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What changed in STARWOOD PROPERTY TRUST, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of STARWOOD PROPERTY TRUST, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+379 added−393 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-22)

Top changes in STARWOOD PROPERTY TRUST, INC.'s 2024 10-K

379 paragraphs added · 393 removed · 315 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

29 edited+2 added−0 removed48 unchanged
Biggest changeAs of December 31, 2023, the Investing and Servicing Segment’s CMBS had a weighted-average expected maturity of 5.6 years. 14 Table of Contents Our Investing and Servicing Segment Property Portfolio (the “REIS Equity Portfolio”), as described in Note 7 to the Consolidated Financial Statements, had the following characteristics based on carrying values as of December 31, 2023 and 2022, respectively: Property Type December 31, 2023 December 31, 2022 Office 46.1 % 29.6 % Retail 29.7 % 49.3 % Mixed Use 20.0 % 11.7 % Hotel 4.2 % 2.6 % Multifamily — % 6.8 % 100.0 % 100.0 % Geographic Location December 31, 2023 December 31, 2022 West 35.3 % 22.0 % North East 30.8 % 28.8 % Midwest 19.9 % 12.2 % South West 14.0 % 8.3 % Mid Atlantic — % 21.9 % South East — % 6.8 % 100.0 % 100.0 % Regulation We have elected, and are organized and conduct our operations, to qualify as a REIT under the Code, as further described below.
Biggest changeAs of December 31, 2024, the Investing and Servicing Segment’s CMBS had a weighted-average expected maturity of 5.4 years. 14 Tab l e of Contents Regulation We have elected, and are organized and conduct our operations, to qualify as a REIT under the Code, as further described below.
Our investment strategy focuses on a few fundamental themes: • origination and acquisition of real estate debt assets with an implied basis sufficiently low to weather declines in asset values; • acquisition of equity interests in commercial real estate properties that generate stable current returns, increase the duration of our investment portfolio and provide potential for capital appreciation; • focus on real estate markets and asset classes with strong supply and demand fundamentals and/or barriers to entry; • structuring and financing each transaction in a manner that reflects the risk of the underlying asset’s cash flow stream and credit risk profile, and efficiently managing and maintaining the transaction’s interest rate and currency exposures at levels consistent with management’s risk objectives; • seeking situations where our size, scale, speed and sophistication allow us to position ourselves as a “one-stop” lending solution for real estate owner/operators; • utilizing the skills, expertise, and contacts developed by our Manager over the past 32 years as one of the premier global real estate investment managers to: (i) correctly anticipate trends and identify attractive risk-adjusted investment opportunities in U.S., European and Australian real estate markets; and (ii) expand and diversify our presence in various asset classes, including: • origination and acquisition of residential loans, including non-agency residential loans sometimes referred to as “non-qualified mortgages” or “non-QMs”; and • origination and acquisition of corporate and asset-backed loans; • utilizing the skills, expertise and infrastructure we acquired through our 2013 acquisition of LNR Property LLC (“LNR”), a market leading diversified real estate investment management and loan servicing company comprising our Investing and Servicing Segment, to expand and diversify our presence in various segments of real estate, including: • origination of small and medium sized loan transactions ($5 million to $50 million) for both investment and securitization/gain-on-sale; • investment in CMBS; • investment in commercial real estate; • special servicing of commercial real estate loans in commercial real estate securitization transactions; and • utilizing the skills and expertise we acquired through our 2018 acquisition of the Infrastructure Lending Segment from GE Capital Global Holdings, LLC (“GE Capital”) to expand our originations and acquisitions of infrastructure debt investments.
Our investment strategy focuses on a few fundamental themes: • origination and acquisition of real estate debt assets with an implied basis sufficiently low to weather declines in asset values; • acquisition of equity interests in commercial real estate properties that generate stable current returns, increase the duration of our investment portfolio and provide potential for capital appreciation; • focus on real estate markets and asset classes with strong supply and demand fundamentals and/or barriers to entry; • structuring and financing each transaction in a manner that reflects the risk of the underlying asset’s cash flow stream and credit risk profile, and efficiently managing and maintaining the transaction’s interest rate and currency exposures at levels consistent with management’s risk objectives; • seeking situations where our size, scale, speed and sophistication allow us to position ourselves as a “one-stop” lending solution for real estate owner/operators; • utilizing the skills, expertise, and contacts developed by our Manager over the past 33 years as one of the premier global real estate investment managers to: (i) correctly anticipate trends and identify attractive risk-adjusted investment opportunities in U.S., European and Australian real estate markets; and (ii) expand and diversify our presence in various asset classes, including: • origination and acquisition of residential loans, including non-agency residential loans sometimes referred to as “non-qualified mortgages” or “non-QMs”; and • origination and acquisition of corporate and asset-backed loans; • utilizing the skills, expertise and infrastructure we acquired through our 2013 acquisition of LNR Property LLC (“LNR”), a market leading diversified real estate investment management and loan servicing company comprising our Investing and Servicing Segment, to expand and diversify our presence in various segments of real estate, including: • origination of small and medium sized loan transactions ($5 million to $50 million) for both investment and securitization/gain-on-sale; • investment in CMBS; • investment in commercial real estate; • special servicing of commercial real estate loans in commercial real estate securitization transactions; and • utilizing the skills and expertise we acquired through our 2018 acquisition of the Infrastructure Lending Segment from GE Capital Global Holdings, LLC (“GE Capital”) to expand our originations and acquisitions of infrastructure debt investments.
We have four reportable business segments as of December 31, 2023 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).
We have four reportable business segments as of December 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).
In addition to our Manager making direct investments on our behalf, we may enter into joint venture, management or other agreements with persons that have special expertise or sourcing capabilities. 7 Table of Contents Investment Guidelines Our board of directors has adopted the following investment guidelines: • our investments will be in our target assets unless otherwise approved by our board of directors; • no investment shall be made that would cause us to fail to qualify as a REIT for federal income tax purposes; • no investment shall be made that would cause us or any of our subsidiaries to be required to be registered as an investment company under the 1940 Act; • not more than 25% of our equity will be invested in any individual asset without the consent of a majority of our independent directors; and • (a) any investment that is less than $150.0 million will require approval of our Chief Executive Officer; (b) any investment that is equal to or in excess of $150.0 million but less than $250.0 million will require approval of our Manager’s investment committee; (c) any investment that is equal to or in excess of $250.0 million but less than $400.0 million will require approval of each of the investment committee of our board of directors and our Manager’s investment committee; and (d) any investment that is equal to or in excess of $400.0 million will require approval of each of our board of directors and our Manager’s investment committee.
In addition to our Manager making direct investments on our behalf, we may enter into joint venture, management or other agreements with persons that have special expertise or sourcing capabilities. 7 Tab l e of Contents Investment Guidelines Our board of directors has adopted the following investment guidelines: • our investments will be in our target assets unless otherwise approved by our board of directors; • no investment shall be made that would cause us to fail to qualify as a REIT for federal income tax purposes; • no investment shall be made that would cause us or any of our subsidiaries to be required to be registered as an investment company under the 1940 Act; • not more than 25% of our equity will be invested in any individual asset without the consent of a majority of our independent directors; and • (a) any investment that is less than $150.0 million will require approval of our Chief Executive Officer; (b) any investment that is equal to or in excess of $150.0 million but less than $250.0 million will require approval of our Manager’s investment committee; (c) any investment that is equal to or in excess of $250.0 million but less than $400.0 million will require approval of each of the investment committee of our board of directors and our Manager’s investment committee; and (d) any investment that is equal to or in excess of $400.0 million will require approval of each of our board of directors and our Manager’s investment committee.
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.
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 and to be stabilized commercial real estate properties, including multifamily properties, 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.
Regions: North East 16.4 % 16.0 % South East 16.3 % 16.7 % South West 15.2 % 15.6 % Mid Atlantic 9.7 % 9.3 % West 8.9 % 10.3 % Midwest 2.4 % 2.7 % International: United Kingdom 12.9 % 13.8 % Other Europe 8.1 % 6.4 % Australia 8.2 % 7.4 % Bahamas/Bermuda 1.9 % 1.8 % 100.0 % 100.0 % Our primary focus has been to build a portfolio of commercial mortgage and mezzanine loans with attractive risk‑adjusted returns by focusing on the underlying real estate fundamentals and credit analysis of the borrowers.
Regions: North East 18.4 % 16.4 % South East 15.8 % 16.3 % South West 15.4 % 15.2 % West 10.5 % 8.9 % Mid Atlantic 9.3 % 9.7 % Midwest 2.2 % 2.4 % International: United Kingdom 12.8 % 12.9 % Australia 7.3 % 8.2 % Other Europe 6.3 % 8.1 % Bahamas/Bermuda 2.0 % 1.9 % 100.0 % 100.0 % Our primary focus has been to build a portfolio of commercial mortgage and mezzanine loans with attractive risk‑adjusted returns by focusing on the underlying real estate fundamentals and credit analysis of the borrowers.
Item 1. Business. The following description of our business should be read in conjunction with the information included elsewhere in this Form 10‑K for the year ended December 31, 2023. This discussion contains forward‑looking statements that involve risks and uncertainties.
Item 1. Business. The following description of our business should be read in conjunction with the information included elsewhere in this Form 10‑K for the year ended December 31, 2024. This discussion contains forward‑looking statements that involve risks and uncertainties.
While we expect that additional new regulations in these areas will be adopted and existing ones may change in the future, it is not possible at this time to forecast the exact nature of any future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial 15 Table of Contents condition or results of operations or prospects.
While we expect that additional new regulations in these areas will be adopted and existing ones may change in the future, it is not possible at this time to forecast the exact nature of any future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial condition or results of operations or prospects.
In addition, we may invest in the following real estate-related investments: • Agency RMBS: RMBS for which a U.S. government agency or a federally chartered corporation guarantees payments of principal and interest on the securities. 9 Table of Contents Business Segments We currently operate our business in four reportable segments: the Commercial and Residential Lending Segment, the Infrastructure Lending Segment, the Property Segment and the Investing and Servicing Segment.
In addition, we may invest in the following real estate-related investments: • Agency RMBS: RMBS for which a U.S. government agency or a federally chartered corporation guarantees payments of principal and interest on the securities. 9 Tab l e of Contents Business Segments We currently operate our business in four reportable segments: the Commercial and Residential Lending Segment, the Infrastructure Lending Segment, the Property Segment and the Investing and Servicing Segment.
We may also utilize other sources of financing to the extent available to us. 8 Table of Contents Our Target Assets We invest in target assets secured primarily by U.S., European or Australian collateral. We focus primarily on originating or opportunistically acquiring commercial mortgage whole loans, B-Notes, mezzanine loans, preferred equity and mortgage-backed securities (“MBS”).
We may also utilize other sources of financing to the extent available to us. 8 Tab l e of Contents Our Target Assets We invest in target assets secured primarily by U.S., European or Australian collateral. We focus primarily on originating or opportunistically acquiring commercial mortgage whole loans, B-Notes, mezzanine loans, preferred equity and mortgage-backed securities (“MBS”).
The application of this methodology resulted in mezzanine loans with carrying values of $1.0 billion and $1.3 billion being classified as first mortgages as of December 31, 2023 and 2022, respectively. (2) Subordinated mortgages include B-Notes and junior participation in first mortgages where we do not own the senior A-Note or senior participation.
The application of this methodology resulted in mezzanine loans with carrying values of $0.9 billion and $1.0 billion being classified as first mortgages as of December 31, 2024 and 2023, respectively. (2) Subordinated mortgages include B-Notes and junior participation in first mortgages where we do not own the senior A-Note or senior participation.
We intend to post on our website any amendment to, or waiver of, a provision of our Code of Business Conduct and Ethics or Code of Ethics for Principal Executive Officer and Senior Financial Officers that applies to our Chief Executive Officer, Chief Financial Officer or persons performing similar functions and that relates to any element of the code of ethics definition set forth in Item 406 of Regulation S-K of the Securities Act of 1933, as amended.
We intend to post on our website any amendment to, or waiver of, a provision of our Code of Business Conduct and Ethics or Code of Ethics for Principal Executive Officer and Senior Financial Officers that applies to our Chief Executive 16 Tab l e of Contents Officer, Chief Financial Officer or persons performing similar functions and that relates to any element of the code of ethics definition set forth in Item 406 of Regulation S-K of the Securities Act of 1933, as amended.
To communicate with our board of directors electronically, we have established an e-mail address, BoardofDirectors@stwdreit.com, to which stockholders may send correspondence to our board of directors or any such individual directors or group or committee of directors. 17 Table of Contents
To communicate with our board of directors electronically, we have established an e-mail address, BoardofDirectors@stwdreit.com, to which stockholders may send correspondence to our board of directors or any such individual directors or group or committee of directors.
If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate 16 Table of Contents rates (including any applicable alternative minimum tax) and will not be able to qualify as a REIT for four subsequent taxable years.
If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and will not be able to qualify as a REIT for four subsequent taxable years.
As of December 31, 2023 and 2022, 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 December 31, 2023 December 31, 2022 Multifamily 37.1 % 33.3 % Office 22.4 % 23.1 % Hotel 14.3 % 16.5 % Industrial 8.0 % 6.0 % Mixed Use 7.2 % 9.7 % Residential 1.7 % 1.8 % Retail 1.4 % 1.6 % Other 7.9 % 8.0 % 100.0 % 100.0 % Geographic Location December 31, 2023 December 31, 2022 U.S.
As of December 31, 2024 and 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 December 31, 2024 December 31, 2023 Multifamily 34.5 % 37.1 % Office 22.0 % 22.4 % Hotel 12.1 % 14.3 % Mixed Use 9.6 % 7.2 % Industrial 8.9 % 8.0 % Residential 1.6 % 1.7 % Retail 1.6 % 1.4 % Other 9.7 % 7.9 % 100.0 % 100.0 % Geographic Location December 31, 2024 December 31, 2023 U.S.
Human Capital Resources As of December 31, 2023, the Company had 293 full-time employees, the majority of which are real estate professionals located throughout the U.S.
Human Capital Resources As of December 31, 2024, the Company had 286 full-time employees, the majority of which are real estate professionals located throughout the U.S.
As of December 31, 2023 and 2022, our Infrastructure Lending Segment’s investment portfolio had the following characteristics based on carrying values: Collateral Type December 31, 2023 December 31, 2022 Power 55.1 % 61.2 % Oil & gas - midstream 35.0 % 30.8 % Oil & gas - downstream 7.0 % 6.7 % Oil & gas - upstream 1.0 % — % Other 1.9 % 1.3 % 100.0 % 100.0 % Geographic Location December 31, 2023 December 31, 2022 U.S.
As of December 31, 2024 and 2023, our Infrastructure Lending Segment’s investment portfolio had the following characteristics based on carrying values: Collateral Type December 31, 2024 December 31, 2023 Power 57.1 % 55.1 % Oil & gas - midstream 33.5 % 35.0 % Oil & gas - downstream 8.5 % 7.0 % Oil & gas - upstream 0.9 % 1.0 % Other — % 1.9 % 100.0 % 100.0 % Geographic Location December 31, 2024 December 31, 2023 U.S.
If we own both the A-Note and B-Note, we categorize the loan as a first mortgage loan. (3) Eliminated in consolidation against VIE liabilities pursuant to Accounting Standards Codification (“ASC”) 810. 10 Table of Contents (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.
If we own both the A-Note and B-Note, we categorize the loan as a first mortgage loan. (3) Eliminated in consolidation against VIE liabilities pursuant to Accounting Standards Codification (“ASC”) 810. 10 Tab l e of Contents (4) CMBS held-to-maturity (“HTM”) and mandatorily redeemable preferred equity interests in commercial real estate entities.
We also benefit from Starwood Capital Group’s portfolio management, finance and administration functions, which address legal, compliance, investor relations and operational matters, asset valuation, risk management and information technologies in connection with the performance of our Manager’s duties.
Our Manager also benefits from Starwood Capital Group’s dedicated asset management group operating in offices located in the U.S. and abroad. We also benefit from Starwood Capital Group’s portfolio management, finance and administration functions, which address legal, compliance, investor relations and operational matters, asset valuation, risk management and information technologies in connection with the performance of our Manager’s duties.
(3) Includes $37.9 million and $39.1 million of servicing rights intangibles eliminated in consolidation against VIE assets pursuant to ASC 810 as of December 31, 2023 and 2022, respectively. (4) Includes $14.6 million and $13.5 million of investments in unconsolidated entities eliminated in consolidation against VIE assets pursuant to ASC 810 as of December 31, 2023 and 2022, respectively.
(3) Includes $35.7 million and $37.9 million of servicing rights intangibles eliminated in consolidation against VIE assets pursuant to ASC 810 as of December 31, 2024 and 2023, respectively. (4) Includes $14.8 million and $14.6 million of investments in unconsolidated entities eliminated in consolidation against VIE assets pursuant to ASC 810 as of December 31, 2024 and 2023, respectively.
Also includes $177.3 million and $198.9 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of December 31, 2023 and 2022, respectively. (2) Includes $33.0 million and $42.8 million of non-controlling interests in the consolidated entities which hold certain debt balances as of December 31, 2023 and 2022, respectively.
Also includes $148.6 million and $177.3 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of December 31, 2024 and 2023, respectively. (2) Includes $30.3 million and $33.0 million of non-controlling interests in the consolidated entities which hold certain debt balances as of December 31, 2024 and 2023, respectively.
