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What changed in STARWOOD PROPERTY TRUST, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of STARWOOD PROPERTY TRUST, INC.'s 2022 and 2023 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 2023 report.

+378 added−422 removedSource: 10-K (2024-02-22) vs 10-K (2023-03-01)

Top changes in STARWOOD PROPERTY TRUST, INC.'s 2023 10-K

378 paragraphs added · 422 removed · 308 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

27 edited+0 added−0 removed50 unchanged
Biggest changeCommercial 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, 2022 and 2021 (dollars in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment Unlevered Return on Asset (6) 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 December 31, 2021 First mortgages (1) $ 13,057,621 $ 12,981,196 $ 9,116,486 $ 3,864,710 5.2 % Subordinated mortgages (2) 72,371 70,771 — 70,771 11.8 % Mezzanine loans (1) 415,155 417,504 — 417,504 10.9 % Residential loans, fair value option 60,133 59,225 36,934 22,291 6.0 % (5) Other loans 19,029 17,424 — 17,424 13.3 % Loans held-for-sale, fair value option, residential 2,525,910 2,590,005 1,808,372 781,633 4.2 % (5) Loans held-for-sale, commercial — — — — — % RMBS, available-for-sale 221,806 143,980 97,354 46,626 11.8 % RMBS, fair value option 127,437 250,424 (3) 37,213 213,211 12.6 % CMBS, fair value option 102,900 98,211 (3) 49,798 48,413 5.2 % HTM debt securities (4) 655,557 656,915 113,143 543,772 6.7 % Credit loss allowance N/A (52,302) — (52,302) Equity security 12,366 11,624 — 11,624 Investments in unconsolidated entities N/A 44,938 — 44,938 Properties, net N/A 124,503 49,483 75,020 $ 17,270,285 $ 17,414,418 $ 11,308,783 $ 6,105,635 __________________________________________ (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.
Biggest changeCommercial 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.
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 30 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 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.
Government agency or federally chartered corporation; • Residential loans: loans secured by a first mortgage lien on residential property; • Infrastructure loans: senior secured project finance loans and senior secured project finance investment securities secured by power generation facilities and midstream and downstream oil and gas assets; and • Net leases: commercial properties subject to net leases, which leases typically have longer terms than gross leases, require tenants to pay substantially all of the operating costs associated with the properties and often have contractually specified rent increases throughout their terms.
Government agency or federally chartered corporation; • Residential loans: loans secured by a first mortgage lien on residential property; • Infrastructure loans: senior secured project finance loans and senior secured project finance investment securities secured by power generation facilities and midstream, downstream and upstream oil and gas assets; and • Net leases: commercial properties subject to net leases, which leases typically have longer terms than gross leases, require tenants to pay substantially all of the operating costs associated with the properties and often have contractually specified rent increases throughout their terms.
We also conduct our business so that neither we nor any of our subsidiaries are required to register as an investment company under the 1940 Act. So long as we qualify for an exemption from registration under the 1940 Act, we are not be subject to leverage and other restrictions imposed on registered investment companies.
We also conduct our business so that neither we nor any of our subsidiaries are required to register as an investment company under the 1940 Act. So long as we qualify for an exemption from registration under the 1940 Act, we are not subject to leverage and other restrictions imposed on registered investment companies.
Regions: South East 16.7 % 12.9 % North East 16.0 % 20.0 % South West 15.6 % 13.0 % West 10.3 % 15.1 % Mid Atlantic 9.3 % 10.8 % Midwest 2.7 % 3.4 % International: United Kingdom 13.8 % 15.8 % Other Europe 6.4 % 5.1 % Australia 7.4 % 1.8 % Bahamas/Bermuda 1.8 % 2.1 % 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 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.
We have four reportable business segments as of December 31, 2022 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, 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 are externally managed and advised by SPT Management, LLC (our “Manager”) pursuant to the terms of a management agreement. Our Manager is controlled by Barry Sternlicht, our Chairman and Chief Executive Officer. Our Manager is an affiliate of Starwood Capital Group Global, L.P. ("Starwood Capital Group"), a privately-held private equity firm founded by Mr. Sternlicht.
We are externally managed and advised by SPT Management, LLC (our “Manager”) pursuant to the terms of a management agreement. Our Manager is controlled by Barry Sternlicht, our Chairman and Chief Executive Officer. Our Manager is an affiliate of Starwood Capital Group Global, L.P. (“Starwood Capital Group”), a privately-held private equity firm founded by Mr. Sternlicht.
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. 5 Table of Content s 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 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.
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, 2022. 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, 2023. This discussion contains forward‑looking statements that involve risks and uncertainties.
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. (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 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.
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. 7 Table of Content s 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 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.
Our corporate headquarters office is located at 591 West Putnam Avenue, Greenwich, Connecticut 06830, and our telephone number is (203) 422-7700. 4 Table of Content s 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 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.
We may also utilize other sources of financing to the extent available to us. 6 Table of Content s 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 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”).
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 13 Table of Content s 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 15 Table of Contents condition or results of operations or prospects.
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.
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
If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate 14 Table of Content s 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 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.
As of December 31, 2022 and 2021, 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, 2022 December 31, 2021 Multifamily 33.3 % 27.3 % Office 23.1 % 29.5 % Hotel 16.5 % 19.0 % Mixed Use 9.7 % 11.5 % Industrial 6.0 % 5.6 % Residential 1.8 % 1.6 % Retail 1.6 % 2.1 % Other 8.0 % 3.4 % 100.0 % 100.0 % Geographic Location December 31, 2022 December 31, 2021 U.S.
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, 2022, the Investing and Servicing Segment’s CMBS had a weighted-average expected maturity of 6.3 years. 12 Table of Content s 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, 2022 and 2021, respectively: Property Type December 31, 2022 December 31, 2021 Retail 49.3 % 37.9 % Office 29.6 % 37.4 % Mixed Use 11.7 % 9.0 % Multifamily 6.8 % 5.4 % Hotel 2.6 % 2.3 % Self-storage — % 8.0 % 100.0 % 100.0 % Geographic Location December 31, 2022 December 31, 2021 North East 28.8 % 31.8 % West 22.0 % 18.1 % Mid Atlantic 21.9 % 14.5 % Midwest 12.2 % 10.1 % South West 8.3 % 6.6 % South East 6.8 % 18.9 % 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.
As 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.
Human Capital Resources As of December 31, 2022, the Company had 290 full-time employees, the majority of which are real estate professionals located throughout the 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.
The application of this methodology resulted in mezzanine loans with carrying values of $1.3 billion and $1.4 billion being classified as first mortgages as of December 31, 2022 and 2021, respectively. 8 Table of Content s (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 $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.
(3) Includes $39.1 million and $42.1 million of servicing rights intangibles eliminated in consolidation against VIE assets pursuant to ASC 810 as of December 31, 2022 and 2021, respectively. (4) Includes $13.5 million and $15.3 million of investments in unconsolidated entities eliminated in consolidation against VIE assets pursuant to ASC 810 as of December 31, 2022 and 2021, respectively.
(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.
Also includes $198.9 million and $182.6 million of non-controlling interests in the consolidated entities which hold certain of these CMBS as of December 31, 2022 and 2021, respectively. (2) Includes $42.8 million and $35.8 million of non-controlling interests in the consolidated entities which hold certain debt balances as of December 31, 2022 and 2021, 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.
As of December 31, 2022 and 2021, our Infrastructure Lending Segment’s investment portfolio had the following characteristics based on carrying values: Collateral Type December 31, 2022 December 31, 2021 Natural gas power 61.2 % 61.0 % Midstream/downstream oil & gas 37.5 % 33.2 % Other thermal power 1.3 % 4.0 % Renewable power — % 1.8 % 100.0 % 100.0 % Geographic Location December 31, 2022 December 31, 2021 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, 2022 and 2021, our Property Segment’s investment portfolio had the following geographic characteristics based on carrying values: Geographic Location December 31, 2022 December 31, 2021 South East 81.2 % 77.4 % South West 5.2 % 6.2 % Midwest 5.0 % 6.0 % North East 4.7 % 5.7 % West 3.9 % 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. 11 Table of Content s 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, 2022 and 2021 (amounts in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment 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 December 31, 2021 CMBS, fair value option $ 2,694,413 $ 1,165,395 (1) $ 380,004 (2) $ 785,391 Intangible assets - servicing rights N/A 58,899 (3) — 58,899 Lease intangibles, net N/A 11,342 — 11,342 Loans held-for-sale, fair value option, commercial 289,761 286,795 173,430 113,365 Loans held-for-investment 9,903 9,903 — 9,903 Investments in unconsolidated entities N/A 34,160 (4) — 34,160 Properties, net N/A 154,331 160,803 (6,472) $ 2,994,077 $ 1,720,825 $ 714,237 $ 1,006,588 ______________________________________________ (1) Includes $1.15 billion and $1.14 billion of CMBS eliminated in consolidation against VIE liabilities pursuant to ASC 810 as of December 31, 2022 and 2021, respectively.
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.
Regions: North East 39.0 % 41.5 % South West 21.9 % 19.5 % Midwest 21.9 % 18.9 % South East 7.4 % 8.8 % West 4.6 % 4.3 % Mid-Atlantic 1.8 % 1.6 % Other 2.1 % 2.1 % International: Mexico 0.5 % 2.0 % Other 0.8 % 1.3 % 100.0 % 100.0 % As of December 31, 2022, the Infrastructure Lending Segment’s first priority infrastructure loans and HTM securities had a weighted‑average contractual maturity of 3.9 years. 10 Table of Content s Property Segment The following table sets forth the amount of each category of investments held within our Property Segment as of December 31, 2022 and 2021 (amounts in thousands): December 31, 2022 December 31, 2021 Properties, net $ 864,778 $ 887,553 Lease intangibles, net 28,470 33,151 Woodstar Fund 1,761,002 1,040,309 $ 2,654,250 $ 1,961,013 The following table sets forth our net investment and other information regarding the Property Segment’s properties and lease intangibles as of December 31, 2022 (dollars in thousands): Carrying Value Asset Specific Financing Net Investment Occupancy Rate Weighted Average Remaining Lease Term Office—Medical Office Portfolio $ 768,248 $ 596,351 $ 171,897 91.4 % 5.7 years Retail—Master Lease Portfolio 343,790 193,368 150,422 100.0 % 19.3 years Subtotal—undepreciated carrying value 1,112,038 789,719 322,319 Accumulated depreciation and amortization (218,790) — (218,790) Net carrying value $ 893,248 $ 789,719 $ 103,529 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 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.
As of December 31, 2022, commercial loans held‑for‑investment and HTM securities had a weighted‑average expected maturity of 1.7 years, inclusive of extension options that management believes are probable of exercise. 9 Table of Content s 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, 2022 and 2021 (dollars in thousands): Face Amount Carrying Value Asset Specific Financing Net Investment Unlevered Return on Asset (1) 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 December 31, 2021 First priority infrastructure loans and HTM securities $ 2,116,836 $ 2,082,927 $ 1,630,866 $ 452,061 5.1 % Credit loss allowance N/A (23,578) — (23,578) Investments in unconsolidated entities N/A 26,255 — 26,255 $ 2,116,836 $ 2,085,604 $ 1,630,866 $ 454,738 __________________________________________ (1) Calculated using applicable index rates for variable rate investments in place as of the respective period end and excludes investments for which interest income is not recognized.
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.
