (including, without limitation, other rights of set‑off) that the Buyer mayhave.

12. Severability. Any provision of this Guarantee that is prohibited or unenforceable in anyjurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability withoutinvalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shallnot invalidate or render unenforceable such provision in any other jurisdiction.

13. Section Headings. The section headings used in this Guarantee are for convenience ofreference only and shall not affect the interpretation or construction of this Guarantee.

14. No Waiver; Cumulative Remedies. Buyer shall not by any act (except by a written instrumentpursuant to Section 15 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right orremedy hereunder or to have acquiesced in any default or

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event of default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay inexercising, on the part of Buyer, any right, power or privilege hereunder shall operate as a waiver thereof. No singleor partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof orthe exercise of any other right, power or privilege. A waiver by Buyer of any right or remedy hereunder on any oneoccasion shall not be construed as a bar to any right or remedy that Buyer would otherwise have on any futureoccasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and arenot exclusive of any rights or remedies provided by law.

15. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms orprovisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a writteninstrument executed by Guarantor and Buyer, except that any provision of this Guarantee may be waived by Buyer ina letter or agreement specifically waiving such terms and executed solely by Buyer. This Guarantee shall be bindingupon Guarantor’s successors and assigns and shall inure to the benefit of Buyer, and Buyer’s permitted successorsand assigns. THIS GUARANTEE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDEROR RELATED TO THIS GUARANTEE, THE RELATIONSHIP OF THE PARTIES TO THISGUARANTEE, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS ANDDUTIES OF THE PARTIES TO THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED INACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK,WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETOINTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERALOBLIGATIONS LAW SHALL APPLY TO THIS GUARANTEE.

16. Notices. Notices by Buyer to Guarantor shall be given in writing, addressed to Guarantor atthe address or transmission number set forth under its signature below and shall be effective for all purposes if handdelivered or sent by (a) hand delivery, with proof of delivery, (b) certified or registered United States mail, postageprepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof ofdelivery or (d) by email, provided that such email notice must also be delivered by one of the means set forth above,to the address or transmission number set forth under its signature below or at such other address and person as shallbe designated from time to time by Guarantor, as the case may be, in a written notice to Buyer. A notice shall bedeemed to have been given: (w) in the case of hand delivery, at the time of delivery, (x) in the case of registered orcertified mail, when delivered or the first attempted delivery on a Business Day, (y) in the case of expedited prepaiddelivery upon the first attempted delivery on a Business Day, or (z) in the case of email, upon receipt ofconfirmation, provided that such email notice was also delivered as required in this Section 16. If Guarantor receivesa notice that does not comply with the technical requirements for notice under this Section 16 it may elect to waiveany deficiencies and treat the notice as having been properly given. Notice by Guarantor to Buyer shall be given inthe manner set forth in Article 15 of the Repurchase Agreement.

17. SUBMISSION TO JURISDICTION; WAIVERS. GUARANTOR HEREBYIRREVOCABLY AND UNCONDITIONALLY:

(A) SUBMITS IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT

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OF OR RELATING TO THIS GUARANTEE OR THE OTHER LOAN DOCUMENTS TO WHICHGUARANTOR IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT INRESPECT THEREOF, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEWYORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEWYORK, AND APPELLATE COURTS FROM ANY THEREOF;

(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT INSUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THEVENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION ORPROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD ORCLAIM THE SAME;

(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDINGMAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANYSUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO GUARANTOR AT ITS ADDRESSSET FORTH UNDER GUARANTOR’S SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICHBUYER SHALL HAVE BEEN NOTIFIED IN WRITING BY GUARANTOR; AND

(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECTSERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHTTO SUE IN ANY OTHER JURISDICTION.

18. Integration. This Guarantee represents the agreement of Guarantor with respect to the subjectmatter hereof and there are no promises or representations by Buyer relative to the subject matter hereof not reflectedherein.