As of December 31, 2023, commercial loans held‑for‑investment and HTM securities had a weighted‑average expected maturity of 2.8 years, calculated assuming all extension options are exercised by the borrower, although our loans may be repaid prior to such date. 11 Table of Contents Infrastructure Lending Segment The following table sets forth the amount of each category of investments we owned within our Infrastructure Lending Segment as of December 31, 2023 and 2022 (dollars in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment Unlevered Return on Asset (1) 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 December 31, 2022 First priority infrastructure loans and HTM securities $ 2,474,994 $ 2,432,758 $ 1,856,692 $ 576,066 9.1 % Credit loss allowance N/A (13,622) — (13,622) Investments in unconsolidated entities N/A 47,078 — 47,078 $ 2,474,994 $ 2,466,214 $ 1,856,692 $ 609,522 __________________________________________ (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.
As of December 31, 2024, commercial loans held‑for‑investment and HTM securities had a weighted‑average expected maturity of 2.4 years, calculated assuming all extension options are exercised by the borrower, although our loans may be repaid prior to such date. 11 Tab l e of Contents Infrastructure Lending Segment The following table sets forth the amount of each category of investments we owned within our Infrastructure Lending Segment as of December 31, 2024 and 2023 (dollars in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment Unlevered Return on Asset (1) December 31, 2024 First priority infrastructure loans and HTM securities $ 2,631,732 $ 2,580,775 $ 1,989,860 $ 590,915 8.9 % Credit loss allowance N/A (21,553) — (21,553) Investments in unconsolidated entities N/A 54,105 — 54,105 $ 2,631,732 $ 2,613,327 $ 1,989,860 $ 623,467 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.
As of December 31, 2023 and 2022, our Property Segment’s investment portfolio had the following geographic characteristics based on carrying values: Geographic Location December 31, 2023 December 31, 2022 South East 82.8 % 81.2 % South West 4.7 % 5.2 % Midwest 4.7 % 5.0 % North East 4.2 % 4.7 % West 3.6 % 3.9 % 100.0 % 100.0 % Refer to Schedule III included in Item 8 of this Form 10‑K for a detailed listing of the properties held by the Company, including their respective geographic locations. 13 Table of Contents Investing and Servicing Segment The following table sets forth the amount of each category of investments we owned within our Investing and Servicing Segment as of December 31, 2023 and 2022 (amounts in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment 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 December 31, 2022 CMBS, fair value option $ 2,753,810 $ 1,165,628 (1) $ 405,665 (2) $ 759,963 Intangible assets - servicing rights N/A 56,848 (3) — 56,848 Lease intangibles, net N/A 8,791 — 8,791 Loans held-for-sale, fair value option, commercial 23,900 21,136 7,519 13,617 Loans held-for-investment 9,577 9,577 — 9,577 Investments in unconsolidated entities N/A 33,030 (4) — 33,030 Properties, net N/A 121,716 130,072 (8,356) $ 2,787,287 $ 1,416,726 $ 543,256 $ 873,470 ______________________________________________ (1) Includes $1.13 billion and $1.15 billion of CMBS eliminated in consolidation against VIE liabilities pursuant to ASC 810 as of December 31, 2023 and 2022, respectively.
As of December 31, 2024 and 2023, our Property Segment’s investment portfolio had the following geographic characteristics based on carrying values: Geographic Location December 31, 2024 December 31, 2023 South East 85.3 % 82.8 % North East 4.2 % 4.2 % South West 2.9 % 4.7 % Mid-Atlantic 2.9 % — % West 2.5 % 3.6 % Midwest 2.2 % 4.7 % 100.0 % 100.0 % Refer to Schedule III included in Item 8 of this Form 10‑K for a detailed listing of the properties held by the Company, including their respective geographic locations. 13 Tab l e of Contents Investing and Servicing Segment The following table sets forth the amount of each category of investments we owned within our Investing and Servicing Segment as of December 31, 2024 and 2023 (amounts in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment December 31, 2024 CMBS, fair value option $ 2,822,153 $ 1,225,024 (1) $ 445,966 (2) $ 779,058 Intangible assets - servicing rights N/A 58,135 (3) — 58,135 Lease intangibles, net N/A 5,545 — 5,545 Loans held-for-sale, fair value option, commercial 125,695 121,384 86,753 34,631 Investments in unconsolidated entities N/A 33,640 (4) — 33,640 Properties, net N/A 65,466 58,375 7,091 $ 2,947,848 $ 1,509,194 $ 591,094 $ 918,100 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 $1.20 billion and $1.13 billion of CMBS eliminated in consolidation against VIE liabilities pursuant to ASC 810 as of December 31, 2024 and 2023, respectively.
Our corporate headquarters office is located at 591 West Putnam Avenue, Greenwich, Connecticut 06830, and our telephone number is (203) 422-7700. 6 Table of Contents Investment Strategy We seek to attain attractive risk-adjusted returns for our investors over the long term by sourcing and managing a diversified portfolio of target assets, financed in a manner that is designed to deliver attractive returns across a variety of market conditions and economic cycles.
Our corporate headquarters office is located at 2340 Collins Avenue, Suite 700, Miami Beach, Florida 33139, and our telephone number is (305) 695-5500. 6 Tab l e of Contents Investment Strategy We seek to attain attractive risk-adjusted returns for our investors over the long term by sourcing and managing a diversified portfolio of target assets, financed in a manner that is designed to deliver attractive returns across a variety of market conditions and economic cycles.
Regions: North East 32.5 % 39.0 % South West 27.6 % 21.9 % Midwest 19.4 % 21.9 % South East 10.1 % 7.4 % West 4.3 % 4.6 % Mid-Atlantic 1.7 % 1.8 % Other 2.0 % 2.1 % International: United Kingdom 2.0 % 0.8 % Mexico 0.4 % 0.5 % 100.0 % 100.0 % As of December 31, 2023, the Infrastructure Lending Segment’s first priority infrastructure loans and HTM securities had a weighted‑average contractual maturity of 3.9 years. 12 Table of Contents Property Segment The following table sets forth the amount of each category of investments held within our Property Segment as of December 31, 2023 and 2022 (amounts in thousands): December 31, 2023 December 31, 2022 Properties, net $ 555,455 $ 864,778 Properties held-for-sale, net 290,937 — Lease intangibles, net 24,560 28,470 Woodstar Fund 2,012,833 1,761,002 $ 2,883,785 $ 2,654,250 The following table sets forth our net investment and other information regarding the Property Segment’s properties and lease intangibles as of December 31, 2023 (dollars in thousands): Carrying Value Asset Specific Financing Net Investment Occupancy Rate Weighted Average Remaining Lease Term Office—Medical Office Portfolio $ 778,195 $ 598,350 $ 179,845 88.3 % 5.5 years Retail—Master Lease Portfolio (held-for-sale) 343,790 193,691 150,099 100.0 % 18.3 years Subtotal—undepreciated carrying value 1,121,985 792,041 329,944 Accumulated depreciation and amortization (251,033) — (251,033) Net carrying value $ 870,952 $ 792,041 $ 78,911 See Notes 7 and 8 to the Consolidated Financial Statements for a description of the above-referenced Property Segment Portfolios and Woodstar Fund.
Regions: North East 31.7 % 32.5 % South West 20.5 % 27.6 % Midwest 20.1 % 19.4 % South East 17.0 % 10.1 % West 5.8 % 4.3 % Mid-Atlantic 1.4 % 1.7 % Other 1.3 % 2.0 % International: United Kingdom 1.9 % 2.0 % Mexico 0.3 % 0.4 % 100.0 % 100.0 % As of December 31, 2024, the Infrastructure Lending Segment’s first priority infrastructure loans and HTM securities had a weighted‑average contractual maturity of 4.4 years. 12 Tab l e of Contents Property Segment The following table sets forth the amount of each category of investments held within our Property Segment as of December 31, 2024 and 2023 (amounts in thousands): December 31, 2024 December 31, 2023 Properties, net $ 657,246 $ 555,455 Properties held-for-sale, net — 290,937 Lease intangibles, net 21,415 24,560 Woodstar Fund 2,073,533 2,012,833 $ 2,752,194 $ 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 December 31, 2024 (dollars in thousands): Carrying Value Asset Specific Financing Net Investment Occupancy Rate Weighted Average Remaining Lease Term Office—Medical Office Portfolio $ 785,513 $ 479,732 $ 305,781 88.5% 5.2 years D.C.
Starwood Capital Group has invested in all major real estate asset classes, directly and indirectly, through operating companies, portfolios of properties and single assets. Starwood Capital Group invests at different levels of the capital structure, including equity, preferred equity, mezzanine debt and senior debt, depending on the asset risk profile and return expectation.
Starwood Capital Group has invested in all major real estate asset classes, directly and indirectly, through operating companies, portfolios of properties and single assets.
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 December 31, 2023 and 2022 (dollars in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment Unlevered Return on Asset (6) 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 December 31, 2022 First mortgages (1) $ 15,638,781 $ 15,552,875 $ 10,883,417 $ 4,669,458 8.2 % Subordinated mortgages (2) 72,118 71,100 — 71,100 14.6 % Mezzanine loans (1) 442,339 445,363 — 445,363 14.1 % Other loans 59,393 58,393 — 58,393 12.0 % Loans held-for-sale, fair value option, residential 3,092,915 2,763,458 2,155,078 608,380 4.5 % (5) RMBS, available-for-sale 202,818 113,386 74,798 38,588 11.0 % RMBS, fair value option 326,274 423,183 (3) 166,560 256,623 12.1 % CMBS, fair value option 102,900 97,218 (3) 49,798 47,420 8.4 % HTM debt securities (4) 603,497 607,438 133,143 474,295 9.4 % Credit loss allowance N/A (88,973) — (88,973) Equity security 11,057 9,840 — 9,840 Investments in unconsolidated entities N/A 25,326 — 25,326 Properties, net N/A 463,492 204,387 259,105 $ 20,552,092 $ 20,542,099 $ 13,667,181 $ 6,874,918 __________________________________________ (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.
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 December 31, 2024 and 2023 (dollars in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment Unlevered Return on Asset (6) December 31, 2024 First mortgages (1) $ 12,955,038 $ 12,931,333 $ 7,371,711 $ 5,559,622 8.3 % Subordinated mortgages (2) 31,000 31,247 — 31,247 15.4 % Mezzanine loans (1) 324,021 323,041 — 323,041 11.3 % Other loans 46,688 46,255 — 46,255 13.2 % Loans held-for-sale, fair value option, residential 2,694,959 2,394,624 2,125,990 268,634 4.5 % (5) RMBS, available-for-sale 180,654 93,806 17,248 76,558 10.4 % RMBS, fair value option 326,274 421,122 (3) 154,870 266,252 18.5 % HTM debt securities (4) 405,404 404,081 121,832 282,249 8.9 % Credit loss allowance N/A (451,205) — (451,205) Equity security 5,606 5,146 — 5,146 Investments in unconsolidated entities N/A 26,441 — 26,441 Properties, net N/A 650,966 87,750 563,216 $ 16,969,644 $ 16,876,857 $ 9,879,401 $ 6,997,456 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.
(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.
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.
Our Manager draws upon the experience and expertise of Starwood Capital Group’s team of professionals and support personnel operating in 16 cities across seven countries. Our Manager also benefits from Starwood Capital Group’s dedicated asset management group operating in offices located in the U.S. and abroad.
Starwood Capital Group invests at different levels of the capital structure, including equity, preferred equity, mezzanine debt and senior debt, depending on the asset risk profile and return expectation. 15 Tab l e of Contents Our Manager draws upon the experience and expertise of Starwood Capital Group’s team of professionals and support personnel operating in 17 cities across eight countries.
Added
(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.
Added
Multifamily Conversion 115,223 — 115,223 N/A N/A Subtotal—undepreciated carrying value 900,736 479,732 421,004 Accumulated depreciation and amortization (222,075) — (222,075) Net carrying value $ 678,661 $ 479,732 $ 198,929 See Notes 7 and 8 to the Consolidated Financial Statements for a description of the above-referenced Property Segment Portfolios and Woodstar Fund.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

124 edited+11 added−36 removed495 unchanged
Biggest changePursuant to the statute, our board of directors has by resolution exempted business combinations between us and any other person, provided that such business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such person). 44 Table of Contents The “control share” provisions of the MGCL provide that “control shares” of a Maryland corporation (defined as shares which, when aggregated with other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and our personnel who are also our directors.
Biggest changeThe “control share” provisions of the MGCL provide that “control shares” of a Maryland corporation (defined as shares which, when aggregated with other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to 42 Tab l e of Contents be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and our personnel who are also our directors.
Moreover, the respective indentures governing our senior notes contain covenants that, subject to a number of exceptions and adjustments, among other things, limit our ability to incur additional indebtedness and require that we maintain total unencumbered assets (as defined therein) of not less than 120% of the aggregate principal amount of our outstanding unsecured indebtedness (as defined therein).
Moreover, the respective indentures governing our unsecured senior notes contain covenants that, subject to a number of exceptions and adjustments, among other things, limit our ability to incur additional indebtedness and require that we maintain total unencumbered assets (as defined therein) of not less than 120% of the aggregate principal amount of our outstanding unsecured indebtedness (as defined therein).
Such future constraints could increase borrowing costs, which would make it more difficult or expensive to obtain additional financing or to refinance existing obligations and commitments, which could slow or deter future growth. Our warehouse facilities may limit our ability to acquire assets, and we may incur losses if the collateral is liquidated.
Such future constraints could increase borrowing costs, which would make it more difficult or expensive to obtain additional financing or to refinance existing obligations and commitments, which could slow or deter future growth. Warehouse facilities may limit our ability to acquire assets, and we may incur losses if the collateral is liquidated.
To the extent we suffer such losses with respect to our bridge loans, the value of our company and the price of our shares of common stock may be adversely affected. We purchase securities backed by subprime or alternative documentation residential loans, which are subject to increased risks.
To the extent we suffer such losses with respect to our bridge loans, the value of the Company and the price of our shares of common stock may be adversely affected. We purchase securities backed by subprime or alternative documentation residential loans, which are subject to increased risks.
In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
These factors could reduce our net interest income and cause us to suffer a loss during periods of rising interest rates. We may invest in distressed and non-performing commercial loans which could subject us to increased risks relative to performing loans, which may result in losses to us.
These factors could reduce our net interest income and cause us to suffer a loss during periods of rising interest rates. We invest in distressed and non-performing commercial loans which could subject us to increased risks relative to performing loans, which may result in losses to us.
Vacancies may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change in control of our company that is in the best interests of our stockholders.
Vacancies may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our management by removing and replacing directors and may prevent a change in control of the Company that is in the best interests of our stockholders.
A project’s cash flows can be adversely affected by, among other things: • if the project involves new construction, • cost overruns, • delays in completion, • availability of land, building materials, energy, raw materials and transportation, • availability of work force, management personnel and reliable contractors, and • natural disasters (fire, drought, flood, earthquake, pandemics, epidemics or other public health emergencies), global climate change, war, civil unrest and strikes affecting contractors, suppliers or markets; • shortfalls in expected capacity, output or efficiency; • the terms of the power purchase or other offtake agreements used in the project; • the creditworthiness of the project company and the project sponsor; • competition; • volatility in commodity prices; • technology deployed, and the failure or degradation of equipment; • inflation and fluctuations in exchange rates or interest rates; • operation and maintenance costs; • unforeseen capital expenditures; • sufficiency of gas and electric transmission capabilities; • licensing and permit requirements; • increased environmental or other applicable regulations, including as it relates to global climate change; • increased regulatory scrutiny and enforcement; and • changes in national, international, regional, state or local policies, economic conditions, laws and regulations.
A project’s cash flows can be adversely affected by, among other things: • if the project involves new construction, • cost overruns, • delays in completion, • availability of land, building materials, energy, raw materials and transportation, • availability of work force, management personnel and reliable contractors, and • natural disasters (wildfires, drought, flood, earthquake, pandemics, epidemics or other public health emergencies), global climate change, war, civil unrest and strikes affecting contractors, suppliers or markets; • shortfalls in expected capacity, output or efficiency; • the terms of the power purchase or other offtake agreements used in the project; • the creditworthiness of the project company and the project sponsor; • competition; • volatility in commodity prices; • technology deployed, and the failure or degradation of equipment; • inflation and fluctuations in exchange rates or interest rates; • operation and maintenance costs; • unforeseen capital expenditures; • sufficiency of gas and electric transmission capabilities; • licensing and permit requirements; • increased environmental or other applicable regulations, including as it relates to global climate change; • increased regulatory scrutiny and enforcement; and • changes in national, international, regional, state or local policies, economic conditions, laws and regulations.
The rules also include an elective alternative method under which the additional taxes resulting from the adjustment are assessed from the affected partners, subject to a higher rate of interest than otherwise would apply. Although regulations have been issued and address some aspects of these rules, questions remain as to how they will apply.
The rules also include an elective alternative method under which the additional taxes resulting from the adjustment are assessed against the affected partners, subject to a higher rate of interest than otherwise would apply. Although regulations have been issued and address some aspects of these rules, questions remain as to how they will apply.
Application of certain standards set forth in the ATR Rules is highly subjective and subject to interpretive uncertainties. As a result, a court may determine that a residential loan did not meet the standard or test even if the originator reasonably believed such standard or test had been satisfied.
Application of certain standards set forth in the ATR Rules is highly subjective and subject to interpretive uncertainties. As a result, a court may determine that a residential loan did not meet the applicable standard or test even if the originator reasonably believed such standard or test had been satisfied.
Even if we remain qualified for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, taxes on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, such as mortgage recording taxes.
Even if we remain qualified for taxation as a REIT, we may be subject to certain U.S. federal, state and local or non-U.S. taxes on our income and assets, including taxes on any undistributed income, taxes on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes, such as mortgage recording taxes.
