stwd-20240331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 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 Avenue
Greenwich, 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 registered
Common stock, $0.01 par value per share	STWD	New York Stock Exchange

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

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

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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

The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of May 3, 2024 was 315,962,445.

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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 made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words “believe,” “expect,” “anticipate” and other similar expressions. Forward-looking statements do not guarantee future performance, which may be materially different from that expressed in, or implied by, any such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates.

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

•factors described in our Annual Report on Form 10-K for the year ended December 31, 2023 and this Quarterly Report on Form 10-Q, including those set forth under the captions “Risk Factors”, “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;

•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 achieve the benefits that we anticipate from the prior acquisition of the project finance origination, underwriting and capital markets business of GE Capital Global Holdings, LLC;

•national and local economic and business conditions, including as a result of the impact of public health emergencies;

•the occurrence of certain geo-political events (such as wars, terrorist attacks and tensions between states) that affect the normal and peaceful course of international relations;

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

•changes in federal government policies;

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

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

•changes in interest rates; and

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

In light of these risks and uncertainties, there can be no assurances that the results referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q will in fact occur. Except to the extent required by applicable law or regulation, we undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, changes to future results over time or otherwise.

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TABLE OF CONTENTS


		Page
Part I	Financial Information
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	10
	Note 1 Business and Organization	10
	Note 2 Summary of Significant Accounting Policies	11
	Note 3 Acquisitions and Divestitures	18
	Note 4 Loans	19
	Note 5 Investment Securities	24
	Note 6 Properties	27
	Note 7 Investments of Consolidated Affordable Housing Fund	28
	Note 8 Investments in Unconsolidated Entities	29
	Note 9 Goodwill and Intangibles	30
	Note 10 Secured Borrowings	32
	Note 11 Unsecured Senior Notes	37
	Note 12 Loan Securitization/Sale Activities	39
	Note 13 Derivatives and Hedging Activity	40
	Note 14 Offsetting Assets and Liabilities	41
	Note 15 Variable Interest Entities	41
	Note 16 Related-Party Transactions	43
	Note 17 Stockholders’ Equity and Non-Controlling Interests	45
	Note 18 Earnings per Share	47
	Note 19 Accumulated Other Comprehensive Income	48
	Note 20 Fair Value	49
	Note 21 Income Taxes	56
	Note 22 Commitments and Contingencies	56
	Note 23 Segment Data	58
	Note 24 Subsequent Events	62
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	63
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	95
Item 4.	Controls and Procedures	97
Part II	Other Information
Item 1.	Legal Proceedings	98
Item 1A.	Risk Factors	98
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	98
Item 3.	Defaults Upon Senior Securities	98
Item 4.	Mine Safety Disclosures	98
Item 5.	Other Information	98
Item 6.	Exhibits	99

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands, except share data)


	As of March 31,		As of December 31,
	2024		2023
Assets:
Cash and cash equivalents	$	327,363	$	194,660
Restricted cash	125,341		117,312
Loans held-for-investment, net of credit loss allowances of $331,646 and $309,039	16,606,862		17,574,249
Loans held-for-sale ($2,642,219 and $2,645,637 held at fair value)	2,689,368		2,645,637
Investment securities, net of credit loss allowances of $17,589 and $13,143 ($127,070 and $129,308 held at fair value)	716,073		735,562
Properties, net	1,044,565		1,046,384
Properties held-for-sale	—		290,937
Investments of consolidated affordable housing fund, at fair value	2,008,937		2,012,833
Investments in unconsolidated entities	96,927		90,376
Goodwill	259,846		259,846
Intangible assets ($19,612 and $19,384 held at fair value)	63,267		64,967
Derivative assets	82,916		63,437
Accrued interest receivable	194,498		200,867
Other assets	319,853		420,773
Variable interest entity (“VIE”) assets, at fair value	41,633,853		43,786,356
Total Assets	$	66,169,669	$	69,504,196
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	259,998	$	293,442
Related-party payable	44,226		44,816
Dividends payable	153,174		152,888
Derivative liabilities	74,647		102,467
Secured financing agreements, net	12,556,487		13,867,996
Collateralized loan obligations and single asset securitization, net	3,223,867		3,491,292
Unsecured senior notes, net	2,751,666		2,158,888
Debt related to properties held for sale	—		193,691
VIE liabilities, at fair value	40,065,423		42,175,734
Total Liabilities	59,129,488		62,481,214
Commitments and contingencies (Note 22)
Temporary Equity: Redeemable non-controlling interests	415,485		414,348
Permanent 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, 323,405,456 issued and 315,956,765 outstanding as of March 31, 2024 and 320,814,765 issued and 313,366,074 outstanding as of December 31, 2023	3,234		3,208
Additional paid-in capital	5,885,852		5,864,670
Treasury stock (7,448,691 shares)	(138,022)		(138,022)
Retained earnings	507,622		505,881
Accumulated other comprehensive income	14,061		15,352
Total Starwood Property Trust, Inc. Stockholders’ Equity	6,272,747		6,251,089
Non-controlling interests in consolidated subsidiaries	351,949		357,545
Total Permanent Equity	6,624,696		6,608,634
Total Liabilities and Equity	$	66,169,669	$	69,504,196

________________________________________________________

Note: In addition to the VIE assets and liabilities which are separately presented, our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 include assets of $4.0 billion and $4.3 billion, respectively, and liabilities of $3.2 billion and $3.5 billion, respectively, related to consolidated collateralized loan obligations (“CLOs”) and a single asset securitization (“SASB”), which are considered to be VIEs. The CLOs’ and SASB’s assets can only be used to settle obligations of the CLOs and SASB, and the CLOs’ and SASB’s liabilities do not have recourse to Starwood Property Trust, Inc. Refer to Note 15 for additional 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 March 31,
	2024		2023
Revenues:
Interest income from loans	$	463,492	$	430,908
Interest income from investment securities	18,206		18,637
Servicing fees	9,689		7,256
Rental income	28,847		32,289
Other revenues	2,854		1,324
Total revenues	523,088		490,414
Costs and expenses:
Management fees	46,014		39,540
Interest expense	355,956		335,301
General and administrative	50,663		42,108
Costs of rental operations	10,344		11,666
Depreciation and amortization	9,818		12,416
Credit loss provision, net	35,839		43,194
Other expense	674		1,117
Total costs and expenses	509,308		485,342
Other income (loss):
Change in net assets related to consolidated VIEs	10,086		41,138
Change in fair value of servicing rights	228		304
Change in fair value of investment securities, net	915		82
Change in fair value of mortgage loans, net	(29,013)		8,901
Income from affordable housing fund investments	9,448		12,965
Earnings from unconsolidated entities	7,675		2,725
Gain on sale of investments and other assets, net	91,962		190
Gain (loss) on derivative financial instruments, net	101,939		(32,828)
Foreign currency (loss) gain, net	(41,870)		15,019
Loss on extinguishment of debt	(1,454)		(61)
Other loss, net	(2,630)		(2,541)
Total other income	147,286		45,894
Income before income taxes	161,066		50,966
Income tax (provision) benefit	(1,206)		8,795
Net income	159,860		59,761
Net income attributable to non-controlling interests	(5,528)		(7,787)
Net income attributable to Starwood Property Trust, Inc.	$	154,332	$	51,974

Earnings per share data attributable to Starwood Property Trust, Inc.:
Basic	$	0.49	$	0.16
Diluted	$	0.48	$	0.16

See notes to condensed consolidated financial statements.

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Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, amounts in thousands)


	For the Three Months Ended March 31,
	2024		2023
Net income	$	159,860	$	59,761
Other comprehensive income (loss) (net change by component):
Available-for-sale securities	(1,291)		(1,104)

Other comprehensive loss	(1,291)		(1,104)
Comprehensive income	158,569		58,657
Less: Comprehensive income attributable to non-controlling interests	(5,528)		(7,787)
Comprehensive income attributable to Starwood Property Trust, Inc.	$	153,041	$	50,870

See notes to condensed consolidated financial statements.

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Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

For the Three Months Ended March 31, 2024 and 2023

(Unaudited, amounts in thousands, except share data)


	Temporary Equity		Common stock			Additional Paid-in Capital		Treasury Stock			Retained Earnings		Accumulated Other Comprehensive Income		Total Starwood Property Trust, Inc. Stockholders’ Equity		Non- Controlling Interests		Total Permanent Equity
			Shares	Par Value				Shares	Amount
Balance, December 31, 2023	$	414,348	320,814,765	$	3,208	$	5,864,670	7,448,691	$	(138,022)	$	505,881	$	15,352	$	6,251,089	$	357,545	$	6,608,634

Proceeds from DRIP Plan	—		13,034	—		266		—	—		—		—		266		—		266
Proceeds from employee stock purchase plan	—		66,315	1		1,133		—	—		—		—		1,134		—		1,134


Share-based compensation	—		2,015,172	20		10,026		—	—		—		—		10,046		—		10,046
Manager fees paid in stock	—		496,170	5		9,757		—	—		—		—		9,762		—		9,762
Net income	1,565		—	—		—		—	—		154,332		—		154,332		3,963		158,295
Dividends declared, $0.48 per share	—		—	—		—		—	—		(152,591)		—		(152,591)		—		(152,591)
Other comprehensive loss, net	—		—	—		—		—	—		—		(1,291)		(1,291)		—		(1,291)


Distributions to non-controlling interests	(428)		—	—		—		—	—		—		—		—		(9,559)		(9,559)
Balance, March 31, 2024	$	415,485	323,405,456	$	3,234	$	5,885,852	7,448,691	$	(138,022)	$	507,622	$	14,061	$	6,272,747	$	351,949	$	6,624,696

Balance, December 31, 2022	$	362,790	318,123,861	$	3,181	$	5,807,087	7,448,691	$	(138,022)	$	769,237	$	20,955	$	6,462,438	$	373,479	$	6,835,917


Proceeds from DRIP Plan	—		15,657	—		299		—	—		—		—		299		—		299
Proceeds from employee stock purchase plan	—		65,026	1		969		—	—		—		—		970		—		970


Share-based compensation	—		1,091,789	11		10,925		—	—		—		—		10,936		—		10,936
Manager fees paid in stock	—		373,204	4		7,229		—	—		—		—		7,233		—		7,233
Net income	2,287		—	—		—		—	—		51,974		—		51,974		5,500		57,474
Dividends declared, $0.48 per share	—		—	—		—		—	—		(150,521)		—		(150,521)		—		(150,521)
Other comprehensive loss, net	—		—	—		—		—	—		—		(1,104)		(1,104)		—		(1,104)


Distributions to non-controlling interests	(659)		—	—		—		—	—		—		—		—		(8,731)		(8,731)
Balance, March 31, 2023	$	364,418	319,669,537	$	3,197	$	5,826,509	7,448,691	$	(138,022)	$	670,690	$	19,851	$	6,382,225	$	370,248	$	6,752,473

See notes to condensed consolidated financial statements.

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Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)


	For the Three Months Ended March 31,
	2024		2023
Cash Flows from Operating Activities:
Net income	$	159,860	$	59,761
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of deferred financing costs, premiums and discounts on secured borrowings	12,490		13,205
Amortization of discounts and deferred financing costs on unsecured senior notes	2,300		2,234
Accretion of net discount on investment securities	(1,387)		(2,094)
Accretion of net deferred loan fees and discounts	(19,891)		(15,180)
Share-based compensation	10,046		10,936
Manager fees paid in stock	9,762		7,233
Change in fair value of investment securities	(915)		(82)
Change in fair value of consolidated VIEs	23,769		(4,245)
Change in fair value of servicing rights	(228)		(304)
Change in fair value of loans	29,013		(8,901)
Change in fair value of affordable housing fund investments	3,896		(1,160)
Change in fair value of derivatives	(75,079)		48,431
Foreign currency loss (gain), net	41,870		(15,019)
Gain on sale of investments and other assets	(91,962)		(190)

Credit loss provision, net	35,839		43,194
Depreciation and amortization	11,049		13,635
Earnings from unconsolidated entities	(7,675)		(2,725)
Distributions of earnings from unconsolidated entities	1,125		243
Loss on extinguishment of debt	1,704		61
Origination and purchase of loans held-for-sale, net of principal collections	(243,325)		(28,333)
Proceeds from sale of loans held-for-sale	218,596		13,439
Changes in operating assets and liabilities:
Related-party payable	(590)		(1,603)
Accrued and capitalized interest receivable, less purchased interest	(15,475)		(41,541)
Other assets	(9,875)		(89,667)
Accounts payable, accrued expenses and other liabilities	(38,968)		(29,886)
Net cash provided by (used in) operating activities	55,949		(28,558)
Cash Flows from Investing Activities:
Origination, purchase and funding of loans held-for-investment	(265,185)		(431,615)
Proceeds from principal collections on loans	1,220,995		407,199

Purchase and funding of investment securities	(9,220)		(591)
Proceeds from sales and redemptions of investment securities	1,314		—
Proceeds from principal collections on investment securities	19,149		40,778
Proceeds from sales of real estate, net of debt assumed by purchaser	188,040		543
Purchases and additions to properties and other assets	(5,576)		(5,839)


Distribution of capital from unconsolidated entities	—		277


Payments for purchase or termination of derivatives	(781)		(3,340)
Proceeds from termination of derivatives	16,925		5,605
Net cash provided by investing activities	1,165,661		13,017

See notes to condensed consolidated financial statements.

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Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited, amounts in thousands)


	For the Three Months Ended March 31,
	2024		2023
Cash Flows from Financing Activities:
Proceeds from borrowings	$	1,234,980	$	1,202,077
Principal repayments on and repurchases of borrowings	(2,165,427)		(892,238)
Payment of deferred financing costs	(6,574)		(2,924)
Proceeds from common stock issuances	1,400		1,269

Payment of dividends	(152,305)		(149,765)

Distributions to non-controlling interests	(9,987)		(9,390)

Issuance of debt of consolidated VIEs	3,166		—
Repayment of debt of consolidated VIEs	(108)		(108)
Distributions of cash from consolidated VIEs	15,022		15,329
Net cash (used in) provided by financing activities	(1,079,833)		164,250
Net increase in cash, cash equivalents and restricted cash	141,777		148,709
Cash, cash equivalents and restricted cash, beginning of period	311,972		382,133
Effect of exchange rate changes on cash	(1,045)		594
Cash, cash equivalents and restricted cash, end of period	$	452,704	$	531,436
Supplemental disclosure of cash flow information:
Cash paid for interest	$	367,142	$	322,932
Income taxes (refunded) paid, net	(269)		42
Supplemental disclosure of non-cash investing and financing activities:
Dividends declared, but not yet paid	$	152,591	$	152,551

Deconsolidation of VIEs (VIE asset/liability reductions)	(622,077)		—



Debt assumed by purchaser in sale of real estate	(194,900)		—
Reclassification of loans held-for-investment to loans held-for-sale	48,695		—
Loan principal collections temporarily held at master servicer	5,305		15,197

See notes to condensed consolidated financial statements.

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Starwood Property Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2024

(Unaudited)

1. Business and Organization

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

We have four reportable business segments as of March 31, 2024 and we refer to the investments within these segments as our target assets:

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

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

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

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

Our segments exclude the consolidation of securitization variable interest entities (“VIEs”).

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

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

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2. Summary of Significant Accounting Policies

Balance Sheet Presentation of Securitization Variable Interest Entities

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

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

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

Refer to the segment data in Note 23 for a presentation of our business segments without consolidation of these VIEs.

Basis of Accounting and Principles of Consolidation

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

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (our “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full year.

Refer to our Form 10-K for a description of our recurring accounting policies. We have included disclosure in this Note 2 regarding principles of consolidation and other accounting policies that (i) are required to be disclosed quarterly, (ii) we view as critical, (iii) became significant since December 31, 2023 due to a corporate action or increase in the significance of the underlying business activity or (iv) changed upon adoption of an Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”).

Variable Interest Entities

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

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

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

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

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

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

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

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

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

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

Loans comprise the vast majority of our securitization VIE assets and are carried at fair value due to the election of the fair value option. When an asset becomes REO, it is due to non-performance of the loan. Because the loan is already at fair value, the carrying value of an REO asset is also initially at fair value. Furthermore, when we consolidate a trust, any existing

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REO would be consolidated at fair value. Once an asset becomes REO, its disposition time is relatively short. As a result, the carrying value of an REO generally approximates fair value under GAAP.

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

REO assets generally represent a very small percentage of the overall asset pool of a trust. In new issue trusts there are no REO assets. We estimate that REO assets constitute approximately 2% of our consolidated securitization VIE assets, with the remaining 98% representing loans. However, it is important to note that the fair value of our securitization VIE assets is determined by reference to our securitization VIE liabilities as permitted under ASU 2014-13, Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity. In other words, our VIE liabilities are more reliably measurable than the VIE assets, resulting in our current measurement methodology which utilizes this value to determine the fair value of our securitization VIE assets as a whole. As a result, these percentages are not necessarily indicative of the relative fair values of each of these asset categories if the assets were to be valued individually.

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

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

Fair Value Option

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

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

Fair Value Measurements

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

As discussed above, we measure the assets and liabilities of consolidated securitization VIEs at fair value pursuant to our election of the fair value option. The securitization VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the securitization VIEs, we maximize the use of observable inputs over unobservable inputs. Refer to Note 20 for further discussion regarding our fair value measurements.

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Loans Held-for-Investment

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

Loans Held-For-Sale

Our loans that we intend to sell or liquidate in the short-term are classified as held-for-sale and are carried at the lower of amortized cost or fair value, unless we have elected to apply the fair value option at origination or purchase. We periodically enter into derivative financial instruments to hedge unpredictable changes in fair value of loans held-for-sale, including changes resulting from both interest rates and credit quality. Because these derivatives are not designated, changes in their fair value are recorded in earnings. In order to best reflect the results of the hedged loan portfolio in earnings, we have elected the fair value option for these loans. As a result, changes in the fair value of the loans are also recorded in earnings.

Investment Securities

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

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

Credit Losses

Loans and Debt Securities Measured at Amortized Cost

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

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

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

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Available-for-Sale Debt Securities

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

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

Investments of Consolidated Affordable Housing Fund

On November 5, 2021, we established Woodstar Portfolio Holdings, LLC (the “Woodstar Fund”), an investment fund which holds our Woodstar multifamily affordable housing portfolios consisting of 59 properties with 15,057 units located in Central and South Florida. As managing member of the Woodstar Fund, we manage interests purchased by third party investors seeking capital appreciation and an ongoing return, for which we earn (i) a management fee based on each investor’s share of total Woodstar Fund equity; and (ii) an incentive distribution if the Woodstar Fund’s returns exceed an established threshold. In connection with the establishment of the Woodstar Fund, we entered into subscription and other related agreements with certain third party institutional investors to sell, through a feeder fund structure, an aggregate 20.6% interest in the Woodstar Fund for an initial aggregate subscription price of $216.0 million, which was adjusted to $214.2 million post-closing. The Woodstar Fund has an initial term of eight years.

Effective with the third party interest sale, the Woodstar Fund has the characteristics of an investment company under ASC 946, Financial Services – Investment Companies. Accordingly, the Woodstar Fund is required to carry the investments in its properties at fair value, with a cumulative effect adjustment between the fair value and previous carrying value of its investments recognized in stockholders’ equity as of November 5, 2021, the date of the Woodstar Fund’s change in status to an investment company. Because we are the primary beneficiary of the Woodstar Fund, which is a VIE (as discussed in Note 15), we consolidate the accounts of the Woodstar Fund into our consolidated financial statements, retaining the fair value basis of accounting for its investments. Realized and unrealized changes in the fair value of the Woodstar Fund’s property investments, and distributions thereon, are recognized in the “Income from affordable housing fund investments” caption within the other income (loss) section of our condensed consolidated statements of operations. See Note 7 for further details regarding the Woodstar Fund’s investments and related income and Note 17 with respect to its contingently redeemable non-controlling interests which are classified as “Temporary Equity” in our condensed consolidated balance sheets.

Revenue Recognition

Interest Income

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

We cease accruing interest on non-performing loans at the earlier of (i) the loan becoming significantly past due or (ii) management concluding that a full recovery of all interest and principal is doubtful. Interest income on non-accrual loans in which management expects a full recovery of the loan’s outstanding principal balance is only recognized when received in cash. If full recovery of principal is doubtful or if collection of interest is less than probable, the cost recovery method is applied whereby any cash received is applied to the outstanding principal balance of the loan. A non-accrual loan is returned to accrual

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status at such time as the loan becomes contractually current and management believes all future principal and interest will be received according to the contractual loan terms.

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

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

Servicing Fees

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

Rental Income

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

Foreign Currency Translation

Our assets and liabilities denominated in foreign currencies are translated into U.S. dollars using foreign currency exchange rates at the end of the reporting period. Income and expenses are translated at the average exchange rates for each reporting period. The effects of translating the assets, liabilities and income of our foreign investments held by entities with a U.S. dollar functional currency are included in foreign currency gain (loss) in the consolidated statements of operations. Realized foreign currency gains and losses and changes in the value of foreign currency denominated monetary assets and liabilities are included in the determination of net income and are reported as foreign currency gain (loss) in our condensed consolidated statements of operations.

Income Taxes

The Company has elected to be taxed as a REIT under the Code. The Company is subject to federal income taxation at corporate rates on its REIT taxable income, however, the Company is allowed a deduction for the amount of dividends paid to its stockholders in arriving at its REIT taxable income. As a result, distributed net income of the Company is subjected to taxation at the stockholder level only. The Company intends to continue operating in a manner that will permit it to maintain its qualification as a REIT for tax purposes.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company evaluates the realizability of its deferred tax assets and recognizes a valuation allowance if, based on the available evidence, both positive and negative, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers, among other matters, estimates of expected future taxable income, nature of current and cumulative losses, existing and projected book/tax differences, tax planning strategies available, and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods.

We recognize tax positions in the financial statements only when it is more likely than not that, based on the technical merits of the tax position, the position will be sustained upon examination by the relevant taxing authority. A tax position is measured at the largest amount of benefit that will more likely than not be realized upon settlement. If, as a result of new events or information, a recognized tax position no longer is considered more likely than not to be sustained upon examination, a liability is established for the unrecognized benefit with a corresponding charge to income tax expense in our consolidated

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statement of operations. We report interest and penalties, if any, related to income tax matters as a component of income tax expense.

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 awards (“RSAs”) and restricted stock units (“RSUs”) and any outstanding discounted share purchase options under the Employee Stock Purchase Program (“ESPP”), (ii) shares contingently issuable to our Manager, (iii) the conversion options associated with our senior convertible notes (the “Convertible Notes”) (see Notes 11 and 18) and (iv) non-controlling interests that are redeemable with our common stock (see Note 17). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.

Nearly all of the Company’s unvested RSUs and RSAs contain rights to receive non-forfeitable dividends and thus are participating securities. In addition, the non-controlling interests that are redeemable with our common stock are considered participating securities because they earn a preferred return indexed to the dividend rate on our common stock (see Note 17). Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. Under the two-class method, undistributed earnings are reallocated between shares of common stock and participating securities. For the three months ended March 31, 2024 and 2023, the two-class method resulted 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 that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. The most significant and subjective estimate that we make is the projection of cash flows we expect to receive on our investments, which has a significant impact on the amount of income that we record and/or disclose. In addition, the fair value of assets and liabilities that are estimated using a discounted cash flows method is significantly impacted by the rates at which we estimate market participants would discount the expected cash flows. Amounts ultimately realized from our investments may vary significantly from the fair values presented.

We believe the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of March 31, 2024. Actual results may ultimately differ from those estimates.

Reclassifications

Acquisition and investment pursuit costs were combined within other expense in the prior period condensed consolidated statement of operations to conform with the current period presentation.

Recent Accounting Developments

On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. This ASU is effective for our fiscal year ending December 31, 2024 and interim quarters beginning in 2025, with early adoption permitted. It must be retrospectively applied to all prior periods presented. We do not expect this ASU will have a material impact on the Company’s reportable segment disclosures, as it already reports significant items within revenues, costs and expenses and other income (loss) categories by segment.

On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which improves income tax disclosures by primarily requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. This ASU is effective for our fiscal year ending December 31, 2025, with early adoption permitted. It is to be applied on a prospective basis, with retrospective application permitted. We do not expect this ASU will have a material impact on the Company’s income tax disclosures.

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On March 6, 2024, the SEC adopted final rules requiring the disclosure of certain climate-related information in registration statements and annual reports filed with the SEC. The SEC has voluntarily stayed the effectiveness of the new rules pending completion of a judicial review of legal challenges to the rules. In the event the stay is lifted, the new rules would, among other things, require disclosure within the notes to the financial statements of certain specified climate-related financial statement effects of severe weather events and other natural conditions and related information. If the stay is lifted and the effective dates unchanged, such financial statement disclosure requirement will be effective for our fiscal year ending December 31, 2025. We do not expect this requirement will have a material impact on the Company’s consolidated financial statement disclosures, as it has not historically experienced significant effects from severe weather events and other natural conditions.

3. Acquisitions and Divestitures

Property Segment Master Lease Portfolio

On February 29, 2024, we sold the 16 retail properties which comprised our Property Segment’s Master Lease Portfolio for a gross sale price of $387.1 million. In connection with the sale, the purchaser assumed the related mortgage debt of $194.9 million, which resulted in net proceeds of $188.0 million after selling costs. We recognized a gain of $92.0 million, which is included within gain on sale of investments and other assets in our condensed consolidated statement of operations for the three months ended March 31, 2024, and a $1.2 million loss on extinguishment of debt.

Investing and Servicing Segment Property Portfolio (“REIS Equity Portfolio”)

During the three months ended March 31, 2024 and 2023, there were no material sales of property within the REIS Equity Portfolio.

Commercial and Residential Lending Segment

During the three months ended March 31, 2024 and 2023, there were no sales of property within the Commercial and Residential Lending Segment.

During the three months ended March 31, 2024 and 2023, we had no significant acquisitions of properties or businesses.