19. Execution. This Guarantee may be executed in counterparts, each of which so executed shallbe deemed to be an original, but all of such counterparts shall together constitute but one and the sameinstrument. Delivery by telecopier or other electronic transmission (including a .pdf e-mail transmission) of anexecuted counterpart of a signature page to this Guarantee shall be effective as delivery of an original executedcounterpart of this Guarantee.

20. Acknowledgments. Guarantor hereby acknowledges that:

(a) it has been advised by counsel in the negotiation, execution and delivery of this Guarantee andthe related documents;

(b) Buyer has no fiduciary relationship to Guarantor, and the relationship between Buyer andGuarantor is solely that of surety and creditor; and

(c) no joint venture exists between or among any of Buyer, on the one hand, and Sellers, Parentsand/or Guarantor on the other hand.

21. Intent. Guarantor intends for this Guarantee to be a credit enhancement

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related to a repurchase agreement, within the meaning of Section 101(47) of the Bankruptcy Code and, therefore, forthis Guarantee to be itself a repurchase agreement, within the meaning of Section 101(47) and Section 559 of theBankruptcy Code.

22. WAIVERS OF JURY TRIAL. EACH OF GUARANTOR AND BUYER HEREBYIRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY ACTION ORPROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE OR ANY RELATED DOCUMENTAND FOR ANY COUNTERCLAIM HEREIN OR THEREIN.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and

delivered as of the date first above written.

STARWOOD PROPERTY TRUST INC., a Maryland corporation By:_ /s/ Andrew J.

Sossen______________________ Name: Andrew J. Sossen Title: Chief Operating Officer

Address: Starwood Property Trust, Inc. 591 West Putnam Avenue Greenwich, Connecticut 06830 Attention: Mr. Andrew Sossen with a copy to: Sidley Austin LLP 787 Seventh Avenue New York, New York 10019 Attention: Robert L. Boyd, Esq.

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Exhibit 10.5

FIRST AMENDMENT TOGUARANTY AGREEMENT

FIRST AMENDMENT TO GUARANTY AGREEMENT, dated as of September 15, 2017 (this“Amendment”), made by STARWOOD PROPERTY TRUST INC., a corporation organized under the laws of theState of Maryland (“Guarantor”), for the benefit of JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,a national banking association organized under the laws of the United States (including any successor thereto,“Buyer”). Capitalized terms used and not otherwise defined herein shall have the meanings given to such terms inthe Guarantee (as defined below).

RECITALS

WHEREAS, Purchaser, Starwood Property Mortgage Sub-14, L.L.C., Starwood Property MortgageSub-14-A, L.L.C. and Starwood Mortgage Funding VI LLC, each a Delaware limited liability company (collectively,the “Seller”) are parties to that certain Uncommitted Master Repurchase Agreement, dated as of December 10, 2015,as amended by that certain First Amendment to Master Repurchase Agreement, dated as of March 31, 2016, and thatcertain Second Amendment to Uncommitted Master Repurchase Agreement, dated as of April 25, 2016 (as soamended, the “Repurchase Agreement”), and the other Transaction Documents (as defined therein);

WHEREAS, in connection with the Repurchase Agreement, Guarantor made that certain Guarantee,dated as of December 10, 2015, for the benefit of Buyer (the “Guarantee”); and

WHEREAS, Guarantor and Buyer desire to make certain modifications to the Guarantee.

NOW THEREFORE, in consideration of the foregoing recitals, and other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legallybound, agree as follows:

ARTICLE I.