We have sponsored, and purchased the more junior securities of, CLOs and such instruments involve significant risks, including that these securities receive distributions from the CLO only if the CLO generates enough income to first pay all the investors holding senior tranches and all CLO expenses.
We have sponsored, and purchased the more junior securities of, CLOs and such instruments involve significant risks, including that these securities receive distributions from the applicable CLO only if the CLO generates enough income to first pay all the investors holding senior tranches and all CLO expenses.
A number of factors may impair borrowers’ abilities to repay their loans, including: • changes in the borrowers’ income or assets; • acts of God, including, without limitation, earthquakes, hurricanes, pandemics, epidemics or other public health emergencies, other natural disasters and global climate change, which may result in uninsured losses; • acts of war or terrorism, including the consequences of such events; • adverse changes in national and local economic and market conditions; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; • costs of remediation and liabilities associated with environmental conditions; and • the potential for uninsured or under-insured property losses.
A number of factors may impair borrowers’ abilities to repay their loans, including: • changes in the borrowers’ income or assets; • acts of God, including, without limitation, earthquakes, hurricanes, pandemics, epidemics or other public health emergencies, wildfires, droughts, other natural disasters and global climate change, which may result in uninsured losses; • acts of war or terrorism, including the consequences of such events; • adverse changes in national and local economic and market conditions; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; • costs of remediation and liabilities associated with environmental conditions; and • the potential for uninsured or under-insured property losses.
The discovery of material environmental liabilities attached to such properties could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders. We invest in commercial properties subject to net leases, which could subject us to losses.
The discovery of material environmental liabilities attached to such properties could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders. We may invest in commercial properties subject to net leases, which could subject us to losses. We may invest in commercial properties subject to net leases.
In addition, we leverage the existing capabilities of Lotus Infrastructure Partners (formerly Starwood Energy Group) and Starwood Oil and Gas, affiliates of our Manager, with respect to our existing and future infrastructure debt investments, and our success depends, in part, on our ability to do so.
We leverage the existing capabilities of Lotus Infrastructure Partners (formerly Starwood Energy Group) and Starwood Oil and Gas, affiliates of our Manager, with respect to our existing and future infrastructure debt investments, and our success depends, in part, on our ability to do so.
Most of the assets in our Investing and Servicing Segment are held through, or are ownership interests in, entities subject to entity level or foreign taxes, which cannot be passed through to, or used by, our stockholders to reduce taxes they owe.
Most of the assets in our Investing and Servicing Segment are held through, or are ownership interests in, entities subject to entity level taxes, which cannot be passed through to, or used by, our stockholders to reduce taxes they owe.
We believe that a change in any one of the following factors could adversely affect our results of operations and impair our ability to continue to pay distributions to our stockholders: • the profitability of the investment of the net proceeds from our equity offerings; • our ability to make profitable investments; • margin calls or other expenses that reduce our cash flow; • defaults in our asset portfolio or decreases in the value of our portfolio; and • the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
We believe that a change in any one of the following factors could adversely affect our results of operations and impair our ability to continue to pay distributions to our stockholders: • the profitability of the investment of the net proceeds from our offerings of securities; • our ability to make profitable investments; • margin calls or other expenses that reduce our cash flow; • defaults in our asset portfolio or decreases in the value of our portfolio; and • the fact that anticipated operating expense levels may not prove accurate, as actual results may vary from estimates.
In order to borrow funds to acquire assets under any additional warehouse facilities, we expect that our lenders thereunder would have the right to review the potential assets for which we are seeking financing.
In order to borrow funds to acquire assets under any warehouse facilities, we expect that our lenders thereunder would have the right to review the potential assets for which we are seeking financing.
However, the more favorable rates that will nevertheless continue to apply to regular corporate qualified dividends could cause investors who are individuals, trusts or estates to perceive investments in REITs to be relatively less attractive as a federal income tax matter than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including ours.
However, the more favorable rates that will nevertheless continue to apply to regular corporate qualified dividends could cause investors who are individuals, trusts or estates to perceive investments in REITs to be relatively less attractive as a U.S. federal income tax matter than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including ours.
Our investments in construction loans require us to make estimates about the fair value of land improvements that may be challenged by the IRS.
Our investments in construction loans require us to make estimates about the fair value of land and improvements that may be challenged by the IRS.
Our credit agreements and master repurchase agreements also involve the risk that the market value of the loans pledged or sold by us to the repurchase agreement counterparty or provider of the bank credit facility may decline in value, in which case the lender may require us to provide additional collateral or to repay all or a portion of the funds advanced.
Our bank credit facilities and repurchase agreements also involve the risk that the market value of the loans pledged or sold by us to the repurchase agreement counterparty or provider of the bank credit facility may decline in value, in which case the lender may require us to provide additional collateral or to repay all or a portion of the funds advanced.
Incurring substantial debt subjects us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt or we may fail to comply with all of the other covenants contained in the debt, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements and/or (iii) the loss of some or all of our assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions, and investment yields may not increase with higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; and 22 Table of Contents • we may not be able to refinance debt that matures prior to the investment it was used to finance on favorable terms, or at all.
Incurring substantial debt subjects us to many risks that, if realized, would materially and adversely affect us, including the risk that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt or we may fail to comply with all of the other covenants contained in the debt, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow 21 Tab l e of Contents unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements and/or (iii) the loss of some or all of our assets to foreclosure or sale; • our debt may increase our vulnerability to adverse economic and industry conditions, and investment yields may not increase with higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for operations, future business opportunities, stockholder distributions or other purposes; and • we may not be able to refinance debt that matures prior to the investment it was used to finance on favorable terms, or at all.
See “Item 1. Business—Investment Guidelines” in this Form 10-K for additional information regarding these investment guidelines. In addition, in conducting periodic reviews, our board of directors may rely and may make investments through affiliates primarily on information provided to them by our Manager.
See Item 1. "Business—Investment Guidelines” in this Form 10-K for additional information regarding these investment guidelines. In addition, in conducting periodic reviews, our board of directors may rely and may make investments through affiliates primarily on information provided to them by our Manager.
We may not have the ability to raise funds on acceptable terms necessary to settle conversions of our outstanding convertible senior notes or to purchase our outstanding convertible senior notes upon a fundamental change. As of December 31, 2023, we had $380.8 million in principal amount of convertible senior notes outstanding.
We may not have the ability to raise funds on acceptable terms necessary to settle conversions of our outstanding convertible senior notes or to purchase our outstanding convertible senior notes upon a fundamental change. As of December 31, 2024, we had $380.8 million in principal amount of convertible senior notes outstanding.
We may invest in distressed and non-performing commercial mortgage loans, which are subject to increased risks of loss.
We invest in distressed and non-performing commercial mortgage loans, which are subject to increased risks of loss.
Increased inflation and interest rates could have an adverse impact on us, as described above in this risk factor. In addition, we cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings.
Elevated or rising inflation and interest rates could have an adverse impact on us, as described above in this risk factor. In addition, we cannot assure you that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings.
In addition, our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or 46 Table of Contents • active and deliberate dishonesty by the director or officer that was established by a final judgment as being material to the cause of action adjudicated.
In addition, our charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or • active and deliberate dishonesty by the director or officer that was established by a final judgment as being material to the cause of action adjudicated.
The economic performance and value of these investments can be adversely affected by many factors that are generally applicable to most real estate, including the following: • changes in the national, regional, local and international economic climate; • local conditions, such as oversupply of space or a reduction in demand for real estate in the areas in which they are located; • competition from other available space; • a reduction in demand for commercial or multifamily properties, including in the case of office properties as a result of an increase in remote and hybrid working arrangements; • the attractiveness of the real estate to tenants; • increases in operating costs if these costs cannot be passed through to tenants; • the financial condition of tenants and the ability to collect rent from tenants; • vacancies, changes in market rental rates and the need to periodically renovate, repair and re-let space; 35 Table of Contents • changes in interest rates and the availability of financing; • changes in zoning laws and taxation, government regulation and potential liability under environmental or other laws or regulations; • acts of God, including, without limitation, earthquakes, hurricanes, pandemics, epidemics or other public health emergencies, other natural disasters, global climate change, or acts of war or terrorism, in each case which may result in uninsured or underinsured losses; and • decreases in the underlying value of real estate.
The economic performance and value of these investments can be adversely affected by many factors that are generally applicable to most real estate, including the following: • changes in the national, regional, local and international economic climate; • local conditions, such as oversupply of space or a reduction in demand for real estate in the areas in which they are located; • competition from other available space; • a reduction in demand for commercial or multifamily properties, including in the case of office properties as a result of an increase in remote and hybrid working arrangements; • the attractiveness of the real estate to tenants; • increases in operating costs if these costs cannot be passed through to tenants; • the financial condition of tenants and the ability to collect rent from tenants; • vacancies, changes in market rental rates and the need to periodically renovate, repair and re-let space; • changes in interest rates and the availability of financing; • changes in zoning laws and taxation, government regulation and potential liability under environmental or other laws or regulations; 34 Tab l e of Contents • acts of God, including, without limitation, earthquakes, hurricanes, pandemics, epidemics or other public health emergencies, wildfires, droughts, other natural disasters, global climate change, or acts of war or terrorism, in each case which may result in uninsured or underinsured losses; and • decreases in the underlying value of real estate.
In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total securities can be represented by securities of one or more TRSs.
In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of a TRS, and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total securities can be represented by securities of one or more TRSs.
Our Manager and Starwood Capital Group have also agreed in our co-investment and allocation agreement that for so long as the management agreement is in effect and our Manager and Starwood Capital Group are under common control, no entity controlled by Starwood Capital Group will sponsor or manage a potential competing vehicle unless Starwood Capital Group adopts a policy that either (i) provides for the fair and equitable allocation of investment opportunities in our “target assets” (as defined in our co-investment and allocation agreement) among all such vehicles and us or (ii) provides us the right to co-invest with respect to any “target assets” (as defined in our co-investment and allocation agreement) with such vehicles, in each case subject to the suitability of each investment opportunity for the particular vehicle and us and each such vehicle’s and our availability of cash for investment.
Our Manager and Starwood Capital Group have also agreed in our co-investment and allocation agreement that for so long as the management agreement is in effect and our Manager and Starwood Capital Group are under common control, no entity controlled by Starwood Capital Group will sponsor or manage a potential competing vehicle unless Starwood Capital Group adopts a policy that either (i) provides for the fair and equitable allocation of investment opportunities in our “target assets” (as defined in our co-investment and allocation agreement) among all such vehicles and us or (ii) provides us the right to co-invest 17 Tab l e of Contents with respect to any “target assets” (as defined in our co-investment and allocation agreement) with such vehicles, in each case subject to the suitability of each investment opportunity for the particular vehicle and us and each such vehicle’s and our availability of cash for investment.
In addition, although REITs are not subject to the corporate alternative minimum tax, a TRS may be subject to this tax if a TRS’s three-year average annual adjusted financial statement income exceeds $1 billion.
Although REITs are not subject to the corporate alternative minimum tax, a TRS may be subject to this tax if a TRS’s three-year average annual adjusted financial statement income exceeds $1 billion.
The scope and duration of any future pandemic, epidemic or other public health crisis, the pace at which government and other restrictions are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global vaccination and booster rates, the speed and extent to which global or local markets recover from any such disruptions caused by such a public health crisis, and the impact of these factors on our business, financial condition, results of operations, liquidity, the market price of our common stock and our ability to make distributions to our stockholders would depend on future developments that would be highly uncertain and unpredictable.
The scope and duration of any future pandemic, epidemic or other public health crisis, the pace at which government and other restrictions are imposed and lifted, the scope of additional actions taken to mitigate the spread of disease, global 19 Tab l e of Contents vaccination and booster rates, the speed and extent to which global or local markets recover from any such disruptions caused by such a public health crisis, and the impact of these factors on our business, financial condition, results of operations, liquidity, the market price of our common stock and our ability to make distributions to our stockholders would depend on future developments that would be highly uncertain and unpredictable.
Our credit agreements contain covenants that restrict our ability to incur additional debt or liens, make certain investments or acquisitions, merge, consolidate or transfer or dispose of substantially all of our assets or otherwise dispose of property and assets, pay dividends and make certain other restricted payments, change the nature of our business or enter into transactions with affiliates.
Our bank credit facilities contain covenants that restrict our ability to incur additional debt or liens, make certain investments or acquisitions, merge, consolidate or transfer or dispose of substantially all of our assets or otherwise dispose of property and assets, pay dividends and make certain other restricted payments, change the nature of our business or enter into transactions with affiliates.
Even if a borrower does not succeed in the challenge, additional costs may be incurred in connection with challenging and defending such claims, which may be more costly in judicial foreclosure jurisdictions than in non-judicial 31 Table of Contents foreclosure jurisdictions, and there may be more of a likelihood such claims are made since the borrower is already exposed to the judicial system to process the foreclosure.
Even if a borrower does not succeed in the challenge, additional costs may be incurred in connection with challenging and defending such claims, which may be more costly in judicial foreclosure jurisdictions than in non-judicial foreclosure jurisdictions, and there may be more of a likelihood such claims are made since the borrower is already exposed to the judicial system to process the foreclosure.
The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
The remainder of our investment in securities (other than government securities, securities of a TRS, and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer.
Subject to market conditions and availability, we may seek additional sources 21 Table of Contents of financing in the form of bank credit facilities (including term loans and revolving facilities), repurchase agreements, warehouse facilities, structured financing arrangements, public and private equity and debt issuances and derivative instruments, in addition to transaction or asset-specific funding arrangements.
Subject to market conditions and availability, we may seek additional sources of financing in the form of additional bank credit facilities (including term loans and revolving facilities), repurchase agreements, warehouse facilities, structured financing arrangements, public and private equity and debt issuances and derivative instruments, in addition to transaction or asset-specific funding arrangements.
To qualify for this deduction, the domestic stockholder receiving such dividend must hold the dividend-paying REIT shares for at least 46 days (taking into account certain special holding period rules) of the 91-day period beginning 45 days before the shares become ex-dividend, and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property.
To qualify for this deduction, the domestic stockholder receiving such dividend must hold the dividend-paying REIT shares for at least 46 days (taking into account certain special holding period rules) of the 91-day period beginning 45 days before the 45 Tab l e of Contents shares become ex-dividend, and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property.
Operation of a project also involves risks that the operator will be unable to transport its product to its customers in an efficient manner due to a lack of 41 Table of Contents transmission capacity. Unplanned outages of a project, including extensions of scheduled outages due to mechanical failures or other problems, occur from time to time.
Operation of a project also involves risks that the operator will be unable to transport its product to its customers in an efficient manner due to a lack of transmission capacity. Unplanned outages of a project, including extensions of scheduled outages due to mechanical failures or other problems, occur from time to time.
Our credit agreements, as well as our master repurchase agreements, each requires us to maintain compliance with various financial covenants, including, as applicable, a minimum tangible net worth and cash liquidity, and specified financial ratios, such as total debt to total assets and EBITDA to fixed charges or loan-to-value ratios.
Our bank credit facilities, as well as our repurchase agreements, each requires us to maintain compliance with various financial covenants, including, as applicable, a minimum tangible net worth and cash liquidity, and specified financial ratios, such as total debt to total assets and EBITDA to fixed charges or loan-to-value ratios.
The securitization of our portfolio investments might magnify our exposure to losses on those portfolio investments because the subordinated interest we retain in the loans sold would be subordinate to the senior interest in the loans sold, and we would, therefore, absorb all of the losses sustained with respect to a loan sold before the owners of the senior interest 24 Table of Contents experience any losses.
The securitization of our portfolio investments might magnify our exposure to losses on those portfolio investments because the subordinated interest we retain in the loans sold would be subordinate to the senior interest in the loans sold, and we would, therefore, absorb all of the losses sustained with respect to a loan sold before the owners of the senior interest experience any losses.
Treasury regulations, does not constitute “gross income” for purposes of 51 Table of Contents the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the gross income tests.
Treasury regulations, does not constitute “gross income” for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both of the gross income tests.
Our board of directors will periodically review our investment guidelines and our 52 Table of Contents investment portfolio but will not, and will not be required to, review all of our proposed investments, except that any investment that is equal to or in excess of $250.0 million but less than $400.0 million will require approval of the investment committee of our board of directors and any investment that is equal to or in excess of $400.0 million will require approval of our board of directors.
Our board of directors will periodically review our investment guidelines and our investment portfolio but will not, and will not be required to, review all of our proposed investments, except that any investment that is equal to or in excess of $250.0 million but less than $400.0 million will require approval of the investment committee of our board of directors and any investment that is equal to or in excess of $400.0 million will require approval of our board of directors.
Our Subsidiary REIT is required to satisfy, on a stand-alone basis, the REIT asset, income, organizational, distribution, stockholder ownership and other requirements described above, and if it were to fail to qualify as a REIT, then our Subsidiary REIT would face adverse tax consequences similar to those described above with respect to our qualification as a REIT and, as described above, failure could have an adverse effect on our ability to comply with the REIT income and asset tests and thus could impair our ability to qualify as a REIT unless we could avail ourselves of certain relief provisions.
Our Subsidiary REIT is required to satisfy, on a stand-alone basis, the REIT asset, income, organizational, distribution, stockholder ownership and other requirements described above, and if it were to fail to qualify as a REIT, then our Subsidiary REIT would face adverse tax consequences similar to those described above with respect to our qualification as a REIT and, as described above, failure could 48 Tab l e of Contents have an adverse effect on our ability to comply with the REIT income and asset tests and thus could impair our ability to qualify as a REIT unless we could avail ourselves of certain relief provisions.