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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 the lower of cost or fair value, unless we have elected the fair value option for either. The following tables summarize our investments in mortgages and loans as of March 31, 2024 and December 31, 2023 (dollars in thousands):


March 31, 2024	Carrying Value		Face Amount		Weighted Average Coupon (1)		Weighted Average Life (“WAL”) (years)(2)
Loans held-for-investment:
Commercial loans:
First mortgages (3)	$	14,107,898	$	14,142,331	9.0	%	2.7
Subordinated mortgages (4)	77,495		77,619		14.8	%	2.1
Mezzanine loans (3)	296,699		298,400		13.9	%	2.4
Other	70,666		71,187		9.6	%	1.6
Total commercial loans	14,552,758		14,589,537
Infrastructure first priority loans (5)	2,385,750		2,429,790		9.4	%	3.7

Total loans held-for-investment	16,938,508		17,019,327
Loans held-for-sale:
Residential, fair value option	2,518,600		2,863,512		4.5	%	N/A	(6)
Commercial, fair value option	123,619		126,955		6.8	%	6.4
Infrastructure, lower of cost or fair value (5)	47,149		49,500		11.5	%	N/A
Total loans held-for-sale	2,689,368		3,039,967
Total gross loans	19,627,876		$	20,059,294
Credit loss allowances:
Commercial loans held-for-investment	(322,087)
Infrastructure loans held-for-investment	(9,559)
Total allowances	(331,646)
Total net loans	$	19,296,230

December 31, 2023
Loans held-for-investment:
Commercial loans:
First mortgages (3)	$	14,956,646	$	15,005,827	9.0	%	2.8
Subordinated mortgages (4)	76,560		76,882		14.8	%	2.2
Mezzanine loans (3)	273,146		274,899		13.7	%	2.7
Other	71,012		71,843		9.6	%	1.8
Total commercial loans	15,377,364		15,429,451
Infrastructure first priority loans	2,505,924		2,550,244		9.5	%	3.9

Total loans held-for-investment	17,883,288		17,979,695
Loans held-for-sale:
Residential, fair value option	2,604,594		2,909,126		4.5	%	N/A	(6)
Commercial, fair value option	41,043		45,400		5.5	%	5.2

Total loans held-for-sale	2,645,637		2,954,526
Total gross loans	20,528,925		$	20,934,221
Credit loss allowances:
Commercial loans held-for-investment	(298,775)
Infrastructure loans held-for-investment	(10,264)
Total allowances	(309,039)
Total net loans	$	20,219,886

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(1)Calculated using applicable index rates as of March 31, 2024 and December 31, 2023 for variable rate loans and excludes loans for which interest income is not recognized.

(2)Represents the WAL of each respective group of loans, excluding loans for which interest income is not recognized, as of the respective balance sheet date. For commercial loans held-for-investment, the WAL is calculated assuming all extension options are exercised by the borrower, although our loans may be repaid prior to such date. For infrastructure loans, the WAL is calculated using the amounts and timing of future principal payments, as projected at origination or acquisition of each loan.

(3)First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan. The application of this methodology resulted in mezzanine loans with carrying values of $1.0 billion being classified as first mortgages as of both March 31, 2024 and December 31, 2023.

(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.

(5)During the three months ended March 31, 2024, a $48.7 million infrastructure loan held-for-investment was reclassified into loans held-for-sale, at which time a $1.5 million fair value adjustment was provided based on the contractual sale price.

(6)Residential loans have a weighted average remaining contractual life of 27.6 years and 27.8 years as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024, our variable rate loans held-for-investment, excluding loans for which interest income is not recognized, were as follows (dollars in thousands):


March 31, 2024	Carrying Value		Weighted-average Spread Above Index
Commercial loans	$	13,698,698	3.9	%
Infrastructure loans	2,385,750		4.0	%
Total variable rate loans held-for-investment	$	16,084,448	3.9	%

Credit Loss Allowances

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

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

The macroeconomic forecasts do not differentiate among property types or asset classes. Instead, these forecasts reference general macroeconomic conditions (i.e. Gross Domestic Product, employment and interest rates) which apply broadly across all assets. For instance, although the office sector has been adversely affected by the increase in remote working arrangements and the retail sector has been adversely affected by electronic commerce, the broad macroeconomic forecasts do not account for such differentiation. Accordingly, we have selected more adverse macroeconomic recovery forecasts related to office and retail properties than for other property types in determining our credit loss allowance.

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

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

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

The significant credit quality indicators for our loans measured at amortized cost, which excludes loans held-for-sale, were as follows as of March 31, 2024 (dollars in thousands):


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Total		Total Amortized Cost Basis		Credit Loss Allowance
As of March 31, 2024	2024		2023		2022		2021		2020		Prior
Commercial loans:
Credit quality indicator:
LTV < 60%	$	—	$	39,940	$	2,030,997	$	2,722,811	$	188,168	$	1,082,498	$	—	$	6,064,414	$	18,658
LTV 60% - 70%	—		797,229		1,951,080		3,429,617		96,804		317,598		—		6,592,328		127,080
LTV > 70%	—		61,805		103,050		400,086		223,480		1,032,003		—		1,820,424		171,424
Credit deteriorated	—		—		—		—		—		4,925		—		4,925		4,925
Defeased and other	—		14,224		41,868		—		—		14,575		—		70,667		—
Total commercial	$	—	$	913,198	$	4,126,995	$	6,552,514	$	508,452	$	2,451,599	$	—	$	14,552,758	$	322,087
Infrastructure loans:
Credit quality indicator:
Power	$	—	$	390,601	$	—	$	104,679	$	68,445	$	734,584	$	13,506	$	1,311,815	$	3,674
Oil and gas	—		410,029		141,259		183,794		36,101		302,752		—		1,073,935		5,885


Total infrastructure	$	—	$	800,630	$	141,259	$	288,473	$	104,546	$	1,037,336	$	13,506	$	2,385,750	$	9,559

Loans held-for-sale															2,689,368		—
Total gross loans															$	19,627,876	$	331,646

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Non-Credit Deteriorated Loans

As of March 31, 2024, we had the following loans with a combined amortized cost basis of $427.9 million that were 90 days or greater past due at March 31, 2024: (i) a $125.1 million senior mortgage loan on an office building in Arlington, Virginia; (ii) a $123.9 million senior mortgage loan on an office building in Washington, DC; (iii) a $51.5 million first mortgage and mezzanine loan on a multifamily property in Nashville, Tennessee; (iv) a $37.8 million leasehold mortgage loan on a luxury resort in California destroyed by wildfire; (v) $80.4 million of residential loans; and (vi) a $9.2 million loan on a hospitality asset in New York City that our Investing and Servicing segment acquired as nonperforming in October 2021. All of these loans were on nonaccrual as of March 31, 2024.

We also had the following loans on nonaccrual that were not 90 days or greater past due as of March 31, 2024: (i) a $185.4 million senior loan on a retail and entertainment project in New Jersey; and (ii) a $6.4 million junior mezzanine loan (commitment of $18.2 million) issued during the three months ended March 31, 2024 in connection with a loan modification on two connected office buildings in Washington, DC (see related discussion below). These loans were not considered credit deteriorated as we presently expect to recover all amounts due.

Credit Deteriorated Loans

As of March 31, 2024, we had a $4.9 million commercial subordinated loan secured by a department store in Chicago which was deemed credit deteriorated and was fully reserved in prior years. The loan was on nonaccrual under the cost recovery method as of March 31, 2024.

Loan Modifications

We may amend or modify a loan based on its specific facts and circumstances. During the three months ended March 31, 2024, we made modifications to three commercial loans described below, which are disclosable under ASU 2022-02, Troubled Debt Restructurings and Vintage Disclosures, as they involved an other-than-insignificant payment delay and/or an interest rate reduction for a borrower experiencing financial difficulty. The three loans had a combined amortized cost basis of $650.8 million, representing 4.5% of our commercial loans as of March 31, 2024. These types of modifications generally provide a borrower additional time to refinance or sell the collateral property in order to repay the principal balance of the loan and/or provide some interest payment relief to a borrower experiencing operating cash shortfalls.

For a $322.2 million first mortgage and mezzanine loan on two connected office buildings in Washington, D.C., we granted a 24-month term extension and a 285 bps reduction in the interest rate to SOFR (floor of 5.0%) plus 1.0%. In addition, we provided an $18.2 million junior mezzanine loan (of which $6.4 million was funded as of March 31, 2024), principally to fund new leasing costs prior to the loan’s extended maturity. As part of this modification, we will receive a percentage of net sales proceeds in excess of the loan amount if the underlying collateral is sold, or a percentage of the equity if the collateral is refinanced. For a $252.0 million senior mortgage loan on an office building in Houston, Texas, we granted a 28-month term extension plus two additional one-year extension options, and provided a $30.0 million preferred equity commitment (of which $22.9 million was unfunded as of March 31, 2024), principally to fund new leasing costs prior to the loan’s extended maturity. For a $76.6 million first mortgage loan on a multifamily property in Birmingham, Alabama, the interest rate was reduced 55 bps for 24 months (which reduction is recaptured in a new exit fee), with the borrower contributing $3.4 million of additional equity. Each of these loans have paid all contractual interest due as of March 31, 2024. The modified terms of the loans were included in the determination of our general CECL reserve.

Loans with modifications disclosed in the previous twelve months are performing in accordance with their modified terms except for a $45.0 million first mortgage loan on a multifamily property in Arizona which did not pay $0.6 million of the reduced interest due during the three months ended March 31, 2024.

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The following tables present the activity in our credit loss allowance for funded loans and unfunded commitments (amounts in thousands):


	Funded Commitments Credit Loss Allowance
	Loans Held-for-Investment				Total Funded Loans
Three Months Ended March 31, 2024	Commercial		Infrastructure
Credit loss allowance at December 31, 2023	$	298,775	$	10,264	$	309,039
Credit loss provision (reversal), net	23,312		(705)		22,607



Credit loss allowance at March 31, 2024	$	322,087	$	9,559	$	331,646


	Unfunded Commitments Credit Loss Allowance (1)
	Loans Held-for-Investment				HTM Preferred
Three Months Ended March 31, 2024	Commercial		Infrastructure		Interests (2)		CMBS (2)		Total
Credit loss allowance at December 31, 2023	$	8,742	$	564	$	1,548	$	74	$	10,928
Credit loss provision, net	571		23		6,645		1		7,240
Credit loss allowance at March 31, 2024	$	9,313	$	587	$	8,193	$	75	$	18,168
Memo: Unfunded commitments as of March 31, 2024 (3)	$	1,035,180	$	66,090	$	30,686	$	31,916	$	1,163,872

______________________________________________________________________________________________________________________

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

(2)See Note 5 for further details.

(3)Represents amounts expected to be funded (see Note 22).

Loan Portfolio Activity

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


	Held-for-Investment Loans
Three Months Ended March 31, 2024	Commercial		Infrastructure		Residential		Held-for-Sale Loans		Total Loans
Balance at December 31, 2023	$	15,078,589	$	2,495,660	$	—	$	2,645,637	$	20,219,886
Acquisitions/originations/additional funding	131,886		133,299		—		289,508		554,693
Capitalized interest (1)	20,418		—		—		—		20,418
Basis of loans sold (2)	—		—		—		(218,597)		(218,597)
Loan maturities/principal repayments	(892,855)		(209,131)		—		(45,316)		(1,147,302)
Discount accretion/premium amortization	15,090		4,801		—		—		19,891
Changes in fair value	—		—		—		(29,013)		(29,013)
Foreign currency translation loss, net	(99,145)		(448)		—		—		(99,593)
Credit loss provision, net	(23,312)		705		—		(1,546)		(24,153)

Transfer to/from other asset classifications or between segments	—		(48,695)		—		48,695		—
Balance at March 31, 2024	$	14,230,671	$	2,376,191	$	—	$	2,689,368	$	19,296,230


	Held-for-Investment Loans
Three Months Ended March 31, 2023	Commercial		Infrastructure		Residential		Held-for-Sale Loans		Total Loans
Balance at December 31, 2022	$	16,048,507	$	2,352,932	$	—	$	2,784,594	$	21,186,033
Acquisitions/originations/additional funding	259,113		172,502		—		69,200		500,815
Capitalized interest (1)	27,924		130		—		—		28,054
Basis of loans sold (2)	—		—		—		(13,439)		(13,439)
Loan maturities/principal repayments	(256,644)		(165,323)		—		(38,367)		(460,334)
Discount accretion/premium amortization	12,551		2,629		—		—		15,180
Changes in fair value	—		—		—		8,901		8,901
Foreign currency translation loss, net	32,820		300		—		—		33,120
Credit loss provision, net	(29,678)		(5,339)		—		—		(35,017)


Balance at March 31, 2023	$	16,094,593	$	2,357,831	$	—	$	2,810,889	$	21,263,313

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______________________________________________________________________________________________________________________

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

(2)See Note 12 for additional disclosure on these transactions.

5. Investment Securities

Investment securities were comprised of the following as of March 31, 2024 and December 31, 2023 (amounts in thousands):


	Carrying Value as of
	March 31, 2024		December 31, 2023
RMBS, available-for-sale	$	100,319	$	102,368
RMBS, fair value option (1)	434,916		449,909
CMBS, fair value option (1), (2)	1,124,724		1,147,550
HTM debt securities, amortized cost net of credit loss allowance of $17,589 and $13,143	589,003		606,254
Equity security, fair value	7,265		8,340
Subtotal—Investment securities	2,256,227		2,314,421
VIE eliminations (1)	(1,540,154)		(1,578,859)
Total investment securities	$	716,073	$	735,562

______________________________________________________________________________________________________________________

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

(2)Includes $171.1 million and $177.3 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of March 31, 2024 and December 31, 2023, respectively.

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


	RMBS, available-for-sale		RMBS, fair value option		CMBS, fair value option		HTM Securities		Equity Security		Securitization VIEs (1)		Total
Three Months Ended March 31, 2024
Purchases/fundings	$	—	$	—	$	—	$	9,220	$	—	$	—	$	9,220
Sales and redemptions	—		—		3,166		—		1,314		(3,166)		1,314
Principal collections	1,925		11,883		3,200		17,163		—		(15,022)		19,149

Three Months Ended March 31, 2023
Purchases/fundings	$	—	$	—	$	—	$	591	$	—	$	—	$	591
Sales and redemptions	—		—		—				—		—		—
Principal collections	2,435		14,220		1,254		38,198		—		(15,329)		40,778

_________________________________________________________________________________________________________________

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

RMBS, Available-for-Sale

The Company classified all of its RMBS not eliminated in consolidation as available-for-sale as of March 31, 2024 and December 31, 2023. These RMBS are reported at fair value in the balance sheet with changes in fair value recorded in accumulated other comprehensive income (“AOCI”).

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The tables below summarize various attributes of our investments in available-for-sale RMBS as of March 31, 2024 and December 31, 2023 (amounts in thousands):


							Unrealized Gains or (Losses) Recognized in AOCI
	Amortized Cost		Credit Loss Allowance		Net Basis		Gross Unrealized Gains		Gross Unrealized Losses		Net Fair Value Adjustment		Fair Value
March 31, 2024
RMBS	$	86,258	$	—	$	86,258	$	16,967	$	(2,906)	$	14,061	$	100,319
December 31, 2023
RMBS	$	87,016	$	—	$	87,016	$	18,092	$	(2,740)	$	15,352	$	102,368


	Weighted Average Coupon (1)		WAL (Years) (2)
March 31, 2024
RMBS	5.8	%	7.8

______________________________________________________________________________________________________________________

(1)Calculated using the March 31, 2024 SOFR rate of 5.329% for floating rate securities.

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

As of March 31, 2024, approximately $89.4 million, or 89%, of RMBS were variable rate. We purchased all of the RMBS at a discount, a portion of which is accreted into income over the expected remaining life of the security. The majority of the income from this strategy is earned from the accretion of this accretable discount.

We have engaged a third party manager who specializes in RMBS to execute the trading of RMBS, the cost of which was $0.2 million for both the three months ended March 31, 2024 and 2023, respectively, recorded as management fees in the accompanying condensed consolidated statements of operations.

The following table presents the gross unrealized losses and estimated fair value of any available-for-sale securities that were in an unrealized loss position as of March 31, 2024 and December 31, 2023, and for which an allowance for credit losses has not been recorded (amounts in thousands):


	Estimated Fair Value				Unrealized Losses
	Securities with a loss less than 12 months		Securities with a loss greater than 12 months		Securities with a loss less than 12 months		Securities with a loss greater than 12 months
As of March 31, 2024
RMBS	$	6,375	$	12,714	$	(526)	$	(2,380)
As of December 31, 2023
RMBS	$	10,687	$	6,361	$	(1,322)	$	(1,418)

As of March 31, 2024 and December 31, 2023, there were 15 and 14 securities, respectively, with unrealized losses reflected in the table above. After evaluating the securities, we concluded that the unrealized losses reflected above were noncredit-related and would be recovered from the securities’ estimated future cash flows. We considered a number of factors in reaching this conclusion, including that we did not intend to sell the securities, it was not considered more likely than not that we would be forced to sell the securities prior to recovering our amortized cost, and there were no material credit events that would have caused us to otherwise conclude that we would not recover our cost. Credit losses, if any, are calculated by comparing (i) the estimated future cash flows of each security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to (ii) our net amortized cost basis. Significant judgment is used in projecting cash flows for our non-agency RMBS. As a result, actual income and/or credit losses could be materially different from what is currently projected and/or reported.

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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 and RMBS in an effort to eliminate accounting mismatches resulting from the current or potential consolidation of securitization VIEs. As of March 31, 2024, the fair value and unpaid principal balance of CMBS where we have elected the fair value option, excluding the notional value of interest-only securities and before consolidation of securitization VIEs, were $1.1 billion and $2.7 billion, respectively. As of March 31, 2024, the fair value and unpaid principal balance of RMBS where we have elected the fair value option, excluding the notional value of interest-only securities and before consolidation of securitization VIEs, were $434.9 million and $326.3 million, respectively. The $1.6 billion total fair value balance of CMBS and RMBS represents our economic interests in these assets. However, as a result of our consolidation of securitization VIEs, the vast majority of this fair value (all except $19.5 million at March 31, 2024) is eliminated against VIE liabilities before arriving at our GAAP balance for fair value option investment securities.

As of March 31, 2024, none of our CMBS or RMBS were variable rate.

HTM Debt Securities, Amortized Cost

The table below summarizes our investments in HTM debt securities as of March 31, 2024 and December 31, 2023 (amounts in thousands):


	Amortized Cost Basis		Credit Loss Allowance		Net Carrying Amount		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
March 31, 2024
CMBS	$	561,174	$	(182)	$	560,992	$	56	$	(24,145)	$	536,903
Preferred interests	16,916		(7,328)		9,588		—		(966)		8,622
Infrastructure bonds	28,502		(10,079)		18,423		30		(15)		18,438
Total	$	606,592	$	(17,589)	$	589,003	$	86	$	(25,126)	$	563,963

December 31, 2023
CMBS	$	580,704	$	(164)	$	580,540	$	43	$	(24,835)	$	555,748
Preferred interests	9,570		(2,898)		6,672		—		(318)		6,354
Infrastructure bonds	29,123		(10,081)		19,042		32		(16)		19,058
Total	$	619,397	$	(13,143)	$	606,254	$	75	$	(25,169)	$	581,160

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


	CMBS		Preferred Interests		Infrastructure Bonds		Total HTM Credit Loss Allowance
Three Months Ended March 31, 2024
Credit loss allowance at December 31, 2023	$	164	$	2,898	$	10,081	$	13,143
Credit loss provision (reversal), net	18		4,430		(2)		4,446
Credit loss allowance at March 31, 2024	$	182	$	7,328	$	10,079	$	17,589

As of March 31, 2024, we had a $10.0 million specific credit loss allowance on a $19.2 million infrastructure bond that is collateralized by a first priority lien on a coal-fired power plant in Mississippi. It was deemed credit deteriorated when we acquired the Infrastructure Lending Segment in 2018 and was placed on nonaccrual under the cost recovery method in 2023 due to a forbearance and restructuring plan agreed between the lenders and borrower that was necessitated by operating shortfalls at the plant.

We had the following commercial lending debt securities on nonaccrual that were not 90 days or greater past due as of March 31, 2024: (i) a $9.8 million preferred interest in an office park in Irvine, California and (ii) a $7.1 million preferred interest in an office building in Houston, Texas. Both of these investments were made in connection with loan modifications granted to a borrower experiencing financial difficulty, but are not considered credit deteriorated as we presently expect to recover all amounts due.

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The table below summarizes the maturities of our HTM debt securities by type as of March 31, 2024 (amounts in thousands):


	CMBS		Preferred Interests		Infrastructure Bonds		Total
Less than one year	$	80,084	$	5,967	$	—	$	86,051
One to three years	433,011		—		239		433,250
Three to five years	47,897		3,621		9,070		60,588
Thereafter	—		—		9,114		9,114
Total	$	560,992	$	9,588	$	18,423	$	589,003

Equity Security, Fair Value

During 2012, we acquired 9,140,000 ordinary shares from a related-party in Starwood European Real Estate Finance Limited (“SEREF”), a debt fund that is externally managed by an affiliate of our Manager and is listed on the London Stock Exchange. During the three months ended March 31, 2024, 1,005,348 shares were redeemed by SEREF, for proceeds of $1.3 million, leaving 6,242,339 shares held as of March 31, 2024. There were no shares redeemed by SEREF during the three months ended March 31, 2023. The fair value of the investment remeasured in USD was $7.3 million and $8.3 million as of March 31, 2024 and December 31, 2023, respectively. As of March 31, 2024, our shares represent an approximate 2.3% interest in SEREF.

6. Properties

Our properties are held within the following portfolios:

Medical Office Portfolio

The Medical Office Portfolio is comprised of 34 medical office buildings acquired during the year ended December 31, 2016. These properties, which collectively comprise 1.9 million square feet, are geographically dispersed throughout the U.S. and primarily affiliated with major hospitals or located on or adjacent to major hospital campuses. The Medical Office Portfolio includes total gross properties and lease intangibles of $779.3 million and debt of $598.8 million as of March 31, 2024.

Investing and Servicing Segment Property Portfolio

The REIS Equity Portfolio is comprised of 6 commercial real estate properties which were acquired from CMBS trusts over time. The REIS Equity Portfolio includes total gross properties and lease intangibles of $109.6 million and debt of $68.5 million as of March 31, 2024.

Commercial and Residential Lending Segment Property Portfolio

The Commercial and Residential Lending Segment Portfolio represents properties acquired through loan foreclosure or exercise of control over a mezzanine loan borrower’s pledged equity interests. This portfolio includes total gross properties and lease intangibles of $461.1 million and debt of $87.8 million as of March 31, 2024.

Woodstar Portfolios

Refer to Note 7 for a discussion of our Woodstar I and Woodstar II Portfolios which are not included in the table below.

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The table below summarizes our properties held-for-investment as of March 31, 2024 and December 31, 2023 (dollars in thousands):


	Depreciable Life	March 31, 2024		December 31, 2023
Property Segment
Land and land improvements	0 - 12 years	$	69,138	$	68,923
Buildings and building improvements	0 - 40 years	630,325		629,511
Furniture & fixtures	3 - 5 years	691		608
Investing and Servicing Segment
Land and land improvements	0 - 15 years	20,229		20,229
Buildings and building improvements	3 - 40 years	65,527		65,433
Furniture & fixtures	2 - 5 years	2,921		2,899
Commercial and Residential Lending Segment
Land and land improvements	N/A	79,361		79,361
Buildings and building improvements	0 - 50 years	139,538		139,538
Construction in progress	N/A	222,842		218,205
Furniture & fixtures	5 years	2,003		2,003
Properties, cost		1,232,575		1,226,710
Less: accumulated depreciation		(188,010)		(180,326)
Properties, net		$	1,044,565	$	1,046,384

On February 29, 2024, we sold the 16 retail properties which comprised our Property Segment's Master Lease Portfolio for a gross sale price of $387.1 million. In connection with the sale, the purchaser assumed the related mortgage debt of $194.9 million, which resulted in net proceeds of $188.0 million after selling costs. We recognized a gain of $92.0 million, which is included within gain on sale of investments and other assets in our condensed consolidated statement of operations for the three months ended March 31, 2024, and a $1.2 million loss on extinguishment of debt.

During the three months ended March 31, 2024 and 2023, there were no material sales of property within the REIS Equity Portfolio or Commercial and Residential Lending Segment.

7. Investments of Consolidated Affordable Housing Fund

As discussed in Note 2, we established the Woodstar Fund effective November 5, 2021, an investment fund which holds our Woodstar multifamily affordable housing portfolios. The Woodstar Portfolios consist of the following:

Woodstar I Portfolio

The Woodstar I Portfolio is comprised of 32 affordable housing communities with 8,948 units concentrated primarily in the Tampa, Orlando and West Palm Beach metropolitan areas. During the year ended December 31, 2015, we acquired 18 of the 32 affordable housing communities of the Woodstar I Portfolio, with the final 14 communities acquired during the year ended December 31, 2016. The Woodstar I Portfolio includes properties at fair value of $1.8 billion and debt at fair value of $732.7 million as of March 31, 2024.

Woodstar II Portfolio

The Woodstar II Portfolio is comprised of 27 affordable housing communities with 6,109 units concentrated primarily in Central and South Florida. We acquired eight of the 27 affordable housing communities in December 2017, with the final 19 communities acquired during the year ended December 31, 2018. The Woodstar II Portfolio includes properties at fair value of $1.4 billion and debt at fair value of $481.6 million as of March 31, 2024.

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Income from the Woodstar Fund’s investments reflects the following components for the three months ended March 31, 2024 and 2023 (in thousands):


	Three Months Ended March 31,
	2024		2023
Distributions from affordable housing fund investments	$	13,344	$	11,805
Unrealized change in fair value of investments (1)	(3,896)		1,160
Income from affordable housing fund investments	$	9,448	$	12,965

______________________________________________________________________________________________________________________

(1)The fair value of the Woodstar Fund’s investments are dependent upon the real estate and capital markets, which are cyclical in nature. Property and investment values are affected by, among other things, capitalization rates, the availability of capital, occupancy, rental rates and interest and inflation rates.

8. Investments in Unconsolidated Entities

The table below summarizes our investments in unconsolidated entities as of March 31, 2024 and December 31, 2023 (dollars in thousands):


	Participation / Ownership % (1)	Carrying value as of
		March 31, 2024		December 31, 2023
Equity method investments:
Equity interests in two natural gas power plants	10% - 12%	$	52,557	$	52,230
Investor entity which owns equity in an online real estate company	50%	5,579		5,575

Various	20% - 50%	17,053		16,854
		75,189		74,659
Other equity investments:
Equity interest in a servicing and advisory business	2%	12,955		12,955
Equity interest in a data center business in Ireland (2)	0.72%	7,334		1,313
Investment funds which own equity in a loan servicer and other real estate assets	4% - 6%	842		842
Various	3% - 15%	607		607
		21,738		15,717
		$	96,927	$	90,376

______________________________________________________________________________________________________________________

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

(2)This equity interest was acquired in connection with the origination of a loan in 2021. The loan was repaid during the three months ended March 31, 2024. In connection with the repayment, an observable price change occurred when a 50% voting interest in this entity was acquired by related parties, including an investment fund and certain other entities affiliated with our Manager. As a result of the acquisition and resulting observable price change, we recorded a $6.0 million increase in the carrying value of our investment to reflect its fair value implied by the acquisition.

There were no differences between the carrying value of our equity method investments and the underlying equity in the net assets of the investees as of March 31, 2024.

During the three months ended March 31, 2024, we did not become aware of (i) any observable price changes in our other equity investments accounted for under the fair value practicability election, except as discussed above, or (ii) any indicators of impairment.

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9. Goodwill and Intangibles

Goodwill

Goodwill is tested for impairment annually in the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Infrastructure Lending Segment

The Infrastructure Lending Segment’s goodwill of $119.4 million at both March 31, 2024 and December 31, 2023 represents the excess of consideration transferred over the fair value of net assets acquired on September 19, 2018 and October 15, 2018. The goodwill recognized is attributable to value embedded in the acquired Infrastructure Lending Segment’s lending platform.

