10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2014

OR

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

Commission file number 001-34436

Starwood Property Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	27-0247747
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
591 West Putnam Avenue
Greenwich, Connecticut	06830
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:

(203) 422-8100

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

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

The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of August 1, 2014 was 222,602,294.

Special Note Regarding Forward-Looking Statements

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

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

·factors described in our Annual Report on Form 10-K for the year ended December 31, 2013, this Quarterly Report on Form 10-Q and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, including those set forth under the captions “Risk Factors” and “Business”;

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

·impairment in the value of real estate property securing our loans;

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

·our ability to fully integrate LNR Property LLC, a Delaware limited liability company (“LNR”), which was acquired on April 19, 2013, into our business and achieve the benefits that we anticipate from this acquisition;

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

·national and local economic and business conditions;

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

·changes in federal government policies;

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

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

·changes in interest rates; and

·the availability of and costs associated with sources of liquidity.

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

2

TABLE OF CONTENTS

		Page
Part I	Financial Information
Item 1.	Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	10
	Note 1 Business and Organization	10
	Note 2 Summary of Significant Accounting Policies	11
	Note 3 Acquisitions and Divestitures	14
	Note 4 Loans	16
	Note 5 Investment Securities	18
	Note 6 Investment in Unconsolidated Entities	22
	Note 7 Goodwill and Intangible Assets	23
	Note 8 Secured Financing Agreements	24
	Note 9 Convertible Senior Notes	25
	Note 10 Loan Securitization/Sale Activities	26
	Note 11 Derivatives and Hedging Activity	27
	Note 12 Offsetting Assets and Liabilities	29
	Note 13 Variable Interest Entities	29
	Note 14 Related-Party Transactions	30
	Note 15 Stockholders’ Equity	31
	Note 16 Earnings per Share	32
	Note 17 Accumulated Other Comprehensive Income	34
	Note 18 Fair Value	35
	Note 19 Income Taxes	40
	Note 20 Commitments and Contingencies	41
	Note 21 Segment Data	42
	Note 22 Subsequent Events	48
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	68
Item 4.	Controls and Procedures	70
Part II	Other Information
Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	71
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosures	71
Item 5.	Other Information	71
Item 6.	Exhibits	73

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands, except share data)

	As ofJune 30, 2014			As ofDecember 31, 2013
Assets:
Cash and cash equivalents	$	518,627		$	317,627
Restricted cash	44,561			69,052
Loans held-for-investment, net	4,885,854			4,363,718
Loans held-for-sale, at fair value	154,412			206,672
Loans transferred as secured borrowings	142,867			180,414
Investment securities ($532,328 and $566,789 held at fair value)	902,424			935,107
Intangible assets—servicing rights ($138,318 and $150,149 held at fair value)	156,846			177,173
Residential real estate, net	—			749,214
Non-performing residential loans	—			215,371
Investment in unconsolidated entities	118,621			122,954
Goodwill	140,437			140,437
Derivative assets	4,681			7,769
Accrued interest receivable	37,483			37,630
Other assets	165,532			95,813
Variable interest entity (“VIE”) assets, at fair value	114,091,158			103,151,624
Total Assets	$	121,363,503		$	110,770,575
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	140,809		$	225,374
Related-party payable	24,475			17,793
Dividends payable	108,012			90,171
Derivative liabilities	26,294			24,192
Secured financing agreements, net	2,561,267			2,257,560
Convertible senior notes, net	1,003,847			997,851
Secured borrowings on transferred loans	142,815			181,238
VIE liabilities, at fair value	113,541,151			102,649,263
Total Liabilities	117,548,670			106,443,442
Commitments and contingencies (Note 20)
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock, $0.01 per share, 100,000,000 shares authorized, no shares issued and outstanding	—			—
Common stock, $0.01 per share, 500,000,000 shares authorized, 223,224,144 issued and 222,598,294 outstanding as of June 30, 2014 and 196,139,045 issued and 195,513,195 outstanding as of December 31, 2013	2,232			1,961
Additional paid-in capital	3,784,575			4,300,479
Treasury stock (625,850 shares)	(10,642		)	(10,642		)
Accumulated other comprehensive income	74,962			75,449
Accumulated deficit	(49,686		)	(84,719		)
Total Starwood Property Trust, Inc. Stockholders’ Equity	3,801,441			4,282,528
Non-controlling interests in consolidated subsidiaries	13,392			44,605
Total Equity	3,814,833			4,327,133
Total Liabilities and Equity	$	121,363,503		$	110,770,575

See notes to condensed consolidated financial statements.

4

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

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

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Revenues:
Interest income from loans	$	105,455		$	74,936		$	210,365		$	142,626
Interest income from investment securities	27,620			18,577			57,074			34,817
Servicing fees	32,681			39,135			66,892			39,135
Other revenues	4,994			1,795			8,398			1,874
Total revenues	170,750			134,443			342,729			218,452
Costs and expenses:
Management fees	25,085			16,146			52,906			31,215
Interest expense	37,695			22,648			75,526			40,074
General and administrative	43,094			44,335			89,195			48,373
Business combination costs	—			13,420			—			17,616
Acquisition and investment pursuit costs	771			916			1,165			997
Depreciation and amortization	5,154			2,228			9,790			2,228
Loan loss allowance, net	(139		)	725			358			755
Other expense	6,026			196			7,715			229
Total costs and expenses	117,686			100,614			236,655			141,487
Income before other income, income taxes and non-controlling interests	53,064			33,829			106,074			76,965
Other income:
Income of consolidated VIEs, net	47,028			31,949			103,032			31,949
Change in fair value of servicing rights	(5,523		)	2,898			(10,774		)	2,898
Change in fair value of investment securities, net	4,959			(1,392		)	13,320			(987		)
Change in fair value of mortgage loans held-for-sale, net	11,608			458			32,501			458
Earnings from unconsolidated entities	9,563			3,770			9,627			4,511
Gain (loss) on sale of investments, net	10,078			(18		)	11,633			13,506
(Loss) gain on derivative financial instruments, net	(9,790		)	6,158			(17,656		)	22,386
Foreign currency gain (loss), net	3,777			1,580			5,254			(6,085		)
Total other-than-temporary impairment (“OTTI”)	(800		)	(846		)	(1,992		)	(1,373		)
Noncredit portion of OTTI recognized in other comprehensive income	3			487			982			972
Net impairment losses recognized in earnings	(797		)	(359		)	(1,010		)	(401		)
Other income, net	692			39			710			39
Total other income	71,595			45,083			146,637			68,274
Income from continuing operations before income taxes	124,659			78,912			252,711			145,239
Income tax provision	(4,277		)	(11,343		)	(9,897		)	(11,958		)
Income from continuing operations	120,382			67,569			242,814			133,281
Loss from discontinued operations, net of tax (Note 3)	—			(6,058		)	(1,551		)	(8,346		)
Net income	120,382			61,511			241,263			124,935
Net income attributable to non-controlling interests	(2,514		)	(1,057		)	(2,794		)	(2,238		)
Net income attributable to Starwood Property Trust, Inc.	$	117,868		$	60,454		$	238,469		$	122,697
Earnings per share data attributable to Starwood Property Trust, Inc.:
Basic:
Income from continuing operations	$	0.53		$	0.41		$	1.14		$	0.87
Loss from discontinued operations	—			(0.04		)	(0.01		)	(0.05		)
Net income	$	0.53		$	0.37		$	1.13		$	0.82
Diluted:
Income from continuing operations	$	0.52		$	0.41		$	1.12		$	0.87
Loss from discontinued operations	—			(0.04		)	(0.01		)	(0.05		)
Net income.	$	0.52		$	0.37		$	1.11		$	0.82
Dividends declared per common share	$	0.48		$	0.46		$	0.96		$	0.90

See notes to condensed consolidated financial statements.

5

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, amounts in thousands)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Net income	$	120,382		$	61,511		$	241,263		$	124,935
Other comprehensive loss (net change by component):
Cash flow hedges	(93		)	1,501			29			1,780
Available-for-sale securities	(9,618		)	(11,778		)	(6,120		)	(14,127		)
Foreign currency remeasurement	4,558			18			5,604			(7,043		)
Other comprehensive loss	(5,153		)	(10,259		)	(487		)	(19,390		)
Comprehensive income	115,229			51,252			240,776			105,545
Less: Comprehensive income attributable to non-controlling interests	(2,514		)	(1,057		)	(2,794		)	(2,238		)
Comprehensive income attributable to Starwood Property Trust, Inc.	$	112,715		$	50,195		$	237,982		$	103,307

See notes to condensed consolidated financial statements.

6

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(Unaudited, amounts in thousands, except share data)

	Common stock			Additional										Accumulated Other Comprehensive			Total Starwood Property Trust, Inc.			Non-
		Par		Paid-In			Treasury Stock				Accumulated			Income			Stockholders’			Controlling			Total
	Shares	Value		Capital			Shares	Amount			Deficit			(Loss)			Equity			Interests			Equity
Balance, January 1, 2014	196,139,045	$	1,961	$	4,300,479		625,850	$	(10,642	)	$	(84,719	)	$	75,449		$	4,282,528		$	44,605		$	4,327,133
Proceeds from public offering of common stock	25,300,000	253		564,442			—	—			—			—			564,695			—			564,695
Proceeds from ATM Agreement	759,000	8		18,338			—	—			—			—			18,346			—			18,346
Proceeds from DRIP Plan	481	—		12			—	—			—			—			12			—			12
Equity offering costs	—	—		(1,636		)	—	—			—			—			(1,636		)	—			(1,636		)
Stock-based compensation	735,014	7		14,724			—	—			—			—			14,731			—			14,731
Manager incentive fee paid in stock	290,604	3		6,959			—	—			—			—			6,962			—			6,962
Net income	—	—		—			—	—			238,469			—			238,469			2,794			241,263
Dividends declared, $0.48 per share	—	—		—			—	—			(203,436		)	—			(203,436		)	—			(203,436		)
Spin-off of SWAY	—	—		(1,118,743		)	—	—			—			—			(1,118,743		)	(1,594		)	(1,120,337		)
Other comprehensive income, net	—	—		—			—	—			—			(487		)	(487		)	—			(487		)
VIE non-controlling interests	—	—		—			—	—			—			—			—			996			996
Distribution to non-controlling interests	—	—		—			—	—			—			—			—			(33,409		)	(33,409		)
Balance, June 30, 2014	223,224,144	$	2,232	$	3,784,575		625,850	$	(10,642	)	$	(49,686	)	$	74,962		$	3,801,441		$	13,392		$	3,814,833
Balance, January 1, 2013	136,125,356	$	1,361	$	2,721,353		625,850	$	(10,642	)	$	(72,401	)	$	79,675		$	2,719,346		$	77,859		$	2,797,205
Proceeds from public offering of common stock	30,475,000	305		822,063			—	—			—			—			822,368			—			822,368
Equity offering costs	—	—		(617		)	—	—			—			—			(617		)	—			(617		)
Convertible senior notes	—	—		28,107			—	—			—			—			28,107			—			28,107
Stock-based compensation	350,002	4		8,825			—	—			—			—			8,829			—			8,829
Manager incentive fee paid in stock	13,188	—		365			—	—			—			—			365			—			365
Net income	—	—		—			—	—			122,697			—			122,697			2,238			124,935
Dividends declared, $0.90 per share	—	—		—			—	—			(137,046		)	—			(137,046		)	—			(137,046		)
Other comprehensive loss, net	—	—		—			—	—			—			(19,390		)	(19,390		)	—			(19,390		)
Non-controlling interest assumed through LNR acquisition	—	—		—			—	—			—			—			—			8,277			8,277
Contributions from non-controlling interests	—	—		—			—	—			—			—			—			1,007			1,007
Distribution to non-controlling interests	—	—		—			—	—			—			—			—			(47,534		)	(47,534		)
Balance, June 30, 2013	166,963,546	$	1,670	$	3,580,096		625,850	$	(10,642	)	$	(86,750	)	$	60,285		$	3,544,659		$	41,847		$	3,586,506

See notes to condensed consolidated financial statements.

7

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

	For the Six Months EndedJune 30,
	2014			2013
Cash Flows from Operating Activities:
Net income	$	241,263		$	124,935
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs	5,543			4,986
Amortization of convertible debt discount and deferred fees	6,209			2,652
Accretion of net discount on investment securities	(11,680		)	(16,568		)
Accretion of net deferred loan fees and discounts	(10,147		)	(14,243		)
Amortization of premium from secured borrowings on transferred loans	(824		)	(731		)
Share-based compensation	14,731			8,829
Share-based component of incentive fees	6,962			365
Change in fair value of fair value option investment securities	(13,320		)	988
Change in fair value of consolidated VIEs	(25,610		)	(11,132		)
Change in fair value of servicing rights	10,774			(2,898		)
Change in fair value of loans held-for-sale	(32,501		)	(458		)
Change in fair value of derivatives	16,494			(23,760		)
Foreign currency (gain) loss, net	(5,464		)	5,867
Gain on non-performing loans and sale of investments	(12,575		)	(15,666		)
Other-than-temporary impairment	1,010			859
Loan loss allowance, net	358			755
Depreciation and amortization	10,550			3,366
Earnings from unconsolidated entities	(9,627		)	(1,919		)
Distributions of earnings from unconsolidated entities	6,016			787
Changes in operating assets and liabilities:
Related-party payable, net	6,682			22,093
Accrued interest receivable, less purchased interest	(18,840		)	(4,985		)
Other assets	(10,535		)	(4,969		)
Accounts payable, accrued expenses and other liabilities	(29,787		)	30,393
Originations of loans held-for-sale, net of principal collections	(582,033		)	(390,669		)
Proceeds from sale of loans held-for-sale	666,793			476,453
Net cash provided by operating activities	230,442			195,330
Cash Flows from Investing Activities:
Spin-off of Starwood Waypoint Residential Trust	(111,960		)	—
Purchase of LNR, net of cash acquired	—			(586,383		)
Purchase of investment securities	(53,453		)	(59,476		)
Proceeds from sales of investment securities	50,219			235,904
Proceeds from principal collections on investment securities	19,114			40,124
Origination and purchase of loans held-for-investment	(1,277,636		)	(651,897		)
Proceeds from principal collections on loans	587,018			140,478
Proceeds from loans sold	202,514			97,490
Acquisition and improvement of single family homes	(61,901		)	(262,315		)
Proceeds from sale of single family homes	1,784			4,095
Purchase of other assets	(15,502		)	(136		)
Purchase of non-performing loans	—			(132,957		)
Proceeds from sale of non-performing loans	1,153			10,742
Investment in unconsolidated entities	(21,973		)	(5,000		)
Distribution of capital from unconsolidated entities	30,544			1,569
Payments for purchase or termination of derivatives	(14,253		)	(39		)
Proceeds from termination of derivatives	2,092			3,544
Return of investment basis in purchased derivative asset	798			1,028
Increase in restricted cash, net	(5,941		)	(41,797		)
Net cash used in investing activities	(667,383		)	(1,205,026		)

See notes to condensed consolidated financial statements.

8

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited, amounts in thousands)

	For the Six Months EndedJune 30,
	2014			2013
Cash Flows from Financing Activities:
Borrowings under financing agreements	$	1,807,229		$	1,614,133
Proceeds from issuance of convertible senior notes	—			587,700
Principal repayments on borrowings	(1,510,052		)	(1,650,974		)
Payment of deferred financing costs	(7,881		)	(8,529		)
Proceeds from secured borrowings	—			95,000
Proceeds from common stock issuances	583,053			822,368
Payment of equity offering costs	(1,636		)	(617		)
Payment of dividends	(185,594		)	(133,944		)
Contributions from non-controlling interests	—			1,007
Distributions to non-controlling interests	(33,409		)	(47,534		)
Issuance of debt of consolidated VIEs	71,756			—
Repayment of debt of consolidated VIEs	(99,763		)	(81,870		)
Distributions of cash from consolidated VIEs	13,413			2,124
Net cash provided by financing activities	637,116			1,198,864
Net increase in cash and cash equivalents	200,175			189,168
Cash and cash equivalents, beginning of period	317,627			177,671
Effect of exchange rate changes on cash	825			(52		)
Cash and cash equivalents, end of period	$	518,627		$	366,787
Supplemental disclosure of cash flow information:
Cash paid for interest	$	65,229		$	22,580
Income taxes paid	14,792			2,214
Supplemental disclosure of non-cash investing and financing activities:
Net assets distributed in spin-off of Starwood Waypoint Residential Trust	$	1,008,377		$	—
Dividends declared, but not yet paid	108,012			76,900
Consolidation of VIEs (VIE asset/liability additions)	23,991,532			10,674,125
Deconsolidation of VIEs (VIE asset/liability reductions)	6,038,375			584,460
Fair value of assets acquired	—			1,152,360
Fair value of liabilities assumed	—			562,279
Unsettled trades and loans receivable	52,815			—

See notes to condensed consolidated financial statements.

9

Starwood Property Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of June 30, 2014

(Unaudited)

1. Business and Organization

Starwood Property Trust, Inc. (“STWD” together with its subsidiaries, “we” or the “Company”) is a Maryland corporation that commenced operations in August 2009, upon the completion of our initial public offering (“IPO”). We are focused primarily on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt investments, commercial mortgage-backed securities (“CMBS”), and other commercial real estate-related debt investments in both the U.S. and Europe. We refer to the following as our target assets:

· commercial real estate mortgage loans, including preferred equity interests;

· CMBS; and

· other commercial real estate-related debt investments.

We may also invest in residential mortgage-backed securities (“RMBS”), certain residential mortgage loans, distressed or non-performing commercial loans, commercial properties subject to net leases and commercial real estate owned. As market conditions change over time, we may adjust our strategy to take advantage of changes in interest rates and credit spreads as well as economic and credit conditions.

We have two reportable business segments as of June 30, 2014:

·Real estate investment lending (the “Lending Segment”)—includes all business activities of the Company, excluding the LNR business, which generally represents investments in real estate-related loans and securities that are held-for-investment.

·LNR—includes all business activities of the acquired LNR Property LLC (“LNR”) business excluding the consolidation of securitization VIEs.

On April 19, 2013, we acquired the equity of LNR and certain of its subsidiaries for an initial agreed upon purchase price of approximately $859 million, which was reduced for transaction expenses and distributions occurring after September 30, 2012, resulting in cash consideration of approximately $730 million. Immediately prior to the acquisition, an affiliate of the Company acquired the remaining equity comprising LNR’s commercial property division for a purchase price of $194 million. The portion of the LNR business acquired by us includes the following: (i) servicing businesses in both the U.S. and Europe that manage and work out problem assets, (ii) a finance business that is focused on selectively acquiring and managing real estate finance investments, including unrated, investment grade and non-investment grade rated CMBS, including subordinated interests of securitization and resecuritization transactions, and high yielding real estate loans; and (iii) a mortgage loan business which originates conduit loans for the primary purpose of selling these loans into securitization transactions.

On January 31, 2014, we completed the spin-off of our former single family residential (“SFR”) segment to our stockholders. The newly-formed real estate investment trust, Starwood Waypoint Residential Trust (“SWAY”), is listed on the New York Stock Exchange (“NYSE”) and trades under the ticker symbol “SWAY.” Our stockholders received one common share of SWAY for every five shares of our common stock held at the close of business on January 24, 2014. As part of the spin-off, we contributed $100 million to the unlevered balance sheet of SWAY to fund its growth and operations. As of January 31, 2014, SWAY held net assets of $1.1 billion. The net assets of SWAY consisted of approximately 7,200 units of single-family homes and residential non-performing mortgage loans as of January 31, 2014. In connection with the spin-off, 40.1 million shares of SWAY were issued. Refer to Note 3 herein for additional information regarding SFR segment financial information, which has been presented within discontinued operations in the condensed consolidated statements of operations included herein.

We are organized and conduct our operations to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). As such, we will generally not be subject to U.S. federal corporate income tax on that portion

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of our net income that is distributed to stockholders if we distribute at least 90% of our taxable income to our stockholders by prescribed dates and comply with various other requirements.

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

These TRSs engage in various real estate related operations, including special servicing of commercial real estate, originating and securitizing commercial mortgage loans, and investing in entities which engage in real estate related operations. As of June 30, 2014, $854.5 million of the LNR assets were owned by TRS entities. Our TRSs are not consolidated for federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earnings recognized by us with respect to our interest in TRSs.

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

2. Summary of Significant Accounting Policies

Balance Sheet Presentation of LNR Variable Interest Entities

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

Because LNR often serves as the special servicer of the trusts in which it invests, consolidation of these structures is required pursuant to GAAP as outlined in detail below. This results in a consolidated balance sheet which presents the gross assets and liabilities of the SPEs. The assets and other instruments held by these SPEs are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the SPEs do not have any recourse to the general credit of any other consolidated entities, nor to us as the consolidator of these SPEs.

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

Please refer to the segment data in Note 21 herein for a presentation of the LNR business without consolidation of these VIEs.

Basis of Accounting and Principles of Consolidation

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

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the operating results for the full year.

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Refer to our Form 10-K for a description of our recurring accounting policies. We have included disclosure in this Note 2 regarding principles of consolidation and other accounting policies that (i) are required to be disclosed quarterly, (ii) we view as critical, or (iii) became significant since December 31, 2013 due to a corporate action or increase in the significance of the underlying business activity.

Variable Interest Entities

We evaluate all of our interests in VIEs for consolidation. When our interests are determined to be variable interests, we assess whether we are deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. ASC 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. We consider our variable interests as well as any variable interests of our related parties in making this determination. Where both of these factors are present, we are deemed to be the primary beneficiary and we consolidate the VIE. Where either one of these factors is not present, we are not the primary beneficiary and do not consolidate the VIE.

To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

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

Our purchased investment securities include CMBS, which are unrated and non-investment grade rated securities issued by CMBS trusts. In certain cases, we may contract to provide special servicing activities for these CMBS trusts, or, as holder of the controlling class, we may have the right to name and remove the special servicer for these trusts. In our role as special servicer, we provide services on defaulted loans within the trusts, such as foreclosure or work-out procedures, as permitted by the underlying contractual agreements. In exchange for these services, we receive a fee. These rights give us the ability to direct activities that could significantly impact the trust’s economic performance. However, in those instances where an unrelated third party has the right to unilaterally remove us as special servicer, we do not have the power to direct activities that most significantly impact the trust’s economic performance. We evaluated all of our positions in such investments for consolidation.

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

We perform ongoing reassessments of: (1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework, and (2) whether changes in the facts and circumstances regarding our involvement with a VIE causes our consolidation conclusion regarding the VIE to change.

We have elected the fair value option in measuring the assets and liabilities of any VIEs we consolidate. Fluctuations in the fair values of the VIE assets and liabilities, along with trust interest income and trust interest and administrative expenses, are presented net in income of consolidated VIEs in our consolidated statements of operations.

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Discontinued Operations

On January 31, 2014, we completed the spin-off of our former SFR segment to our stockholders as discussed in Note 1.  In accordance with Accounting Standards Codification (“ASC”) Topic 205, Presentation of Financial Statements, the results of the SFR segment are presented within discontinued operations in our condensed consolidated statements of operations for the six months ended June 30, 2014 and the three and six months ended June 30, 2013.

Fair Value Option

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

We have elected the fair value option for eligible financial assets and liabilities of our consolidated VIEs, loans held-for-sale originated by LNR’s conduit platform, purchased CMBS issued by VIEs we could consolidate in the future and certain investments in marketable equity securities. The fair value elections for VIE and securitization related items were made in order to mitigate accounting mismatches between the carrying value of the instruments and the related assets and liabilities that we consolidate at fair value. The fair value elections for mortgage loans held-for-sale originated by LNR’s conduit platform were made due to the short-term nature of these instruments. The fair value elections for investments in marketable equity securities were made because the shares are listed on an exchange, which allows us to determine the fair value using a quoted price from an active market.

Loans Receivable and Provision for Loan Losses

In our Lending Segment we purchase and originate commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. We are required to periodically evaluate each of these loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan. If a loan is determined to be impaired, we write down the loan through a charge to the provision for loan losses. Actual losses, if any, could ultimately differ from these estimates.

We perform a quarterly review of our portfolio of loans. In connection with this review, we assess the performance of each loan and assign a risk rating based on several factors including risk of loss, loan-to-value ratio (“LTV”), collateral performance, structure, exit plan, and sponsorship. Loans are rated “1” through “5”, from less risk to greater risk, in connection with this review.

Use of Estimates

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

Reclassifications and Measurement Period Adjustments

As a result of the spin-off, the results from our SFR segment have been reclassified as discontinued operations in our condensed consolidated statements of operations for the three and six months ended June 30, 2013.  In addition, certain prior period amounts have been reclassified to conform to the current period presentation, which had no effect on our previously reported net income.  In that regard, we reclassified $177.0 million of proceeds from sales of loans held-for-sale by LNR to cash flows from operating activities in the condensed consolidated statement of cash flows for the six months ended June 30, 2013 in order to conform to the current period presentation, which is also consistent with the presentation in our Form 10-K.  These proceeds were previously reported as a non-cash financing activity and reflected net against principal repayments on borrowings for the related repurchase agreements that were settled net with those proceeds.

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The prior period financial statements included herein reflect the retrospective measurement period adjustment related to the LNR acquisition as described in Note 3 to the consolidated financial statements included in our Form 10-K.  Such adjustment reduced earnings from unconsolidated entities and net income by $1.8 million in the three and six months ended June 30, 2013.

Recent Accounting Developments

On April 10, 2014 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which requires only those disposals which represent a strategic shift that has or will have a major impact on an entity’s operations or financial results be presented as discontinued operations.  The ASU is effective for annual periods beginning on or after December 15, 2014, and interim periods within those annual periods, and requires prospective application.  Early adoption is permitted for disposals not already reported in previously issued financial statements.  We do not expect the application of this ASU to materially impact the Company.

On May 28, 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which establishes key principles by which an entity determines the amount and timing of revenue recognized from customer contracts.  The ASU is effective for the first interim or annual period beginning after December 15, 2016. Early application is not permitted.  We do not expect the application of this ASU to materially impact the Company.

On June 12, 2014 the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, which requires entities to account for repurchase-to-maturity transactions as secured borrowings rather than as sales and expands disclosure requirements related to certain transfers of financial assets. The ASU is effective for the first interim or annual period beginning after December 15, 2014. Early application is not permitted.  We do not expect the application of this ASU to materially impact the Company.

On July 16, 2014, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 12-G, Measuring the Financial Liabilities of a Consolidated Collateralized Financing Entity.  Final issuance of the ASU is pending.  At its June 2014 meeting, the EITF reached a consensus which enables the application of a measurement alternative for collateralized financing entities (“CFEs”).  This measurement alternative allows qualifying entities to measure both the CFE’s financial assets and financial liabilities based on the fair value of the financial assets or financial liabilities, whichever is more observable.  The measurement alternative is only available upon initial consolidation of the CFE or adoption of 12-G and can be applied on a CFE-by-CFE basis.  We expect to be eligible to apply the measurement alternative and will elect to do so.  Application of this alternative is consistent with our current accounting treatment for consolidated CFEs.

3.  Acquisitions and Divestitures

SFR Spin-off

As described in Note 1, on January 31, 2014, we completed the spin-off of our former SFR segment to our stockholders.  The results of operations for the SFR segment are presented within discontinued operations in our condensed consolidated statements of operations for all periods presented. We have no continuing involvement with the SFR segment following the spin-off.  Subsequent to the spin-off, SWAY entered into a management agreement with an affiliate of our Manager. The following table presents the summarized consolidated results of operations for the SFR segment prior to the spin-off, excluding segment allocations during the six months ended June 30, 2014 (in thousands):

	For the Three Months EndedJune 30,					For the Six Months EndedJune 30,
	2014		2013			2014			2013
Total revenues	$	—	$	2,594		$	3,876		$	3,758
Total costs and expenses	—		9,870			6,369			13,495
Loss before other income and income taxes	—		(7,276		)	(2,493		)	(9,737		)
Total other income	—		1,068			942			1,403
Loss before income taxes	—		(6,208		)	(1,551		)	(8,334		)
Income tax benefit (provision)	—		150			—			(12		)
Net loss	$	—	$	(6,058	)	$	(1,551	)	$	(8,346	)

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The following table presents the summarized consolidated balance sheet of the SFR segment as of January 31, 2014, the date of the spin-off (in thousands):

	January 31, 2014
Assets:
Cash and cash equivalents	$	111,960
Restricted cash	189
Residential real estate, net	812,017
Non-performing residential loans	211,019
Other assets	9,498
Total Assets	$	1,144,683
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	24,346
Equity:
Additional paid-in capital	1,130,405
Accumulated deficit	(11,662		)
Total Stockholders’ Equity	1,118,743
Non-controlling interests in consolidated subsidiaries	1,594
Total Equity	1,120,337
Total Liabilities and Equity	$	1,144,683

LNR Acquisition

As described in Note 1, on April 19, 2013, we acquired the equity of LNR for an initial agreed upon purchase price of $859 million, which was reduced for transaction expenses and distributions occurring after September 30, 2012, resulting in cash consideration of approximately $730 million.  We applied the provisions of ASC 805 in accounting for our acquisition of LNR. Refer to Note 3 to the consolidated financial statements included in our Form 10-K for further discussion of the LNR acquisition including the final purchase price allocation and retrospective measurement period adjustments.

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4. Loans

Our loans held-for-investment are accounted for at amortized cost and our loans held-for-sale are accounted for at the lower of cost or fair value, unless we have elected the fair value option. The following tables summarize our investments in mortgages and loans by subordination class as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Carrying Value			Face Amount		Weighted Average Coupon		Weighted Average Life (“WAL”) (years)(2)
June 30, 2014
First mortgages	$	3,259,428		$	3,317,358	5.4	%	3.9
Subordinated mortgages(1)	355,561			388,449		8.6	%	4.1
Mezzanine loans	1,275,207			1,281,518		10.6	%	3.3
Total loans held-for-investment	4,890,196			4,987,325
Loans held-for-sale, fair value option elected	154,412			153,724		4.7	%	9.8
Loans transferred as secured borrowings	142,867			142,883		5.5	%	2.8
Total gross loans	5,187,475			5,283,932
Loan loss allowance (loans held-for-investment)	(4,342		)	—
Total net loans	$	5,183,133		$	5,283,932
December 31, 2013
First mortgages	$	2,714,512		$	2,766,217	5.5	%	4.3
Subordinated mortgages(1)	407,462			442,475		9.7	%	4.2
Mezzanine loans	1,245,728			1,246,841		11.7	%	3.5
Total loans held-for-investment	4,367,702			4,455,533
Loans held-for-sale, fair value option elected	206,672			209,099		5.3	%	9.6
Loans transferred as secured borrowings	180,414			180,483		5.4	%	2.9
Total gross loans	4,754,788			4,845,115
Loan loss allowance (loans held-for-investment)	(3,984		)	—
Total net loans	$	4,750,804		$	4,845,115

(1)Subordinated mortgages include B-notes and junior participations in first mortgages where we do not own the senior A-note or senior participation.  If we own both the A-note and B-note we categorize the loan as a first mortgage loan.

(2)Represents the WAL of each respective group of loans as of the respective balance sheet date. The WAL of each individual loan is calculated as a fraction, the numerator of which is the sum of the timing (in years) of each expected future principal payment multiplied by the balance of the respective payment, and with a denominator equal to the sum of the expected principal payments using the contractually extended maturity dates of the assets. Assumptions for the calculation of the WAL are adjusted as necessary for changes in projected principal repayments and/or maturity dates of the loan.

As of June 30, 2014, approximately $3.9 billion, or 74.8%, of the loans were variable rate and paid interest principally at LIBOR plus a weighted-average spread of 5.65%. The following table summarizes our investments in floating rate loans (amounts in thousands):

	June 30, 2014			December 31, 2013
Index	Base Rate	Carrying Value		Base Rate	Carrying Value
1 Month LIBOR	0.1552%	$	137,092	0.1677%	$	150,076
3 Month LIBOR	0.5525%	406,392		0.5253%	392,950
LIBOR Floor	0.15% - 3.00%(1)	3,333,849		0.19% - 3.00%(1)	2,688,308
Total		$	3,877,333		$	3,231,334

(1)The weighted-average LIBOR Floor was 0.36% and 0.49% as of June 30, 2014 and December 31, 2013, respectively.