These programs, which are typically administered by the United States Department of Housing and Urban Development (“HUD”) or 36 Table of Contents state housing finance agencies, typically provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners.
These programs, which are typically administered by the United States Department of Housing and Urban Development (“HUD”) or state housing finance agencies, typically provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners.
Any such measures could adversely impact the economy globally or locally, including by leading to further economic slowdowns and additional volatility and disruption of financial markets.
Any such measures could adversely impact the economy globally or locally, including by leading to economic slowdowns and volatility and disruption of financial markets.
Under many net leases, however, the owner of the property retains certain obligations with respect to the property, including, among other things, the responsibility for maintenance and repair of the property, to provide adequate parking, maintenance of common areas and 34 Table of Contents compliance with other affirmative covenants in the lease.
Under many net leases, however, the owner of the property retains certain obligations with respect to the property, including, among other things, the responsibility for maintenance and repair of the property, to provide adequate parking, maintenance of common areas and compliance with other affirmative covenants in the lease.
We have been and may continue to be adversely affected by trends in the office sector. Remote and hybrid working arrangements, flexible work schedules, open workplaces, videoconferencing, and teleconferencing are becoming more common, and these trends accelerated as a result of the COVID-19 pandemic. These practices have and may continue to enable businesses to reduce their office space requirements.
We have been and may continue to be adversely affected by trends in the office sector. Remote and hybrid working arrangements, flexible work schedules, open workplaces, videoconferencing, and teleconferencing have become more common, and these trends accelerated as a result of the recent COVID-19 pandemic. These practices have and may continue to enable businesses to reduce their office space requirements.
Unless we were entitled to relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. 47 Table of Contents Ordinary dividends payable by REITs do not qualify for the reduced tax rates available for some corporate dividends.
Unless we were entitled to relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. Ordinary dividends payable by REITs do not qualify for the reduced tax rates available for some corporate dividends.
In addition, since such loans generally entail greater risk than mortgage loans on income producing property, we may need to increase our allowance for loan losses in the future to account for the likely increase in probable incurred credit losses associated with such loans.
In addition, since such loans generally entail greater risk than mortgage loans on income producing property, we may need to increase our allowance for loan losses in the future to account for the likely increase in expected credit losses associated with such loans.
The Infrastructure 39 Table of Contents Lending Segment has made and will continue to make certain estimates regarding project cash flows during the underwriting of its investments. These estimates may not prove accurate, as actual results may vary from estimates.
The Infrastructure Lending Segment has made and will continue to make certain estimates regarding project cash flows during the underwriting of its investments. These estimates may not prove accurate, as actual results may vary from estimates.
In addition, many of our construction or rehabilitation loans have multiple lenders and if another lender fails to fund, we could be faced with the choice of either funding for that defaulting lender or suffering a delay or protracted interruption in the progress of construction, renovation, refurbishment or expansion. 27 Table of Contents The commercial mortgage loans we originate or acquire and the mortgage loans underlying our CMBS investments are subject to the ability of the commercial property owner to generate net income from operating the property, as well as the risks of delinquency and foreclosure.
In addition, many of our construction or rehabilitation loans have multiple lenders and if another lender fails to fund, we could be faced with the choice of either funding for that defaulting lender or suffering a delay or protracted interruption in the progress of construction, renovation, refurbishment or expansion. 26 Tab l e of Contents The commercial mortgage loans we originate or acquire and the mortgage loans underlying our CMBS investments are subject to the ability of the commercial property owner to generate net income from operating the property, as well as the risks of delinquency and foreclosure.
Such loans may require a substantial amount of workout negotiations and/or 33 Table of Contents restructuring, which may divert attention from other activities and may entail, among other things, a substantial reduction in the interest rate and a substantial write-down of the principal of the loan.
Such loans may require a substantial amount of workout negotiations and/or restructuring, which may divert attention from other activities and may entail, among other things, a substantial reduction in the interest rate and a substantial write-down of the principal of the loan.
Although Starwood Capital Group has adopted such an investment allocation policy, Starwood Capital Group has some discretion as to 18 Table of Contents how investment opportunities are allocated. As a result, we may either not be presented with the opportunity to participate in these investments or may be limited in our ability to invest.
Although Starwood Capital Group has adopted such an investment allocation policy, Starwood Capital Group has some discretion as to how investment opportunities are allocated. As a result, we may either not be presented with the opportunity to participate in these investments or may be limited in our ability to invest.
Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. 48 Table of Contents tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock.
Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock.
Risks Related to Our Company We are subject to risk associated with pandemics, epidemics or other public health crises, including the COVID-19 pandemic, which may have a material adverse effect on our business. The nature and extent of future impacts are highly uncertain and unpredictable.
Risks Related to the Company We are subject to risk associated with pandemics, epidemics or other public health crises, which may have a material adverse effect on our business. The nature and extent of future impacts are highly uncertain and unpredictable. We are subject to risks associated with pandemics, epidemics or other public health crises.
In the event of any default under a project finance loan, we bear the risk of loss of principal to the extent of any deficiency between the value of the collateral, if any, and the principal and accrued interest of the loan, which could have a material adverse effect on our business, financial condition and results of operations.
In the event of any default under an infrastructure loan, we bear the risk of loss of principal to the extent of any deficiency between the value of the collateral, if any, and the principal and accrued interest of the loan, which could have a material adverse effect on our business, financial condition and results of operations.
There can be no assurance that the measures we take to ensure the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently, may persist undetected over extended periods of time, and may not be mitigated in a timely manner to prevent or minimize the impact of an attack.
There can be no assurance that the measures we take to ensure the integrity of our systems will provide protection, especially because cyberattack techniques used change frequently, may persist undetected over 51 Tab l e of Contents extended periods of time, and may not be mitigated in a timely manner to prevent or minimize the impact of an attack.
For example, even if no loan in the pool experiences a default, an appraisal reduction of a loan in the pool may cause the pool 37 Table of Contents of loans in the applicable CLO not to meet certain of these tests.
For example, even if no loan in the pool experiences a default, an appraisal reduction of a loan in the pool may cause the pool of loans in the applicable CLO not to meet certain of these tests.
It is possible, however, that the IRS could assert that we did not own the assets during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT. We may be required to report taxable income for certain investments in excess of the economic income we ultimately realize from them.
It is possible, however, that the IRS could assert that we did not own the assets during the term of the sale and repurchase agreement, in which case we could fail to qualify as a REIT. 47 Tab l e of Contents We may be required to report taxable income for certain investments in excess of the economic income we ultimately realize from them.
Prepayment rates may adversely affect the value of our investment portfolio. The value of our investment portfolio is affected by prepayment rates on our mortgage assets. In many cases, borrowers are not prohibited from making prepayments on their mortgage loans.
The value of our investment portfolio is affected by prepayment rates on our mortgage assets. In many cases, borrowers are not prohibited from making prepayments on their mortgage loans.
Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CLO, may experience a significant reduction in our cash flow from those interests. Moreover, the reinvestment and replenishment period in one or more of our CLOs may be nearing the end of its term.
Accordingly, if such tests are not satisfied, we, as holders of the subordinate debt and equity interests in the applicable CLO, may experience a significant reduction in our cash flow from those interests. 36 Tab l e of Contents Moreover, the reinvestment and replenishment period in one or more of our CLOs may be nearing the end of its term.
Infrastructure loans are subject to the risk of default, foreclosure and loss, and the risk of loss may be greater than similar risks associated with loans made on other types of assets.
We are subject to the risks of investing in infrastructure loans. Infrastructure loans are subject to the risk of default, foreclosure and loss, and the risk of loss may be greater than similar risks associated with loans made on other types of assets.
In addition, our investments may be exposed to new or increased risks and liabilities associated with global climate change, such as increased frequency or intensity of adverse weather and natural disasters, which could negatively impact our and our borrowers’ businesses and the value of the properties securing our loans or in which we invest.
In addition, our investments may be exposed to new or increased risks and liabilities associated with global climate change, such as increased frequency or intensity of adverse weather and natural disasters, as well as increased unavailability or costs of insurance, any of which could negatively impact our and our borrowers’ businesses and the value of the properties securing our loans or in which we invest.
Our charter, with certain exceptions, authorizes our board of directors to take the actions that are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of directors, no person may own more than 9.8% of the aggregate value of our outstanding capital stock.
Our charter, with certain exceptions, authorizes our 46 Tab l e of Contents board of directors to take the actions that are necessary and desirable to preserve our qualification as a REIT. Unless exempted by our board of directors, no person may own more than 9.8% of the aggregate value of our outstanding capital stock.
However, a portion of our distributions may be designated by us as long-term capital gains to the extent that they are attributable to capital gain income recognized by us or may constitute a return of capital to the extent that they exceed our earnings and profits as determined for tax purposes.
However, a portion of our distributions may be designated by us as long-term capital gains to the extent that they are attributable to capital gain income recognized by us or may constitute a return of capital to the extent that they exceed our 20 Tab l e of Contents earnings and profits as determined for tax purposes.
In addition, we will typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage a HUD-assisted property. We may not always receive such approval. We are subject to the general risks of owning properties relating to the healthcare industry.
In addition, we will 35 Tab l e of Contents typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage a HUD-assisted property. We may not always receive such approval. We are subject to the general risks of owning properties relating to the healthcare industry.
Many of the investments in the portfolio of our Infrastructure Lending Segment are focused in the power industry, including thermal power and renewable power. If there is a downturn in the U.S. or global power industry generally, the applicable infrastructure investments may default or not perform in accordance with expectations.
Many of the investments in the portfolio of our Infrastructure Lending Segment are focused in the power industry, including thermal power and renewable power. If there is a downturn in the U.S. or global power industry generally, the 38 Tab l e of Contents applicable infrastructure investments may default or not perform in accordance with expectations.
Our significant indebtedness subjects us to increased risk of loss and may reduce cash available for distributions to our stockholders. We currently have a significant amount of indebtedness outstanding. As of December 31, 2023, our total consolidated indebtedness was approximately $19.7 billion (excluding accounts payable, accrued expenses, other liabilities, VIE liabilities and unfunded commitments).
Our significant indebtedness subjects us to increased risk of loss and may reduce cash available for distributions to our stockholders. We currently have a significant amount of indebtedness outstanding. As of December 31, 2024, our total consolidated indebtedness was approximately $17.3 billion (excluding accounts payable, accrued expenses, other liabilities, VIE liabilities and unfunded commitments).
We expect that some commercial properties subject to net leases in which we invest generally will be occupied by a single tenant and, therefore, the success of these investments will be materially dependent on the financial stability of each such tenant.
We expect that some commercial properties subject to net leases in which we invest generally will be occupied by a single tenant and, therefore, the success of these investments will be materially dependent on the financial stability of each such 33 Tab l e of Contents tenant.
In addition, losses in our TRS will not directly reduce our REIT taxable income but may reduce current or future taxable income in the TRS. Partnership tax audits could increase the tax liability borne by us in the event of a U.S. federal income tax audit of a subsidiary partnership.
In addition, losses in our TRS will not directly reduce our REIT taxable income but may reduce current or future taxable income in the TRS. 49 Tab l e of Contents Partnership tax audits could increase the tax liability borne by us in the event of a U.S. federal income tax audit of a subsidiary partnership.
In addition, certain of our subsidiaries in our Infrastructure Lending Segment may seek to rely, among other things, on the exceptions from the definition of “investment company” contained in Section 3(c)(5)(A) or Section 3(c)(5)(B) of the Investment Company Act.
In addition, certain of our subsidiaries in our Infrastructure Lending Segment may seek to 43 Tab l e of Contents rely, among other things, on the exceptions from the definition of “investment company” contained in Section 3(c)(5)(A) or Section 3(c)(5)(B) of the Investment Company Act.
Some of the factors that could negatively affect our stock price or result in fluctuations in the price or trading volume of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; • actual or perceived conflicts of interest with our Manager or Starwood Capital Group and individuals, including our executives; 54 Table of Contents • equity issuances by us or share resales by our stockholders, or the perception that such issuances or resales may occur; • actual or anticipated accounting problems; • publication of research reports about us or the real estate industry; • changes in market valuations of similar companies; • adverse market reaction to the level of leverage we employ; • additions to or departures of our Manager’s or Starwood Capital Group’s key personnel; • speculation in the press or investment community; • our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; • increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock and would result in increased interest expenses on our debt; • failure to maintain our REIT qualification; • uncertainty regarding our exemption from the Investment Company Act; • price and volume fluctuations in the stock market generally; and • general market and economic conditions, including the current state of the credit and capital markets.
Some of the factors that could negatively affect our stock price or result in fluctuations in the price or trading volume of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; • actual or perceived conflicts of interest with our Manager or Starwood Capital Group and individuals, including our executives; • equity issuances by us or share resales by our stockholders, or the perception that such issuances or resales may occur; • actual or anticipated accounting problems; • publication of research reports about us or the real estate industry; • changes in market valuations of similar companies; • adverse market reaction to the level of leverage we employ; • additions to or departures of our Manager’s or Starwood Capital Group’s key personnel; • speculation in the press or investment community; • our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; • increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock and would result in increased interest expenses on our debt; • failure to maintain our REIT qualification; • uncertainty regarding our exemption from the Investment Company Act; • price and volume fluctuations in the stock market generally; and • general market and economic conditions, including the current state of the credit and capital markets. 52 Tab l e of Contents In the past, securities class action litigation has often been instituted against companies following periods of volatility in their share price.
Our outstanding indebtedness currently includes our credit agreements, our repurchase agreements, our CLOs, our SASB, our convertible senior notes, our senior notes and mortgage debt on certain investment properties.
Our outstanding indebtedness currently includes our bank credit facilities, our repurchase agreements, our CLOs, our SASB, our convertible senior notes, our unsecured senior notes and mortgage debt on certain investment properties.
In addition, we may be obligated to fund the defense costs incurred by our directors and officers. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist absent the current provisions in our charter and bylaws or that might exist with other companies.
In addition, we may be obligated to fund the defense costs incurred by our directors 44 Tab l e of Contents and officers. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist absent the current provisions in our charter and bylaws or that might exist with other companies.
Our operations and financial performance, as well as the operations and financial performance of many of the borrowers underlying our real estate-related assets and tenants of our owned properties, could be materially and adversely impacted as the result of the future emergence of new variants of COVID-19, or another pandemic, epidemic or other public health crisis, and any related shutdowns or other significant business disruptions.
Our operations and financial performance, as well as the operations and financial performance of many of the borrowers underlying our real estate-related assets and tenants of our owned properties, could be materially and adversely impacted as the result of the future emergence of a pandemic, epidemic or other public health crisis, and any related shutdowns or other significant business disruptions.
Accordingly, the ability of the project company to repay a project finance loan is dependent upon the successful development, construction and/or operation of such project rather than upon the existence of independent income or assets of the project company.
Accordingly, the ability of the project company to repay an infrastructure loan is dependent upon the successful development, construction and/or operation of such project rather than upon the existence of independent income or assets of the project company.
Instead, certain categories of the REIT’s stockholders, such as foreign stockholders eligible for treaty or sovereign benefits, stockholders with net operating losses, and generally tax-exempt stockholders that are 50 Table of Contents subject to unrelated business income tax, may be subject to taxation, or to increased taxes, on any portion, known as “excess inclusions”, of their dividend income from the REIT that is attributable to the TMP, but only to the extent that the REIT actually distributes “excess inclusions” to them.
Instead, the REIT's stockholders, including, without limitation, foreign stockholders eligible for treaty or sovereign benefits, stockholders with net operating losses, and generally tax-exempt stockholders that are subject to unrelated business income tax, may be subject to taxation, or to increased taxes, on any portion, known as “excess inclusions”, of their dividend income from the REIT that is attributable to the TMP, but only to the extent that the REIT actually distributes “excess inclusions” to them.
Furthermore, our Manager may use complex strategies, and transactions entered into by our Manager may be costly, difficult or impossible to unwind by the time they are reviewed by our board of directors.
Furthermore, our Manager may use 50 Tab l e of Contents complex strategies, and transactions entered into by our Manager may be costly, difficult or impossible to unwind by the time they are reviewed by our board of directors.
Our board may grant an exemption in its sole discretion, subject to such conditions, representations and undertakings as it may determine. The ownership limits imposed by the tax law are based upon direct or indirect ownership by “individuals,” but only during the last half of a tax year.
Our board may grant an exemption in its sole discretion, subject to such conditions, representations and undertakings as it may determine. The ownership limits imposed by the tax law are based upon direct or indirect ownership by “individuals” (as defined in the Code to include certain entities), but only during the last half of a tax year.
Our estimates and judgments are based on a number of factors, including projected cash flow from the collateral securing our loans, debt structure, including the availability of reserves and recourse guarantees, likelihood of repayment in full at the maturity of a loan, potential for refinancing and expected market discount rates for varying property types, all of which remain uncertain and are subjective.
Our estimates and judgments are based on a number of factors, including projected cash flow from the collateral securing our loans and debt securities, debt structure, including the availability of reserves and substantive recourse guarantees, likelihood of repayment in full at maturity, potential for refinancing and expected market value of the collateral, all of which remain uncertain and are subjective.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Chief Information Officer leads our overall cybersecurity function and is responsible for developing and implementing our information security program and managing our response to threats. In addition to our in-house cybersecurity capabilities, at times we also engage third parties to assist with assessing, identifying, and managing cybersecurity risks.
Biggest changeThe Board and Audit Committee also may receive updates on topics such as the results of various cybersecurity assessments, third party risk management, and evolving risks. Our Chief Information Officer leads our overall cybersecurity function and is responsible for developing and implementing our information security program and managing our response to threats.