LNR Property LLC (“LNR”)

The Investing and Servicing Segment’s goodwill of $140.4 million at both March 31, 2024 and December 31, 2023 represents the excess of consideration transferred over the fair value of net assets of LNR acquired on April 19, 2013. The goodwill recognized is attributable to value embedded in LNR’s existing platform, which includes a network of commercial real estate asset managers, work-out specialists, underwriters and administrative support professionals as well as proprietary historical performance data on commercial real estate assets.

Intangible Assets

Servicing Rights Intangibles

In connection with the LNR acquisition, we identified domestic servicing rights that existed at the purchase date, based upon the expected future cash flows of the associated servicing contracts. As of March 31, 2024 and December 31, 2023, the balance of the domestic servicing intangible was net of $34.3 million and $37.9 million, respectively, which was eliminated in consolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs. Before VIE consolidation, as of March 31, 2024 and December 31, 2023, the domestic servicing intangible had a balance of $53.9 million and $57.2 million, respectively, which represents our economic interest in this asset.

Lease Intangibles

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

The following table summarizes our intangible assets, which are comprised of servicing rights intangibles and lease intangibles, as of March 31, 2024 and December 31, 2023 (amounts in thousands):


	As of March 31, 2024						As of December 31, 2023
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Domestic servicing rights, at fair value	$	19,612	$	—	$	19,612	$	19,384	$	—	$	19,384
In-place lease intangible assets	96,158		(68,896)		27,262		96,158		(67,420)		28,738
Favorable lease intangible assets	27,928		(11,535)		16,393		27,928		(11,083)		16,845
Total net intangible assets	$	143,698	$	(80,431)	$	63,267	$	143,470	$	(78,503)	$	64,967

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The following table summarizes the activity within intangible assets for the three months ended March 31, 2024 (amounts in thousands):


	Domestic Servicing Rights		In-place Lease Intangible Assets		Favorable Lease Intangible Assets		Total
Balance as of January 1, 2024	$	19,384	$	28,738	$	16,845	$	64,967

Amortization	—		(1,476)		(452)		(1,928)


Changes in fair value due to changes in inputs and assumptions	228		—		—		228
Balance as of March 31, 2024	$	19,612	$	27,262	$	16,393	$	63,267

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


2024 (remainder of)	$	5,267
2025	6,099
2026	4,573
2027	4,089
2028	3,943
Thereafter	19,684
Total	$	43,655

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10. Secured Borrowings

Secured Financing Agreements

The following table is a summary of our secured financing agreements in place as of March 31, 2024 and December 31, 2023 (dollars in thousands):


													Outstanding Balance at
	Current Maturity		Extended Maturity (a)		Weighted Average Pricing		Pledged Asset Carrying Value			Maximum Facility Size			March 31, 2024			December 31, 2023
Repurchase Agreements:
Commercial Loans	Jun 2024 to Dec 2028	(b)	Oct 2025 to Dec 2030	(b)	Index + 2.05%	(c)	$	9,736,328		$	12,234,452	(d)	$	6,010,151		$	7,170,389
Residential Loans	Mar 2025 to Feb 2026		Mar 2025 to Apr 2026		SOFR + 1.90%		2,516,364			3,450,000			2,269,811			2,287,655
Infrastructure Loans	Sep 2024		Sep 2026		SOFR + 2.07%		571,784			650,000			475,763			453,217
Conduit Loans	Dec 2024 to Jun 2026		Dec 2025 to Jun 2027		SOFR + 2.15%		72,402			375,000			56,507			26,930
CMBS/RMBS	Dec 2024 to Apr 2032	(e)	Mar 2025 to Oct 2032	(e)	(f)		1,397,945			990,460			706,459		(g)	714,168
Total Repurchase Agreements							14,294,823			17,699,912			9,518,691			10,652,359
Other Secured Financing:
Borrowing Base Facility	Nov 2024		Oct 2026		SOFR + 2.11%		104,276			750,000		(h)	5,384			27,639
Commercial Financing Facilities	Jul 2024 to Aug 2028		Jul 2025 to Dec 2030		Index + 2.24%		580,687			571,030		(i)	408,210			387,822

Infrastructure Financing Facilities	Jul 2025 to Oct 2025		Oct 2027 to Jul 2032		Index + 2.15%		818,997			1,050,000			594,211			631,187
Property Mortgages - Fixed rate	Oct 2025 to Jun 2026		N/A		4.52%		32,436			29,797			29,797			29,898
Property Mortgages - Variable rate	Nov 2024 to Dec 2025		N/A		(j)		677,616			707,941			705,916			853,145
Term Loans and Revolver	(k)		N/A		(k)		N/A		(k)	1,513,281			1,363,281			1,366,778
Total Other Secured Financing							2,214,012			4,622,049			3,106,799			3,296,469
							$	16,508,835		$	22,321,961		12,625,490			13,948,828
Unamortized net discount													(23,530)			(24,975)
Unamortized deferred financing costs													(45,473)			(55,857)
													$	12,556,487		$	13,867,996

______________________________________________________________________________________________________________________

(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 $2.5 billion as of March 31, 2024 are indexed to EURIBOR, BBSY, SARON and SONIA. The remainder are indexed to SOFR.

(d)Certain facilities with an aggregate initial maximum facility size of $11.8 billion may be increased to $12.2 billion, subject to certain conditions. The $12.2 billion amount includes such upsizes.

(e)Certain facilities with an outstanding balance of $330.9 million as of March 31, 2024 carry a rolling 12-month term which may reset quarterly with the lender’s consent. These facilities carry no maximum facility size.

(f)A facility with an outstanding balance of $279.0 million as of March 31, 2024 has a weighted average fixed annual interest rate of 3.54%. All other facilities are variable rate with a weighted average rate of SOFR + 2.19%.

(g)Includes: (i) $279.0 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $32.2 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 15).

(h)The maximum facility size as of March 31, 2024 of $450.0 million may be increased to $750.0 million, subject to certain conditions.

(i)Certain facilities with an aggregate initial maximum facility size of $471.0 million may be increased to $571.0 million, subject to certain conditions. The $571.0 million amount includes such upsizes.

(j)Includes a $600.0 million first mortgage and mezzanine loan secured by our Medical Office Portfolio. This debt has a weighted average interest rate of SOFR + 2.18% that we swapped to a fixed rate of 3.46%. The remainder have a weighted average rate of SOFR + 2.73%.

(k)Consists of: (i) a $770.8 million term loan facility that matures in July 2026, of which $382.0 million has an annual interest rate of SOFR + 2.60% and $388.8 million has an annual interest rate of SOFR + 3.35%, subject to a 0.75% SOFR floor, (ii) a $150.0 million revolving credit facility that matures in April 2026 with an annual interest rate of SOFR + 2.60% and (iii) a $592.5 million term loan facility that matures in November 2027, with an annual interest

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rate of SOFR + 3.25%, subject to a 0.50% SOFR floor. These facilities are secured by the equity interests in certain of our subsidiaries which totaled $5.9 billion as of March 31, 2024.

The above table no longer reflects property mortgages of the Woodstar Portfolios which, as discussed in Notes 2 and 7, are now reflected within “Investments of consolidated affordable housing fund” on our condensed consolidated balance sheets.

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

Our secured financing agreements contain certain financial tests and covenants. As of March 31, 2024, we were in compliance with all such covenants.

We seek to mitigate risks associated with our repurchase agreements by managing risk related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value. The margin call provisions under the majority of our repurchase facilities, consisting of 65% of these agreements, do not permit valuation adjustments based on capital market events and are limited to collateral-specific credit marks generally determined on a commercially reasonable basis. To monitor credit risk associated with the performance and value of our loans and investments, our asset management team regularly reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary. For the 35% of repurchase agreements which do permit valuation adjustments based on capital market events, approximately 6% 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 months ended March 31, 2024 and 2023, approximately $9.6 million and $10.2 million, respectively, of amortization of deferred financing costs from secured financing agreements was included in interest expense on our condensed consolidated statements of operations.

As of March 31, 2024, Morgan Stanley Bank, N.A., Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. held collateral sold under certain of our repurchase agreements with carrying values that exceeded the respective repurchase obligations by $918.2 million, $818.3 million and $671.1 million, respectively. The weighted average extended maturity of those repurchase agreements is 3.4 years, 6.5 years and 3.7 years, respectively.

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Collateralized Loan Obligations and Single Asset Securitization

Commercial and Residential Lending Segment

In February 2022, we refinanced a pool of our commercial loans held-for-investment through a CLO, STWD 2022-FL3. On the closing date, the CLO issued $1.0 billion of notes and preferred shares, of which $842.5 million of notes were purchased by third party investors. We retained $82.5 million of notes along with preferred shares with a liquidation preference of $75.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO for a period of two years. During the three months ended March 31, 2024, we utilized the reinvestment feature, contributing $6.7 million of additional interests into the CLO.

In July 2021, we contributed into a single asset securitization, STWD 2021-HTS, a previously originated $230.0 million first mortgage and mezzanine loan on a portfolio of 41 extended stay hotels with $210.1 million of third party financing.

In May 2021, we refinanced a pool of our commercial loans held-for-investment through a CLO, STWD 2021-FL2. On the closing date, the CLO issued $1.3 billion of notes and preferred shares, of which $1.1 billion of notes were purchased by third party investors. We retained $70.1 million of notes, along with preferred shares with a liquidation preference of $127.5 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash. The reinvestment period expired during 2023 and during the three months ended March 31, 2024, we repaid CLO debt in the amount of $73.5 million.

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 of notes and preferred shares, of which $936.4 million of notes were purchased by third party investors. We retained $86.6 million of notes, along with preferred shares with a liquidation preference of $77.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allowed us to contribute new loans or participation interests in loans to the CLO in exchange for cash. The reinvestment period expired during 2022 and during the three months ended March 31, 2024, we repaid CLO debt in the amount of $184.2 million.

Infrastructure Lending Segment

In January 2022, we refinanced a pool of our infrastructure loans held-for-investment through a CLO, STWD 2021-SIF2. On the closing date, the CLO issued $500.0 million of notes and preferred shares, of which $410.0 million of notes were purchased by third party investors. We retained preferred shares with a liquidation preference of $90.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO for a period of three years. During the three months ended March 31, 2024, we utilized the reinvestment feature, contributing $17.8 million of additional interests into the CLO.

In April 2021, we refinanced a pool of our infrastructure loans held-for-investment through a CLO, STWD 2021-SIF1. On the closing date, the CLO issued $500.0 million of notes and preferred shares, of which $410.0 million of notes were purchased by third party investors. We retained preferred shares with a liquidation preference of $90.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO for a period of three years. During the three months ended March 31, 2024, we utilized the reinvestment feature, contributing $27.2 million of additional interests into the CLO.

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The following table is a summary of our CLOs and our SASB as of March 31, 2024 and December 31, 2023 (amounts in thousands):

March 31, 2024

Count

Face
Amount

Carrying
Value

Weighted
Average Spread

Maturity

STWD 2022-FL3

Collateral assets

1,000,000

1,007,284

SOFR + 3.49%

(a)

August 2026

(b)

Financing

840,620

837,805

SOFR + 1.89%

(c)

November 2038

(d)

STWD 2021-HTS

Collateral assets

210,181

216,750

SOFR + 4.02%

(a)

April 2026

(b)

Financing

195,576

SOFR + 2.42%

(c)

April 2034

(d)

STWD 2021-FL2

Collateral assets

1,206,319

1,216,834

SOFR + 3.81%

(a)

April 2026

(b)

Financing

988,749

987,167

SOFR + 1.89%

(c)

April 2038

(d)

STWD 2019-FL1

Collateral assets

550,006

553,096

SOFR + 3.58%

(a)

June 2026

(b)

Financing

386,381

386,380

SOFR + 1.83%

(c)

July 2038

(d)

STWD 2021-SIF2

Collateral assets

458,687

514,678

SOFR + 3.80%

(a)

January 2028

(b)

Financing

410,000

408,393

SOFR + 2.11%

(c)

January 2033

(d)

STWD 2021-SIF1

Collateral assets

439,322

515,246

SOFR + 3.88%

(a)

September 2027

(b)

Financing

410,000

408,546

SOFR + 2.42%

(c)

April 2032

(d)

Total

Collateral assets

3,864,515

4,023,888

Financing

3,231,326

3,223,867

December 31, 2023

Count

Face
Amount

Carrying
Value

Weighted
Average Spread

Maturity

STWD 2022-FL3

Collateral assets

997,569

1,007,532

SOFR + 3.53%

(a)

May 2026

(b)

Financing

840,620

837,881

SOFR + 1.89%

(c)

November 2038

(d)

STWD 2021-HTS

Collateral assets

223,193

224,509

SOFR + 3.87%

(a)

April 2026

(b)

Financing

203,284

203,058

SOFR + 2.82%

(c)

April 2034

(d)

STWD 2021-FL2

Collateral assets

1,272,585

1,288,165

SOFR + 3.95%

(a)

January 2026

(b)

Financing

1,065,713

1,063,454

SOFR + 1.85%

(c)

April 2038

(d)

STWD 2019-FL1

Collateral assets

734,099

739,684

SOFR + 3.51%

(a)

May 2025

(b)

Financing

570,546

SOFR + 1.62%

(c)

July 2038

(d)

STWD 2021-SIF2

Collateral assets

499,401

514,286

SOFR + 3.87%

(a)

December 2027

(b)

Financing

410,000

408,166

SOFR + 2.11%

(c)

January 2033

(d)

STWD 2021-SIF1

Collateral assets

499,767

514,594

SOFR + 3.97%

(a)

August 2027

(b)

Financing

410,000

408,187

SOFR + 2.42%

(c)

April 2032

(d)

Total

Collateral assets

4,226,614

4,288,770

Financing

3,500,163

3,491,292

______________________________________________________________________________________________________________________________

(a)Represents the weighted-average coupon earned on variable rate loans during the respective year-to-date period and excludes loans for which interest income is not recognized. Of the loans financed by the STWD 2021-FL2 CLO as of March 31, 2024, 7% earned fixed-rate weighted average interest of 7.39%. Of the investments financed by the STWD 2021-SIF1 CLO as of March 31, 2024, 2% earned fixed-rate weighted average interest of 5.68%.

(b)Represents the weighted-average maturity, assuming the extended contractual maturity of the collateral assets.

(c)Represents the weighted-average cost of financing, inclusive of deferred issuance costs.

(d)Repayments of the CLOs and SASB are tied to timing of the related collateral asset repayments. The term of the CLOs and SASB financing obligations represents the legal final maturity date.

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We incurred $37.9 million of issuance costs in connection with the CLOs and SASB, which are amortized on an effective yield basis over the estimated life of the CLOs and SASB. For the three months ended March 31, 2024 and 2023, approximately $2.0 million and $2.7 million, respectively, of amortization of deferred financing costs was included in interest expense on our condensed consolidated statements of operations. As of March 31, 2024 and December 31, 2023, our unamortized issuance costs were $7.5 million and $9.5 million, respectively.

The CLOs and SASB are considered VIEs, for which we are deemed the primary beneficiary. We therefore consolidate the CLOs and SASB. Refer to Note 15 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 our principal repayments schedule for secured financings based on the earlier of (i) the extended contractual maturity of each credit facility or (ii) the extended contractual maturity of each of the investments that have been pledged as collateral under the respective credit facility (amounts in thousands):


	Repurchase Agreements		Other Secured Financing		CLOs and SASB (a)		Total
2024 (remainder of)	$	515,639	$	634,084	$	167,665	$	1,317,388
2025	2,093,167		301,171		941,958		3,336,296
2026	2,938,739		923,618		1,689,436		5,551,793
2027	2,988,663		1,086,335		176,026		4,251,024
2028	774,644		144,203		181,306		1,100,153
Thereafter	207,839		17,388		74,935		300,162
Total	$	9,518,691	$	3,106,799	$	3,231,326	$	15,856,816

______________________________________________________________________________________________________________________

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

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11. Unsecured Senior Notes

The following table is a summary of our unsecured senior notes outstanding as of March 31, 2024 and December 31, 2023 (dollars in thousands):


	Coupon Rate			Effective Rate (1)		Maturity Date	Remaining Period of Amortization	Carrying Value at
								March 31, 2024		December 31, 2023
2027 Convertible Notes	6.75	%		7.38	%	7/15/2027	3.3 years	380,750		380,750
2024 Senior Notes	3.75	%		3.94	%	12/31/2024	0.8 years	400,000		400,000
2025 Senior Notes	4.75	%	(2)	5.04	%	3/15/2025	1.0 year	500,000		500,000
2026 Senior Notes	3.63	%		3.77	%	7/15/2026	2.3 years	400,000		400,000
2027 Senior Notes	4.38	%	(3)	4.49	%	1/15/2027	2.8 years	500,000		500,000
2029 Senior Notes	7.25	%	(4)	7.37	%	4/1/2029	5.0 years	600,000		—
Total principal amount								2,780,750		2,180,750
Unamortized discount—Convertible Notes								(8,040)		(8,570)
Unamortized discount—Senior Notes								(7,656)		(5,445)
Unamortized deferred financing costs								(13,388)		(7,847)
Total carrying amount								$	2,751,666	$	2,158,888

______________________________________________________________________________________________________________________

(1)Effective rate includes the effects of underwriter purchase discount.

(2)The coupon on the 2025 Senior Notes is 4.75%. At closing, we swapped $470.0 million of the notes to a floating rate of LIBOR + 2.53%, which was converted to SOFR + 2.53% effective July 2023.

(3)The coupon on the 2027 Senior Notes is 4.375%. At closing, we swapped the notes to a floating rate of SOFR + 2.95%.

(4)The coupon on the 2029 Senior Notes is 7.25%. At closing, we swapped the notes to a floating rate of SOFR + 3.25%.

Our unsecured senior notes contain certain financial tests and covenants. As of March 31, 2024, we were in compliance with all such covenants.

Senior Notes Due 2029

On March 27, 2024, we issued $600.0 million of 7.250% Senior Notes due 2029 (the “2029 Senior Notes”). The 2029 Senior Notes mature on April 1, 2029. Prior to October 1, 2028, we may redeem some or all of the 2029 Notes at a price equal to 100% of the principal amount thereof, plus the applicable “make-whole” premium as of the applicable date of redemption. On and after October 1, 2028, we may redeem some or all of the 2029 Notes at a price equal to 100% of the principal amount thereof. In addition, prior to April 1, 2027, we may redeem up to 40% of the 2029 Notes at the applicable redemption price using the proceeds of certain equity offerings.

Convertible Notes

In July 2023, we issued $380.8 million of 6.750% Convertible Senior Notes due 2027 (the “2027 Convertible Notes”) for net proceeds of $371.2 million. The notes mature on July 15, 2027.

We recognized interest expense from our Convertible Notes (including prior convertible notes repaid during 2023) of $7.0 million and $2.9 million during three months ended March 31, 2024 and 2023, respectively.

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The following table details the conversion attributes of our Convertible Notes outstanding as of March 31, 2024 (amounts in thousands, except rates):


	March 31, 2024
	Conversion	Conversion
	Rate (1)	Price (2)
2027 Convertible Notes	48.1783	$	20.76

(1) The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of 2027

Convertible Notes converted, as adjusted in accordance with the indenture governing the 2027 Convertible Notes

(including the applicable supplemental indenture).

(2) As of March 31, 2024, the market price of the Company's common stock was $20.33.

The if-converted value of the 2027 Convertible Notes was less than their principal amount by $7.8 million at March 31, 2024 as the closing market price of the Company’s common stock of $20.33 was less than the implicit conversion price of $20.76 per share. The if-converted value of the principal amount of the 2027 Convertible Notes was $372.9 million as of March 31, 2024. As of March 31, 2024, the net carrying amount and fair value of the 2027 Convertible Notes was $372.0 million and $383.1 million, respectively.

Upon conversion of the 2027 Convertible Notes, settlement may be made in common stock, cash, or a combination of both, at the option of the Company.

Conditions for Conversion

Prior to January 15, 2027, the 2027 Convertible Notes will be convertible only upon satisfaction of one or more of the following conditions: (1) the closing market price of the Company’s common stock is at least 110% of the conversion price of the 2027 Convertible Notes for at least 20 out of 30 trading days prior to the end of the preceding fiscal quarter, (2) the trading price of the 2027 Convertible Notes is less than 98% of the product of (i) the conversion rate and (ii) the closing price of the Company’s common stock during any five consecutive trading day period, (3) the Company issues certain equity instruments at less than the 10-day average closing market price of its common stock or the per-share value of certain distributions exceeds the market price of the Company’s common stock by more than 10% or (4) certain other specified corporate events (significant consolidation, sale, merger, share exchange, fundamental change, etc.) occur.

On or after January 15, 2027, holders of the 2027 Convertible Notes may convert each of their notes at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date.

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12. Loan Securitization/Sale Activities

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

Loan Securitizations

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

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

The following summarizes the face amount and proceeds of commercial loans securitized for the three months ended March 31, 2024 and 2023 (amounts in thousands):


	Commercial Loans
	Face Amount		Proceeds
For the Three Months Ended March 31,
2024	$	211,700	$	218,596
2023	12,196		13,439

There were no residential loans securitized during the three months ended March 31, 2024 and 2023

The securitization of these commercial and residential loans does not result in a discrete gain or loss since they are carried under the fair value option.

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

Commercial and Residential Loan Sales

Within the Commercial and Residential Lending Segment, we originate or acquire commercial mortgage loans, subsequently selling all or a portion thereof. Typically, our motivation for entering into these transactions is to effectively create leverage on the subordinated position that we will retain and hold for investment. We also may sell certain of our previously-acquired residential loans to third parties outside a securitization.

There were no sales of commercial or residential loans within the Commercial and Residential Lending Segment during the three months ended March 31, 2024 and 2023.

Infrastructure Loan Sales

There were no sales of loans by the Infrastructure Lending Segment during the three months ended March 31, 2024 and 2023.

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13. 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 14 to the consolidated financial statements included in our Form 10-K for further discussion of our risk management objectives and policies.

Designated Hedges

The Company does not generally elect to apply the hedge accounting designation to its hedging instruments. As of March 31, 2024 and December 31, 2023, the Company did not have any designated hedges.

Non-designated Hedges and Derivatives

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

•Foreign exchange (“Fx”) forwards whereby we agree to buy or sell a specified amount of foreign currency for a specified amount of USD at a future date, economically fixing the USD amounts of foreign denominated cash flows we expect to receive or pay related to certain foreign denominated loan investments;

•Interest rate contracts which hedge a portion of our exposure to changes in interest rates;

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

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

The following table summarizes our non-designated derivatives as of March 31, 2024 (notional amounts in thousands):

Type of Derivative

Number of Contracts

Aggregate Notional Amount

Notional Currency

Maturity

Fx contracts – Buy Euros (“EUR”)

399,300

EUR

April 2024 - April 2026

Fx contracts – Buy Pounds Sterling (“GBP”)

68,963

GBP

April 2024 - January 2027

Fx contracts – Buy Australian dollar (“AUD”)

819,763

AUD

April 2024 - October 2026

Fx contracts – Sell EUR

162

838,898

EUR

April 2024 - February 2027

Fx contracts – Sell GBP

209

552,574

GBP

April 2024 - April 2027

Fx contracts – Sell AUD

140

1,620,052

AUD

April 2024 - July 2027

Fx contracts – Sell Swiss Franc (“CHF”)

20,900

CHF

April 2024 - November 2025

Interest rate swaps – Paying fixed rates

4,524,605

USD

April 2024 - March 2034

Interest rate swaps – Receiving fixed rates

1,592,500

USD

March 2025 - February 2030

Interest rate caps

624,332

USD

November 2024 - April 2025

Interest rate caps

61,000

GBP

April 2024

Credit instruments

49,000

USD

September 2058 - August 2061

Interest rate swap guarantees

98,925

USD

June 2025

Total

700

The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 (amounts in thousands):


	Fair Value of Derivatives in an Asset Position (1) as of				Fair Value of Derivatives in a Liability Position (2) as of
	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
Interest rate contracts	$	24,367	$	8,899	$	52,312	$	48,401

Foreign exchange contracts	58,196		53,979		22,074		54,066
Credit instruments	353		559		261		—
Total derivatives	$	82,916	$	63,437	$	74,647	$	102,467

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___________________________________________________

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

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

The table below presents the effect of our derivative financial instruments on the condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023 (amounts in thousands):


Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income	Amount of Gain (Loss) Recognized in Income for the Three Months Ended March 31,
		2024		2023
Interest rate contracts	Gain (loss) on derivative financial instruments, net	$	54,298	$	(22,950)

Foreign exchange contracts	Gain (loss) on derivative financial instruments, net	48,123		(10,344)
Credit instruments	Gain (loss) on derivative financial instruments, net	(482)		466
		$	101,939	$	(32,828)

14. Offsetting Assets and Liabilities

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


			(ii) Gross Amounts Offset in the Statement of Financial Position		(iii) = (i) - (ii) Net Amounts Presented in the Statement of Financial Position		(iv) Gross Amounts Not Offset in the Statement of Financial Position
	(i) Gross Amounts Recognized						Financial Instruments		Cash Collateral Received / Pledged		(v) = (iii) - (iv) Net Amount
As of March 31, 2024
Derivative assets	$	82,916	$	—	$	82,916	$	40,098	$	—	$	42,818
Derivative liabilities	$	74,647	$	—	$	74,647	$	40,098	$	34,549	$	—
Repurchase agreements	9,518,691		—		9,518,691		9,518,691		—		—
	$	9,593,338	$	—	$	9,593,338	$	9,558,789	$	34,549	$	—
As of December 31, 2023
Derivative assets	$	63,437	$	—	$	63,437	$	41,341	$	—	$	22,096
Derivative liabilities	$	102,467	$	—	$	102,467	$	41,340	$	61,127	$	—
Repurchase agreements	10,652,359		—		10,652,359		10,652,359		—		—
	$	10,754,826	$	—	$	10,754,826	$	10,693,699	$	61,127	$	—

15. Variable Interest Entities

Investment Securities

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

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

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VIEs in which we are the Primary Beneficiary

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

As discussed in Note 10, we have refinanced various pools of our commercial and infrastructure loans held-for-investment through five CLOs and one SASB, which are considered to be VIEs. We are the primary beneficiary of, and therefore consolidate, the CLOs and SASB in our financial statements as we have both (i) the power to direct the activities in our role as collateral manager, collateral advisor, or controlling class representative that most significantly impact the CLOs’ and SASB’s economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the CLOs and SASB that could be potentially significant through the subordinate interests we own.