AMENDMENT

(a) The definition of “Contingent Liabilities” set forth in Section 1 of the Guarantee is herebyamended and restated in its entirety as follows:

“Contingent Liabilities” shall mean, with respect to any Person as of any date of determination, all ofthe following as of such date: (a) liabilities and obligations (including any Guarantee Obligations) of suchPerson in respect of “off-balance sheet arrangements” (as defined in the Off-Balance Sheet Rules definedbelow in this definition), and (b) obligations, including Guarantee Obligations, whether or not required to bedisclosed in the footnotes to such Person’s financial statements, guaranteeing in whole or in part any Non-Recourse Indebtedness, lease, dividend or other obligation, excluding, however, (i) contractual indemnities(including any indemnity or price-adjustment provision relating to the purchase or

sale of securities or other assets), and (ii) guarantees of non-monetary obligations that have not yet beencalled on or quantified, of such Person or any other Person. The amount of any Contingent Liabilitiesdescribed in the preceding clause (b) shall be deemed to be (i) with respect to a guarantee of interest orinterest and principal, or operating income guarantee, the sum of all payments required to be made thereunder(which, in the case of an operating income guarantee, shall be deemed to be equal to the debt service for thenote secured thereby), through (x) in the case of an interest or interest and principal guarantee, the stated dateof maturity of the obligation (and commencing on the date interest could first be payable thereunder), or(y) in the case of an operating income guarantee, the date through which such guarantee will remain in effect,and (ii) with respect to all guarantees not covered by the preceding clause (i), an amount equal to the stated ordeterminable amount of the primary obligation in respect of which such guarantee is made or, if not stated ordeterminable, the maximum reasonably anticipated liability in respect thereof (assuming such Person isrequired to perform thereunder) as recorded on the balance sheet and in the footnotes to the most recentfinancial statements of such Person. “Off-Balance Sheet Rules” means the Disclosure in Management’sDiscussion and Analysis About Off-Balance Sheet Arrangements and Aggregate Contractual Obligations,Securities Act Release Nos. 33-8182; 34-47264; FR-67 International Series Release No. 1266 File No. S7-42-02, 68 Fed. Reg. 5982 (Feb. 5, 2003) (codified at 17 CFR Parts 228, 229 and 249).

(b) The definition of “Fixed Charges” set forth in Section 1 of the Guarantee is hereby deleted inits entirety.

(c) The definition of “Near Cash Liquidity” set forth in Section 1 of the Guarantee is herebyamended and restated in its entirety as follows:

“Near Cash Liquidity” shall mean, at any time and with respect to any Person and its Subsidiaries ona consolidated basis, the sum of (i) the market value of Near Cash Securities held by such Person and itsSubsidiaries as of such date as determined on a consolidated basis in accordance with GAAP and (ii) theamount of Undrawn Borrowing Capacity of such Person and its Subsidiaries under repurchase and creditfacilities to which they are a party as of such date. Market Value of Near Cash Securities shall be determinedon a quarterly basis through bids obtained from independent third party broker-dealers reasonably acceptableto Buyer.

(d) The definition of “Total (d) Assets” set forth in Section 1 of the Guarantee is hereby amended

and restated in its entirety as follows:

“Total Assets” shall mean, with respect to any Person on any date, (i) an amount equal to theaggregate book value of all assets owned by such Person and its Subsidiaries on a consolidated basis and theproportionate share of assets owned by non-consolidated Subsidiaries of such Person, less (ii) (A) amountsowing to such Person or any of its Subsidiaries from any Affiliate thereof, or from officers, employees,partners, members, directors, shareholders or other Persons similarly

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affiliated with such Person or any Affiliate thereof, (B) intangible assets (other than Hedging Transactionsspecifically related to the Purchased Assets and excluding mortgage loan servicing and/or special servicingrights of such Person and its consolidated Subsidiaries) and (C) prepaid taxes and expenses, all on or as ofsuch date and determined in accordance with GAAP.