All employees are required to complete a monthly computer-based Security Awareness Training Program that includes various topics on cybersecurity risk management best practices. This program educates users to identify information security threats and what actions should be taken. Additionally, the employees are regularly tested with phishing campaigns reinforcing their awareness of email threats.
All employees are required to complete a monthly computer-based Security Awareness Training Program that includes various topics on cybersecurity risk management best practices. This program educates users to identify information security threats and what actions should be taken. Additionally, employees are regularly tested with phishing campaigns reinforcing their awareness of email threats.
The enterprise risk management framework includes internal reporting at the business and enterprise levels, with consideration of key risk indicators, trends and countermeasures for cybersecurity and other types of significant risks. We have implemented a comprehensive cybersecurity program that employs various controls and activities aimed at identifying, protecting against, detecting, and responding to cybersecurity threats.
The enterprise risk management framework includes internal reporting at the business and enterprise levels, with consideration of key risk indicators, trends and countermeasures for cybersecurity and other types of significant risks. We have implemented a robust cybersecurity program that employs various controls and activities aimed at identifying, protecting against, detecting, and responding to cybersecurity threats.
Annual risk assessments of our Information Security Program are conducted to identify emerging information security and third party risks. In addition, periodic vulnerability assessments and penetration tests are conducted throughout the year to support the identification of risks.
Annual risk assessments of our Information Security Program are conducted to identify emerging information security and third party risks. In addition, periodic vulnerability assessments and penetration tests are conducted to support the identification of risks.
Our cybersecurity incident response plan, integrated into the enterprise risk management framework, outlines a structured process for handling information security incidents involving assets or data. It guides our computer security incident response team in containing, eradicating, and recovering from incidents while minimizing damage and disruption.
Our cybersecurity incident response plan, integrated into the enterprise risk management framework, outlines a structured process for handling cybersecurity incidents involving assets or data. It guides our cybersecurity incident response team in containing, eradicating, and recovering from incidents while minimizing damage and disruption.
Accordingly, our exposure to data breaches is more limited. In the last fiscal year, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, cash flow or financial condition.
In the last fiscal year, we have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, cash flow or financial condition.
Oversight of cybersecurity is a joint responsibility of our Board of Directors and Audit Committee, with each receiving at least quarterly updates from management on our cybersecurity program, including measures taken to address cybersecurity risks and significant cybersecurity incidents. We also maintain a cybersecurity insurance policy to mitigate risks associated with cybersecurity incidents.
Governance Oversight of cybersecurity is a joint responsibility of our Board of Directors and Audit Committee, with each receiving at least quarterly updates on our cybersecurity program, including measures taken to address cybersecurity risks and significant cybersecurity incidents.
Our IT systems, like those of most companies, may be vulnerable to certain cybersecurity threats such as ransomware, interruption of services, data breaches, or any other cyber incident that could adversely impact our ability to operate its core business functions. As a financial services firm, we do not maintain a significant level of personally identifiable information data.
Our IT systems, like those of most companies, may be vulnerable to certain cybersecurity threats such as ransomware, interruption of services, data breaches, or any other cybersecurity incident that could adversely impact our ability to operate our core business functions.
These controls and activities include hardware and software inventory tracking, endpoint protection, and network security measures to safeguard our assets from unauthorized access and attacks. We 55 Table of Contents prioritize data protection through data classification and access management designed to permit access only by authorized personnel.
These controls, including endpoint and network monitoring, endpoint protection, and network security measures, safeguard our assets from unauthorized access and attacks. We prioritize data protection through data classification and access management designed to permit access only by authorized personnel.
The plan includes a clearly defined notification framework ensuring timely communication with business and management teams based on the incident’s severity and potential impact. Controls and related activities are designed taking into consideration recognized third party cybersecurity frameworks.
The plan includes a clearly defined notification framework for timely communication to relevant parties, that may include our management team, Board of Directors and Audit Committee, based on the incident’s severity and potential impact. Controls and related activities are designed taking into consideration recognized third party cybersecurity frameworks.
If a third party vendor is not able to provide a SOC 1 or SOC 2 report, we take additional steps to assess their cybersecurity preparedness and assess our relationship on that basis. Our assessment of risks associated with the use of third party providers is part of our overall cybersecurity risk management framework.
For any of our hosted applications we by default require the vendor to maintain a System and Organization Controls (“SOC”) 1 or SOC 2 report. If a third party vendor is not able to provide a SOC 1 or SOC 2 report, we take additional steps to assess their cybersecurity preparedness and assess our relationship on that basis.
These external managed security service providers collect events generated by critical systems in real-time, filters non-security events, and then correlates the information using security data analytical engines so that personnel can identify and analyze threats. We also periodically perform simulations and tabletop exercises at a management level and incorporate external resources and advisors as needed.
We utilize on-premises and cloud-based security solutions, with real-time monitoring provided by specialized managed security services providers. These external managed security service providers collect events generated by critical systems in real-time, filter non-security events, and then correlate the information using security data analytical engines so that personnel can identify and analyze threats.
Members of our IT security team, including the third party security firms we utilize as part of our program, have cybersecurity experience or certifications, such as the Certified Information Systems Security Professional certification. We utilize on-premises and cloud-based security solutions, with real-time monitoring provided by specialized managed security services providers.
In addition to our in-house cybersecurity capabilities, at times we also engage third parties to assist with assessing, identifying, and managing cybersecurity risks. Members of our IT security team, including the third party security firms we utilize as part of our program, have cybersecurity experience or certifications, such as the Certified Information Systems Security Professional certification.
We also conduct independent audits on both the design and operational effectiveness of security controls and consult with external advisors on best practices to address new challenges. With respect to our software platforms that are hosted by third parties, we utilize an external vendor risk management platform is utilized to evaluate, rate, monitor and track vendor risk.
We also conduct independent audits, including through the use of third-party assessors on both the design 53 Tab l e of Contents and operational effectiveness of security controls and consult with external advisors on best practices to address new challenges.
However, we have, from time to time, experienced threats to and breaches of our data and systems, including malware and computer virus attacks. We consider cybersecurity, along with other top risks, within our enterprise risk management framework.
However, we have, from time to time, experienced threats to our data and systems, including from malicious software and computer virus attacks. We anticipate we will continue to face similar threats, including attempts for unauthorized access, in the future.
Removed
The security practices and processes of the service providers are monitored regularly, and periodic audits are performed on the security adequacy and compliance of the service provider. For any of our hosted applications we require the vendor to maintain a System and Organization Controls (“SOC”) 1 or SOC 2 report.
Added
As a real estate finance services firm, we do not maintain a significant level of personally identifiable information data, so our exposure to data breaches is limited.
Added
We also maintain a cybersecurity insurance policy to mitigate risks associated with cybersecurity incidents, though coverage may not be available or sufficient to cover costs of certain cybersecurity incidents. Risk Management and Strategy We consider cybersecurity, along with other top risks, within our enterprise risk management framework.
Added
An external vendor risk management platform is utilized to evaluate, rate, monitor, and track vendor risk pertaining to our critical vendors. The security practices and processes of the service providers are monitored regularly, and periodic assessments may be performed on the service providers’compliance with cybersecurity terms, based on the service providers’ risk.
Added
Our assessment of risks associated with the use of third party providers is part of our overall cybersecurity risk management framework. We also periodically perform simulations and tabletop exercises at a management level and incorporate external resources and advisors as needed.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−1 removed0 unchanged
Biggest changeRefer to Schedule III included in Item 8 of this Form 10‑K for a listing of investment properties owned as of December 31, 2023. Item 3. Legal Proceedings. Currently, no material legal proceedings are pending against us that could have a material adverse effect on our business, financial position or results of operations. Item 4. Mine Safety Disclosures.
Biggest changeCurrently, no material legal proceedings are pending against us that could have a material adverse effect on our business, financial position or results of operations. Item 4. Mine Safety Disclosures. Not applicable. 54 Tab l e of Contents PART II
Item 2. Properties. The Company leases office space in Miami Beach, FL; New York, NY; Los Angeles, CA; Stamford, CT; and Charlotte, NC. Our headquarters is located in Greenwich, CT in office space leased by our Manager.
Item 2. Properties. The Company leases office space in Miami Beach, FL; New York, NY; Los Angeles, CA; Stamford, CT; and Charlotte, NC. Refer to Schedule III included in Item 8 of this Form 10‑K for a listing of investment properties owned as of December 31, 2024. Item 3. Legal Proceedings.
Removed
Not applicable. 56 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−0 removed2 unchanged
Biggest changeOne of the holders of record is Cede & Co., which holds shares as nominee for The Depository Trust Company which itself holds shares on behalf of other beneficial owners of our common stock. 57 Table of Contents Stock Performance Graph CUMULATIVE TOTAL RETURN Based upon initial investment of $100 on December 31, 2018 (1) Starwood Property Bloomberg REIT Trust Mortgage Index S&P © 500 12/31/2018 $ 100.00 $ 100.00 $ 100.00 12/31/2019 $ 136.78 $ 123.63 $ 131.47 12/31/2020 $ 120.86 $ 96.18 $ 155.65 12/31/2021 $ 164.17 $ 113.11 $ 200.29 12/31/2022 $ 136.07 $ 85.54 $ 163.98 12/31/2023 $ 172.28 $ 97.93 $ 207.04 __________________________________________ (1) Dividend reinvestment is assumed.
Biggest changeOne of the holders of record is Cede & Co., which holds shares as nominee for The Depository Trust Company which itself holds shares on behalf of other beneficial owners of our common stock. 55 Tab l e of Contents Stock Performance Graph CUMULATIVE TOTAL RETURN Based upon initial investment of $100 on December 31, 2019 (1) Starwood Property Trust FTSE NAREIT Mortgage REITs Index (2) S&P 500 Index 12/31/2019 $ 100.00 $ 100.00 $ 100.00 12/31/2020 $ 88.36 $ 81.38 $ 118.39 12/31/2021 $ 120.03 $ 94.05 $ 152.34 12/31/2022 $ 99.48 $ 69.27 $ 124.73 12/31/2023 $ 125.95 $ 79.79 $ 157.48 12/31/2024 $ 125.07 $ 79.96 $ 196.85 __________________________________________ (1) Dividend reinvestment is assumed.
We generally intend over time to pay quarterly distributions in an amount at least equal to our taxable income. Refer to Note 18 to the Consolidated Financial Statements for the Company’s dividend history for the three years ended December 31, 2023.
We generally intend over time to pay quarterly distributions in an amount at least equal to our taxable income. Refer to Note 18 to the Consolidated Financial Statements for the Company’s dividend history for the three years ended December 31, 2024.
On February 16, 2024, the closing price of our common stock, as reported by the NYSE, was $19.79 per share. We intend to make regular quarterly distributions to holders of our common stock and distribution equivalents to holders of restricted stock units which are settled in shares of common stock.
On February 21, 2025, the closing price of our common stock, as reported by the NYSE, was $19.90 per share. We intend to make regular quarterly distributions to holders of our common stock and distribution equivalents to holders of restricted stock units which are settled in shares of common stock.
Sales of Unregistered Equity Securities There were no sales of unregistered equity securities during the year ended December 31, 2023. Issuer Purchases of Equity Securities There were no purchases of common stock during the year ended December 31, 2023. Item 6. [Reserved] 58 Table of Contents
Issuer Purchases of Equity Securities There were no purchases of common stock during the year ended December 31, 2024.
Holders As of February 16, 2024, there were 747 holders of record of the Company’s 313,375,899 shares of common stock outstanding.
Holders As of February 21, 2025, there were 600 holders of record of the Company’s 337,423,560 shares of common stock outstanding.
Added
(2) The Bloomberg REIT Mortgage Index used for comparison in our prior year graph is no longer published. We retrospectively replaced it with the FTSE NAREIT Mortgage REITs Index (FNMR-FTX) in the graph above. Sales of Unregistered Equity Securities There were no sales of unregistered equity securities during the year ended December 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

133 edited+39 added−38 removed152 unchanged
Biggest changeThe following table summarizes our quarterly Distributable Earnings per weighted average diluted share for the years ended December 31, 2023, 2022 and 2021: Distributable Earnings For the Three-Month Periods Ended March 31, June 30, September 30, December 31, 2023 $ 0.49 $ 0.49 $ 0.49 $ 0.58 2022 0.76 0.51 0.51 0.50 2021 0.50 0.51 0.52 1.10 73 Table of Contents The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the year 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 $ 1,704,210 $ 239,985 $ 94,172 $ 174,804 $ 1,622 $ 2,214,793 Costs and expenses (1,271,867) (174,713) (113,461) (145,129) (393,994) (2,099,164) Other income (loss) (1,511) 6,026 293,339 15,277 (11,285) 301,846 Income (loss) before income taxes 430,832 71,298 274,050 44,952 (403,657) 417,475 Income tax benefit (provision) 990 590 — (898) — 682 Income attributable to non-controlling interests (14) — (77,156) (1,774) — (78,944) Net income (loss) attributable to Starwood Property Trust, Inc. 431,808 71,888 196,894 42,280 (403,657) 339,213 Add / (Deduct): Non-controlling interests attributable to Woodstar II Class A Units — — 18,732 — — 18,732 Non-controlling interests attributable to unrealized gains/losses — — 47,249 (13,885) — 33,364 Non-cash equity compensation expense 8,755 1,469 310 6,372 22,341 39,247 Management incentive fee — — — — 35,709 35,709 Acquisition and investment pursuit costs (81) — (328) (555) — (964) Depreciation and amortization 7,810 64 32,257 10,263 84 50,478 Interest income adjustment for securities 22,404 — — 28,368 — 50,772 Extinguishment of debt, net — — — — (246) (246) Consolidated income tax (benefit) provision associated with fair value adjustments (990) (590) — 898 — (682) Other non-cash items 15 — 1,468 285 — 1,768 Reversal of GAAP unrealized and realized (gains) / losses on: (1) Loans (25,874) — — (36,828) — (62,702) Credit loss provision, net 225,720 18,008 — — — 243,728 Securities (69,259) — — 51,889 — (17,370) Woodstar Fund investments — — (291,244) — — (291,244) Derivatives 25,206 (123) (2,111) 4,348 11,285 38,605 Foreign currency (60,644) (201) 11 — — (60,834) Earnings from unconsolidated entities (4,410) (5,702) — (8,849) — (18,961) Sales of properties — — — (25,841) — (25,841) Impairment of properties 124,902 — — — — 124,902 Recognition of Distributable realized gains / (losses) on: Loans (2) (4,072) — — 36,375 — 32,303 Realized credit loss (3) (12,292) (10,795) — — — (23,087) Securities (4) 105 — — (22,475) — (22,370) Woodstar Fund investments (5) — — 61,513 — — 61,513 Derivatives (7) 119,917 397 22,851 (2,493) (32,659) 108,013 Foreign currency (8) (7,250) 13 (11) — — (7,248) Earnings (loss) from unconsolidated entities (9) 4,410 (1,908) — 7,020 — 9,522 Sales of properties (10) — — 6,246 — 6,246 Distributable Earnings (Loss) $ 786,180 $ 72,520 $ 87,591 $ 83,418 $ (367,143) $ 662,566 Distributable Earnings (Loss) per Weighted Average Diluted Share $ 2.43 $ 0.22 $ 0.27 $ 0.26 $ (1.13) $ 2.05 74 Table of Contents The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the year ended December 31, 2022, 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 $ 1,167,980 $ 154,362 $ 91,832 $ 205,311 $ 69 $ 1,619,554 Costs and expenses (611,637) (100,591) (92,651) (137,814) (330,833) (1,273,526) Other income (loss) (115,802) 4,431 789,726 56,095 (82,987) 651,463 Income (loss) before income taxes 440,541 58,202 788,907 123,592 (413,751) 997,491 Income tax benefit (provision) 69,199 12 — (7,688) — 61,523 Income attributable to non-controlling interests (14) — (172,598) (14,927) — (187,539) Net income (loss) attributable to Starwood Property Trust, Inc. 509,726 58,214 616,309 100,977 (413,751) 871,475 Add / (Deduct): Non-controlling interests attributable to Woodstar II Class A Units — — 18,764 — — 18,764 Non-controlling interests attributable to unrealized gains/losses — — 143,769 (5,161) — 138,608 Non-cash equity compensation expense 7,966 1,246 285 5,616 25,072 40,185 Management incentive fee — — — — 49,586 49,586 Acquisition and investment pursuit costs (381) — (324) (392) — (1,097) Depreciation and amortization 4,919 348 33,005 11,959 — 50,231 Interest income adjustment for securities 10,777 — — 12,362 — 23,139 Extinguishment of debt, net — — — — (986) (986) Consolidated income tax (benefit) provision associated with fair value adjustments (64,616) (7) — 3,345 — (61,278) Other non-cash items 88,194 — 1,498 355 — 90,047 Reversal of GAAP unrealized and realized (gains) / losses on: (1) Loans 352,412 — — (6,190) — 346,222 Credit loss provision, net 39,780 6,877 — — — 46,657 Securities (11,818) — — 43,179 — 31,361 Woodstar Fund investments — — (755,736) — — (755,736) Derivatives (338,994) (1,235) (35,081) (41,692) 82,987 (334,015) Foreign currency 96,651 317 (12) — — 96,956 Loss (earnings) from unconsolidated entities 11,242 (3,982) — (2,871) — 4,389 Sales of properties (86,610) — — (51,079) — (137,689) Recognition of Distributable realized gains / (losses) on: Loans (2) (73,406) — — 5,467 — (67,939) Securities (4) (3,102) — — (20,443) — (23,545) Woodstar Fund investments (5) — — 56,576 — — 56,576 Derivatives (7) 97,444 5 2,138 32,591 214 132,392 Foreign currency (8) (4,652) 58 12 — — (4,582) (Loss) earnings from unconsolidated entities (9) (10,798) 2,632 — 4,236 — (3,930) Sales of properties (10) 84,738 — 35,768 — 120,506 Distributable Earnings (Loss) $ 709,472 $ 64,473 $ 81,203 $ 128,027 $ (256,878) $ 726,297 Distributable Earnings (Loss) per Weighted Average Diluted Share $ 2.22 $ 0.20 $ 0.26 $ 0.40 $ (0.80) $ 2.28 75 Table of Contents The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the year ended December 31, 2021, by business segment (amounts in thousands, except per share data): Commercial and Residential Lending Segment Infrastructure Lending Segment Property Segment Investing and Servicing Segment Corporate Total Revenues $ 779,321 $ 87,540 $ 235,038 $ 210,185 $ — $ 1,312,084 Costs and expenses (249,677) (64,775) (226,583) (144,055) (304,468) (989,558) Other income (loss) 58,595 1,178 11,299 118,961 (11,023) 179,010 Income (loss) before income taxes 588,239 23,943 19,754 185,091 (315,491) 501,536 Income tax (provision) benefit (1,201) 306 — (7,775) 1 (8,669) Income attributable to non-controlling interests (14) — (20,121) (24,993) — (45,128) Net income (loss) attributable to Starwood Property Trust, Inc. 587,024 24,249 (367) 152,323 (315,490) 447,739 Add / (Deduct): Non-controlling interests attributable to Woodstar II Class A Units — — 19,373 — — 19,373 Non-controlling interests attributable to unrealized gains/losses — — (155) 7,741 — 7,586 Non-cash equity compensation expense 7,210 2,217 197 4,129 25,534 39,287 Management incentive fee — — — — 70,270 70,270 Acquisition and investment pursuit costs (555) — (355) (166) — (1,076) Depreciation and amortization 1,003 363 66,101 15,078 — 82,545 Interest income adjustment for securities (1,437) — — 17,301 — 15,864 Extinguishment of debt, net — — — — (986) (986) Consolidated income tax (benefit) provision associated with fair value adjustments (6,495) — — 405 — (6,090) Other non-cash items 14 — (771) (1,435) 415 (1,777) Reversal of GAAP unrealized and realized (gains) / losses on: (1) Loans (13,836) — — (55,214) — (69,050) Credit loss (reversal) provision, net (3,560) 11,895 — — — 8,335 Securities 8,277 — — (28,221) — (19,944) Woodstar Fund investments — — (6,425) — — (6,425) Derivatives (73,209) (1,253) (10,155) (8,288) 10,542 (82,363) Foreign currency 36,045 183 — 64 — 36,292 Earnings from unconsolidated entities (6,984) (1,160) — (815) — (8,959) Sales of properties (17,693) — — (22,210) — (39,903) Recognition of Distributable realized gains / (losses) on: Loans (2) 45,621 — — 57,723 — 103,344 Realized credit loss (3) (14,807) — — — — (14,807) Securities (4) (38,180) — — (5,696) — (43,876) Woodstar Fund investments (5) — — 7,182 — — 7,182 Sale of interest in Woodstar Fund (6) — — 196,410 — — 196,410 Derivatives (7) 1,720 (27) (7,252) 2,885 9,804 7,130 Foreign currency (8) 12,471 (145) — (64) — 12,262 Earnings from unconsolidated entities (9) 11,356 1,160 — 2,456 — 14,972 Sales of properties (10) 8,298 — 12,483 — 20,781 Distributable Earnings (Loss) $ 542,283 $ 37,482 $ 263,783 $ 150,479 $ (199,911) $ 794,116 Distributable Earnings (Loss) per Weighted Average Diluted Share $ 1.80 $ 0.12 $ 0.87 $ 0.50 $ (0.66) $ 2.63 76 Table of Contents ______________________________________________________________________________________________________________________ (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 24 to our Consolidated Financial Statements.