The following table details the assets and liabilities of our consolidated CLOs and SASB as of March 31, 2024 and December 31, 2023 (amounts in thousands):


	March 31, 2024		December 31, 2023
Assets:
Cash and cash equivalents	$	136,858	$	33,175
Loans held-for-investment	3,847,992		4,210,097
Investment securities	9,326		9,946
Accrued interest receivable	24,408		26,355
Other assets	5,304		9,197
Total Assets	$	4,023,888	$	4,288,770
Liabilities
Accounts payable, accrued expenses and other liabilities	$	20,100	$	21,174
Collateralized loan obligations and single asset securitization, net	3,223,867		3,491,292
Total Liabilities	$	3,243,967	$	3,512,466

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

We also hold controlling interests in other non-securitization entities that are considered VIEs. The Woodstar Fund, Woodstar Feeder Fund, L.P. and one of the Woodstar Fund’s indirect investees, SPT Dolphin Intermediate LLC (“SPT Dolphin”), the entity which holds the Woodstar II Portfolio, are each VIEs 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 those VIEs because we possess both the power to direct the activities of the VIEs that most significantly impact their economic performance and a significant economic interest in each entity. The Woodstar Fund had total assets of $2.0 billion, including its indirect investment in SPT Dolphin, and no significant liabilities as of March 31, 2024. As of March 31, 2024, Woodstar Feeder Fund, L.P. and its consolidated subsidiary which is also considered a VIE, Woodstar Feeder REIT, LLC, had a $0.6 billion investment in the Woodstar Fund, had no significant liabilities and had temporary equity of $0.4 billion consisting of the contingently redeemable non-controlling interests of the third party investors (see Note 17).

We also hold a 51% controlling interest in a joint venture (the “CMBS JV”) within our Investing and Servicing Segment, which is considered a VIE because the third party interest holder does not carry kick-out rights or substantive participating rights. We are deemed the primary beneficiary of the CMBS JV. This VIE had total assets of $303.1 million and liabilities of $66.9 million as of March 31, 2024. Refer to Note 17 for further discussion.

In addition to the above non-securitization entities, we have smaller VIEs with total assets of $48.0 million and liabilities of $10.2 million as of March 31, 2024.

VIEs in which we are not the Primary Beneficiary

In certain instances, we hold a variable interest in a VIE in the form of CMBS, but either (i) we are not appointed, or do not serve as, special servicer or servicing administrator or (ii) an unrelated third party has the rights to unilaterally remove us as special servicer without cause. In these instances, we do not have the power to direct activities that most significantly impact

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the VIE’s economic performance. In other cases, the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive benefits from the VIE which could potentially be significant. For these structures, we are not deemed to be the primary beneficiary of the VIE, and we do not consolidate these VIEs.

As noted above, we are not obligated to provide, nor have we provided, any financial support for any of our securitization VIEs, whether or not we are deemed to be the primary beneficiary. As such, the risk associated with our involvement in these VIEs is limited to the carrying value of our investment in the entity. As of March 31, 2024, our maximum risk of loss related to securitization VIEs in which we were not the primary beneficiary was $19.5 million on a fair value basis.

As of March 31, 2024, the securitization VIEs which we do not consolidate had debt obligations to beneficial interest holders with unpaid principal balances, excluding the notional value of interest-only securities, of $3.9 billion. The corresponding assets are comprised primarily of commercial mortgage loans with unpaid principal balances corresponding to the amounts of the outstanding debt obligations.

We also hold passive non-controlling interests in certain unconsolidated entities that are considered VIEs. We are not the primary beneficiaries of these VIEs as we do not possess the power to direct the activities of the VIEs that most significantly impact their economic performance and therefore report our interests, which totaled $0.8 million as of March 31, 2024, within investments in unconsolidated entities on our condensed consolidated balance sheet. Our maximum risk of loss is limited to our carrying value of the investments.

16. Related-Party Transactions

Management Agreement

We are party to a management agreement (the “Management Agreement”) with our Manager. Under the Management Agreement, our Manager, subject to the oversight of our board of directors, is required to manage our day to day activities, for which our Manager receives a base management fee and is eligible for an incentive fee and stock awards. Our Manager’s personnel perform certain due diligence, legal, management and other services that outside professionals or consultants would otherwise perform. As such, in accordance with the terms of our Management Agreement, our Manager is paid or reimbursed for the documented costs of performing such tasks, provided that such costs and reimbursements are in amounts no greater than those which would be payable to outside professionals or consultants engaged to perform such services pursuant to agreements negotiated on an arm’s-length basis. Refer to Note 17 to the consolidated financial statements included in our Form 10-K for further discussion of this agreement.

Base Management Fee. For the three months ended March 31, 2024 and 2023, approximately $21.9 million and $21.8 million, respectively, was incurred for base management fees. As of both March 31, 2024 and December 31, 2023, there were $21.9 million of unpaid base management fees included in related-party payable in our condensed consolidated balance sheets.

Incentive Fee. For the three months ended March 31, 2024 and 2023, approximately $19.1 million and $12.4 million, respectively, was incurred for incentive fees. As of March 31, 2024 and December 31, 2023, there were $19.1 million and $19.5 million, respectively, of unpaid incentive fees included in related-party payable in our condensed consolidated balance sheets.

Expense Reimbursement. For the three months ended March 31, 2024 and 2023, approximately $0.5 million and $1.7 million, respectively, was incurred for executive compensation and other reimbursable expenses and recognized within general and administrative expenses in our condensed consolidated statements of operations. As of March 31, 2024 and December 31, 2023, there were $3.2 million and $3.4 million, respectively, of unpaid reimbursable executive compensation and other expenses included in related-party payable in our condensed consolidated balance sheets.

Equity Awards. In certain instances, we issue RSAs to certain employees of affiliates of our Manager who perform services for us. During the three months ended March 31, 2024 and 2023, we granted 924,092 and 226,955 RSAs, respectively, at grant date fair values of $18.8 million and $4.3 million, respectively. Expenses related to the vesting of awards to employees of affiliates of our Manager were $1.5 million and $2.2 million during the three months ended March 31, 2024 and 2023, respectively, and are reflected in general and administrative expenses in our condensed consolidated statements of operations. These shares generally vest over a three-year period. Compensation expense related to the ESPP (refer to Note 17) for employees of affiliates of our Manager were not material during the three months ended March 31, 2024 and 2023, and are reflected in general and administrative expenses in our condensed consolidated statements of operations.

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Manager Equity Plan

In April 2022, the Company’s shareholders approved the Starwood Property Trust, Inc. 2022 Manager Equity Plan (the “2022 Manager Equity Plan”) which replaces the Starwood Property Trust, Inc. 2017 Manager Equity Plan (the “2017 Manager Equity Plan”). In March 2024, we granted 1,300,000 RSUs to our Manager under the 2022 Manager Equity Plan. In November 2022, we granted 1,500,000 RSUs to our Manager under the 2022 Manager Equity Plan. In November 2020, we granted 1,800,000 RSUs to our Manager under the 2017 Manager Equity Plan. In connection with these grants and prior similar grants, we recognized share-based compensation expense of $4.8 million and $5.1 million within management fees in our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023, respectively. Refer to Note 17 for further discussion.

Investments in Loans and Securities

In March 2022, we originated a new loan on the development and recapitalization of luxury rental cabins with a total commitment of $200.0 million, of which $149.0 million was outstanding as of March 31, 2024. The loan bears interest at SOFR + 6.50% plus fees and has a term of 24 months with three one-year extension options. Certain members of our executive team who also serve on our board of directors own minority equity interests in the borrower. In July 2023, we agreed to a 10-month 300 bps interest payment deferral, which amounted to $3.4 million as of March 31, 2024 . In January 2024, the interest payment deferral period was extended to December 2024.

In December 2012, the Company acquired 9,140,000 ordinary shares in SEREF, a debt fund that is externally managed by an affiliate of our Manager and is listed on the London Stock Exchange, for approximately $14.7 million, which equated to approximately 4% ownership of SEREF. During the three months ended March 31, 2024, 1,005,348 shares were redeemed by SEREF, for proceeds of $1.3 million, leaving 6,242,339 shares held as of March 31, 2024. There were no shares redeemed during the three months ended March 31, 2023. As of March 31, 2024, our shares represent an approximate 2.3% interest in SEREF. Refer to Note 5 for additional details.

We hold a 0.72% equity interest in a data center business in Ireland that had a carrying value of $7.3 million as of March 31, 2024. An investment fund and certain other entities affiliated with our Manager exercise a combined 50% voting interest in this entity. Refer to Note 8 for additional details.

Lease Arrangements

In March 2020, we entered into an office lease agreement with an entity which is controlled by our Chairman and CEO through majority equity ownership of the entity. The leased premises serve as our new Miami Beach office following the expiration of our former lease in Miami Beach. The lease, as amended in September 2022, is for 64,424 square feet of office space, commenced July 1, 2022 and has an initial term of 15 years from the monthly lease payment commencement date of November 1, 2022. The lease payments are based on an annual base rate of $52.00 per square foot that increases by 3% each November, plus our pro rata share of building operating expenses. Prior to the execution of this lease, we engaged an independent third party leasing firm and external counsel to advise the independent directors of our board of directors on market terms for the lease. The terms of the lease and subsequent amendment were approved by our independent directors. In April 2020, we provided a $1.9 million cash security deposit to the landlord. During the three months ended March 31, 2024 and 2023, we made payments to the landlord under the terms of the lease of $1.6 million and $1.4 million, respectively, for rent, parking and our pro rata share of building operating expenses. During the three months ended March 31, 2024 and 2023, we recognized $1.7 million and $1.6 million, respectively, of expenses with respect to this lease within general and administrative expenses in our condensed consolidated statements of operations.

Other Related-Party Arrangements

Highmark Residential (“Highmark”), an affiliate of our Manager, provides property management services for properties within our Woodstar I and Woodstar II Portfolios. Fees paid to Highmark are calculated as a percentage of gross receipts and are at market terms. During the three months ended March 31, 2024 and 2023, property management fees to Highmark of $1.6 million and $1.5 million, respectively, were recognized within our Woodstar Portfolios.

Refer to Note 17 to the consolidated financial statements included in our Form 10-K for further discussion of related-party agreements.

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17. Stockholders’ Equity and Non-Controlling Interests

During the three months ended March 31, 2024, our board of directors declared the following dividends:

Declaration Date

Record Date

Ex-Dividend Date

Payment Date

Amount

Frequency

3/15/24

3/29/24

3/27/24

4/15/24

0.48

Quarterly

ATM Agreement

In May 2022, we entered into a Starwood Property Trust, Inc. Common Stock Sales Agreement (the “ATM Agreement”) with a syndicate of financial institutions to sell shares of the Company’s common stock of up to $500.0 million from time to time, through an “at the market” equity offering program. Sales of shares under the ATM Agreement are made by means of ordinary brokers’ transactions on the New York Stock Exchange or otherwise at market prices prevailing at the time of sale or at negotiated prices. There were no shares issued under the ATM Agreement during the three months ended March 31, 2024 and 2023.

Dividend Reinvestment and Direct Stock Purchase Plan

During the three months ended March 31, 2024 and 2023, shares issued under the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) were not material.

Employee Stock Purchase Plan

In April 2022, the Company’s shareholders approved the ESPP which allows eligible employees to purchase common stock of the Company at a discounted purchase price. The discounted purchase price of a share of the Company's common stock is 85% of the fair market value (closing market price) at the lower of the beginning or the end of the quarterly offering period. Participants may purchase shares not exceeding an aggregate fair market value of $25,000 in any calendar year. The maximum aggregate number of shares subject to issuance in accordance with the ESPP is 2,000,000 shares.

During the three months ended March 31, 2024 and 2023, 66,315 and 65,026 shares, respectively, of common stock were purchased by participants at a weighted average discounted purchase price of $17.09 and $14.91 per share, respectively. During the three months ended March 31, 2024 and 2023, the Company recognized $0.3 million and $0.2 million, respectively, of compensation expense related to its ESPP based on the estimated fair value of the discounted purchase options granted to the participants as of the beginning of the quarterly offering period determined using the Black-Scholes option pricing model.

As of March 31, 2024, there were 1.7 million shares of common stock available for future issuance through the ESPP.

Equity Incentive Plans

In April 2022, the Company’s shareholders approved the 2022 Manager Equity Plan and the Starwood Property Trust, Inc. 2022 Equity Plan (the “2022 Equity Plan”), which allow for the issuance of up to 18,700,000 stock options, stock appreciation rights, RSAs, RSUs or other equity-based awards or any combination thereof to the Manager, directors, employees, consultants or any other party providing services to the Company. The 2022 Manager Equity Plan succeeds and replaces the 2017 Manager Equity Plan and the 2022 Equity Plan succeeds and replaces the Starwood Property Trust, Inc. 2017 Equity Plan (the “2017 Equity Plan”).

The table below summarizes our share awards granted or vested under the 2017 and 2022 Manager Equity Plans during the three months ended March 31, 2024 and 2023 (dollar amounts in thousands):

Grant Date

Type

Amount Granted

Grant Date Fair Value

Vesting Period

March 2024

RSU

1,300,000

26,104

3 years

November 2022

RSU

1,500,000

31,605

3 years

November 2020

RSU

1,800,000

30,078

3 years

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Schedule of Non-Vested Shares and Share Equivalents (1)


	Equity Plan	Manager Equity Plan	Total	Weighted Average Grant Date Fair Value (per share)
Balance as of January 1, 2024	2,571,728	875,000	3,446,728	$	21.08
Granted	1,785,570	1,300,000	3,085,570	20.23
Vested	(1,623,734)	(233,333)	(1,857,067)	21.21
Forfeited	(3,731)	—	(3,731)	21.69
Balance as of March 31, 2024	2,729,833	1,941,667	4,671,500	20.47

(1) Equity-based award activity for awards granted under the 2017 and 2022 Equity Plans is reflected within the Equity Plan column, and for awards granted under the 2017 and 2022 Manager Equity Plans, within the Manager Equity Plan column.

As of March 31, 2024, there were 13.4 million shares of common stock available for future grants under the 2022 Manager Equity Plan and the 2022 Equity Plan.

Non-Controlling Interests in Consolidated Subsidiaries

As discussed in Note 2, on November 5, 2021 we sold a 20.6% non-controlling interest in the Woodstar Fund to third party investors for net cash proceeds of $214.2 million. Under the Woodstar Fund operating agreement, such interests are contingently redeemable by us, at the option of the interest holder, for cash at liquidation fair value if any assets remain upon termination of the Woodstar Fund. The Woodstar Fund operating agreement specifies an eight-year term with two one-year extension options, the first at our option and the second subject to consent of an advisory committee representing the non-controlling interest holders. Accordingly, these contingently redeemable non-controlling interests have been classified as “Temporary Equity” in our condensed consolidated balance sheets and represent the fair value of the Woodstar Fund’s net assets allocable to those interests. During the three months ended March 31, 2024 and 2023, net income attributable to these non-controlling interests was $1.6 million and $2.3 million, respectively.

In connection with our Woodstar II Portfolio acquisitions, we issued 10.2 million Class A Units in our subsidiary, SPT Dolphin, and rights to receive an additional 1.9 million Class A Units if certain contingent events occur. As of March 31, 2024, all of the 1.9 million contingent Class A Units were issued. The Class A Units are redeemable for consideration equal to the current share price of the Company’s common stock on a one-for-one basis, with the consideration paid in either cash or the Company’s common stock, at the determination of the Company. There were 9.7 million Class A Units outstanding as of March 31, 2024. The outstanding Class A Units are reflected as non-controlling interests in consolidated subsidiaries on our condensed consolidated balance sheets, the balance of which was $207.1 million as of both March 31, 2024 and December 31, 2023.

To the extent SPT Dolphin has sufficient cash available, the Class A Units earn a preferred return indexed to the dividend rate of the Company’s common stock. Any distributions made pursuant to this waterfall are recognized within net income attributable to non-controlling interests in our condensed consolidated statements of operations. During both the three months ended March 31, 2024 and 2023, we recognized net income attributable to non-controlling interests of $4.7 million associated with these Class A Units.

As discussed in Note 15, we hold a 51% controlling interest in the CMBS JV within our Investing and Servicing Segment. Because the CMBS JV is deemed a VIE for which we are the primary beneficiary, the 49% interest of our joint venture partner is reflected as a non-controlling interest in consolidated subsidiaries on our condensed consolidated balance sheets, and any net income attributable to this 49% joint venture interest is reflected within net income attributable to non-controlling interests in our condensed consolidated statements of operations. The non-controlling interests in the CMBS JV were $124.9 million and $129.2 million as of March 31, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024 and 2023, net (loss) income attributable to these non-controlling interests was $(1.0) million and $0.7 million, respectively.

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18. Earnings per Share

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


	For the Three Months Ended March 31,
	2024		2023
Basic Earnings
Income attributable to STWD common stockholders	$	154,332	$	51,974
Less: Income attributable to participating shares not already deducted as non-controlling interests	(2,576)		(1,811)
Basic earnings	$	151,756	$	50,163

Diluted Earnings
Income attributable to STWD common stockholders	$	154,332	$	51,974
Less: Income attributable to participating shares not already deducted as non-controlling interests	(2,576)		(1,811)
Add: Interest expense on Convertible Notes	7,005		*
Add: Undistributed earnings to participating shares	68		—
Less: Undistributed earnings reallocated to participating shares	(65)		—
Diluted earnings	$	158,764	$	50,163

Number of Shares:
Basic — Average shares outstanding	311,827		308,408
Effect of dilutive securities — Convertible Notes	18,344		*
Effect of dilutive securities — Contingently issuable shares	469		357
Effect of dilutive securities — Unvested non-participating shares	200		231
Diluted — Average shares outstanding	330,840		308,996

Earnings Per Share Attributable to STWD Common Stockholders:
Basic	$	0.49	$	0.16
Diluted	$	0.48	$	0.16

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* Our Convertible Notes were not dilutive for the three months ended March 31, 2023.

As of March 31, 2024 and 2023, participating shares of 13.8 million and 13.5 million, respectively, were excluded from the computation of diluted shares as their effect was already considered under the more dilutive two-class method used above. Such participating shares at March 31, 2024 and 2023 included 9.7 million and 9.8 million potential shares, respectively, of our common stock issuable upon redemption of the Class A Units in SPT Dolphin, as discussed in Note 17.

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19. Accumulated Other Comprehensive Income

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


	Cumulative Unrealized Gain (Loss) on Available-for- Sale Securities
Three Months Ended March 31, 2024
Balance at January 1, 2024	$	15,352
OCI before reclassifications	(1,291)
Amounts reclassified from AOCI	—
Net period OCI	(1,291)
Balance at March 31, 2024	$	14,061
Three Months Ended March 31, 2023
Balance at January 1, 2023	$	20,955
OCI before reclassifications	(1,104)
Amounts reclassified from AOCI	—
Net period OCI	(1,104)
Balance at March 31, 2023	$	19,851

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20. Fair Value

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

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

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

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

Valuation Process

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

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

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

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

Fair Value on a Recurring Basis

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

Loans held-for-sale, commercial

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

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Loans held-for-sale, residential

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

RMBS

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

CMBS

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

Equity security

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

Woodstar Fund Investments

The fair value of investments held by the Woodstar Fund is determined based on observable and unobservable market inputs. The initial fair value of the Woodstar Fund’s investments at its November 5, 2021 establishment date was determined by reference to the purchase price paid by third party investors, which was consistent with both a recent external appraisal as well as our extensive marketing efforts to sell interests in the Woodstar Fund, plus working capital. The fair value of the Woodstar Fund’s investments as of December 31, 2023 was determined by reference to an external appraisal as of that date.

For the properties, the third party appraisals applied the income capitalization approach with corroborative support from the sales comparison approach. The cost approach was not employed, as it is typically not emphasized by potential investors in the multifamily affordable housing sector. The income capitalization approach estimates an income stream for a property over a 10-year period and discounts this income plus a reversion (presumed sale) into a present value at a risk adjusted discount rate. Terminal capitalization rates and discount rates utilized in this approach are derived from market transactions as well as other financial and industry data.

For secured financing, we discounted the contractual cash flows at the interest rate at which such arrangements would bear if executed in the current market. The fair value of investment level working capital is assumed to approximate carrying value due to its primarily short-term monetary nature. The fair value of interest rate derivatives is determined using the methodology described in the Derivatives discussion below.

Internal valuations at interim quarter ends, including March 31, 2024, are prepared by management. The valuation of properties is based on a direct income capitalization approach, whereby a direct capitalization market rate is applied to annualized in-place net operating income at the portfolio level. The direct capitalization rate is initially calibrated to the

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implied rate from the latest appraisal and adjusted for subsequent changes in current market capitalization rates for sales of comparable multifamily properties. The valuations of secured financing agreements, working capital and interest rate derivatives are consistent with the methodologies described in the paragraph above.

Given the significance of the unobservable inputs used in the respective valuations, the Woodstar Fund’s investments have been classified within Level III of the fair value hierarchy.

Domestic servicing rights

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

Derivatives

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

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

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

Although we have determined that the majority of the inputs used to value our derivatives fall within Level II of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level III inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of March 31, 2024 and December 31, 2023, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level II of the fair value hierarchy.

Liabilities of consolidated VIEs

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

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

Assets of consolidated VIEs

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

Fair Value on a Nonrecurring Basis

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

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 or purchase agreements received from third parties to acquire these assets. As these bids or purchase agreements represent quoted market prices, we have determined that the fair value of these assets would be classified in Level I of the fair value hierarchy.

Investments in unconsolidated entities, other equity investments

Our other equity investments set forth in Note 8 do not have readily determinable fair values. Therefore, we have elected the fair value practicability exception under ASC 321, Equity Securities, whereby we measure those investments within its scope at cost, less any impairment, plus or minus observable price changes from identical or similar investments of the same issuer. As such price changes represent observable market data, the fair value of the specific investments affected would be classified in Level II of the fair value hierarchy as of the date of the observable price change.

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

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

HTM debt securities

We estimate the fair value of our mandatorily redeemable preferred equity interests in commercial real estate companies and infrastructure bonds using the same methodology described for our loans held-for-investment. 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.

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Secured financing agreements, CLOs and SASB

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

Unsecured senior notes

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

Fair Value Disclosures

The following tables present our financial assets and liabilities carried at fair value on a recurring basis in the consolidated balance sheets by their level in the fair value hierarchy as of March 31, 2024 and December 31, 2023 (amounts in thousands):


	March 31, 2024
	Total		Level I		Level II		Level III
Financial Assets:
Loans under fair value option	$	2,642,219	$	—	$	—	$	2,642,219
RMBS	100,319		—		—		100,319
CMBS	19,486		—		—		19,486
Equity security	7,265		7,265		—		—
Woodstar Fund investments	2,008,937		—		—		2,008,937
Domestic servicing rights	19,612		—		—		19,612
Derivative assets	82,916		—		82,916		—
VIE assets	41,633,853		—		—		41,633,853
Total	$	46,514,607	$	7,265	$	82,916	$	46,424,426
Financial Liabilities:
Derivative liabilities	$	74,647	$	—	$	74,647	$	—
VIE liabilities	40,065,423		—		34,706,906		5,358,517
Total	$	40,140,070	$	—	$	34,781,553	$	5,358,517


	December 31, 2023
	Total		Level I		Level II		Level III
Financial Assets:
Loans under fair value option	$	2,645,637	$	—	$	—	$	2,645,637
RMBS	102,368		—		—		102,368
CMBS	18,600		—		—		18,600
Equity security	8,340		8,340		—		—
Woodstar Fund investments	2,012,833		—		—		2,012,833
Domestic servicing rights	19,384		—		—		19,384
Derivative assets	63,437		—		63,437		—
VIE assets	43,786,356		—		—		43,786,356
Total	$	48,656,955	$	8,340	$	63,437	$	48,585,178
Financial Liabilities:
Derivative liabilities	$	102,467	$	—	$	102,467	$	—
VIE liabilities	42,175,734		—		36,570,938		5,604,796
Total	$	42,278,201	$	—	$	36,673,405	$	5,604,796

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The changes in financial assets and liabilities classified as Level III are as follows for the three months ended March 31, 2024 and 2023 (amounts in thousands):


Three Months Ended March 31, 2024	Loans at Fair Value		RMBS		CMBS		Woodstar Fund Investments		Domestic Servicing Rights		VIE Assets		VIE Liabilities		Total
January 1, 2024 balance	$	2,645,637	$	102,368	$	18,600	$	2,012,833	$	19,384	$	43,786,356	$	(5,604,796)	$	42,980,382
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale	(29,013)		—		607		(3,896)		228		(1,530,426)		112,113		(1,450,387)
Net accretion	—		1,167		—		—		—		—		—		1,167
Included in OCI	—		(1,291)		—		—		—		—		—		(1,291)
Purchases / Originations	289,508		—		—		—		—		—		—		289,508
Sales	(218,597)		—		—		—		—		—		—		(218,597)
Issuances	—		—		—		—		—		—		(3,166)		(3,166)
Cash repayments / receipts	(45,316)		(1,925)		(63)		—		—		—		(3,138)		(50,442)
Transfers into Level III	—		—		—		—		—		—		(465,410)		(465,410)
Transfers out of Level III	—		—		—		—		—		—		601,090		601,090


Deconsolidation of VIEs	—		—		342		—		—		(622,077)		4,790		(616,945)
March 31, 2024 balance	$	2,642,219	$	100,319	$	19,486	$	2,008,937	$	19,612	$	41,633,853	$	(5,358,517)	$	41,065,909
Amount of unrealized gains (losses) attributable to assets still held at March 31, 2024:
Included in earnings	$	(40,815)	$	1,167	$	949	$	(3,896)	$	228	$	(1,530,426)	$	112,113	$	(1,460,680)
Included in OCI	$	—	$	(1,291)	$	—	$	—	$	—	$	—	$	—	$	(1,291)


Three Months Ended March 31, 2023	Loans at Fair Value		RMBS		CMBS		Woodstar Fund Investments		Domestic Servicing Rights		VIE Assets		VIE Liabilities		Total
January 1, 2023 balance	$	2,784,594	$	113,386	$	19,108	$	1,761,002	$	17,790	$	52,453,041	$	(5,505,943)	$	51,642,978
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale	8,901		—		(19)		1,160		304		(1,926,651)		153,053		(1,763,252)
Net accretion	—		1,222		—		—		—		—		—		1,222
Included in OCI	—		(1,104)		—		—		—		—		—		(1,104)
Purchases / Originations	69,200		—		—		—		—		—		—		69,200
Sales	(13,439)		—		—		—		—		—		—		(13,439)

Cash repayments / receipts	(38,367)		(2,435)		(144)		—		—		—		(1,109)		(42,055)

Transfers out of Level III	—		—		—		—		—		—		520,459		520,459



March 31, 2023 balance	$	2,810,889	$	111,069	$	18,945	$	1,762,162	$	18,094	$	50,526,390	$	(4,833,540)	$	50,414,009
Amount of unrealized gains (losses) attributable to assets still held at March 31, 2023:
Included in earnings	$	6,205	$	1,222	$	(19)	$	1,160	$	304	$	(1,926,651)	$	153,053	$	(1,764,726)
Included in OCI	$	—	$	(1,104)	$	—	$	—	$	—	$	—	$	—	$	(1,104)

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

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


	March 31, 2024				December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets not carried at fair value:
Loans	$	16,654,011	$	16,684,966	$	17,574,249	$	17,483,058
HTM debt securities	589,003		563,963		606,254		581,160
Financial liabilities not carried at fair value:
Secured financing agreements, CLOs and SASB (a)	$	15,780,354	$	15,726,523	$	17,552,979	$	17,466,172
Unsecured senior notes	2,751,666		2,721,859		2,158,888		2,128,835

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(a)As of December 31, 2023, includes debt related to properties held-for-sale.