Refer to Note 24 to the consolidated financial statements included herein (the “Consolidated Financial Statements”) for our results of operations and financial position by business segment. Refer to the section entitled “Risk Factors” in Part I, Item 1A of this Form 10-K for a discussion of the potential impacts on us from the ongoing COVID-19 pandemic.
Refer to Note 24 to the consolidated financial statements included herein (the “Consolidated Financial Statements”) for our results of operations and financial position by business segment.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

130 edited+27 added−58 removed498 unchanged
Biggest changeWe may experience a decline in the fair value of our assets. • Investments outside the U.S. that are denominated in foreign currencies subject us to foreign currency risks and to the uncertainty of foreign laws and markets, which may adversely affect our distributions and our REIT status. • We invest in equity interests in commercial real estate assets, which subjects us to the general risks of owning commercial real estate. • 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 are subject to the risks of investing in project finance investments, many of which are outside our control, and that may negatively impact our business and financial results. • The investment portfolio of our Infrastructure Lending Segment is concentrated in the power industry, which subjects the portfolio to more risks than if the investments were more diversified.
Biggest changeWe 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.
In addition, upon conversion of the convertible senior notes, we will be required to make cash payments in respect of the notes being converted, unless we elect to settle the conversion entirely in shares of our common stock.
In addition, upon conversion of the convertible senior notes, unless we elect to settle the conversion entirely in shares of our common stock, we will be required to make cash payments in respect of the convertible senior notes being converted.
The “safe harbor” under the ATR Rules applies to a covered transaction that meets the definition of “qualified mortgage” and is not a “higher-priced covered transaction.” For any covered transaction that meets the definition of a “qualified mortgage” and is not a “higher-priced covered transaction,” the creditor or assignee will be deemed to have complied with the ability-to-repay requirement and, accordingly, will be conclusively presumed to have made a good faith and reasonable determination of the consumer’s ability to repay.
The “safe harbor” under the ATR Rules applies to a covered transaction that meets the definition of “qualified mortgage” and is not a “higher-priced covered transaction.” For any covered transaction that meets the definition of a “qualified mortgage” and is not a “higher-priced covered transaction,” the creditor or assignee will be deemed to have complied with the ability-to-repay requirement and, accordingly, will be conclusively presumed to have made a good faith and reasonable determination of the consumer’s reasonable ability to repay.
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.
Our Consolidated Financial Statements changed materially following our acquisition of LNR, as we became required to consolidate the assets and liabilities of CMBS pools in which we own the controlling class of subordinated securities and are considered the “primary beneficiary.” Following our acquisition of LNR, we became required to consolidate the assets and liabilities of certain CMBS pools in which we own the controlling class of subordinated securities into our financial statements, even though the value of the subordinated securities may represent a small interest relative to the size of the pool.
Our Consolidated Financial Statements changed materially following our acquisition of LNR, as we became required to consolidate the assets and liabilities of CMBS pools in which we own the controlling class of subordinated securities and are considered the “primary beneficiary.” Following our acquisition of LNR in 2013, we became required to consolidate the assets and liabilities of certain CMBS pools in which we own the controlling class of subordinated securities into our financial statements, even though the value of the subordinated securities may represent a small interest relative to the size of the pool.
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.
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.
Such joint venture investments may involve risks not otherwise present when we make investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest and could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; 38 Table of Content s • joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT and our exemption from registration under the Investment Company Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent our Manager and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to qualify as a REIT or maintain our exclusion from registration under the Investment Company Act, even though we do not control the joint venture.
Such joint venture investments may involve risks not otherwise present when we make investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest and could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT and our exemption from registration under the Investment Company Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent our Manager and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to qualify as a REIT or maintain our exclusion from registration under the Investment Company Act, even though we do not control the joint venture.
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 • 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 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.
Our primary interest rate exposures relate to the following: • changes in interest rates may affect the yield on our investments and the financing cost of our debt, as well as the performance of our interest rate swaps that we utilize for hedging purposes, which could result in operating losses for us should interest expense exceed interest income; • declines in interest rates may reduce the yield on existing floating rate assets and/or the yield on prospective investments; • changes in the level of interest rates may affect our ability to source investments; • increases in the level of interest rates may negatively impact the value of our investments and our ability to realize gains from the disposition of assets; • increases in the level of interest rates may (x) increase the credit risk of our assets by negatively impacting the ability of our borrowers to pay debt service or our ability to refinance our assets upon maturity and (y) negatively impact the 22 Table of Content s value of the real estate supporting our investments (or that we own directly) through the impact such increases can have on property valuation capitalization rates; and • changes in interest rates and/or the differential between U.S. dollar interest rates and those of non-dollar currencies in which we invest can adversely affect the value of our non-dollar assets and/or associated currency hedging transactions.
Our primary interest rate exposures relate to the following: • changes in interest rates may affect the yield on our investments and the financing cost of our debt, as well as the performance of our interest rate swaps that we utilize for hedging purposes, which could result in operating losses for us should interest expense exceed interest income; • declines in interest rates may reduce the yield on existing floating rate assets and/or the yield on prospective investments; • changes in the level of interest rates may affect our ability to source investments; • increases in the level of interest rates may negatively impact the value of our investments and our ability to realize gains from the disposition of assets; • increases in the level of interest rates may (x) increase the credit risk of our assets by negatively impacting the ability of our borrowers to pay debt service or our ability to refinance our assets upon maturity and (y) negatively impact the value of the real estate supporting our investments (or that we own directly) through the impact such increases can have on property valuation capitalization rates; and • changes in interest rates and/or the differential between U.S. dollar interest rates and those of non-dollar currencies in which we invest can adversely affect the value of our non-dollar assets and/or associated currency hedging transactions.
Our acquisition of equity interests in commercial real estate assets is subject to, and the success of those assets may be adversely affected by, various risks, including those described below: • we may be unable to meet required closing conditions; • we may be unable to finance acquisitions on favorable terms or at all; • acquired assets may fail to perform as expected; • our estimates of the costs of repositioning or renovating acquired commercial real estate assets may be inaccurate; • we may not be able to obtain adequate insurance coverage for acquired commercial real estate assets; 36 Table of Content s • acquisitions may be located in markets where we and our Manager have a lack of market knowledge or understanding of the local economy, lack of business relationships in the area and unfamiliarity with local governmental and permitting procedures; • we may be unable to quickly and efficiently integrate new acquisitions of commercial real estate assets into our existing operations and, therefore, our results of operations and financial condition could be adversely affected; and • we may acquire equity interests in commercial real estate assets through a joint venture, and such investments could be adversely affected by our lack of sole decision-making authority and reliance upon a co-venturer’s financial condition.
Our acquisition of equity interests in commercial real estate assets is subject to, and the success of those assets may be adversely affected by, various risks, including those described below: • we may be unable to meet required closing conditions; • we may be unable to finance acquisitions on favorable terms or at all; • acquired assets may fail to perform as expected; • our estimates of the costs of repositioning or renovating acquired commercial real estate assets may be inaccurate; • we may not be able to obtain adequate insurance coverage for acquired commercial real estate assets; • acquisitions may be located in markets where we and our Manager have a lack of market knowledge or understanding of the local economy, lack of business relationships in the area and unfamiliarity with local governmental and permitting procedures; • we may be unable to quickly and efficiently integrate new acquisitions of commercial real estate assets into our existing operations and, therefore, our results of operations and financial condition could be adversely affected; and • we may acquire equity interests in commercial real estate assets through a joint venture, and such investments could be adversely affected by our lack of sole decision-making authority and reliance upon a co-venturer’s financial condition.
These factors include, without limitation: federal, state or local legislative action or initiatives designed to provide homeowners with assistance in avoiding residential loan foreclosures and that serve to delay the foreclosure process; Home Affordable Modification Program and other programs that require specific procedures to be followed to explore the refinancing of a mortgage loan prior to the commencement of a foreclosure proceeding; and continued declines in real estate values and sustained high levels of unemployment that increase the number of foreclosures and place additional pressure on the already overburdened judicial and administrative systems.
These factors include, without limitation: federal, state or local legislative action or initiatives designed to 32 Table of Contents provide homeowners with assistance in avoiding residential loan foreclosures and that serve to delay the foreclosure process; Home Affordable Modification Program and other programs that require specific procedures to be followed to explore the refinancing of a mortgage loan prior to the commencement of a foreclosure proceeding; and continued declines in real estate values and sustained high levels of unemployment that increase the number of foreclosures and place additional pressure on the already overburdened judicial and administrative systems.
If we were unable to raise necessary funding on acceptable terms, our operating results and financial position could be negatively impacted if we were required to repurchase the notes or to pay cash upon conversion. Risks Related to Hedging We enter into hedging transactions that could expose us to contingent liabilities in the future.
If we were unable to raise necessary funding on acceptable terms or at all, our operating results and financial position could be negatively impacted if we were required to repurchase the notes or to pay cash upon conversion. Risks Related to Hedging We enter into hedging transactions that could expose us to contingent liabilities in the future.
The “taxable mortgage pool” rules will increase the taxes that we, or our stockholders may, incur and limit our actions with respect to our taxable mortgage pool. Securitizations in the form of bonds or notes secured principally by mortgage loans generally result in the creation of TMPs for U.S. federal income tax purposes.
The “taxable mortgage pool” rules will increase the taxes that we, or our stockholders may, incur and limit our actions with respect to our taxable mortgage pools. Securitizations in the form of bonds or notes secured principally by mortgage loans generally result in the creation of TMPs for U.S. federal income tax purposes.
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 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, 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.
These investments involve a higher degree of risk than conventional debt financing due to a variety of factors, including their non-collateralized nature and subordinated ranking to other loans and liabilities of the entity in which such preferred equity is held.
We make preferred equity investments. These investments involve a higher degree of risk than conventional debt financing due to a variety of factors, including their non-collateralized nature and subordinated ranking to other loans and liabilities of the entity in which such preferred equity is held.
The stock markets, including the New York Stock Exchange (the "NYSE"), which is the exchange on which our common stock is listed, have experienced significant price and volume fluctuations. In the past, overall weakness in the economy and other factors have contributed to extreme volatility of the equity markets generally, including the market price of our common stock.
The stock markets, including the New York Stock Exchange (the “NYSE”), which is the exchange on which our common stock is listed, have experienced significant price and volume fluctuations. In the past, overall weakness in the economy and other factors have contributed to extreme volatility of the equity markets generally, including the market price of our common stock.
Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and costs that could result in material losses.
Any such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. 25 Table of Contents Hedging instruments often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities and involve risks and costs that could result in material losses.
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.
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.
As a result, we are required to devote significant management attention and resources to integrating the Infrastructure Lending Segment with the rest of our company. The integration process may disrupt our business and, if implemented ineffectively, could preclude us from realizing all of the potential benefits we expect to realize with respect to the acquisition.
As a result, we are required to devote significant management attention and resources to integrating the Infrastructure Lending Segment with the rest of our company. The 38 Table of Contents integration process may disrupt our business and, if implemented ineffectively, could preclude us from realizing all of the potential benefits we expect to realize with respect to the acquisition.
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.
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.
As with other provisions of the Investment Company Act, including Section 3(c)(5)(C), reliance on Sections 3(c)(5)(A) and/or 3(c)(5)(B) is based in large part on the nature of the assets held by the relevant entities, and we have analyzed 46 Table of Content s the availability of Section 3(c)(5)(A) and/or 3(c)(5)(B) to certain of our subsidiaries in the Infrastructure Lending Segment based on guidance from the SEC staff on the types of assets that qualify an entity to rely on either exception.