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As of June 30, 2014, the risk ratings for loans subject to our rating system, which are described in our Form 10-K and excludes loans on the cost recovery method and loans for which the fair value option has been elected, by class of loan were as follows (amounts in thousands):

	Balance Sheet Classification
	Loans Held-For-Investment										Loans
Risk Rating Category	First Mortgages		Subordinated Mortgages		Mezzanine Loans		Cost Recovery Loans		Loans Held- For-Sale		Transferred As Secured Borrowings		Total
1	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	101,875		104,821		209,690		—		—		12,971		429,357
3	3,010,516		218,685		950,268		—		—		129,896		4,309,365
4	142,166		32,055		115,249		—		—		—		289,470
5	—		—		—		—		—		—		—
N/A	455		—		—		4,416		154,412		—		159,283
	$	3,255,012	$	355,561	$	1,275,207	$	4,416	$	154,412	$	142,867	$	5,187,475

As of December 31, 2013, the risk ratings for loans subject to our rating system by class of loan were as follows (amounts in thousands):

	Balance Sheet Classification
	Loans Held-For-Investment										Loans
Risk Rating Category	First Mortgages		Subordinated Mortgages		Mezzanine Loans		Cost Recovery Loans		Loans Held- For-Sale		Transferred As Secured Borrowings		Total
1	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	94,981		103,369		153,119		—		—		13,022		364,491
3	2,452,763		272,375		1,012,674		—		—		167,392		3,905,204
4	153,987		31,718		79,935		—		—		—		265,640
5	—		—		—		—		—		—		—
N/A	—		—		—		12,781		206,672		—		219,453
	$	2,701,731	$	407,462	$	1,245,728	$	12,781	$	206,672	$	180,414	$	4,754,788

After completing our impairment evaluation process as described in our Form 10-K, we concluded that no impairment charges were required on any individual loans held-for-investment as of June 30, 2014 or December 31, 2013. As of June 30, 2014, approximately $4.4 million of our loans held-for-investment were in default, all of which are within the LNR Segment and were acquired as non-performing loans prior to the April 19, 2013 acquisition.

In accordance with our policies, we record an allowance for loan losses equal to (i) 1.5% of the aggregate carrying amount of loans rated as a “4,” plus (ii) 5% of the aggregate carrying amount of loans rated as a “5.” These groups accounted for 5.6% of our loan portfolios as of both June 30, 2014 and December 31, 2013.  The following table presents the activity in our allowance for loan losses (amounts in thousands):

	For the Six Months EndedJune 30,
	2014			2013
Allowance for loan losses at January 1	$	3,984		$	2,061
Provision for loan losses	577			755
Charge-offs	—			—
Recoveries	(219		)	—
Allowance for loan losses at June 30	$	4,342		$	2,816
Recorded investment in loans related to the allowance for loan loss	$	289,470		$	160,893

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

	For the Six Months EndedJune 30,
	2014			2013
Balance at January 1	$	4,750,804		$	3,000,335
Acquisitions/originations/additional funding	1,860,026			1,308,602
Capitalized interest(1)	19,022			5,279
Basis of loans sold(2)	(868,804		)	(573,825		)
Loan maturities/principal repayments	(633,425		)	(140,596		)
Discount accretion/premium amortization	10,147			14,243
Changes in fair value	32,501			458
Unrealized foreign currency remeasurement gain (loss)	16,462			(4,572		)
Capitalized costs written off	—			(1,517		)
Loan loss allowance, net	(358		)	(755		)
Transfer to other assets	(3,242		)	—
Balance at June 30	$	5,183,133		$	3,607,652

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

(2)See Note 10 for additional disclosure on these transactions.

5. Investment Securities

Investment securities were comprised of the following as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Carrying Value as of
	June 30, 2014			December 31, 2013
RMBS, available-for-sale	$	231,605		$	296,236
Single-borrower CMBS, available-for-sale	116,071			114,346
CMBS, fair value option (1)	638,069			550,282
Held-to-maturity (“HTM”) securities	370,096			368,318
Equity security, fair value option	16,104			15,247
Subtotal - Investment securities	1,371,945			1,344,429
VIE eliminations (1)	(469,521		)	(409,322		)
Total investment securities	$	902,424		$	935,107

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

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

Three Months ended	Available-for-sale					CMBS, fair		HTM		Equity
June 30, 2014	RMBS			CMBS		value option		Securities		Security		Total
Purchases	$	—		$	—	$	43,563	$	—	$	—	$	43,563
Sales	53,236			—		13,548		—		—		66,784
Principal collections	10,466			421		—		—		—		10,887
June 30, 2013
Purchases	20,090			—		1,618		—		—		21,708
Sales	—			—		10,072		—		—		10,072
Principal collections	15,771			2,627		—		—		—		18,398
Six Months ended
June 30, 2014
Purchases	$	—		$	—	$	53,453	$	—	$	—	$	53,453
Sales	62,546		(1)	—		32,032		—		—		94,578
Principal collections	18,285			829		—		—		—		19,114
June 30, 2013
Purchases	20,090			—		1,618		37,190		—		58,898
Sales	12,712			206,608		10,072		—		6,769		236,161
Principal collections	32,638			7,484		—		—		—		40,122

(1)Settlement of $44.4 million occurred subsequent to June 30, 2014.  We account for all investment securities transactions on a trade-date basis.

RMBS and Single-borrower CMBS, Available-for-Sale

With the exception of one CMBS classified as HTM, the Company classified all of its RMBS and CMBS investments where the fair value option has not been elected as available-for-sale as of June 30, 2014 and December 31, 2013. These RMBS and CMBS are reported at fair value in the balance sheet with changes in fair value recorded in accumulated other comprehensive income (“AOCI”).

The tables below summarize various attributes of our investments in available-for-sale RMBS and single-borrower CMBS where the fair value option has not been elected as of June 30, 2014 and December 31, 2013 (amounts in thousands):

								Unrealized Gains or (Losses) Recognized in AOCI
	Purchase Amortized Cost		Credit OTTI			Recorded Amortized Cost		Non-Credit OTTI			Gross Unrealized Gains		Gross Unrealized Losses			Net Fair Value Adjustment		Fair Value
June 30, 2014
RMBS	$	193,084	$	(10,322	)	$	182,762	$	(3	)	$	49,529	$	(683	)	$	48,843	$	231,605
Single-borrower CMBS	103,498		—			103,498		—			12,573		—			12,573		116,071
Total	$	296,582	$	(10,322	)	$	286,260	$	(3	)	$	62,102	$	(683	)	$	61,416	$	347,676
December 31, 2013
RMBS	$	253,912	$	(11,134	)	$	242,778	$	(55	)	$	55,154	$	(1,641	)	$	53,458	$	296,236
Single-borrower CMBS	100,687		—			100,687		—			13,659		—			13,659		114,346
Total	$	354,599	$	(11,134	)	$	343,465	$	(55	)	$	68,813	$	(1,641	)	$	67,117	$	410,582

	Weighted Average Coupon(1)		Weighted Average Rating (Standard & Poor’s)		WAL (Years)(3)
June 30, 2014
RMBS	1.0	%	B-		7.4
Single-borrower CMBS	11.6	%	BB+	(2)	3.7
December 31, 2013
RMBS	1.0	%	B-		6.8
Single-borrower CMBS	11.5	%	BB+	(2)	5.9

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(1)Calculated using the June 30, 2014 and December 31, 2013 one-month LIBOR rate of 0.155% and 0.168%, respectively, for floating rate securities.

(2)As of June 30, 2014 and December 31, 2013, approximately 99.3% and 98.8%, respectively, of the CMBS securities were rated BB+.

(3)Represents the WAL of each respective group of securities calculated as of the respective balance sheet date. The WAL of each individual security or loan is calculated as a fraction, the numerator of which is the sum of the timing (in years) of each expected future principal payment multiplied by the balance of the respective payment, and with a denominator equal to the sum of the expected principal payments using the contractually extended maturity dates of the assets. Assumptions for the calculation of the WAL are adjusted as necessary for changes in projected principal repayments and/or maturity dates of the security.

As of June 30, 2014, $0.9 million, or 0.7%, of the single-borrower CMBS were variable rate. As of December 31, 2013, $1.3 million, or 1.2%, of the single-borrower CMBS were variable rate. As of June 30, 2014, approximately $195.4 million, or 84.3%, of RMBS were variable rate and paid interest at LIBOR plus a weighted average spread of 0.44%. As of December 31, 2013, approximately $256.1 million, or 86.5%, of RMBS were variable rate and paid interest at LIBOR plus a weighted average spread of 0.37%. We purchased all of the RMBS at a discount that will be accreted into income over the expected remaining life of the security. The majority of the income from this strategy is earned from the accretion of these discounts.

The following table contains a reconciliation of aggregate principal balance to amortized cost for our RMBS and single-borrower CMBS as of June 30, 2014 and December 31, 2013, excluding CMBS where we have elected the fair value option (amounts in thousands):

	June 30, 2014					December 31, 2013
	RMBS			CMBS		RMBS			CMBS
Principal balance	$	312,280		$	103,498	$	414,020		$	100,687
Accretable yield	(90,876		)	—		(101,046		)	—
Non-accretable difference	(38,642		)	—		(70,196		)	—
Total discount	(129,518		)	—		(171,242		)	—
Amortized cost	$	182,762		$	103,498	$	242,778		$	100,687

The principal balance of credit deteriorated RMBS was $240.8 million and $320.4 million as of June 30, 2014 and December 31, 2013, respectively. Accretable yield related to these securities totaled $73.5 million and $78.3 million as of June 30, 2014 and December 31, 2013, respectively.

The following table discloses the changes to accretable yield and non-accretable difference for our RMBS and single-borrower CMBS during the three and six months ended June 30, 2014, excluding CMBS where we have elected the fair value option (amounts in thousands):

	Accretable Yield					Non-Accretable Difference
	RMBS			CMBS		RMBS			CMBS
Three Months ended June 30, 2014
Balance as of April 1, 2014	$	99,622		$	—	$	55,432		$	—
Accretion of discount	(3,323		)	—		—			—
Principal write-downs	—			—		(509		)	—
Purchases	—			—		—			—
Sales	(10,276		)	—		(11,428		)	—
OTTI	—			—		—			—
Transfer to/from non-accretable difference	4,853			—		(4,853		)	—
Balance as of June 30, 2014	$	90,876		$	—	$	38,642		$	—
Six Months ended June 30, 2014
Balance as of January 1, 2014	$	101,046		$	—	$	70,196		$	—
Accretion of discount	(9,887		)	—		—			—
Principal write-downs	—			—		(875		)	—
Purchases	—			—		—			—
Sales	(12,238		)	—		(18,937		)	—
OTTI	213			—		—			—
Transfer to/from non-accretable difference	11,742			—		(11,742		)	—
Balance as of June 30, 2014	$	90,876		$	—	$	38,642		$	—

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Subject to certain limitations on durations, we have allocated an amount to invest in RMBS that cannot exceed 10% of our total assets excluding LNR VIEs. We have engaged a third party manager who specializes in RMBS to execute the trading of RMBS, the cost of which was $0.5 million and $0.8 million for the three months ended June 30, 2014 and 2013, respectively, and $1.1 million and $1.4 million for the six months ended June 30, 2014 and 2013, respectively, which has been recorded as management fees in the accompanying condensed consolidated statements of operations.

The following table presents the gross unrealized losses and estimated fair value of the available-for-sale securities (i) where we have not elected the fair value option, (ii) that were in an unrealized loss position as of June 30, 2014 and December 31, 2013, and (iii) for which OTTIs (full or partial) have not been recognized in earnings (amounts in thousands):

	Estimated Fair Value				Unrealized Losses
	Securities with a loss less than 12 months		Securities with a loss greater than 12 months		Securities with a loss less than 12 months			Securities with a loss greater than 12 months
As of June 30, 2014
RMBS	$	16,255	$	1,552	$	(480	)	$	(206	)
Single-borrower CMBS	—		—		—			—
Total	$	16,255	$	1,552	$	(480	)	$	(206	)
As of December 31, 2013
RMBS	$	26,344	$	1,809	$	(1,444	)	$	(252	)
Single-borrower CMBS	—		—		—			—
Total	$	26,344	$	1,809	$	(1,444	)	$	(252	)

As of June 30, 2014, there were three securities with unrealized losses reflected in the table above. After evaluating each security and recording adjustments, as necessary, for other-than-temporary impairments, the remaining unrealized losses reflected above were not considered to represent credit-related other-than-temporary impairments. We considered a number of factors in reaching this conclusion, including that we did not intend to sell any individual security, it was not considered more likely than not that we would be forced to sell any individual security prior to recovering our amortized cost, and there were no material credit events that would have caused us to otherwise conclude that we would not recover our cost. Credit losses, which represent most of the other-than-temporary impairments we record, are calculated by comparing (i) the estimated future cash flows of each security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to (ii) our amortized cost basis. Significant judgment is used in projecting cash flows for our non-agency RMBS. As a result, actual income and/or impairments could be materially different from what is currently projected and/or reported.

CMBS, Fair Value Option

As discussed in the “Fair Value Option” section of Note 2 herein, we elect the fair value option for LNR’s CMBS in an effort to eliminate accounting mismatches resulting from the current or potential consolidation of securitization VIEs. As of June 30, 2014, the fair value and unpaid principal balance of CMBS where we have elected the fair value option, before consolidation of securitization VIEs, was $638.1 million and $4.1 billion, respectively. These balances represent our economic interests in these assets. However, as a result of our consolidation of securitization VIEs, the vast majority of this fair value ($469.5 million at June 30, 2014) is eliminated against VIE liabilities before arriving at our GAAP balance for fair value option CMBS. During the three and six months ended June 30, 2014, we purchased $107.1 million and $151.7 million of CMBS, respectively, for which we elected the fair value option. Due to our consolidation of securitization VIEs, $63.5 million and $98.3 million, respectively, of these amounts are reflected as repayment of debt of consolidated VIEs in our condensed consolidated statement of cash flows.

As of June 30, 2014 and December 31, 2013, none of our CMBS where we have elected the fair value option were variable rate. The table below summarizes various attributes of our investment in fair value option CMBS as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Weighted Average Coupon		Weighted Average Rating		WAL (Years)(1)
June 30, 2014
CMBS, fair value option	5.0	%	CCC	(2)	5.3
December 31, 2013
CMBS, fair value option	5.4	%	CC	(2)	4.4

(1)The WAL of each security is calculated based on the period of time over which we expect to receive principal cash flows. Expected principal cash flows are based on contractual payments net of expected losses.

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(2)As of June 30, 2014 and December 31, 2013, excludes $27.3 million and $55.5 million, respectively, in fair value option CMBS that are not rated.

HTM Securities

The table below summarizes various attributes of our investments in HTM securities as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Net Carrying Amount (Amortized Cost)		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
June 30, 2014
Preferred interests	$	285,946	$	2,083	$	—		$	288,029
CMBS	84,150		—		(576		)	83,574
Total	$	370,096	$	2,083	$	(576	)	$	371,603
December 31, 2013
Preferred interests	$	284,087	$	135	$	—		$	284,222
CMBS	84,231		—		—			84,231
Total	$	368,318	$	135	$	—		$	368,453

During 2013, we originated two preferred equity interests of $246.1 million and $37.2 million, respectively, in limited liability companies that own commercial real estate. These preferred equity interests mature in December 2018 and October 2014, respectively.  During 2013, we also purchased a CMBS security with a face value and purchase price of $84.1 million, which we expect to hold to maturity. The stated maturity of this security is November 2016.

Equity Security, Fair Value Option

During 2012, we acquired 9,140,000 ordinary shares from a related-party (approximately a 4% interest) in Starwood European Real Estate Finance Limited (“SEREF”), a debt fund that is externally managed by an affiliate of our Manager and is listed on the London Stock Exchange. We have elected to report the investment using the fair value option because the shares are listed on an exchange, which allows us to determine the fair value using a quoted price from an active market, and also due to potential lags in reporting resulting from differences in the respective regulatory requirements. The fair value of the investment remeasured in U.S. dollars (“USD”) was $16.1 million and $15.2 million as of June 30, 2014 and December 31, 2013, respectively.

6. Investment in Unconsolidated Entities

The below table summarizes our investments in unconsolidated entities as of June 30, 2014 and December 31, 2013 (dollar amounts in thousands):

	Participation /	Carrying value as of				Carrying value over (under) equity in net assets as of
	Ownership %(1)	June 30, 2014		December 31, 2013		June 30, 2014(2)
Equity method:
Investor entity which owns equity interests in two real estate services providers	50%	$	20,010	$	19,371	$	—
Small balance bridge loan financing venture	50%	26,445		26,121		—
European investment fund	50%	7,974		23,779		(4,235		)
Mezzanine loan venture	49%	23,335		23,676		—
Healthcare bridge loan venture	various	14,945		14,163		—
Various	25% - 50%	5,118		4,371		—
		97,827		111,481		$	(4,235	)
Cost method:
Loan servicing venture	4% - 6%	9,225		8,014
Various	2% - 10%	11,569		3,459
		20,794		11,473
		$	118,621	$	122,954

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

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(2)Differences between the carrying value of our investment and the underlying equity in net assets of the investee are accounted for as if the investee were a consolidated entity in accordance with ASC 323, Investments—Equity Method and Joint Ventures.

7. Goodwill and Intangible Assets

Goodwill

Goodwill at June 30, 2014 and December 31, 2013 represents the excess of consideration transferred over the fair value of net assets of LNR acquired on April 19, 2013. The goodwill recognized is attributable to value embedded in LNR’s existing platform, which includes an international network of commercial real estate asset managers, work-out specialists, underwriters and administrative support professionals as well as proprietary historical performance data on commercial real estate assets.

Servicing Rights Intangibles

In connection with the LNR acquisition, we identified domestic and European servicing rights that existed at the purchase date, based upon the expected future cash flows of the associated servicing contracts. All of our servicing fees are specified by these Pooling and Servicing Agreements. At June 30, 2014 and December 31, 2013, the balance of the domestic servicing intangible was net of $67.8 million and $80.6 million, respectively, that was eliminated in consolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs. Before VIE consolidation, as of June 30, 2014 and December 31, 2013, the domestic servicing intangible had a balance of $206.1 million and $230.7 million, respectively, which represents our economic interest in this asset.

The table below presents information about our GAAP servicing intangibles for the six months ended June 30, 2014 and 2013 (in thousands):

	2014			2013
Domestic servicing rights, at fair value
Fair value at January 1	$	150,149		$	—
Acquisition of LNR	—			156,993
Changes in fair value due to changes in inputs and assumptions	(10,774		)	2,898
Other	(1,057		)	—
Fair value at June 30	138,318			159,891
European servicing rights
Net carrying amount at January 1 (fair value of $29.3 million)	27,024			—
Acquisition of LNR	—			32,649
Foreign exchange gain (loss)	713			(18		)
Amortization and OTTI	(9,209		)	(1,876		)
Net carrying value at June 30 (fair value of $18.5 million and $33.9 million)	18,528			30,755
Total servicing rights at June 30	$	156,846		$	190,646

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8. Secured Financing Agreements

The following table is a summary of our secured financing agreements in place as of June 30, 2014 and December 31, 2013 (dollars in thousands):

Pledged Asset

Maximum

Carrying Value at

Facility Type

Revolver

Eligible Assets

Current Maturity

Extended Maturity(a)

Pricing

Carrying Value

Facility Size

June 30, 2014

December 31, 2013

Lender 1 Repo 1

Repurchase

Yes

Identified Loans and CMBS

(b)

(b)

LIBOR + 1.85% to 5.25%

$

1,349,733

$

1,000,000

$

753,032

$

449,323

Lender 1 Repo 2

Repurchase

Yes

Identified RMBS

(c)

N/A

LIBOR + 1.90%

230,129

175,000

120,627

127,943

Lender 1 Repo 3

Repurchase

No

Identified Loans

Dec 2014

Dec 2016

LIBOR + 2.75%

210,041

148,860

148,860

154,133

Lender 2 Repo 1

Repurchase

Yes

Identified Loans

Oct 2015

Oct 2018

LIBOR + 2.00% to 2.75%

269,290

225,000

(d)

181,151

100,886

Lender 3 Repo 1

Repurchase

No

Identified Loans

May 2017

May 2019

LIBOR + 2.85%

135,132

93,836

93,836

50,871

Conduit Repo 1

Repurchase

Yes

Identified Loans

Sep 2014

Sep 2014

LIBOR + 2.20%

—

250,000

—

129,843

Conduit Repo 2

Repurchase

Yes

Identified Loans

Nov 2014

Nov 2014

LIBOR + 2.10%

128,083

150,000

95,568

—

Lender 4 Repo 1

Repurchase

No

Identified Loans

Oct 2015

Oct 2017

LIBOR + 2.60%

456,758

359,226

359,226

347,697

Lender 5 Repo 1

Repurchase

No

Identified CMBS

Dec 2014

Dec 2014

LIBOR + 2.00%

84,150

58,467

58,467

58,467

Borrowing Base

Bank Credit Facility

Yes

Identified Loans

Sep 2015

Sep 2017

LIBOR + 3.25%(e)

661,164

250,000

84,386

169,104

Term Loan

Syndicated Facility

No

Specifically Identified Assets

Apr 2020

Apr 2020

LIBOR + 2.75%(e)

2,936,771

668,423

666,114

(f)

669,293

(f)

$

6,461,251

$

3,378,812

$

2,561,267

$

2,257,560

(a)Subject to certain conditions as defined in the respective facility agreement.

(b)Maturity date for borrowings collateralized by loans of January 2017 before extension options and January 2019 assuming initial extension options.  Maturity date for borrowings collateralized by CMBS of January 2015 before extension options and January 2016 assuming initial extension options.

(c)The date that is 180 days after the buyer delivers notice to seller, subject to a maximum date of March 13, 2015.

(d)On July 24, 2014, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $225 million to $325 million and reduce pricing 25-50 basis points depending on the collateral type.

(e)Subject to borrower’s option to choose alternative benchmark based rates pursuant to the terms of the credit agreement. The Term Loan is also subject to a 75 basis point floor.

(f)Term loan outstanding balance is net of $2.3 million and $2.5 million of unamortized discount as of June 30, 2014 and December 31, 2013.

In January 2014, we amended the Lender 1 Repo 1 facility to (i) upsize available borrowings to $1.0 billion from $550 million; (ii) extend the maturity date for loan collateral to January 2019 and for CMBS collateral to January 2016, each from August 2014, and each assuming initial extension options; (iii) allow for up to four additional one-year extension options with respect to any loan collateral that remains financed at maturity, in an effort to match the term of the maturity dates of these assets; (iv) reduce pricing and debt-yield thresholds for purchased assets; and (v) amend certain financial covenants to contemplate the spin-off of the SFR segment.  STWD guarantees certain of the obligations of the consolidated subsidiary, which is the borrower under the repurchase agreement, up to a maximum liability of either 25% or 100% of the then-currently outstanding repurchase price of purchased assets, depending upon the type of asset being financed.

In May 2014, we amended our Lender 3 Repo 1 facility to (i) increase additional borrowings by $42.7 million; (ii) extend the maturity date for loan collateral to May 2019, assuming the exercise of two one-year extension options; (iii) reduce pricing for all purchased assets; and (iv) increase advance rates for certain purchased assets.

Our secured financing agreements contain certain financial tests and covenants. As of June 30, 2014, we were in compliance with all such covenants.

The following table sets forth our five-year principal repayments schedule for the secured financings, assuming no defaults or expected extensions and excluding the loans transferred as secured borrowings. Our credit facilities generally require principal to be paid down prior to the facilities’ respective maturities if and when we receive principal payments on, or sell, the investment collateral that we have pledged. The amount reflected in each period includes principal repayments on our credit facilities that would be required if (i) we received the repayments that we expect to receive on the investments that have been pledged as collateral under the

24

credit facilities, as applicable, and (ii) the credit facilities that are expected to have amounts outstanding at their current maturity dates are extended where extension options are available to us (amounts in thousands):

2014 (remainder of)	$	194,472
2015	155,464
2016	296,329
2017	568,760
2018	223,683
Thereafter(1)	1,124,868
Total	$	2,563,576

(1)Principal paydown of the Term Loan through 2020 excludes $2.3 million of discount amortization.

Secured financing maturities for 2014 primarily relate to $95.6 million on the Conduit Repo 2 facility, $58.5 million on the Lender 5 Repo 1 facility, and $26.2 million on the Lender 1 Repo 3 facility.

As of June 30, 2014 and December 31, 2013, we had approximately $24.9 million and $22.5 million, respectively, of deferred financing costs from secured financing agreements, net of amortization, which is included in other assets on our condensed consolidated balance sheets. For the three and six months ended June 30, 2014, approximately $2.6 million, and $5.3 million, respectively, of amortization was included in interest expense on our condensed consolidated statements of operations. For the three and six months ended June 30, 2013, approximately $1.8 million, and $5.0 million, respectively, of amortization was included in interest expense on our condensed consolidated statements of operations.

9. Convertible Senior Notes

On February 15, 2013, we issued $600.0 million of 4.55% Convertible Senior Notes due 2018 (the “2018 Notes”). On July 3, 2013, we issued $460.0 million of 4.00% Convertible Senior Notes due 2019 (the “2019 Notes”). The following summarizes the unsecured convertible senior notes (collectively, the “Convertible Notes”) outstanding as of June 30, 2014 (amounts in thousands, except rates):

	Principal Amount		Coupon Rate		Effective Rate(1)		Conversion Rate(2)	Maturity Date	Remaining Period of Amortization
2018 Notes	$	599,981	4.55	%	6.08	%	44.6455	3/1/2018	3.7 years
2019 Notes	$	459,997	4.00	%	5.37	%	47.5456	1/15/2019	4.5 years

	As ofJune 30, 2014			As ofDecember 31, 2013
Total principal	$	1,059,978		$	1,060,000
Net unamortized discount	(56,131		)	(62,149		)
Carrying amount of debt components	$	1,003,847		$	997,851
Carrying amount of conversion option equity components recorded in additional paid-in capital	$	48,502		$	48,502

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

(2)The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of Convertible Notes converted, as adjusted in accordance with the applicable indentures as a result of the spin-off of the SFR segment and cash dividend payments. The if-converted value of the 2018 Notes exceeded their principal amount by $36.7 million at June 30, 2014 since the closing market price of the Company’s common stock of $23.77 per share exceeded the implicit conversion price of $22.40 per share. The if-converted value of the 2019 Notes exceeded their principal amount by $59.9 million at June 30, 2014 since the closing market price of $23.77 per share exceeded the implicit conversion price of $21.03 per share for the 2019 Notes.  The Company has asserted its intent and ability to settle the principal amount of the Convertible Notes in cash.  As a result, conversion of this principal amount, totaling 44.6 million and 44.8 million shares for the three and six months ended June 30, 2014, respectively, was not included in the computation of diluted earnings per share (“EPS”).  However, the conversion spread value,

25

representing 4.1 million and 3.9 million shares for the three and six months ended June 30, 2014, respectively, was included in the computation of diluted EPS.  See further discussion at Note 16.

As of June 30, 2014 and December 31, 2013, we had approximately $1.5 million and $1.6 million, respectively, of deferred financing costs from our Convertible Notes, net of amortization, which is included in other assets on our condensed consolidated balance sheets.

Conditions for Conversion

Prior to September 1, 2017 for the 2018 Notes and July 15, 2018 for the 2019 Notes, the Convertible Notes will be convertible only upon satisfaction of one or more of the following conditions: (1) the closing market price of the Company’s common stock is at least 130% of the conversion price of the respective Convertible Notes for at least 20 out of 30 trading days prior to the end of the preceding fiscal quarter, (2) the trading price of the Convertible Notes is less than 98% of the product of (i) the conversion rate and (ii) the closing price of the Company’s common stock during any five consecutive trading day period, (3) the Company issues certain equity instruments at less than the 10-day average closing market price of its common stock or the per-share value of certain distributions exceeds the market price of the Company’s common stock by more than 10% or (4) other specified corporate events (significant consolidation, sale, merger, share exchange, fundamental change, etc.) occur.

On or after September 1, 2017 for the 2018 Notes and July 15, 2018 for the 2019 Notes, holders may convert each of their notes at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date.

Impact of Spin-off on Convertible Senior Notes

As described in Note 1, on January 31, 2014, the Company distributed all of its interest in the SFR segment to the Company’s stockholders of record as of January 24, 2014.  As the per-share value of the distribution was expected to exceed 10% of the last reported market price of the Company’s common stock on the trading day prior to the announcement for such distribution, holders of the Convertible Notes were eligible to surrender their notes for conversion at any time during the period beginning November 26, 2013 (the 45th trading day immediately prior to the scheduled ex-dividend date for the distribution) and ending on the close of the business day immediately preceding February 3, 2014, the ex-dividend date for such distribution.  During this period, the Company received notices of conversion totaling $19 thousand and $3 thousand in principal for the 2018 Notes and 2019 Notes, respectively.  The cash settlement of these conversions occurred in April 2014.

Due to the distribution, the quarterly dividend threshold amounts for the Convertible Notes were adjusted to $0.3548 and $0.3710 (from $0.44 and $0.46) per share of common stock for the 2018 Notes and 2019 Notes, respectively, effective February 3, 2014.

Refer to Note 11 to the consolidated financial statements included in our Form 10-K for further discussion regarding our accounting for the Convertible Notes.

10. Loan Securitization/Sale Activities

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

Within LNR, we originate commercial mortgage loans with the intent to sell these mortgage loans to SPEs for the purposes of securitization. These SPEs then issue CMBS that are collateralized in part by these assets, as well as other assets transferred to the SPE. In certain instances, we retain a subordinated interest in the SPE and serve as special servicer for the SPE. During the three and six months ended June 30, 2014, we sold $348.0 million and $637.4 million, respectively, par value of loans held-for-sale from our conduit platform for their fair values of $364.3 million and $666.8 million, respectively. During the three and six months ended June 30, 2014, the sale proceeds were used in part to repay $261.0 million and $478.1 million, respectively, of the outstanding balance of the repurchase agreements associated with these loans.

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Within the Lending Segment (refer to Note 21), we originate or acquire loans and then subsequently sell a senior portion, which can be represented in various forms including first mortgages, A-Notes and senior participations. Typically, our motivation for entering into these transactions is to effectively create leverage on the subordinated position that we will retain and hold for investment. The following table summarizes our loans sold and loans transferred as secured borrowings by the Lending Segment net of expenses (in thousands):

	Loan Transfers Accounted for as Sales				Loan Transfers Accounted for as Secured Borrowings
	Face Amount		Proceeds		Face Amount		Proceeds
For the three months ended June 30,
2014	$	56,975	$	56,124	$	—	$	—
2013	52,849		52,859		95,000		95,000
For the six months ended June 30,
2014	$	204,859	$	202,524	$	—	$	—
2013	97,380		97,490		95,000		95,000

11. Derivatives and Hedging Activity

Risk Management Objective of Using Derivatives

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

Designated Hedges

Our objective in using interest rate derivatives is to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

In connection with our repurchase agreements, we have entered into seven outstanding interest rate swaps that have been designated as cash flow hedges of the interest rate risk associated with forecasted interest payments. As of June 30, 2014, the aggregate notional amount of our interest rate swaps designated as cash flow hedges of interest rate risk totaled $162.9 million. Under these agreements, we will pay fixed monthly coupons at fixed rates ranging from 0.56% to 2.23% of the notional amount to the counterparty and receive floating rate LIBOR. Our interest rate swaps designated as cash flow hedges of interest rate risk have maturities ranging from November 2015 to May 2021.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and six months ended June 30, 2014 and 2013 we did not recognize any hedge ineffectiveness in earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the associated variable-rate debt. Over the next twelve months, we estimate that an additional $1.0 million will be reclassified as an increase to interest expense. We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of 83 months.

Non-designated Hedges

Derivatives not designated as hedges are derivatives that do not meet the criteria for hedge accounting under GAAP or which we have not elected to designate as hedges. We do not use these derivatives for speculative purposes but instead they are used to manage our exposure to foreign exchange rates, interest rate changes, and certain credit spreads. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in gain (loss) on derivative financial instruments in our condensed consolidated statements of operations. The LNR conduit platform uses interest rate and credit index instruments to manage exposures related to commercial mortgage loans held-for-sale.

We have entered into a series of forward contracts whereby we agreed to sell an amount of foreign currency for an agreed upon amount of USD at various dates through January 2018. These forward contracts were executed to economically fix the USD amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.