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


	Carrying Value at March 31, 2024		Valuation Technique	Unobservable Input	Range (Weighted Average) as of (1)
					March 31, 2024	December 31, 2023
Loans under fair value option	$	2,642,219	Discounted cash flow, market pricing	Coupon (d)	2.8% - 10.1% (4.6%)	2.8% - 9.9% (4.5%)
				Remaining contractual term (d)	4.0 - 38.3 years (26.5 years)	4.3 - 38.5 years (27.4 years)
				FICO score (a)	585 - 900 (749)	585 - 900 (749)
				LTV (b)	2% - 93% (65%)	5% - 140% (68%)
				Purchase price (d)	80.0% - 106.8% (101.3%)	80.0% - 108.6% (101.4%)
RMBS	100,319		Discounted cash flow	Constant prepayment rate (a)	2.2% - 9.1% (4.6%)	2.9% - 9.6% (5.2%)
				Constant default rate (b)	1.0% - 4.1% (1.7%)	1.0% - 4.2% (1.7%)
				Loss severity (b)	0% - 63% (13%) (f)	0% - 99% (17%) (f)
				Delinquency rate (c)	9% - 24% (14%)	8% - 25% (14%)
				Servicer advances (a)	27% - 79% (51%)	30% - 78% (51%)
				Annual coupon deterioration (b)	0% - 0.6% (0.1%)	0% - 1.3% (0.1%)
				Putback amount per projected total collateral loss (e)	0% - 8% (0.5%)	0% - 8% (0.5%)
CMBS	19,486		Discounted cash flow	Yield (b)	0% - 74.8% (11.1%)	0% - 540.1% (10.6%)
				Duration (c)	0 - 6.4 years (2.3 years)	0 - 6.7 years (2.4 years)
Woodstar Fund investments	2,008,937		Discounted cash flow	Discount rate - properties (b)	N/A	6.3% - 7.0% (6.7%)
				Discount rate - debt (a)	3.0% - 7.2% (5.5%)	3.0% - 6.9% (5.4%)
				Terminal capitalization rate (b)	N/A	4.8% - 5.5% (5.2%)
				Direct capitalization rate (b)	4.25% (4.25%)	4.25% (4.25%) (Implied)
Domestic servicing rights	19,612		Discounted cash flow	Debt yield (a)	8.50% (8.50%)	8.50% (8.50%)
				Discount rate (b)	15% (15%)	15% (15%)
VIE assets	41,633,853		Discounted cash flow	Yield (b)	0% - 551.8% (25.2%)	0% - 691.0% (15.9%)
				Duration (c)	0 - 9.7 years (2.0 years)	0 - 10.0 years (1.8 years)
VIE liabilities	5,358,517		Discounted cash flow	Yield (b)	0% - 551.8% (15.6%)	0% - 691.0% (11.4%)
				Duration (c)	0 - 9.7 years (1.7 years)	0 - 10.0 years (1.7 years)

______________________________________________________________________________________________________________________

(1)Unobservable inputs were weighted by the relative carrying value of the instruments as of March 31, 2024 and December 31, 2023.

Information about Uncertainty of Fair Value Measurements

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

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

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

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(d)This unobservable input is not subject to variability as of the respective reporting dates.

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

(f)3% and 5% of the portfolio falls within a range of 45% - 80% as of March 31, 2024 and December 31, 2023, respectively.

21. Income Taxes

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

Our TRSs engage in various real estate-related operations, including special servicing of commercial real estate, originating and securitizing mortgage loans, and investing in entities which engage in real estate-related operations. As of both March 31, 2024 and December 31, 2023, approximately $3.1 billion, of assets were owned by TRS entities. Our TRSs are not consolidated for U.S. federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earnings recognized by us with respect to our interest in TRSs.

The following table is a reconciliation of our U.S. federal income tax provision determined using our statutory federal tax rate to our reported income tax provision (benefit) for the three months ended March 31, 2024 and 2023 (dollars in thousands):


	For the Three Months Ended March 31,
	2024				2023
Federal statutory tax rate	$	33,824	21.0	%	$	10,703	21.0	%
REIT and other non-taxable income	(32,915)		(20.5)	%	(17,727)		(34.8)	%
State income taxes	298		0.2	%	(2,308)		(4.5)	%
Federal benefit of state tax deduction	(63)		—	%	485		1.0	%


Other	62		—	%	52		—	%
Effective tax rate	$	1,206	0.7	%	$	(8,795)	(17.3)	%

For the three months ended March 31, 2024 and 2023, we have utilized the discrete effective tax rate method, as allowed by ASC 740-270-30-18, “Income Taxes—Interim Reporting,” to calculate our interim income tax expense (benefit). The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year to date period as if it was the annual period and determines the income tax expense or benefit on that basis. We believe that due to market dislocation and volatility, particularly with respect to the Company's residential assets that are housed in TRSs, the use of the discrete method is more appropriate at this time than the annual effective tax rate method due to the high degree of uncertainty in estimating annual pretax earnings.

22. Commitments and Contingencies

As of March 31, 2024, our Commercial and Residential Lending Segment had future commercial loan funding commitments totaling $1.4 billion, of which we expect to fund $1.1 billion. These future funding commitments primarily relate to construction projects, capital improvements, tenant improvements and leasing commissions. In connection with the prior sale of a $433.1 million first mortgage loan on an office and retail center in Los Angeles, for which we retained the mezzanine loan ($81.6 million amortized cost and $10.2 million unfunded commitment as of March 31, 2024), we entered into various guarantees, including a carry guaranty and a guaranty related to tenant improvement and leasing commission deficiencies. These guarantees provide for the payment of approximately $70.0 million by us to the senior lender in the event that the first mortgage loan is foreclosed. The loan is currently performing and the senior lender obtained an appraisal during the three months ended March 31, 2024 indicating full recovery in excess of the outstanding debt. As a result, we do not believe foreclosure is probable at this time and thus no liability has been recorded as of March 31, 2024.

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As of March 31, 2024, our Infrastructure Lending Segment had future infrastructure loan funding commitments totaling $183.2 million, including $117.1 million under revolvers and letters of credit (“LCs”), and $66.1 million under delayed draw term loans. As of March 31, 2024, $12.6 million of revolvers and LCs were outstanding.

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

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

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23. Segment Data

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

The table below presents our results of operations for the three months ended March 31, 2024 by business segment (amounts in thousands):


	Commercial and Residential Lending Segment		Infrastructure Lending Segment		Property Segment		Investing and Servicing Segment		Corporate		Subtotal		Securitization VIEs		Total
Revenues:
Interest income from loans	$	394,472	$	66,398	$	—	$	2,622	$	—	$	463,492	$	—	$	463,492
Interest income from investment securities	31,405		138		—		21,144		—		52,687		(34,481)		18,206
Servicing fees	128		—		—		13,039		—		13,167		(3,478)		9,689
Rental income	3,565		—		20,775		4,507		—		28,847		—		28,847
Other revenues	983		392		127		748		604		2,854		—		2,854
Total revenues	430,553		66,928		20,902		42,060		604		561,047		(37,959)		523,088
Costs and expenses:
Management fees	192		—		—		—		45,822		46,014		—		46,014
Interest expense	236,149		38,973		13,298		8,317		59,429		356,166		(210)		355,956
General and administrative	16,828		5,955		1,263		23,467		3,150		50,663		—		50,663
Costs of rental operations	2,025		—		5,707		2,612		—		10,344		—		10,344
Depreciation and amortization	1,949		14		5,855		1,749		251		9,818		—		9,818
Credit loss provision, net	34,977		862		—		—		—		35,839		—		35,839
Other expense	730		—		—		(56)		—		674		—		674
Total costs and expenses	292,850		45,804		26,123		36,089		108,652		509,518		(210)		509,308
Other income (loss):
Change in net assets related to consolidated VIEs	—		—		—		—		—		—		10,086		10,086
Change in fair value of servicing rights	—		—		—		(3,381)		—		(3,381)		3,609		228
Change in fair value of investment securities, net	(6,991)		—		—		(16,458)		—		(23,449)		24,364		915
Change in fair value of mortgage loans, net	(40,677)		—		—		11,664		—		(29,013)		—		(29,013)
Income from affordable housing fund investments	—		—		9,448		—		—		9,448		—		9,448
Earnings from unconsolidated entities	7,345		327		—		313		—		7,985		(310)		7,675
(Loss) gain on sale of investments and other assets, net	(41)		—		92,003		—		—		91,962		—		91,962
Gain (loss) on derivative financial instruments, net	110,952		122		1,721		3,012		(13,868)		101,939		—		101,939
Foreign currency (loss) gain, net	(41,818)		(84)		32		—		—		(41,870)		—		(41,870)
Gain (loss) on extinguishment of debt	315		(560)		(1,209)		—		—		(1,454)		—		(1,454)
Other (loss) income, net	(2,676)		40		—		6		—		(2,630)		—		(2,630)
Total other income (loss)	26,409		(155)		101,995		(4,844)		(13,868)		109,537		37,749		147,286
Income (loss) before income taxes	164,112		20,969		96,774		1,127		(121,916)		161,066		—		161,066
Income tax (provision) benefit	(721)		128		—		(613)		—		(1,206)		—		(1,206)
Net income (loss)	163,391		21,097		96,774		514		(121,916)		159,860		—		159,860
Net (income) loss attributable to non-controlling interests	(3)		—		(6,225)		700		—		(5,528)		—		(5,528)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	163,388	$	21,097	$	90,549	$	1,214	$	(121,916)	$	154,332	$	—	$	154,332

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The table below presents our results of operations for the three months ended March 31, 2023 by business segment (amounts in thousands):


	Commercial and Residential Lending Segment		Infrastructure Lending Segment		Property Segment		Investing and Servicing Segment		Corporate		Subtotal		Securitization VIEs		Total
Revenues:
Interest income from loans	$	375,601	$	54,760	$	—	$	547	$	—	$	430,908	$	—	$	430,908
Interest income from investment securities	32,521		1,338		—		22,785		—		56,644		(38,007)		18,637
Servicing fees	159		—		—		9,834		—		9,993		(2,737)		7,256
Rental income	1,981		—		23,695		6,613		—		32,289		—		32,289
Other revenues	344		216		103		383		278		1,324		—		1,324
Total revenues	410,606		56,314		23,798		40,162		278		531,158		(40,744)		490,414
Costs and expenses:
Management fees	218		—		—		—		39,322		39,540		—		39,540
Interest expense	226,393		32,818		12,599		7,429		56,272		335,511		(210)		335,301
General and administrative	11,893		3,964		952		20,047		5,252		42,108		—		42,108
Costs of rental operations	2,451		—		5,549		3,666		—		11,666		—		11,666
Depreciation and amortization	1,631		30		8,108		2,647		—		12,416		—		12,416
Credit loss provision, net	30,790		12,404		—		—		—		43,194		—		43,194
Other expense	1,039		8		—		70		—		1,117		—		1,117
Total costs and expenses	274,415		49,224		27,208		33,859		100,846		485,552		(210)		485,342
Other income (loss):
Change in net assets related to consolidated VIEs	—		—		—		—		—		—		41,138		41,138
Change in fair value of servicing rights	—		—		—		(50)		—		(50)		354		304
Change in fair value of investment securities, net	14,866		—		—		(14,459)		—		407		(325)		82
Change in fair value of mortgage loans, net	8,262		—		—		639		—		8,901		—		8,901
Income from affordable housing fund investments	—		—		12,965		—		—		12,965		—		12,965
Earnings (loss) from unconsolidated entities	939		1,740		—		679		—		3,358		(633)		2,725
Gain on sale of investments and other assets, net	—		—		—		190		—		190		—		190
(Loss) gain on derivative financial instruments, net	(34,363)		(51)		(1,217)		(3,467)		6,270		(32,828)		—		(32,828)
Foreign currency gain, net	14,930		75		14		—		—		15,019		—		15,019
Loss on extinguishment of debt	(61)		—		—		—		—		(61)		—		(61)
Other loss, net	(2,541)		—		—		—		—		(2,541)		—		(2,541)
Total other income (loss)	2,032		1,764		11,762		(16,468)		6,270		5,360		40,534		45,894
Income (loss) before income taxes	138,223		8,854		8,352		(10,165)		(94,298)		50,966		—		50,966
Income tax benefit	6,557		46		—		2,192		—		8,795		—		8,795
Net income (loss)	144,780		8,900		8,352		(7,973)		(94,298)		59,761		—		59,761
Net income attributable to non-controlling interests	(3)		—		(6,978)		(806)		—		(7,787)		—		(7,787)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	144,777	$	8,900	$	1,374	$	(8,779)	$	(94,298)	$	51,974	$	—	$	51,974

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The table below presents our consolidated balance sheet as of March 31, 2024 by business segment (amounts in thousands):


	Commercial and Residential Lending Segment		Infrastructure Lending Segment		Property Segment		Investing and Servicing Segment		Corporate		Subtotal		Securitization VIEs		Total
Assets:
Cash and cash equivalents	$	9,602	$	137,049	$	29,103	$	8,340	$	143,269	$	327,363	$	—	$	327,363
Restricted cash	11,506		41,394		1,031		6,862		64,548		125,341		—		125,341
Loans held-for-investment, net	14,221,471		2,376,191		—		9,200		—		16,606,862		—		16,606,862
Loans held-for-sale	2,518,600		47,149		—		123,619		—		2,689,368		—		2,689,368
Investment securities	1,113,081		18,422		—		1,124,724		—		2,256,227		(1,540,154)		716,073
Properties, net	434,365		—		551,502		58,698		—		1,044,565		—		1,044,565

Investments of consolidated affordable housing fund	—		—		2,008,937		—		—		2,008,937		—		2,008,937
Investments in unconsolidated entities	25,371		53,018		—		33,154		—		111,543		(14,616)		96,927
Goodwill	—		119,409		—		140,437		—		259,846		—		259,846
Intangible assets	12,724		—		24,505		60,293		—		97,522		(34,255)		63,267
Derivative assets	73,830		216		4,280		4,590		—		82,916		—		82,916
Accrued interest receivable	179,147		11,750		1,484		1,939		178		194,498		—		194,498
Other assets	186,807		5,745		61,505		17,296		48,500		319,853		—		319,853
VIE assets, at fair value	—		—		—		—		—		—		41,633,853		41,633,853
Total Assets	$	18,786,504	$	2,810,343	$	2,682,347	$	1,589,152	$	256,495	$	26,124,841	$	40,044,828	$	66,169,669
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	127,023	$	24,337	$	10,730	$	28,936	$	68,972	$	259,998	$	—	$	259,998
Related-party payable	—		—		—		—		44,226		44,226		—		44,226
Dividends payable	—		—		—		—		153,174		153,174		—		153,174
Derivative liabilities	22,074		—		—		261		52,312		74,647		—		74,647
Secured financing agreements, net	9,051,746		1,069,519		598,850		521,399		1,335,623		12,577,137		(20,650)		12,556,487
Collateralized loan obligations and single asset securitization, net	2,406,928		816,939		—		—		—		3,223,867		—		3,223,867
Unsecured senior notes, net	—		—		—		—		2,751,666		2,751,666		—		2,751,666

VIE liabilities, at fair value	—		—		—		—		—		—		40,065,423		40,065,423
Total Liabilities	11,607,771		1,910,795		609,580		550,596		4,405,973		19,084,715		40,044,773		59,129,488
Temporary Equity: Redeemable non-controlling interests	—		—		415,485		—		—		415,485		—		415,485
Permanent Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock	—		—		—		—		3,234		3,234		—		3,234
Additional paid-in capital	1,486,260		705,773		(615,052)		(663,588)		4,972,459		5,885,852		—		5,885,852
Treasury stock	—		—		—		—		(138,022)		(138,022)		—		(138,022)
Retained earnings (accumulated deficit)	5,678,294		193,775		2,065,089		1,557,613		(8,987,149)		507,622		—		507,622
Accumulated other comprehensive income	14,061		—		—		—		—		14,061		—		14,061
Total Starwood Property Trust, Inc. Stockholders’ Equity	7,178,615		899,548		1,450,037		894,025		(4,149,478)		6,272,747		—		6,272,747
Non-controlling interests in consolidated subsidiaries	118		—		207,245		144,531		—		351,894		55		351,949
Total Permanent Equity	7,178,733		899,548		1,657,282		1,038,556		(4,149,478)		6,624,641		55		6,624,696
Total Liabilities and Equity	$	18,786,504	$	2,810,343	$	2,682,347	$	1,589,152	$	256,495	$	26,124,841	$	40,044,828	$	66,169,669

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The table below presents our consolidated balance sheet as of December 31, 2023 by business segment (amounts in thousands):


	Commercial and Residential Lending Segment		Infrastructure Lending Segment		Property Segment		Investing and Servicing Segment		Corporate		Subtotal		Securitization VIEs		Total
Assets:
Cash and cash equivalents	$	8,823	$	56,300	$	19,957	$	22,011	$	87,569	$	194,660	$	—	$	194,660
Restricted cash	23,902		28,693		1,016		5,175		58,526		117,312		—		117,312
Loans held-for-investment, net	15,069,389		2,495,660		—		9,200		—		17,574,249		—		17,574,249
Loans held-for-sale	2,604,594		—		—		41,043		—		2,645,637		—		2,645,637
Investment securities	1,147,829		19,042		—		1,147,550		—		2,314,421		(1,578,859)		735,562
Properties, net	431,155		—		555,455		59,774		—		1,046,384		—		1,046,384
Properties held-for-sale, net	—		—		290,937		—		—		290,937		—		290,937
Investments of consolidated affordable housing fund	—		—		2,012,833		—		—		2,012,833		—		2,012,833
Investments in unconsolidated entities	19,151		52,691		—		33,134		—		104,976		(14,600)		90,376
Goodwill	—		119,409		—		140,437		—		259,846		—		259,846
Intangible assets	13,415		—		25,432		63,985		—		102,832		(37,865)		64,967
Derivative assets	55,559		84		5,638		2,156		—		63,437		—		63,437
Accrued interest receivable	180,441		12,485		1,502		1,369		5,070		200,867		—		200,867
Other assets	301,436		3,486		50,459		15,828		49,564		420,773		—		420,773
VIE assets, at fair value	—		—		—		—		—		—		43,786,356		43,786,356
Total Assets	$	19,855,694	$	2,787,850	$	2,963,229	$	1,541,662	$	200,729	$	27,349,164	$	42,155,032	$	69,504,196
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	106,236	$	45,232	$	12,225	$	44,452	$	85,297	$	293,442	$	—	$	293,442
Related-party payable	—		—		—		—		44,816		44,816		—		44,816
Dividends payable	—		—		—		—		152,888		152,888		—		152,888
Derivative liabilities	54,066		—		—		—		48,401		102,467		—		102,467
Secured financing agreements, net	10,368,668		1,088,965		598,350		495,857		1,336,913		13,888,753		(20,757)		13,867,996
Collateralized loan obligations and single asset securitization, net	2,674,938		816,354		—		—		—		3,491,292		—		3,491,292
Unsecured senior notes, net	—		—		—		—		2,158,888		2,158,888		—		2,158,888
Debt related to properties held-for-sale	—		—		193,691		—		—		193,691		—		193,691
VIE liabilities, at fair value	—		—		—		—		—		—		42,175,734		42,175,734
Total Liabilities	13,203,908		1,950,551		804,266		540,309		3,827,203		20,326,237		42,154,977		62,481,214
Temporary Equity: Redeemable non-controlling interests	—		—		414,348		—		—		414,348		—		414,348
Permanent Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock	—		—		—		—		3,208		3,208		—		3,208
Additional paid-in capital	1,121,413		664,621		(437,169)		(705,176)		5,220,981		5,864,670		—		5,864,670
Treasury stock	—		—		—		—		(138,022)		(138,022)		—		(138,022)
Retained earnings (accumulated deficit)	5,514,906		172,678		1,974,539		1,556,399		(8,712,641)		505,881		—		505,881
Accumulated other comprehensive income	15,352		—		—		—		—		15,352		—		15,352
Total Starwood Property Trust, Inc. Stockholders’ Equity	6,651,671		837,299		1,537,370		851,223		(3,626,474)		6,251,089		—		6,251,089
Non-controlling interests in consolidated subsidiaries	115		—		207,245		150,130		—		357,490		55		357,545
Total Permanent Equity	6,651,786		837,299		1,744,615		1,001,353		(3,626,474)		6,608,579		55		6,608,634
Total Liabilities and Equity	$	19,855,694	$	2,787,850	$	2,963,229	$	1,541,662	$	200,729	$	27,349,164	$	42,155,032	$	69,504,196

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24. Subsequent Events

Our significant events subsequent to March 31, 2024 were as follows:

Collateralized Loan Obligations

In May 2024, we refinanced a $400 million pool of our infrastructure loans held-for-investment through a CLO, STWD 2024-FL3, with $330 million of third party financing at a weighted average coupon of SOFR + 2.18%. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO for a period of three years.

Refinancing of Medical Office Portfolio

In May 2024, we priced the refinancing of $600.0 million of outstanding debt on our Medical Office Portfolio due November, 2024 with $450.5 million of senior securitized mortgage debt and a $39.5 million mezzanine loan. The refinance proceeds will carry an initial term of two years, followed by three successive one-year extension options and a weighted average coupon of SOFR + 2.52%.

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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 in conjunction with the information included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (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

We have four reportable business segments as of March 31, 2024 and we refer to the investments within these segments as our target assets:

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

Our segments exclude the consolidation of securitization variable interest entities (“VIEs”).

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

Economic Environment

During 2023, inflation began to moderate as a result of the monetary policy tightening actions taken by the Federal Reserve, including repeatedly raising interest rates. While it is possible that the Federal Reserve may begin to lower interest rates later in 2024, interest rates may remain at or near recent highs or may increase, which creates further uncertainty for the economy and for our borrowers. Although our business model is such that rising interest rates will, all else equal, correlate to increases in our net income, elevated interest rates over time may adversely affect our existing borrowers and lead to nonperformance as higher costs may dampen consumer spending and slow income growth, which may negatively impact the collateral underlying certain of our loans. Additionally, higher interest rates could adversely affect the value of commercial real estate we own and that collateralizes our loans. It remains difficult to predict the full impact of recent events and any future changes in interest rates or inflation.

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In addition, following the onset of the COVID-19 pandemic, the U.S. office sector has been adversely affected by the increase in remote working arrangements and, over the past several years, the retail sector has been adversely affected by electronic commerce. These negative factors have been considered in the determination of our current expected credit loss (“CECL”) allowance as discussed in Note 4 to the Condensed Consolidated Financial Statements.

Developments During the First Quarter of 2024

Commercial and Residential Lending Segment

•Funded $128.1 million of previously originated commercial loan commitments and investment securities.

•Received gross proceeds of $909.4 million ($457.4 million, net of debt repayments) from maturities and principal repayments on our commercial loans and investment securities.

Infrastructure Lending Segment

•Acquired $120.2 million of infrastructure loans and funded $42.5 million of pre-existing infrastructure loan commitments.

•Received proceeds of $209.8 million from principal repayments on our infrastructure loans and bonds.

Property

•Sold the 16 retail properties which comprised our Property Segment's Master Lease Portfolio for net proceeds of $188.0 million, recognizing a net gain of $90.8 million.

Investing and Servicing

•Originated commercial conduit loans of $293.3 million.

•Received proceeds of $218.6 million from sales of previously originated commercial conduit loans.

•Obtained one new special servicing assignment for a CMBS trust with a total unpaid principal balance of $1.1 billion, while $3.7 billion matured, bringing our total named special servicing portfolio to $96.1 billion.

Corporate

•Issued $600.0 million of 7.25% Senior Notes due 2029 (the “2029 Senior Notes”) and swapped the notes to a floating rate of SOFR + 3.25%.

Subsequent Events

Refer to Note 24 to the Condensed Consolidated Financial Statements for disclosure regarding significant transactions that occurred subsequent to March 31, 2024.

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Results of Operations

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

The following table compares our summarized results of operations for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023 by business segment (amounts in thousands):


							$ Change		$ Change
	For the Three Months Ended						March 31, 2024 vs.		March 31, 2024 vs.
Revenues:	March 31, 2024		December 31, 2023		March 31, 2023		December 31, 2023		March 31, 2023
Commercial and Residential Lending Segment	$	430,553	$	426,132	$	410,606	$	4,421	$	19,947
Infrastructure Lending Segment	66,928		64,363		56,314		2,565		10,614
Property Segment	20,902		23,091		23,798		(2,189)		(2,896)
Investing and Servicing Segment	42,060		48,490		40,162		(6,430)		1,898
Corporate	604		450		278		154		326
Securitization VIE eliminations	(37,959)		(40,248)		(40,744)		2,289		2,785
	523,088		522,278		490,414		810		32,674
Costs and expenses:
Commercial and Residential Lending Segment	292,850		289,347		274,415		3,503		18,435
Infrastructure Lending Segment	45,804		42,590		49,224		3,214		(3,420)
Property Segment	26,123		29,148		27,208		(3,025)		(1,085)
Investing and Servicing Segment	36,089		40,392		33,859		(4,303)		2,230
Corporate	108,652		108,660		100,846		(8)		7,806
Securitization VIE eliminations	(210)		(213)		(210)		3		—
	509,308		509,924		485,342		(616)		23,966
Other income (loss):
Commercial and Residential Lending Segment	26,409		(23,363)		2,032		49,772		24,377
Infrastructure Lending Segment	(155)		4,683		1,764		(4,838)		(1,919)
Property Segment	101,995		35,150		11,762		66,845		90,233
Investing and Servicing Segment	(4,844)		21,965		(16,468)		(26,809)		11,624
Corporate	(13,868)		12,131		6,270		(25,999)		(20,138)
Securitization VIE eliminations	37,749		40,035		40,534		(2,286)		(2,785)
	147,286		90,601		45,894		56,685		101,392
Income (loss) before income taxes:
Commercial and Residential Lending Segment	164,112		113,422		138,223		50,690		25,889
Infrastructure Lending Segment	20,969		26,456		8,854		(5,487)		12,115
Property Segment	96,774		29,093		8,352		67,681		88,422
Investing and Servicing Segment	1,127		30,063		(10,165)		(28,936)		11,292
Corporate	(121,916)		(96,079)		(94,298)		(25,837)		(27,618)
Securitization VIE eliminations	—		—		—		—		—
	161,066		102,955		50,966		58,111		110,100
Income tax (provision) benefit	(1,206)		(18,315)		8,795		17,109		(10,001)
Net income attributable to non-controlling interests	(5,528)		(13,679)		(7,787)		8,151		2,259
Net income attributable to Starwood Property Trust, Inc.	$	154,332	$	70,961	$	51,974	$	83,371	$	102,358

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Three Months Ended March 31, 2024 Compared to the Three Months Ended December 31, 2023

Commercial and Residential Lending Segment

Revenues

For the three months March 31, 2024, revenues of our Commercial and Residential Lending Segment increased $4.5 million to $430.6 million, compared to $426.1 million for the three months ended December 31, 2023. This increase was primarily due to an increase in interest income from loans of $3.6 million. The increase in interest income from loans reflects (i) a $4.4 million increase from commercial loans reflecting higher prepayment related income, partially offset by the effects of lower average balances and interest rate spreads, and (ii) a $0.8 million decrease from residential loans reflecting lower average balances.