As with other provisions of the Investment Company Act, including Section 3(c)(5)(C), reliance on Sections 3(c)(5)(A) and/or 3(c)(5)(B) is based in large part on the nature of the assets held by the relevant entities, and we have analyzed the availability of Section 3(c)(5)(A) and/or 3(c)(5)(B) to certain of our subsidiaries in the Infrastructure Lending Segment based on guidance from the SEC staff on the types of assets that qualify an entity to rely on either exception.
Subject to market conditions and availability, we may seek additional sources 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 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.
We cannot predict how changes in the tax laws 52 Table of Content s might affect us or our stockholders. New legislation, U.S. Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the U.S. federal income tax consequences of such qualification.
We cannot predict how changes in the tax laws might affect us or our stockholders. New legislation, U.S. Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the U.S. federal income tax consequences of such qualification.
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.
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.
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.
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.
These investments also subject us to the risks inherent with real estate-related investments, including: • risks of delinquency and foreclosure, and risks of loss in the event thereof; • the dependence upon the successful operation of, and net income from, real property; • risks generally incident to interests in real property; and • risks specific to the type and use of a particular property.
These investments also subject us to the risks inherent with real estate-related investments, including: • risks of delinquency and foreclosure, and risks of loss in the event thereof; • the dependence upon the successful operation of, and net income from, real property; • risks generally incident to interests in real property; and 29 Table of Contents • risks specific to the type and use of a particular property.
To the extent structured financing arrangements are unavailable, we may have to rely more heavily on additional equity issuances, which may be dilutive to our stockholders, or on less efficient forms of debt financing that require a larger 21 Table of Content s portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities, cash distributions to our stockholders and other purposes.
To the extent structured financing arrangements are unavailable, we may have to rely more heavily on additional equity issuances, which may be dilutive to our stockholders, or on less efficient forms of debt financing that require a larger portion of our cash flow from operations, thereby reducing funds available for our operations, future business opportunities, cash distributions to our stockholders and other purposes.
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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.
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 fundamental change purchase price will equal 100% of the principal amount of the notes to be purchased, plus accrued and unpaid interest thereon.
The fundamental change purchase price will equal 100% of the principal amount of the convertible senior notes to be purchased, plus accrued and unpaid interest thereon.
Consequently, in many cases, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying hedging transactions 26 Table of Content s may depend on compliance with applicable securities, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements.
Consequently, in many cases, there are no requirements with respect to record keeping, financial responsibility or segregation of customer funds and positions. Furthermore, the enforceability of agreements underlying hedging transactions may depend on compliance with applicable securities, commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements.
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.
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.
Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of our common stock.
Any such tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of our common stock.
However, these ownership limits might also delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. 49 Table of Content s Even as a REIT, we may face tax liabilities that reduce our cash flow.
However, these ownership limits might also delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interest of our stockholders. Even as a REIT, we may face tax liabilities that reduce our cash flow.
In August 2011, the SEC solicited public comment on a wide range of issues relating to Section 3(c)(5)(C) of the Investment Company Act, including the nature of the assets that qualify for purposes of the exemption and whether mortgage REITs should be regulated in a manner similar to investment companies.
The SEC has periodically solicited public comment on a wide range of issues relating to Section 3(c)(5)(C) of the Investment Company Act, including the nature of the assets that qualify for purposes of the exemption and whether mortgage REITs should be regulated in a manner similar to investment companies.
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.
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.
We might be subject to this tax if we were to dispose of or securitize loans in a 51 Table of Content s manner that was treated as a sale of the loans for U.S. federal income tax purposes.
We might be subject to this tax if we were to dispose of or securitize loans in a manner that was treated as a sale of the loans for U.S. federal income tax purposes.
The prices of lower credit quality securities are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to adverse economic downturns or individual issuer developments.
The prices of 28 Table of Contents lower credit quality securities are generally less sensitive to interest rate changes than more highly rated investments, but more sensitive to adverse economic downturns or individual issuer developments.
For example, the rights of holders of B-Notes to control the process following a borrower default may 30 Table of Content s vary from transaction to transaction. Further, B-Notes typically are secured by a single property and so reflect the risks associated with significant concentration.
For example, the rights of holders of B-Notes to control the process following a borrower default may vary from transaction to transaction. Further, B-Notes typically are secured by a single property and so reflect the risks associated with significant concentration.
The ownership of residential loans, including non-QMs, subjects us to legal, regulatory and other risks, including those arising under federal consumer protection laws and regulations designed to regulate residential loan underwriting and 31 Table of Content s originators’ lending processes, standards and disclosures to borrowers.
The ownership of residential loans, including non-QMs, subjects us to legal, regulatory and other risks, including those arising under federal consumer protection laws and regulations designed to regulate residential loan underwriting and originators’ lending processes, standards and disclosures to borrowers.
The value of our common stock could be adversely affected if our determinations regarding the fair value of these investments were materially higher than the values that we ultimately realize upon their disposal. 34 Table of Content s We may experience a decline in the fair value of our assets.
The value of our common stock could be adversely affected if our determinations regarding the fair value of these investments were materially higher than the values that we ultimately realize upon their disposal. We may experience a decline in the fair value of our assets.
Although 17 Table of Content s 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.
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.
However, we may not have sufficient funds at the time we are required to purchase the notes surrendered therefor or to make cash payments on the notes being converted, and we may not be able to arrange necessary financing on acceptable terms.
However, we may not have sufficient funds at the time we are required to purchase the convertible senior notes surrendered therefor or to make cash payments on the notes being converted, and we may not be able to arrange necessary financing on acceptable terms, if at all.
If the amendments to the outstanding debt are “significant modifications” under applicable U.S. Treasury regulations, the modified debt may be considered to have been reissued to us at a gain in a debt-for-debt exchange with the 50 Table of Content s borrower.
If the amendments to the outstanding debt are “significant modifications” under applicable U.S. Treasury regulations, the modified debt may be considered to have been reissued to us at a gain in a debt-for-debt exchange with the borrower.
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, including the COVID-19 pandemic), 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; 40 Table of Content s • 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; • 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 (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.
Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock.
Certain provisions of the Maryland General Corporation Law (the “MGCL”) that are applicable to Maryland REITs, such as the Company, may have the effect of deterring a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-prevailing market price of our common stock.
Thus, compliance with the funding obligations with respect to the infrastructure loans may hinder our ability to grow, which could have a material 41 Table of Content s adverse effect on our business, financial condition and results of operations.
Thus, compliance with the funding obligations with respect to the infrastructure loans may hinder our ability to grow, which could have a material adverse effect on our business, financial condition and results of operations.
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, 2022, our total consolidated indebtedness was approximately $20.5 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, 2023, our total consolidated indebtedness was approximately $19.7 billion (excluding accounts payable, accrued expenses, other liabilities, VIE liabilities and unfunded commitments).
The term “investment securities” generally includes all securities except U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exemption from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.
The term “investment securities” generally includes all securities except cash, investments in U.S. money market funds, U.S. government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exemption from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.
Moreover, the CECL model created more volatility in the level of our credit loss 20 Table of Content s provisions. If we are required to materially increase our future level of credit loss allowances for any reason, such increase could adversely affect our business, results of operations, liquidity and financial condition.
Moreover, the CECL model creates more volatility in the level of our credit loss provisions. If we are required to materially increase our future level of credit loss allowances for any reason, such increase could adversely affect our business, results of operations, liquidity and financial condition.
In the event that 29 Table of Content s we underestimate the asset level losses relative to the price we pay for a particular investment, we may experience losses with respect to such investment. Real estate valuation is inherently subjective and uncertain.
In the event that we underestimate the asset level losses relative to the price we pay for a particular investment, we may experience losses with respect to such investment. Real estate valuation is inherently subjective and uncertain.
If we are unable to retain executives and other key employees, the roles and responsibilities of such executive officers and employees will need to be filled either by existing or new officers and employees, which may require us to devote time and resources to identifying, hiring and integrating replacements for the departed executives and employees that could otherwise be used to integrate the Infrastructure Lending Segment with the rest of our company or otherwise pursue business opportunities.
If we are unable to retain executives and other key employees, the roles and responsibilities of such executive officers and employees will need to be filled either by existing or new officers and employees, which may require us to devote time and resources to identifying, hiring and integrating replacements for the departed executives and employees that could otherwise be used to pursue business opportunities.
In addition to natural risks such as earthquakes, floods, droughts, lightning, wildfires, hurricanes, wind, global climate change and pandemics, including the COVID-19 pandemic, other hazards, such as fire, explosion, structural collapse and machinery failure, acts of terrorism or related acts of war, hostile cyber intrusions or other catastrophic events are inherent risks in the operation of a project.
In addition to natural risks such as earthquakes, floods, droughts, lightning, wildfires, hurricanes, wind, global climate change and pandemics, epidemics or other public health emergencies, other hazards, such as fire, explosion, structural collapse and machinery failure, acts of terrorism or related acts of war, hostile cyber intrusions or other catastrophic events are inherent risks in the operation of a project.
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; • 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; • acts of God, including, without limitation, earthquakes, hurricanes, pandemics, such as the COVID-19 pandemic, 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; 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.
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 test.
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.
We may also acquire distressed debt investments that are subsequently modified by agreement with the borrower, or we may be required to amend other debt investments, including in connection with the discontinuation of LIBOR. If the amendments to the outstanding debt are “significant modifications” under the applicable U.S.
We may also acquire distressed debt investments that are subsequently modified by agreement with the borrower, or we may be required to amend other debt investments. If the amendments to the outstanding debt are “significant modifications” under the applicable U.S.
If we are unable to invest in similar mortgage assets, we would be adversely affected. While we seek to minimize prepayment risk to the extent practical, in selecting investments we must balance prepayment risk against other risks and the potential returns of each investment.
If we are unable to invest in similar mortgage assets, we would be adversely affected. While we seek to minimize prepayment risk to the extent practical, in selecting investments we must balance prepayment risk against other risks and the potential returns of each investment. No strategy can completely insulate us from prepayment risk.
This could result in increased risk to the value of our investment portfolio. Distributable Earnings is not a measure calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and is defined within Item 7 – Non-GAAP Financial Measures in this Form 10-K.
Investments with higher yield potential are generally riskier or more speculative. This could result in increased risk to the value of our investment portfolio. Distributable Earnings is not a measure calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and is defined within Item 7 – Non-GAAP Financial Measures in this Form 10-K.
Paniry are also employees of other entities affiliated with our Manager and, as a result, are subject to potential conflicts of interest in service as our employees and as employees of such entities.
Paniry is also an employee of other entities affiliated with our Manager and, as a result, is subject to potential conflicts of interest in service as our employee and as an employee of such entities.
Net operating income of an income-producing property can be adversely affected by, among other things, • tenant mix; • success of tenant businesses; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in laws that increase operating expenses or limit rents that may be charged; • changes in national, regional or local economic conditions and/or specific industry segments, including the credit and securitization markets; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; 28 Table of Content s • increases in interest rates, real estate tax rates and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, terrorist attacks, pandemics, such as the COVID-19 pandemic, natural disasters, global climate change, social unrest and civil disturbances.
Net operating income of an income-producing property can be adversely affected by, among other things, • tenant mix; • success of tenant businesses; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in laws that increase operating expenses or limit rents that may be charged; • changes in national, regional or local economic conditions and/or specific industry segments, including the credit and securitization markets; • 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; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, terrorist attacks, pandemics, epidemics or other public health emergencies, natural disasters, global climate change, social unrest and civil disturbances.
These provisions may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide the holders of shares of common stock with the opportunity to realize a premium over the then current market price. 45 Table of Content s Our authorized but unissued shares of common and preferred stock may prevent a change in control.