Biggest changeThe following table summarizes our quarterly Distributable Earnings per weighted average diluted share for the years ended December 31, 2024, 2023 and 2022: Distributable Earnings For the Three-Month Periods Ended March 31, June 30, September 30, December 31, 2024 $ 0.59 $ 0.48 $ 0.48 $ 0.48 2023 0.49 0.49 0.49 0.58 2022 0.76 0.51 0.51 0.50 Distributable Earnings per weighted average diluted share for the year ended December 31, 2024 does not equal the sum of the individual quarters due to rounding and other computational factors. 72 Tab l e of Contents The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the year ended December 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 $ 1,566,550 $ 260,993 $ 69,982 $ 208,759 $ 2,514 $ 2,108,798 Costs and expenses (1,123,862) (174,812) (96,453) (155,704) (432,075) (1,982,906) Other income (loss) 128,256 444 192,522 2,701 (43,806) 280,117 Income (loss) before income taxes 570,944 86,625 166,051 55,756 (473,367) 406,009 Income tax (provision) benefit (9,116) 259 — (16,575) — (25,432) (Income) loss attributable to non-controlling interests (14) — (38,201) 17,571 — (20,644) Net income (loss) attributable to Starwood Property Trust, Inc. 561,814 86,884 127,850 56,752 (473,367) 359,933 Add / (Deduct): Non-controlling interests attributable to Woodstar II Class A Units — — 18,638 — — 18,638 Non-controlling interests attributable to unrealized gains/losses — — 6,551 (34,961) — (28,410) Non-cash equity compensation expense 9,750 1,975 370 6,127 23,564 41,786 Management incentive fee — — — — 35,324 35,324 Depreciation and amortization 10,239 17 23,896 7,440 — 41,592 Interest income adjustment for securities 20,252 — — 35,593 — 55,845 Consolidated income tax provision (benefit) associated with fair value adjustments 9,116 (259) — 16,575 — 25,432 Other non-cash items 14 — 1,111 (940) — 185 Reversal of GAAP unrealized and realized (gains) / losses on: (1) Loans (3,597) — — (72,283) — (75,880) Credit loss provision, net 194,260 3,140 — — — 197,400 Securities (76) — — 83,748 — 83,672 Woodstar Fund investments — — (102,141) — — (102,141) Derivatives (196,349) (152) (1,492) (3,454) 43,513 (157,934) Foreign currency 73,830 187 (89) — — 73,928 Earnings from unconsolidated entities (11,599) (1,414) — (1,473) — (14,486) Sales of properties — — (92,003) (8,402) — (100,405) Recognition of Distributable realized gains / (losses) on: Loans (2) (5,235) — — 73,214 — 67,979 Realized credit loss (3) — (1,546) — — — (1,546) Securities (4) (9,556) — — (48,711) — (58,267) Woodstar Fund investments (5) — — 70,346 — — 70,346 Derivatives (6) 144,325 334 8,283 9,354 (43,265) 119,031 Foreign currency (7) (26,055) (46) 89 — — (26,012) Earnings (loss) from unconsolidated entities (8) 5,577 (437) — 1,338 — 6,478 Sales of properties (9) — — 39,150 3,323 — 42,473 Distributable Earnings (Loss) $ 776,710 $ 88,683 $ 100,559 $ 123,240 $ (414,231) $ 674,961 Distributable Earnings (Loss) per Weighted Average Diluted Share $ 2.32 $ 0.27 $ 0.30 $ 0.37 $ (1.24) $ 2.02 73 Tab l e of Contents The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the year 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 $ 1,704,210 $ 239,985 $ 94,172 $ 174,804 $ 1,622 $ 2,214,793 Costs and expenses (1,271,867) (174,713) (113,461) (145,129) (393,994) (2,099,164) Other income (loss) (1,511) 6,026 293,339 15,277 (11,285) 301,846 Income (loss) before income taxes 430,832 71,298 274,050 44,952 (403,657) 417,475 Income tax benefit (provision) 990 590 — (898) — 682 Income attributable to non-controlling interests (14) — (77,156) (1,774) — (78,944) Net income (loss) attributable to Starwood Property Trust, Inc. 431,808 71,888 196,894 42,280 (403,657) 339,213 Add / (Deduct): Non-controlling interests attributable to Woodstar II Class A Units — — 18,732 — — 18,732 Non-controlling interests attributable to unrealized gains/losses — — 47,249 (13,885) — 33,364 Non-cash equity compensation expense 8,755 1,469 310 6,372 22,341 39,247 Management incentive fee — — — — 35,709 35,709 Depreciation and amortization 7,810 64 32,257 10,263 84 50,478 Interest income adjustment for securities 22,404 — — 28,368 — 50,772 Extinguishment of debt, net — — — — (246) (246) Consolidated income tax (benefit) provision associated with fair value adjustments (990) (590) — 898 — (682) Other non-cash items (66) — 1,140 (270) — 804 Reversal of GAAP unrealized and realized (gains) / losses on: (1) Loans (25,874) — — (36,828) — (62,702) Credit loss provision, net 225,720 18,008 — — — 243,728 Securities (69,259) — — 51,889 — (17,370) Woodstar Fund investments — — (291,244) — — (291,244) Derivatives 25,206 (123) (2,111) 4,348 11,285 38,605 Foreign currency (60,644) (201) 11 — — (60,834) Earnings from unconsolidated entities (4,410) (5,702) — (8,849) — (18,961) Sales of properties — — — (25,841) — (25,841) Unrealized impairment of properties 124,902 — — — — 124,902 Recognition of Distributable realized gains / (losses) on: Loans (2) (4,072) — — 36,375 — 32,303 Realized credit loss (3) (12,292) (10,795) — — — (23,087) Securities (4) 105 — — (22,475) — (22,370) Woodstar Fund investments (5) — — 61,513 — — 61,513 Derivatives (6) 119,917 397 22,851 (2,493) (32,659) 108,013 Foreign currency (7) (7,250) 13 (11) — — (7,248) Earnings (loss) from unconsolidated entities (8) 4,410 (1,908) — 7,020 — 9,522 Sales of properties (9) — — — 6,246 — 6,246 Distributable Earnings (Loss) $ 786,180 $ 72,520 $ 87,591 $ 83,418 $ (367,143) $ 662,566 Distributable Earnings (Loss) per Weighted Average Diluted Share $ 2.43 $ 0.22 $ 0.27 $ 0.26 $ (1.13) $ 2.05 74 Tab l e of Contents The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the year ended December 31, 2022, 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 $ 1,167,980 $ 154,362 $ 91,832 $ 205,311 $ 69 $ 1,619,554 Costs and expenses (611,637) (100,591) (92,651) (137,814) (330,833) (1,273,526) Other income (loss) (115,802) 4,431 789,726 56,095 (82,987) 651,463 Income (loss) before income taxes 440,541 58,202 788,907 123,592 (413,751) 997,491 Income tax benefit (provision) 69,199 12 — (7,688) — 61,523 Income attributable to non-controlling interests (14) — (172,598) (14,927) — (187,539) Net income (loss) attributable to Starwood Property Trust, Inc. 509,726 58,214 616,309 100,977 (413,751) 871,475 Add / (Deduct): Non-controlling interests attributable to Woodstar II Class A Units — — 18,764 — — 18,764 Non-controlling interests attributable to unrealized gains/losses — — 143,769 (5,161) — 138,608 Non-cash equity compensation expense 7,966 1,246 285 5,616 25,072 40,185 Management incentive fee — — — — 49,586 49,586 Depreciation and amortization 4,919 348 33,005 11,959 — 50,231 Interest income adjustment for securities 10,777 — — 12,362 — 23,139 Extinguishment of debt, net — — — — (986) (986) Consolidated income tax (benefit) provision associated with fair value adjustments (64,616) (7) — 3,345 — (61,278) Other non-cash items 87,813 — 1,174 (37) — 88,950 Reversal of GAAP unrealized and realized (gains) / losses on: (1) Loans 352,412 — — (6,190) — 346,222 Credit loss provision, net 39,780 6,877 — — — 46,657 Securities (11,818) — — 43,179 — 31,361 Woodstar Fund investments — — (755,736) — — (755,736) Derivatives (338,994) (1,235) (35,081) (41,692) 82,987 (334,015) Foreign currency 96,651 317 (12) — — 96,956 Loss (earnings) from unconsolidated entities 11,242 (3,982) — (2,871) — 4,389 Sales of properties (86,610) — — (51,079) — (137,689) Recognition of Distributable realized gains / (losses) on: Loans (2) (73,406) — — 5,467 — (67,939) Securities (4) (3,102) — — (20,443) — (23,545) Woodstar Fund investments (5) — — 56,576 — — 56,576 Derivatives (6) 97,444 5 2,138 32,591 214 132,392 Foreign currency (7) (4,652) 58 12 — — (4,582) (Loss) earnings from unconsolidated entities (8) (10,798) 2,632 — 4,236 — (3,930) Sales of properties (9) 84,738 — 35,768 — 120,506 Distributable Earnings (Loss) $ 709,472 $ 64,473 $ 81,203 $ 128,027 $ (256,878) $ 726,297 Distributable Earnings (Loss) per Weighted Average Diluted Share $ 2.22 $ 0.20 $ 0.26 $ 0.40 $ (0.80) $ 2.28 75 Tab l e of Contents ______________________________________________________________________________________________________________________ (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 24 to our Consolidated Financial Statements.
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 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 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 increase in interest income from loans reflects (i) a $485.1 million increase from commercial loans, reflecting higher average index rates and loan balances, and (ii) a $14.2 million increase from residential loans principally due to higher average balances, reflecting the timing of purchases and securitizations.
The increase in interest income from loans reflects (i) a $485.1 million increase from commercial loans, reflecting higher average index rates and loan balances, and (ii) a $14.2 million increase from residential loans principally due to higher average balances, reflecting the timing of purchases and securitizations.
Changes in our current estimates, due to unanticipated market conditions or events, could have a material effect on our ability to utilize deferred tax assets. Refer to Note 22 to our consolidated financial statements for additional information on the composition of our deferred taxes.
Changes in our current estimates, due to unanticipated market conditions or events, could have a material effect on our ability to utilize deferred tax assets. Refer to Note 22 to the Consolidated Financial Statements for additional information on the composition of our deferred taxes.
As of December 31, 2023, we had various repurchase agreements, with details referenced in the table provided below. 2) Secured Property Financings: We use long-term mortgage facilities from commercial lenders and government sponsors of affordable housing loans to finance many of the investment properties that we hold. These facilities accrue interest at either fixed or floating rates.
As of December 31, 2024, we had various repurchase agreements, with details referenced in the table provided below. 2) Secured Property Financings: We use long-term mortgage facilities from commercial lenders and government sponsors of affordable housing loans to finance many of the investment properties that we hold. These facilities accrue interest at either fixed or floating rates.
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.
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 amount of leverage we deploy for particular investments in our target assets depends upon our assessment of a variety of factors, which may include the anticipated liquidity and price volatility of the assets in our investment portfolio, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, including hedges, the availability and cost of financing the assets, our opinion of the creditworthiness of our financing counterparties, the health of the U.S., European and Australian economies and commercial, residential and infrastructure markets, our outlook for the level, slope and volatility of interest rates, the credit quality of our assets, the collateral underlying our assets and our 87 Table of Contents outlook for asset spreads relative to the applicable reference rate curve.
The amount of leverage we deploy for particular investments in our target assets depends upon our assessment of a variety of factors, which may include the anticipated liquidity and price volatility of the assets in our investment portfolio, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, including hedges, the availability and cost of financing the assets, our opinion of the creditworthiness of our financing counterparties, the health of the U.S., European and Australian economies and commercial, residential and infrastructure markets, our outlook for the level, slope and volatility of interest rates, the credit quality of our assets, the collateral underlying our assets and our outlook for asset spreads relative to the applicable reference rate curve.
Income Tax Benefit Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in TRSs.
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.
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 foreclosed or other property, when the underlying asset is sold.
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.
(10) 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.
(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 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.
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.
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. (8) Represents the realized portion of foreign currency gains (losses) related to assets and liabilities denominated in a foreign currency.
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.
(9) 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.
(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.
Based on our qualitative assessment during the fourth quarter of 2023, we believe that the Investing and Servicing Segment reporting unit to which the LNR acquisition goodwill was attributed is not currently at risk of failing a quantitative assessment.
Based on our qualitative assessment during the fourth quarter of 2024, we believe that the Investing and Servicing Segment reporting unit to which the LNR acquisition goodwill was attributed is not currently at risk of failing a quantitative assessment.
We did not recognize any provision for credit losses with respect to our AFS debt securities during the three years ended December 31, 2023 and there was no related credit loss allowance as of December 31, 2023.
We did not recognize any provision for credit losses with respect to our AFS debt securities during the three years ended December 31, 2024 and there was no related credit loss allowance as of December 31, 2024.
The increase in interest expense was primarily due to higher average borrowings outstanding and higher average index rates.
The increase in interest expense was primarily due to higher average borrowings outstanding and interest rates.
Based on our quantitative assessment during the fourth quarter of 2023, we determined that the fair value of the Infrastructure Lending Segment reporting unit to which goodwill is attributed exceeded its carrying value including goodwill.
Based on our quantitative assessment during the fourth quarter of 2024, we determined that the fair value of the Infrastructure Lending Segment reporting unit to which goodwill is attributed exceeded its carrying value including goodwill.
Securitization VIE Eliminations Refer to the preceding comparison of the year ended December 31, 2023 to the year ended December 31, 2022 for a discussion of securitization VIE eliminations. Income Tax Benefit (Provision) Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in TRSs.
Securitization VIE Eliminations Refer to the preceding comparison of the year ended December 31, 2024 to the year ended December 31, 2023 for a discussion of securitization VIE eliminations. Income Tax Benefit Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in TRSs.