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As of June 30, 2014, we had 66 foreign exchange forward derivatives to sell pounds sterling (“GBP”) with a total notional amount of £226.2 million, 29 foreign exchange forward derivatives to sell Euros (“EUR”) with a total notional amount of €147.9 million, two foreign exchange forward derivatives to sell Swedish Krona (“SEK”) with a total notional of SEK 23.0 million, one foreign exchange forward derivative to sell Norwegian Krone (“NOK”) with a notional of NOK 1.3 million and one foreign exchange forward to sell Danish Krone (“DKK”) with a notional of DKK 3.2 million that were not designated as hedges in qualifying hedging relationships.  We also had one foreign exchange forward contract to buy EUR with a total notional of €60.3 million.  As of June 30, 2014, there were 34 interest rate swaps where the Company is paying fixed rates, with maturities ranging from 2 to 10 years and a total notional amount of $203.1 million, four interest rate swaps where the Company is receiving fixed rates with maturities ranging from 0 to 3 years and a total notional of $59.9 million and eight credit index instruments with a total notional amount of $50.0 million.  The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Fair Value of Derivatives in an Asset Position(1) As of				Fair Value of Derivatives in a Liability Position(2) As of
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Interest rate swaps	$	63	$	125	$	638	$	729
Total derivatives designated as hedging instruments	63		125		638		729
Derivatives not designated as hedging instruments:
Interest rate swaps	1,874		5,102		1,819		983
Foreign exchange contracts	502		269		23,837		22,480
Credit index instruments	2,242		2,273		—		—
Total derivatives not designated as hedging instruments	4,618		7,644		25,656		23,463
Total derivatives	$	4,681	$	7,769	$	26,294	$	24,192

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

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

The tables below present the effect of our derivative financial instruments on the condensed consolidated statements of operations and of comprehensive income for the three and six months ended June 30, 2014 and 2013:

Derivatives Designated as Hedging Instruments For the Three Months Ended June 30,	(Loss) Gain Recognized in OCI (effective portion)			(Loss) Gain Reclassified from AOCI into Income (effective portion)			(Loss) Gain Recognized in Income (ineffective portion)		Location of (Loss) Gain Recognized in Income
2014	$	(457	)	$	(364	)	$	—	Interest expense
2013	$	1,094		$	(407	)	$	—	Interest expense
For the Six Months Ended June 30,
2014	$	(708	)	$	(737	)	$	—	Interest expense
2013	$	926		$	(854	)	$	—	Interest expense

Derivatives Not Designated as	Location of (Loss) Gain	Amount of (Loss) Gain Recognized in Income for theThree Months Ended June 30,						Amount of (Loss) Gain Recognized in Income for theSix Months Ended June 30,
Hedging Instruments	Recognized in Income	2014			2013			2014			2013
Interest rate swaps	(Loss) gain on derivative financial instruments	$	(2,314	)	$	6,863		$	(6,511	)	$	7,013
Foreign exchange contracts	(Loss) gain on derivative financial instruments	(6,965		)	(1,311		)	(10,012		)	14,767
Credit index instruments	(Loss) gain on derivative financial instruments	(511		)	606			(1,133		)	606
		$	(9,790	)	$	6,158		$	(17,656	)	$	22,386

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Credit-risk-related Contingent Features

We have entered into agreements with certain of our derivative counterparties that contain provisions providing that if we were to default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, we may also be declared in default on our derivative obligations. We also have certain agreements that contain provisions providing that if our ratio of principal amount of indebtedness to total assets at any time exceeds 75%, then we could be declared in default of our derivative obligations.

As of June 30, 2014, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, was $24.5 million. As of June 30, 2014, we had posted collateral of $19.1 million related to these agreements. If we had breached any of these provisions at June 30, 2014, we could have been required to settle our obligations under the agreements at their termination liability value of $24.5 million.

12. Offsetting Assets and Liabilities

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

			(ii)		(iii) = (i) - (ii)		(iv) Gross Amounts Not Offset in the Statement of Financial Position
	(i) Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received / Pledged		(v) = (iii) - (iv) Net Amount
As of June 30, 2014
Derivative assets	$	4,681	$	—	$	4,681	$	606	$	1,564	$	2,511
Derivative liabilities	$	26,294	$	—	$	26,294	$	606	$	18,412	$	7,276
Repurchase agreements	1,810,767		—		1,810,767		1,810,767		—		—
	$	1,837,061	$	—	$	1,837,061	$	1,811,373	$	18,412	$	7,276
As of December 31, 2013
Derivative assets	$	7,769	$	—	$	7,769	$	692	$	1,916	$	5,161
Derivative liabilities	$	24,192	$	—	$	24,192	$	692	$	7,150	$	16,350
Repurchase agreements	1,419,163		—		1,419,163		1,419,163		—		—
	$	1,443,355	$	—	$	1,443,355	$	1,419,855	$	7,150	$	16,350

13. Variable Interest Entities

Investment Securities

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

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

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VIEs in which we are the Primary Beneficiary

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

VIEs in which we are not the Primary Beneficiary

In certain instances, we hold a variable interest in a VIE in the form of CMBS, but either (i) we are not appointed, or do not serve as, special servicer or (ii) an unrelated third party has the rights to unilaterally remove us as special servicer. In these instances, we do not have the power to direct activities that most significantly impact the VIE’s economic performance. In other cases, the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive benefits from the VIE which could potentially be significant. For these structures, we are not deemed to be the primary beneficiary of the VIE, and we do not consolidate these VIEs.

As of June 30, 2014, one of our collateralized debt obligation (“CDO”) structures was in default, which pursuant to the underlying indentures, changes the rights of the variable interest holders. Upon default of a CDO, the trustee or senior note holders are allowed to exercise certain rights, including liquidation of the collateral, which at that time, is the activity which would most significantly impact the CDO’s economic performance. Further, when the CDO is in default, the collateral administrator no longer has the option to purchase securities from the CDO. In cases where the CDO is in default and we do not have the ability to exercise rights which would most significantly impact the CDO’s economic performance, we do not consolidate the VIE. As of June 30, 2014, this CDO structure was not consolidated.  During the three months ended March 31, 2014, one of our CDOs, which was previously in default as of December 31, 2013, ceased to be in default.  This event triggered the initial consolidation of CDO and its underlying assets during the three months ended March 31, 2014.

As noted above, we are not obligated to provide, nor have we provided, any financial support for any of our securitization SPEs, whether or not we are deemed to be the primary beneficiary. As such, the risk associated with our involvement in these VIEs is limited to the carrying value of our investment in the entity. As of June 30, 2014, our maximum risk of loss related to VIEs in which we were not the primary beneficiary was $168.5 million on a fair value basis.

As of June 30, 2014, the securitization SPEs which we do not consolidate had debt obligations to beneficial interest holders with unpaid principal balances of $106.4 billion. The corresponding assets are comprised primarily of commercial mortgage loans with unpaid principal balances corresponding to the amounts of the outstanding debt obligations.

14. Related-Party Transactions

Management Agreement

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

Base Management Fee.  For the three months ended June 30, 2014 and 2013, approximately $13.6 million and $12.7 million, respectively, was incurred for base management fees. For the six months ended June 30, 2014 and 2013, approximately $26.8 million and $22.4 million, respectively, was incurred for base management fees. As of June 30, 2014 and December 31, 2013, there were $13.5 million and $0, respectively, of unpaid base management fees included in related-party payable in our condensed consolidated balance sheets.

Incentive Fee.  For the three months ended June 30, 2014 and 2013, approximately $4.1 million and $0, respectively, was incurred for incentive fees. For the six months ended June 30, 2014 and 2013, approximately $11.3 million and $0, respectively, was incurred for incentive fees.  As of June 30, 2014 and December 31, 2013, approximately $4.1 million and $6.8 million, respectively, of unpaid incentive fees were included in related-party payable in our condensed consolidated balance sheets.

Expense Reimbursement.  For the three months ended June 30, 2014 and 2013, approximately $2.0 million and $1.8 million, respectively, was incurred for executive compensation and other reimbursable expenses. For the six months ended June 30, 2014 and 2013, approximately $3.9 million and $4.3 million, respectively, was incurred for executive compensation and other reimbursable

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expenses. As of June 30, 2014 and December 31, 2013, approximately $2.4 million and $4.4 million, respectively, of unpaid reimbursable executive compensation and other expenses were included in related-party payable in our condensed consolidated balance sheets.

Manager Equity Plan

In January 2014, we granted 2,489,281 restricted stock units to our Manager under the Starwood Property Trust, Inc. Manager Equity Plan (“Manager Equity Plan”).  In connection with these grants and prior similar grants, we recognized share-based compensation expense of $6.8 million and $4.0 million within management fees in our condensed consolidated statements of operations for the three months ended June 30, 2014 and 2013, respectively.  In the six months ended June 30, 2014 and 2013, we recognized $13.6 million and $8.5 million, respectively, related to these awards. Refer to Note 15 herein for further discussion of these grants.

Investment in Loan

In October 2012, we co-originated $475.0 million in financing for the acquisition and redevelopment of a 10-story retail building located at 701 Seventh Avenue in the Times Square area of Manhattan through a joint venture with Starwood Distressed Opportunity Fund IX (“Fund IX”), an affiliate of our Manager.  In January 2014, we refinanced the initial financing with an $815.0 million first mortgage and mezzanine financing to facilitate the further development of the property.  Fund IX did not participate in the refinancing. As such, the joint venture distributed $31.6 million to Fund IX for the liquidation of Fund IX’s interest in the joint venture.

LNR Related-Party Arrangement

In connection with the LNR acquisition, we were required to cash collateralize certain obligations of LNR, including letters of credit and performance obligations. Fund IX funded $6.2 million of this obligation, but the account is within our name and is thus reflected within our restricted cash balance. We have recognized a corresponding payable to Fund IX of $4.4 million and $6.2 million within related-party payable in our condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013, respectively.

15. Stockholders’ Equity

On February 24, 2014, our board of directors declared a dividend of $0.48 per share for the first quarter of 2014, which was paid on April 15, 2014 to common stockholders of record as of March 31, 2014.

On May 6, 2014, our board of directors declared a dividend of $0.48 per share for the second quarter of 2014, which was paid on July 15, 2014 to common stockholders of record as of June 30, 2014.

On April 11, 2014, we issued 22.0 million shares of common stock for gross proceeds of $491.0 million.  In connection with this offering, the underwriters had a 30-day option to purchase an additional 3.3 million shares of common stock, which they exercised in full, resulting in additional gross proceeds of $73.7 million.

On May 15, 2014, we established the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) which provides stockholders with a means of purchasing additional shares of our common stock by reinvesting the cash dividends paid on our common stock and by making additional optional cash purchases.  Shares of our common stock purchased under the DRIP Plan will either be issued directly by the Company or purchased in the open market by the plan administrator.  The Company may issue up to 11 million shares of common stock under the DRIP Plan.   During the three months ended June 30, 2014, shares issued under the DRIP Plan were not material.

On May 27, 2014, we entered into an amended and restated At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated to sell shares of the Company’s common stock of up to $500 million from time to time, through an “at the market” equity offering program. Sales of shares under the ATM Agreement will be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale or at negotiated prices.  During the three months ended June 30, 2014, we issued 759 thousand shares under the ATM Agreement for gross proceeds of $18.3 million.

Equity Incentive Plans

The Company currently maintains the Manager Equity Plan, the Starwood Property Trust, Inc. Equity Plan (the “Equity Plan”), and the Starwood Property Trust, Inc. Non-Executive Director Stock Plan (“Non-Executive Director Stock Plan”).  Refer to Note 17 to the consolidated financial statements included in our Form 10-K for further information regarding these plans.

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On January 2, 2014, the Company granted 2,000,000 restricted stock units to our Manager under the Manager Equity Plan. These awards vest ratably on a quarterly basis over a three-year period beginning on March 31, 2014 and had a grant date fair value of $55.4 million. On January 31, 2014, in connection with the spin-off of the SFR segment, the Company granted our Manager 489,281 restricted stock units of the Company in consideration of the Company’s currently unvested restricted stock units. Of these restricted stock units, 99,480 vest ratably on a quarterly basis over a 21-month period beginning on March 31, 2014 and 389,801 vest ratably on a quarterly basis over a three-year period beginning on March 31, 2014.  These restricted stock units had a grant date fair value of $14.8 million.

As of June 30, 2014, there were 3.4 million shares available for future grants under the Manager Equity Plan and the Equity Plan.

Schedule of Non-Vested Shares and Share Equivalents

	Non-Executive Director Stock Plan	Equity Plan		Manager Equity Plan		Total		Weighted Average Grant Date Fair Value (per share)
Balance as of January 1, 2014	11,228	22,502		510,415		544,145		$	22.88
Granted	—	162,458		2,489,281		2,651,739		27.94
Vested	—	(42,475	)	(572,556	)	(615,031	)	26.65
Forfeited	—	—		—		—		—
Balance as of June 30, 2014	11,228	142,485		2,427,140		2,580,853		$	27.18

16. Earnings per Share

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

The Company’s unvested restricted share units and awards contain rights to receive non-forfeitable dividends and thus are participating securities.  Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. Under the two-class method, undistributed earnings are reallocated between common shares and participating securities.  For the three and six months ended June 30, 2014 and 2013, the two-class method resulted in the most dilutive EPS calculation.

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

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	For the Three Month EndedJune 30,						For the Six Month EndedJune 30,
	2014			2013			2014			2013
Basic Earnings
Continuing Operations:
Income from continuing operations attributable to STWD common stockholders	$	117,868		$	66,512		$	240,020		$	131,043
Less: Income attributable to unvested shares	(1,367		)	(369		)	(3,100		)	(823		)
Basic — Income from continuing operations	$	116,501		$	66,143		$	236,920		$	130,220
Discontinued Operations:
Loss from discontinued operations	$	—		$	(6,058	)	$	(1,551	)	$	(8,346	)
Basic — Net income attributable to STWD common stockholders after allocation to participating securities	$	116,501		$	60,085		$	235,369		$	121,874
Diluted Earnings
Continuing Operations:
Basic — Income from continuing operations attributable to STWD common stockholders	$	117,868		$	66,512		$	240,020		$	131,043
Less: Income attributable to unvested shares	(1,367		)	(369		)	(3,100		)	(823		)
Add: Undistributed earnings to unvested shares	128			—			480			—
Less: Undistributed earnings reallocated to unvested shares	(126		)	—			(471		)	—
Diluted — Income from continuing operations	$	116,503		$	66,143		$	236,929		$	130,220
Discontinued Operations:
Basic — Loss from discontinued operations	$	—		$	(6,058	)	$	(1,551	)	$	(8,346	)
Diluted — Net income attributable to STWD common stockholders after allocation to participating securities	$	116,503		$	60,085		$	235,378		$	121,874
Number of Shares:
Basic — Average shares outstanding	218,751			162,448			207,203			149,037
Effect of dilutive securities — Convertible Notes	4,056			—			3,906			—
Effect of dilutive securities — Contingently Issuable Shares	85			—			85			—
Diluted — Average shares outstanding	222,892			162,448			211,194			149,037
Earnings Per Share Attributable to STWD Common Stockholders
Basic:
Income from continuing operations	$	0.53		$	0.41		$	1.14		$	0.87
Loss from discontinued operations	—			(0.04		)	(0.01		)	(0.05		)
Net income	$	0.53		$	0.37		$	1.13		$	0.82
Diluted:
Income from continuing operations	$	0.52		$	0.41		$	1.12		$	0.87
Loss from discontinued operations	—			(0.04		)	(0.01		)	(0.05		)
Net income	$	0.52		$	0.37		$	1.11		$	0.82

As of June 30, 2014 and 2013, unvested restricted shares of 2.6 million and 0.9 million, respectively, were excluded from the computation of diluted EPS as their effect was determined to be anti-dilutive.

Also as of June 30, 2014, there were 48.7 million potential shares of common stock contingently issuable upon the conversion of the Convertible Notes.  The Company has asserted its intent and ability to settle the principal amount of the Convertible Notes in cash.  As a result, this principal amount, representing 44.6 million and 44.8 million shares for the three and six months ended

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June 30, 2014, respectively, was not included in the computation of diluted EPS.  However, as discussed in Note 9, the conversion options associated with both Convertible Notes are “in-the-money.”  The if-converted value of the 2018 Notes and the 2019 Notes exceeded their respective principal amounts by $36.7 million and $59.9 million, respectively, at June 30, 2014.  The dilutive effect to EPS is determined by dividing this “conversion spread value” by the average share price. The “conversion spread value” is the value that would be delivered to investors in shares based on the terms of the Convertible Notes, upon an assumed conversion. In calculating the dilutive effect of these shares, the treasury stock method was used and resulted in a dilution of 4.1 million shares and 3.9 million shares for the three and six months ended June 30, 2014, respectively.

17. Accumulated Other Comprehensive Income

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

	Effective Portion of Cumulative Loss on Cash Flow Hedges			Cumulative Unrealized Gain (Loss) on Available-for- Sale Securities			Foreign Currency Translation			Total
Three Months ended June 30, 2014
Balance at March 31, 2014	$	(482	)	$	70,064		$	10,533		$	80,115
OCI before reclassifications	(457		)	2,285			4,558			6,386
Amounts reclassified from AOCI	364			(11,903		)	—			(11,539		)
Net period OCI	(93		)	(9,618		)	4,558			(5,153		)
Balance at June 30, 2014	$	(575	)	$	60,446		$	15,091		$	74,962
Three Months ended June 30, 2013
Balance at March 31, 2013	$	(2,292	)	$	79,897		$	(7,061	)	$	70,544
OCI before reclassifications	1,094			(11,419		)	18			(10,307		)
Amounts reclassified from AOCI	407			(359		)	—			48
Net period OCI	1,501			(11,778		)	18			(10,259		)
Balance at June 30, 2013	$	(791	)	$	68,119		$	(7,043	)	$	60,285

	Effective Portion of Cumulative Loss on Cash Flow Hedges			Cumulative Unrealized Gain (Loss) on Available-for- Sale Securities			Foreign Currency Translation			Total
Six Months ended June 30, 2014
Balance at January 1, 2014	$	(604	)	$	66,566		$	9,487		$	75,449
OCI before reclassifications	(708		)	5,566			5,604			10,462
Amounts reclassified from AOCI	737			(11,686		)	—			(10,949		)
Net period OCI	29			(6,120		)	5,604			(487		)
Balance at June 30, 2014	$	(575	)	$	60,446		$	15,091		$	74,962
Six Months ended June 30, 2013
Balance at January 1, 2013	$	(2,571	)	$	82,246		$	—		$	79,675
OCI before reclassifications	926			537			(7,043		)	(5,580		)
Amounts reclassified from AOCI	854			(14,664		)	—			(13,810		)
Net period OCI	1,780			(14,127		)	(7,043		)	(19,390		)
Balance at June 30, 2013	$	(791	)	$	68,119		$	(7,043	)	$	60,285

34

The reclassifications out of AOCI impacted the condensed consolidated statements of operations for the three and six months ended June 30, 2014 and 2013 as follows:

	Amounts Reclassified from AOCI during the Three Months Ended June 30,						Amounts Reclassified from AOCI during the Six Months Ended June 30,						Affected Line Item
Details about AOCI Components	2014			2013			2014			2013			in the Statements
Losses on cash flow hedges:
Interest rate contracts	$	(364	)	$	(407	)	$	(737	)	$	(854	)	Interest expense
Unrealized gains on available for sale securities:
Net realized gain on sale of investments	11,903			718			11,899			15,065			Gain (loss) on sale of investments, net
OTTI	—			(359		)	(213		)	(401		)	OTTI
Total	11,903			359			11,686			14,664
Total reclassifications for the period	$	11,539		$	(48	)	$	10,949		$	13,810

18. Fair Value

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

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

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

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

Valuation Process

We have valuation control processes in place to validate the fair value of the Company’s financial assets and liabilities measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible.  Refer to Note 21 to the consolidated financial statements included in our Form 10-K for further discussion of our valuation process.

We determine the fair value of our assets and liabilities measured at fair value on a recurring and nonrecurring basis in accordance with the methodology described in our Form 10-K.

35

The following tables present our financial assets and liabilities carried at fair value on a recurring basis in the condensed consolidated balance sheets by their level in the fair value hierarchy as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	June 30, 2014
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	154,412	$	—	$	—	$	154,412
RMBS	231,605		—		—		231,605
CMBS	284,619		—		2,258		282,361
Equity security	16,104		16,104		—		—
Domestic servicing rights	138,318		—		—		138,318
Derivative assets	4,681		—		4,681		—
VIE assets	114,091,158		—		—		114,091,158
Total	$	114,920,897	$	16,104	$	6,939	$	114,897,854
Financial Liabilities:
Derivative liabilities	$	26,294	$	—	$	26,294	$	—
VIE liabilities	113,541,151		—		108,355,026		5,186,125
Total	$	113,567,445	$	—	$	108,381,320	$	5,186,125

	December 31, 2013
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	206,672	$	—	$	—	$	206,672
RMBS	296,236		—		—		296,236
CMBS	255,306		—		47,300		208,006
Equity security	15,247		15,247		—		—
Domestic servicing rights	150,149		—		—		150,149
Derivative assets	7,769		—		7,769		—
VIE assets	103,151,624		—		—		103,151,624
Total	$	104,083,003	$	15,247	$	55,069	$	104,012,687
Financial Liabilities:
Derivative liabilities	$	24,192	$	—	$	24,192	$	—
VIE liabilities	102,649,263		—		101,051,279		1,597,984
Total	$	102,673,455	$	—	$	101,075,471	$	1,597,984

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The changes in financial assets and liabilities classified as Level III were as follows for the three and six months ended June 30, 2014 and 2013 (amounts in thousands):

Three Months ended June 30, 2014	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights			VIE Assets			VIE Liabilities			Total
April 1, 2014 balance	$	74,117		$	291,217		$	240,665		$	144,898		$	118,451,518		$	(3,482,922	)	$	115,719,493
Total realized and unrealized (losses) gains:
Included in earnings:
Change in fair value / gain on sale	11,546			10,130			4,393			(5,523		)	(3,332,084		)	(1,664		)	(3,313,202		)
Net accretion	—			3,323			—			—			—			—			3,323
Included in OCI	—			(9,363		)	2,740			—			—			—			(6,623		)
Purchases / Originations	320,566			—			42,740			—			—			—			363,306
Sales	(251,612		)	(53,236		)	(13,457		)	—			—			—			(318,305		)
Issuances	—			—			—			—			—			(25,995		)	(25,995		)
Cash repayments / receipts	(205		)	(10,466		)	(421		)	—			—			50,984			39,892
Transfers into Level III	—			—			5,480			—			—			(1,983,525		)	(1,978,045		)
Transfers out of Level III	—			—			—			(1,057		)	—			293,115			292,058
Consolidations of VIEs	—			—			—			—			3,720,885			(68,772		)	3,652,113
Deconsolidations of VIEs	—			—			221			—			(4,749,161		)	32,654			(4,716,286		)
June 30, 2014 balance	$	154,412		$	231,605		$	282,361		$	138,318		$	114,091,158		$	(5,186,125	)	$	109,711,729
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2014	$	688		$	2,804		$	4,513		$	(5,523	)	$	(3,332,084	)	$	(1,664	)	$	(3,331,266	)

Three Months ended June 30, 2013	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights		VIE Assets			VIE Liabilities			Total
April 1, 2013 balance	$	—		$	321,043		$	—		$	—	$	—		$	—		$	321,043
Acquisition of LNR	256,502			—			62,432			156,993		90,989,793			(1,994,243		)	89,471,477
Total realized and unrealized (losses) gains:	—			—			18			—		—			—			18
Included in earnings:	—			—			—			—		—			—			—
Change in fair value	458						(1,187		)	2,898		(3,794,641		)	94,448			(3,698,024		)
Impairment	—			(359		)	—			—		—			—			(359		)
Net accretion	—			5,755			—			—		—			—			5,755
Included in OCI	—			(11,103		)	1,908			—		—			—			(9,195		)
Purchases / Originations	390,669			20,090			39			—		—			—			410,798
Sales	(476,336		)	—			(10,072		)	—		—			—			(486,408		)
Issuances	—			—			—			—		—			—			—
Cash repayments / receipts	(117		)	(15,771		)	—			—		—			79,735			63,847
Transfers into Level III	—			—			115,814			—		—			(489,513		)	(373,699		)
Transfers out of Level III	—			—			(3,499		)	—		—			152,683			149,184
Consolidations of VIEs	—			—			—			—		10,674,125			(178,631		)	10,495,494
Deconsolidations of VIEs	—			—			(1,054		)	—		(584,804		)	861			(584,997		)
June 30, 2013 balance	$	171,176		$	319,655		$	164,399		$	159,891	$	97,284,473		$	(2,334,660	)	$	95,764,934
Amount of total (losses) gains included in earnings attributable to assets still held at June 30, 2013	(8,344		)	6,627			(3,430		)	2,898		(3,794,641		)	94,448			(3,702,442		)

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Six Months ended June 30, 2014	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights			VIE Assets			VIE Liabilities			Total
January 1, 2014 balance	$	206,672		$	296,236		$	208,006		$	150,149		$	103,151,624		$	(1,597,984	)	$	102,414,703
Total realized and unrealized (losses) gains:
Included in earnings:
Change in fair value / gain on sale	32,439			11,141			9,600			(10,774		)	(7,013,623		)	99,837			(6,871,380		)
OTTI	—			(213		)	—			—			—			—			(213		)
Net accretion	—			9,887			—			—			—			—			9,887
Included in OCI	—			(4,615		)	2,207			—			—			—			(2,408		)
Purchases / Originations	582,391			—			46,571			—			—			—			628,962
Sales	(554,073		)	(62,546		)	(29,301		)	—			—			—			(645,920		)
Issuances	—			—			—			—			—			(71,756		)	(71,756		)
Cash repayments / receipts	(297		)	(18,285		)	(829		)	—			—			86,349			66,938
Transfers into Level III	—			—			52,780			—			—			(2,555,137		)	(2,502,357		)
Transfers out of Level III	(112,720		)	—			(179		)	(1,057		)	—			712,856			598,900
Consolidations of VIEs	—			—			(6,715		)	—			23,991,532			(1,892,944		)	22,091,873
Deconsolidations of VIEs	—			—			221			—			(6,038,375		)	32,654			(6,005,500		)
June 30, 2014 balance	$	154,412		$	231,605		$	282,361		$	138,318		$	114,091,158		$	(5,186,125	)	$	109,711,729
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2014	$	688		$	7,971		$	9,018		$	(10,774	)	$	(7,013,623	)	$	99,837		$	(6,906,883	)

Six Months ended June 30, 2013	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights		VIE Assets			VIE Liabilities			Total
January 1, 2013 balance	$	—		$	333,153		$	—		$	—	$	—		$	—		$	333,153
Acquisition of LNR	256,502			—			62,432			156,993		90,989,793			(1,994,243		)	89,471,477
Total realized and unrealized (losses) gains:	—			2,129			18			—		—			—			2,147
Included in earnings:	—			—			—			—		—			—			—
Change in fair value	458			—			(1,187		)	2,898		(3,794,641		)	94,448			(3,698,024		)
Impairment	—			(402		)	—			—		—			—			(402		)
Net accretion	—			11,906			—			—		—			—			11,906
Included in OCI	—			(1,871		)	1,908			—		—			—			37
Purchases / Originations	390,669			20,090			39			—		—			—			410,798
Sales	(476,336		)	(12,712		)	(10,072		)	—		—			—			(499,120		)
Issuances	—			—			—			—		—			—			—
Cash repayments / receipts	(117		)	(32,638		)	—			—		—			79,735			46,980
Transfers into Level III	—			—			115,814			—		—			(489,513		)	(373,699		)
Transfers out of Level III	—			—			(3,499		)	—		—			152,683			149,184
Consolidations of VIEs	—			—			—			—		10,674,125			(178,631		)	10,495,494
Deconsolidations of VIEs	—			—			(1,054		)	—		(584,804		)	861			(584,997		)
June 30, 2013 balance	$	171,176		$	319,655		$	164,399		$	159,891	$	97,284,473		$	(2,334,660	)	$	95,764,934
Amount of total (losses) gains included in earnings attributable to assets still held at June 30, 2013	(8,344		)	14,306			(3,430		)	2,898		(3,794,641		)	94,448			(3,694,763		)

During the three and six months ended June 30, 2014, we transferred $5.5 million and $52.8 million, respectively of CMBS investments from Level II to Level III due to a decrease in the observable relevant market activity.  During both the three and six months ended June 30, 2013, we transferred $115.8 million of CMBS investments from Level II to Level III due to a decrease in the observable relevant market activity.

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

	June 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets not carried at fair value:
Loans held-for-investment and loans transferred as secured borrowings	$	5,028,721	$	5,163,988	$	4,544,132	$	4,609,040
Securities, held-to-maturity	370,096		371,603		368,318		368,453
European servicing rights	18,528		18,528		27,024		29,327
Non-performing residential loans	—		—		215,371		215,371
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	$	2,704,082	$	2,705,452	$	2,438,798	$	2,436,708
Convertible senior notes	1,003,847		1,190,700		997,851		1,160,000

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

	Carrying Value at		Valuation		Range as of (1)
	June 30, 2014		Technique	Unobservable Input	June 30, 2014	December 31, 2013
Loans held-for-sale, fair value option	$	154,412	Discounted cash flow	Yield (b)	4.5% - 5.2%	5.2% - 5.9%
				Duration(c)	5.0 - 10.0 years	5.0 - 10.0 years
RMBS	231,605		Discounted cash flow	Constant prepayment rate(a)	0.3% - 16.8%	(0.6)% - 16.6%
				Constant default rate(b)	1.5% - 9.5%	1.4% - 11.3%
				Loss severity(b)	12% - 81%(e)	15% - 92%(e)
				Delinquency rate(c)	3% - 32%	3% - 48%
				Servicer advances(a)	23% - 96%	24% - 95%
				Annual coupon deterioration(b)	0% - 0.8%	0% - 0.7%
				Putback amount per projected total collateral loss(d)	0% - 11%	0% - 9%
CMBS	282,361		Discounted cash flow	Yield(b)	0% - 527.9%	0% - 890.0%
				Duration(c)	0 – 11.5 years	0 - 11.0 years
Domestic servicing rights	138,318		Discounted cash flow	Debt yield(a)	8.75%	8.75%
				Discount rate(b)	15%	15%
				Control migration(b)	0% - 80%	0% - 80%
VIE assets	114,091,158		Discounted cash flow	Yield(b)	0% - 912.2%	0% - 952.3%
				Duration(c)	0 – 21.9 years	0 - 22.7 years
VIE liabilities	5,186,125		Discounted cash flow	Yield(b)	0% - 912.2%	0% - 952.3%
				Duration(c)	0 – 21.9 years	0 - 22.7 years

39

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

Sensitivity of the Fair Value to Changes in the Unobservable Inputs

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

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

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

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

(e)85% and 90% of the portfolio falls within a range of 45%-80% as of June 30, 2014 and December 31, 2013, respectively.

19.  Income Taxes

As described in Note 1, we established additional TRSs to hold certain operations of the LNR Segment. Our income tax provision consisted of the following for the three and six months ended June 30, 2014 and 2013 (in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Current
Federal	$	5,484		$	9,481		$	10,624		$	9,931
Foreign	1,782			570			3,231			570
State	929			1,534			1,799			1,861
Total current	8,195			11,585			15,654			12,362
Deferred
Federal	(2,344		)	63			(3,048		)	63
Foreign	(1,192		)	(465		)	(2,198		)	(465		)
State	(382		)	10			(511		)	10
Total deferred	(3,918		)	(392		)	(5,757		)	(392		)
Total income tax provision (1)	$	4,277		$	11,193		$	9,897		$	11,970

(1)Includes (benefit) provision of $0 and $(150) thousand reflected in discontinued operations for the three months ended June 30, 2014 and 2013, respectively, and $0 and $12 thousand reflected in discontinued operators for the six months ended June 30, 2014 and 2013, respectively.