Costs and Expenses

For the three months ended March 31, 2024, costs and expenses of our Commercial and Residential Lending Segment increased $3.5 million to $292.8 million, compared to $289.3 million for the three months ended December 31, 2023. This increase was primarily due to increases of $9.7 million in the credit loss provision and $3.2 million in general and administrative expenses, partially offset by a $10.4 million decrease in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio. The increase in the credit loss provision was primarily due to us selecting the most unfavorable modeled macroeconomic forecast for office and retail loans in the first quarter of 2024. The decrease in interest expense was primarily due to lower average borrowings outstanding due to paydowns from excess cash balances.

Net Interest Income (amounts in thousands)


	For the Three Months Ended
	March 31, 2024		December 31, 2023		Change
Interest income from loans	$	394,472	$	390,873	$	3,599
Interest income from investment securities	31,405		32,668		(1,263)
Interest expense	(236,149)		(246,576)		10,427
Net interest income	$	189,728	$	176,965	$	12,763

For the three months ended March 31, 2024, net interest income of our Commercial and Residential Lending Segment increased $12.7 million to $189.7 million, compared to $177.0 million for the three months ended December 31, 2023. This increase reflects a net increase in interest income and the decrease in interest expense on our secured financing facilities, both as discussed in the sections above.

During the three months ended March 31, 2024 and December 31, 2023, the weighted average unlevered yields on the Commercial and Residential Lending Segment’s loans and investment securities, excluding retained RMBS and loans for which interest income is not recognized, were as follows:


	For the Three Months Ended
	March 31, 2024		December 31, 2023
Commercial	9.6	%	9.7	%
Residential	5.1	%	5.3	%
Overall	8.9	%	9.0	%

For the three months ended March 31, 2024, the weighted average unlevered yield on our commercial loans decreased slightly primarily due to lower average interest rate spreads. The weighted average unlevered yield on our residential loans decreased primarily due to prepayments of higher rate loans.

During both the three months ended March 31, 2024 and December 31, 2023, the Commercial and Residential Lending Segment’s weighted average secured borrowing rate, inclusive of the amortization of deferred financing fees, was 7.6%. Interest rate hedges had the effect of reducing these weighted average borrowing costs to 6.7% and 6.8% during the three months ended March 31, 2024 and December 31, 2023, respectively.

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Other Income (Loss)

For the three months ended March 31, 2024, other income of our Commercial and Residential Lending Segment increased $49.8 million to income of $26.4 million compared to a loss of $23.4 million for the three months ended December 31, 2023. This increase was primarily due to (i) a $268.8 million favorable change in gain (loss) on derivatives and (ii) the nonrecurrence of $101.1 million of property impairment losses recognized in the fourth quarter of 2023, both partially offset by (iii) a $191.9 million unfavorable change in fair value of residential loans and (iv) a $120.6 million unfavorable change in foreign currency gain (loss). The favorable change in gain (loss) on derivatives in the first quarter of 2024 reflects a $137.2 million favorable change on interest rate swaps principally related to residential loans, which partially offsets the unfavorable change in fair value of those loans, and a $131.6 million favorable change in gain (loss) on foreign currency hedges. The interest rate swaps are used primarily to hedge our interest rate risk on residential loans held-for-sale and 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 unfavorable change in foreign currency gain (loss) and the favorable change in gain (loss) on foreign currency hedges reflect the strengthening of the U.S. dollar against the pound sterling (“GBP”), Euro (“EUR”) and Australian dollar (“AUD”), in the first quarter of 2024, compared to a weakening of the U.S. dollar against the GBP and EUR, partially offset by a strengthening against the AUD, in the fourth quarter of 2023.

Infrastructure Lending Segment

Revenues

For the three months ended March 31, 2024, revenues of our Infrastructure Lending Segment increased $2.5 million to $66.9 million, compared to $64.4 million for the three months ended December 31, 2023. This was primarily due to an increase in interest income from loans of $2.5 million reflecting higher average loan balances and prepayment related income.

Costs and Expenses

For the three months ended March 31, 2024, costs and expenses of our Infrastructure Lending Segment increased $3.2 million to $45.8 million, compared to $42.6 million for the three months ended December 31, 2023. The increase was primarily due to increases of $1.9 million in general and administrative expenses and $1.1 million in interest expense associated with the various secured financing facilities used to fund this segment’s investment portfolio. The increase in interest expense was primarily due to higher average borrowings outstanding.

Net Interest Income (amounts in thousands)


	For the Three Months Ended
	March 31, 2024		December 31, 2023		Change
Interest income from loans	$	66,398	$	63,915	$	2,483
Interest income from investment securities	138		147		(9)
Interest expense	(38,973)		(37,828)		(1,145)
Net interest income	$	27,563	$	26,234	$	1,329

For the three months ended March 31, 2024, net interest income of our Infrastructure Lending Segment increased $1.4 million to $27.6 million, compared to $26.2 million for the three months ended December 31, 2023. The increase reflects the increase in interest income, partially offset by the increase in interest expense on the secured financing facilities, both as discussed in the sections above.

During both the three months ended March 31, 2024 and December 31, 2023, the weighted average unlevered yield on the Infrastructure Lending Segment’s loans and investment securities, excluding those for which interest income is not recognized, was 10.4%.

During both the three months ended March 31, 2024 and December 31, 2023, the Infrastructure Lending Segment’s weighted average secured borrowing rate, inclusive of the amortization of deferred financing fees, was 8.0%.

Other (Loss) Income

For the three months ended March 31, 2024, other income of our Infrastructure Lending Segment decreased $4.9 million to a loss of $0.2 million, compared to income of $4.7 million for the three months ended December 31, 2023. The decrease is primarily due to a $4.1 million decrease in earnings from unconsolidated entities.

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Property Segment

Change in Results by Portfolio (amounts in thousands)


	$ Change from prior period
	Revenues		Costs and expenses		Gain (loss) on derivative financial instruments		Other income (loss)		Income (loss) before income taxes
Master Lease Portfolio	$	(2,532)	$	(2,996)	$	—	$	90,795	$	91,259
Medical Office Portfolio	445		(201)		4,057		—		4,703


Woodstar Fund	(96)		(70)		—		(28,100)		(28,126)
Other/Corporate	(6)		242		—		93		(155)
Total	$	(2,189)	$	(3,025)	$	4,057	$	62,788	$	67,681

See Notes 6 and 7 to the Condensed Consolidated Financial Statements for a description of the above-referenced Property Segment portfolios and fund.

Revenues

For the three months ended March 31, 2024, revenues of our Property Segment decreased $2.2 million to $20.9 million for the three months ended March 31, 2024, compared to $23.1 million for the three months ended December 31, 2023. The decrease is primarily due to the sale of the Master Lease Portfolio on February 29, 2024 (see Note 3 to the Condensed Consolidated Financial Statements).

Costs and Expenses

For the three months ended March 31, 2024, costs and expenses of our Property Segment decreased $3.0 million to $26.1 million, compared to $29.1 million for the three months ended December 31, 2023, primarily due to the sale of the Master Lease Portfolio on February 29, 2024.

Other Income

For the three months ended March 31, 2024, other income of our Property Segment increased $66.8 million to $102.0 million compared to $35.2 million for the three months ended December 31, 2023. The increase is primarily due to (i) a $90.8 million net gain on sale of the Master Lease Portfolio in the first quarter of 2024 and (ii) a $4.1 million favorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on borrowings secured by our Medical Office Portfolio, partially offset by (iii) a $28.1 million decrease in income attributable to investments of the Woodstar Fund, mainly reflecting lower unrealized increases in fair value during the first quarter of 2024.

Investing and Servicing Segment

Revenues

For the three months ended March 31, 2024, revenues of our Investing and Servicing Segment decreased $6.4 million to $42.1 million, compared to $48.5 million for the three months ended December 31, 2023. The decrease in revenues is primarily due to a $4.1 million decrease in interest income from conduit loans and CMBS investments and a $1.4 million decrease in servicing fees.

Costs and Expenses

For the three months ended March 31, 2024, costs and expenses of our Investing and Servicing Segment decreased $4.3 million to $36.1 million, compared to $40.4 million for the three months ended December 31, 2023. The decrease was primarily due to decreases of $2.1 million in general and administrative expenses and $1.5 million in interest expense, both primarily related to loan securitization activity.

Other (Loss) Income

For the three months ended March 31, 2024, other income of our Investing and Servicing Segment decreased $26.8 million to a loss of $4.8 million, compared to income of $22.0 million for the three months ended December 31, 2023. The decrease in other income was primarily due to (i) an $11.0 million lesser increase in fair value of conduit loans, (ii) a $10.8

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million greater decrease in fair value of CMBS investments, (iii) the nonrecurrence of a $10.2 million gain on sale of our interest in an operating property in the fourth quarter of 2023 and (iv) a $6.5 million unfavorable change in fair value of servicing rights, all partially offset by (v) an $11.8 million favorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments.

Corporate and Other Items

Corporate Costs and Expenses

For the three months ended March 31, 2024 and December 31, 2023, corporate expenses were relatively unchanged at $108.7 million.

Corporate Other (Loss) Income

For the three months ended March 31, 2024, corporate other income decreased $26.0 million to a loss of $13.9 million, compared to income of $12.1 million for the three months ended December 31, 2023. This was due to an unfavorable change in gain (loss) on our fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes.

Securitization VIE Eliminations

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

Income Tax Provision

Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in taxable REIT subsidiaries (“TRSs”). For the three months ended March 31, 2024, our income tax provision decreased $17.1 million to $1.2 million compared to $18.3 million for the three months ended December 31, 2023 due to lower taxable income of our TRSs in the first quarter of 2024 compared to the fourth quarter of 2023.

Net Income Attributable to Non-controlling Interests

During the three months ended March 31, 2024, net income attributable to non-controlling interests decreased $8.2 million to $5.5 million, compared to $13.7 million during the three months ended December 31, 2023. The decrease was primarily due to non-controlling interests in decreased income of the Woodstar Fund and a consolidated CMBS joint venture in the first quarter of 2024.

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Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Commercial and Residential Lending Segment

Revenues

For the three months ended March 31, 2024, revenues of our Commercial and Residential Lending Segment increased $20.0 million to $430.6 million, compared to $410.6 million for the three months ended March 31, 2023. This increase was primarily due to an increase in interest income from loans of $18.9 million. The increase in interest income from loans reflects (i) a $21.3 million increase from commercial loans, reflecting higher average index rates and prepayment related income, partially offset by lower average loan balances, and (ii) a $2.4 million decrease from residential loans principally due to lower average balances.

Costs and Expenses

For the three months ended March 31, 2024, costs and expenses of our Commercial and Residential Lending Segment increased $18.4 million to $292.8 million, compared to $274.4 million for the three months ended March 31, 2023. This increase was primarily due to increases of (i) $9.8 million in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio, (ii) $4.9 million in general and administrative expenses, primarily for compensation and professional fees, and (iii) $4.2 million in credit loss provision. The increase in interest expense was primarily due to higher average index rates. The increase in credit loss provision was primarily due to us selecting the most unfavorable modeled macroeconomic forecast for office and retail loans in the first quarter of 2024.

Net Interest Income (amounts in thousands)


	For the Three Months Ended March 31,
	2024		2023		Change
Interest income from loans	$	394,472	$	375,601	$	18,871
Interest income from investment securities	31,405		32,521		(1,116)
Interest expense	(236,149)		(226,393)		(9,756)
Net interest income	$	189,728	$	181,729	$	7,999

For the three months ended March 31, 2024, net interest income of our Commercial and Residential Lending Segment increased $8.0 million to $189.7 million, compared to $181.7 million for the three months ended March 31, 2023. This increase reflects a net increase in interest income, partially offset by the increase in interest expense on our secured financing facilities, both as discussed in the sections above.

During the three months ended March 31, 2024 and 2023, the weighted average unlevered yields on the Commercial and Residential Lending Segment’s loans and investment securities, excluding retained RMBS and loans for which interest income is not recognized, were as follows:


	For the Three Months Ended March 31,
	2024		2023
Commercial	9.6	%	8.6	%
Residential	5.1	%	4.9	%
Overall	8.9	%	8.1	%

The weighted average unlevered yield on our commercial loans increased primarily due to higher average index rates and prepayment related income. The unlevered yield on our residential loans increased primarily due to a decline in fair value of the residential loans.

During the three months ended March 31, 2024 and 2023, the Commercial and Residential Lending Segment’s weighted average secured borrowing rates, inclusive of the amortization of deferred financing fees, were 7.6% and 6.7%, respectively. The increase in borrowing rates primarily reflects higher average index rates. Interest rate hedges had the effect of adjusting these weighted average borrowing costs to 6.7% and 6.2% during the three months ended March 31, 2024 and 2023, respectively.

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Other Income

For the three months ended March 31, 2024, other income of our Commercial and Residential Lending Segment increased $24.4 million to $26.4 million, compared to $2.0 million for the three months ended March 31, 2023. This increase primarily reflects (i) a $145.3 million favorable change in gain (loss) on derivatives and (ii) a $6.4 million increase in earnings from unconsolidated entities primarily due to an observable price change in an equity investment, partially offset by (iii) a $56.7 million unfavorable change in foreign currency gain (loss), (iv) a $48.9 million unfavorable change in fair value of residential loans and (v) a $21.9 million unfavorable change in fair value of primarily RMBS investment securities. The favorable change in gain (loss) on derivatives during the three months ended March 31, 2024 reflects (i) an $86.8 million favorable change in gain (loss) on interest rate swaps principally related to residential loans, which more than offsets the decrease in fair value of those loans, and (ii) a $58.5 million favorable change in gain (loss) on foreign currency hedges. The interest rate swaps are used primarily to hedge our interest rate risk on residential loans held-for-sale and 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 unfavorable change in foreign currency gain (loss) and the favorable change in gain (loss) on foreign currency hedges reflect the strengthening of the U.S. dollar against the GBP, EUR and AUD during the first quarter of 2024, compared to a weakening of the U.S. dollar against the GBP and EUR, partially offset by a strengthening against the AUD, in the first quarter of 2023.

Infrastructure Lending Segment

Revenues

For the three months ended March 31, 2024, revenues of our Infrastructure Lending Segment increased $10.6 million to $66.9 million, compared to $56.3 million for the three months ended March 31, 2023. This increase was primarily due to an increase in interest income from loans of $11.6 million, principally due to higher average loan balances and index rates, partially offset by a $1.2 million decrease in interest income from investment securities, primarily due to lower average balances resulting from repayments.

Costs and Expenses

For the three months ended March 31, 2024, costs and expenses of our Infrastructure Lending Segment decreased $3.4 million to $45.8 million, compared to $49.2 million for the three months ended March 31, 2023. The decrease was primarily due to (i) an $11.5 million decrease in credit loss provision, partially offset by (ii) a $6.2 million increase in interest expense associated with the various secured financing facilities used to fund this segment’s investment portfolio and (iii) a $2.0 million increase in general and administrative expenses, primarily for compensation and professional fees. The decrease in the credit loss provision was primarily due to specific allowances for a credit-deteriorated loan and investment security provided during the first quarter of 2023. The increase in interest expense was primarily due to higher average index rates and borrowings outstanding.

Net Interest Income (amounts in thousands)


	For the Three Months Ended March 31,
	2024		2023		Change
Interest income from loans	$	66,398	$	54,760	$	11,638
Interest income from investment securities	138		1,338		(1,200)
Interest expense	(38,973)		(32,818)		(6,155)
Net interest income	$	27,563	$	23,280	$	4,283

For the three months ended March 31, 2024, net interest income of our Infrastructure Lending Segment increased $4.3 million to $27.6 million, compared to $23.3 million for the three months ended March 31, 2023. The increase reflects the net increase in interest income, partially offset by the increase in interest expense on the secured financing facilities, both as discussed in the sections above.

During the three months ended March 31, 2024 and 2023, the weighted average unlevered yields on the Infrastructure Lending Segment’s loans and investment securities, excluding those for which interest income is not recognized, were 10.4% and 9.4%, respectively, primarily reflecting higher average index rates in the first quarter of 2024.

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During the three months ended March 31, 2024 and 2023, the Infrastructure Lending Segment’s weighted average secured borrowing rates, inclusive of the amortization of deferred financing fees, were 8.0% and 7.1%, respectively.

Other (Loss) Income

For the three months ended March 31, 2024 and 2023, other income of our Infrastructure Lending Segment decreased $2.0 million to a loss of $0.2 million, compared to income of $1.8 million for the three months ended March 31, 2023. The decrease primarily reflects a $1.4 million decrease in earnings from unconsolidated entities and a $0.6 million loss on extinguishment of debt in the first quarter of 2024.

Property Segment

Change in Results by Portfolio (amounts in thousands)


	$ Change from prior period
	Revenues		Costs and expenses		Gain (loss) on derivative financial instruments		Other income (loss)		Income (loss) before income taxes
Master Lease Portfolio	$	(2,532)	$	(2,940)	$	—	$	90,795	$	91,203
Medical Office Portfolio	(382)		1,488		2,938		—		1,068


Woodstar Fund	9		21		—		(3,517)		(3,529)
Other/Corporate	9		346		—		17		(320)
Total	$	(2,896)	$	(1,085)	$	2,938	$	87,295	$	88,422

Revenues

For the three months ended March 31, 2024, revenues of our Property Segment decreased $2.9 million to $20.9 million, compared to $23.8 million for the three months ended March 31, 2023, primarily due to the sale of our Master Lease Portfolio on February 29, 2024.

Costs and Expenses

For the three months ended March 31, 2024, costs and expenses of our Property Segment decreased $1.1 million to $26.1 million, compared to $27.2 million for the three months ended March 31, 2023. The decrease is primarily due to the sale of our Master Lease Portfolio on February 29, 2024, partially offset by an increase of $1.5 million in interest expense reflecting higher index rates on variable rate borrowings of the Medical Office Portfolio.

Other Income

For the three months ended March 31, 2024, other income of our Property Segment increased $90.2 million to $102.0 million, compared to $11.8 million for the three months ended March 31, 2023. The increase is primarily due to (i) a $90.8 million net gain on sale of the Master Lease Portfolio in the first quarter of 2024 and (ii) a $2.9 million favorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on borrowings secured by our Medical Office Portfolio, partially offset by a $3.5 million decrease in income attributable to investments of the Woodstar Fund.

Investing and Servicing Segment

Revenues

For the three months ended March 31, 2024, revenues of our Investing and Servicing Segment increased $1.9 million to $42.1 million, compared to $40.2 million for the three months ended March 31, 2023. The increase in revenues was primarily due to a $3.2 million increase in servicing fees principally related to loan modifications, partially offset by a $2.1 million decrease in rental revenues due to fewer operating properties held.

Costs and Expenses

For the three months ended March 31, 2024, costs and expenses of our Investing and Servicing Segment increased $2.2 million to $36.1 million, compared to $33.9 million for the three months ended March 31, 2023. The increase in costs and expenses primarily reflects a $3.4 million increase in general and administrative expense, principally reflecting increased

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incentive compensation due to higher loan securitization volume, partially offset by a $1.1 million decrease in cost of rental operations due to fewer operating properties held.

Other Loss

For the three months ended March 31, 2024, other loss of our Investing and Servicing Segment decreased $11.7 million to of $4.8 million, compared to $16.5 million for the three months ended March 31, 2023. The decrease in other loss was primarily due to (i) an $11.0 million greater increase in fair value of conduit loans and (ii) a $6.5 million favorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments, partially offset by (iii) a $3.3 million greater decrease in fair value of servicing rights and (iv) a $2.0 million greater decrease in fair value of CMBS investments.

Corporate and Other Items

Corporate Costs and Expenses

For the three months ended March 31, 2024, corporate expenses increased $7.9 million to $108.7 million, compared to $100.8 million for the three months ended March 31, 2023. This increase was primarily due to (i) a $6.5 million increase in management fees, primarily reflecting higher incentive fees, and (ii) a $3.2 million increase in interest expense reflecting higher average unsecured borrowings outstanding, as well as higher index rates on our secured term loans, partially offset by (iii) a $2.1 million decrease in general and administrative expenses.

Corporate Other (Loss) Income

For the three months ended March 31, 2024, corporate other income decreased $20.2 million to a loss of $13.9 million, compared to income of $6.3 million for the three months ended March 31, 2023. This was due to an unfavorable change in gain (loss) on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes.

Securitization VIE Eliminations

Refer to the preceding comparison of the three months ended March 31, 2024 to the three months ended December 31, 2023 for a discussion of the effect of securitization VIE eliminations.

Income Tax (Provision) Benefit

Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in TRSs. For the three months ended March 31, 2024, our income taxes increased $10.0 million to a provision of $1.2 million, compared to a benefit of $8.8 million for the three months ended March 31, 2023 due to taxable income of our TRSs in the first quarter of 2024 compared to tax losses in the first quarter of 2023 primarily attributable to net unrealized losses on our residential loans and related interest rate derivatives.

Net Income Attributable to Non-controlling Interests

For the three months ended March 31, 2024, net income attributable to non-controlling interests decreased $2.3 million to $5.5 million, compared to $7.8 million for the three months ended March 31, 2023. The decrease was primarily due to non-controlling interests in lower income of a consolidated CMBS joint venture and the Woodstar Fund in the first quarter of 2024.

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Non-GAAP Financial Measures

Distributable Earnings is a non-GAAP financial measure. We calculate Distributable Earnings as GAAP net income (loss) excluding the following: (i) non-cash equity compensation expense; (ii) the incentive fee due under our management agreement; (iii) acquisition and investment pursuit costs associated with successful acquisitions; (iv) depreciation and amortization of real estate and associated intangibles; (v) unrealized gains (losses), net of realized gains (losses), as described further below; (vi) other non-cash items; and (vii) to the extent deducted from net income (loss), distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein (i.e. the Woodstar II Class A units), with each of the above adjusted for any related non-controlling interest. Distributable Earnings may be adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash adjustments as determined by our Manager and approved by a majority of our independent directors.

As noted in (v) above, we exclude unrealized gains and losses from our calculation of Distributable Earnings and include realized gains and losses. The nature of these adjustments is described more fully in the footnotes to our reconciliation tables. In order to present each of these items within our Distributable Earnings reconciliation tables in a manner which can be agreed more easily to our GAAP financial statements, we reverse the entirety of those items within our GAAP financial statements which contain unrealized and realized components (i.e. those assets and liabilities carried at fair value, including loans or securities for which the fair value option has been elected, investment company assets and liabilities, derivatives, foreign currency conversions, and accumulated depreciation related to sold properties). The realized portion of these items is then separately included in the reconciliation table, along with a description as to how the amount was determined.

The CECL reserve and any property impairment losses have been excluded from Distributable Earnings consistent with other unrealized losses pursuant to our existing policy for reporting Distributable Earnings. We expect to only recognize such potential credit or property impairment losses in Distributable Earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case of a foreclosure or other property, when the underlying asset is sold. Non-recoverability may also be determined if, in our determination, it is nearly certain the carrying amounts will not be collected or realized upon sale. The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received, or expected to be received, and the Distributable Earnings basis of the asset, and is reflective of our economic experience as it relates to the ultimate realization of the asset. The timing of any such loss realization in our Distributable Earnings may differ materially from the timing of the corresponding CECL reserves, charge-offs or impairments in our consolidated financial statements prepared in accordance with GAAP.

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

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

As discussed in Note 2 to the Condensed Consolidated Financial Statements, consolidation of securitization variable interest entities (“VIEs”) results in the elimination of certain key financial statement line items, particularly within revenues and other income, including unrealized changes in fair value of loans and investment securities. These line items are essential to understanding the true financial performance of our business segments and the Company as a whole. For this reason, as referenced in Note 2 to our Condensed Consolidated Financial Statements, we present business segment data in Note 23 without consolidation of these VIEs. This is how we manage our business and is the basis for all data reviewed with our board of directors, investors and analysts. This presentation also allows for a more transparent reconciliation of the unrealized gain (loss) adjustments below to the segment data presented in Note 23.

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

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

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

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

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


	For the Three Months Ended
	March 31, 2024	December 31, 2023	March 31, 2023
Diluted weighted average shares - GAAP EPS	330,840	311,449	308,996
Add: Unvested stock awards	3,333	3,228	4,193
Add: Woodstar II Class A Units	9,707	9,721	9,773
Less: Convertible Notes dilution	(18,344)	—	—
Diluted weighted average shares - Distributable EPS	325,536	324,398	322,962

As noted above, the definition of Distributable Earnings allows management to make adjustments, subject to the approval of a majority of our independent directors. This is done in situations where such adjustments are considered appropriate in order for Distributable Earnings to be calculated in a manner consistent with its definition and objective. No adjustments to the definition of Distributable Earnings became effective during the three months ended March 31, 2024.

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The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended March 31, 2024, by business segment (amounts in thousands, except per share data).