(e) Section 1 of the Guarantee is hereby amended by adding the following defined term in itsappropriate alphabetical order:

“Undrawn Borrowing Capacity” shall mean, with respect to any Person as of any date, the totalundrawn borrowing capacity available to such Person and its direct or indirect Subsidiaries under anyrepurchase and credit facilities and similar agreements to which they are a party as of such date, but (i) withrespect to any such repurchase or committed credit facility or similar agreement that is a secured facility,solely to the extent that collateral has been approved by and pledged to the related buyer or lender under suchfacility and such amounts are available to such Person and its direct or indirect Subsidiaries withoutrestriction or any other condition other than notice, and (ii) with respect to any such credit facility or similaragreement that is an unsecured facility, solely to the extent that such undrawn borrowing capacity iscommitted by the related lender.

(f) Section 9 of the Guarantee is hereby amended and restated in its entirety as follows:

(9) Financial Covenants. Guarantor (on a consolidated basis, but adjusted to remove theimpact of consolidating any variable interest entities under the requirements of Accounting StandardsCodification (“ASC”) Section 810 and/or transfers of financial assets accounted for as securedborrowings under ASC 860, as both ASC sections are amended, modified and/or supplemented fromtime to time) shall satisfy each of the following financial covenants:

(a) Guarantor shall not permit its Liquidity at any time to be less than$175,000,000; of which not less than $75,000,000 shall be comprised of Cash Liquidity.

(b) Guarantor shall not permit its Tangible Net Worth to be less than the sum of(A) $3,124,857,000, plus (B) seventy-five percent (75%) of the aggregate net cash proceeds(net of underwriting discounts and commissions, and other out-of-pocket expenses incurred byGuarantor in connection any issuance or sale) received by Guarantor from any issuance or saleof Capital Stock (other than Capital Stock constituting Convertible Debt Securities) occurringafter September 15, 2017, plus (C) seventy-five percent (75%) of any increase in capital orshareholders’ equity (or

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like caption however denominated) on the balance sheet of Guarantor resulting from thesettlement, conversion or repayment of any Convertible Debt Security occurring afterSeptember 15, 2017;

(c) Guarantor shall not permit the ratio of its Total Indebtedness to Total Assets atany time to be greater than 0.75 to 1.00;

(d) Guarantor shall not permit the ratio of Guarantor’s EBITDA for any fiscalquarter to Guarantor’s Interest Expense for such fiscal quarter to be less than 2.00 to 1.00; or

(e) Guarantor shall not permit at any time Guarantor to fail to maintain its status asa REIT.

ARTICLE II.

REPRESENTATIONS

Guarantor represents and warrants to Buyer, as of the date of this Amendment, as follows:

(i) all representations and warranties made by it in Section 8 of the Guarantee are true and correctin all material respects;

(ii) it is duly authorized to execute and deliver this Amendment and has taken all necessary actionto authorize such execution, delivery and performance;

(iii) the person signing this Amendment on its behalf is duly authorized to do so on its behalf;

(iv) the execution, delivery and performance of this Amendment will not violate any Requirementof Law applicable to it or its organizational documents or any agreement by which it is bound or by whichany of its assets are affected;

(v) this Amendment has been duly executed and delivered by it; and

(vi) Guarantor is not subject to financial covenants that are more favorable to the lender orrepurchase buyer, as applicable, under any corporate credit facility or any repurchase agreement or loanagreement entered into for the purpose of financing the purchase or origination by Guarantor and/or its director indirect Subsidiaries of commercial real estate CMBS-type loans than the financial covenants set forth inArticle 1(d) above.

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ARTICLE III.

GOVERNING LAW

THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THESTATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIESHEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TOTHE CONFLICT OF LAWS DOCTRINE APPLIED IN SUCH STATE (OTHER THAN SECTION 5-1401 OFTHE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

ARTICLE IV.

MISCELLANEOUS

(a) Except as expressly amended or modified hereby, the Guarantee and the other TransactionDocuments shall each be and shall remain in full force and effect in accordance with their terms.

(b) This Amendment may be executed in counterparts, each of which so executed shall be deemedto be an original, but all of such counterparts shall together constitute but one and the same instrument.

(c) The headings in this Amendment are for convenience of reference only and shall not affect theinterpretation or construction of this Amendment.