40

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are presented net by tax jurisdiction and are reported in other assets and other liabilities, respectively. At June 30, 2014 and December 31, 2013, our U.S. tax jurisdiction was in a net deferred tax asset position, while our European tax jurisdiction was in a net deferred tax liability position. The following table presents each of these tax jurisdictions and the tax effects of temporary differences on their respective net deferred tax assets and liabilities (in thousands):

	June 30, 2014			December 31, 2013
U.S.
Deferred tax asset, net
Reserves and accruals	$	11,506		$	11,454
Domestic intangible assets	3,673			(714		)
Investment securities and loans	(2,303		)	(892		)
Investment in unconsolidated entities	1,901			1,811
Deferred income	360			59
Net operating and capital loss carryforwards	1,379			967
Valuation allowance	(1,379		)	(799		)
Other U.S. temporary differences	(202		)	(242		)
	14,935			11,644
Europe
Deferred tax liability, net
European servicing rights	(4,224		)	(6,257		)
Net operating and capital loss carryforwards	11,064			10,951
Valuation allowance	(11,064		)	(10,951		)
Other European temporary differences	(373		)	(527		)
	(4,597		)	(6,784		)
Net deferred tax assets	$	10,338		$	4,860

Unrecognized tax benefits were not material as of and during the three and six months ended June 30, 2014.

The following table is a reconciliation of our federal income tax determined using our statutory federal tax rate to our reported income tax provision for the three and six months ended June 30, 2014 and 2013 (dollar amounts in thousands):

	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2014					2013					2014					2013
Federal statutory tax rate	$	43,631		35.0	%	$	25,446		35.0	%	$	87,906		35.0	%	$	47,917		35.0	%
REIT and other non-taxable income	(38,989		)	(31.3	)%	(15,516		)	(21.3	)%	(79,372		)	(31.7	)%	(37,308		)	(27.3	)%
State income taxes	753			0.6	%	1,592			2.2	%	1,203			0.5	%	1,592			1.2	%
Federal benefit of state tax deduction	(263		)	(0.2	)%	(557		)	(0.8	)%	(421		)	(0.2	)%	(557		)	(0.4	)%
Valuation allowance	(1,100		)	(0.9	)%	—			—	%	412			0.2	%	—			—	%
Other	245			0.2	%	228			0.3	%	169			0.1	%	326			0.2	%
Effective tax rate	$	4,277		3.4	%	$	11,193		15.4	%	$	9,897		3.9	%	$	11,970		8.7	%

20. Commitments and Contingencies

As of June 30, 2014, we had future funding commitments on 43 loans totaling $1.8 billion, primarily related to construction projects, capital improvements, tenant improvements, and leasing commissions. Generally, funding commitments are subject to certain conditions that must be met, such as customary construction draw certifications, minimum debt service coverage ratios or executions of new leases before advances are made to the borrower.

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

41

21.  Segment Data

In its operation of the business, management, including our chief operating decision maker, who is our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis prior to the impact of consolidating VIEs under ASC 810. The segment information within this note is reported on that basis.  Refer to Note 24 to the consolidated financial statements included in our Form 10-K for further discussion of the composition of our reportable business segments.

The table below presents our results of operations for the three months ended June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	102,892		$	2,563		$	105,455		$	—		$	105,455
Interest income from investment securities	15,178			30,081			45,259			(17,639		)	27,620
Servicing fees	153			57,834			57,987			(25,306		)	32,681
Other revenues	108			5,236			5,344			(350		)	4,994
Total revenues	118,331			95,714			214,045			(43,295		)	170,750
Costs and expenses:
Management fees (1)	20,423			4,622			25,045			40			25,085
Interest expense (1)	31,557			6,138			37,695			—			37,695
General and administrative	7,921			34,992			42,913			181			43,094
Acquisition and investment pursuit costs	523			248			771			—			771
Depreciation and amortization	—			5,154			5,154			—			5,154
Loan loss allowance, net	(139		)	—			(139		)	—			(139		)
Other expense	66			5,960			6,026			—			6,026
Total costs and expenses	60,351			57,114			117,465			221			117,686
Income before other income, income taxes and non-controlling interests	57,980			38,600			96,580			(43,516		)	53,064
Other income:
Income of consolidated VIEs, net	—			—			—			47,028			47,028
Change in fair value of servicing rights	—			(12,804		)	(12,804		)	7,281			(5,523		)
Change in fair value of investment securities, net	861			16,294			17,155			(12,196		)	4,959
Change in fair value of mortgage loans held- for-sale, net	—			11,608			11,608			—			11,608
Earnings from unconsolidated entities	3,432			5,219			8,651			912			9,563
Gain on sale of investments, net	10,078			—			10,078			—			10,078
Loss on derivative financial instruments, net	(7,610		)	(2,180		)	(9,790		)	—			(9,790		)
Foreign currency gain (loss), net	4,082			(305		)	3,777			—			3,777
OTTI	—			(797		)	(797		)	—			(797		)
Other income, net	35			657			692			—			692
Total other income	10,878			17,692			28,570			43,025			71,595
Income from continuing operations before income taxes	68,858			56,292			125,150			(491		)	124,659
Income tax provision	(443		)	(3,834		)	(4,277		)	—			(4,277		)
Income from continuing operations	68,415			52,458			120,873			(491		)	120,382
Loss from discontinued operations, net of tax	—			—			—			—			—
Net income	68,415			52,458			120,873			(491		)	120,382
Net income attributable to non-controlling interests	(3,005		)	—			(3,005		)	491			(2,514		)
Net income attributable to Starwood Property Trust, Inc.	$	65,410		$	52,458		$	117,868		$	—		$	117,868

(1)Due to the structure of our business, certain costs incurred by one segment may benefit other segments. Costs that are identifiable are allocated to the segments that benefit so that one segment is not solely burdened by this cost. Allocated costs currently include interest expense related to our consolidated debt (excluding VIEs) and management fees payable to our Manager, both of which represent shared costs. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated.  During the three months ended June 30, 2014, management fees and interest expense of $4.6 million and $5.2 million, respectively, were allocated to the LNR segment.

42

The table below presents our results of operations for the three months ended June 30, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	72,676		$	2,260		$	—		$	74,936		$	—		$	74,936
Interest income from investment securities	13,638			11,758			—			25,396			(6,819		)	18,577
Servicing fees	—			52,860			—			52,860			(13,725		)	39,135
Other revenues	96			1,972			—			2,068			(273		)	1,795
Total revenues	86,410			68,850			—			155,260			(20,817		)	134,443
Costs and expenses:
Management fees	13,854			2,274			—			16,128			18			16,146
Interest expense	19,941			2,707			—			22,648			—			22,648
General and administrative	3,615			40,573			—			44,188			147			44,335
Business combination costs	13,420			—			—			13,420			—			13,420
Acquisition and investment pursuit costs	525			391			—			916			—			916
Depreciation and amortization	—			2,228			—			2,228			—			2,228
Loan loss allowance	725			—			—			725			—			725
Other expense	58			138			—			196			—			196
Total costs and expenses	52,138			48,311			—			100,449			165			100,614
Income before other income, income taxes and non-controlling interests	34,272			20,539			—			54,811			(20,982		)	33,829
Other income:							—
Income of consolidated VIEs, net	—			—			—			—			31,949			31,949
Change in fair value of servicing rights	—			6,114			—			6,114			(3,216		)	2,898
Change in fair value of investment securities, net	(331		)	6,388			—			6,057			(7,449		)	(1,392		)
Change in fair value of mortgage loans held- for-sale, net	—			458			—			458			—			458
Earnings from unconsolidated entities	1,851			2,115			—			3,966			(196		)	3,770
Loss on sale of investments	(18		)	—			—			(18		)	—			(18		)
(Loss) gain on derivative financial instruments	(2,001		)	8,159			—			6,158			—			6,158
Foreign currency gain (loss), net	1,647			(67		)	—			1,580			—			1,580
OTTI	(359		)	—			—			(359		)	—			(359		)
Other income, net	—			39			—			39			—			39
Total other income	789			23,206			—			23,995			21,088			45,083
Income from continuing operations before income taxes	35,061			43,745			—			78,806			106			78,912
Income tax provision	(411		)	(10,932		)	—			(11,343		)	—			(11,343		)
Income from continuing operations	34,650			32,813			—			67,463			106			67,569
Loss from discontinued operations, net of tax	—			—			(6,058		)	(6,058		)	—			(6,058		)
Net income	34,650			32,813			(6,058		)	61,405			106			61,511
Net income attributable to non-controlling interests	(951		)	—			—			(951		)	(106		)	(1,057		)
Net income attributable to Starwood Property Trust, Inc.	$	33,699		$	32,813		$	(6,058	)	$	60,454		$	—		$	60,454

43

The table below presents our results of operations for the six months ended June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	204,979		$	5,386		$	—		$	210,365		$	—		$	210,365
Interest income from investment securities	33,467			53,089			—			86,556			(29,482		)	57,074
Servicing fees	190			114,019			—			114,209			(47,317		)	66,892
Other revenues	188			8,833			—			9,021			(623		)	8,398
Total revenues	238,824			181,327			—			420,151			(77,422		)	342,729
Costs and expenses:
Management fees (1)	41,778			10,259			791			52,828			78			52,906
Interest expense (1)	62,811			11,624			1,091			75,526			—			75,526
General and administrative	15,066			73,762			—			88,828			367			89,195
Acquisition and investment pursuit costs	735			430			—			1,165			—			1,165
Depreciation and amortization	—			9,790			—			9,790			—			9,790
Loan loss allowance, net	358			—			—			358			—			358
Other expense	52			7,663			—			7,715			—			7,715
Total costs and expenses	120,800			113,528			1,882			236,210			445			236,655
Income before other income, income taxes and non-controlling interests	118,024			67,799			(1,882		)	183,941			(77,867		)	106,074
Other income:
Income of consolidated VIEs, net	—			—			—			—			103,032			103,032
Change in fair value of servicing rights	—			(24,979		)	—			(24,979		)	14,205			(10,774		)
Change in fair value of investment securities, net	705			53,246			—			53,951			(40,631		)	13,320
Change in fair value of mortgage loans held- for-sale, net	—			32,501			—			32,501			—			32,501
Earnings from unconsolidated entities	4,972			3,836			—			8,808			819			9,627
Gain on sale of investments, net	11,633			—			—			11,633			—			11,633
Loss on derivative financial instruments, net	(10,398		)	(7,258		)	—			(17,656		)	—			(17,656		)
Foreign currency gain (loss), net	5,643			(389		)	—			5,254			—			5,254
OTTI	(213		)	(797		)	—			(1,010		)	—			(1,010		)
Other income, net	53			657			—			710			—			710
Total other income	12,395			56,817			—			69,212			77,425			146,637
Income from continuing operations before income taxes	130,419			124,616			(1,882		)	253,153			(442		)	252,711
Income tax provision	(526		)	(9,371		)	—			(9,897		)	—			(9,897		)
Income from continuing operations	129,893			115,245			(1,882		)	243,256			(442		)	242,814
Loss from discontinued operations, net of tax	—			—			(1,551		)	(1,551		)	—			(1,551		)
Net income	129,893			115,245			(3,433		)	241,705			(442		)	241,263
Net income attributable to non-controlling interests	(3,236		)	—			—			(3,236		)	442			(2,794		)
Net income attributable to Starwood Property Trust, Inc.	$	126,657		$	115,245		$	(3,433	)	$	238,469		$	—		$	238,469

(1)Refer to Note 1 to the table above for the three months ended June 30, 2014. During the six months ended June 30, 2014, management fees and interest expense of $10.2 million and $9.7 million, respectively, were allocated to the LNR segment while $0.8 million and $1.1 million, respectively, were allocated to the SFR segment.

44

The table below presents our results of operations for the six months ended June 30, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	140,366		$	2,260		$	—		$	142,626		$	—		$	142,626
Interest income from investment securities	29,878			11,758			—			41,636			(6,819		)	34,817
Servicing fees	—			52,860			—			52,860			(13,725		)	39,135
Other revenues	175			1,972			—			2,147			(273		)	1,874
Total revenues	170,419			68,850			—			239,269			(20,817		)	218,452
Costs and expenses:
Management fees	28,923			2,274			—			31,197			18			31,215
Interest expense	37,367			2,707			—			40,074			—			40,074
General and administrative	7,653			40,573			—			48,226			147			48,373
Business combination costs	17,616			—			—			17,616			—			17,616
Acquisition and investment pursuit costs	606			391			—			997			—			997
Depreciation and amortization	—			2,228			—			2,228			—			2,228
Loan loss allowance	755			—			—			755			—			755
Other expense	91			138			—			229			—			229
Total costs and expenses	93,011			48,311			—			141,322			165			141,487
Income before other income, income taxes and non-controlling interests	77,408			20,539			—			97,947			(20,982		)	76,965
Other income:							—
Income of consolidated VIEs, net	—			—			—			—			31,949			31,949
Change in fair value of servicing rights	—			6,114			—			6,114			(3,216		)	2,898
Change in fair value of investment securities	74			6,388			—			6,462			(7,449		)	(987		)
Change in fair value of mortgage loans held- for-sale, net	—			458			—			458			—			458
Earnings from unconsolidated entities	2,592			2,115			—			4,707			(196		)	4,511
Gain on sale of investments	13,506			—			—			13,506			—			13,506
Gain on derivative financial instruments	14,227			8,159			—			22,386			—			22,386
Foreign currency loss, net	(6,018		)	(67		)	—			(6,085		)	—			(6,085		)
OTTI	(401		)	—			—			(401		)	—			(401		)
Other income, net	—			39			—			39			—			39
Total other income	23,980			23,206			—			47,186			21,088			68,274
Income from continuing operations before income taxes	101,388			43,745			—			145,133			106			145,239
Income tax provision	(1,026		)	(10,932		)	—			(11,958		)	—			(11,958		)
Income from continuing operations	100,362			32,813			—			133,175			106			133,281
Loss from discontinued operations, net of tax	—			—			(8,346		)	(8,346		)	—			(8,346		)
Net income	100,362			32,813			(8,346		)	124,829			106			124,935
Net income attributable to non-controlling interests	(2,132		)	—			—			(2,132		)	(106		)	(2,238		)
Net income attributable to Starwood Property Trust, Inc.	$	98,230		$	32,813		$	(8,346	)	$	122,697		$	—		$	122,697

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The table below presents our condensed consolidated balance sheet as of June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Subtotal			LNR VIEs			Total
Assets:
Cash and cash equivalents	$	382,285		$	136,148		$	518,433		$	194		$	518,627
Restricted cash	34,324			10,237			44,561			—			44,561
Loans held-for-investment, net	4,881,439			4,415			4,885,854			—			4,885,854
Loans held-for-sale	8,750			145,662			154,412			—			154,412
Loans transferred as secured borrowings	142,867			—			142,867			—			142,867
Investment securities	733,876			638,069			1,371,945			(469,521		)	902,424
Intangible assets—servicing rights	—			224,676			224,676			(67,830		)	156,846
Investment in unconsolidated entities	52,541			68,644			121,185			(2,564		)	118,621
Goodwill	—			140,437			140,437			—			140,437
Derivative assets	2,321			2,360			4,681			—			4,681
Accrued interest receivable	36,904			579			37,483			—			37,483
Other assets	80,279			86,432			166,711			(1,179		)	165,532
VIE assets, at fair value	—			—			—			114,091,158			114,091,158
Total Assets	$	6,355,586		$	1,457,659		$	7,813,245		$	113,550,258		$	121,363,503
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	50,540		$	89,904		$	140,444		$	365		$	140,809
Related-party payable	19,784			4,691			24,475			—			24,475
Dividends payable	108,012			—			108,012			—			108,012
Derivative liabilities	25,019			1,275			26,294			—			26,294
Secured financing agreements, net	2,465,699			95,568			2,561,267			—			2,561,267
Convertible senior notes, net	1,003,847			—			1,003,847			—			1,003,847
Secured borrowings on transferred loans	142,815			—			142,815			—			142,815
VIE liabilities, at fair value	—			—			—			113,541,151			113,541,151
Total Liabilities	3,815,716			191,438			4,007,154			113,541,516			117,548,670
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock	—			—			—			—			—
Common stock	2,232			—			2,232			—			2,232
Additional paid-in capital	2,417,704			1,366,871			3,784,575			—			3,784,575
Treasury stock	(10,642		)	—			(10,642		)	—			(10,642		)
Accumulated other comprehensive income	65,712			9,250			74,962			—			74,962
Retained earnings (deficit)	60,214			(109,900		)	(49,686		)	—			(49,686		)
Total Starwood Property Trust, Inc. Stockholders’ Equity	2,535,220			1,266,221			3,801,441			—			3,801,441
Non-controlling interests in consolidated subsidiaries	4,650			—			4,650			8,742			13,392
Total Equity	2,539,870			1,266,221			3,806,091			8,742			3,814,833
Total Liabilities and Equity	$	6,355,586		$	1,457,659		$	7,813,245		$	113,550,258		$	121,363,503

46

The table below presents our condensed consolidated balance sheet as of December 31, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential		Subtotal			LNR VIEs			Total
Assets:
Cash and cash equivalents	$	232,270		$	40,274		$	44,807	$	317,351		$	276		$	317,627
Restricted cash	36,593			32,208			251		69,052			—			69,052
Loans held-for-investment, net	4,350,937			12,781			—		4,363,718			—			4,363,718
Loans held-for-sale	—			206,672			—		206,672			—			206,672
Loans transferred as secured borrowings	180,414			—			—		180,414			—			180,414
Investment securities	794,147			550,282			—		1,344,429			(409,322		)	935,107
Intangible assets-servicing rights	—			257,736			—		257,736			(80,563		)	177,173
Residential real estate, net	—			—			749,214		749,214			—			749,214
Non-performing residential loans	—			—			215,371		215,371			—			215,371
Investment in unconsolidated entities	50,167			76,170			—		126,337			(3,383		)	122,954
Goodwill	—			140,437			—		140,437			—			140,437
Derivative assets	3,138			4,631			—		7,769			—			7,769
Accrued interest receivable	35,501			2,129			—		37,630			—			37,630
Other assets	31,020			57,620			8,045		96,685			(872		)	95,813
VIE assets, at fair value	—			—			—		—			103,151,624			103,151,624
Total Assets	$	5,714,187		$	1,380,940		$	1,017,688	$	8,112,815		$	102,657,760		$	110,770,575
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	66,127		$	135,882		$	23,056	$	225,065		$	309		$	225,374
Related-party payable	11,245			6,548			—		17,793			—			17,793
Dividends payable	90,171			—			—		90,171			—			90,171
Derivative liabilities	24,149			43			—		24,192			—			24,192
Secured financing agreements, net	2,127,717			129,843			—		2,257,560			—			2,257,560
Convertible senior notes, net	997,851			—			—		997,851			—			997,851
Secured borrowings on transferred loans	181,238			—			—		181,238			—			181,238
VIE liabilities, at fair value	—			—			—		—			102,649,263			102,649,263
Total Liabilities	3,498,498			272,316			23,056		3,793,870			102,649,572			106,443,442
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock	—			—			—		—			—			—
Common stock	1,961			—			—		1,961			—			1,961
Additional paid-in capital	1,987,133			1,308,500			1,004,846		4,300,479			—			4,300,479
Treasury stock	(10,642		)	—			—		(10,642		)	—			(10,642		)
Accumulated other comprehensive income	68,092			7,357			—		75,449			—			75,449
Retained earnings (deficit)	132,625			(207,233		)	(10,111		(84,719		)	—			(84,719		)
Total Starwood Property Trust, Inc. Stockholders’ Equity	2,179,169			1,108,624			994,735		4,282,528			—			4,282,528
Non-controlling interests in consolidated subsidiaries	36,520			—			(103		36,417			8,188			44,605
Total Equity	2,215,689			1,108,624			994,632		4,318,945			8,188			4,327,133
Total Liabilities and Equity	$	5,714,187		$	1,380,940		$	1,017,688	$	8,112,815		$	102,657,760		$	110,770,575

47

22. Subsequent Events

Our significant events subsequent to June 30, 2014 were as follows:

Secured Financing Agreements

On July 24, 2014, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $225 million to $325 million and reduce pricing 25-50 basis points depending on the collateral type.

On August 1, 2014, we entered into a new $250 million warehouse line to finance our more transitional assets.

Dividend Declaration

On August 6, 2014, our board of directors declared a dividend of $0.48 per share for the third quarter of 2014, which is payable on October 15, 2014 to common stockholders of record as of September 30, 2014.

48

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the information included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “Form 10-K”). This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from the results discussed in the forward-looking statements.  See “Special Note Regarding Forward-Looking Statements” at the beginning of this Quarterly Report on Form 10-Q.

Overview

Starwood Property Trust, Inc. (“STWD” together with its subsidiaries, “we” or the “Company”) is a Maryland corporation that commenced operations in August 2009, upon the completion of our initial public offering (“IPO”). We are focused primarily on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt investments, commercial mortgage-backed securities (“CMBS”), and other commercial real estate-related debt investments in both the U.S. and Europe. We refer to the following as our target assets:

· commercial real estate mortgage loans, including preferred equity interests;

· CMBS; and

· other commercial real estate-related debt investments.

We may also invest in residential mortgage-backed securities (“RMBS”), certain residential mortgage loans, distressed or non-performing commercial loans, commercial properties subject to net leases and commercial real estate owned. As market conditions change over time, we may adjust our strategy to take advantage of changes in interest rates and credit spreads as well as economic and credit conditions.

We have two reportable business segments as of June 30, 2014:

·Real estate investment lending (the “Lending Segment”)—includes all business activities of the Company, excluding the LNR Property LLC (“LNR”) business, which generally represents investments in real estate related loans and securities that are held-for-investment.

·LNR—includes all business activities of the acquired LNR business excluding the consolidation of securitization VIEs.

Refer to Note 1 of our condensed consolidated financial statements included herein for further discussion of our business and organization including our material business acquisitions and dispositions.

Developments During the Second Quarter of 2014

·Originated a $152.0 million first mortgage and mezzanine financing for the acquisition of a Class A office campus in Pleasanton, California, of which the Company funded $106.5 million during the second quarter.

·Originated a $120.0 million first mortgage and mezzanine refinancing of existing first mortgage, senior mezzanine and junior mezzanine loans on a six property office portfolio located in Rosslyn, Virginia.  The Company was the original lender on the $49.8 million junior mezzanine loan. The Company fully funded the refinancing during the second quarter.

·Originated a $69.6 million first mortgage and mezzanine financing for the acquisition of a Class A office building in Parsippany, New Jersey, of which the Company funded $58.9 million during the second quarter.

·Originated a $62.2 million first mortgage financing for the acquisition of a 953 key, full service hotel in San Diego, California, of which the Company funded $59.6 million during the second quarter.

·Originated a $59.7 million first mortgage and mezzanine financing for the acquisition of a seven property office portfolio in Minneapolis, Minnesota, of which the Company funded $54.3 million during the second quarter.

·Originated a $58.0 million first mortgage financing for the acquisition of a Class A office building in San Francisco, California. The Company fully funded the loan during the second quarter.

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·Funded $72.3 million of previously originated loan commitments during the second quarter.

·Named special servicer on six new issue CMBS deals with total unpaid principal balances of $6.6 billion.

·Purchased $107.1 million of CMBS, including $97.0 million in new issue B-pieces.

·Originated new conduit loans of $320.6 million.

·Received proceeds of $364.3 million from sales of conduit loans.

·Amended our Lender 3 Repo 1 facility to (i) increase additional borrowings by $42.7 million; (ii) extend the maturity date for loan collateral to May 2019, assuming the exercise of two one-year extension options; (iii) reduce pricing for all purchased assets; and (iv) increase advance rates for certain purchased assets.

·Issued 22.0 million shares of common stock for gross proceeds of $491.0 million.  In connection with this offering, the underwriters had a 30-day option to purchase an additional 3.3 million shares of common stock, which they exercised in full, resulting in additional gross proceeds of $73.7 million.

·Entered into an amended and restated At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated to sell shares of the Company’s common stock of up to $500 million from time to time, through an “at the market” equity offering program.  During the second quarter, we issued 759 thousand shares under the ATM Agreement for gross proceeds of $18.3 million.

·Established the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) which provides stockholders with a means of purchasing additional shares of our common stock by reinvesting the cash dividends paid on our common stock and by making additional optional cash purchases. During the second quarter, shares issued under the DRIP Plan were not material.

Developments During the First Quarter of 2014

·Completed the spin-off of our SFR segment to our stockholders on January 31, 2014, as described above.

·Originated a $450.0 million first mortgage and mezzanine construction financing for the development of a 57-story tower containing luxury condominium residences and ground floor retail space in Manhattan, New York, of which the Company funded $26.1 million during the first quarter.

·Originated a $234.9 million first mortgage and mezzanine construction financing for the development of a mixed-use luxury residential and retail development in the Flushing area of Queens, New York, of which the Company funded $19.9 million during the first quarter.

·Co-originated $407.5 million out of a total of $815.0 million of first mortgage and mezzanine financing, which was used to refinance and recapitalize loans the Company had co-originated in October 2012 for the acquisition and redevelopment of a 10-story retail building in the Times Square area of Manhattan, New York, including the addition of a hotel.  The Company’s balance under the prior loans was $210.9 million.  The Company funded $182.0 million of the financing during the first quarter.

·Originated and fully funded $197.2 million of first mortgage and mezzanine financing secured by an 89-asset bank branch portfolio in California.

·Originated a $179.5 million first mortgage and mezzanine loan to finance the acquisition of a premier data center in Philadelphia, Pennsylvania, of which the Company funded $99.9 million during the first quarter.

·Originated a $113.5 million first mortgage and mezzanine loan to finance the acquisition of a 31-story class A office tower located in Burbank, California, of which the Company funded $74.0 million during the first quarter.

·Named special servicer on three new issue CMBS deals with total unpaid principal balances of $3.2 billion.

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·Purchased $44.7 million of CMBS, including $38.9 million in new issue B-pieces.

·Originated new conduit loans of $261.8 million.

·Received proceeds of $302.5 million from sales of conduit loans.

·Amended one of our repurchase facilities to upsize available borrowings to $1.0 billion from $550 million, extend the maturity date, allow for additional extension options, reduce pricing and debt-yield thresholds for purchased assets and amend certain financial covenants to contemplate the spin-off of the SFR segment.  Refer to Note 8 of our condensed consolidated financial statements for further discussion.

Subsequent Events

Refer to Note 22 of our condensed consolidated financial statements included herein for a discussion of subsequent events.

Results of Operations

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

The following table compares our summarized results of operations for the three and six months ended June 30, 2014 and 2013 by business segment (amounts in thousands):

	For the three months ended June 30,									For the six months endedJune 30,
	2014			2013			$ Change			2014			2013			$ Change
Revenues:
Lending segment	$	118,331		$	86,410		$	31,921		$	238,824		$	170,419		$	68,405
LNR segment	95,714			68,850			26,864			181,327			68,850			112,477
LNR VIEs	(43,295		)	(20,817		)	(22,478		)	(77,422		)	(20,817		)	(56,605		)
	170,750			134,443			36,307			342,729			218,452			124,277
Costs and expenses:
Lending segment	60,351			52,138			8,213			120,800			93,011			27,789
LNR segment	57,114			48,311			8,803			113,528			48,311			65,217
SFR segment allocations	—			—			—			1,882			—			1,882
LNR VIEs	221			165			56			445			165			280
	117,686			100,614			17,072			236,655			141,487			95,168
Other income:
Lending segment	10,878			789			10,089			12,395			23,980			(11,585		)
LNR segment	17,692			23,206			(5,514		)	56,817			23,206			33,611
LNR VIEs	43,025			21,088			21,937			77,425			21,088			56,337
	71,595			45,083			26,512			146,637			68,274			78,363
Income from continuing operations before income taxes:
Lending segment	68,858			35,061			33,797			130,419			101,388			29,031
LNR segment	56,292			43,745			12,547			124,616			43,745			80,871
SFR segment allocations	—			—			—			(1,882		)	—			(1,882		)
LNR VIEs	(491		)	106			(597		)	(442		)	106			(548		)
	124,659			78,912			45,747			252,711			145,239			107,472
Income tax provision	(4,277		)	(11,343		)	7,066			(9,897		)	(11,958		)	2,061
Loss from discontinued operations, net of tax	—			(6,058		)	6,058			(1,551		)	(8,346		)	6,795
Net income attributable to non- controlling interests	(2,514		)	(1,057		)	(1,457		)	(2,794		)	(2,238		)	(556		)
Net income attributable to Starwood Property Trust, Inc.	$	117,868		$	60,454		$	57,414		$	238,469		$	122,697		$	115,772

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Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Lending Segment

Revenues

For the three months ended June 30, 2014, revenues of our Lending Segment increased $31.9 million to $118.3 million, compared to $86.4 million for the three months ended June 30, 2013. This increase was primarily due to a $30.2 million increase in interest income from loans, which reflects a $1.6 billion net increase in loan investments of our Lending Segment between June 30, 2013 and 2014, mainly resulting from new loan originations.

Costs and Expenses

For the three months ended June 30, 2014, costs and expenses of our Lending Segment increased $8.2 million to $60.3 million, compared to $52.1 million for the three months ended June 30, 2013. The increase was primarily due to increases of $11.6 million in interest expense, $6.6 million in management fees and $4.3 million in general and administrative (“G&A”) expenses, all partially offset by the absence of $13.4 million of business combination costs incurred in the 2013 quarter associated with the LNR acquisition.  The increase in interest expense reflects a $0.9 billion increase in outstanding balances under secured financing agreements of our Lending Segment between June 30, 2013 and 2014, as well as our issuance of $460 million principal amount of 4.0% convertible senior notes in July 2013.  These borrowings, along with equity issuances, are used to fund the growth of our investment portfolio.  The increase in management fees reflects the impacts of (i) higher returns on invested capital which resulted in an incentive fee in the 2014 second quarter, compared to none in the 2013 quarter, and (ii) higher manager stock compensation expense resulting from awards granted in the 2014 first quarter.  The increase in G&A expenses reflects higher legal fees principally associated with the administration of our financing facilities and higher compensation expense, both reflective of the increased size of our investment portfolio and related borrowings.

Other Income

For the three months ended June 30, 2014, other income of our Lending Segment increased $10.1 million to $10.9 million, from $0.8 million for the three months ended June 30, 2013. The increase was primarily due to $10.1 million of gains on sales of investments, particularly RMBS, in the 2014 second quarter, compared to a negligible loss on sales of investments in the 2013 quarter.

LNR Segment and VIEs

The Company acquired LNR on April 19, 2013.  Therefore, a comparison of results of the LNR Segment and VIEs for the three months ended June 30, 2014 to the three months ended June 30, 2013 is not meaningful as the current year quarter has an additional 18 days of operational activity.

Revenues

For the three months ended June 30, 2014 and 2013, revenues of LNR were $52.4 million and $48.0 million, respectively, after consolidated VIE eliminations of $43.3 million and $20.8 million, respectively.  For the three months ended June 30, 2014, these revenues primarily consisted of $32.5 million of servicing fees and $15.0 million of interest income from investment securities and loans, after consolidated VIE eliminations of $25.3 million and $17.6 million, respectively.  For the three months ended June 30, 2013, these revenues primarily consisted of $39.1 million of servicing fees and $7.2 million of interest income from investment securities and loans, after consolidated VIE eliminations of $13.7 million and $6.8 million, respectively.  The VIE eliminations are merely a function of the number of CMBS trusts consolidated in any given period, and as such, are not a meaningful indicator of the operating results for this segment.  The increase in revenues of $26.9 million (before VIE eliminations) is not only attributable to additional days in the 2014 second quarter, but also to improved performance of the CMBS book.

Costs and Expenses

For the three months ended June 30, 2014 and 2013, costs and expenses of LNR were $57.3 million and $48.5 million, respectively, including nominal VIE eliminations.  For the three months ended June 30, 2014, these costs and expenses primarily consisted of G&A expenses of $35.2 million, direct and allocated interest expense of $6.1 million, depreciation and amortization of $5.2 million (including $4.4 million related to the European servicing rights intangible), allocated management fees of $4.6 million, and other expenses of $6.0 million, which includes accruals for contingencies and fee sharing arrangements.  For the three months ended June 30, 2013, these costs and expenses primarily consisted of G&A expenses of $40.7 million, direct and allocated interest

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expense of $2.7 million, depreciation and amortization of $2.2 million and allocated management fees of $2.3 million.  G&A expenses in the three months ended June 30, 2013 included $8.5 million of expenses recognized under LNR’s change in control bonus plan as well as non-recurring severance expenses of $6.7 million incurred in connection with the LNR segment restructuring which occurred after the acquisition.