	Commercial and Residential Lending Segment		Infrastructure Lending Segment		Property Segment		Investing and Servicing Segment		Corporate		Total
Revenues	$	430,553	$	66,928	$	20,902	$	42,060	$	604	$	561,047
Costs and expenses	(292,850)		(45,804)		(26,123)		(36,089)		(108,652)		(509,518)
Other income (loss)	26,409		(155)		101,995		(4,844)		(13,868)		109,537
Income (loss) before income taxes	164,112		20,969		96,774		1,127		(121,916)		161,066
Income tax (provision) benefit	(721)		128		—		(613)		—		(1,206)
(Income) loss attributable to non-controlling interests	(3)		—		(6,225)		700		—		(5,528)
Net income (loss) attributable to Starwood Property Trust, Inc.	163,388		21,097		90,549		1,214		(121,916)		154,332
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units	—		—		4,659		—		—		4,659
Non-controlling interests attributable to unrealized gains/losses	—		—		(1,678)		(2,053)		—		(3,731)
Non-cash equity compensation expense	2,200		456		86		1,597		5,707		10,046
Management incentive fee	—		—		—		—		19,083		19,083
Depreciation and amortization	2,099		5		5,939		1,843		—		9,886
Interest income adjustment for securities	5,581		—		—		10,005		—		15,586

Consolidated income tax provision (benefit) associated with fair value adjustments	721		(128)		—		613		—		1,206
Other non-cash items	3		—		274		38		9		324
Reversal of GAAP unrealized and realized (gains) / losses on: (1)
Loans	40,677		—		—		(11,664)		—		29,013
Credit loss provision, net	34,977		862		—		—		—		35,839
Securities	6,991		—		—		16,458		—		23,449
Woodstar Fund investments	—		—		(9,448)		—		—		(9,448)
Derivatives	(110,952)		(122)		(1,721)		(3,012)		13,868		(101,939)
Foreign currency	41,818		84		(32)		—		—		41,870
Earnings from unconsolidated entities	(7,345)		(327)		—		(313)		—		(7,985)
Sales of properties	—		—		(92,003)		—		—		(92,003)

Recognition of Distributable realized gains / (losses) on:
Loans (2)	(2,395)		—		—		11,642		—		9,247
Realized credit loss (3)	—		(1,546)		—		—		—		(1,546)
Securities (4)	(8,994)		—		—		(31,982)		—		(40,976)
Woodstar Fund investments (5)	—		—		17,610		—		—		17,610

Derivatives (6)	40,734		95		5,817		4,353		(9,149)		41,850
Foreign currency (7)	(5,601)		(15)		32		—		—		(5,584)
Earnings (loss) from unconsolidated entities (8)	1,324		(16)		—		313		—		1,621
Sales of properties (9)	—		—		39,150		—		—		39,150
Distributable Earnings (Loss)	$	205,226	$	20,445	$	59,234	$	(948)	$	(92,398)	$	191,559
Distributable Earnings (Loss) per Weighted Average Diluted Share	$	0.63	$	0.06	$	0.18	$	—	$	(0.28)	$	0.59

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The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended December 31, 2023, by business segment (amounts in thousands, except per share data).


	Commercial and Residential Lending Segment		Infrastructure Lending Segment		Property Segment		Investing and Servicing Segment		Corporate		Total
Revenues	$	426,132	$	64,363	$	23,091	$	48,490	$	450	$	562,526
Costs and expenses	(289,347)		(42,590)		(29,148)		(40,392)		(108,660)		(510,137)
Other income (loss)	(23,363)		4,683		35,150		21,965		12,131		50,566
Income (loss) before income taxes	113,422		26,456		29,093		30,063		(96,079)		102,955
Income tax (provision) benefit	(14,991)		9		—		(3,333)		—		(18,315)
Income attributable to non-controlling interests	(4)		—		(12,007)		(1,668)		—		(13,679)
Net income (loss) attributable to Starwood Property Trust, Inc.	98,427		26,465		17,086		25,062		(96,079)		70,961
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units	—		—		4,659		—		—		4,659
Non-controlling interests attributable to unrealized gains/losses	—		—		4,558		(2,546)		—		2,012
Non-cash equity compensation expense	2,237		387		79		1,601		3,888		8,192
Management incentive fee	—		—		—		—		19,530		19,530
Depreciation and amortization	2,114		9		7,979		2,298		84		12,484
Interest income adjustment for securities	5,743		—		—		8,125		—		13,868

Consolidated income tax provision (benefit) associated with fair value adjustments	14,991		(9)		—		3,333		—		18,315
Other non-cash items	5		—		269		(198)		—		76
Reversal of GAAP unrealized and realized (gains) / losses on: (1)
Loans	(151,264)		—		—		(22,685)		—		(173,949)
Credit loss provision, net	25,281		694		—		—		—		25,975
Securities	(6,493)		—		—		5,676		—		(817)
Woodstar Fund investments	—		—		(37,548)		—		—		(37,548)
Derivatives	157,892		121		2,337		8,817		(12,131)		157,036
Foreign currency	(78,762)		(426)		61		—		—		(79,127)
(Earnings) from unconsolidated entities	(847)		(4,378)		—		(456)		—		(5,681)
Sales of properties	—		—		—		(10,215)		—		(10,215)
Impairment of properties	101,069		—		—		—		—		101,069
Recognition of Distributable realized gains / (losses) on:
Loans (2)	(541)		—		—		21,326		—		20,785
Realized credit loss recovery (3)	2,370		311		—		—		—		2,681
Securities (4)	54		—		—		(3,432)		—		(3,378)
Woodstar Fund investments (5)	—		—		16,115		—		—		16,115

Derivatives (6)	34,120		102		6,619		(4,297)		(9,222)		27,322
Foreign currency (7)	(2,084)		53		(60)		—		—		(2,091)
Earnings from unconsolidated entities (8)	847		93		—		427		—		1,367
Sales of properties (9)	—		—		—		(198)		—		(198)
Distributable Earnings (Loss)	$	205,159	$	23,422	$	22,154	$	32,638	$	(93,930)	$	189,443
Distributable Earnings (Loss) per Weighted Average Diluted Share	$	0.63	$	0.07	$	0.07	$	0.10	$	(0.29)	$	0.58

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The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the three months ended March 31, 2023, by business segment (amounts in thousands, except per share data):


	Commercial and Residential Lending Segment		Infrastructure Lending Segment		Property Segment		Investing and Servicing Segment		Corporate		Total
Revenues	$	410,606	$	56,314	$	23,798	$	40,162	$	278	$	531,158
Costs and expenses	(274,415)		(49,224)		(27,208)		(33,859)		(100,846)		(485,552)
Other income (loss)	2,032		1,764		11,762		(16,468)		6,270		5,360
Income (loss) before income taxes	138,223		8,854		8,352		(10,165)		(94,298)		50,966
Income tax benefit	6,557		46		—		2,192		—		8,795
Income attributable to non-controlling interests	(3)		—		(6,978)		(806)		—		(7,787)
Net income (loss) attributable to Starwood Property Trust, Inc.	144,777		8,900		1,374		(8,779)		(94,298)		51,974
Add / (Deduct):
Non-controlling interests attributable to Woodstar II Class A Units	—		—		4,691		—		—		4,691
Non-controlling interests attributable to unrealized gains/losses	—		—		(263)		(2,798)		—		(3,061)
Non-cash equity compensation expense	2,087		312		74		1,595		6,868		10,936
Management incentive fee	—		—		—		—		12,365		12,365
Depreciation and amortization	1,742		20		8,185		2,771		—		12,718
Interest income adjustment for securities	5,220		—		—		5,420		—		10,640
Extinguishment of debt, net	—		—		—		—		(246)		(246)
Consolidated income tax benefit associated with fair value adjustments	(6,557)		(46)		—		(2,192)		—		(8,795)
Other non-cash items	(19)		—		270		74		—		325
Reversal of GAAP unrealized and realized (gains) / losses on: (1)
Loans	(8,262)		—		—		(639)		—		(8,901)
Credit loss provision, net	30,790		12,404		—		—		—		43,194
Securities	(14,866)		—		—		14,459		—		(407)
Woodstar Fund investments	—		—		(12,965)		—		—		(12,965)
Derivatives	34,363		51		1,217		3,467		(6,270)		32,828
Foreign currency	(14,930)		(75)		(14)		—		—		(15,019)
Earnings from unconsolidated entities	(939)		(1,740)		—		(679)		—		(3,358)
Sales of properties	—		—		—		(190)		—		(190)
Recognition of Distributable realized gains / (losses) on:
Loans (2)	(1,720)		—		—		1,763		—		43

Securities (4)	—		—		—		(2,076)		—		(2,076)
Woodstar Fund investments(5)	—		—		14,243		—		—		14,243

Derivatives (6)	19,946		91		4,212		(111)		(6,529)		17,609
Foreign currency (7)	(714)		(30)		14		—		—		(730)
Earnings (loss) from unconsolidated entities (8)	939		(96)		—		497		—		1,340
Sales of properties (9)	—		—		—		79		—		79
Distributable Earnings (Loss)	$	191,857	$	19,791	$	21,038	$	12,661	$	(88,110)	$	157,237
Distributable Earnings (Loss) per Weighted Average Diluted Share	$	0.60	$	0.06	$	0.06	$	0.04	$	(0.27)	$	0.49

______________________________________________________________________________________________________________________

(1)The reconciling items in this section are exactly equivalent to the amounts recognized within GAAP net income (before the consolidation of VIEs), each of which can be agreed back to the respective lines within Note 23 to our Condensed Consolidated Financial Statements. They reflect both unrealized and realized (gains) and losses. For added transparency and consistency of presentation, the entire amount recognized in GAAP income is reversed in this section, and the realized components of these amounts are reflected in the next section entitled “Recognition of Distributable realized gains / (losses).”

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(2)Represents the realized portion of GAAP gains (losses) on residential and commercial conduit loans carried under the fair value option that were sold during the period or expected to be sold in the near term subject to a binding agreement. The amount is calculated as the difference between (i) the net proceeds received or expected to be received in connection with a securitization or sale of loans and (ii) such loans’ historical cost basis.

(3)Represents loan losses that are deemed nonrecoverable, which is generally upon a realization event, such as when a loan is repaid, or in the case of foreclosure, when the underlying asset is sold. Non-recoverability may also be determined if, in our determination, it is nearly certain that the carrying amounts will not be collected or realized upon sale. The loss amount is calculated as the difference between the cash received or expected to be received and the Distributable Earnings basis of the asset.

(4)Represents the realized portion of GAAP gains (losses) on CMBS and RMBS carried under the fair value option that are sold or impaired during the period. Upon sale, the difference between the cash proceeds received and the historical cost basis of the security is treated as a realized gain or loss for Distributable Earnings purposes. We consider a CMBS or an RMBS credit loss to be realized when such amounts are deemed nonrecoverable. Non-recoverability is generally at the time the underlying assets within the securitization are liquidated, but non-recoverability may also be determined if, in our determination, it is nearly certain that all amounts due will not be collected. The amount is calculated as the difference between the cash received and the historical cost basis of the security.

(5)Represents GAAP income from the Woodstar Fund investments excluding unrealized changes in the fair value of its underlying assets and liabilities. The amount is calculated as the difference between the Woodstar Fund’s GAAP net income and its unrealized gains (losses), which represents changes in working capital and actual cash distributions received.

(6)Represents the realized portion of GAAP gains or losses on the termination or settlement of derivatives that are accounted for at fair value. Derivatives are only treated as realized for Distributable Earnings when they are terminated or settled, and cash is exchanged. The amount of cash received or paid to terminate or settle the derivative is the amount treated as realized for Distributable Earnings purposes at the time of such termination or settlement.

(7)Represents the realized portion of foreign currency gains (losses) related to assets and liabilities denominated in a foreign currency. Realization occurs when the foreign currency is converted back to USD. The amount is calculated as the difference between the foreign exchange rate at the time the asset was placed on the balance sheet and the foreign exchange rate at the time cash is received and is offset by any gains or losses on the related foreign currency derivative at settlement.

(8)Represents GAAP earnings (loss) from unconsolidated entities excluding non-cash items and unrealized changes in fair value recorded on the books and records of the unconsolidated entities. The difference between GAAP and Distributable Earnings for these entities principally relates to depreciation and unrealized changes in the fair value of mortgage loans and securities.

(9)Represents the realized gain (loss) on sales of properties held at depreciated cost. Because depreciation is a non-cash expense that is excluded from Distributable Earnings, GAAP gains upon sale of a property are higher, and GAAP losses are lower, than the respective realized amounts reflected in Distributable Earnings. The amount is calculated as net sales proceeds less undepreciated cost, adjusted for any noncontrolling interest.

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Three Months Ended March 31, 2024 Compared to the Three Months Ended December 31, 2023

Commercial and Residential Lending Segment

The Commercial and Residential Lending Segment’s Distributable Earnings were relatively unchanged at $205.2 million during both the first quarter of 2024 and the fourth quarter of 2023. After making adjustments for the calculation of Distributable Earnings, revenues were $436.3 million, costs and expenses were $253.8 million, other income was $22.7 million and there was no income tax provision or benefit.

Revenues, consisting principally of interest income on loans, increased by $4.2 million in the first quarter of 2024, primarily due to an increase in interest income from loans of $3.6 million. The increase in interest income from loans reflects (i) a $4.4 million increase from commercial loans reflecting higher prepayment related income, partially offset by the effects of lower average balances and interest rate spreads, and (ii) a $0.8 million decrease from residential loans reflecting lower average balances.

Costs and expenses decreased by $3.8 million in the first quarter of 2024, primarily due to (i) a $10.4 million decrease in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio, primarily reflecting lower average borrowings outstanding due to paydowns from excess cash balances, partially offset by (ii) a $3.2 million increase in general and administrative expenses and (iii) the nonrecurrence of a $2.4 million credit loss recovery on a commercial loan in the fourth quarter of 2023.

Other income decreased by $8.0 million in the first quarter of 2024, primarily due to a $10.9 million increase in recognized credit losses on RMBS investments and residential loans, partially offset by a $3.1 million increase in realized gains on derivatives which hedge our interest rate and foreign currency risks, net of an increase in realized foreign currency losses.

Infrastructure Lending Segment

The Infrastructure Lending Segment’s Distributable Earnings decreased by $3.0 million, from $23.4 million during the fourth quarter of 2023 to $20.4 million in the first quarter of 2024. After making adjustments for the calculation of Distributable Earnings, revenues were $66.9 million, costs and expenses were $46.0 million and other loss was $0.5 million.

Revenues, consisting principally of interest income on loans, increased by $2.5 million in the first quarter of 2024, primarily due to an increase in interest income from loans of $2.5 million reflecting higher average loan balances and prepayment related income.

Costs and expenses increased by $4.8 million in the first quarter of 2024, primarily due to (i) a $1.8 million increase in general and administrative expenses, (ii) a $1.5 million credit loss recognized on an infrastructure loan classified as held-for-sale in the first quarter of 2024 and (iii) a $1.1 million increase in interest expense primarily due to higher average borrowings outstanding.

Other income decreased by $0.7 million to a loss in the first quarter of 2024, primarily due to a loss on extinguishment of debt.

Property Segment

Distributable Earnings by Portfolio (amounts in thousands)


	For the Three Months Ended
	March 31, 2024		December 31, 2023		Change
Master Lease Portfolio	$	40,788	$	4,973	$	35,815
Medical Office Portfolio	5,116		4,719		397


Woodstar Fund, net of non-controlling interests	14,332		13,334		998

Other/Corporate	(1,002)		(872)		(130)
Distributable Earnings	$	59,234	$	22,154	$	37,080

The Property Segment’s Distributable Earnings increased by $37.0 million, from $22.2 million during the fourth quarter of 2023 to $59.2 million in the first quarter of 2024. After making adjustments for the calculation of Distributable Earnings, revenues were $21.3 million, costs and expenses were $22.4 million, other income was $63.5 million and the deduction of income attributable to non-controlling interests in the Woodstar Fund was $3.2 million.

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Revenues decreased by $2.2 million in the first quarter of 2024, primarily due to the sale of our Master Lease Portfolio on February 29, 2024.

Costs and expenses were relatively unchanged in the first quarter of 2024.

Other income increased by $39.7 million in the first quarter of 2024 primarily due to a $37.4 million net gain on sale of our Master Lease Portfolio.

Income attributable to non-controlling interests in the Woodstar Fund increased by $0.5 million in the first quarter of 2024.

Investing and Servicing Segment

The Investing and Servicing Segment’s Distributable Earnings decreased by $33.5 million, from earnings of $32.6 million during the fourth quarter of 2023 to a loss of $0.9 million in the first quarter of 2024. After making adjustments for the calculation of Distributable Earnings (Loss), revenues were $52.2 million, costs and expenses were $32.7 million, other loss was $19.0 million, there was no income tax provision or benefit, and the deduction of income attributable to non-controlling interests was $1.4 million.

Revenues decreased by $4.6 million in the first quarter of 2024, primarily due to a $2.2 million net decrease in interest income from conduit loans and CMBS investments and a $1.4 million decrease in servicing fees. The treatment of CMBS interest income on a GAAP basis is complicated by our application of the ASC 810 consolidation rules. In an attempt to treat these securities similar to the trust’s other investment securities, we compute distributable interest income pursuant to an effective yield methodology. In doing so, we segregate the portfolio into various categories based on the components of the bonds’ cash flows and the volatility related to each of these components. We then accrete interest income on an effective yield basis using the components of cash flows that are reliably estimable. Other minor adjustments are made to reflect management’s expectations for other components of the projected cash flow stream.

Costs and expenses decreased by $4.1 million in the first quarter of 2024, primarily due to decreases of $2.1 million in general and administrative expenses and $1.5 million in interest expense, both primarily related to loan securitization activity.

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 and CMBS investments. For GAAP purposes, the loans, CMBS and derivatives are accounted for at fair value, with all changes in fair value (realized or unrealized) recognized in earnings. The adjustments to Distributable Earnings outlined above are also applied to the GAAP earnings of our unconsolidated entities. Other income decreased by $35.9 million to a loss in the first quarter of 2024, primarily due to a $27.4 million increase in recognized credit losses on CMBS, a $9.7 million decrease in realized gains on conduit loans and a $6.5 million unfavorable change in fair value of servicing rights, all partially offset by an $8.6 million favorable change in realized gains (losses) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments.

Income attributable to non-controlling interests decreased $2.9 million in the first quarter of 2024, primarily due to non-controlling interests in decreased income of a consolidated CMBS joint venture.

Corporate

Corporate loss decreased by $1.5 million, from $93.9 million during the fourth quarter of 2023 to $92.4 million in the first quarter of 2024, primarily due to a $1.3 million decrease in interest expense.

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Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

Commercial and Residential Lending Segment

The Commercial and Residential Lending Segment’s Distributable Earnings increased by $13.3 million, from $191.9 million during the first quarter of 2023 to $205.2 million in the first quarter of 2024. After making adjustments for the calculation of Distributable Earnings, revenues were $436.3 million, costs and expenses were $253.8 million, other income was $22.7 million and there was no income tax provision or benefit.

Revenues, consisting principally of interest income on loans, increased by $20.3 million in the first quarter of 2024, primarily due to an increase in interest income from loans of $18.9 million. The increase in interest income from loans reflects (i) a $21.3 million increase from commercial loans, reflecting higher average index rates and prepayment related income, partially offset by lower average loan balances, and (ii) a $2.4 million decrease from residential loans principally due to lower average balances.

Costs and expenses increased by $13.8 million in the first quarter of 2024, primarily due to (i) a $9.8 million increase in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio, reflecting higher average index rates, and (ii) a $4.8 million increase in general and administrative expenses, primarily for compensation and professional fees.

Other income increased by $6.8 million in the first quarter of 2024, primarily due to a $15.9 million increase in realized gains on derivatives which hedge our interest rate and foreign currency hedges, net of an increase in realized foreign currency losses, partially offset by a $9.7 million increase in recognized credit losses on RMBS investments and residential loans.

Infrastructure Lending Segment

The Infrastructure Lending Segment’s Distributable Earnings increased by $0.6 million, from $19.8 million during the first quarter of 2023 to $20.4 million in the first quarter of 2024. After making adjustments for the calculation of Distributable Earnings, revenues were $66.9 million, costs and expenses were $46.0 million and other loss was $0.5 million.

Revenues, consisting principally of interest income on loans, increased by $10.6 million in the first quarter of 2024, primarily due to an increase in interest income from loans of $11.6 million, reflecting higher average loan balances and index rates, partially offset by a $1.2 million decrease in interest income from investment securities, primarily due to lower average balances resulting from repayments.

Costs and expenses increased by $9.5 million in the first quarter of 2024, primarily due to a $6.2 million increase in interest expense, reflecting higher average index rates and borrowings outstanding, a $1.8 million increase in general and administrative expenses and a $1.5 million credit loss recognized on an infrastructure loan classified as held-for-sale in the first quarter of 2024.

Other loss increased by $0.5 million in the first quarter of 2024, primarily due to a loss on extinguishment of debt.

Property Segment

Distributable Earnings by Portfolio (amounts in thousands)


	For the Three Months Ended March 31,
	2024		2023		Change
Master Lease Portfolio	$	40,788	$	5,029	$	35,759
Medical Office Portfolio	5,116		5,034		82


Woodstar Fund, net of non-controlling interests	14,332		11,667		2,665

Other/Corporate	(1,002)		(692)		(310)
Distributable Earnings	$	59,234	$	21,038	$	38,196

The Property Segment’s Distributable Earnings increased by $38.2 million, from $21.0 million during the first quarter of 2023 to $59.2 million in the first quarter of 2024. After making adjustments for the calculation of Distributable Earnings, revenues were $21.3 million, costs and expenses were $22.4 million, other income was $63.5 million and the deduction of income attributable to non-controlling interests in the Woodstar Fund was $3.2 million.

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Revenues decreased by $2.9 million in the first quarter of 2024, primarily due to the sale of our Master Lease Portfolio on February 29, 2024.

Costs and expenses increased by $2.6 million in the first quarter of 2024, primarily due to a $2.5 million increase in interest expense of our Medical Office Portfolio, reflecting higher index rates on variable rate borrowings.

Other income increased by $44.4 million in the first quarter of 2024 primarily due to (i) a $37.4 million net gain on sale of our Master Lease Portfolio, (ii) a $3.4 million increase in income from the Woodstar Fund and (iii) a $3.1 million increase in realized gain on derivatives which primarily hedge our interest rate risk on borrowings secured by our Medical Office Portfolio.

Income attributable to non-controlling interests in the Woodstar Fund increased $0.7 million in the first quarter of 2024.

Investing and Servicing Segment

The Investing and Servicing Segment’s Distributable Earnings decreased by $13.6 million from earnings of $12.7 million during the first quarter of 2023 to a loss of $0.9 million in the first quarter of 2024. After making adjustments for the calculation of Distributable Earnings (Loss), revenues were $52.2 million, costs and expenses were $32.7 million, other loss was $19.0 million, there was no income tax provision or benefit, and the deduction of income attributable to non-controlling interests was $1.4 million.

Revenues increased by $6.4 million in the first quarter of 2024, primarily due to a $5.0 million increase in interest income from CMBS investments and conduit loans, a $3.2 million increase in servicing fees principally related to loan modifications, partially offset by a $2.2 million decrease in rental income due to fewer operating properties held.

Costs and expenses increased by $3.1 million in the first quarter of 2024, primarily due to a $3.4 million increase in general and administrative expenses reflecting increased incentive compensation due to higher loan securitization volume.

Other income decreased by $19.2 million to a loss in the first quarter of 2024, primarily due to (i) a $28.8 million increase in recognized credit losses on CMBS and (ii) a $3.3 million greater decrease in fair value of servicing rights, partially offset by (iii) a $9.9 million increase in realized gains on conduit loans and (iv) a $4.5 million favorable change in realized gain (loss) on derivatives which primarily hedge our interest rate risk on CMBS investments and conduit loans.

Income attributable to non-controlling interests decreased $2.3 million, primarily due to non-controlling interests in decreased income of a consolidated CMBS joint venture.

Corporate

Corporate loss increased by $4.3 million, from $88.1 million during the first quarter of 2023 to $92.4 million in the first quarter of 2024, primarily due to (i) a $3.2 million increase in interest expense reflecting higher average unsecured borrowings outstanding, as well as higher index rates on our secured term loans, and (ii) a $2.6 million increase in realized losses on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes, partially offset by (iii) a $1.3 million decrease in general and administrative expenses.

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, 2023. Refer to our Form 10-K for a description of these strategies.

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Sources of Liquidity

Our primary sources of liquidity are as follows:

Cash Flows for the Three Months Ended March 31, 2024 (amounts in thousands)


	GAAP		VIE Adjustments		Excluding Securitization VIEs
Net cash provided by operating activities	$	55,949	$	—	$	55,949
Cash Flows from Investing Activities:
Origination, purchase and funding of loans held-for-investment	(265,185)		—		(265,185)
Proceeds from principal collections on loans	1,220,995		—		1,220,995
Purchase and funding of investment securities	(9,220)		—		(9,220)
Proceeds from sales, redemptions and collections of investment securities	20,463		18,188		38,651
Proceeds from sales of real estate	188,040		—		188,040
Purchases and additions to properties and other assets	(5,576)		—		(5,576)
Net cash flows from other investments and assets	16,144		—		16,144
Net cash provided by investing activities	1,165,661		18,188		1,183,849
Cash Flows from Financing Activities:
Proceeds from borrowings	1,234,980		—		1,234,980
Principal repayments on and repurchases of borrowings	(2,165,427)		(108)		(2,165,535)
Payment of deferred financing costs	(6,574)		—		(6,574)
Proceeds from common stock issuances	1,400		—		1,400
Payment of dividends	(152,305)		—		(152,305)

Distributions to non-controlling interests	(9,987)		—		(9,987)
Issuance of debt of consolidated VIEs	3,166		(3,166)		—
Repayment of debt of consolidated VIEs	(108)		108		—
Distributions of cash from consolidated VIEs	15,022		(15,022)		—
Net cash used in financing activities	(1,079,833)		(18,188)		(1,098,021)
Net increase in cash, cash equivalents and restricted cash	141,777		—		141,777
Cash, cash equivalents and restricted cash, beginning of period	311,972		—		311,972
Effect of exchange rate changes on cash	(1,045)		—		(1,045)
Cash, cash equivalents and restricted cash, end of period	$	452,704	$	—	$	452,704

The discussion below is on a non-GAAP basis, after removing adjustments principally resulting from the consolidation of the securitization VIEs under ASC 810. These adjustments principally relate to (i) the purchase of CMBS, RMBS, loans and real estate from consolidated VIEs, which are reflected as repayments of VIE debt on a GAAP basis and (ii) sales, principal collections and redemptions of CMBS and RMBS related to consolidated VIEs, which are reflected as VIE distributions on a GAAP basis. There is no net impact to overall cash resulting from these consolidations. Refer to Note 2 to the Condensed Consolidated Financial Statements for further discussion.

Cash and cash equivalents increased by $141.8 million during the three months ended March 31, 2024, reflecting net cash provided by investing activities of $1.2 billion and net cash provided by operating activities of $55.9 million, partially offset by net cash used in financing activities of $1.1 billion.

Net cash provided by operating activities of $55.9 million during the three months ended March 31, 2024 related primarily to cash interest income of $427.4 million from our loans and $47.8 million from our investment securities, receipts from our interest rate derivatives of $26.9 million, net rental income of $17.3 million, distributions from our affordable housing fund investments of $13.3 million, and servicing fees of $12.1 million. Offsetting these cash inflows was cash interest expense of $367.1 million, general and administrative expenses of $80.7 million, originations and purchases of loans held-for-sale, net of sales and principal collections of $24.7 million, and a net change in operating assets and liabilities of $27.5 million.

Net cash provided by investing activities of $1.2 billion for the three months ended March 31, 2024 related primarily to proceeds received from principal collections and sale of loans held-for-investment of $1.2 billion and net proceeds from the

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sale of our Master Lease Portfolio of $188.0 million, partially offset by the origination, purchase and funding of loans held-for-investment of $265.2 million.

Net cash used in financing activities of $1.1 billion for the three months ended March 31, 2024 related primarily to payments on our debt and deferred financing costs, net of borrowings, of $937.1 million and dividend distributions of $152.3 million.