(d) This Amendment may not be amended or otherwise modified, waived or supplemented exceptas provided in the Guarantee.

(e) This Amendment contains a final and complete integration of all prior expressions by theparties with respect to the subject matter hereof and shall constitute the entire agreement among the parties withrespect to such subject matter, superseding all prior oral or written understandings.

(f) The Guarantee, as amended by this Amendment, is a Transaction Document.

[SIGNATURES FOLLOW]

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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the

date first above written.

GUARANTOR: STARWOOD PROPERTY TRUST INC., a corporation

organized under the laws of the State of Maryland By:_ /s/ Andrew Sossen______________________ Name: Andrew Sossen Title: Authorized Signatory ACCEPTED AND AGREED BY: BUYER: JPMORGAN CHASE BANK, NATIONALASSOCIATION, a national banking associationorganized under the laws of the United States

By: _ /s/ Thomas Cassino_________ Name: Thomas Cassino Title: Executive Director

Signature Page to First Amendment to Guarantee

Exhibit 10.6

SECOND AMENDMENT TO GUARANTEE AGREEMENT

THIS SECOND AMENDMENT TO GUARANTEE AGREEMENT, dated as of March 15, 2019(this “Amendment”), between STARWOOD PROPERTY TRUST INC., a corporation organized under the laws ofthe State of Maryland (“Guarantor”), and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a nationalbank association organized under the laws of the United States (“Buyer”). Capitalized terms used and not otherwisedefined herein shall have the meanings given to such terms in the Guarantee (as defined below).

RECITALS

WHEREAS, Buyer, Starwood Property Mortgage Sub-14, L.L.C. (“Seller 14”), Starwood PropertyMortgage Sub-14-A, L.L.C. (“Seller 14-A”), Starwood Mortgage Funding VI LLC (“Funding VI Seller”) and SPTCA Fundings 2, LLC (“SPT CA Seller”, together with Seller 14, Seller 14-A and Funding VI Seller, collectively,“Seller”) are parties to that certain Uncommitted Master Repurchase Agreement, dated as of December 10, 2015, asamended by: (i) that certain First Amendment to Uncommitted Master Repurchase Agreement, dated as of March 31,2016, (ii) that certain Second Amendment to Uncommitted Master Repurchase Agreement, dated as of April 25,2016, (iii) that certain Third Amendment to Uncommitted Master Repurchase Agreement and Amendment of FeeLetter, dated as of April 20, 2018, (iv) that certain Fourth Amendment to Uncommitted Master RepurchaseAgreement, dated as of May 1, 2018, and (v) that certain Fifth Amendment to Uncommitted Master RepurchaseAgreement, dated as of January 10, 2019 (as amended, modified and/or restated from time to time, the “RepurchaseAgreement”), and the other Transaction Documents (as defined therein);

WHEREAS, Guarantor indirectly owns one hundred percent (100%) of the Capital Stock of Seller;

WHEREAS, in connection with the Repurchase Agreement, Guarantor made that certain Guarantee,dated as of December 10, 2015, for the benefit of Buyer, as amended by that certain First Amendment to GuaranteeAgreement, dated as of September 15, 2017, (as amended or modified prior to the date hereof, the “ExistingGuarantee”; and, as amended by this Amendment, and as same may be hereafter further amended, modified and/orrestated, the “Guarantee”), for the benefit of Buyer; and

WHEREAS, Guarantor and Buyer desire to make certain amendments and modifications to theExisting Guarantee.

NOW THEREFORE, in consideration of the foregoing recitals, and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to belegally bound, agree as follows:

ARTICLE I.

AMENDMENT

Sections 9(c) and 9(d) of the Existing Guarantee are hereby deleted in their entirety and replacedwith the following:

“(c) Guarantor shall not permit the ratio of its Total Indebtedness to Total Assets at anytime to be greater than 0.80 to 1.00;

(d) Guarantor shall not permit the ratio of Guarantor’s EBITDA for any fiscal quarter to

Guarantor’s Interest Expense for such fiscal quarter to be less than 1.40 to 1.00;”.