Other Income

For the three months ended June 30, 2014 and 2013, other income of LNR was $60.7 million and $44.3 million, respectively, including additive net VIE eliminations of $43.0 million and $21.1 million, respectively.  For the three months ended June 30, 2014, other income primarily consisted of $47.0 million of income of consolidated VIEs and $15.7 million of net increases in fair value of investment securities and mortgage loans held-for-sale, which reflect both realized and unrealized net gains.  For the three months ended June 30, 2013, other income primarily consisted of $31.9 million of income of consolidated VIEs and $8.2 million of net gain on derivatives which are used to hedge interest rate risk and credit risk on LNR’s conduit loans held-for-sale.  Income of consolidated VIEs reflects amounts associated with LNR’s variable interests in the CMBS trusts it consolidates, including special servicing fees, interest income, and changes in fair value of CMBS and servicing rights.  As noted above, this number is merely a function of the number of CMBS trusts consolidated in any given period, and as such, is not a meaningful indicator of the operating results for this segment.

Income Tax Provision

Most of our consolidated income tax provision relates to the taxable nature of LNR’s loan servicing and loan conduit businesses which are housed in TRSs.  Our tax provision for the three months ended June 30, 2014, as well as the overall effective tax rate, is lower than for the three months ended June 30, 2013 primarily due to the finalization of our tax planning strategies associated with the LNR acquisition.

Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

Lending Segment

Revenues

For the six months ended June 30, 2014, revenues of our Lending Segment increased $68.4 million to $238.8 million, compared to $170.4 million for the six months ended June 30, 2013. This increase is primarily due to a $64.6 million increase in interest income from loans, which reflects a $1.6 billion net increase in loan investments of our Lending Segment between June 30, 2013 and 2014, mainly resulting from new loan originations.

Costs and Expenses

For the six months ended June 30, 2014, costs and expenses of our Lending Segment increased $27.8 million to $120.8 million, compared to $93.0 million for the six months ended June 30, 2013. The increase was primarily due to increases of $25.4 million in interest expense, $12.9 million in management fees and $7.4 million in G&A expenses, all partially offset by the absence of $17.6 million of business combination costs incurred in the 2013 period associated with the LNR acquisition.  The increase in interest expense reflects our issuance of $1.1 billion total principal amount of 4.6% and 4.0% convertible senior notes in February and July of 2013, respectively, and a $0.9 billion increase in outstanding balances under secured financing agreements of our Lending Segment between June 30, 2013 and 2014.  These borrowings, along with equity issuances, are used to fund the growth of our investment portfolio.  The increase in management fees reflects the impacts of (i) higher returns on invested capital which resulted in an incentive fee in the 2014 period, compared to none in the 2013 period, and (ii) higher manager stock compensation expense resulting from awards granted in the 2014 first quarter.  The increase in G&A expenses reflects higher legal fees principally associated with the administration of our financing facilities and higher compensation expense, both reflective of the increased size of our investment portfolio and related borrowings.

Other Income

For the six months ended June 30, 2014, other income of our Lending Segment decreased $11.6 million to $12.4 million, from $24.0 million for the six months ended June 30, 2013. The decrease was primarily due to a $24.6 million unfavorable swing in gain (loss) on derivatives partially offset by an $11.7 million favorable swing in foreign currency gain (loss).  The unfavorable swing in gain (loss) on derivatives was primarily due to $14.8 million of unrealized gains on foreign currency hedges in the six months ended June 30, 2013 driven by a deterioration of the European currency markets principally in the 2013 first quarter compared to a $10.0 million loss in the six months ended June 30, 2014 driven by a strengthening of those currency markets.  These 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 CMBS investments.   The unfavorable swing in these foreign currency hedges is greater than

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the offsetting favorable swing in foreign currency gain (loss) mainly because the portion of unrealized foreign currency gain (loss) associated with our available-for-sale CMBS investments is reported in accumulated other comprehensive income rather than earnings, in accordance with GAAP, whereas the full change in fair value of the related currency hedges is reported in earnings since they are not designated hedges.

LNR Segment and VIEs

The Company acquired LNR on April 19, 2013. Therefore, a comparison of results of the LNR Segment and VIEs for the six months ended June 30, 2014 to the six months ended June 30, 2013 is not meaningful as the current year period has an additional 108 days of operational activity.  Refer to the three month discussion above with respect to the composition of LNR’s revenues, costs and expenses and other income for the 2013 six month period, which is the same as the 2013 three month period.

Revenues

For the six months ended June 30, 2014, revenues of LNR were $103.9 million, after consolidated VIE eliminations of $77.4 million, and primarily consisted of $66.7 million of servicing fees and $29.0 million of interest income from investment securities and loans, after consolidated VIE eliminations of $47.3 million and $29.5 million, respectively.

Costs and Expenses

For the six months ended June 30, 2014, costs and expenses of LNR were $114.0 million, including nominal VIE eliminations, and primarily consisted of G&A expenses of $74.1 million, direct and allocated interest expense of $11.6 million, allocated management fees of $10.3 million and depreciation and amortization of $9.8 million (including $8.4 million related to the European servicing rights intangible).  Other expenses were $7.7 million, which includes accruals for contingencies and fee sharing arrangements.

Other Income

For the six months ended June 30, 2014, other income of LNR was $134.2 million, including additive net VIE eliminations of $77.4 million, and primarily consisted of $103.0 million of income of consolidated VIEs and $45.1 million of net increases in fair value of investment securities and mortgage loans held-for-sale, which are accounted for using the fair value option.  These increases were partially offset by a $10.8 million decrease in the fair value of our domestic servicing intangible resulting from the expected amortization of this deteriorating asset, net of increases in fair value due to the attainment of new servicing contracts, and $7.3 million of net loss on derivatives which are used to hedge interest rate risk and credit risk on LNR’s conduit loans held-for-sale.

Income Tax Provision

Most of our consolidated income tax provision relates to the taxable nature of LNR’s loan servicing and loan conduit businesses which are housed in TRSs.  Our tax provision for the six months ended June 30, 2014, as well as the overall effective tax rate, is lower than for the six months ended June 30, 2013 primarily due to the finalization of our tax planning strategies associated with the LNR acquisition.

Non-GAAP Financial Measures

Core Earnings is a non-GAAP financial measure. We calculate Core Earnings as GAAP net income (loss) excluding non-cash equity compensation expense, the incentive fee due under our Management Agreement, depreciation and amortization of real estate (to the extent that we own properties), any unrealized gains, losses or other non-cash items recorded in net income for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income. The amount is adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges as determined by our Manager and approved by a majority of our independent directors.

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

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

In assessing the appropriate weighted average diluted share count to apply to Core Earnings for purposes of determining Core earnings per share (“EPS”), management considered the following: (i) in accordance with GAAP, the two-class method was deemed most dilutive; and (ii) under the two-class method, our participating securities were determined to be anti-dilutive and were thus excluded from the denominator.  Because compensation expense related to participating securities is added back for Core Earnings purposes pursuant to the definition above, there is no dilution to Core Earnings resulting from the associated expense recognition.  As a result, we determined that the two-class method, adjusted to include (instead of exclude) participating securities, was the most conservative and appropriate weighted average share count to apply to the calculation.  The following table presents the diluted weighted average shares used in our calculation of Core EPS (in thousands):

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2014	2013	2014	2013
Diluted weighted average shares	225,766	163,489	214,070	150,156

The definition of Core Earnings allows management to make adjustments, subject to the approval of a majority of the independent directors, in non-standard situations where such adjustments are considered appropriate in order for Core Earnings to be calculated in a manner consistent with its definition and objective. We encountered this type of situation during 2014 when a hedged loan was expected to be repaid, but was instead extended.  The series of foreign exchange forward contracts which hedged this loan were in a loss position on the expected repayment date.  In order to accommodate the revised repayment date, the hedges were extended.  In doing so, the counterparty required that the existing hedges be effectively liquidated.  As a result, for GAAP and Core Earnings purposes, the loss on the hedge is realized, while the corresponding gain on the loan continues as unrealized until the repayment occurs.  In an effort to treat this transaction consistently with similar past transactions, and to match the income statement effects of a hedge with the related hedged item, we modified the definition of Core Earnings to allow for hedged loans and their corresponding hedges to be treated as realized in the same accounting period.

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Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

The following table presents our summarized results of operations and reconciliation to Core Earnings for the three months ended June 30, 2014, by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Total
Revenues	$	118,331		$	95,714		$	214,045
Costs and expenses	(60,351		)	(57,114		)	(117,465		)
Other income	10,878			17,692			28,570
Income from continuing operations before income taxes	68,858			56,292			125,150
Income tax provision	(443		)	(3,834		)	(4,277		)
Income attributable to non-controlling interests	(3,005		)	—			(3,005		)
Net income attributable to Starwood Property Trust, Inc.	65,410			52,458			117,868
Add / (Deduct):
Non-cash equity compensation expense	7,524			—			7,524
Management incentive fee	2,674			1,373			4,047
Depreciation and amortization	—			788			788
Loan loss allowance, net	(139		)	—			(139		)
Interest income adjustment for securities	(948		)	396			(552		)
Other non-cash items	—			250			250
(Gains) / losses on:
Loans held-for-sale	—			(512		)	(512		)
Securities	(690		)	(16,577		)	(17,267		)
Derivatives	(2,622		)	1,362			(1,260		)
Foreign currency	5,017			—			5,017
Earnings from unconsolidated entities	—			(522		)	(522		)
Core Earnings	$	76,226		$	39,016		$	115,242
Core Earnings per Weighted Average Diluted Share	$	0.34		$	0.17		$	0.51

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The following table presents our summarized results of operations and reconciliation to Core Earnings for the three months ended June 30, 2013, by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Total
Revenues	$	86,410		$	68,850		$	—		$	155,260
Costs and expenses	(52,138		)	(48,311		)	—			(100,449		)
Other income	789			23,206			—			23,995
Income from continuing operations before income taxes	35,061			43,745			—			78,806
Income tax provision	(411		)	(10,932		)	—			(11,343		)
Loss from discontinued operations, net of tax	—			—			(6,058		)	(6,058		)
Income attributable to non-controlling interests	(951		)	—			—			(951		)
Net income (loss) attributable to Starwood Property Trust, Inc.	33,699			32,813			(6,058		)	60,454
Add / (Deduct):
Non-cash equity compensation expense	4,173			—			—			4,173
Management incentive fee	—			—			—			—
Change in Control Plan	—			8,512			—			8,512
Depreciation and amortization	—			112			715			827
Loan loss allowance	725			—			—			725
Interest income adjustment for securities	(488		)	3,806			—			3,318
(Gains) / losses on:
Loans held for sale	—			8,344			—			8,344
Securities	690			(5,248		)	—			(4,558		)
Impairment of real estate	—			—			458			458
Derivatives	1,144			(6,037		)	—			(4,893		)
Foreign currency	(1,716		)	—			—			(1,716		)
Earnings from unconsolidated entities	—			(546		)	—			(546		)
U.S. special servicing intangible	—			(6,114		)	—			(6,114		)
Core Earnings (Loss)	$	38,227		$	35,642		$	(4,885	)	$	68,984
Core Earnings (Loss) per Weighted Average Diluted Share	$	0.23		$	0.22		$	(0.03	)	$	0.42

Real Estate Investment Lending Segment

The Lending Segment’s Core Earnings increased by $38.0 million, from $38.2 million during the second quarter of 2013 to $76.2 million in the second quarter of 2014. After making adjustments for the calculation of Core Earnings, revenues were $117.4 million, costs and expenses were $50.3 million, other income was $12.6 million and income taxes were $0.4 million.

Core revenues, consisting principally of interest income on loans, increased by $31.5 million due to growth of $1.6 billion in our loan portfolio since June 30, 2013.

Core costs and expenses increased by $3.1 million in the second quarter of 2014, primarily due to higher interest expense associated with the various facilities utilized to fund the growth of our investment portfolio.  This increase in interest expense was partially offset by the absence of $13.4 million of costs incurred in the second quarter of 2013 associated with the LNR acquisition.  General and administrative expenses increased by $4.3 million during the quarter primarily due to higher legal fees principally associated with the administration of our financing facilities and higher compensation expense.

Core other income increased by $11.7 million, principally due to higher gains on sales of investments of $9.6 million. The nature and timing of investment sales will depend upon a variety of factors, including our current outlook and strategy with respect to an investment, other available investment opportunities, and market pricing. As a result, gains (or losses) from sales of our investments have fluctuated over time, and we would expect this variability to continue for the foreseeable future.

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LNR Segment

The Company acquired LNR on April 19, 2013.  Therefore, a comparison of the LNR Segment Core Earnings for the three months ended June 30, 2014 to the three months ended June 30, 2013 is not meaningful as the current year quarter has an additional 18 days of operational activity.

The LNR Segment contributed Core Earnings of $39.0 million during the second quarter of 2014. After making adjustments for the calculation of Core Earnings, revenues were $96.1 million, costs and expenses were $54.7 million, other income was $1.4 million and income taxes were $3.8 million.

Core revenues benefited from servicing fees of $57.8 million, CMBS interest income of $30.5 million, interest income on our conduit loans of $2.6 million, and other revenues of $5.2 million. Our U.S. servicing operation earned $45.3 million in fees during the period while our European servicer earned $12.5 million. The treatment of CMBS interest income on a GAAP basis is complicated by our application of the ASC 810 consolidation rules. In an attempt to treat these securities similar to the trust’s other investment securities, we compute core interest income pursuant to an effective yield methodology. In doing so, we segregate the portfolio into various categories based on the components of the bonds’ cash flows and the volatility related to each of these components. We then accrete interest income on an effective yield basis using the components of cash flows that are reliably estimable. Other minor adjustments are made to reflect management’s expectations for other components of the projected cash flow stream.

Included in core costs and expenses were general and administrative expenses of $35.0 million, allocated segment management fees of $3.2 million, direct interest expense of $1.0 million, allocated interest expense of $5.1 million and amortization expense of $4.4 million. Amortization expense principally represents the amortization of the European special servicing intangible, which reflects the deterioration of this asset as fees are earned.

Core other income includes profit realized upon securitization of loans by our conduit business, gains on sales of CMBS, gains on derivatives that were either effectively terminated or novated, and earnings from unconsolidated entities. Derivatives include instruments which hedge interest rate risk and credit risk on our conduit loans. For GAAP purposes, the loans, CMBS and derivatives are accounted for at fair value, with all changes in fair value (realized or unrealized) recognized in earnings. The adjustments to Core Earnings outlined above are also applied to the GAAP earnings of our unconsolidated entities.

Income taxes principally relate to the operating results of our servicing business and our conduit business, which are held in TRSs.

Single Family Residential Segment

As discussed in Note 3 to our condensed consolidated financial statements included herein, the SFR segment was spun off to our stockholders on January 31, 2014.

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Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

The following table presents our summarized results of operations and reconciliation to Core Earnings for the six months ended June 30, 2014, by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Total
Revenues	$	238,824		$	181,327		$	—		$	420,151
Costs and expenses	(120,800		)	(113,528		)	(1,882		)	(236,210		)
Other income	12,395			56,817			—			69,212
Income (loss) from continuing operations before income taxes	130,419			124,616			(1,882		)	253,153
Income tax provision	(526		)	(9,371		)	—			(9,897		)
Loss from discontinued operations, net of tax	—			—			(1,551		)	(1,551		)
Income attributable to non-controlling interests	(3,236		)	—			—			(3,236		)
Net income (loss) attributable to Starwood Property Trust, Inc.	126,657			115,245			(3,433		)	238,469
Add / (Deduct):
Non-cash equity compensation expense	14,731			—			—			14,731
Management incentive fee	7,148			4,075			—			11,223
Change in Control Plan	—			1,279			—			1,279
Depreciation and amortization	—			1,070			1,540			2,610
Loan loss allowance, net	358			—			—			358
Interest income adjustment for securities	(1,350		)	5,854			—			4,504
Other non-cash items	—			250			—			250
(Gains) / losses on:
Loans held-for-sale	—			(3,116		)	—			(3,116		)
Securities	(1,053		)	(39,114		)	—			(40,167		)
Derivatives	(180		)	3,325			—			3,145
Foreign currency	4,072			—			—			4,072
Earnings from unconsolidated entities	—			(593		)	—			(593		)
Core Earnings (Loss)	$	150,383		$	88,275		$	(1,893	)	$	236,765
Core Earnings (Loss) per Weighted Average Diluted Share	$	0.70		$	0.42		$	(0.01	)	$	1.11

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The following table presents our summarized results of operations and reconciliation to Core Earnings for the six months ended June 30, 2013, by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Total
Revenues	$	170,419		$	68,850		$	—		$	239,269
Costs and expenses	(93,011		)	(48,311		)	—			(141,322		)
Other income	23,980			23,206			—			47,186
Income from continuing operations before income taxes	101,388			43,745			—			145,133
Income tax provision	(1,026		)	(10,932		)	—			(11,958		)
Loss from discontinued operations, net of tax	—			—			(8,346		)	(8,346		)
Income attributable to non-controlling interests	(2,132		)	—			—			(2,132		)
Net income (loss) attributable to Starwood Property Trust, Inc.	98,230			32,813			(8,346		)	122,697
Add / (Deduct):
Non-cash equity compensation expense	8,829			—			—			8,829
Management incentive fee	47			—			—			47
Change in Control Plan	—			8,512			—			8,512
Depreciation and amortization	—			112			1,428			1,540
Loan loss allowance	755			—			—			755
Interest income adjustment for securities	(488		)	3,806			—			3,318
(Gains) / losses on:
Loans held for sale	—			8,344			—			8,344
Securities	252			(5,248		)	—			(4,996		)
Impairment of real estate	—			—			458			458
Derivatives	(15,436		)	(6,037		)	—			(21,473		)
Foreign currency	5,711			—			—			5,711
Earnings from unconsolidated entities	—			(546		)	—			(546		)
U.S. special servicing intangible	—			(6,114		)	—			(6,114		)
Core Earnings (Loss)	$	97,900		$	35,642		$	(6,460	)	$	127,082
Core Earnings (Loss) per Weighted Average Diluted Share	$	0.65		$	0.24		$	(0.04	)	$	0.85

Real Estate Investment Lending Segment

The Lending Segment’s Core Earnings increased by $52.5 million, from $97.9 million during the six months ended June 30, 2013 to $150.4 million during the six months ended June 30, 2014. After making adjustments for the calculation of Core Earnings, revenues were $237.5 million, costs and expenses were $98.6 million, other income was $15.2 million and income taxes were $0.5 million.

Core revenues, consisting principally of interest income on loans, increased by $67.5 million due to growth of $1.6 billion in our loan portfolio since June 30, 2013.

Core costs and expenses increased by $15.2 million, primarily due to higher interest expense associated with the various facilities utilized to fund the growth of our investment portfolio.  This increase in interest expense was partially offset by the absence of $17.6 million of costs associated with the LNR acquisition.  General and administrative expenses increased by $7.0 million primarily due to higher legal fees principally associated with the administration of our financing facilities and higher compensation expense.

Core other income increased by $0.7 million on a net basis.

LNR Segment

The Company acquired LNR on April 19, 2013.  Therefore, a comparison of the LNR Segment Core Earnings for the six months ended June 30, 2014 to the six months ended June 30, 2013 is not meaningful as the current year period has an additional 108 days of operational activity.

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The LNR Segment contributed Core Earnings of $88.3 million during the six months ended June 30, 2014. After making adjustments for the calculation of Core Earnings, revenues were $187.2 million, costs and expenses were $106.8 million, other income was $17.3 million and income taxes were $9.4 million.

Core revenues benefited from servicing fees of $114.0 million, CMBS interest income of $58.9 million, interest income on our conduit loans of $5.4 million, and other revenues of $8.9 million. Our U.S. servicing operation earned $88.6 million in fees during the period while our European servicer earned $25.4 million. The treatment of CMBS interest income on a GAAP basis is complicated by our application of the ASC 810 consolidation rules. In an attempt to treat these securities similar to the trust’s other investment securities, we compute core interest income pursuant to an effective yield methodology. In doing so, we segregate the portfolio into various categories based on the components of the bonds’ cash flows and the volatility related to each of these components. We then accrete interest income on an effective yield basis using the components of cash flows that are reliably estimable. Other minor adjustments are made to reflect management’s expectations for other components of the projected cash flow stream.

Included in core costs and expenses were general and administrative expenses of $72.8 million, allocated segment management fees of $6.1 million, direct interest expense of $1.9 million, allocated interest expense of $9.7 million and amortization expense of $8.4 million. Amortization expense principally represents the amortization of the European special servicing intangible, which reflects the deterioration of this asset as fees are earned.

Core other income includes profit realized upon securitization of loans by our conduit business, gains on sales of CMBS, gains on derivatives that were either effectively terminated or novated, and earnings from unconsolidated entities. Derivatives include instruments which hedge interest rate risk and credit risk on our conduit loans. For GAAP purposes, the loans, CMBS and derivatives are accounted for at fair value, with all changes in fair value (realized or unrealized) recognized in earnings. The adjustments to Core Earnings outlined above are also applied to the GAAP earnings of our unconsolidated entities.

Income taxes principally relate to the operating results of our servicing business and our conduit business, which are held in TRSs.

Single Family Residential Segment

As discussed in Note 3 to our condensed consolidated financial statements included herein, the SFR segment was spun off to our stockholders on January 31, 2014.

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 any dividends to our stockholders, and other general business needs. We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next 12 months. Our strategy for managing liquidity and capital resources has not changed since December 31, 2013, other than as set forth below.  Please refer to our Form 10-K for a description of these strategies.

Cash and Cash Equivalents

As of June 30, 2014, we had cash and cash equivalents of $518.6 million.

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Cash Flows for the Six Months Ended June 30, 2014

	GAAP			VIE Adjustments			Excluding LNR VIEs
Net cash provided by operating activities	$	230,442		$	82		$	230,524
Cash Flows from Investing Activities:
Spin-off of SWAY	(111,960		)	—			(111,960		)
Purchase of investment securities	(53,453		)	(98,291		)	(151,744		)
Proceeds from sales and collections of investment securities	69,333			85,169			154,502
Origination and purchase of loans held-for-investment	(1,277,636		)	—			(1,277,636		)
Proceeds from principal collections and sale of loans	789,532			—			789,532
Acquisition and improvement of single family homes and acquisition of non-performing loans, net of sales proceeds	(58,964		)	—			(58,964		)
Net cash flows from other investments and assets	(18,294		)	(1,472		)	(19,766		)
Increase in restricted cash, net	(5,941		)	—			(5,941		)
Net cash used in investing activities	(667,383		)	(14,594		)	(681,977		)
Cash Flows from Financing Activities:
Borrowings under financing agreements	1,807,229			—			1,807,229
Principal repayments on borrowings	(1,510,052		)	—			(1,510,052		)
Payment of deferred financing costs	(7,881		)	—			(7,881		)
Proceeds from common stock issuances, net of offering costs	581,417			—			581,417
Payment of dividends	(185,594		)	—			(185,594		)
Distributions to non-controlling interests	(33,409		)	—			(33,409		)
Issuance of debt of consolidated VIEs	71,756			(71,756		)	—
Repayment of debt of consolidated VIEs	(99,763		)	99,763			—
Distributions of cash from consolidated VIEs	13,413			(13,413		)	—
Net cash provided by financing activities	637,116			14,594			651,710
Net increase in cash and cash equivalents	200,175			82			200,257
Cash and cash equivalents, beginning of period	317,627			(276		)	317,351
Effect of exchange rate changes on cash	825			—			825
Cash and cash equivalents, end of period	$	518,627		$	(194	)	$	518,433

The discussion below is on a non-GAAP basis, after removing adjustments principally resulting from the consolidation of LNR’s VIEs under ASC 810. These adjustments principally relate to (i) purchase of CMBS related to consolidated VIEs, which are reflected as repayments of VIE debt on a GAAP basis and (ii) sales of CMBS related to consolidated VIEs, which are reflected as VIE distributions on a GAAP basis. There is no significant net impact to cash flows from operations or to overall cash resulting from these consolidations. Refer to Note 2 to our condensed consolidated financial statements included herein for further discussion.

Cash and cash equivalents increased by $200.3 million during the six months ended June 30, 2014, reflecting net cash provided by operating activities of $230.5 million and net cash provided by financing activities of $651.7 million partially offset by net cash used in investing activities of $682.0 million.

Net cash provided by operating activities of $230.5 million for the six months ended June 30, 2014 related primarily to cash interest income of $264.2 million from our loan origination and conduit programs, plus cash interest income on investment securities of $76.0 million. Servicing fees provided cash of $111.4 million and other revenues provided $13.3 million. Offsetting these revenues were general and administrative expenses of $66.7 million, a net change in operating assets and liabilities of $76.4 million, cash interest expense of $65.2 million and management fees of $26.6 million.

Net cash used in investing activities of $682.0 million for the six months ended June 30, 2014 related primarily to the origination and acquisition of new loans held-for-investment of $1.3 billion, $112.0 million distributed in connection with the SWAY spin-off, the acquisition and improvement of real estate and non-performing residential loans of $59.0 million, all partially offset by proceeds received from principal repayments and sales of loans of $789.5 million.

Net cash provided by financing activities of $651.7 million for the six months ended June 30 related primarily to net proceeds from our April 2014 equity offering and other common stock issuances of $581.4 million and net borrowings after repayments on our secured debt of $289.3 million, partially offset by dividend distributions of $185.6 million and distributions to non-controlling entities of $33.4 million.

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Our Investment Portfolio

Lending Segment

The following table sets forth the amount of each category of investments we owned across various property types within our Lending Segment as of June 30, 2014 and December 31, 2013 (amounts in thousands):

June 30, 2014	Face Amount		Carrying Value			% Owned		Asset Specific Financing		Net Investment			Weighted Average Rating	Vintage
First mortgages	$	3,309,328	$	3,255,013		100	%	$	1,492,005	$	1,763,008		N/A	1989-2014
Subordinated mortgages	388,449		355,561			100	%	2,000		353,561			N/A	1999-2014
Mezzanine loans	1,281,518		1,275,207			100	%	42,100		1,233,107			N/A	2006-2014
Loans held-for-sale, fair value option	8,750		8,750			100	%	—		8,750			N/A	2014
Loans transferred as secured borrowings	142,883		142,867			100	%	142,815		52			N/A	N/A
Loan loss allowance	—		(4,342		)			—		(4,342		)	N/A	N/A
RMBS—AFS(1)	312,280		231,605			100	%	120,627		110,978			B-	2003 - 2007
CMBS—AFS(1)	103,113		116,071			100	%	—		116,071			BB+	2012 - 2013
HTM securities(2)	371,700		370,096			100	%	58,467		311,629			N/A	2013
Equity security	15,635		16,104			100	%	—		16,104			N/A	N/A
Investments in unconsolidated entities	52,541		52,541			100	%	—		52,541			N/A	N/A
	$	5,986,197	$	5,819,473				$	1,858,014	$	3,961,459
December 31, 2013
First mortgages	$	2,749,072	$	2,701,730		100	%	$	1,099,628	$	1,602,102		N/A	1989 - 2013
Subordinated mortgages	442,475		407,462			100	%	4,000		403,462			N/A	1999-2013
Mezzanine loans	1,246,841		1,245,729			100	%	—		1,245,729			N/A	2010-2013
Loans transferred as secured borrowings	180,484		180,414			100	%	181,238		(824		)	N/A	N/A
Loan loss allowance	—		(3,984		)			—		(3,984		)	N/A	N/A
RMBS—AFS(1)	414,020		296,236			100	%	127,943		168,293			B-	2003 - 2007
CMBS—AFS(1)	100,648		114,346			100	%	—		114,346			BB+	2012 - 2013
HTM securities(2)	371,700		368,318			100	%	58,467		309,851			N/A	2013
Equity security	15,133		15,247			100	%	—		15,247			N/A	N/A
Investments in unconsolidated entities	50,167		50,167			100	%	—		50,167			N/A	N/A
	$	5,570,540	$	5,375,665				$	1,471,276	$	3,904,389

(1)RMBS and CMBS available-for-sale (“AFS”) securities.

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

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As of June 30, 2014 and December 31, 2013, our Lending Segment’s investment portfolio, excluding other investments, had the following characteristics based on carrying values:

Collateral Property Type	June 30, 2014		December 31, 2013
Office	43.6	%	33.1	%
Hospitality	25.3	%	25.6	%
Multi-family	9.6	%	1.3	%
Retail	7.3	%	11.7	%
Mixed Use	6.6	%	16.9	%
Residential	4.6	%	9.6	%
Industrial	3.0	%	1.8	%
	100.0	%	100.0	%
Geographic Location	June 30, 2014		December 31, 2013
West	30.2	%	25.7	%
North East	20.8	%	20.8	%
International	14.2	%	15.4	%
South East	13.4	%	17.7	%
Mid Atlantic	10.3	%	9.1	%
Midwest	6.7	%	5.3	%
South West	4.4	%	6.0	%
	100.0	%	100.0	%

LNR Segment

The following table sets forth the amount of each category of investments we owned within our LNR Segment as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	FaceAmount		Carrying Value			Asset Specific Financing		Net Investment
June 30, 2014
CMBS, fair value option	$	4,049,330	$	638,069	(1)	$	—	$	638,069
Servicing rights intangibles	N/A		224,676		(2)	—		224,676
Loans held-for-sale, fair value option	144,974		145,662			95,568		50,094
Loans held-for-investment	8,027		4,415			—		4,415
Investments in unconsolidated entities	N/A		68,644			—		68,644
	$	4,202,331	$	1,081,466		$	95,568	$	985,898
December 31, 2013
CMBS, fair value option	$	3,871,803	$	550,282	(1)	$	—	$	550,282
Servicing rights intangibles	N/A		257,736		(2)	—		257,736
Loans held-for-sale, fair value option	209,099		206,672			129,843		76,829
Loans held-for-investment	17,144		12,781			—		12,781
Investments in unconsolidated entities	N/A		76,170			—		76,170
	$	4,098,046	$	1,103,641		$	129,843	$	973,798

(1)Includes $469.5 million and $409.3 million of CMBS reflected in “VIE liabilities” in accordance with ASC 810 as of June 30, 2014 and December 31, 2013, respectively.

(2)Includes $67.8 million and $80.6 million of servicing rights intangibles reflected in “VIE assets” in accordance with ASC 810 as of June 30, 2014 and December 31, 2013, respectively.

New Credit Facilities

In January 2014, we amended our Lender 1 Repo 1 facility to (i) upsize available borrowings to $1.0 billion from $550 million; (ii) extend the maturity date for loan collateral to January 2019 and for CMBS collateral to January 2016, each from August 2014, and each assuming initial extension options; (iii) allow for up to four additional one-year extension options with respect to any loan collateral that remains financed at maturity, in an effort to match the term of the maturity dates of these assets; (iv) reduce pricing and debt-yield thresholds for purchased assets; and (v) amend certain financial covenants to contemplate the spin-off of the SFR segment.  STWD guarantees certain of the obligations of the consolidated subsidiary, which is the borrower under the repurchase

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agreement, up to a maximum liability of either 25% or 100% of the then-currently outstanding repurchase price of purchased assets, depending upon the type of asset being financed.

In May 2014, we amended our Lender 3 Repo 1 facility to (i) increase additional borrowings by $42.7 million; (ii) extend the maturity date for loan collateral to May 2019, assuming the exercise of two one-year extension options; (iii) reduce pricing for all purchased assets; and (iv) increase advance rates for certain purchased assets.

On July 24, 2014, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $225 million to $325 million and reduce pricing 25-50 basis points depending on the collateral type.

On August 1, 2014, we entered into a new $250 million warehouse line to finance our more transitional assets.