These provisions may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide the holders of shares of common stock with the opportunity to realize a premium over the then current market price.
Improving economic conditions and property prices and declines in interest rates and greater availability of mortgage financing could reduce the incidence of assets going into special servicing and reduce our revenues from special servicing, including as a result of lower fees under new arrangements. The fair value of our servicing rights may decrease under the foregoing circumstances, resulting in losses.
Improving economic conditions and property prices and declines in interest rates and greater availability of mortgage financing could reduce the incidence of assets going into special servicing and reduce our revenues from special servicing, including as a result of lower fees under new arrangements.
To the extent that this underwriting has incorrectly anticipated the timing or magnitude of losses, our business may be adversely affected. Some of the mortgage loans underlying the CMBS are in default and additional loans may default in the future.
However, this underwriting may not accurately predict the 43 Table of Contents timing or magnitude of such losses. To the extent that this underwriting has incorrectly anticipated the timing or magnitude of losses, our business may be adversely affected. Some of the mortgage loans underlying the CMBS are in default and additional loans may default in the future.
If the market in which the asset is located fails to recover according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset, the borrower may not receive a sufficient return on the asset to satisfy the bridge loan, and we bear the risk that we may not recover some or all of our initial expenditure.
If the market in which the asset is located fails to recover according to the borrower’s projections, or if the borrower fails to improve the quality of the asset’s management and/or the value of the asset, the borrower may not receive a sufficient return on the asset to satisfy the bridge loan, and we bear the risk that we may not recover some or all of our initial expenditure. 30 Table of Contents In addition, borrowers usually use the proceeds of a conventional mortgage to repay a bridge loan.
In addition, if we lend money to a TRS, the TRS may be unable to deduct all or a portion of the interest paid to us, which could result in an even higher corporate-level tax liability. Any of these taxes would decrease cash available for distribution to our stockholders.
Furthermore, if we lend money to a TRS, the TRS may be unable to deduct all or a portion of the interest paid to us, which could result in an even higher corporate-level tax liability. Any of these taxes would decrease cash available for distribution to our stockholders. Complying with REIT requirements may cause us to forgo otherwise attractive opportunities.
The difficulties relating to the integration process include, among others: • managing a new area of business; • the potential diversion of management focus and resources from other strategic opportunities and from operational matters and potential disruption associated with the acquisition; • maintaining employee morale and retaining key management and other employees; • integrating two unique business cultures; • the possibility of faulty assumptions underlying expectations regarding the integration process; • consolidating corporate and administrative infrastructures; • coordinating geographically separate organizations; • unanticipated issues in integrating information technology, communications and other systems; • unanticipated changes in applicable laws and regulations; • managing tax costs or inefficiencies associated with the integration process; and • suffering losses if we do not experience the anticipated benefits of the transaction. 39 Table of Content s For our prior acquisition of the Infrastructure Lending Segment to be successful, we must retain and motivate key employees, and failure to do so could seriously harm our business and financial results.
The difficulties relating to the integration process include, among others: • managing a new area of business; • the potential diversion of management focus and resources from other strategic opportunities and from operational matters and potential disruption associated with the acquisition; • maintaining employee morale and retaining key management and other employees; • integrating two unique business cultures; • the possibility of faulty assumptions underlying expectations regarding the integration process; • consolidating corporate and administrative infrastructures; • coordinating geographically separate organizations; • unanticipated issues in integrating information technology, communications and other systems; • unanticipated changes in applicable laws and regulations; • managing tax costs or inefficiencies associated with the integration process; and • suffering losses if we do not experience the anticipated benefits of the transaction.
We intend to continue to make distributions to our stockholders to comply with the REIT requirements of the Code. From time to time, we may generate taxable income greater than our income for financial reporting purposes prepared in accordance with GAAP, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur.
From time to time, we may generate taxable income greater than our income for financial reporting purposes prepared in accordance with GAAP, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur.
Non-QMs, such as residential loans with a debt-to-income ratio exceeding 43%, are among the loan products that we may acquire that do not constitute qualified mortgages and, accordingly, do not have the benefit of either a safe harbor from liability under the ATR Rules or a rebuttable presumption of compliance with the ATR Rules.
Non-QMs are among the loan products that we may acquire that do not constitute qualified mortgages and, accordingly, do not have the benefit of either a safe harbor from liability under the ATR Rules or a rebuttable presumption of compliance with the ATR Rules.
Complying with REIT requirements may cause us to forgo otherwise attractive opportunities. To qualify as a REIT for U.S. federal income tax purposes, we must satisfy ongoing tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts that we distribute to our stockholders and the ownership of our stock.
To qualify as a REIT for U.S. federal income tax purposes, we must satisfy ongoing tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts that we distribute to our stockholders and the ownership of our stock.
The exercise of remedies and successful realization of liquidation proceeds relating to commercial mortgage loans underlying CMBS may be highly dependent on our performance as special servicer. We attempt to underwrite investments on a “loss-adjusted” basis, which projects a certain level of performance. However, this underwriting may not accurately predict the timing or magnitude of such losses.
The exercise of remedies and successful realization of liquidation proceeds relating to commercial mortgage loans underlying CMBS may be highly dependent on our performance as special servicer. We attempt to underwrite investments on a “loss-adjusted” basis, which projects a certain level of performance.
We will determine whether an entity is a majority-owned subsidiary of our company. The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person.
The Investment Company Act defines a majority-owned subsidiary of a person as a company 50% or more of the outstanding voting securities of which are owned by such person, or by another company which is a majority-owned subsidiary of such person.
Excluding our operating subsidiaries, we do not have any employees except for Andrew Sossen, our Chief Operating Officer, Executive Vice President, General Counsel and Chief Compliance Officer, and Rina Paniry, our Chief Financial Officer, Treasurer and Chief Accounting Officer, whom Starwood Capital Group has seconded to us exclusively. Mr. Sossen and Ms.
Excluding our operating subsidiaries, we do not have any employees except for Rina Paniry, our Chief Financial Officer, Treasurer and Chief Accounting Officer, whom Starwood Capital Group has seconded to us exclusively. Ms.
The economic performance and value of these properties and of some or all of the tenants/operators of such properties could be adversely affected by many factors that are generally applicable to properties relating to the healthcare industry, including the following: • adverse trends in healthcare provider operations, such as changes in the demand for and methods of delivering healthcare services, changes in third party reimbursement policies, significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas, increased expense for uninsured patients, increased competition among healthcare providers, increased liability insurance expense, continued pressure by private and governmental payors to reduce payments to providers of services and increased scrutiny of billing, referral and other practices by federal and state authorities and private insurers; • extensive healthcare regulation, changes in enforcement policies with respect to such regulation and potential changes in the regulatory framework of the healthcare industry; and • significant legal actions brought against tenants/operators that could subject them to increased operating costs and substantial uninsured liabilities. 37 Table of Content s 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.
The economic performance and value of these properties and of some or all of the tenants/operators of such properties could be adversely affected by many factors that are generally applicable to properties relating to the healthcare industry, including the following: • adverse trends in healthcare provider operations, such as changes in the demand for and methods of delivering healthcare services, changes in third party reimbursement policies, significant unused capacity in certain areas, which has created substantial competition for patients among healthcare providers in those areas, increased expense for uninsured patients, increased competition among healthcare providers, increased liability insurance expense, continued pressure by private and governmental payors to reduce payments to providers of services and increased scrutiny of billing, referral and other practices by federal and state authorities and private insurers; • extensive healthcare regulation, changes in enforcement policies with respect to such regulation and potential changes in the regulatory framework of the healthcare industry; and • significant legal actions brought against tenants/operators that could subject them to increased operating costs and substantial uninsured liabilities.
Concerns about the real estate market, inflation, energy costs, geopolitical issues and the availability and cost of credit, have contributed to increased volatility and diminished expectations for the economy and markets going forward.
Concerns about the real estate market, inflation, energy costs, geopolitical issues and the availability and cost of credit have contributed to increased volatility and diminished expectations for the economy and markets going forward, any of which could adversely affect our business and financial results.
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.
Pursuant 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.
In evaluating investments and other management strategies, the opportunity to earn incentive compensation based on Distributable Earnings may lead our Manager to place undue emphasis on the maximization of Distributable Earnings at the expense of other criteria, such as preservation of capital, in order to achieve higher incentive compensation. Investments with higher yield potential are generally riskier or more speculative.
In evaluating investments and 19 Table of Contents other management strategies, the opportunity to earn incentive compensation based on Distributable Earnings may lead our Manager to place undue emphasis on the maximization of Distributable Earnings at the expense of other criteria, such as preservation of capital, in order to achieve higher incentive compensation.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeNot applicable. 56 Table of Content s PART II
Biggest changeNot applicable. 56 Table of Contents PART II
Refer to Schedule III included in Item 8 of this Form 10‑K for a listing of investment properties owned as of December 31, 2022. 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.
Refer 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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+2 added−2 removed2 unchanged
Biggest changeSales of Unregistered Equity Securities There were no sales of unregistered equity securities during the year ended December 31, 2022. Issuer Purchases of Equity Securities There were no purchases of common stock during the year ended December 31, 2022. Item 6. [Reserved] 58 Table of Content s
Biggest changeSales 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
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, 2022.
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.
On February 24, 2023, the closing price of our common stock, as reported by the NYSE, was $19.47 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 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.
Removed
Holders As of February 24, 2023, there were 729 holders of record of the Company’s 310,649,263 shares of common stock outstanding. One 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.
Added
Holders As of February 16, 2024, there were 747 holders of record of the Company’s 313,375,899 shares of common stock outstanding.
Removed
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item is set forth under Item 12 of this Form 10-K and is incorporated herein by reference. 57 Table of Content s Stock Performance Graph CUMULATIVE TOTAL RETURN Based upon initial investment of $100 on December 31, 2017 (1) Starwood Property Bloomberg REIT Trust Mortgage Index S&P © 500 12/31/2017 $ 100.00 $ 100.00 $ 100.00 12/31/2018 $ 101.05 $ 97.09 $ 95.61 12/31/2019 $ 138.22 $ 120.03 $ 125.70 12/31/2020 $ 122.14 $ 93.38 $ 148.81 12/31/2021 $ 165.90 $ 109.82 $ 191.48 12/31/2022 $ 137.51 $ 83.05 $ 156.77 __________________________________________ (1) Dividend reinvestment is assumed.
Added
One 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.