ARTICLE II.

REPRESENTATIONS

Guarantor represents and warrants to Buyer, as of the date of this Amendment, as follows: (i) all representations and warranties made by it in Section 8 of the Existing Guarantee are true

and correct in all material respects; (ii) it is duly authorized to execute and deliver this Amendment and has taken all necessary

action to authorize such execution, delivery and performance; (iii) the person signing this Amendment on its behalf is duly authorized to do so on its behalf; (iv) the execution, delivery and performance of this Amendment will not violate any Requirement

of Law applicable to it or its organizational documents or any agreement by which it is boundor by which any of its assets are affected; and

(v) this Amendment has been duly executed and delivered by it.

ARTICLE III.

FEES AND EXPENSES

Guarantor shall promptly pay all of Buyer’s reasonable out-of-pocket costs and expenses, includingreasonable attorney’s fees and expenses incurred in connection with the preparation, negotiation, execution anddelivery of this Amendment.

ARTICLE IV.

GOVERNING LAW

THIS AMENDMENT (AND ANY CLAIM OR CONTROVERSY HEREUNDER) SHALL BE

CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THEOBLIGATIONS, RIGHTS, AND REMEDIES OF THEPARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH

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LAWS WITHOUT REGARD TO THE CONFLICT OF LAWS DOCTRINE APPLIED IN SUCH STATE (OTHERTHAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

ARTICLE V.

MISCELLANEOUS

(a) Except as expressly amended or modified hereby, the Guarantee and the other TransactionDocuments shall each be and shall remain in full force and effect in accordance with their terms.

(b) This Amendment may be executed in counterparts, each of which so executed shall bedeemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. Theparties intend that faxed signatures and electronically imaged signatures (such as PDF files) shall constitute originalsignatures and are binding on all parties.

(c) The headings in this Amendment are for convenience of reference only and shall not affectthe interpretation or construction of this Amendment.

(d) This Amendment may not be amended or otherwise modified, waived or supplementedexcept as provided in the Guarantee.

(e) This Amendment contains a final and complete integration of all prior expressions by theparties with respect to the subject matter hereof and shall constitute the entire agreement among the parties withrespect to such subject matter, superseding all prior oral or written understandings.

[SIGNATURES FOLLOW]

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IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed anddelivered as of the date first above written.

GUARANTOR: STARWOOD PROPERTY TRUST INC., a Maryland corporation By: /s/ Andrew J. Sossen Name: Andrew J. Sossen Title: Authorized Signatory BUYER: JPMORGAN CHASE BANK, A NATIONAL ASSOCIATION, a national banking association By: /s/ Thomas N. Cassino Name: Thomas N. Cassino Title: Executive Director

Signature Page to Second Amendment to Guarantee Agreement

Exhibit 10.7EXECUTION VERSION

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION383 Madison Avenue

New York, New York 10179

September 17, 2019

Starwood Property Trust, Inc.591 West Putnam AvenueGreenwich, Connecticut 06830

Re: Guarantee Agreement, dated as of December 10, 2015, made by Starwood Property Trust, Inc., a Marylandcorporation (“Guarantor”) for the benefit of JPMorgan Chase Bank, National Association, a national bankingassociation (“Buyer”), as amended by that certain First Amendment to Guarantee Agreement, dated as ofSeptember 15, 2017, and as amended by that certain Second Amendment to Guarantee Agreement, dated asof March 15, 2019

Ladies and Gentlemen:

Notwithstanding anything to the contrary contained in the Guarantee, Guarantor and Buyer agree that,if (a) Guarantor has entered into amendments of its liquidity covenants with each of the other repurchase buyersunder all repurchase facilities that currently (or as of the Liquidity Covenant Modification Effective Date (as definedbelow)) have liquidity covenants more favorable to such repurchase buyers than the Requested Liquidity Covenant(as defined below) (such repurchase facilities, the “Other Facilities”) to which Guarantor is a party on or beforeSeptember __, 2020, and (b) in all of such amendments to the Other Facilities, Guarantor’s liquidity covenant hasbeen modified to be less restrictive to Guarantor than the liquidity covenant expressly set forth in Section 9(a) of theGuarantee, then Guarantor will give Buyer prompt notice thereof and, upon the earlier of (such earlier date, the“Liquidity Covenant Modification Effective Date”) (i) September __, 2020 and (ii) the date upon which Guarantorhas entered into such amendments of its liquidity covenants with respect to each of its Other Facilities, Section 9(a)of the Guarantee shall be deemed to be automatically modified to conform to the most restrictive of such lessrestrictive liquidity covenants of the Other Facilities (as amended) (such covenant, the “MFN Liquidity Covenant”);provided that, notwithstanding the foregoing, in no event shall the foregoing cause, and the foregoing shall not cause,the liquidity covenant in Section 9(a) of the Guarantee to be any less restrictive than a liquidity covenant requiringthat Guarantor not permit at any time (x) its Liquidity (as defined in the Guarantee on the date hereof) to be less than$150,000,000 or (y) its Cash Liquidity (as defined in the Guarantee on the date hereof) to be less than $50,000,000(such covenant as described in the preceding clauses (x) and (y), the “Requested Liquidity Covenant”), and in theevent that the MFN Liquidity Covenant is less restrictive than the Requested Liquidity Covenant, then on theLiquidity Covenant Modification Effective Date, Section 9(a) of the Guarantee, with no further action required onthe part of either Guarantor or Buyer, shall automatically be modified, mutatis mutandis, to conform to the RequestedLiquidity

Covenant. Guarantor and Buyer each agree, at the request of the other, to execute and deliver any relatedamendments to the Guarantee to document the modifications contemplated by this paragraph, provided that theexecution of any such amendments shall not be a precondition to the effectiveness thereof, but shall merely be for theconvenience of Buyer and Guarantor. For the avoidance of doubt, if, on September 17, 2020, Guarantor shall nothave entered into amendments with each of the other repurchase buyers under all of the Other Facilities to modify theGuarantor’s liquidity covenants under such Other Facilities to be less restrictive to Guarantor than the liquiditycovenant set forth in Section 9(a) of the Guarantee, then this paragraph shall be of no further force and effect, and theliquidity covenant set forth in Section 9(a) of the Guarantee shall remain unmodified.

Capitalized terms not otherwise defined herein shall have the respective meanings set forth in theUncommitted Master Repurchase Agreement, dated as of December 10, 2015, by and among Starwood PropertyMortgage Sub-14, L.L.C. (“Seller 14”), Starwood Property Mortgage Sub-14-A, L.L.C. (“Seller 14-A”), StarwoodMortgage Funding VI LLC (“Funding VI Seller”) and SPT CA Fundings 2, LLC (“SPT CA Seller”, together withSeller 14, Seller 14-A and Funding VI Seller, collectively, “Seller”), and JPMorgan Chase Bank, NationalAssociation (“Buyer”) (as the same has been and may be from time to time amended, modified and/or restated fromtime to time, the “Repurchase Agreement”).

Guarantor hereby agrees to keep the existence and the contents of this letter agreement strictlyconfidential and to not disclose the same without the prior written consent of Buyer, except (i) to the Affiliates ofGuarantor or their respective directors, officers, employees, agents, advisors, attorneys and other representatives whoare informed of the confidential nature of such information and instructed to keep it confidential, (ii) to Sellers’ andGuarantor’s direct or indirect investors, (iii) to the extent requested by any regulatory authority or required byRequirements of Law (including SEC rules, regulations and guidelines), (iv) to the extent required by GAAP to beincluded in the financial statements of Guarantor, Sellers or Affiliates thereof, (v) to the extent required to exerciseany rights or remedies under the Transaction Documents, Purchased Assets, Purchased Asset Documents orUnderlying Mortgaged Properties, (vi) to the extent required to consummate and administer a Transaction, (vii) tothe extent required in connection with any litigation between any Buyer and Guarantor in connection with anyTransaction Document or (viii) to the extent it is or becomes generally available to the public (other than if caused bythe disclosure by Guarantor or any of their respective Affiliates).