Borrowings under Various Financing Arrangements

The following table is a summary of our financing facilities as of June 30, 2014 (dollar amounts in thousands):

	Current Maturity	Extended Maturity(a)	Pricing	Pledged Asset Carrying Value		Maximum Facility Size			Outstanding balance			Approved but Undrawn Capacity(b)		Unallocated Financing Amount(c)
Lender 1 Repo 1	(d)	(d)	LIBOR + 1.85% to 5.25%	$	1,349,733	$	1,000,000		$	753,032		$	125,218	$	121,750
Lender 1 Repo 2	(e)	N/A	LIBOR + 1.90%	230,129		175,000			120,627			32,421		21,952
Lender 1 Repo 3	Dec 2014	Dec 2016	LIBOR + 2.75%	210,041		148,860			148,860			—		—
Lender 2 Repo 1	Oct 2015	Oct 2018	LIBOR + 2.00% to 2.75%	269,290		225,000		(f)	181,151			—		43,849
Lender 3 Repo 1	May 2017	May 2019	LIBOR + 2.85%	135,132		93,836			93,836			—		—
Conduit Repo 1	Sep 2014	Sep 2014	LIBOR + 2.20%	—		250,000			—			—		250,000
Conduit Repo 2	Nov 2014	Nov 2014	LIBOR + 2.10%	128,083		150,000			95,568			—		54,432
Lender 4 Repo 1	Oct 2015	Oct 2017	LIBOR + 2.60%	456,758		359,226			359,226			—		—
Lender 5 Repo 1	Dec 2014	Dec 2014	LIBOR + 2.00%	84,150		58,467			58,467			—		—
Borrowing Base	Sep 2015	Sep 2017	LIBOR + 3.25%(g)	661,164		250,000			84,386			—		165,614
Term Loan	Apr 2020	Apr 2020	LIBOR + 2.75%(g)	2,936,771		668,423			666,114		(h)	—		—
				$	6,461,251	$	3,378,812		$	2,561,267		$	157,639	$	657,597

(a)Subject to certain conditions as defined in the respective facility agreement.

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

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

(d)Maturity date for borrowings collateralized by loans of January 2017 before extension options and January 2019 assuming initial extension options.  Maturity date for borrowings collateralized by CMBS of January 2015 before extension options and January 2016 assuming initial extension options.

(e)The date that is 180 days after the buyer delivers notice to seller, subject to a maximum date of March 13, 2015.

(f)On July 24, 2014, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $225 million to $325 million and reduce pricing 25-50 basis points depending on the collateral type.

(g)Subject to borrower’s option to choose alternative benchmark based rates pursuant to the terms of the credit agreement. The Term Loan is also subject to a 75 basis point floor.

(h)Term loan outstanding balance is net of $2.3 million of unamortized discount.

65

Refer to Note 8 of our condensed consolidated financial statements included herein for further disclosure regarding the terms of our financing arrangements.

Variance between Average and Quarter-End Credit Facility Borrowings Outstanding

The following table compares the average amount outstanding of 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:

Quarter Ended	Quarter-End Balance (in 000’s)	Weighted-Average Balance During Quarter (in 000’s)	Variance (in 000’s)	Explanations for Significant Variances
December 31, 2013	2,257,560	1,850,572	406,988		(a)
March 31, 2014	2,601,062	2,536,926	64,136		(b)
June 30, 2014	2,561,267	2,366,435	194,832		(c)

(a)Variance primarily due to the following: (i) $375.0 million in proceeds from the upsize of the Term Loan in December 2013, and (ii) $86.1 million draw on the Borrowing Base facility.

(b)Variance primarily due to the following:  (i) $281.6 million in draws on the Lender 1 Repo 1 facility subsequent to its upsizing in January 2014; partially offset by (ii) $146.0 million repayment on the Borrowing Base facility in March 2014.

(c)Variance primarily due to the following:  (i) $90.0 million drawn on the Lender 1 Repo 1 facility in June 2014; (ii) $84.4 million drawn on the borrowing base facility in June 2014; and (iii) $43.5 million drawn on the Lender 2 Repo 1 facility in June 2014.

Scheduled Principal Repayments on Investments and Overhang on Financing Facilities

The following scheduled and/or projected principal repayments on our investments were based upon the amounts outstanding and contractual terms of the financing facilities in effect as of June 30, 2014 (amounts in thousands):

	Scheduled Principal Repayments on Loans and Preferred Interests		Scheduled/Projected Principal Repayments on RMBS and CMBS		Projected Required Repayments of Financing			Scheduled Principal Inflows Net of Financing Outflows
Third Quarter 2014	$	173,275	$	16,682	$	(106,985	)	$	82,972
Fourth Quarter 2014	74,913		21,464		(87,486		)	8,891
First Quarter 2015	20,216		16,845		(124,776		)	(87,715		)
Second Quarter 2015	54,913		21,763		(10,831		)	65,845
Total	$	323,317	$	76,754	$	(330,078	)	$	69,993

The Company is in discussions with its lenders to extend or amend any financing facilities which contain near term expirations.

Issuances of Equity Securities

We may raise funds through capital market transactions by issuing capital stock. There can be no assurance, however, that we will be able to access the capital markets at any particular time or on any particular terms. We have authorized 100,000,000 shares of preferred stock and 500,000,000 shares of common stock. At June 30, 2014, we had 100,000,000 shares of preferred stock available for issuance and 276,775,856 shares of common stock available for issuance.

Refer to Note 15 of our condensed consolidated financial statements included herein for discussion of our issuances of equity securities during the six months ended June 30, 2014.

Other Potential Sources of Financing

In the future, we may also use other sources of financing to fund the acquisition of our target assets, including other secured as well as unsecured forms of borrowing and/or sale of certain investment securities which no longer meet our return requirements. We may also seek to raise further equity capital, issue debt securities or liquidate investment securities which no longer meet our return requirements in order to fund our future investments.

66

Off-Balance Sheet Arrangements

We have relationships with unconsolidated entities and/or financial partnerships, such as entities often referred to as SPEs or VIEs. We are not obligated to provide, nor have we provided, any financial support for any SPEs or VIEs. As such, the risk associated with our involvement is limited to the carrying value of our investment in the entity. Refer to Note 13 to our condensed consolidated financial statements included herein for further discussion.

Dividends

We intend to continue to make regular quarterly distributions to holders of our common stock. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. We intend to continue to pay regular quarterly dividends to our stockholders in an amount approximating our net taxable income, if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating and debt service requirements. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. Please refer to our Form 10-K for a detailed dividend history.

The Company’s board of directors declared the following dividends during the six months ended June 30, 2014:

Record Date	Announce Date	Pay Date	Amount		Frequency
6/30/14	5/6/14	7/15/14	$	0.48	Quarterly
3/31/14	2/24/14	4/15/14	$	0.48	Quarterly

On August 6, 2014, our board of directors declared a dividend of $0.48 per share for the third quarter of 2014, which is payable on October 15, 2014 to common stockholders of record as of September 30, 2014.

Leverage Policies

Our strategies with regards to use of leverage have not changed significantly since December 31, 2013.  Please refer to our Form 10-K for a description of our strategies regarding use of leverage.

Contractual Obligations and Commitments

Contractual obligations as of June 30, 2014 are as follows (amounts in thousands):

	Total		Less than 1 Year		1 to 3 years		3 to 5 years		More than 5 years
Secured financings	$	2,563,576	$	330,079	$	320,486	$	1,278,432	$	634,579
Convertible senior notes	1,059,978		—		—		1,059,978		—
Secured borrowings on transferred loans(a)	142,883		13,656		1,463		127,764		—
Loan funding obligations	1,783,426		801,104		968,562		13,760		—
Future lease commitments	40,197		6,550		12,151		11,473		10,023
Total	$	5,590,060	$	1,151,389	$	1,302,662	$	2,491,407	$	644,602

(a)These amounts relate to financial asset sales that were required to be accounted for as secured borrowings. As a result, the assets we sold remain on our consolidated balance sheet for financial reporting purposes. Such assets are expected to provide match funding for these liabilities.

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

67

Critical Accounting Estimates

Refer to the section of our Form 10-K entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” for a full discussion of our critical accounting estimates.  Our critical accounting estimates have not materially changed since December 31, 2013.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.  Our strategies for managing risk and our exposure to such risks have not changed materially since December 31, 2013.  Refer to our Form 10-K Item 7A for further discussion.

Market Risk

Our loans and investments are subject to credit risk. The performance and value of our loans and investments depend upon the owners’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest and principal due to us. To monitor this risk, our Manager’s asset management team reviews our investment portfolios and in certain instances 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 loans held-for-sale through the purchase of credit index instruments.  The following table presents our credit index instruments as of June 30, 2014 and December 31, 2013 (dollar amounts in thousands):

	Face Value of Loans Held-for-Sale		Aggregate Notional Value of Credit Index Instruments		Number of Credit Index Instruments
June 30, 2014	$	153,724	$	50,000	8
December 31, 2013	$	209,099	$	50,000	4

Our RMBS portfolio had a weighted average Standard and Poor’s rating of B-, as of both June 30, 2014 and December 31, 2013.  Our CMBS fair value option portfolio, including CMBS eliminated in consolidation pursuant to ASC 810 and excluding unrated CMBS, had a weighted average rating of CCC and CC, as of June 30, 2014 and December 31, 2013, respectively.

As of June 30, 2014, we had not elected the fair value option for the following CMBS (1) $115.2 million of an available-for-sale CMBS rated BB+, (2) $84.1 million of a held-to-maturity CMBS rated BB-, and (3) a $0.9 million interest-only debt security rated BBB-.

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. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through borrowings under repurchase obligations or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore requires us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise.

68

Interest Rate Risk

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our investments and the related financing obligations. In general, we seek to match the interest rate characteristics of our investments with the interest rate characteristics of any related financing obligations such as repurchase agreements, bank credit facilities, term loans, revolving facilities and securitizations. In instances where the interest rate characteristics of an investment and the related financing obligation are not matched, we mitigate such interest rate risk through the utilization of interest rate swaps of the same duration. The following table presents financial instruments where we have utilized interest rate swaps to hedge interest rate risk and the related interest rate swaps as of June 30, 2014 and December 31, 2013 (dollar amounts in thousands):

Instrument hedged as of June 30, 2014	Face Value of Hedged Instruments		Aggregate NotionalValue of Interest Rate Swaps		Number of Interest Rate Swaps
Loans held-for-investment	$	59,922	$	59,941	4
Loans held-for-sale	154,412		129,100		31
RMBS, available-for-sale	312,280		74,000		3
Secured financing agreements	156,013		162,941		7
	$	682,627	$	425,982	45
Instrument hedged as of December 31, 2013
Loans held-for-investment	$	60,810	$	60,905	4
Loans held-for-sale	209,099		175,400		41
RMBS, available-for-sale	414,020		25,000		2
CMBS, fair value option	18,939		9,700		1
Secured financing agreements	168,766		177,100		8
	$	871,635,	$	448,105	56

The following table summarizes the change in net investment income for the subsequent 12 month period for our LIBOR-based investments and our LIBOR-based debt assuming an increase or decrease of 100 basis points in LIBOR 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			100 Basis Point Increase			100 Basis Point Decrease (1)
Investment income from variable-rate investments	$	4,118,416		$	35,690		$	(5,853	)
Interest expense from variable-rate debt	(2,563,576		)	(21,660		)	4,368
Net investment income from variable rate instruments	$	1,554,840		$	14,030		$	(1,485	)

(1)Assumes LIBOR does not go below 0%.

Foreign Currency Risk

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

Consistent with our strategy of hedging foreign currency exposure on certain investments, we typically enter into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest and principal payments) we expect to receive from our foreign currency denominated loan and CMBS investments. Accordingly, the notional values and expiration dates of our foreign currency hedges approximate the amounts and timing of future payments we expect to receive on the related investments.  The following table represents our current currency hedge exposure as it relates to our loan investments and a CMBS investment denominated in foreign currencies, along with the aggregate notional amount of the hedges in place (amounts in thousands except for number of contracts, using the June 30, 2014 pound sterling (“GBP”) closing rate of 1.7106, Euro (“EUR”) closing rate of 1.3689,

69

Swedish Krona (“SEK”) closing rate of 0.1496, Norwegian Krone (“NOK”) closing rate of 0.1630, Danish Krone (“DKK”) closing rate of 0.1837):

Carrying Value of Investment		Local Currency	Number of foreign exchange contracts	Aggregate Notional Value of Hedges Applied		Expiration Range of Contracts
$	11,032	GBP	16	$	12,752	July 2014 – March 2016
115,209		GBP	4	126,499		September 2014 – March 2016
25,373		GBP	10	30,786		July 2014 – August 2016
30,149		EUR	7	37,171		August 2014 – February 2016
101,515		GBP	12	130,632		July 2014 – April 2017
51,149		GBP	7	62,280		July 2014 – January 2016
63,671		EUR	20	72,493		July 2014 – October 2016
1,745		GBP	1	4,280		March 2015
8,319		EUR, DKK, NOK, SEK	5	14,369		December 2015
16,104		GBP	16	19,739		July 2014 – January 2018

Item 4.    Controls and Procedures.

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

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

Changes in Internal Control Over Financial Reporting.  No change in internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the quarter ended June 30, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

70

PART II—OTHER INFORMATION

Item 1.    Legal Proceedings.

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

Item 1A.    Risk Factors.

In addition to the following risk factor, refer to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.

Risks Related to Regulatory Matters

Mortgage loan servicing is an increasingly regulated business.

The mortgage loan servicing activities of our LNR segment are subject to a still evolving set of regulations, including regulations being promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act. In addition, various governmental authorities have recently increased their investigative focus on the activities of mortgage loan servicers.  As a result, we may have to spend additional resources and devote additional management time to address any regulatory concerns, which may reduce the resources available to grow our business.  In addition, if we fail to operate the servicing activities of our LNR segment in compliance with existing and future regulations, our business, reputation, financial condition or results of operations could be materially and adversely affected.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3.    Defaults Upon Senior Securities.

None.

Item 4.    Mine Safety Disclosures.

Not applicable.

Item 5.    Other Information.

None.

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SIGNATURES

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

	STARWOOD PROPERTY TRUST, INC.
Date: August 6, 2014	By:	/s/ BARRY S. STERNLICHT
		Barry S. Sternlicht Chief Executive Officer Principal Executive Officer
Date: August 6, 2014	By:	/s/ RINA PANIRY
		Rina Paniry Chief Financial Officer, Treasurer and Principal Financial Officer

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Item 6.  Exhibits.

(a)Index to Exhibits

INDEX TO EXHIBITS

Exhibit No.	Description
10.1	Credit Agreement, dated December 3, 2010, among SPT Real Estate Sub II, LLC, Starwood Property Trust, Inc. and certain subsidiaries of Starwood Property Trust, Inc., as guarantors, and Bank of America, N.A., as administrative agent
31.1	Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

73

EX-10.1

Exhibit 10.1

CREDIT AGREEMENT

Dated as of December 3, 2010

among

SPT REAL ESTATE SUB II, LLC,
as the Borrower,

and

STARWOOD PROPERTY TRUST, INC.

and

THE SUBSIDIARIES OF
STARWOOD PROPERTY TRUST, INC.
FROM TIME TO TIME PARTY HERETO,
as Guarantors,

and

BANK OF AMERICA, N.A.,
as Administrative Agent

and

The Other Lenders Party Hereto

TABLE OF CONTENTS

Section		Page
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS		1
1.01	Defined Terms	1
1.02	Other Interpretive Provisions	26
1.03	Accounting Terms	27
1.04	Rounding	28
1.05	Times of Day	28
ARTICLE II. THE COMMITMENTS AND LOANS		28
2.01	Term Loans	28
2.02	Borrowings, Conversions and Continuations of Loans	28
2.03	Prepayments	29
2.04	Termination or Reduction of Commitments	32
2.05	Collections	32
2.06	Interest	34
2.07	Fees	34
2.08	Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate	34
2.09	Evidence of Debt	35
2.10	Payments Generally; Administrative Agent’s Clawback	35
2.11	Sharing of Payments by Lenders	37
2.12	Extension of Maturity Date	37
2.13	Defaulting Lenders	39
2.14	Increase in Commitments	40
ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY		41
3.01	Taxes	41
3.02	Illegality	45
3.03	Inability to Determine Rates	46
3.04	Increased Costs; Reserves on Eurodollar Rate Loans	46
3.05	Compensation for Losses	47
3.06	Mitigation Obligations; Replacement of Lenders	48
3.07	Survival	48
ARTICLE IV. CONDITIONS PRECEDENT		48
ARTICLE V. REPRESENTATIONS AND WARRANTIES		51
5.01	Existence, Qualification and Power	51
5.02	Authorization; No Contravention	51
5.03	Governmental Authorization; Other Consents	52
5.04	Binding Effect	52

i

Section		Page
5.05	Financial Statements; No Material Adverse Effect	52
5.06	Litigation	53
5.07	No Default	53
5.08	Ownership of Property; Liens	53
5.09	Environmental Compliance	53
5.10	Insurance	53
5.11	Taxes	54
5.12	ERISA Compliance	54
5.13	Subsidiaries; Equity Interests	55
5.14	Margin Regulations; Investment Company Act	55
5.15	Disclosure	55
5.16	Compliance with Laws	56
5.17	Taxpayer Identification Number	56
5.18	Intellectual Property; Licenses, Etc.	56
5.19	Solvency	56
5.20	Casualty, Etc.	56
5.21	[Intentionally Omitted]	56
5.22	Collateral Documents	56
5.23	Anti-Money Laundering and Economic Sanctions Laws	57
5.24	REIT Status; Stock Exchange Listing	57
5.25	Eligible Assets	57
ARTICLE VI. AFFIRMATIVE COVENANTS		58
6.01	Financial Statements	58
6.02	Certificates; Other Information	59
6.03	Notices	61
6.04	Payment of Obligations	61
6.05	Preservation of Existence, Etc.	61
6.06	[Intentionally Omitted]	61
6.07	Maintenance of Insurance	62
6.08	Compliance with Laws	62
6.09	Books and Records	62
6.10	Inspection Rights	62
6.11	Use of Proceeds	62
6.12	Additional Loan Parties	62
6.13	Compliance with Environmental Laws	63
6.14	Further Assurances	63
6.15	Maintenance of REIT Status; New York Stock Exchange Listing	63
6.16	Information Regarding Collateral	64
ARTICLE VII. NEGATIVE COVENANTS		64
7.01	Liens	64
7.02	Investments	64
7.03	Indebtedness	65
7.04	Fundamental Changes	65
7.05	Dispositions	66

ii

Section		Page
7.06	Restricted Payments	67
7.07	Change in Nature of Business	67
7.08	Transactions with Affiliates	67
7.09	[Intentionally Omitted]	67
7.10	Use of Proceeds	68
7.11	Amendments, Waivers and Terminations of Certain Agreements	68
7.12	Financial Covenants	68
7.13	Accounting or Tax Changes	68
ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES		69
8.01	Events of Default	69
8.02	Remedies Upon Event of Default	71
8.03	Application of Funds	71
ARTICLE IX. ADMINISTRATIVE AGENT		72
9.01	Appointment and Authority	72
9.02	Rights as a Lender	72
9.03	Exculpatory Provisions	72
9.04	Reliance by Administrative Agent	73
9.05	Delegation of Duties	73
9.06	Resignation of Administrative Agent	74
9.07	Non-Reliance on Administrative Agent and Other Lenders	74
9.08	[Intentionally Omitted]	74
9.09	Administrative Agent May File Proofs of Claim	74
9.10	Collateral and Guaranty Matters	75
ARTICLE X. CONTINUING GUARANTY		76
10.01	Guaranty	76
10.02	Rights of Lenders	77
10.03	Certain Waivers	77
10.04	Obligations Independent	77
10.05	Subrogation	77
10.06	Termination; Reinstatement	77
10.07	Subordination	78
10.08	Stay of Acceleration	78
10.09	Condition of the Borrower	78
10.10	Limitations on Enforcement	78
10.11	Contribution	78
ARTICLE XI. MISCELLANEOUS		79
11.01	Amendments, Etc.	79
11.02	Notices; Effectiveness; Electronic Communication	81
11.03	No Waiver; Cumulative Remedies; Enforcement	83
11.04	Expenses; Indemnity; Damage Waiver	83
11.05	Payments Set Aside	85

iii

Section		Page
11.06	Successors and Assigns	85
11.07	Treatment of Certain Information; Confidentiality	89
11.08	Right of Setoff	90
11.09	Interest Rate Limitation	91
11.10	Counterparts; Integration; Effectiveness	91
11.11	Survival of Representations and Warranties	91
11.12	Severability	91
11.13	Replacement of Lenders	92
11.14	Governing Law; Jurisdiction; Etc.	93
11.15	Waiver of Jury Trial	94
11.16	No Advisory or Fiduciary Responsibility	94
11.17	Electronic Execution of Assignments and Certain Other Documents	94
11.18	USA PATRIOT Act	95
11.19	ENTIRE AGREEMENT	95
SIGNATURES		S-1

iv

SCHEDULES

I	Guarantors
2.01	Commitments and Applicable Percentages
5.05	Supplement to Interim Financial Statements
5.12(d)	Pension Plans
5.13	Subsidiaries; Equity Interests
7.08	Transactions with Affiliates
11.02	Administrative Agent’s Office; Certain Addresses for Notices

EXHIBITS

Form of
A	Loan Notice
B	Note
C	Compliance Certificate
D-1	Assignment and Assumption
D-2	Administrative Questionnaire
E	Pledge Agreement
F	Security Agreement
G	Solvency Certificate
H	United States Tax Compliance Certificate
I	Certification of Market Value of Near Cash Securities

v

CREDIT AGREEMENT

This CREDIT AGREEMENT is entered into as of December 3, 2010, among SPT REAL ESTATE SUB II, LLC, a Delaware limited liability company (the “Borrower”), STARWOOD PROPERTY TRUST, INC., a Maryland corporation (the “Parent”), CERTAIN SUBSIDIARIES OF THE PARENT, as Guarantors, each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and BANK OF AMERICA, N.A., as Administrative Agent.

The Borrower has requested that the Lenders extend credit in the form of term loans, and the Lenders are willing to do so on the terms and conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I.  DEFINITIONS AND ACCOUNTING TERMS

1.01        Defined Terms.  As used in this Agreement, the following terms shall have the meanings set forth below:

“Administrative Agent” means Bank of America in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.

“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 11.02, or such other address or account as the Administrative Agent may from time to time notify to the Borrower and the Lenders.

“Administrative Questionnaire” means an Administrative Questionnaire in substantially the form of Exhibit D-2 or any other form approved by the Administrative Agent.

“Advance Rate” means, at any time, the ratio (expressed as a percentage) at such time of (i) Total Outstandings to (ii) the Market Value of the Eligible Assets.

“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agent Parties” has the meaning specified in Section 11.02(c).

“Aggregate Commitments” means the Commitments of all the Lenders.  The Aggregate Commitments shall be $125,195,000 on the Closing Date.

“Aggregate Deficit Amount” has the meaning specified in Section 10.11.

“Aggregate Excess Amount” has the meaning specified in Section 10.11.

“Agreement” means this Credit Agreement.

“Anti-Money Laundering Laws” means any and all laws, judgments, orders, executive orders, decrees, ordinances, rules, regulations, statutes, case law or treaties applicable to a Loan Party, its Subsidiaries or Affiliates, related to terrorism financing or money laundering including any applicable provision of Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT Act) of 2001 (Title III of Pub. L. 107-56) and The Currency and Foreign Transactions Reporting Act (also known as the “Bank Secrecy Act”, 31 U.S.C. §§ 5311-5330 and 12 U.S.C. §§ 1818(s), 1820(b) and 1951-1959).

“Applicable Percentage” means with respect to any Lender at any time, a percentage (carried out to the ninth decimal place) equal to (i) on the Closing Date, a fraction the numerator of which is such Lender’s Commitment and the denominator of which is the Aggregate Commitments and (ii) thereafter, a fraction the numerator of which is the principal amount of such Lender’s Term Loan at such time and the denominator of which is the aggregate principal amount of all of the Lenders’ Term Loans.  The initial Applicable Percentage of each Lender is set forth opposite the name of such Lender on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable.

“Applicable Rate” means (i) from the Closing Date to the date on which the Administrative Agent and the Lenders receive the report accompanying the monthly financial statements referred to in Section 6.02(i) for the month ending December 31, 2010, 1.35% per annum for Base Rate Loans and 2.35% for Eurodollar Rate Loans and (ii) thereafter, the applicable percentage per annum set forth below determined by reference to the Facility Debt Yield:

			Applicable Rate
Pricing Level	Facility Debt Yield		Eurodollar Rate		Base Rate
1	> 27	%	2.35	%	1.35	%
2	< 27	%	2.50	%	1.50	%

Any increase or decrease in the Applicable Rate resulting from a change in the Facility Debt Yield shall become effective immediately upon the applicable determination of the Facility Debt Yield.

Notwithstanding the foregoing, if at any time Pledged Asset EBITDA is deemed to equal zero in accordance with the definition thereof, then Pricing Level 2 shall apply and shall remain in effect until the date on which the Facility Debt Yield is determined to be greater than 27%.

For purposes of this definition, Facility Debt Yield as of any date will be determined by reference to the monthly report that is most recently required to be delivered pursuant to Section 6.02(i) unless as of such date of determination Pledged Asset EBITDA is deemed to equal zero in accordance with the definition thereof, in which case the Facility Debt Yield will be deemed to be less than 27% as of the applicable date of determination.

Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.08(b).

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“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Assignee Group” means two or more Eligible Assignees that are Affiliates of one another or two or more Approved Funds managed by the same investment advisor.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 11.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit D-1 or any other form approved by the Administrative Agent.

“Audited Financial Statements” means the audited consolidated balance sheet of the Parent and its consolidated Subsidiaries for the fiscal year ended December 31, 2009, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such fiscal year of the Parent and its consolidated Subsidiaries, including the notes thereto.

“Bank of America” means Bank of America, N.A. and its successors.

“Base Rate”  means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” and (c) the Eurodollar Rate plus 1.00%.  The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change.

“Base Rate Loan” means that portion of the Term Loans or a Borrowing that bears interest based on the Base Rate.

“Borrower” has the meaning specified in the introductory paragraph hereto.

“Borrower Materials” has the meaning specified in Section 6.02.

“Borrowing” means Term Loans of the same Type and, in the case of Eurodollar Rate Loans, having the same Interest Period.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate Loan, means any such day that is also a London Banking Day.

“Capital Lease Obligations” means, with respect to any Person, the amount of all obligations of such Person to pay rent or other amounts under a lease of property to the extent and in the amount that such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person.

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“Cash Equivalents” means:

(a)           United States dollars (including such dollars as are held as overnight bank deposits and demand deposits with banks);

(b)           marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency or instrumentality thereof and backed by the full faith and credit of the United States of America, in each case maturing within one year from the date of acquisition thereof;

(c)           marketable direct obligations issued by any State of the United States of America or any political subdivision of any such State or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having a rating of at least A-2 from S&P or at least P-2 of Moody’s;

(d)           commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-2 from S&P or at least P-2 from Moody’s;

(e)           time deposits, demand deposits, certificates of deposit, Eurodollar time deposits, time deposit accounts, term deposit accounts or bankers’ acceptances maturing within one year from the date of acquisition thereof or overnight bank deposits, in each case, issued by any bank organized under the laws of the United States of America or any State thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $500.0 million; and

(f)            investments in money market funds which invest substantially all their assets in securities of the types described in clauses (a) through (e) above.

“Cash Liquidity” means, at any time with respect to the Parent and its Subsidiaries, on a consolidated basis, the amount of Unrestricted Cash held by such Persons at such time.

“Cash Sweep Reference Date” has the meaning specified in Section 2.03(b)(ii).

“Change in Law” means the occurrence, after the date of this Agreement (or, with respect to any Lender which becomes a party hereto after the date of this Agreement, the date such Lender becomes a party hereto), of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority.

“Change of Control” means an event or series of events by which:

(a)           prior to an internalization of management by the Parent, neither the Manager nor any Affiliate of the Manager is the manager of the Parent;

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(b)           after such time as the Parent is internally managed, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934), directly or indirectly, of a percentage of the total voting power of all classes of Equity Interests of the Parent entitled to vote generally in the election of directors, of 20% or more;

(c)           change in Control of the Manager and/or Starwood Capital Group Global, L.P. from the Person or Persons who are directly or indirectly Controlling such entities on the date hereof; or

(d)           the Parent shall cease to own and control, directly or indirectly, 100% of the outstanding Equity Interests of the Borrower.

Notwithstanding the foregoing, the Administrative Agent and the Required Lenders shall not be deemed to approve or to have approved any internalization of management by the Parent as a result of this definition or any other provision herein, other than to the extent actually approved pursuant to Section7.14.

“Closing Date” means the first date all the conditions precedent in Article IV are satisfied or waived in accordance with Section 11.01.

“CMBS” means mortgage pass-through certificates or other securities issued pursuant to a securitization of commercial real estate loans.

“Code” means the Internal Revenue Code of 1986.

“Collateral” means all of the “Collateral” referred to in the Collateral Documents and all of the other property that is or is intended under the terms of the Collateral Documents to be subject to Liens in favor of the Administrative Agent for the benefit of the Secured Parties.

“Collateral Documents” means, collectively, the Security Agreement, the Pledge Agreement, any Control Agreement and each of the other agreements, instruments or documents that creates or perfects or purports to create or perfect a Lien in favor of the Administrative Agent for the benefit of the Secured Parties.

“Collection Account” has the meaning specified in Section 2.05(a).

“Commitment” means, as to each Lender, its obligation to make a Term Loan to the Borrower pursuant to Section 2.01 in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption or New Lender Joinder Agreement pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be increased by such Lender pursuant to Section 2.14 or otherwise adjusted from time to time in accordance with this Agreement.

“Compliance Certificate” means a certificate substantially in the form of Exhibit C.

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“Contingent Liabilities” means, with respect to any Person as of any date of determination, all of the following as of such date:  (a) liabilities and obligations (including any Guarantees) of such Person in respect of “off-balance sheet arrangements” (as defined in the Off-Balance Sheet Rules defined below), (b) obligations, including Guarantees, whether or not required to be disclosed in the footnotes to such Person’s financial statements, guaranteeing in whole or in part any Non-Recourse Indebtedness, lease, dividend or other obligation, excluding, however, (i) contractual indemnities (including any indemnity or price-adjustment provision relating to the purchase or sale of securities or other assets), and (ii) guarantees of non-monetary obligations which have not yet been called on or quantified, of such Person or any other Person, and (c) forward commitments or obligations to fund or provide proceeds with respect to any loan or other financing which is obligatory and non-discretionary on the part of the lender.  The amount of any Contingent Liabilities described in the preceding clause (b) shall be deemed to be (i) with respect to a guarantee of interest or interest and principal, or operating income guarantee, the sum of all payments required to be made thereunder (which, in the case of an operating income guarantee, shall be deemed to be equal to the debt service for the note secured thereby), through (x) in the case of an interest or interest and principal guarantee, the stated date of maturity of the obligation (and commencing on the date interest could first be payable thereunder), or (y) in the case of an operating income guarantee, the date through which such guarantee will remain in effect, and (ii) with respect to all guarantees not covered by the preceding clause (i), an amount equal to the stated or determinable amount of the primary obligation in respect of which such guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as recorded on the balance sheet and in the footnotes to the most recent financial statements of such Person.  “Off-Balance Sheet Rules” means the Disclosure in Management’s Discussion and Analysis About Off-Balance Sheet Arrangements and Aggregate Contractual Obligations, Securities Act Release Nos. 33-8182; 34-47264; FR-67 International Series Release No. 1266 File No. S7-42-02, 68 Fed. Reg. 5982 (Feb. 5, 2003) (codified of 17 CFR Parts 228, 229 and 249).

“Contractual Obligation” means, as to any Person, any provision of any securities issued by such Person or of any indenture, mortgage, deed of trust, deed to secure debt, contract, undertaking, agreement, instrument or other document to which such Person is a party or by which it or any of its property or assets are bound or are subject.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

“Control Agreement” means a deposit account control agreement or securities account control agreement, as applicable, executed by a Loan Party, the Administrative Agent and the applicable depository bank or securities intermediary granting the Administrative Agent control over the applicable deposit account or securities account, which agreement shall be in form and substance satisfactory to the Administrative Agent.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,

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rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate applicable to Base Rate Loans plus (iii) 2% per annum.

“Defaulting Lender” means, subject to Section 2.13(b), any Lender that, as determined by the Administrative Agent, (a) has failed to perform any of its funding obligations hereunder, including in respect of its Term Loan, within three (3) Business Days of the date required to be funded by it hereunder, (b) has notified the Borrower, the Administrative Agent or any Lender that it does not intend to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations hereunder or under other agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after request by the Administrative Agent, to confirm in a manner satisfactory to the Administrative Agent that it will comply with its funding obligations, or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or a custodian appointed for it, or (iii) taken any action in furtherance of, or indicated its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“Dollar” and “$” mean lawful money of the United States.

“EA Principal Payment” has the meaning specified in Section 2.03(b)(v).