Item 7. Management's Discussion & Analysis

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

137 edited+39 added−45 removed147 unchanged
Biggest changeThe following table summarizes our quarterly Distributable Earnings per weighted average diluted share for the years ended December 31, 2022, 2021 and 2020: Distributable Earnings For the Three-Month Periods Ended March 31, June 30, September 30, December 31, 2022 $ 0.76 $ 0.51 $ 0.51 $ 0.50 2021 0.50 0.51 0.52 1.10 2020 0.55 0.43 0.50 0.50 74 Table of Content s 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) Income tax benefit associated with unrealized 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 Content s 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) Income tax provision associated with realized 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) loss 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 (loss) 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 Content s The following table presents our summarized results of operations and reconciliation to Distributable Earnings for the year ended December 31, 2020, by business segment (amounts in thousands, except per share data): Commercial and Residential Lending Segment Infrastructure Lending Segment Property Segment Investing and Servicing Segment Corporate Total Revenues $ 749,660 $ 80,987 $ 255,745 $ 183,027 $ — $ 1,269,419 Costs and expenses (273,861) (54,008) (243,857) (138,677) (253,997) (964,400) Other income (loss) 53,126 (2,712) (36,757) 34,224 33,158 81,039 Income (loss) before income taxes 528,925 24,267 (24,869) 78,574 (220,839) 386,058 Income tax (provision) benefit (21,091) (117) — 1,011 — (20,197) Income attributable to non-controlling interests (14) — (20,394) (13,764) — (34,172) Net income (loss) attributable to Starwood Property Trust, Inc. 507,820 24,150 (45,263) 65,821 (220,839) 331,689 Add / (Deduct): Non-controlling interests attributable to Woodstar II Class A Units — — 20,394 — — 20,394 Non-controlling interests attributable to unrealized gains/losses — — — (4,145) — (4,145) Non-cash equity compensation expense 4,454 1,120 219 4,594 20,854 31,241 Management incentive fee — — — — 30,773 30,773 Acquisition and investment pursuit costs 123 — (355) (72) — (304) Depreciation and amortization 1,467 294 76,544 14,501 — 92,806 Interest income adjustment for securities (864) — — 15,101 — 14,237 Extinguishment of debt, net — — — — (986) (986) Income tax benefit associated with unrealized fair value adjustments 6,495 — — (405) — 6,090 Other non-cash items 14 — (2,063) 942 631 (476) Reversal of GAAP unrealized and realized (gains) / losses on: (1) Loans (76,897) — — (56,227) — (133,124) Credit loss provision (reversal), net 46,215 (4,103) — — — 42,112 Securities 15,108 — — 51,403 — 66,511 Derivatives 58,664 1,499 34,392 21,269 (33,646) 82,178 Foreign currency (42,205) (207) 14 3 — (42,395) (Earnings) loss from unconsolidated entities (8,779) 767 — (30,845) — (38,857) Recognition of Distributable realized gains / (losses) on: Loans (2) 48,203 (62) — 55,287 — 103,428 Realized credit loss (3) Securities (4) 398 — — (13,955) — (13,557) Derivatives (7) (9,513) (16) (4,752) (14,919) 14,082 (15,118) Foreign currency (8) (4,810) (133) (14) (3) — (4,960) Earnings (loss) from unconsolidated entities (9) 5,686 (382) — 18,247 — 23,551 Sales of properties (10) — — — (5,789) — (5,789) Distributable Earnings (Loss) $ 551,579 $ 22,927 $ 79,116 $ 120,808 $ (189,131) $ 585,299 Distributable Earnings (Loss) per Weighted Average Diluted Share $ 1.86 $ 0.08 $ 0.27 $ 0.41 $ (0.64) $ 1.98 ______________________________________________________________________________________________________________________ (1) The reconciling items in this section are 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, 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.
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 interest rate swaps are used primarily to fix our interest rate payments on certain variable rate borrowings which fund fixed rate investments and to hedge our interest rate risk on residential loans held-for-sale.
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 increase in interest income from loans reflects (i) a $299.7 million increase from commercial loans, reflecting higher average balances and index rates, partially offset by the timing effect of certain loans being placed on nonaccrual, and (ii) a $53.1 million increase from residential loans principally due to higher average balances reflecting the timing of purchases and securitizations, partially offset by lower average coupon rates.
The increase in interest income from loans reflects (i) a $299.7 million increase from commercial loans, reflecting higher average balances and index rates, partially offset by the timing effect of certain loans being placed on nonaccrual, and (ii) a $53.1 million increase from residential loans principally due to higher average balances reflecting the timing of purchases and securitizations, partially offset by lower average coupon rates.
The increase in interest income from investment securities was primarily due to higher commercial and RMBS average investment balances and the effect of higher index rates on certain commercial investments.
The increase in interest income from investment securities was primarily due to higher commercial and RMBS average investment balances and the effect of higher index rates on certain commercial investments.
The increase in interest expense was primarily due to higher average borrowings outstanding and higher average index rates. The credit loss provision during the year ended December 31, 2022 was primarily due to rising index rates and its potential effect on borrower cash flows in our estimate of current expected credit losses (“CECL”).
The increase in interest expense was primarily due to higher average borrowings outstanding and higher average index rates. The credit loss provision during the year ended December 31, 2022 was primarily due to rising index rates and its potential effect on borrower cash flows in our estimate of current expected credit losses.
As of December 31, 2022, 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, 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.
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.
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.
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.
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.
There is no significant net impact to overall cash resulting from these consolidations. Refer to Note 2 to the Consolidated Financial Statements for further discussion.
There is no net impact to overall cash resulting from these consolidations. Refer to Note 2 to the Consolidated Financial Statements for further discussion.
Subsequently, cumulative adverse changes in expected cash flows on our available-for-sale debt securities are recognized currently as an increase to the credit loss allowance. However, the allowance is limited to the amount by which the AFS debt security’s amortized cost exceeds its fair value.
Subsequently, cumulative adverse changes in expected cash flows on our available-for-sale debt securities are recognized currently as an increase to the allowance for credit losses. However, the allowance is limited to the amount by which the AFS debt security’s amortized cost exceeds its fair value.
Goodwill Impairment Our goodwill at December 31, 2022 of $259.8 million represents the excess of consideration transferred over the fair value of net assets acquired in connection with the acquisitions of LNR in April 2013 and the Infrastructure Lending Segment in September 2018 and October 2018.
Goodwill Impairment Our goodwill at December 31, 2023 of $259.8 million represents the excess of consideration transferred over the fair value of net assets acquired in connection with the acquisitions of LNR in April 2013 and the Infrastructure Lending Segment in September 2018 and October 2018.
Based on our qualitative assessment during the fourth quarter of 2022, 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 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.
Revenues decreased by $10.4 million during the year ended December 31, 2022, primarily due to (i) an $8.8 million decrease in rental income principally reflecting fewer properties held and (ii) a $4.1 million decrease in servicing fees, partially offset by (iii) a $4.8 million increase in other fee income related to the origination of certain loans contributed into CMBS transactions.
Revenues decreased by $10.4 million during the year ended December 31, 2022, primarily due to (i) an $8.8 million decrease in rental income principally reflecting fewer properties held and (ii) a $4.1 million decrease in servicing fees, partially 81 Table of Contents offset by (iii) a $4.8 million increase in other fee income related to the origination of certain loans contributed into CMBS transactions.
We did not recognize any provision for credit losses with respect to our AFS debt securities during the three years ended December 31, 2022 and there was no related credit loss allowance as of December 31, 2022.
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.
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, 2022, 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). As of December 31, 2023, we were in compliance with all such covenants.
The weighted average unlevered yield on our residential loans was unchanged, reflecting lower weighted average coupons which resulted from market spread tightening as well as a change in composition of our residential loan portfolio to include agency loans which generally carry a lower coupon than non-agency loans, the effect of which was offset by a decline in fair value of residential loans during the year ended December 31, 2022. 64 Table of Content s During the years ended December 31, 2022 and 2021, the Commercial and Residential Lending Segment’s weighted average secured borrowing rates, inclusive of interest rate hedging costs and the amortization of deferred financing fees, were 4.0% and 2.5%, respectively.
The weighted average unlevered yield on our residential loans was unchanged, reflecting lower weighted average coupons which resulted from market spread tightening as well as a change in composition of our residential loan portfolio to include agency loans which generally carry a lower coupon than non-agency loans, the effect of which was offset by a decline in fair value of residential loans during the year ended December 31, 2022. 68 Table of Contents During the years ended December 31, 2022 and 2021, the Commercial and Residential Lending Segment’s weighted average secured borrowing rates, inclusive of interest rate hedging costs and the amortization of deferred financing fees, were 4.0% and 2.5%, respectively.
Based on our quantitative assessment during the fourth quarter of 2022, 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 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.
Other income decreased by $16.7 million during the year ended December 31, 2022, primarily due to (i) a $52.3 million decrease in realized gains on conduit loans and (ii) a $14.9 million decrease in realized gains 80 Table of Content s and increase in recognized losses on CMBS, partially offset by (iii) a $29.7 million increase in realized gains on derivatives principally related to conduit loans and (iv) a $23.3 million increased gain on sales of operating properties..
Other income decreased by $16.7 million during the year ended December 31, 2022, primarily due to (i) a $52.3 million decrease in realized gains on conduit loans and (ii) a $14.9 million decrease in realized gains and increase in recognized losses on CMBS, partially offset by (iii) a $29.7 million increase in realized gains on derivatives principally related to conduit loans and (iv) a $23.3 million increased gain on sales of operating properties.
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).” 77 Table of Content s (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.
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.
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.
(3) Represents loan losses that are deemed nonrecoverable, which is generally upon a realization event, such as when a loan is repaid, or in the case of foreclosure, when the underlying asset is sold. Non-recoverability may also be determined if, in our determination, it is nearly certain that amounts due will not be collected.
(3) Represents loan losses that are deemed nonrecoverable, which is generally upon a realization event, such as when a loan is repaid, or in the case of foreclosure, when the underlying asset is sold. Non-recoverability may also be determined if, in our determination, it is nearly certain that the carrying amounts will not be collected or realized upon sale.
Infrastructure Lending Segment Revenues For the year ended December 31, 2022, revenues of our Infrastructure Lending Segment increased $66.8 million to $154.3 million, compared to $87.5 million for the year ended December 31, 2021. This increase was primarily due to an increase in interest income from loans of $65.2 million, principally due to higher average loan balances and index rates.
Infrastructure Lending Segment Revenues For the year ended December 31, 2022, revenues of our Infrastructure Lending Segment increased $66.9 million to $154.4 million, compared to $87.5 million for the year ended December 31, 2021. This increase was primarily due to an increase in interest income from loans of $65.2 million, principally due to higher average loan balances and index rates.
These facilities are secured by the equity interests in certain of our subsidiaries which totaled $5.9 billion as of December 31, 2022.
These facilities are secured by the equity interests in certain of our subsidiaries which totaled $5.9 billion as of December 31, 2023.
We also evaluate each loan and security measured at amortized cost for credit deterioration at least quarterly. Credit deterioration occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual 90 Table of Content s terms of the loan or security.
We also evaluate each loan and security measured at amortized cost for credit deterioration at least quarterly. Credit deterioration occurs when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan or security.
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, 2022, we held $113.4 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, 2023, we held $102.4 million of AFS debt securities.
However, if the qualitative assessment determines that it is more likely than not that the fair value of the 91 Table of Content s reporting unit is less than its carrying value including goodwill, or we choose not to perform the qualitative assessment, then we compare the fair value of that reporting unit with its carrying value, including goodwill, in a quantitative assessment.
However, if the qualitative assessment determines that it is more likely than not that the fair value of the reporting unit is less than its carrying value including goodwill, or we choose not to perform the qualitative assessment, then we compare the fair value of that reporting unit with its carrying value, including goodwill, in a quantitative assessment.
The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received, or expected to be received, and the book value of the asset, and is reflective of our economic experience as it relates to the ultimate realization of the loan.
The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received, or expected to be received, and the Distributable Earnings basis of the asset, and is reflective of our economic experience as it relates to the ultimate realization of the asset.
In 88 Table of Content s addition, we intend to mitigate the impact of potential future interest rate increases on our borrowings through utilization of hedging instruments, primarily interest rate swap agreements.
In addition, we intend to mitigate the impact of potential future interest rate increases on our borrowings through utilization of hedging instruments, primarily interest rate swap agreements.
During the year ended December 31, 2021, the weighted average unlevered 65 Table of Content s yield on the Infrastructure Lending Segment’s loans held-for-sale was 2.9%. There were no loans held-for-sale during the year ended December 31, 2022.