If any term, covenant or condition of this letter agreement is held to be invalid, illegal orunenforceable in any respect, this letter agreement shall be construed without such provision.

This letter agreement may be executed in any number of duplicate originals and each duplicateoriginal shall be deemed to be an original. This letter agreement may be executed in several counterparts, each ofwhich shall be deemed an original instrument and all of which together shall constitute a single letteragreement. The failure of any party hereto to execute this letter agreement, or any counterpart hereof, shall notrelieve the other signatories from their obligations hereunder.

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This letter agreement and the obligations arising hereunder shall be governed by, and construed inaccordance with, the laws of the State of New York.

[NO FURTHER TEXT ON THIS PAGE]

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IN WITNESS WHEREOF, the undersigned have executed this letter agreement as of the date andyear first written above.

BUYER: JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a national banking association By: /s/ Anthony Shaskus Name: Anthony Shaskus Title: Vice President

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GUARANTOR: STARWOOD PROPERTY TRUST, INC. a Maryland corporation By:_ /s/ Andrew Sossen____________ Name:Andrew Sossen Title: Authorized Signatory

Exhibit 31.1

Certification Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002

I, Barry S. Sternlicht, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Starwood Property Trust, Inc. for the period ended September

30, 2019; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material

fact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present

in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be

designed under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;

b. Designed such internal controls over financial reporting, or caused such internal control over financial reporting

to be designed under our supervision, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report

our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred

during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controlover financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over

financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarizeand report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role

in the registrant’s internal control over financial reporting.

Date: November 8, 2019 /s/ BARRY S. STERNLICHT Barry S. Sternlicht Chief Executive Officer

Exhibit 31.2

Certification Pursuant toSection 302 of the Sarbanes-Oxley Act of 2002

I, Rina Paniry, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Starwood Property Trust, Inc. for the period ended September

30, 2019; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material

fact necessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present

in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, theperiods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and

procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be

designed under our supervision, to ensure that material information relating to the registrant, including itsconsolidated subsidiaries, is made known to us by others within those entities, particularly during the period inwhich this report is being prepared;

b. Designed such internal controls over financial reporting, or caused such internal control over financial reporting

to be designed under our supervision, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report

our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the periodcovered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred

during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annualreport) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controlover financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over

financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial

reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarizeand report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role

in the registrant’s internal control over financial reporting.

Date: November 8, 2019 /s/ RINA PANIRY Rina Paniry Chief Financial Officer

Exhibit 32.1

Certification Pursuant to18 U.S.C. Section 1350,As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with Starwood Property Trust, Inc.’s (the “Company”) Quarterly Report on Form 10-Q for the periodended September 30, 2019 (the “Report”), I, Barry S. Sternlicht, do hereby certify, pursuant to 18 U.S.C. § 1350, as adoptedpursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities

Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and

results of operations of the Company.

Date: November 8, 2019 /s/ BARRY S. STERNLICHT Barry S. Sternlicht Chief Executive Officer

Exhibit 32.2

Certification Pursuant to18 U.S.C. Section 1350,As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with Starwood Property Trust, Inc.’s (the “Company”) Quarterly Report on Form 10-Q for the periodended September 30, 2019 (the “Report”), I, Rina Paniry, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to§ 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities

Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and

results of operations of the Company.

Date: November 8, 2019 /s/ RINA PANIRY Rina Paniry Chief Financial Officer