In testing goodwill for impairment, we follow ASC 350, Intangibles—Goodwill and 90 Table of Contents Other , which permits a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill.
In testing goodwill for impairment, we follow ASC 350, Intangibles—Goodwill and Other , which permits a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value including goodwill.
This increase reflects the increase in interest income, partially offset by the increase in interest expense on our secured financing facilities, both as discussed in the sections above.
This decrease reflects the decrease in interest income, partially offset by the decrease in interest expense on our secured financing facilities, both as discussed in the sections above.
The amount is calculated as the difference between (i) the net proceeds received in connection with a securitization or sale of loans and (ii) such loans’ historical cost basis.
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.
The increase in costs and expenses was primarily due to a $7.9 million increase in interest expense reflecting higher average index rates on borrowings which finance our CMBS investments and conduit loans. 66 Table of Contents Other Income For the year ended December 31, 2023, other income of our Investing and Servicing Segment decreased $40.8 million to $15.3 million, compared to $56.1 million for the year ended December 31, 2022.
The increase in costs and expenses was primarily due to a $7.9 million increase in interest expense reflecting higher average index rates on borrowings which finance our CMBS investments and conduit loans. 69 Tab l e of Contents Other Income For the year ended December 31, 2023, other income of our Investing and Servicing Segment decreased $40.8 million to $15.3 million, compared to $56.1 million for the year ended December 31, 2022.
This presentation also allows for a more transparent reconciliation of the unrealized gain (loss) adjustments below to the segment data presented in Note 24. 72 Table of Contents 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.
This presentation also allows for a more transparent reconciliation of the unrealized gain (loss) adjustments below to the segment data presented in Note 24. 71 Tab l e of Contents 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.
Interest rate hedges had the effect of reducing these weighted average borrowing costs to 6.6% and 3.9% during the year ended December 31, 2023 and 2022, respectively. 64 Table of Contents Other Loss For the year ended December 31, 2023, other loss of our Commercial and Residential Lending Segment decreased $114.3 million to $1.5 million, compared to $115.8 million for the year ended December 31, 2022.
Interest rate hedges had the effect of reducing these weighted average borrowing costs to 6.6% and 3.9% during the year ended December 31, 2023 and 2022, respectively. 67 Tab l e of Contents Other Loss For the year ended December 31, 2023, other loss of our Commercial and Residential Lending Segment decreased $114.3 million to $1.5 million, compared to $115.8 million for the year ended December 31, 2022.
During the years ended December 31, 2023 and 2022, the Infrastructure Lending Segment’s weighted average secured borrowing rates, inclusive of the amortization of deferred financing fees, were 7.6% and 4.3%, respectively. 65 Table of Contents Other Income For the year ended December 31, 2023, other income of our Infrastructure Lending Segment increased $1.6 million to $6.0 million, compared to $4.4 million for the year ended December 31, 2022.
During the years ended December 31, 2023 and 2022, the Infrastructure Lending Segment’s weighted average secured borrowing rates, inclusive of the amortization of deferred financing fees, were 7.6% and 4.3%, respectively. 68 Tab l e of Contents Other Income For the year ended December 31, 2023, other income of our Infrastructure Lending Segment increased $1.6 million to $6.0 million, compared to $4.4 million for the year ended December 31, 2022.
The nature of these adjustments is described more fully in the footnotes to our reconciliation table.
The nature of these adjustments is described more fully in the footnotes to our reconciliation tables.
(i) Includes: (i) $281.3 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $33.0 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 16 to the Consolidated Financial Statements).
(j) Includes: (i) $323.5 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $30.3 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 16 to the Consolidated Financial Statements).
Significant judgment is required when estimating expected cash flows used in determining the credit loss allowance for AFS debt securities; therefore, actual results over time could be materially different. As of December 31, 2023, we held $102.4 million of AFS debt securities.
Significant judgment is required when estimating expected cash flows used in determining the credit loss allowance for AFS debt securities; therefore, actual results over time could be materially different. As of December 31, 2024, we held $93.8 million of AFS debt securities.
(m) Consists of: (i) a $772.8 million term loan facility that matures in July 2026, of which $383.0 million has an annual interest rate of SOFR + 2.60% and $389.8 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 $594.0 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.
(m) Consists of: (i) a $764.8 million term loan facility that matures in July 2026, of which $379.0 million has an annual interest rate of SOFR + 2.60% and $385.8 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 $687.8 million term loan facility that matures in November 2027, with an annual interest rate of SOFR + 2.25%, subject to a 0.50% SOFR floor.
Refer to Note 12 to the Consolidated Financial Statements for further disclosure regarding the terms of our unsecured senior notes. 86 Table of Contents Scheduled Principal Repayments on Investments and Overhang on Financing Facilities The following scheduled and/or projected principal repayments on our investments were based on amounts outstanding and extended contractual maturities of those investments as of December 31, 2023.
Refer to Note 12 to the Consolidated Financial Statements for further disclosure regarding the terms of our unsecured senior notes. 85 Tab l e of Contents Scheduled Principal Repayments on Investments and Overhang on Financing Facilities The following scheduled and/or projected principal repayments on our investments were based on amounts outstanding and extended contractual maturities of those investments as of December 31, 2024.
The favorable change in foreign currency gain (loss) and the unfavorable change in gain (loss) on foreign currency hedges reflect the weakening of the U.S. dollar against the pound sterling (“GBP”) and Euro (“EUR”), partially offset by a slight strengthening against the Australian dollar (“AUD”), during the year ended December 31, 2023 compared to a strengthening of the U.S. dollar against each of those currencies during the year ended December 31, 2022.
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”) during the year ended December 31, 2024, compared to a weakening of the U.S. dollar against the GBP and EUR, partially offset by a slight strengthening against the AUD, during the year ended December 31, 2023.
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).” (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.
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).” (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.
Other income decreased by $3.7 million to a loss during the year ended December 31, 2023, primarily due to a $4.5 million unfavorable change in earnings (loss) from unconsolidated entities. 78 Table of Contents Property Segment Distributable Earnings by Portfolio (amounts in thousands) For the Year Ended December 31, 2023 2022 Change Master Lease Portfolio $ 19,966 $ 17,947 $ 2,019 Medical Office Portfolio 20,268 21,221 (953) Woodstar Fund, net of non-controlling interests 50,414 46,092 4,322 Other/Corporate (3,057) (4,057) 1,000 Distributable Earnings $ 87,591 $ 81,203 $ 6,388 The Property Segment’s Distributable Earnings increased by $6.4 million, from $81.2 million during the year ended December 31, 2022 to $87.6 million during the year ended December 31, 2023.
Property Segment Distributable Earnings by Portfolio (amounts in thousands) For the Year Ended December 31, 2023 2022 Change Master Lease Portfolio $ 19,966 $ 17,947 $ 2,019 Medical Office Portfolio 20,268 21,221 (953) Woodstar Fund, net of non-controlling interests 50,414 46,092 4,322 Other/Corporate (3,057) (4,057) 1,000 Distributable Earnings $ 87,591 $ 81,203 $ 6,388 The Property Segment’s Distributable Earnings increased by $6.4 million, from $81.2 million during the year ended December 31, 2022 to $87.6 million during the year ended December 31, 2023.
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 Year Ended December 31, 2023 2022 2021 Diluted weighted average shares - GAAP EPS 310,507 315,728 296,826 Add: Unvested stock awards 3,708 3,485 4,107 Add: Woodstar II Class A Units 9,760 9,773 10,154 Less: Convertible Notes dilution — (9,649) (9,649) Diluted weighted average shares - Distributable EPS 323,975 319,337 301,438 As noted above, the definition of Distributable Earnings allows management to make adjustments, subject to the approval of a majority of our independent directors.
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 Year Ended December 31, 2024 2023 2022 Diluted weighted average shares - GAAP EPS 320,569 310,507 315,728 Add: Unvested stock awards 3,873 3,708 3,485 Add: Woodstar II Class A Units 9,707 9,760 9,773 Less: Convertible Notes dilution — — (9,649) Diluted weighted average shares - Distributable EPS 334,149 323,975 319,337 As noted above, the definition of Distributable Earnings allows management to make adjustments, subject to the approval of a majority of our independent directors.
At December 31, 2023, we had 100,000,000 shares of preferred stock available for issuance and 186,633,926 shares of common stock available for issuance. Refer to Note 18 to the Consolidated Financial Statements for a discussion of our issuances of equity securities in recent years.
At December 31, 2024, we had 100,000,000 shares of preferred stock available for issuance and 162,590,312 shares of common stock available for issuance. Refer to Note 18 to the Consolidated Financial Statements for a discussion of our issuances of equity securities in recent years.
Recent Accounting Developments Refer to Note 2 to the Consolidated Financial Statements for a discussion of recent accounting developments and the expected impact to the Company.
Recent Accounting Developments Refer to Note 2 to the Consolidated Financial Statements for a discussion of recent accounting developments and the expected impact to the Company. 90 Tab l e of Contents
The amount is calculated as net sales proceeds less undepreciated cost, adjusted for any noncontrolling interest. 77 Table of Contents Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Commercial and Residential Lending Segment The Commercial and Residential Lending Segment’s Distributable Earnings increased by $76.7 million, from $709.5 million during the year ended December 31, 2022 to $786.2 million during the year ended December 31, 2023.
The amount is calculated as net sales proceeds less undepreciated cost, adjusted for any noncontrolling interest. 76 Tab l e of Contents Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Commercial and Residential Lending Segment The Commercial and Residential Lending Segment’s Distributable Earnings decreased by $9.5 million, from $786.2 million during the year ended December 31, 2023 to $776.7 million during the year ended December 31, 2024.
These facilities are secured by the equity interests in certain of our subsidiaries which totaled $5.9 billion as of December 31, 2023.
These facilities are secured by the equity interests in certain of our subsidiaries which totaled $6.0 billion as of December 31, 2024.
Offsetting these cash inflows was cash interest expense of $1.4 billion, general and administrative expenses of $260.4 million and a net change in operating assets and liabilities of $107.9 million.
Offsetting these cash inflows was cash interest expense of $1.3 billion, general and administrative expenses of $277.5 million and a net change in operating assets and liabilities of $5.1 million.
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 11 to the Consolidated Financial Statements for the expected maturities by year. Excludes debt related to properties held-for-sale (see Note 7 to the Consolidated Financial Statements).
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 11 to the Consolidated Financial Statements for the expected maturities by year. (b) Represents the fully extended maturity of the underlying collateral.
Using these losses as a benchmark, we determine expected credit losses for our loans and securities on a collective basis within our commercial real estate and infrastructure portfolios. Such determination also incorporates significant assumptions and estimates regarding, among other things, prepayments, future fundings and economic forecasts. See Note 5 to the Consolidated Financial Statements for further discussion of our methodologies.
Using these losses as a benchmark, we determine expected credit losses for our loans and securities on a collective pool basis within our commercial real estate and infrastructure portfolios. Such determination also incorporates significant assumptions and estimates regarding, among other things, prepayments, future fundings and economic forecasts.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Commercial and Residential Lending Segment The Commercial and Residential Lending Segment’s Distributable Earnings increased by $167.2 million, from $542.3 million during the year ended December 31, 2021 to $709.5 million during the year ended December 31, 2022.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Commercial and Residential Lending Segment The Commercial and Residential Lending Segment’s Distributable Earnings increased by $76.7 million, from $709.5 million during the year ended December 31, 2022 to $786.2 million during the year ended December 31, 2023.
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.
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.
As of December 31, 2023, we had properties held-for-investment with a carrying value of $1.0 billion. During the year ended December 31, 2023 we recognized $124.9 million of impairment losses on two foreclosed properties in the Commercial and Residential Lending Segment, as discussed in Note 7 to the Consolidated Financial Statements.
During the year ended December 31, 2023, we recognized $124.9 million of impairment losses on two foreclosed properties in the Commercial and Residential Lending Segment, as discussed in Note 7 to the Consolidated Financial Statements.
Refer to the preceding Non-GAAP Financial Measures discussion above for more information. (7) 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.
(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.
(b) Represents the fully extended maturity of the underlying collateral. (c) Excludes $374.9 million of loan funding commitments in which management projects the Company will not be obligated to fund in the future due to repayments made by the borrower earlier than, or in excess of, expectations.
(c) Excludes $181.2 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.
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.
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.
(d) Represents contractual commitments of $124.4 million under revolvers and letters of credit, $65.5 million under delayed draw term loans and $37.6 million of outstanding infrastructure loan purchase commitments. 88 Table of Contents 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.
(d) Represents contractual commitments of $90.0 million under revolvers and letters of credit, $101.8 million under delayed draw term loans and $291.7 million of outstanding infrastructure loan purchase commitments. 87 Tab l e of Contents 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.
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.
As of December 31, 2024, we were in compliance with all such covenants. 86 Tab l e of Contents 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.
Corporate Corporate loss increased by $57.0 million, from $199.9 million during the year ended December 31, 2021 to $256.9 million during the year ended December 31, 2022, primarily due to (i) a $38.1 million increase in interest expense on higher average outstanding term loan and unsecured senior note balances, as well as higher index rates on our term loan, (ii) a $9.6 million decrease in realized gains on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes and (iii) an $8.8 million increase in base management fees. 82 Table of Contents 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.
Corporate Corporate loss increased by $110.2 million, from $256.9 million during the year ended December 31, 2022 to $367.1 million during the year ended December 31, 2023, primarily due to (i) a $78.7 million increase in interest expense reflecting higher average outstanding term loan and unsecured senior note balances, as well as higher interest rates, and (ii) a $32.9 million unfavorable change in realized gain (loss) on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes. 81 Tab l e of Contents 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.
After making adjustments for the calculation of Distributable Earnings, revenues were $1.2 billion, costs and expenses were $559.8 million, other income was $85.5 million and income tax benefit was $4.6 million.
After making adjustments for the calculation of Distributable Earnings, revenues were $1.6 billion, costs and expenses were $910.4 million, other income was $99.5 million and there was no income tax provision or benefit.
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 $ 2,072 $ 54 $ — $ — $ 2,018 Medical Office Portfolio (213) 20,675 (32,970) — (53,858) Woodstar Fund 278 11 — (464,492) (464,225) Other/Corporate 203 70 — 1,075 1,208 Total $ 2,340 $ 20,810 $ (32,970) $ (463,417) $ (514,857) See Notes 7 and 8 to the Consolidated Financial Statements for a description of the above-referenced Property Segment portfolios and fund.
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 $ 2,072 $ 54 $ — $ — $ 2,018 Medical Office Portfolio (213) 20,675 (32,970) — (53,858) Woodstar Fund 278 11 — (464,492) (464,225) Other/Corporate 203 70 — 1,075 1,208 Total $ 2,340 $ 20,810 $ (32,970) $ (463,417) $ (514,857) Revenues For the year ended December 31, 2023, revenues of our Property Segment increased $2.4 million to $94.2 million, compared to $91.8 million for the year ended December 31, 2022, primarily due to rent increases in our Master Lease Portfolio.
As of December 31, 2023, we had $48.7 billion and $42.3 billion of assets and liabilities, respectively, that are measured at fair value, including $43.8 billion of VIE assets and $42.2 billion of VIE liabilities we consolidate pursuant to ASC 810.
As of December 31, 2024, we had $43.9 billion and $37.4 billion of assets and liabilities, respectively, that are measured at fair value, including $38.9 billion of VIE assets and $37.3 billion of VIE liabilities we consolidate pursuant to ASC 810.
Corporate Other Loss For the year ended December 31, 2022, corporate other loss increased $72.0 million to $83.0 million, compared to $11.0 million for the year ended December 31, 2021. This increase was primarily due to a greater loss on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes.
Corporate Other Loss For the year ended December 31, 2024, corporate other loss increased $32.5 million to $43.8 million, compared to $11.3 million for the year ended December 31, 2023. This was primarily due to a $32.2 million increased loss on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes.
Our secured debt agreements contain customary affirmative and negative covenants, including financial covenants, that in some cases restrict our total leverage (as defined therein). As of December 31, 2023, we were in compliance with all such covenants.
Our secured debt agreements contain customary affirmative and negative covenants, including financial covenants, that in some cases restrict our total leverage (as defined therein).
Revenues, consisting principally of interest income on loans, increased by $85.6 million during the year ended December 31, 2023, primarily due to an increase in interest income from loans of $86.7 million, reflecting higher average index rates and loan balances.
Revenues, consisting principally of interest income on loans, increased by $85.6 million during the year ended December 31, 2023, primarily due to an increase in interest income from loans of $86.7 million, reflecting higher average index rates and loan balances. 79 Tab l e of Contents Costs and expenses increased by $73.9 million during the year ended December 31, 2023, primarily due to a $61.9 million increase in interest expense, reflecting higher average index rates, and a $10.8 million credit loss recognized in the year ended December 31, 2023.
After making adjustments for the calculation of Distributable Earnings, revenues were $93.5 million, costs and expenses were $60.3 million, other income was $58.1 million and the deduction for income attributable to non-controlling interests in the Woodstar Fund was $10.1 million.
After making adjustments for the calculation of Distributable Earnings, revenues were $71.7 million, costs and expenses were $79.2 million, other income was $121.1 million and the deduction for income attributable to non-controlling interests in the Woodstar Fund was $13.0 million.
The increased gain on foreign currency hedges and the increase in foreign currency loss reflect the strengthening of the U.S. dollar against the GBP, EUR and AUD during the year ended December 31, 2022 compared to a lesser overall strengthening of the U.S. dollar against those currencies during the year ended December 31, 2021.