During the year ended December 31, 2021, the weighted average unlevered 69 Table of Contents yield on the Infrastructure Lending Segment’s loans held-for-sale was 2.9%. There were no loans held-for-sale during the year ended December 31, 2022.
(g) Certain facilities with an outstanding balance of $358.3 million as of December 31, 2022 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) 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.
Significant judgment is required when estimating future credit losses; therefore, actual results over time could be materially different. As of December 31, 2022, we held $19.2 billion of loans and HTM securities measured at amortized cost with expected future funding commitments of $2.3 billion.
Significant judgment is required when estimating future credit losses; therefore, actual results over time could be materially different. As of December 31, 2023, we held $18.5 billion of loans and HTM securities measured at amortized cost with expected future funding commitments of $1.3 billion.
(d) For certain facilities, borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions. (e) Certain facilities with an outstanding balance of $3.0 billion as of December 31, 2022 are indexed to EURIBOR, BBSY, SARON and SONIA. The remainder are indexed to USD LIBOR and SOFR.
(d) For certain facilities, borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions. (e) Certain facilities with an outstanding balance of $2.8 billion as of December 31, 2023 are indexed to EURIBOR, BBSY, SARON and SONIA. The remainder are indexed to SOFR.
(i) Includes: (i) $262.2 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $42.8 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 16 to the Consolidated Financial Statements).
(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).
(f) Certain facilities with an aggregate initial maximum facility size of $11.8 billion may be increased to $11.9 billion, subject to certain conditions. The $11.9 billion amount includes such upsizes.
(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.
The amount is calculated as the difference between the cash received and the book value of the asset. (4) Represents the realized portion of GAAP gains (losses) on CMBS and RMBS carried under the fair value option that are sold or impaired during the period.
The loss amount is calculated as the difference between the cash received or expected to be received and the Distributable Earnings basis of the asset. (4) Represents the realized portion of GAAP gains (losses) on CMBS and RMBS carried under the fair value option that are sold or impaired during the period.
At December 31, 2022, we had 100,000,000 shares of preferred stock available for issuance and 189,324,830 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, 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.
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 $ 691 $ (39) $ — $ — $ 730 Medical Office Portfolio 1,995 9,740 25,249 — 17,504 Woodstar I Portfolio (84,209) (78,578) (323) 5,140 (814) Woodstar II Portfolio (61,705) (61,323) — 140 (242) Woodstar Fund 3 104 — 749,311 749,210 Other/Corporate 19 (3,836) — (1,090) 2,765 Total $ (143,206) $ (133,932) $ 24,926 $ 753,501 $ 769,153 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 $ 691 $ (39) $ — $ — $ 730 Medical Office Portfolio 1,995 9,740 25,249 — 17,504 Woodstar I Portfolio (84,209) (78,578) (323) 5,140 (814) Woodstar II Portfolio (61,705) (61,323) — 140 (242) Woodstar Fund 3 104 — 749,311 749,210 Other/Corporate 19 (3,836) — (1,090) 2,765 Total $ (143,206) $ (133,932) $ 24,926 $ 753,501 $ 769,153 Revenues For the year ended December 31, 2022, revenues of our Property Segment decreased $143.2 million to $91.8 million, compared to $235.0 million for the year ended December 31, 2021.
Costs and Expenses For the year ended December 31, 2022, costs and expenses of our Investing and Servicing Segment decreased $6.3 million to $137.8 million, compared to $144.1 million for the year ended December 31, 2021. The decrease was primarily due to lower costs and expenses of rental operations, reflecting fewer properties held.
The decrease was primarily due to lower costs and expenses of rental operations, reflecting fewer properties held. Other Income For the year ended December 31, 2022, other income of our Investing and Servicing Segment decreased $62.8 million to $56.1 million, compared to $118.9 million for the year ended December 31, 2021.
The increased gain on foreign currency hedges and the increase in foreign currency loss 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, 2022 compared to a lesser overall strengthening of the U.S. dollar against those currencies during the year ended December 31, 2021.
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.
(n) Consists of: (i) a $780.8 million term loan facility that matures in July 2026, of which $387.0 million has an annual interest rate of LIBOR + 2.50% and $393.8 million has an annual interest rate of LIBOR + 3.25%, subject to a 0.75% LIBOR floor, (ii) a $150.0 million revolving credit facility that matures in April 2026 with an annual interest rate of SOFR + 2.50%, and (iii) a $600.0 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 $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.
Costs and expenses decreased by $4.4 million during the year ended December 31, 2022. Other income includes profit realized upon securitization of loans by our conduit business, gains on sales of CMBS and operating properties, gains and losses on derivatives that were either effectively terminated or novated, and earnings from unconsolidated entities.
Other income includes profit realized upon securitization of loans by our conduit business, gains on sales of CMBS and operating properties, gains and losses on derivatives that were either effectively terminated or novated, and earnings from unconsolidated entities.
Corporate Corporate loss increased by $10.8 million, from $189.1 million during the year ended December 31, 2020 to $199.9 million during the year ended December 31, 2021, primarily due to (i) a $6.3 million increase in interest expense on higher average outstanding term loan and unsecured senior note balances and (ii) a $4.3 million decrease in realized gains on interest rate swaps which hedge a portion of our unsecured senior notes used to repay variable-rate secured financing. 83 Table of Content s 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 $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.
Cash and cash equivalents increased by $61.9 million during the year ended December 31, 2022, reflecting net cash provided by financing activities of $3.0 billion and operating activities of $212.3 million, partially offset by net cash used in investing activities of $3.1 billion.
Cash and cash equivalents decreased by $70.9 million during the year ended December 31, 2023, reflecting net cash used in financing activities of $1.6 billion, partially offset by net cash provided by investing activities of $1.0 billion and operating activities of $528.6 million.
(h) A facility with an outstanding balance of $262.2 million as of December 31, 2022 has a weighted average fixed annual interest rate of 3.25%. All other facilities are variable rate with a weighted average rate of Index + 2.11%.
(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%.
Other income (loss) improved by $2.3 million during the year ended December 31, 2022, primarily due to a $1.5 million increase in earnings from an unconsolidated entity and a $0.8 million lower loss on extinguishment of debt. 79 Table of Content s Property Segment Distributable Earnings by Portfolio (amounts in thousands) For the Year Ended December 31, 2022 2021 Change Master Lease Portfolio $ 17,947 $ 17,217 $ 730 Medical Office Portfolio 21,221 20,299 922 Woodstar I Portfolio — 13,807 (13,807) Woodstar II Portfolio — 16,901 (16,901) Woodstar Fund 46,092 6,279 39,813 Sale of interest in Woodstar Fund — 191,301 (191,301) Other/Corporate (4,057) (2,021) (2,036) Distributable Earnings $ 81,203 $ 263,783 $ (182,580) The Property Segment’s Distributable Earnings decreased by $182.6 million, from $263.8 million during the year ended December 31, 2021 to $81.2 million during the year ended December 31, 2022.
Property Segment Distributable Earnings by Portfolio (amounts in thousands) For the Year Ended December 31, 2022 2021 Change Master Lease Portfolio $ 17,947 $ 17,217 $ 730 Medical Office Portfolio 21,221 20,299 922 Woodstar I Portfolio — 13,807 (13,807) Woodstar II Portfolio — 16,901 (16,901) Woodstar Fund, net of non-controlling interests 46,092 6,279 39,813 Sale of interest in Woodstar Fund — 191,301 (191,301) Other/Corporate (4,057) (2,021) (2,036) Distributable Earnings $ 81,203 $ 263,783 $ (182,580) The Property Segment’s Distributable Earnings decreased by $182.6 million, from $263.8 million during the year ended December 31, 2021 to $81.2 million during the year ended December 31, 2022.
The increase in other income was primarily due to (i) a $79.6 million favorable change in fair value of CMBS investments, (ii) a $29.6 million favorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments and (iii) a $14.2 million increase in gain on sale of properties, partially offset by (iv) a $30.0 million decrease in earnings from unconsolidated entities and (v) a $7.1 million lesser increase in fair value of servicing rights.
The decrease in other income was primarily due to (i) a $46.0 million unfavorable change in gain (loss) on derivatives which primarily hedge our interest rate risk on conduit loans and CMBS investments, (ii) a $25.2 million decreased gain on sales of operating properties and (iii) an $8.7 million greater decrease in fair value of CMBS investments, all partially offset by (iv) a $30.6 million greater increase in fair value of conduit loans and (v) a $6.0 million increase in earnings from unconsolidated entities.
The amount is calculated as net sales proceeds less undepreciated cost, adjusted for any non-controlling interest. 78 Table of Content s 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.
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.
Infrastructure Lending Segment The Infrastructure Lending Segment’s Distributable Earnings increased by $27.0 million, from $37.5 million during the year ended December 31, 2021 to $64.5 million during the year ended December 31, 2022. After making adjustments for the calculation of Distributable Earnings, revenues were $154.4 million, costs and expenses were $92.1 million and other income was $2.2 million.
Infrastructure Lending Segment The Infrastructure Lending Segment’s Distributable Earnings increased by $8.0 million, from $64.5 million during the year ended December 31, 2022 to $72.5 million during the year ended December 31, 2023. After making adjustments for the calculation of Distributable Earnings, revenues were $240.0 million, costs and expenses were $166.0 million and other loss was $1.5 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.
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.
We calculate Distributable Earnings as GAAP net income (loss) excluding the following: (i) non-cash equity compensation expense; (ii) incentive fees due under our management agreement; (iii) depreciation and amortization of real estate and associated intangibles; (iv) acquisition costs associated with successful acquisitions; (v) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period; and (vi) any deductions for distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein.
We calculate Distributable Earnings as GAAP net income (loss) excluding the following: (i) non-cash equity compensation expense; (ii) the incentive fee due under our management agreement; (iii) acquisition and investment pursuit costs associated with successful acquisitions; (iv) depreciation and amortization of real estate and associated intangibles; (v) unrealized gains (losses), net of realized gains (losses), as described further below; (vi) other non-cash items; and (vii) to the extent deducted from net income (loss), distributions payable with respect to equity securities of subsidiaries issued in exchange for properties or interests therein (i.e. the Woodstar II Class A units), with each of the above adjusted for any related non-controlling interest.
As of December 31, 2022, we had $57.3 billion and $50.8 billion of assets and liabilities, respectively, that are measured at fair value, including $52.5 billion of VIE assets and $50.8 billion of VIE liabilities we consolidate pursuant to ASC 810.
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.
The decrease in revenues was primarily due to (i) an $8.3 million decrease in rental income principally reflecting fewer properties held and (ii) a $4.1 million decrease in servicing fees, partially offset by (iii) a $4.8 million increase in other fee income related to the origination of certain loans 66 Table of Content s contributed into CMBS transactions and (iv) a $2.5 million increase in interest income from CMBS investments and conduit loans.
The decrease in revenues was primarily due to (i) an $8.3 million decrease in rental income principally reflecting fewer properties held and (ii) a $4.1 million decrease in servicing fees, partially offset by (iii) a $4.8 million increase in other fee income related to the origination of certain loans contributed into CMBS transactions and (iv) a $2.5 million increase in interest income from CMBS investments and conduit loans. 70 Table of Contents Costs and Expenses For the year ended December 31, 2022, costs and expenses of our Investing and Servicing Segment decreased $6.3 million to $137.8 million, compared to $144.1 million for the year ended December 31, 2021.