“EBITDA” with respect to the Parent and its Subsidiaries on a consolidated basis for any Test Period, an amount equal to the sum of (a) Net Income (or loss) (prior to any impact from minority interests or joint venture net income and before deduction of any dividends on preferred stock), plus the following (but only to the extent actually included in determination of such Net Income (or loss)): (i) depreciation and amortization expense, (ii) Interest Expense, (iii) income tax expense, and (iv) extraordinary or non-recurring gains and losses, plus (b) such Person’s proportionate share of Net Income of the joint venture investments and unconsolidated Affiliates of such Person, all with respect to such Test Period, plus (c) amounts deducted in accordance with GAAP in respect of other non-cash expenses in determining such Net Income for such Person.

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“Economic Sanctions Laws” means any and all laws, judgments, orders, executive orders, decrees, ordinances, rules, regulations, statutes, case law or treaties applicable to a Loan Party, its Subsidiaries or Affiliates relating to economic sanctions and terrorism financing, including any applicable provisions of the Trading with the Enemy Act (50 U.S.C. App. §§ 5(b) and 16, as amended), the International Emergency Economic Powers Act, (50 U.S.C. §§ 1701-1706, as amended) and Executive Order 13224 (effective September 24, 2001), as amended.

“Eligible Assets” means all right, title and interest of the Borrower in and to (i) the “Senior Loan” (as defined in the Offering Circular) acquired by the Borrower from Bank of America on the Closing Date (or from any Person after the Closing Date), including, the Senior Loan Agreement (as defined in the Offering Circular), all instruments evidencing such interest and all other documents and agreements delivered in connection therewith (including, without limitation, the Co-Lender Agreement, the Servicing Agreement, the Custodial Agreement and the Interim Servicing Agreement (as each such term is defined in the Offering Circular)), and (ii) if and to the extent that the Borrower exchanges its interest in any or all of the “Senior Loan” referenced in clause (i) above for an Additional Certificate (as such term is defined in the Offering Circular) pursuant to the terms of an Additional Trust Asset Transfer Agreement (as such term is defined in the Offering Circular, each such Additional Certificate and all other documents and agreements delivered in connection therewith (including, without limitation, the Trust Agreement), together with, in the case of each of clauses (i) and (ii), all collateral securing the same and all principal, interest and other income, distributions, receipts, payments, collections, prepayments, recoveries, proceeds (including insurance and condemnation proceeds) and other payments or amounts of any kind paid, received, collected, recovered or distributed on, or in connection with or in respect thereof.

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 11.06(b)(ii), (iii) and (v) (subject to such consents, if any, as may be required under Section 11.06(b)(iii)).

“Embargoed Person” means any party that (i) is publicly identified on the most current list of “Specially Designated Nationals and Blocked Persons” published by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) or (ii) resides, is organized or chartered, or has a place of business in a country or territory that is the subject of OFAC sanctions programs.

“Environment” means ambient air, indoor air, surface water, groundwater, drinking water, soil, surface and subsurface strata, and natural resources such as wetlands, flora and fauna.

“Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, agreements or governmental restrictions relating to pollution or the protection of the Environment or of human health (to the extent related to exposure to Hazardous Materials), including those relating to the manufacture, generation, handling, transport, storage, treatment, Release or threat of Release of Hazardous Materials.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the

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Borrower, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Equity Interests” means, with respect to any Person, (a) any share, interest, participation and other equivalent (however denominated) of capital stock of (or other ownership, equity or profit interests in) such Person, (b) any warrant, option or other right for the purchase or other acquisition from such Person of any of the foregoing, (c) any security convertible into or exchangeable for any of the foregoing, and (d) any other ownership or profit interest in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such share, warrant, option, right or other interest is authorized or otherwise existing on any date.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which such entity was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Pension Plan amendment as a termination under Section 4041 or 4041A of ERISA; (e) the institution by the PBGC of proceedings to terminate a Pension Plan; (f) any event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (g) the determination that any Pension Plan is considered an at-risk plan or a plan in endangered or critical status within the meaning of Sections 430, 431 and 432 of the Code or Sections 303, 304 and 305 of ERISA; (h) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate; or (i) a failure by the Borrower or any ERISA Affiliate to meet all applicable requirements under the Pension Funding Rules in respect of a Pension Plan, whether or not waived, or the failure by the Borrower or any ERISA Affiliate to make any required contribution to a Multiemployer Plan.

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“Eurodollar Rate” means:

(a)           for any Interest Period with respect to a Eurodollar Rate Loan, the rate per annum equal to (i) the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or such other commercially available source providing quotations of BBA LIBOR as may be designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two London Banking Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or, (ii) if such rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted and with a term equivalent to such Interest Period would be offered by Bank of America’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two London Banking Days prior to the commencement of such Interest Period; and

(b)           for any interest calculation (i) on any date with respect to a Base Rate Loan or (ii) with respect to a Eurodollar Rate Loan made on or prior to the tenth day following the Closing Date, the rate per annum equal to (A) BBA LIBOR, at approximately 11:00 a.m., London time determined two London Banking Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (B) if such published rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one month would be offered by Bank of America’s London Branch to major banks in the London interbank Eurodollar market at their request at the date and time of determination.

“Eurodollar Rate Loan” means that portion of the Term Loans or a Borrowing that bears interest at a rate based on clause (a) or clause (b)(ii) of the definition of “Eurodollar Rate.”

“Event of Default” has the meaning specified in Section 8.01.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder or under any other Loan Documents, (a) Taxes imposed on or measured by its overall net income (however denominated), franchise Taxes imposed on it (in lieu of net income Taxes), and any similar Taxes imposed on or measured by the net income of such person, or gross receipts Taxes imposed in lieu of net income taxes, by a jurisdiction (or any political subdivision thereof) as a result of such recipient being organized or having its principal office in such jurisdiction, or as a result of a present or former connection between such recipient and such jurisdiction (other than any such connection arising solely from such recipient having executed, delivered or performed its obligations or received a payment under, any Loan Document) or, in the case of any Lender, in having its applicable Lending Office in such jurisdiction, (b) any

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Taxes in the nature of the branch profits tax within the meaning of Section 884 of the Code imposed by any jurisdiction described in clause (a), (c) other than an assignee pursuant to a request by the Borrower under Section 11.13, any United States federal withholding tax that is imposed on amounts payable to such Person other than as a result of a Change in Law occurring after (1) the date that such Person became a party to this Agreement, or (2) with respect to an assignment, participation, acquisition, or designation of a new Lending Office, the effective date of such assignment, participation, acquisition or designation, except, in each case, to the extent and at the rate that such Person’s predecessor was entitled to such amounts (or in the case of a designation of a new Lending Office, to the extent that such Person was entitled to such amounts with respect to its prior Lending Office), (d) any withholding Tax that is attributable to such Person’s failure to comply with Section 3.01(e) hereto, and (e) any United States federal withholding Tax that is imposed on amounts payable to any Lender or other Person as a result of any law in effect as of the Closing Date and any amounts that would not have been imposed but for a failure by a Lender (or any financial institution through which any payment is made to such Lender) (including a participant and any other recipient of any payment hereunder) to comply with the procedures, certifications, information reporting, disclosure, or other related requirements of newly enacted Sections 1471-1474 of the Code and any amended or successor version that is substantively comparable.

“Extension Notice” has the meaning specified in Section 2.12(a).

“Extension Reference Rate” has the meaning specified in clause (b)(i) of the definition of “Reference Advance Rate.”

“Facility Debt Yield” means, as of any date of determination with respect to any Measurement Period, the ratio (expressed as a percentage) of:

(a)           an amount equal to (i) the Pledged Asset EBITDA for such Measurement Period, multiplied by (ii) the sum of (x) the aggregate principal balance as of the last day of such Measurement Period of the portion of the Senior Loan included as part of Eligible Assets under clause (i) of such defined term plus (y) the product of the Borrower’s Certificate Percentage as of the last day of such Measurement Period multiplied by the aggregate principal balance as of the last day of such Measurement Period of the portion of the Senior Loan then held by the Trust, divided by (iii) the aggregate principal balance of the Senior Loan as of the last day of such Measurement Period, to

(b)           the Total Outstandings as of the last day of such Measurement Period.

For purposes of this definition, (1) “Borrower’s Certificate Percentage” shall mean as of the last day of any Measurement Period a fraction, the numerator of which is the aggregate Certificate Balance as of the last day of such Measurement Period of the Additional Certificates included as part of the Eligible Assets under clause (ii) of such defined term (or, with respect to any such Additional Certificate in which the Borrower only has a beneficial ownership interest, the Borrower’s beneficial ownership percentage interest of the Certificate Balance of such Additional Certificate), and the denominator of which is the aggregate Certificate Balance as of the last day of such Measurement Period of all Certificates, and (2) the following terms shall

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have the meanings set forth in the Offering Circular:  “Senior Loan”, “Certificate Balance”, “Additional Certificates”, “Trust”, “Trust Asset Transfer Agreement” and “Certificate.”

“FASB ASC” means the Accounting Standards Codification of the Financial Accounting Standards Board.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on such day on such transactions as determined by the Administrative Agent.

“Fee Letter” means the letter agreement, dated December 3, 2010, between the Borrower and Bank of America.

“Fitch” means Fitch Ratings and its successors.

“Fixed Charge Coverage Ratio” means, with respect to the Parent and its Subsidiaries on a consolidated basis for any Test Period the ratio of (i) EBITDA for such Test Period to (ii) Fixed Charges for such Test Period.

“Fixed Charges” means, with respect to the Parent and its Subsidiaries on a consolidated basis for any Test Period, the sum of (a) debt service, (b) all preferred dividends, (c) Capital Lease Obligations paid or accrued during such Test Period, (d) capital expenditures (if any), and (e) any amounts payable under any Ground Lease.

“Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.  For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“FRB” means the Board of Governors of the Federal Reserve System of the United States.

“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

“GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the

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accounting profession in the United States, that are applicable to the circumstances as of the date of determination.

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank).

“Grantor” means the applicable Loan Party that is party to a Collateral Document.

“Ground Lease” means a ground lease containing the following terms and conditions:  (a) a remaining term (exclusive of any unexercised extension options) of thirty (30) years or more from the Closing Date, (b) the right of the lessee to mortgage and encumber its interest in the leased property without the consent of the lessor or with such consent given, (c) the obligation of the lessor to give the holder of any mortgage lien on such leased property written notice of any defaults on the part of the lessee and agreement of such lessor that such lease will not be terminated until such holder has had a reasonable opportunity to cure or complete foreclosures, and fails to do so, (d) reasonable transferability of the lessee’s interest under such lease, including ability to sublease, and (e) such other rights customarily required by mortgagees making a loan secured by the interest of the holder of the leasehold estate demised pursuant to a ground lease.

“Guarantee” means, with respect to any Person (the “guaranteeing person”), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of the obligations for which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends, Contractual Obligation, Swap Contract or other obligations or indebtedness (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation, or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, that the term “Guarantee” shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee of any guaranteeing person shall be deemed to be the maximum stated amount of the primary obligation relating to such Guarantee (or, if less, the maximum stated liability set forth in the instrument embodying such Guarantee); provided, that in the absence of any such stated amount or stated liability, the amount of such Guarantee shall be such guaranteeing person’s maximum anticipated liability in respect thereof as reasonably determined by such Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

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“Guarantors” means, collectively, at any time (i) the Parent, (ii) each Subsidiary of the Parent listed on Schedule I hereto and (iii) each other Subsidiary of the Parent (other than the Borrower) that becomes a guarantor of the Obligations pursuant to Section 6.12.

“Guaranty” means the Guaranty made by the Guarantors under Article X in favor of the Secured Parties.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances or wastes, including petroleum or petroleum distillates, natural gas, natural gas liquids, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, toxic mold, infectious or medical wastes and all other substances, wastes, chemicals, pollutants, contaminants or compounds of any nature in any form regulated pursuant to any Environmental Law.

“Increase Effective Date” has the meaning specified in Section 2.14(d).

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

(a) obligations in respect of money borrowed (including principal, interest, assumption fees, prepayment fees, yield maintenance charges, penalties, exit fees, contingent interest and other monetary obligations whether choate or inchoate and whether by loan, the issuance and sale of debt securities or the sale of property or assets to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets, or otherwise);

(b) obligations, whether or not for money borrowed (i) represented by notes payable, letters of credit or drafts accepted, in each case representing extensions of credit, (ii) evidenced by bonds, debentures, notes or similar instruments, (iii) constituting purchase money indebtedness, conditional sales contracts, title retention debt instruments or other similar instruments, upon which interest charges are customarily paid or that are issued or assumed as full or partial payment for property or services rendered, or (iv) in connection with the issuance of preferred equity or trust preferred securities;

(c) Capital Lease Obligations;

(d) reimbursement obligations under any letters of credit or acceptances (whether or not the same have been presented for payment);

(e) Off—Balance Sheet Obligations;

(f) obligations to purchase, redeem, retire, defease or otherwise make any payment in respect of any mandatory redeemable stock issued by such Person or any other Person (inclusive of forward equity contracts), valued at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends;

(g) as applicable, all obligations of such Person (but not the obligation of others) in respect of any keep well arrangements, credit enhancements, contingent or future

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funding obligations, purchase obligations, repurchase obligations, sale/buy—back agreements, takeout commitments or forward equity commitments, in each case evidenced by a binding agreement (excluding any such obligation to the extent the obligation can be satisfied by the issuance of Equity Interests (other than mandatory redeemable stock));

(h) net obligations under any Swap Contract not entered into as a hedge against existing indebtedness, in an amount equal to the Swap Termination Value thereof;

(i) all Non—Recourse Indebtedness, recourse indebtedness and all indebtedness of other Persons which such Person has guaranteed or is otherwise recourse to such Person;

(j) all indebtedness of another Person secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien (other than Liens permitted hereunder) on property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment obligation; provided, that if such Person has not assumed or become liable for the payment of such indebtedness, then for the purposes of this definition the amount of such indebtedness shall not exceed the market value of the property subject to such Lien;

(k) all Contingent Liabilities;

(l) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person or obligations of such Person to pay the deferred purchase or acquisition price of property or assets, including contracts for the deferred purchase price of property or assets that include the procurement of services;

(m) indebtedness of general partnerships of which such Person is liable as a general partner (whether secondarily or contingently liable or otherwise); and

(n) obligations to fund capital commitments under any articles or certificate of incorporation or formation, by-laws, partnership, limited liability company, operating or trust agreement and/or other organizational, charter or governing documents, subscription agreement or otherwise.

For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnitees” has the meaning specified in Section 11.04(b).

“Information” has the meaning specified in Section 11.07.

“Initial Maturity Date” means December 3, 2013.

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“Insolvency Event” means, with respect to any Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises with respect to such Person or any substantial part of its assets or property in an involuntary case under any applicable Insolvency Law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its assets or property, or ordering the winding—up or liquidation of such Person’s affairs, and such decree or order shall remain unstayed and in effect for a period of thirty (30) days, (b) the commencement by such Person of a voluntary case under any applicable Insolvency Law now or hereafter in effect, (c) the consent by such Person to the entry of an order for relief in an involuntary case under any Insolvency Law, (d) the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its assets or property, (e) the making by such Person of any general assignment for the benefit of creditors, (f) the admission in a legal proceeding of the inability of such Person to pay its debts generally as they become due, (g) the failure by such Person generally to pay its debts as they become due, or (h) the taking of action by such Person in furtherance of any of the foregoing.

“Insolvency Laws” means Title 11 of the United States Code and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments and similar debtor relief laws from time to time in effect affecting the rights of creditors generally.

“Intangible Assets” means assets that are considered to be intangible assets under GAAP, including customer lists, goodwill, computer software, copyrights, trade names, trademarks, patents, franchises, licenses, unamortized deferred charges, unamortized debt discount and capitalized research and development costs.

“Interest Expense” means, with respect to the Parent and its Subsidiaries on a consolidated basis for any Test Period, the amount of total interest expense incurred by such Person, including capitalized or accruing interest (but excluding interest funded under a construction loan), all with respect to such Test Period.

“Interest Payment Date” means, (a) as to any Eurodollar Rate Loan, the last day of each Interest Period applicable to such Eurodollar Rate Loan and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan, the last Business Day of each March, June, September and December and the Maturity Date.

“Interest Period” means as to each Eurodollar Rate Loan, the period commencing on the date such Eurodollar Rate Loan is disbursed or (in the case of any Eurodollar Rate Loan) converted to or continued as a Eurodollar Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower in a Loan Notice; provided that:

(i)            any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such

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Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(ii)           any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(iii)          no Interest Period shall extend beyond the Maturity Date.

Notwithstanding the foregoing, the Interest Period shall be one Business Day for each Borrowing of a Eurodollar Rate Loan that bears interest at a rate based on clause (b)(ii) of the definition of “Eurodollar Rate.”

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit.  For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law.

“Lender” has the meaning specified in the introductory paragraph hereto.

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Administrative Agent.

“Leverage Ratio” means, with respect to the Parent and its Subsidiaries, on a consolidated basis, as of any date of determination, the ratio as of such date of (i) Total Indebtedness of the Parent, to (ii) Total Assets of the Parent.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, easement, right-of-way or other encumbrance on title to real property, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any

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conditional sale or other title retention agreement, and any financing lease having substantially the same economic effect as any of the foregoing).

“Loan Documents” means this Agreement, each Note, the Fee Letter and the Collateral Documents.

“Loan Notice” means a notice of (a) the initial borrowing of the Term Loans on the Closing Date, (b) a conversion of all or a portion of the Term Loans or a Borrowing from one Type to the other, or (c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

“Loan Parties” means, collectively, the Borrower and the Guarantors.

“London Banking Day” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

“Mandatory Prepayment Event” means any occurrence that gives rise to a requirement to make a prepayment under Section 2.03(b).

“Manager” means SPT Management, LLC, a Delaware limited liability company.

“Market Value” means, as of any date of determination, the market value of the Eligible Assets  as determined by the Administrative Agent in its sole discretion on a daily basis, using methodology and parameters determined and applied by the Administrative Agent in its sole discretion.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower, the Parent or the Parent and its Subsidiaries taken as a whole; (b) a material impairment of the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party; (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party; or (d) a material adverse effect upon the Collateral or the validity, enforceability, perfection or priority of the Administrative Agent’s Liens on the Collateral.

“Maturity Date” means the later of (a) the Initial Maturity Date and (b) if the Initial Maturity Date is extended pursuant to Section 2.12, such extended maturity date as determined pursuant to such Section; provided, however, that, in each case, if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.

“Measurement Period” means, as of any date of determination, the twelve (12)-month period ending on the last day of the month immediately preceding such date of determination.

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is

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obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

“Multiple Employer Plan” means a Plan which has two or more contributing sponsors (including the Borrower or any ERISA Affiliate) at least two of whom are not under common control, as such a plan is described in Section 4064 of ERISA.

“Near Cash Liquidity” means, with respect to the Parent and its Subsidiaries on a consolidated basis, as of any date of determination, the market value of Near Cash Securities held by the Parent and its Subsidiaries as of such date.  “Market Value” of Near Cash Securities shall be determined on a quarterly basis through bids obtained from independent third party broker-dealers reasonably acceptable to the Administrative Agent.

“Near Cash Securities” means (i) CMBS having, at all times, a maturity or weighted average life of twelve (12) months or less as determined by the applicable service, (ii) RMBS having a duration of twelve (12) months or less as determined by the Parent (and, at the Administrative Agent’s request, the assumptions used in such determination shall be provided to the Administrative Agent for the Administrative Agent’s review), in each case, having a rating of Baa3 or BBB (or the equivalent) or higher by at least one Rating Agency (it being acknowledged that such securities may also have a lower rating from one or more Rating Agencies) or (iii) other public or privately placed securities approved by the Administrative Agent.

“Net Cash Proceeds” means, with respect to any issuance or sale by the Parent of any of its Equity Interests, the excess of (i) the sum of the cash and Cash Equivalents received by the Parent in connection with such issuance or sale, less (ii) the underwriting discounts and commissions, and other out-of-pocket expenses, incurred by the Parent in connection with such issuance or sale.

“Net Income” means, with respect to any Test Period, the net income of Parent and its Subsidiaries on a consolidated basis for such Test Period as determined in accordance with GAAP.

“New Lender Joinder Agreement” has the meaning specified in Section 2.14(c).

“Non-Recourse Indebtedness” means Indebtedness of a Person for borrowed money in respect of which recourse for payment (except for customary exceptions for fraud, misapplication of funds, environmental indemnities, Insolvency Events, non-approved transfers or other events) is contractually limited to specific assets of such Person encumbered by a Lien securing such Indebtedness.

“Note” means a promissory note made by the Borrower in favor of a Lender evidencing the Term Loan made by such Lender, substantially in the form of Exhibit B.

“Obligations” means, collectively, all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Term Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any

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Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.

“OFAC” has the meaning set forth in the definition of “Embargoed Person.”

“Off-Balance Sheet Obligations” means, with respect to any Person and any date, to the extent not included as a liability on the balance sheet of such Person, all of the following with respect to such Person as of such date: (a) monetary obligations under any financing lease or so—called “synthetic,” tax retention or off—balance sheet lease transaction which, upon the application of any Insolvency Laws, would be characterized as indebtedness, (b) monetary obligations under any sale and leaseback transaction which does not create a liability on the balance sheet of such Person, or (c) any other monetary obligation arising with respect to any other transaction which (i) is characterized as indebtedness for tax purposes but not for accounting purposes, or (ii) is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person (for purposes of this clause (c), any transaction structured to provide tax deductibility as interest expense of any dividend, coupon or other periodic payment will be deemed to be the functional equivalent of a borrowing).

“Offering Circular” means that certain Offering Circular, dated November 18, 2010, relating to approximately $2,458,894,115 of Banc of America Large Loan, Inc. Pass-Through Certificates Series 2010-HLTN.

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Overadvance Amount” means, as of any date of determination, an amount equal to the positive difference (if any) between (i) the Total Outstandings at such time multiplied by the then effective Advance Rate and (ii) the Total Outstandings at such time multiplied by the then Reference Advance Rate.

“Parent” has the meaning specified in the introductory paragraph hereto.

“Participant” has the meaning specified in Section 11.06(d).

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“Participant Register” has the meaning specified in Section 11.06(d).

“PBGC” means the Pension Benefit Guaranty Corporation.

“Pension Act” means the Pension Protection Act of 2006.

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to Pension Plans and set forth in, with respect to plan years ending prior to the effective date of the Pension Act, Section 412 of the Code and Section 302 of ERISA, each as in effect prior to the Pension Act and, thereafter, Section 412, 430, 431, 432 and 436 of the Code and Sections 302, 303, 304 and 305 of ERISA.

“Pension Plan” means any employee pension benefit plan (including a Multiple Employer Plan or a Multiemployer Plan) that is maintained or is contributed to by the Borrower and any ERISA Affiliate and is either covered by Title IV of ERISA or is subject to the minimum funding standards under Section 412 of the Code.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee benefit plan within the meaning of Section 3(3) of ERISA (including a Pension Plan), maintained for employees of a Loan Party or any ERISA Affiliate or any such Plan to which a Loan Party or any ERISA Affiliate is required to contribute on behalf of any of its employees.

“Platform” has the meaning specified in Section 6.02.

“Pledge Agreement” means the Pledge Agreement between the Parent and the Administrative Agent, dated as of the Closing Date, substantially in the form of Exhibit E.

“Pledged Asset EBITDA” means, as of any date of determination with respect to any Measurement Period, an amount equal to the sum of Hilton Worldwide, Inc.’s (i) Adjusted EBITDA (as defined in the Offering Circular) plus (ii) “Corporate Overhead” minus (iii) “Timeshare” minus (iv) “Other Income”, in each case, for such Measurement Period and, in the case of clauses (ii), (iii) and (iv), as reported in the monthly reporting package described in the Offering Circular; provided, that “Pledged Asset EBITDA” shall be deemed to be equal to zero at any time from and after the Borrower’s failure to deliver the report required under Section 6.02(i) by the earlier of (a) the third Business Day after it receives the applicable monthly financial statements to be furnished pursuant to the “Hilton Loan Documents” (as defined in the Security Agreement) or (b) the 45th day following the date that monthly financial statements for the applicable Measurement Period to be furnished pursuant to the “Hilton Loan Documents” (as defined in the Security Agreement) are required to be delivered thereunder, in each case until such time as the Borrower is able to determine the Pledged Asset EBITDA and delivers the related report under Section 6.02(i).

“Rating Agency” means each of Fitch, Moody’s and S&P.

“Reference Advance Rate” means:

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(a)           prior to the Initial Maturity Date:

(i)            70% on the Closing Date and at any time thereafter until such time (if any) that the Borrower is required to make a prepayment under Section 2.03(b)(iii)(B) or Section 2.03(b)(iv);

(ii)           60% at any time following the occurrence of a Mandatory Prepayment Event arising under Section 2.03(b)(iii)(B) so long as no Mandatory Prepayment Event has theretofore arisen under Section 2.03(b)(iv);

(iii)          50% at any time following the occurrence of a Mandatory Prepayment Event arising under Section 2.03(b)(iv) so long as no Mandatory Prepayment Event has theretofore arisen under Section 2.03(b)(iii)(B); and

(iv)          40% at any time following the occurrence of Mandatory Prepayment Events under both Section 2.03(b)(iii)(B) and Section 2.03(b)(iv); and

(b)           on and after the Initial Maturity Date:

(i)            on the Initial Maturity Date (and thereafter unless and until one of the following clauses becomes applicable), a rate that is 10% lower than the Reference Advance Rate in effect on the day prior to the Initial Maturity Date as determined in accordance with the foregoing clauses of this definition (i.e., in the case where the Reference Advance Rate is 70% on the day prior to the Initial Maturity Date, the Reference Advance Rate on the Initial Maturity Date shall be 60%) (the Reference Advance Rate on the Initial Maturity Date being referred to herein as the “Extension Reference Rate”);

(ii)           a rate that is 10% lower than the Extension Reference Rate at any time following the occurrence of a Mandatory Prepayment Event arising under Section 2.03(b)(iii)(B) on or after the Initial Maturity Date so long as no Mandatory Prepayment Event has theretofore arisen under Section 2.03(b)(iii)(B) or Section 2.03(b)(iv) (i.e., 50% in the case where the Extension Reference Rate is 60%);

(iii)          a rate that is 20% lower than the Extension Reference Rate at any time following the occurrence of a Mandatory Prepayment Event arising under Section 2.03(b)(iv) on or after the Initial Maturity Date so long as no Mandatory Prepayment Event has theretofore arisen under Section 2.03(b)(iii)(B) or Section 2.03(b)(iv) (i.e., 40% in the case where the Extension Reference Rate is 60%); and

(iv)          at any time following the occurrence of Mandatory Prepayment Events arising under both Section 2.03(b)(iii)(B) and Section 2.03(b)(iv) on or after the Initial Maturity Date, the greater of (A) 30% and (B) the rate that is 30% lower than the Extension Reference Rate (i.e., 30% in the case where the Extension Reference Rate is 60%).

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“Register” has the meaning specified in Section 11.06(c).

“REIT” means a Person satisfying the conditions and limitations set forth in Section 856(b) and 856(c) of the Code which are necessary to qualify such Person as a “real estate investment trust,” as defined in Section 856(a) of the Code.

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.

“Release” means any release, spill, emission, discharge, deposit, disposal, leaking, pumping, pouring, dumping, emptying, injection or leaching of any Hazardous Material into the Environment, or into, from or through any building, structure or facility.

“Relevant Payment” has the meaning specified in Section 10.11.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30 day notice period has been waived.

“Required Lenders” means, as of any date of determination, Lenders holding in the aggregate more than 50% of the Total Outstandings; provided that the portion of the Total Outstandings held or deemed held by any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.

“Responsible Officer” means the chief executive officer, president, chief financial officer, vice president, general counsel, treasurer, assistant treasurer or controller of a Loan Party and solely for purposes of the delivery of incumbency certificates pursuant to Article IV, the secretary or any assistant secretary of a Loan Party.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of any Person or any of its Subsidiaries, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to any Person’s stockholders, partners or members (or the equivalent of any thereof), or any option, warrant or other right to acquire any such dividend or other distribution or payment.

“RMBS” means mortgage pass-through certificates or other securities issued pursuant to a securitization of residential mortgage loans.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

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“Secured Parties” means, collectively, the Administrative Agent, the Lenders, each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.05, and the other Persons the Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Collateral Documents.

“Security Agreement” means the Security Agreement between the Borrower and the Administrative Agent, dated as of the Closing Date, substantially in the form of Exhibit F.

“Senior Debt Yield” means, as of any date of determination with respect to any Measurement Period, the ratio (expressed as a percentage) of (i) Pledged Asset EBITDA for such Measurement Period to (ii) the aggregate outstanding principal balance of the “Senior Loan” (as defined in the Offering Circular) as of the last day of such Measurement Period.

“Significant Subsidiary” means, at any date of determination, each Subsidiary or group of Subsidiaries of the Parent (a) whose total assets at the last day of the most recent fiscal period for which financial statements have been delivered pursuant to clause (a) or (b) of Section 6.01 were equal to or greater than 10% of the consolidated total assets of the Parent and its Subsidiaries at such date or (b) whose gross revenues for the most recently completed period of four fiscal quarters for which financial statements have been delivered pursuant to clause (a) or (b) of Section 6.01 were equal to or greater than 10% of the consolidated gross revenues of the Parent and its Subsidiaries for such period, in each case, determined in accordance with GAAP (it being understood that such calculations shall be determined in the aggregate for all Subsidiaries of the Company subject to any of the events specified in clause (e), (f), (g) or (h) of Section 8.01).

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (e) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Solvency Certificate” means a Solvency Certificate of the chief financial officer of the Parent, substantially in the form of Exhibit G.

“S&P” means Standard & Poor’s Ratings Group and its successors.

“Stretch Advance Rate” means, at any time, a percentage that is 5% greater than the then Reference Advance Rate (i.e., in the case where the Reference Advance Rate is 60%, the Stretch Advance Rate shall be 65%).

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“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Parent.

“Swap Contract” means any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement.

“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

“Tangible Net Worth” means, as of any date of determination, with respect to any Person, all amounts which would be included under capital or shareholder’s equity (or any like caption) on a balance sheet of such Person, minus (a) amounts owing to such Person from any Affiliate thereof, or from officers, employees, partners, members, directors, shareholders or other Persons similarly affiliated with such Person or any Affiliate thereof, (b) Intangible Assets and (c) prepaid taxes and/or expenses, all on or as of such date.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“Term Loan” has the meaning specified in Section 2.01.

“Test Period” means the time period commencing on the first day of each calendar quarter through and including the last day of such calendar quarter.

“Threshold Amount” means (i) with reference to the Borrower, $100,000 and (ii) with reference to any other Loan Party, $25,000,000.

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“Total Assets” means, with respect to the Parent, as of any date of determination, an amount equal to the aggregate book value of all assets owned by the Parent on a consolidated basis and the proportionate share of assets owned by non-consolidated Subsidiaries of the Parent, less (a) amounts owing to the Parent or any of its Subsidiaries from any Affiliate thereof, or from officers, employees, partners, members, directors, shareholders or other Persons similarly affiliated with the Parent or any Affiliate thereof, (b) Intangible Assets and (c) prepaid taxes and expenses, all on or as of such date of determination; provided, however, that “Total Assets” shall exclude the assets reflected on the Parent’s consolidated balance sheet financed pursuant to the United States’ government’s TALF program.

“Total Indebtedness” means, with respect to the Parent, as of any date of determination, all Indebtedness (other than Contingent Liabilities not reflected on Parent’s consolidated balance sheet), plus the proportionate share of all Indebtedness (other than Contingent Liabilities not reflected on Parent’s consolidated balance sheet) of all non-consolidated Affiliates of Parent, on or as of such date of determination; provided, however, that “Total Indebtedness” shall exclude the $171,349,642.62 of Indebtedness reflected on the Parent’s consolidated balance sheet obtained in connection with the United States’ government’s TALF program.

“Total Outstandings” means, at any time, the aggregate outstanding principal amount of the Term Loans then outstanding.

“Type” means, when used in reference to the Term Loans or any Borrowing, whether the rate of interest on the Term Loans, or on that portion of the Term Loans comprising such Borrowing, is determined by reference to the Base Rate or the Eurodollar Rate.

“United States” and “U.S.” mean the United States of America.