Our Investment Portfolio

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

Commercial and Residential Lending Segment

The following table sets forth the amount of each category of investments we owned across various property types within our Commercial and Residential Lending Segment as of March 31, 2024 and December 31, 2023 (dollars in thousands):


	Face Amount		Carrying Value			Asset Specific Financing		Net Investment		Unlevered Return on Asset (6)
March 31, 2024
First mortgages (1)	$	14,133,131	$	14,098,699		$	8,807,008	$	5,291,691	9.3	%
Subordinated mortgages (2)	77,619		77,495			—		77,495		16.1	%
Mezzanine loans (1)	298,400		296,699			—		296,699		14.3	%

Other loans	71,187		70,666			—		70,666		12.6	%
Loans held-for-sale, fair value option, residential	2,863,512		2,518,600			2,268,493		250,107		4.5	%	(5)

RMBS, available-for-sale	189,960		100,319			18,604		81,715		10.3	%
RMBS, fair value option	326,274		434,916		(3)	147,043		287,873		19.7	%

HTM debt securities (4)	580,088		578,090			129,776		448,314		10.2	%
Credit loss allowance	N/A		(329,597)			—		(329,597)
Equity security	7,880		7,265			—		7,265
Investments in unconsolidated entities	N/A		25,371			—		25,371
Properties, net	N/A		434,365			87,750		346,615
	$	18,548,051	$	18,312,888		$	11,458,674	$	6,854,214

December 31, 2023
First mortgages (1)	$	14,996,627	$	14,947,446		$	10,223,439	$	4,724,007	9.4	%
Subordinated mortgages (2)	76,882		76,560			—		76,560		16.0	%
Mezzanine loans (1)	274,899		273,146			—		273,146		14.0	%

Other loans	71,843		71,012			—		71,012		12.5	%
Loans held-for-sale, fair value option, residential	2,909,126		2,604,594			2,286,070		318,524		4.5	%	(5)

RMBS, available-for-sale	191,916		102,368			18,638		83,730		10.1	%
RMBS, fair value option	326,274		449,909		(3)	147,428		302,481		19.6	%

HTM debt securities (4)	592,542		590,274			133,142		457,132		10.1	%
Credit loss allowance	N/A		(301,837)			—		(301,837)
Equity security	9,226		8,340			—		8,340
Investments in unconsolidated entities	N/A		19,151			—		19,151
Properties, net	N/A		431,155			234,889		196,266
	$	19,449,335	$	19,272,118		$	13,043,606	$	6,228,512

__________________________________________

(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 $1.0 billion being classified as first mortgages as of both March 31, 2024 and December 31, 2023.

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

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

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

(5)Represents the weighted average coupon of residential mortgage loans.

(6)Calculated using applicable index rates for variable rate investments as of the respective period end and excludes loans for which interest income is not recognized. In addition to cash coupon, unlevered return includes the amortization of deferred origination and extension fees, loan origination costs, and purchase discounts, as well as the accrual of exit fees.

As of March 31, 2024 and December 31, 2023, our Commercial and Residential Lending Segment’s investment portfolio, excluding residential loans, RMBS, properties and other investments, had the following characteristics based on carrying values:


Collateral Property Type	March 31, 2024		December 31, 2023
Multifamily	37.2	%	37.1	%
Office	23.8	%	22.4	%
Hotel	14.3	%	14.3	%
Mixed Use	7.5	%	7.2	%
Industrial	5.9	%	8.0	%
Residential	1.8	%	1.7	%
Retail	1.4	%	1.4	%

Other	8.1	%	7.9	%
	100.0	%	100.0	%


Geographic Location	March 31, 2024		December 31, 2023
U.S. Regions:
North East	17.6	%	16.4	%
South East	17.3	%	16.3	%
South West	15.9	%	15.2	%
Mid Atlantic	10.2	%	9.7	%
West	8.8	%	8.9	%
Midwest	2.1	%	2.4	%
International:
United Kingdom	12.1	%	12.9	%
Australia	8.4	%	8.2	%
Other Europe	5.6	%	8.1	%
Bahamas/Bermuda	2.0	%	1.9	%
	100.0	%	100.0	%

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Infrastructure Lending Segment

The following table sets forth the amount of each category of investments we owned within our Infrastructure Lending Segment as of March 31, 2024 and December 31, 2023 (dollars in thousands):


	Face Amount		Carrying Value		Asset Specific Financing		Net Investment		Unlevered Return on Asset (1)
March 31, 2024
First priority infrastructure loans and HTM securities	$	2,468,407	$	2,414,251	$	1,845,710	$	568,541	10.0	%
Loans held-for-sale, infrastructure	49,500		47,149		40,748		6,401		N/A
Credit loss allowance	N/A		(19,638)		—		(19,638)
Investments in unconsolidated entities	N/A		53,018		—		53,018
	$	2,517,907	$	2,494,780	$	1,886,458	$	608,322

December 31, 2023
First priority infrastructure loans and HTM securities	$	2,589,481	$	2,535,047	$	1,905,319	$	629,728	10.0	%

Credit loss allowance	N/A		(20,345)		—		(20,345)
Investments in unconsolidated entities	N/A		52,691		—		52,691
	$	2,589,481	$	2,567,393	$	1,905,319	$	662,074

__________________________________________

(1)Calculated using applicable index rates for variable rate investments as of the respective period end and excludes loans for which interest income is not recognized. In addition to cash coupon, unlevered return includes the amortization of deferred purchase discounts.

As of March 31, 2024 and December 31, 2023, our Infrastructure Lending Segment’s investment portfolio had the following characteristics based on carrying values:


Collateral Type	March 31, 2024		December 31, 2023
Power	55.4	%	55.1	%
Oil & gas - midstream	34.5	%	35.0	%
Oil & gas - downstream	7.2	%	7.0	%
Oil & gas - upstream	1.0	%	1.0	%
Other	1.9	%	1.9	%
	100.0	%	100.0	%


Geographic Location	March 31, 2024		December 31, 2023
U.S. Regions:
North East	31.2	%	32.5	%
South West	29.4	%	27.6	%
Midwest	19.7	%	19.4	%
South East	10.9	%	10.1	%
West	4.4	%	4.3	%
Mid-Atlantic	1.9	%	1.7	%
Other	—	%	2.0	%
International:
United Kingdom	2.1	%	2.0	%
Mexico	0.4	%	0.4	%
	100.0	%	100.0	%

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Property Segment

The following table sets forth the amount of each category of investments held within our Property Segment as of March 31, 2024 and December 31, 2023 (amounts in thousands):


	March 31, 2024		December 31, 2023
Properties, net	$	551,502	$	555,455
Properties held-for-sale, net	—		290,937
Lease intangibles, net	23,686		24,560
Woodstar Fund	2,008,937		2,012,833
	$	2,584,125	$	2,883,785

The following table sets forth our net investment and other information regarding the Property Segment’s properties and lease intangibles as of March 31, 2024 (dollars in thousands):


	Carrying Value		Asset Specific Financing		Net Investment		Occupancy Rate		Weighted Average Remaining Lease Term
Office—Medical Office Portfolio, cost	$	779,307	$	598,850	$	180,457	88.3	%	5.5 years


Accumulated depreciation and amortization	(204,119)		—		(204,119)
Net carrying value	$	575,188	$	598,850	$	(23,662)

As of March 31, 2024 and December 31, 2023, our Property Segment’s investment portfolio had the following geographic characteristics based on carrying values:


Geographic Location	March 31, 2024		December 31, 2023
South East	87.4	%	82.8	%
North East	4.5	%	4.2	%
South West	3.1	%	4.7	%
West	2.6	%	3.6	%
Midwest	2.4	%	4.7	%
	100.0	%	100.0	%

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Investing and Servicing Segment

The following table sets forth the amount of each category of investments we owned within our Investing and Servicing Segment as of March 31, 2024 and December 31, 2023 (amounts in thousands):


	Face Amount		Carrying Value			Asset Specific Financing			Net Investment
March 31, 2024
CMBS, fair value option	$	2,693,108	$	1,124,724	(1)	$	397,019	(2)	$	727,705
Intangible assets - servicing rights	N/A		53,868		(3)	—			53,868
Lease intangibles, net	N/A		5,856			—			5,856
Loans held-for-sale, fair value option, commercial	126,955		123,619			55,878			67,741
Loans held-for-investment	9,200		9,200			—			9,200
Investments in unconsolidated entities	N/A		33,154		(4)	—			33,154
Properties, net	N/A		58,698			68,502			(9,804)
	$	2,829,263	$	1,409,119		$	521,399		$	887,720
December 31, 2023
CMBS, fair value option	$	2,729,194	$	1,147,550	(1)	$	401,059	(2)	$	746,491
Intangible assets - servicing rights	N/A		57,249		(3)	—			57,249
Lease intangibles, net	N/A		6,155			—			6,155
Loans held-for-sale, fair value option, commercial	45,400		41,043			26,014			15,029
Loans held-for-investment	9,200		9,200			—			9,200
Investments in unconsolidated entities	N/A		33,134		(4)	—			33,134
Properties, net	N/A		59,774			68,784			(9,010)
	$	2,783,794	$	1,354,105		$	495,857		$	858,248

______________________________________________

(1)Includes $1.11 billion and $1.13 billion of CMBS eliminated in consolidation against VIE liabilities pursuant to ASC 810 as of March 31, 2024 and December 31, 2023, respectively. Also includes $171.1 million and $177.3 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of March 31, 2024 and December 31, 2023, respectively.

(2)Includes $32.2 million and $33.0 million of non-controlling interests in the consolidated entities which hold certain debt balances as of March 31, 2024 and December 31, 2023, respectively.

(3)Includes $34.3 million and $37.9 million of servicing rights intangibles eliminated in consolidation against VIE assets pursuant to ASC 810 as of March 31, 2024 and December 31, 2023, respectively.

(4)Includes $14.6 million of investments in unconsolidated entities eliminated in consolidation against VIE assets pursuant to ASC 810 as of both March 31, 2024 and December 31, 2023, respectively.

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Our REIS Equity Portfolio, as described in Note 6 to the Condensed Consolidated Financial Statements, had the following characteristics based on carrying values as of March 31, 2024 and December 31, 2023, respectively:


Property Type	March 31, 2024		December 31, 2023
Office	45.7	%	46.1	%
Retail	30.0	%	29.7	%
Mixed Use	20.3	%	20.0	%
Hotel	4.0	%	4.2	%


	100.0	%	100.0	%


Geographic Location	March 31, 2024		December 31, 2023
West	35.4	%	35.3	%
North East	30.7	%	30.8	%
Midwest	19.8	%	19.9	%
South West	14.1	%	14.0	%


	100.0	%	100.0	%

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Secured Borrowings

The following table is a summary of our secured borrowings as of March 31, 2024 (dollars in thousands):


	Current Maturity		Extended Maturity (a)		Weighted Average Pricing		Pledged Asset Carrying Value			Maximum Facility Size			Outstanding Balance			Approved but Undrawn Capacity (b)		Unallocated Financing Amount (c)
Repurchase Agreements:
Commercial Loans	Jun 2024 to Dec 2028	(d)	Oct 2025 to Dec 2030	(d)	Index + 2.05%	(e)	$	9,736,328		$	12,234,452	(f)	$	6,010,151		$	952,461	$	5,271,840
Residential Loans	Mar 2025 to Feb 2026		Mar 2025 to Apr 2026		SOFR + 1.90%		2,516,364			3,450,000			2,269,811			21,884		1,158,305
Infrastructure Loans	Sep 2024		Sep 2026		SOFR + 2.07%		571,784			650,000			475,763			—		174,237
Conduit Loans	Dec 2024 to Jun 2026		Dec 2025 to Jun 2027		SOFR + 2.15%		72,402			375,000			56,507			—		318,493
CMBS/RMBS	Dec 2024 to Apr 2032	(g)	Mar 2025 to Oct 2032	(g)	(h)		1,397,945			990,460			706,459		(i)	47,961		236,040
Total Repurchase Agreements							14,294,823			17,699,912			9,518,691			1,022,306		7,158,915
Other Secured Financing:
Borrowing Base Facility	Nov 2024		Oct 2026		SOFR + 2.11%		104,276			750,000		(j)	5,384			58,670		685,946
Commercial Financing Facilities	Jul 2024 to Aug 2028		Jul 2025 to Dec 2030		Index + 2.24%		580,687			571,030		(k)	408,210			—		162,820

Infrastructure Financing Facilities	Jul 2025 to Oct 2025		Oct 2027 to Jul 2032		Index + 2.15%		818,997			1,050,000			594,211			67,644		388,145
Property Mortgages - Fixed rate	Oct 2025 to Jun 2026		N/A		4.52%		32,436			29,797			29,797			—		—
Property Mortgages - Variable rate	Nov 2024 to Dec 2025		N/A		(l)		677,616			707,941			705,916			—		2,025
Term Loans and Revolver	(m)		N/A		(m)		N/A		(m)	1,513,281			1,363,281			150,000		—
STWD 2022-FL3 CLO	Nov 2038		N/A		SOFR + 1.64%		1,007,284			840,620			840,620			—		—
STWD 2021-HTS SASB	Apr 2034		N/A		SOFR + 2.42%		216,750			195,576			195,576			—		—
STWD 2021-FL2 CLO	Apr 2038		N/A		SOFR + 1.63%		1,216,834			988,749			988,749			—		—
STWD 2019-FL1 CLO	Jul 2038		N/A		SOFR + 1.83%		553,096			386,381			386,381			—		—
STWD 2021-SIF2 CLO	Jan 2033		N/A		SOFR + 1.89%		514,678			410,000			410,000			—		—
STWD 2021-SIF1 CLO	Apr 2032		N/A		SOFR + 2.07%		515,246			410,000			410,000			—		—
Total Other Secured Financing							6,237,900			7,853,375			6,338,125			276,314		1,238,936
							$	20,532,723		$	25,553,287		$	15,856,816		$	1,298,620	$	8,397,851
Unamortized net discount													(23,530)
Unamortized deferred financing costs													(52,932)
													$	15,780,354

___________________________________________

(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 $2.5 billion as of March 31, 2024 are indexed to EURIBOR, BBSY, SARON and SONIA. The remainder are indexed to SOFR.

(f)Certain facilities with an aggregate initial maximum facility size of $11.8 billion may be increased to $12.2 billion, subject to certain conditions. The $12.2 billion amount includes such upsizes.

(g)Certain facilities with an outstanding balance of $330.9 million as of March 31, 2024 carry a rolling 12-month term which may reset quarterly with the lender’s consent. These facilities carry no maximum facility size.

(h)A facility with an outstanding balance of $279.0 million as of March 31, 2024 has a weighted average fixed annual interest rate of 3.54%. All other facilities are variable rate with a weighted average rate of SOFR + 2.19%.

(i)Includes: (i) $279.0 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $32.2 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 15 to the Condensed Consolidated Financial Statements).

(j)The maximum facility size as of March 31, 2024 of $450.0 million may be increased to $750.0 million, subject to certain conditions.

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(k)Certain facilities with an aggregate initial maximum facility size of $471.0 million may be increased to $571.0 million, subject to certain conditions. The $571.0 million amount includes such upsizes.

(l)Includes a $600.0 million first mortgage and mezzanine loan secured by our Medical Office Portfolio. This debt has a weighted average interest rate of SOFR + 2.18% that we swapped to a fixed rate of 3.46%. The remainder have a weighted average rate of SOFR + 2.73%.

(m)Consists of: (i) a $770.8 million term loan facility that matures in July 2026, of which $382.0 million has an annual interest rate of SOFR + 2.60% and $388.8 million has an annual interest rate of SOFR + 3.35%, subject to a 0.75% SOFR floor, (ii) a $150.0 million revolving credit facility that matures in April 2026 with an annual interest rate of SOFR + 2.60%, and (iii) a $592.5 million term loan facility that matures in November 2027, with an annual interest rate of SOFR + 3.25%, subject to a 0.50% SOFR floor. These facilities are secured by the equity interests in certain of our subsidiaries which totaled $5.9 billion as of March 31, 2024.

The above table no longer reflects property mortgages of the Woodstar Portfolios which, as discussed in Notes 2 and 7 to the Condensed Consolidated Financial Statements, are now reflected within “Investments of consolidated affordable housing fund” on our condensed consolidated balance sheets.

Refer to Note 10 to the Condensed Consolidated Financial Statements for further disclosure regarding the terms of our secured financing arrangements.

Variance between Average and Quarter-End Credit Facility Borrowings Outstanding

The following table compares the average amount outstanding under our secured financing agreements during each quarter and the amount outstanding as of the end of each quarter, together with an explanation of significant variances (amounts in thousands):


Quarter Ended	Quarter-End Balance	Weighted-Average Balance During Quarter	Variance
December 31, 2023	17,643,891	17,493,558	150,333


March 31, 2024	15,856,816	17,090,987	(1,234,171)	(a)

__________________________________________________

(a)Variance primarily related to secured debt pay downs from unsecured senior note issuance and the sale of the Master Lease Portfolio.

Borrowings under Unsecured Senior Notes

During the three months ended March 31, 2024 and 2023, the weighted average effective borrowing rate on our unsecured senior notes was 5.1% and 4.7%, respectively. The effective borrowing rate includes the effects of underwriter purchase discount.

Refer to Note 11 to the Condensed Consolidated Financial Statements for further disclosure regarding the terms of our unsecured senior notes.

Scheduled Principal Repayments on Investments and Overhang on Financing Facilities

The following scheduled and/or projected principal repayments on our investments were based on amounts outstanding and extended contractual maturities of those investments as of March 31, 2024. The projected and/or required repayments of financing were based on the earlier of (i) the extended contractual maturity of each credit facility or (ii) the extended contractual maturity of each of the investments that have been pledged as collateral under the respective credit facility (amounts in thousands):


	Scheduled Principal Repayments on Loans and HTM Securities		Scheduled/Projected Principal Repayments on RMBS and CMBS		Projected/Required Repayments of Financing		Scheduled Principal Inflows Net of Financing Outflows
Second Quarter 2024	$	300,780	$	38,547	$	(185,677)	$	153,650
Third Quarter 2024	212,445		7,144		(140,546)		79,043
Fourth Quarter 2024	410,175		69,434		(1,391,166)		(911,557)		(1)
First Quarter 2025	407,284		79,076		(1,573,647)		(1,087,287)		(2)
Total	$	1,330,684	$	194,201	$	(3,291,036)	$	(1,766,151)

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______________________________________________________________________________________________________________________

(1)Shortfall primarily relates to (i) $600.0 million related to outstanding debt on our Medical Office Portfolio that we priced the refinancing of subsequent to March 31, 2024 (see Note 24) and (ii) $400.0 million of our unsecured senior notes that mature in December 2024 that we intend to repay with funds generated in the normal course of business.

(2)Shortfall primarily relates to (i) $500.0 million of our unsecured senior notes that mature in March 2025 that we intend to repay with funds generated in the normal course of business, (ii) $330.9 million of repayments under securities facilities which carry a rolling 12-month term that we have historically extended, and intend to continue to extend with lender’s consent and (iii) $284.2 million of repayments under a Residential Loans repurchase facility which carries a one-year term that we extend every three months with lender’s consent.

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

Issuances of Equity Securities

We may raise funds through capital market transactions by issuing capital stock. There can be no assurance, however, that we will be able to access the capital markets at any particular time or on any particular terms. We have authorized 100,000,000 shares of preferred stock and 500,000,000 shares of common stock. At March 31, 2024, we had 100,000,000 shares of preferred stock available for issuance and 184,043,235 shares of common stock available for issuance.

Other Potential Sources of Financing

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

Leverage Policies

Our strategies with regards to use of leverage have not changed significantly since December 31, 2023. Refer to our Form 10-K for a description of our strategies regarding use of leverage.

Cash Requirements

Dividends

U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. We generally intend to distribute substantially all of our taxable income (which does not necessarily equal our GAAP net income) to our stockholders each year, if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating and debt service requirements. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. Refer to our Form 10-K for a detailed dividend history.

The Company’s board of directors declared the following dividends during the three months ended March 31, 2024:

Declaration Date

Record Date

Payment Date

Amount

Frequency

3/15/24

3/29/24

4/15/24

0.48

Quarterly

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Contractual Obligations and Commitments

Our material contractual obligations and commitments as of March 31, 2024 are as follows (amounts in thousands):


	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Secured financings (a)	$	12,625,490	$	1,436,033	$	3,941,513	$	5,744,587	$	1,503,357
CLOs and SASB (b)	3,231,326		438,807		2,438,143		279,801		74,575
Unsecured senior notes	2,780,750		900,000		900,000		380,750		600,000
Future loan commitments:
Commercial Lending (c)	1,097,782		713,205		384,490		87		—

Infrastructure Lending (d)	183,164		158,618		24,546		—		—

__________________________________________________

(a)Represents the contractual maturity of the respective credit facility, inclusive of available extension options. If investments that have been pledged as collateral repay earlier than the contractual maturity of the debt, the related portion of the debt would likewise require earlier repayment. Refer to Note 10 to the Condensed Consolidated Financial Statements for the expected maturities by year.

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

(c)Excludes $278.0 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.

(d)Represents contractual commitments of $117.1 million under revolvers and letters of credit and $66.1 million under delayed draw term loans.

The table above does not include interest payable, amounts due under our management agreement, amounts due under our derivative agreements or amounts due under guarantees as those contracts do not have fixed and determinable payments.

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

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

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

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, 2023.

Recent Accounting Developments

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

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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, as described in Item 7A of our Form 10-K, have not changed materially since December 31, 2023 except as described below.

Credit Risk

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

We seek to further manage credit risk associated with our Investing and Servicing Segment loans held-for-sale through the purchase of credit instruments. The following table presents our credit instruments as of March 31, 2024 and December 31, 2023 (dollars in thousands):


	Face Value of Loans Held-for-Sale		Aggregate Notional Value of Credit Instruments		Number of Credit Instruments
March 31, 2024	$	126,955	$	49,000	3
December 31, 2023	$	45,400	$	49,000	3

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our investments and the related financing obligations. In general, we seek to match the interest rate characteristics of our investments with the interest rate characteristics of any related financing obligations such as repurchase agreements, bank credit facilities, term loans, revolving facilities and securitizations. In instances where the interest rate characteristics of an investment and the related financing obligation are not matched, we mitigate such interest rate risk through the utilization of interest rate derivatives of the same duration. The following table presents financial instruments where we have utilized interest rate derivatives to hedge interest rate risk and the related interest rate derivatives as of March 31, 2024 and December 31, 2023 (dollars in thousands):


	Face Value of Hedged Instruments		Aggregate Notional Value of Credit Instruments		Number of Credit Instruments
Instrument hedged as of March 31, 2024
Loans held-for-sale	$	2,990,467	$	3,715,500	52
RMBS, available-for-sale	189,960		85,000		2
CMBS, fair value option	65,738		81,300		3
HTM debt securities	9,100		9,100		1
Secured financing agreements	715,854		1,357,537		8
Unsecured senior notes	1,600,000		1,570,000		3
	$	5,571,119	$	6,818,437	69
Instrument hedged as of December 31, 2023
Loans held-for-sale	$	2,954,526	$	3,646,500	43
RMBS, available-for-sale	191,916		85,000		2
CMBS, fair value option	67,433		58,800		2
HTM debt securities	9,629		9,629		1
Secured financing agreements	716,786		1,358,775		8
Unsecured senior notes	1,000,000		970,000		2
	$	4,940,290	$	6,128,704	58

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The following table summarizes the estimated annual change in net investment income for our variable rate investments and our variable rate debt assuming increases or decreases in SOFR or other applicable index rates and adjusted for the effects of our interest rate hedging activities (amounts in thousands):


Income (Expense) Subject to Interest Rate Sensitivity	Variable rate investments and indebtedness (1)		1.00% Decrease		0.50% Decrease		0.25% Decrease		0.25% Increase
Investment income from variable rate investments	$	16,801,153	$	(165,131)	$	(83,082)	$	(41,810)	$	41,810
Interest expense from variable rate debt, net of interest rate derivatives	(8,814,575)		119,546		59,773		29,886		(29,886)
Net investment income from variable rate instruments	$	7,986,578	$	(45,585)	$	(23,309)	$	(11,924)	$	11,924

______________________________________________________________________________________________________________________

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

Foreign Currency Risk

Our loans and investments that are denominated in a foreign currency are also subject to risks related to fluctuations in exchange rates. We generally mitigate this exposure by matching the currency of our foreign currency assets to the currency of the borrowings that finance those assets. As a result, we substantially reduce our exposure to changes in portfolio value related to changes in foreign exchange rates.

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

Consistent with our strategy of hedging foreign currency exposure on certain investments, we typically enter into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income 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.

The following table represents our assets and liabilities that are denominated in Pounds Sterling (“GBP”), Euros (“EUR”), Australian dollars (“AUD”) and Swiss Francs (“CHF”), as well as our expected future net interest receipts (amounts in thousands):


	March 31, 2024
	GBP		EUR		AUD		CHF
Foreign currency assets	£	1,506,124	€	735,294	A$	1,961,174	Fr.	64,805
Foreign currency liabilities	(1,104,200)		(327,733)		(1,369,637)		(47,474)
Foreign currency contracts - notional, net	(483,611)		(439,598)		(800,289)		(20,900)
Subtotal (1)	£	(81,687)	€	(32,037)	A$	(208,752)	Fr.	(3,569)

______________________________________________________________________________________________________________________

(1) Primarily relates to expected net interest cash flows on the respective assets and liabilities over their term.

Substantially all of our net asset exposure to the GBP, EUR, AUD and CHF has been hedged with foreign currency forward contracts as of March 31, 2024, as indicated in the table above. Refer to Note 13 of the Condensed Consolidated Financial Statements for further detail regarding our foreign currency derivatives and their contractual maturities.

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Item 4. Controls and Procedures.

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

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

Changes in Internal Control Over Financial Reporting. No change in internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the quarter ended March 31, 2024 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, that could have a material adverse effect on our business, financial position or results of operations.

Item 1A. Risk Factors.

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

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.

There were no unregistered sales of securities or issuer purchases of equity securities during the three months ended March 31, 2024.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits.

(a)Index to Exhibits

INDEX TO EXHIBITS


Exhibit No.						Description

4.1						Indenture, dated as of March 27, 2024, between Starwood Property Trust, Inc. and The Bank of New York Mellon, as trustee (including the form of Starwood Property Trust, Inc.'s 7.250% Senior Notes due 2029) (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed March 27, 2024)
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 its XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

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SIGNATURES

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


	STARWOOD PROPERTY TRUST, INC.

Date: May 8, 2024	By:	/s/ BARRY S. STERNLICHT
		Barry S. Sternlicht Chief Executive Officer Principal Executive Officer

Date: May 8, 2024	By:	/s/ RINA PANIRY
		Rina Paniry Chief Financial Officer, Treasurer, Chief Accounting Officer and Principal Financial Officer

100