If investments that have been pledged as collateral repay earlier than the contractual maturity of the debt, the related portion of the debt 89 Table of Content s 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.
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).
After making adjustments for the calculation of Distributable Earnings, revenues were $234.4 million, costs and expenses were $160.9 million, other income was $191.2 million and income attributable to non-controlling interests in the Woodstar Fund was $0.9 million.
After making adjustments for the calculation of Distributable Earnings, revenues were $95.8 million, costs and expenses were $84.5 million, other income was $87.5 million and the deduction for income attributable to non-controlling interests in the Woodstar Fund was $11.2 million.
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, 2022 2021 2020 Diluted weighted average shares - GAAP EPS 315,728 296,826 282,483 Add: Unvested stock awards 3,485 4,107 2,801 Add: Woodstar II Class A Units 9,773 10,154 10,656 Less: Convertible Notes dilution (9,649) (9,649) — Diluted weighted average shares - Distributable EPS 319,337 301,438 295,940 The definition of Distributable Earnings allows management to make adjustments, subject to the approval of a majority of our independent directors, in situations where such adjustments are considered appropriate in order for Distributable Earnings to be calculated in a manner consistent with its definition and objective.
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.
Net cash used in investing activities of $3.1 billion for the year ended December 31, 2022 related primarily to the origination and acquisition of loans held-for-investment of $5.5 billion and the purchase and funding of investment securities of $376.3 million, partially offset by proceeds received from principal collections and sales of loans of $2.2 billion and investment securities of $209.4 million and sales of operating properties for $203.7 million.
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.
The increase reflects the increase in interest income from loans and the decrease 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.
Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020 Commercial and Residential Lending Segment The Commercial and Residential Lending Segment’s Distributable Earnings decreased by $9.3 million, from $551.6 million during the year ended December 31, 2020 to $542.3 million during the year ended December 31, 2021.
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.
Revenues, consisting principally of interest income on loans, increased by $6.5 million during the year ended December 31, 2021, primarily due to an increase in interest income from loans of $7.2 million principally due to higher average balances outstanding, partially offset by lower average LIBOR rates.
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.
Variance between Average and Quarter-End Credit Facility Borrowings Outstanding The following table compares the average amount outstanding under our secured financing agreements during each quarter and the amount outstanding as of the end of each quarter, together with an explanation of significant variances (amounts in thousands): Quarter Ended Quarter-End Balance Weighted-Average Balance During Quarter Variance Explanations for Significant Variances March 31, 2022 15,419,344 15,645,668 (226,324) (a) June 30, 2022 17,008,158 16,151,019 857,139 (b) September 30, 2022 17,282,020 17,521,495 (239,475) (c) December 31, 2022 18,299,267 18,084,425 214,842 (d) _____________________________________________ (a) Variance primarily due to sales and securitizations that occurred late in the quarter.
Variance between Average and Quarter-End Credit Facility Borrowings Outstanding The following table compares the average amount outstanding under our secured financing agreements during each quarter and the amount outstanding as of the end of each quarter, together with an explanation of significant variances (amounts in thousands): 2023 Quarter Ended Quarter-End Balance Weighted-Average Balance During Quarter Variance March 31, 2023 18,630,290 18,331,322 298,968 June 30, 2023 18,263,851 18,625,814 (361,963) September 30, 2023 17,171,912 17,506,017 (334,105) December 31, 2023 17,643,891 17,493,558 150,333 2022 Quarter Ended Quarter-End Balance Weighted-Average Balance During Quarter Variance March 31, 2022 15,419,344 15,645,668 (226,324) June 30, 2022 17,008,158 16,151,019 857,139 (a) September 30, 2022 17,282,020 17,521,495 (239,475) December 31, 2022 18,299,267 18,084,425 214,842 (a) Variance primarily due to late quarter timing of loan pledges and advances.
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.
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.
Net cash provided by financing activities of $3.0 billion for the year ended December 31, 2022 related primarily to borrowings on our debt, net of repayments and deferred loan costs, of $3.6 billion, partially offset by dividend distributions of $591.5 million.
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 Income Attributable to Non-controlling Interests For the year ended December 31, 2021, net income attributable to non-controlling interests increased $10.3 million to $44.7 million, compared to $34.4 million for the year ended December 31, 2020.
Net Income Attributable to Non-controlling Interests For the year ended December 31, 2022, net income attributable to non-controlling interests increased $142.9 million to $187.6 million, compared to $44.7 million for the year ended December 31, 2021.
Income taxes, which principally relate to the taxable nature of this segment’s residential loan securitization activities which are housed in TRSs, decreased $6.9 million primarily due to lower taxable income of those TRSs during the year ended December 31, 2021 compared to the year ended December 31, 2020.
Income taxes principally relate to the taxable nature of this segment’s residential loan securitization activities which are housed in TRSs. The income tax benefit decreased from $4.6 million during the year ended December 31, 2022 to none during the year ended December 31, 2023.
Infrastructure Lending Segment • Acquired $75.8 million of infrastructure loans and funded $7.3 million of pre-existing infrastructure loan commitments. • Received proceeds of $47.7 million from principal repayments on our infrastructure loans and bonds and $26.8 million from sales of infrastructure loans.
Infrastructure Lending Segment • Acquired $425.4 million of infrastructure loans and funded $20.0 million of pre-existing infrastructure loan commitments. • Received proceeds of $182.0 million from principal repayments on our infrastructure loans and bonds.
(j) The maximum facility size as of December 31, 2022 of $450.0 million may be increased to $750.0 million, subject to certain conditions. (k) Certain facilities with an aggregate initial maximum facility size of $420.7 million may be increased to $520.7 million, subject to certain conditions.
(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.
After making adjustments for the calculation of Distributable Earnings, revenues were $228.7 million, costs and expenses were $125.4 million, other income 82 Table of Content s was $71.8 million, income tax provision was $7.4 million and the deduction of income attributable to non-controlling interests was $17.2 million.
After making adjustments for the calculation of Distributable Earnings, revenues were $203.8 million, costs and expenses were $129.4 million, other income was $24.7 million, there was no income tax provision or benefit and the deduction of income attributable to non-controlling interests was $15.7 million.
After making adjustments for the calculation of Distributable Earnings, revenues were $777.9 million, costs and expenses were $260.4 million, other income was $32.5 million and income tax provision was $7.7 million.
After making adjustments for the calculation of Distributable Earnings, revenues were $1.7 billion, costs and expenses were $1.0 billion, other income was $101.5 million and there was no income tax provision or benefit.
Costs and Expenses For the year ended December 31, 2021, costs and expenses of our Investing and Servicing Segment increased $5.4 million to $144.1 million, compared to $138.7 million for the year ended December 31, 2020.
Costs and Expenses For the year ended December 31, 2023, costs and expenses of our Investing and Servicing Segment increased $7.3 million to $145.1 million, compared to $137.8 million for the year ended December 31, 2022.
Revenues increased by $29.3 million during the year ended December 31, 2021, primarily due to (i) a $17.1 million increase in servicing fees reflecting an increased volume of COVID-19-related loan resolutions, (ii) a $6.3 million increase in interest income from CMBS investments and conduit loans and (iii) a $5.3 million increase in other fee income related to the origination of certain loans contributed into CMBS transactions.
Revenues decreased by $14.5 million during the year ended December 31, 2023, primarily due to (i) a $9.9 million decrease in servicing fees and (ii) a $10.3 million decrease in other fee income related to the origination of certain loans contributed into CMBS transactions, partially offset by (iii) an $8.7 million increase in interest income principally from CMBS investments.
The tax losses during the year ended December 31, 2022 were primarily attributable to net unrealized losses on our residential loans resulting from elevated market volatility.
The tax losses during the year ended December 31, 2022 were primarily attributable to net unrealized losses on our residential loans resulting from elevated market volatility. This market dislocation resulted in us choosing to hold more residential loans rather than securitize them, which resulted in higher net unrealized losses on those loans during the year ended December 31, 2022.
The increase in revenues was primarily due to (i) a $17.1 million increase in servicing fees reflecting an increased volume of COVID-19 related loan resolutions, (ii) a $5.3 million increase in other fee income related to the origination of certain loans contributed into CMBS transactions and (iii) a $4.1 million increase in interest income from CMBS investments and conduit loans.
The decrease in revenues was primarily due to (i) a $9.9 million decrease in servicing fees, (ii) a $10.3 million decrease in other fee income related to the origination of certain loans contributed into CMBS transactions and (iii) a $7.3 million decrease in interest income reflecting lower CMBS interest recoveries and conduit loan inventories.
The following table compares our summarized results of operations for the years ended December 31, 2022, 2021 and 2020 by business segment (amounts in thousands): For the Year Ended December 31, $ Change 2022 vs. 2021 $ Change 2021 vs. 2020 2022 2021 2020 Revenues: Commercial and Residential Lending Segment $ 1,167,980 $ 779,321 $ 749,660 $ 388,659 $ 29,661 Infrastructure Lending Segment 154,362 87,540 80,987 66,822 6,553 Property Segment 91,832 235,038 255,745 (143,206) (20,707) Investing and Servicing Segment 205,311 210,185 183,027 (4,874) 27,158 Corporate 69 — — 69 — Securitization VIE eliminations (154,838) (141,996) (133,264) (12,842) (8,732) 1,464,716 1,170,088 1,136,155 294,628 33,933 Costs and expenses: Commercial and Residential Lending Segment 611,637 249,677 273,861 361,960 (24,184) Infrastructure Lending Segment 100,591 64,775 54,008 35,816 10,767 Property Segment 92,651 226,583 243,857 (133,932) (17,274) Investing and Servicing Segment 137,814 144,055 138,677 (6,241) 5,378 Corporate 330,833 304,468 253,997 26,365 50,471 Securitization VIE eliminations (575) (501) 8 (74) (509) 1,272,951 989,057 964,408 283,894 24,649 Other income (loss): Commercial and Residential Lending Segment (115,802) 58,595 53,126 (174,397) 5,469 Infrastructure Lending Segment 4,431 1,178 (2,712) 3,253 3,890 Property Segment 789,726 11,299 (36,757) 778,427 48,056 Investing and Servicing Segment 56,095 118,961 34,224 (62,866) 84,737 Corporate (82,987) (11,023) 33,158 (71,964) (44,181) Securitization VIE eliminations 154,310 141,054 133,492 13,256 7,562 805,773 320,064 214,531 485,709 105,533 Income (loss) before income taxes: Commercial and Residential Lending Segment 440,541 588,239 528,925 (147,698) 59,314 Infrastructure Lending Segment 58,202 23,943 24,267 34,259 (324) Property Segment 788,907 19,754 (24,869) 769,153 44,623 Investing and Servicing Segment 123,592 185,091 78,574 (61,499) 106,517 Corporate (413,751) (315,491) (220,839) (98,260) (94,652) Securitization VIE eliminations 47 (441) 220 488 (661) 997,538 501,095 386,278 496,443 114,817 Income tax benefit (provision) 61,523 (8,669) (20,197) 70,192 11,528 Net income attributable to non-controlling interests (187,586) (44,687) (34,392) (142,899) (10,295) Net income attributable to Starwood Property Trust, Inc. $ 871,475 $ 447,739 $ 331,689 $ 423,736 $ 116,050 63 Table of Content s 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 following table compares our summarized results of operations for the years ended December 31, 2023, 2022 and 2021 by business segment (amounts in thousands): For the Year Ended December 31, $ Change 2023 vs. 2022 $ Change 2022 vs. 2021 2023 2022 2021 Revenues: Commercial and Residential Lending Segment $ 1,704,210 $ 1,167,980 $ 779,321 $ 536,230 $ 388,659 Infrastructure Lending Segment 239,985 154,362 87,540 85,623 66,822 Property Segment 94,172 91,832 235,038 2,340 (143,206) Investing and Servicing Segment 174,804 205,311 210,185 (30,507) (4,874) Corporate 1,622 69 — 1,553 69 Securitization VIE eliminations (164,885) (154,838) (141,996) (10,047) (12,842) 2,049,908 1,464,716 1,170,088 585,192 294,628 Costs and expenses: Commercial and Residential Lending Segment 1,271,867 611,637 249,677 660,230 361,960 Infrastructure Lending Segment 174,713 100,591 64,775 74,122 35,816 Property Segment 113,461 92,651 226,583 20,810 (133,932) Investing and Servicing Segment 145,129 137,814 144,055 7,315 (6,241) Corporate 393,994 330,833 304,468 63,161 26,365 Securitization VIE eliminations (846) (575) (501) (271) (74) 2,098,318 1,272,951 989,057 825,367 283,894 Other income (loss): Commercial and Residential Lending Segment (1,511) (115,802) 58,595 114,291 (174,397) Infrastructure Lending Segment 6,026 4,431 1,178 1,595 3,253 Property Segment 293,339 789,726 11,299 (496,387) 778,427 Investing and Servicing Segment 15,277 56,095 118,961 (40,818) (62,866) Corporate (11,285) (82,987) (11,023) 71,702 (71,964) Securitization VIE eliminations 164,039 154,310 141,054 9,729 13,256 465,885 805,773 320,064 (339,888) 485,709 Income (loss) before income taxes: Commercial and Residential Lending Segment 430,832 440,541 588,239 (9,709) (147,698) Infrastructure Lending Segment 71,298 58,202 23,943 13,096 34,259 Property Segment 274,050 788,907 19,754 (514,857) 769,153 Investing and Servicing Segment 44,952 123,592 185,091 (78,640) (61,499) Corporate (403,657) (413,751) (315,491) 10,094 (98,260) Securitization VIE eliminations — 47 (441) (47) 488 417,475 997,538 501,095 (580,063) 496,443 Income tax benefit (provision) 682 61,523 (8,669) (60,841) 70,192 Net income attributable to non-controlling interests (78,944) (187,586) (44,687) 108,642 (142,899) Net income attributable to Starwood Property Trust, Inc. $ 339,213 $ 871,475 $ 447,739 $ (532,262) $ 423,736 63 Table 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.