The favorable change in foreign currency gain (loss) and the unfavorable change in gain (loss) on foreign currency hedges reflect the weakening of the U.S. dollar against the GBP and EUR, partially offset by a slight strengthening against the AUD, during the year ended December 31, 2023 compared to a strengthening of the U.S. dollar against each of those currencies during the year ended December 31, 2022.
Other Income For the year ended December 31, 2022, other income of our Infrastructure Lending Segment increased $3.2 million to $4.4 million, compared to $1.2 million for the year ended December 31, 2021. The increase primarily reflects a $2.8 million increase in earnings from an unconsolidated entity and a $0.8 million lower loss on extinguishment of debt.
Other Income For the year ended December 31, 2024, other income of our Infrastructure Lending Segment decreased $5.6 million to $0.4 million, compared to $6.0 million for the year ended December 31, 2023. The decrease primarily reflects a $4.3 million decrease in earnings from unconsolidated entities and a $1.5 million loss on extinguishment of debt in 2024.
Corporate Corporate loss increased by $110.2 million, from $256.9 million during the year ended December 31, 2022 to $367.1 million during the year ended December 31, 2023, primarily due to (i) a $78.7 million increase in interest expense reflecting higher average outstanding term loan and unsecured senior note balances, as well as higher interest rates, and (ii) a $32.9 million unfavorable change in realized gain (loss) on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes.
Corporate Corporate loss increased by $47.1 million, from $367.1 million during the year ended December 31, 2023 to $414.2 million during the year ended December 31, 2024, primarily due to (i) a $35.7 million increase in interest expense reflecting higher average unsecured borrowings outstanding and (ii) a $10.6 million increase in realized losses on fixed-to-floating interest rate swaps which hedge a portion of our unsecured senior notes.
The decrease was primarily due to non-controlling interests in lower income, reflecting lower unrealized gains in fair value, of the Woodstar Fund during the year ended December 31, 2023. 67 Table of Contents Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 Commercial and Residential Lending Segment Revenues For the year ended December 31, 2022, revenues of our Commercial and Residential Lending Segment increased $388.7 million to $1.2 billion, compared to $779.3 million for the year ended December 31, 2021.
The decrease was primarily due to non-controlling interests in (i) lower income of the Woodstar Fund, reflecting lower unrealized increases in fair value, and (ii) losses of a consolidated CMBS joint venture during the year ended December 31, 2024. 66 Tab l e of Contents Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Commercial and Residential Lending Segment Revenues For the year ended December 31, 2023, revenues of our Commercial and Residential Lending Segment increased $536.2 million to $1.7 billion, compared to $1.2 billion for the year ended December 31, 2022.
After making adjustments for the calculation of Distributable Earnings, revenues were $218.3 million, costs and expenses were $121.0 million, other income was $55.1 million, income tax provision was $4.3 million and the deduction of income attributable to non-controlling interests was $20.1 million.
After making adjustments for the calculation of Distributable Earnings, revenues were $244.7 million, costs and expenses were $143.4 million, other income was $39.3 million, there was no income tax provision or benefit and the deduction of income attributable to non-controlling interests was $17.4 million.
(j) The maximum facility size as of December 31, 2023 of $450.0 million may be increased to $750.0 million, subject to certain conditions. 85 Table of Contents (k) Certain facilities with an aggregate initial maximum facility size of $472.6 million may be increased to $572.6 million, subject to certain conditions. The $572.6 million amount includes such upsizes.
(k) The maximum facility size as of December 31, 2024 of $410.0 million may be increased to $750.0 million, subject to certain conditions. (l) Certain facilities with an aggregate initial maximum facility size of $637.1 million may be increased to $737.1 million, subject to certain conditions. The $737.1 million amount includes such upsizes.
Net rental income 83 Table of Contents provided cash of $78.9 million, servicing fees of $47.1 million, receipts from our interest rate derivatives of $89.6 million, distributions from our affordable housing fund investments of $39.4 million, and sales and principal collections, net of originations and purchases of loans held-for-sale of $199.7 million.
Other cash inflows included sales and principal collections, net of originations and purchases of loans held-for-sale of $202.9 million, receipts from our interest rate derivatives of $73.7 million, servicing fees of $72.9 million, net rental income of $55.6 million and distributions from our affordable housing fund investments of $41.4 million.
The increase was primarily due to non-controlling interests in increased income, including unrealized gains in fair value, of the Woodstar Fund for the full year ended December 31, 2022. 71 Table of Contents Non-GAAP Financial Measures Distributable Earnings is a non-GAAP measure.
The decrease was primarily due to non-controlling interests in lower income, reflecting lower unrealized gains in fair value, of the Woodstar Fund during the year ended December 31, 2023. 70 Tab l e of Contents Non-GAAP Financial Measures Distributable Earnings is a non-GAAP financial measure.
Costs and Expense s For the year ended December 31, 2022, costs and expenses of our Infrastructure Lending Segment increased $35.8 million to $100.6 million, compared to $64.8 million for the year ended December 31, 2021.
Costs and Expense s For the year ended December 31, 2024, costs and expenses of our Infrastructure Lending Segment increased $0.1 million to $174.8 million, compared to $174.7 million for the year ended December 31, 2023.
Income taxes, which principally relate to the taxable nature of this segment’s residential loan securitization activities which are housed in TRSs, decreased $12.3 million to a benefit of $4.6 million during the year ended December 31, 2022 compared to a provision of $7.7 million during the year ended December 31, 2021.
Income taxes, which principally relate to the taxable nature of this segment’s loan servicing and loan securitization businesses which are housed in TRSs, decreased $4.3 million to no provision or benefit in the year ended December 31, 2023.
Net cash provided by investing activities of $1.0 billion for the year ended December 31, 2023 related primarily to proceeds received from principal collections and sale of loans held-for-investment of $3.4 billion and investment securities of $263.0 million, partially offset by the origination, purchase and funding of loans held-for-investment of $2.7 billion and investment securities of $59.6 million.
Net cash provided by investing activities of $2.0 billion for the year ended December 31, 2024 related primarily to proceeds received from principal collections and sale of loans held-for-investment of $4.7 billion and investment securities of $349.2 million, as well as net proceeds from the sale of real estate of $216.8 million.
During the years ended December 31, 2022 and 2021, 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 Year Ended December 31, 2022 2021 Commercial 6.5 % 5.8 % Residential 4.7 % 4.7 % Overall 6.2 % 5.7 % The weighted average unlevered yield on our commercial loans increased primarily due to higher index rates partially offset by the repayment of loans with higher LIBOR floors being replaced by newer loans with lower floating rate floors.
During the years ended December 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 Year Ended December 31, 2024 2023 Commercial 9.7 % 9.4 % Residential 5.0 % 5.1 % Overall 9.0 % 8.8 % The weighted average unlevered yield on our commercial loans increased primarily due to higher prepayment related income.
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 59 Table of Contents electronic commerce.
It remains difficult to predict the full impact of recent events and any future changes in interest rates or inflation. 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.
Net cash used in financing activities of $1.6 billion for the year ended December 31, 2023 related primarily to repayments and deferred loan costs on our debt, net of borrowings, of $935.3 million and dividend distributions of $601.2 million.
Net cash used in financing activities of $2.4 billion for the year ended December 31, 2024 related primarily to repayments and deferred loan costs on our debt, net of borrowings, of $2.1 billion and dividend distributions of $620.0 million. Offsetting these cash outflows was net proceeds from issuances of common stock of $395.5 million.
(g) Certain facilities with an outstanding balance of $332.6 million as of December 31, 2023 carry a rolling 11-month or 12-month term which may reset monthly or quarterly with the lender's consent. These facilities carry no maximum facility size.
(g) The facility with a current maturity of February 2025 was extended to February 2026 subsequent to December 31, 2024. (h) Certain facilities with an outstanding balance of $342.6 million as of December 31, 2024 carry a rolling 12-month term which may reset monthly or quarterly with the lender's consent.
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.
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, elevated interest rates could adversely affect the value of commercial real estate we own and that collateralizes our loans.
The decrease in other income was primarily due to (i) a $71.4 million unfavorable change in fair value of CMBS investments reflecting widening credit spreads and (ii) a $49.0 million lesser increase in fair value of conduit loans, partially offset by (iii) a $33.4 million increased gain on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments and (iv) a $28.7 million increased gain on sales of operating properties.
The decrease in other income was primarily due to (i) a $31.9 million greater decrease in fair value of CMBS investments, (ii) a $17.4 million decreased gain on sale of operating properties and (iii) a $7.4 million decrease in earnings from unconsolidated entities, partially offset by (iv) a $35.5 million greater increase in fair value of conduit loans and (v) a $7.8 million favorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments.
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.
In those cases, we depart from the collective pool approach 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. 88 Tab l e of Contents Significant judgment is required when estimating future credit losses; therefore, actual results over time could be materially different.
Other Income (Loss) For the year ended December 31, 2022, other income of our Commercial and Residential Lending Segment decreased $174.4 million to a loss of $115.8 million, compared to income of $58.6 million for the year ended December 31, 2021.
Other Income (Loss) For the year ended December 31, 2024, other income of our Commercial and Residential Lending Segment increased $129.8 million to income of $128.3 million, compared to a loss of $1.5 million for the year ended December 31, 2023.
(f) Certain facilities with an aggregate initial maximum facility size of $11.7 billion may be increased to $12.1 billion, subject to certain conditions. The $12.1 billion amount includes such upsizes.
(e) Certain facilities with an outstanding balance of $2.3 billion as of December 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 $10.7 billion may be increased to $11.1 billion, subject to certain conditions. The $11.1 billion amount includes such upsizes.
Revenues For the year ended December 31, 2023, revenues of our Property Segment increased $2.4 million to $94.2 million, compared to $91.8 million for the year ended December 31, 2022, primarily due to rent increases in our Master Lease Portfolio.
Revenues For the year ended December 31, 2024, revenues of our Property Segment decreased $24.2 million to $70.0 million, compared to $94.2 million for the year ended December 31, 2023, primarily due to the sale of our Master Lease Portfolio on February 29, 2024.
(h) A facility with an outstanding balance of $281.3 million as of December 31, 2023 has a weighted average fixed annual interest rate of 3.54%. All other facilities are variable rate with a weighted average rate of SOFR + 2.22%.
These facilities carry no maximum facility size. 84 Tab l e of Contents (i) A facility with an outstanding balance of $323.5 million as of December 31, 2024 has a weighted average fixed annual interest rate of 3.94%. All other facilities are variable rate with a weighted average rate of SOFR + 2.06%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+7 added−2 removed19 unchanged
Biggest changeThe 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 December 31, 2023 and 2022 (dollars in thousands): Face Value of Hedged Instruments Aggregate Notional Value of Credit Instruments Number of Credit Instruments 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 Instrument hedged as of December 31, 2022 Loans held-for-sale $ 3,116,815 $ 2,718,900 36 RMBS, available-for-sale 202,818 85,000 2 CMBS, fair value option 42,793 58,800 2 HTM debt securities 12,005 12,005 1 Secured financing agreements 681,823 1,471,446 9 Unsecured senior notes 1,000,000 970,000 2 $ 5,056,254 $ 5,316,151 52 92 Table of Contents 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 $ 17,766,428 $ (176,888) $ (88,444) $ (44,222) $ 44,416 Interest expense from variable rate debt, net of interest rate derivatives (12,949,699) 129,497 64,748 32,374 (32,374) Net investment income from variable rate instruments $ 4,816,729 $ (47,391) $ (23,696) $ (11,848) $ 12,042 ______________________________________________________________________________________________________________________ (1) Includes the notional value of interest rate derivatives.
Biggest changeWhile the fair value of the forward starting swap will impact earnings, it will not impact net investment income until its effective date. 91 Tab l e of Contents 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 December 31, 2024 and 2023 (dollars in thousands); however, consistent with Note 14 to the Consolidated Financial Statements, the notional value and number of credit instruments excludes the residential lending reverse swap trades and forward starting swaps as well as certain other interest rate swaps that were not effective as of December 31, 2024: Face Value of Hedged Instruments Aggregate Notional Value of Credit Instruments Number of Credit Instruments Instrument hedged as of December 31, 2024 Loans held-for-sale $ 2,820,654 $ 3,573,200 47 RMBS, available-for-sale 180,654 40,000 1 CMBS, fair value option 76,641 38,380 1 HTM debt securities 7,955 7,358 1 Secured financing agreements 507,895 531,746 4 Unsecured senior notes 2,250,000 2,235,000 5 $ 5,843,799 $ 6,425,684 59 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 The table below 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).
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. 91 Table of Contents We seek to further manage credit risk associated with our Investing and Servicing Segment loans held-for-sale through the purchase of credit instruments.
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.
Our financial statements are prepared in accordance with GAAP, and our distributions are determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification; in each case, our activities and balance sheet are measured with reference to historical cost and/or fair value without considering inflation. 94 Table of Contents
Our financial statements are prepared in accordance with GAAP, and our distributions are determined by our board of directors consistent with our obligation to distribute to our stockholders at least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification; in each case, our activities and balance sheet are measured with reference to historical cost and/or fair value without considering inflation. 94 Tab l e of Contents
This could have a negative impact on our results of operations. In some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses. Fair Value Risk The estimated fair value of our investments fluctuates primarily due to changes in interest rates and other factors.
This could 92 Tab l e of Contents have a negative impact on our results of operations. In some situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses. Fair Value Risk The estimated fair value of our investments fluctuates primarily due to changes in interest rates and other factors.
(4,533) ______________________________________________________________________________________________________________________ (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 December 31, 2023, as indicated in the table above.
(3,631) ______________________________________________________________________________________________________________________ (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 December 31, 2024, as indicated in the table above.
The following table presents our credit instruments as of December 31, 2023 and December 31, 2022 (dollars in thousands): Face Value of Loans Held-for-Sale Aggregate Notional Value of Credit Instruments Number of Credit Instruments December 31, 2023 $ 45,400 $ 49,000 3 December 31, 2022 $ 23,900 $ 49,000 3 Capital Market Risk We are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our common stock or other equity instruments.
The following table presents our credit instruments as of December 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 December 31, 2024 $ 125,695 $ 64,000 4 December 31, 2023 $ 45,400 $ 49,000 3 Capital Market Risk We are exposed to risks related to the equity capital markets and our related ability to raise capital through the issuance of our common stock or other equity instruments.
Real Estate Risk The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns, public health emergencies and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes.
Refer to Note 14 to the Consolidated Financial Statements for further detail regarding our foreign currency derivatives and their contractual maturities. 93 Tab l e of Contents Real Estate Risk The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns, public health emergencies and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes.
Removed
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. 93 Table of Contents 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): December 31, 2023 GBP EUR AUD CHF Foreign currency assets £ 1,684,671 € 1,105,375 A$ 1,927,795 Fr. 64,266 Foreign currency liabilities 1,166,900 364,198 1,350,903 47,474 Foreign currency contracts - notional, net (538,939) (815,083) (882,675) (20,423) Subtotal (1) £ 2,312,631 € 654,490 A$ 2,396,023 Fr. 91,316 December 31, 2022 GBP EUR AUD CHF Foreign currency assets £ 1,955,257 € 959,280 A$ 1,863,969 Fr. 58,140 Foreign currency liabilities (1,437,484) (373,901) (1,387,924) (38,218) Foreign currency contracts - notional, net (579,970) (661,468) (636,167) (24,455) Subtotal (1) £ (62,197) € (76,089) A$ (160,122) Fr.
Added
As discussed in Note 14 to the Consolidated Financial Statements, we entered into a series of derivative transactions during the year ended December 31, 2024 related to our residential loan portfolio in an effort to extend hedge duration.
Removed
Refer to Note 14 to the Consolidated Financial Statements for further detail regarding our foreign currency derivatives and their contractual maturities.
Added
These transactions involved a series of reverse swap trades which effectively locked a portion of positive cash flows from our original hedges for a period of time. We simultaneously entered into a forward starting swap which will not be effective until June 2027.
Added
However, this table excludes: (i) our floating rate residential loan debt along with its related hedges (see Note 14); (ii) certain other interest rate swaps that were not effective as of December 31, 2024 (see Note 14); and (iii) nonaccrual loans (see Note 5).
Added
Income (Expense) Subject to Interest Rate Sensitivity Variable rate investments and indebtedness (1) 1.00% Decrease 0.50% Decrease 0.25% Increase Investment income from variable rate investments $ 15,170,417 $ (138,754) $ (71,050) $ 36,214 Interest expense from variable rate debt, net of interest rate derivatives (13,422,389) 137,144 68,687 (34,357) Net investment income from variable rate instruments $ 1,748,028 $ (1,610) $ (2,363) $ 1,857 ______________________________________________________________________________________________________________________ (1) Includes the notional value of interest rate derivatives.
Added
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.
Added
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): December 31, 2024 GBP EUR AUD CHF Foreign currency assets £ 1,504,911 € 748,130 A$ 1,645,315 Fr. 65,995 Foreign currency liabilities (1,089,633) (481,566) (1,148,993) (48,856) Foreign currency contracts - notional, net (490,124) (293,927) (654,648) (19,084) Subtotal (1) £ (74,845) € (27,363) A$ (158,325) Fr.
Added
(1,944) December 31, 2023 GBP EUR AUD CHF Foreign currency assets £ 1,684,671 € 1,105,375 A$ 1,927,795 Fr. 64,266 Foreign currency liabilities (1,166,900) (364,198) (1,350,903) (47,474) Foreign currency contracts - notional, net (538,939) (815,083) (882,675) (20,423) Subtotal (1) £ (21,168) € (73,906) A$ (305,783) Fr.

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