Investing and Servicing Segment • Originated commercial conduit loans of $0.9 billion. • Received proceeds of $1.2 billion from sales of previously originated commercial conduit loans. • Acquired CMBS for a purchase price of $63.7 million, of which $17.1 million related to non-controlling interests. • Obtained 27 new special servicing assignments for CMBS trusts with a total unpaid principal balance of $24.5 billion, bringing our total named special servicing portfolio to $108.9 billion. • Sold commercial real estate for gross proceeds of $92.1 million and recognized a total gain of $50.9 million.
Investing and Servicing Segment • Originated commercial conduit loans of $404.5 million. • Received proceeds of $475.8 million from sales of previously originated commercial conduit loans. • Acquired CMBS for a purchase price of $48.0 million, of which $2.7 million related to non-controlling interests. • Obtained 3 new special servicing assignments for CMBS trusts with a total unpaid principal balance of $1.8 billion, while $4.2 billion matured, bringing our total named special servicing portfolio to $98.7 billion. • Sold our interest in the subsidiary that holds an operating property for net proceeds of $12.8 million and recognized a gain of $10.2 million.
Repayments of such facilities are generally made from proceeds from maturities, prepayments or sales of such investments and operating cash flows from owned properties. In the normal course of business, we are in discussions with our lenders to extend, amend or replace any financing facilities which contain near term expirations.
In the normal course of business, we are in discussions with our lenders to extend, amend or replace any financing facilities which contain near term expirations.
Income Tax Provision Our consolidated income taxes principally relate to the taxable nature of our loan servicing and loan securitization businesses which are housed in TRSs.
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.
This decrease was primarily due to a $50.8 million decrease in credit loss provision, partially offset by a $30.1 million increase in interest expense associated with the various secured financing facilities used to fund a portion of this segment’s investment portfolio.
The increase was primarily due to a $61.9 million increase in interest expense associated with the various secured financing facilities used to fund this segment’s investment portfolio and an $11.1 million increase in credit loss provision. The increase in interest expense was primarily due to higher average index rates.
The unfavorable change in foreign currency gain (loss) and favorable change in foreign currency hedges reflect the strengthening of the U.S. dollar against the GBP, EUR and AUD during the year ended December 31, 2021 compared to a weakening of the U.S. dollar against those currencies during the year ended December 31, 2020.
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.
This increase was primarily due to increases in interest income from loans of $40.0 million, partially offset by a decrease in interest income from investment securities of $10.9 million.
This increase was primarily due to increases in interest income from loans of $499.3 million, and investment securities of $33.0 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+2 added−9 removed17 unchanged
Biggest changeThe following table represents our assets and liabilities that are denominated in Pounds Sterling (“GBP”), Euros (“EUR”), Australian dollar (“AUD”) and Swiss Franc (“CHF”), as well as our expected future net interest receipts (amounts in thousands): 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 (579,970) (661,468) (636,167) (24,455) Expected future net interest cash flows 62,197 76,089 160,122 4,533 Net exposure to exchange rate fluctuations £ — € — A$ — Fr. — Net exposure to exchange rate fluctuations in USD (1) $ — $ — $ — $ — December 31, 2021 GBP EUR AUD CHF Foreign currency assets £ 1,703,759 € 651,685 A$ 359,136 Fr. — Foreign currency liabilities (1,253,959) (248,634) (283,796) — Foreign currency contracts - notional (521,148) (422,515) (247,901) — Expected future net interest cash flows 71,348 19,464 12,561 — Net exposure to exchange rate fluctuations £ — € — A$ (160,000) (2) Fr. — Net exposure to exchange rate fluctuations in USD (1) $ — $ — $ — $ — ______________________________________________________________________________________________________________________ (1) Represents the U.S.
Biggest changeAccordingly, 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.
To monitor this risk, our asset management team reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary. We seek to further manage credit risk associated with our Investing and Servicing Segment loans held-for-sale through the purchase of credit index instruments.
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.
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. 96 Table of Content s
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
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, the impacts of the ongoing COVID-19 pandemic, national, regional and local economic conditions (which may be adversely affected by industry slowdowns 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.
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.
The following table presents our credit index instruments as of December 31, 2022 and December 31, 2021 (dollars in thousands): Face Value of Loans Held-for-Sale Aggregate Notional Value of Credit Index Instruments Number of Credit Index Instruments December 31, 2022 $ 23,900 $ 49,000 3 December 31, 2021 $ 289,761 $ 49,000 3 92 Table of Content s 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, 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.
As a result, interest rates and other factors influence our performance significantly more than inflation does. Changes in interest rates may correlate with inflation rates 95 Table of Content s and/or changes in inflation rates.
As a result, interest rates and other factors influence our performance significantly more than inflation does. Changes in interest rates may correlate with inflation rates and/or changes in inflation rates.
Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity. 94 Table of Content s Consistent with our strategy of hedging foreign currency exposure on certain investments, we typically enter into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income and principal payments) we expect to receive from our foreign currency denominated investments.
Consistent with our strategy of hedging foreign currency exposure on certain investments, we typically enter into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income and principal payments) we expect to receive from our foreign currency denominated investments.
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, 2022 and 2021 (dollars in thousands): Face Value of Hedged Instruments Aggregate Notional Value of Credit Index Instruments Number of Credit Index Instruments 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 Instrument hedged as of December 31, 2021 Loans held-for-sale $ 2,815,671 $ 2,135,800 62 RMBS, available-for-sale 221,806 85,000 2 CMBS, fair value option 79,651 71,000 2 HTM debt securities 14,283 14,283 1 Secured financing agreements 754,620 1,425,396 10 Unsecured senior notes 500,000 470,000 1 $ 4,386,031 $ 4,201,479 78 The following table summarizes the estimated annual change in net investment income for our variable rate investments and our variable rate debt assuming increases or decreases in LIBOR or other applicable index rates and adjusted for the effects of our interest rate hedging activities (amounts in thousands): Income (Expense) Subject to Interest Rate Sensitivity Variable rate investments and indebtedness (1) 0.25% Decrease 0.50% Increase 1.00% Increase 1.50% Increase Investment income from variable rate investments $ 18,821,874 $ (46,866) $ 93,740 $ 187,481 $ 281,221 Interest expense from variable rate debt, net of interest rate derivatives (14,411,438) 38,046 (74,900) (148,296) (221,692) Net investment income from variable rate instruments $ 4,410,436 $ (8,820) $ 18,840 $ 39,185 $ 59,529 ______________________________________________________________________________________________________________________ (1) Includes the notional value of interest rate derivatives.
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, 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.
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, 2022, as indicated in the table above. Refer to Note 14 to the Consolidated Financial Statements for further detail regarding our foreign currency derivatives and their contractual maturities.
(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.
Removed
LIBOR Transition Risk 93 Table of Content s The United Kingdom’s Financial Conduct Authority (the authority that regulates LIBOR) stopped compelling banks to submit rates for the calculation of LIBOR and the LIBOR administrator ceased publication of non-U.S. dollar LIBOR after December 31, 2021. However, for U.S. dollar LIBOR, the relevant date has been deferred to June 30, 2023.
Added
Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.
Removed
Regulators emphasized that, despite any continued publication of U.S. dollar LIBOR through June 30, 2023, no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. As indicated in the Interest Rate Risk section above, a substantial portion of our loans, investment securities, borrowings and interest rate derivatives are indexed to LIBOR or similar reference rates.
Added
Refer to Note 14 to the Consolidated Financial Statements for further detail regarding our foreign currency derivatives and their contractual maturities.
Removed
Our U.S. dollar LIBOR-based loan agreements and borrowing arrangements generally specify alternative reference rates such as the prime rate, federal funds rate or secured overnight financing rate (“SOFR”).
Removed
Our foreign denominated loan agreements and borrowing arrangements now generally specify the sterling overnight index average (“SONIA”) instead of GBP LIBOR and the bank bill swap rate (“BBSW” or “BBSY”) instead of AUD LIBOR.
Removed
As of December 31, 2022, daily compounded SONIA is utilized as the floating benchmark rate on $2.3 billion of our loans and $1.7 billion of our debt outstanding, while SOFR is utilized as the floating benchmark rate on $6.3 billion of our loans and $8.3 billion of our debt outstanding.
Removed
At this time, it is not possible to predict how markets will respond to SOFR, SONIA, or other alternative reference rates as the transition away from USD LIBOR and GBP LIBOR proceeds. The resulting changes to benchmark interest rates could increase our financing costs and/or result in mismatches between the interest rates of our investments and the corresponding financings.
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.
Removed
Dollar equivalent using the GBP closing rate of 1.2097, EUR closing rate of 1.0705, AUD closing rate of 0.6813 and CHF closing rate of 1.0818 as of December 31, 2022, and GBP closing rate of 1.3529, EUR closing rate of 1.1371 and AUD closing rate of 0.7260 as of December 31, 2021.
Removed
(2) The AUD net exposure was related to borrowings received in December 2021 on one of our AUD denominated assets. Subsequent to December 31, 2021, we terminated a foreign currency contract totaling AU$160.0 million related to these borrowings.

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