“Unrestricted Cash” means (i) cash and Cash Equivalents (other than prepaid rents and security deposits made under tenant leases) held by the Parent or any of its Subsidiaries that are not subject to any Lien (excluding statutory liens in favor of any depositary bank where such cash is maintained), minus (ii) amounts included in the foregoing clause (i) that are with an entity other than the Parent or any of its Subsidiaries as deposits or security for Contractual Obligations.

“Wholly Owned Unrestricted Subsidiary” means, as to any Person as of any date of determination, any other Person (i) all of the Equity Interests of which (other than directors’ qualifying shares required by law) is owned directly and/or through other Wholly Owned Unrestricted Subsidiaries by such Person and (ii) who is not, as of such date of determination, prohibited from becoming a guarantor of the Obligations under the express terms of its Organization Documents or any contract, instrument or other agreement to which such Person is a party.

1.02        Other Interpretive Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a)           The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and

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“including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “hereto,” “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(b)           In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

(c)           Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

1.03        Accounting Terms.

(a)           Generally.  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

(b)           Changes in GAAP; Changes in Accounting Policies or Reporting Practices.  If at any time any change in GAAP, or any change in accounting policies or reporting practices of the Parent or any of its Subsidiaries that are permitted by but not required under, GAAP, would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change(s) (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP and the accounting policies and reporting practices (as the case may be) in effect prior to such change(s) and (ii) the Borrower shall provide to the

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Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change(s).

1.04        Rounding.  Any financial ratios required to be maintained by the Parent pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

1.05        Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

ARTICLE II.  THE COMMITMENTS AND LOANS

2.01        Term Loans.  Subject to the terms and conditions set forth herein, each Lender severally agrees to make a term loan (each such loan, a “Term Loan”) to the Borrower on the Closing Date, in an aggregate amount not to exceed the amount of such Lender’s Commitment.  The amounts borrowed under this Section 2.01 and repaid or prepaid may not be reborrowed.  Term Loans may be Base Rate Loans or Eurodollar Rate Loans, as further provided herein.  Each Lender hereby represents and warrants that, on and as of the Closing Date, it is a “qualified purchaser” (within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder) and a “qualified institutional buyer” (within the meaning of Rule 144A under the Securities Act of 1933, as amended).

2.02        Borrowings, Conversions and Continuations of Loans.

(a)           Each Borrowing, each conversion of Borrowings from one Type to the other, and each continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by telephone.  Each such notice must be received by the Administrative Agent not later than 11:00 a.m. (i) three (3) Business Days prior to the requested date of any Borrowing of, conversion to or continuation of Eurodollar Rate Loans (other than Eurodollar Rate Loans referred to in the following clause (ii)) or of any conversion of Eurodollar Rate Loans to Base Rate Loans, and (ii) on the requested date of any Borrowing of Eurodollar Rate Loans made on or prior to the 10th day following the Closing Date or any Borrowing of Base Rate Loans.  Each telephonic notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.  Each Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof. Each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof.  Each Loan Notice (whether telephonic or written) shall specify (i) whether the Borrower is requesting a Borrowing, a conversion of a Borrowing from one Type to the other, or a continuation of Eurodollar Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Term Loans to be borrowed (in the case of the initial Loan Notice), converted or continued, (iv) the Type of Borrowing to be borrowed or to which existing

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Borrowings are to be converted, and (v) if applicable, the duration of the Interest Period with respect thereto (which shall be one, two, three or six months).  If the Borrower fails to specify a Type of Loan in a Loan Notice or if the Borrower fails to give a timely notice requesting a conversion or continuation, then the applicable Borrowing shall be made as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurodollar Rate Loans.  If the Borrower requests a Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in any such Loan Notice, but fails to specify an Interest Period, it will be deemed to have specified an Interest Period of one month.

(b)           Following receipt of a Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Term Loan, and if no timely notice of a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans described in the preceding subsection.  In the case of the initial Borrowing, each Lender shall make the amount of its Term Loan available to the Administrative Agent in immediately available funds at the Administrative Agent’s Office not later than 1:00 p.m. on the Closing Date.  Upon satisfaction of the conditions set forth in Article IV, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of Bank of America with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower.

(c)           Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurodollar Rate Loan.  During the existence of a Default, no Loans may be requested as, converted to or continued as Eurodollar Rate Loans without the consent of the Required Lenders.

(d)           The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of such interest rate.  At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in Bank of America’s prime rate used in determining the Base Rate promptly following the public announcement of such change.

(e)           After giving effect to all Borrowings, all conversions from one Type to the other, and all continuations of Borrowings as the same Type, there shall not be more than six Interest Periods in effect.

2.03        Prepayments.

(a)           Optional.  The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay the Term Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 11:00 a.m. (A) three (3) Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the date of prepayment of Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof; and (iii) any prepayment of Base Rate Loans shall be in a

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principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Type(s) of Term Loans to be prepaid and, if Eurodollar Rate Loans are to be prepaid, the Interest Period(s) of such Term Loans.  The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment.  If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest on the amount prepaid, together with any additional amounts required pursuant to Section 3.05.  Subject to Section 2.13, each such prepayment shall be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages.

(b)           Mandatory.

(i)            The Borrower shall repay in full the outstanding balance of all Term Loans on the earlier of:

(A)          the Maturity Date, and

(B)          the second Business Day following the date (if any) that the Market Value of the Eligible Assets is equal to zero.

(ii)           If for any reason on any date (a “Cash Sweep Reference Date”) either:

(A)          the then effective Advance Rate is greater than the then Reference Advance Rate but less than the then Stretch Advance Rate then, all amounts then and thereafter on deposit in the Collection Account will be applied immediately to prepay the Term Loans; provided that such requirement to apply such amounts (1) will not apply unless the Overadvance Amount exceeds $500,000 as of the applicable Cash Sweep Reference Date and (2) will cease to apply once the effective Advance Rate is no longer greater than the then Reference Advance Rate, or

(B)          the Senior Debt Yield as of the last day of the then most recently ended Measurement Period is determined to be less than 12%, then, on and after the date of such determination of Senior Debt Yield, all amounts on deposit in the Collection Account will be applied immediately to prepay the Term Loans; for purposes of any determination under this clause, the Senior Debt Yield will be determined by reference to the most recently delivered monthly report that is required to be delivered pursuant to Section 6.02(i) with respect to the applicable Measurement Period unless as of such date of determination Pledged Asset EBITDA is deemed to equal zero in accordance with the definition thereof, in which case the Senior Debt Yield will be deemed to be less than 12% as of the applicable date of determination.

(iii)          If for any reason on any date:

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(A)          the effective Advance Rate is greater than the then Stretch Advance Rate, the Borrower shall within two (2) Business Days of such occurrence prepay the Term Loans in an aggregate amount sufficient to cause the then effective Advance Rate to be no greater than the then Reference Advance Rate;

(B)          the Senior Debt Yield as of the last day of the then most recently ended Measurement Period is determined to be less than 12%, the Borrower shall within two (2) Business Days following the date of such determination of Senior Debt Yield, prepay the Term Loans in an aggregate amount sufficient, immediately after giving effect to such prepayment, to cause the effective Advance Rate to be no greater than the then Reference Advance Rate; for purposes of any determination under this clause, the Senior Debt Yield will be determined by reference to the most recently delivered monthly report that is required to be delivered pursuant to Section 6.02(i) with respect to the applicable Measurement Period unless as of such date of determination Pledged Asset EBITDA is deemed to equal zero in accordance with the definition thereof, in which case the Senior Debt Yield will be deemed to be less than 12% as of the applicable date of determination; or

(C)          the Facility Debt Yield as of the last day of the then most recently ended Measurement Period is determined to be less than 24.5%, the Borrower shall within two (2) Business Days following the date of such determination of Facility Debt Yield, prepay the Term Loans in an aggregate amount sufficient to cause the Facility Debt Yield, on a pro forma basis after giving effect to such prepayment, to be at least equal to 24.5%; for purposes of any determination under this clause, the Facility Debt Yield will be determined by reference to the most recently delivered monthly report that is required to be delivered pursuant to Section 6.02(i) with respect to the applicable Measurement Period unless as of such date of determination Pledged Asset EBITDA is deemed to equal zero in accordance with the definition thereof, in which case the Facility Debt Yield will be deemed to be equal to 24.5% as of the applicable date of determination.

(iv)          On the first date (if any) that any amount owing under or in respect of any Eligible Asset is for any reason overdue or otherwise delinquent for a period of sixty (60) days or more, or if the Borrower is unable for any reason to determine (by reference to monthly financial statements required to be furnished pursuant to the “Hilton Loan Documents” (as defined in the Security Agreement)) the Facility Debt Yield for a period of 120 consecutive days, then the Borrower shall within two (2) Business Days following such date prepay the Term Loans in an aggregate amount sufficient, immediately after giving effect to such prepayment, to cause the effective Advance Rate to be no greater than the then Reference Advance Rate.

(v)           Upon receipt by the Borrower of any amount in respect of a payment on account of the principal of an Eligible Asset (whether by virtue of an amortization payment, a prepayment, an enforcement or otherwise) (each, an “EA Principal Payment”), the Borrower shall within two (2) Business Days following such date prepay

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the Term Loans in an aggregate equal to the product of (x) the amount of such EA Principal Payment, multiplied by (y) the then Reference Advance Rate.

(vi)          The obligations of the Borrower to make prepayments pursuant to the foregoing clauses of this Section 2.03(b) are independent obligations, and no prepayment made pursuant to any clause of this Section 2.03(b) (other than a prepayment in full of all Term Loans) shall relieve the Borrower of its obligation to make any other prepayment that is required to be made under any other clause hereof.  If at any time the Borrower is required to make prepayments of the Term Loans pursuant to more than one of clauses (ii) through (v) of this Section 2.03(b), then until such time as all such required prepayments have been made all prepayments made by the Borrower pursuant to this Section 2.03(b) shall be deemed as having been applied in the following order for purposes of determining whether any such prepayment requirement has been satisfied:

First, to prepayments of the Term Loans required at such time pursuant to Section 2.03(b)(iii) (irrespective of the date that such required prepayments are required to be paid pursuant to such Sections), until such time as all such prepayments have been made in full;

Second, to prepayments of the Term Loans required at such time pursuant to Section 2.03(b)(ii), until such time as all such prepayments have been made in full;

Third, to prepayments of the Term Loans required at such time pursuant to Section 2.03(b)(iv), until such time as all such prepayments have been made in full; and

Fourth, to prepayments of the Term Loans required at such time pursuant to Section 2.03(b)(v), until such time as all such prepayments have been made in full.

2.04        Termination or Reduction of Commitments.  The Aggregate Commitments shall automatically terminate upon the making of the Term Loans on the Closing Date.

2.05        Collections.

(a)           Collection Account.  On or prior to the Closing Date, the Borrower shall establish an account (the “Collection Account”) with Bank of America that is subject to a Control Agreement.  All funds on deposit in the Collection Account shall be collateral security for the Obligations.  The Collection Account shall be an interest-bearing account, with all accrued interest to become part of the balance in the Collection Account.  The Borrower agrees the Borrower shall include all interest and earnings on any such balance as its income (and, if the Borrower is a partnership or other pass-through entity, the income of all partners, members or beneficiaries, as the case may be), and shall be the owner of all funds on deposit in the Collection Account for federal and applicable state and local tax purposes.

(b)           The Borrower will on the Closing Date instruct (and after the Closing Date will continue to instruct), the applicable obligor, agent, trustee, servicer or sub-servicer (as the case may be) with respect to the Eligible Assets to deposit or otherwise transfer into the Collection Account all principal, interest and other income, distributions, receipts, payments, collections, prepayments, recoveries, proceeds (including insurance and condemnation proceeds) and other

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payments or amounts of any kind paid, received, collected, recovered or distributed on, or in connection with or in respect of the Eligible Assets.  The Borrower shall not make any change in the foregoing instructions.  The Borrower shall provide to the Administrative Agent a written report within five (5) Business Days following each deposit or other transfer into the Collection Account, which report identifies the amount included in such deposit or transfer in respect of principal, interest and other sums paid in respect of Eligible Assets.  Each such report will include the Borrower’s calculation of the amount that Bank of America is authorized to debit and apply to the Obligations as contemplated in clause (c) of this Section 2.05.

(c)           The Administrative Agent shall have the exclusive right to manage and control all funds in the Collection Account, but the Administrative Agent shall have no fiduciary duty with respect to such deposited funds.  With respect to each deposit or other transfer of funds into the Collection Account, promptly following the Administrative Agent’s receipt of the report referred to in clause (b) above with respect to such deposit or transfer the Administrative Agent shall:

(i)            cause an amount equal to any interest on the Term Loans then due and payable to be applied to pay such Obligations;

(ii)           cause an amount equal to the amount of any prepayment that is then due and payable pursuant to Section 2.03(b) to be to be applied to pay such Obligations;

(iii)          cause an amount equal to any then due and payable Obligations not described in the foregoing clauses (i) or (ii) to be applied to pay such Obligations; and

(iv)          after application of funds as described in the foregoing clauses (i) through (iii), transfer any remaining funds on deposit in the Collection Account by wire transfer to an account designated by the Borrower, but if and only if each of the following conditions are satisfied at the time:

(A)          no Default or Event of Default shall exist; and

(B)          the Borrower is not required to make a prepayment of the Term Loans pursuant to Section 2.03 (irrespective of the date that such prepayments are required to be paid pursuant to such Section).

(d)           Any account fees and charges may be deducted from the balance, if any, in the Collection Account.  The Collection Account may be established and held in such name or names as the Administrative Agent may deem appropriate, including in the name of the Administrative Agent for the Lenders.  The Borrower hereby constitutes and appoints the Administrative Agent and any officer or agent of the Administrative Agent its true and lawful attorneys-in-fact with full power of substitution to open the Collection Account and to do any and every act that the Borrower might do on its own behalf to fulfill the terms of this Section 2.05.  To the extent permitted by law, the Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof.  It is understood and agreed that this power of attorney, which shall be deemed to be a power coupled with an interest, cannot be revoked.

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2.06        Interest.

(a)           Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate.

(b)           (i)            While any Event of Default exists, the Borrower shall pay interest on the principal amount of all outstanding Obligations hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

(ii)           Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c)           Interest on the Term Loans shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

2.07        Fees.  In addition to certain fees described in Section 2.12(b)(iii):

(a)           The Borrower shall pay to Bank of America, for its own account, the fee in the amount and at the time specified in the Fee Letter.  Such fee shall be fully earned when paid and shall not be refundable for any reason whatsoever.

(b)           The Borrower shall pay to the Lenders such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever.

2.08        Computation of Interest and Fees; Retroactive Adjustments of Applicable Rate.  (a) All computations of interest for Base Rate Loans (including Base Rate Loans determined by reference to the Eurodollar Rate) shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year).  Interest shall accrue on the Term Loans for the day on which the Term Loans are made, and shall not accrue on the Term Loans, or any portion thereof, for the day on which the Term Loans or such portion is paid, provided that if the Term Loans are repaid on the same day on which it is made it shall, subject to Section 2.10(a), bear interest for one day.  Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent demonstrable error.

(b)           If, for any reason, the Parent or the Administrative Agent or the Required Lenders determine(s) that (i) the Facility Debt Yield as calculated by the Loan Parties (or any of them) as of any applicable date was inaccurate and (ii) a proper calculation of the Facility Debt Yield would have resulted in higher pricing for such period, the Borrower shall immediately and

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retroactively be obligated to pay to the Administrative Agent for the account of the Lenders, promptly on demand by the Administrative Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, automatically and without further action by the Administrative Agent or any Lender), an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and fees actually paid for such period.  This paragraph shall not limit the rights of the Administrative Agent or any Lender, as the case may be, under any other provision of this Agreement or any other Loan Document.  The Borrower’s obligations under this paragraph shall survive the repayment of all other Obligations hereunder.

2.09        Evidence of Debt.  The Term Loan made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent demonstrable error of the amount of the Term Loans made by the Lenders to the Borrower and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of demonstrable error.  Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Term Loan in addition to such accounts or records.  Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount of its Term Loan and payments with respect thereto.

2.10        Payments Generally; Administrative Agent’s Clawback.

(a)           General.  All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein.  The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be.

(b)           (i)  Funding by Lenders; Presumption by Administrative Agent.  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed Closing Date that such Lender will not make available to the Administrative Agent such Lender’s Term Loan, the Administrative Agent may assume that such Lender has made such Term Loan

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available on such date in accordance with Section 2.02 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount.  In such event, if a Lender has not in fact made its Term Loan available to the Administrative Agent, then the applicable Lender and the Borrower jointly and severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Base Rate Loans.  If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period.  If such Lender pays its share of the Term Loans to the Administrative Agent, then the amount so paid shall constitute such Lender’s Term Loan included in such Borrowing.  Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent.

(ii)           Payments by the Borrower; Presumptions by Administrative Agent.  Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent demonstrable error.

(c)           Failure to Satisfy Conditions Precedent.  If any Lender makes available to the Administrative Agent funds for the Term Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the Term Loans set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

(d)           Obligations of Lenders Several.  The obligations of the Lenders hereunder to make the Term Loans and to make payments pursuant to Section 11.04(c) are several and not joint.  The failure of any Lender to make its Term Loan or to make any payment under Section 11.04(c) on any date required hereunder shall not relieve any other Lender of its

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corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Term Loan, or to make its payment under Section 11.04(c).

(e)           Funding Source.  Nothing herein shall be deemed to obligate any Lender to obtain the funds for its Term Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its Term Loan in any particular place or manner.

2.11        Sharing of Payments by Lenders.  If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on the Term Loan made by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of the Term Loans and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Term Loans, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Term Loans and other amounts owing them, provided that:

(i)            if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

(ii)           the provisions of this Section shall not be construed to apply to (x) any payment made by or on behalf of the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Term Loan to any assignee or participant, other than an assignment to the Borrower or any Affiliate thereof (as to which the provisions of this Section shall apply).

The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

2.12        Extension of Maturity Date.

(a)           Requests for Extension.  The Borrower may, by written notice to the Administrative Agent (such notice, an “Extension Notice”) not earlier than 60 days and not later than 30 days prior to the Initial Maturity Date, request that the Lenders extend the Maturity Date for an additional twelve (12) months from the Initial Maturity Date.  The Administrative Agent shall distribute any such Extension Notice promptly following its receipt thereof.

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(b)           Conditions Precedent to Effectiveness of Maturity Date Extension.  As conditions precedent to such extension, the Borrower shall, on or prior to the Initial Maturity Date, satisfy each of the following requirements for such extension to become effective:

(i)            The Administrative Agent shall have received an Extension Notice within the period required under subsection (a) above;

(ii)           On the date of such Extension Notice and both immediately before and immediately after giving effect to such extension of the Maturity Date, no Default or Event of Default shall have occurred and be continuing;

(iii)          The Borrower shall have paid to the Administrative Agent, for the pro rata benefit of the Lenders based on their respective Applicable Percentage as of such date, an extension fee in an amount equal to 0.25% of the Total Outstandings as of the Initial Maturity Date (it being agreed that such fee shall be fully earned when paid and shall not be refundable for any reason);

(iv)          The Administrative Agent shall have received evidence satisfactory to it that the Senior Debt Yield, as at the date of the most recent monthly financial statements furnished pursuant to the “Hilton Loan Documents” (as defined in the Security Agreement), is at least 15%;

(v)           The Borrower shall have made a prepayment of the Term Loans in an aggregate amount sufficient, immediately after giving effect to such prepayment, to cause the effective Advance Rate to be no greater than the Extension Reference Rate;

(vi)          The Administrative Agent shall have received a certificate of each Loan Party dated as of the Initial Maturity Date signed by a Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such extension and (ii) certifying that, before and after giving effect to such extension, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the Initial Maturity Date, except (x) to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, (y) any representation or warranty that is already by its terms qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects as of such date after giving effect to such qualification and (z) for purposes of this Section 2.12, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of Section 6.01, and (B) no Default exists;

(vii)         The Borrower shall have delivered to the Administrative Agent a Solvency Certificate executed on behalf of each of the Loan Parties (with respect to the Solvency of each such Loan Party both before and after giving effect to such extension); and

(viii)        The Borrower and the other Loan Parties shall have delivered to the Administrative Agent such reaffirmations of their respective obligations under the Loan

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Documents (after giving effect to the extension), and acknowledgments and certifications that they have no claims, offsets or defenses with respect to the payment or performance of any of the Obligations, including, without limitation, reaffirmations of each of the Pledge Agreement, the Security Agreement and Guaranty, executed by the Loan Parties party thereto.

2.13        Defaulting Lenders.  (a)  Adjustments.  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

(i)            Waivers and Amendments.  That Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in Section 11.01.

(ii)           Reallocation of Payments.  Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of that Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise, and including any amounts made available to the Administrative Agent by that Defaulting Lender pursuant to Section 11.08), shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by that Defaulting Lender to the Administrative Agent hereunder; second, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; third, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; and fourth, to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of the Term Loans in respect of which that Defaulting Lender has not fully funded its appropriate share and (y) the Term Loans were made at a time when the conditions set forth in Article IV were satisfied or waived, such payment shall be applied solely to pay the Loans of all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of the Term Loan of that Defaulting Lender.  Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.

(b)           Defaulting Lender Cure.  If the Borrower and the Administrative Agent agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein that Lender will, to the extent applicable, purchase that portion of outstanding Term Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages, whereupon that Lender will cease to be a Defaulting Lender;

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provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

2.14Increase in Commitments.

(a)Request for Increase.  Provided there exists no Default, upon notice to the Administrative Agent (which shall promptly notify the Lenders), the Borrower may from time to time, request an increase in the Term Loans by an amount (for all such requests) not exceeding $24,805,000; provided that (i) any such request for an increase shall be in a minimum amount of $5,000,000 and (ii) the Borrower may make a maximum of three (3) such requests.  At the time of sending such notice, the Borrower (in consultation with the Administrative Agent) shall specify the time period within which each Lender is requested to respond (which shall in no event be less than ten (10) Business Days from the date of delivery of such notice to the Lenders).

(b)Lender Elections to Increase.  Each Lender shall notify the Administrative Agent within such time period whether or not it agrees to increase its Term Loans and, if so, whether by an amount equal to, greater than, or less than its ratable portion (based on such Lender’s Applicable Percentage) of such requested increase.  Any Lender not responding within such time period shall be deemed to have declined to increase its Term Loans.

(c)Notification by Administrative Agent; Additional Lenders.  The Administrative Agent shall notify the Borrower and each Lender of the Lenders’ responses to each request made hereunder.  To achieve the full amount of a requested increase, and subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld), the Borrower may also invite additional Eligible Assignees to become Lenders pursuant to a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent and its counsel (a “New Lender Joinder Agreement”).

(d)Effective Date and Allocations.  If the Term Loans are increased in accordance with this Section, the Administrative Agent and the Borrower shall determine the effective date (the “Increase Effective Date”) and the final allocation of such increase.  The Administrative Agent shall promptly notify the Borrower and the Lenders of the final allocation of such increase and the Increase Effective Date.

(e)Conditions to Effectiveness of Increase.  As a condition precedent to such increase, the Borrower shall deliver to the Administrative Agent a certificate of each Loan Party dated as of the Increase Effective Date (in sufficient copies for each Lender) signed by a Responsible Officer of such Loan Party (i) certifying and attaching the resolutions adopted by such Loan Party approving or consenting to such increase, (ii) in the case of the Borrower, certifying that, before and after giving effect to such increase, (A) the representations and warranties contained in Article V and the other Loan Documents are true and correct in all material respects on and as of the Increase Effective Date, except to the extent that (1) such representations and warranties specifically refer to an earlier date, in which case they are true and correct as of such earlier date, (2) any representation or warranty that is already by its terms qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and

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correct in all respects as of such date after giving effect to such qualification and (3) except that for purposes of this Section 2.14, the representations and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to refer to the most recent statements furnished pursuant to clauses (a) and (b), respectively, of Section 6.01, (B) no Default exists, (C) the then effective Advance Rate is not greater than the then Reference Advance Rate, (D) the Senior Debt Yield, as most recently determined, is at least 12% and (E) the Facility Debt Yield, as most recently determined, is at least 24.5% , and (iii) any fees required to be paid under the Loan Documents in connection with such increase shall have been paid.  The additional Term Loans shall be made by the Lenders participating therein pursuant to the procedures set forth in Section 2.02.

(f)Conflicting Provisions.  This Section shall supersede any provisions in Section 2.11 or 11.01 to the contrary.

ARTICLE III.  TAXES, YIELD PROTECTION AND ILLEGALITY

3.01Taxes.

(a)Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.  (i) Any and all payments by or on account of any obligation of any Loan Party hereunder or under any other Loan Document shall be made free and clear of and without reduction or withholding for any Indemnified Taxes or Other Taxes.  If, however, applicable Laws require the applicable withholding agent to withhold or deduct any Indemnified Taxes (including Other Taxes), such Tax shall be withheld or deducted in accordance with such Laws as determined in good faith by the applicable withholding agent.

(ii)If the applicable withholding agent shall be required by applicable Laws to withhold or deduct any Indemnified Taxes or Other Taxes, from any payment, then (A) the applicable withholding agent shall withhold or make such deductions, (B) the applicable withholding agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with applicable Laws, and (C) the sum payable by the applicable Loan Party shall be increased as necessary so that after any required withholding or all required deductions (including deductions applicable to additional sums payable under this Section) have been made, the Administrative Agent or Lender, as the case may be, receives an amount equal to the sum it would have received had no such withholding or deduction been made.

(b)Payment of Other Taxes by the Loan Parties.  Without limiting the provisions of subsection (a) above, the relevant Loan Party shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Laws.

(c)Tax Indemnifications.  (i) Without limiting the provisions of subsection (a) or (b) above, the Loan Parties shall, and do hereby, jointly and severally, indemnify the Administrative Agent and each Lender for any Indemnified Taxes and Other Taxes as set forth herein, and shall make payment in respect thereof within ten (10) days after demand therefor, for the full amount of any such Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) payable by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and

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reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  The Loan Parties shall also, and do hereby, jointly and severally, indemnify the Administrative Agent, and shall make payment in respect thereof within ten (10) days after demand therefor, for any amount which a Lender for any reason fails to pay indefeasibly to the Administrative Agent as required by clause (ii) of this subsection.  A certificate as to the amount of any such payment or liability delivered to the Loan Parties by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent demonstrable error.

(ii)To the extent required by any applicable Law, the Administrative Agent may deduct or withhold from any payment to any Lender an amount equivalent to any applicable withholding tax.  Without limiting the provisions of subsection (a) or (b) above, if any Governmental Authority asserts a claim that a Loan Party or the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed or because such Lender failed to notify the Loan Parties or the Administrative Agent of a change in circumstances that rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), then each Lender shall, and does hereby, indemnify and hold harmless such Loan Party and the Administrative Agent, and shall make payment in respect thereof within ten (10) days after demand therefor, fully for all amounts paid, directly or indirectly, by the Administrative Agent as Taxes or otherwise, and any and all related losses, claims, liabilities, penalties, interest and expenses (including the fees, charges and disbursements of any counsel for such Loan Party or the Administrative Agent), whether or not such Tax was correctly or legally asserted.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent demonstrable error.  Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due to the Administrative Agent under this clause (ii).  The agreements in this clause (ii) shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all other Obligations.

(d)Evidence of Payments.  As soon as practicable, after any payment of Indemnified Taxes or Other Taxes paid by a Loan Party to a Governmental Authority as provided in this Section 3.01, such Loan Party shall deliver to the Administrative Agent, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e)Status of Lenders.  Each Lender shall, at such times as are reasonably requested by the Borrower, any other Loan Party or the Administrative Agent, provide the Borrower, such other Loan Party and the Administrative Agent with any documentation prescribed by Law, or reasonably requested by the Borrower, such other Loan Party or the Administrative Agent, certifying as to any entitlement of such Lender to an exemption from, or reduction in, any withholding Tax with respect to any payments to be made to such Lender under the Loan

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Documents.  Each such Lender shall, whenever a lapse in time or change in circumstances renders such documentation expired, obsolete or inaccurate in any material respect, deliver promptly to the Borrower, the other Loan Parties and the Administrative Agent updated or other appropriate documentation (including any new documentation reasonably requested by the applicable withholding agent) or promptly notify the Borrower, the other Loan Parties and the Administrative Agent of its inability to do so.  Unless the applicable withholding agent has received forms or other documents satisfactory to it indicating that payments under any Loan Document to or for a Lender are not subject to withholding tax or are subject to such Tax at a rate reduced by an applicable tax treaty, the Borrower, the other Loan Parties, Administrative Agent or other applicable withholding agent shall withhold amounts required to be withheld by applicable Law from such payments at the applicable statutory rate.

Without limiting the generality of the foregoing:

(i)Each Lender that is a United States person (as defined in Section 7701(a)(30) of the Code) shall deliver to the Borrower, the other Loan Parties and the Administrative Agent on or before the date on which it becomes a party to this Agreement two properly completed and duly signed original copies of Internal Revenue Service Form W-9 (or any successor form) certifying that such Lender is exempt from U.S. federal backup withholding.

(ii)Each Lender that is not a United States person (as defined in Section 7701(a)(30) of the Code) shall deliver to the Borrower, the other Loan Parties and the Administrative Agent on or before the date on which it becomes a party to this Agreement (and from time to time thereafter when required by Law or upon the reasonable request of the Borrower, the other Loan Parties or the Administrative Agent) whichever of the following is applicable:

(I)two (2) duly completed copies of Internal Revenue Service Form W-8BEN (or any successor forms) claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

(II)two (2) duly completed copies of Internal Revenue Service Form W-8ECI (or any successor forms),

(III)in the case of a Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate, in substantially the form of Exhibit H (any such certificate a “United States Tax Compliance Certificate”), or any other form approved by the Administrative Agent, to the effect that such Lender is not (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower or the Parent within the meaning of Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and that no payments in connection with the Loan Documents are effectively connected with such Lender’s conduct of a U.S. trade or business and (y) two (2) duly completed copies of Internal Revenue Service Form W-8BEN (or any successor forms),

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(IV)to the extent a Lender is not the beneficial owner (for example, where the Lender is a partnership, or is a Lender that has granted a participation), Internal Revenue Service Form W-8IMY (or any successor forms) of the Lender, accompanied by a Form W-8ECI, W-8BEN, United States Tax Compliance Certificate, Form W-9, Form W-8IMY (or other successor forms) or any other required information from each beneficial owner, as applicable (provided that, if the Lender is a partnership (and not a participating Lender) and one or more beneficial owners are claiming the portfolio interest exemption, the United States Tax Compliance Certificate shall be provided by such Lender on behalf of such beneficial owner(s)), or

(V)any other form prescribed by applicable requirements of U.S. federal income tax Law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable requirements of Law to permit the Borrower and the Administrative Agent to determine the withholding or deduction required to be made.

Each Lender shall, from time to time after the initial delivery by such Lender of the forms described above, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence so delivered expired, obsolete or inaccurate, promptly (1) deliver to the Borrower, the other Loan Parties and the Administrative Agent (in such number of copies as shall be requested by the recipient) renewals, amendments or additional or successor forms, properly completed and duly executed by such Lender (or other applicable Person), together with any other certificate or statement of exemption required in order to confirm or establish such Lender’s (or other applicable Person’s) status or that such Lender (or other applicable Person) is entitled to an exemption from or reduction in U.S. federal withholding tax or (2) notify Administrative Agent, the Borrower and the other Loan Parties of its (or other applicable Person’s) inability to deliver any such forms, certificates or other evidence.

Notwithstanding any other provision of this subsection (e), a Lender shall not be required to deliver any form that such Lender is not legally eligible to deliver.

(f)Treatment of Certain Refunds.  Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender, or have any obligation to pay to any Lender, any refund of Taxes withheld or deducted from funds paid for the account of such Lender, as the case may be.  If the Administrative Agent or any Lender determines, in its sole discretion, that it has received a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which a Loan Party has paid additional amounts pursuant to this Section, it shall pay to such Loan Party an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) incurred by the Administrative Agent or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund net of any Taxes payable by the Administrative Agent or Lender), provided that the applicable Loan Party, upon the request of the Administrative Agent or such

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Lender, agrees to repay the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.  This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to any Loan Party or any other Person.

(g)Payments made by Administrative Agent.  For the avoidance of doubt, any payments made by the Administrative Agent to any Lender shall be treated as payments made by the applicable Loan Party.

(h)Lender treated as Partnership.  If any Lender is treated as partnership for purposes of an applicable Indemnified Tax or Other Tax, any withholding made by such Lender shall be treated as if such withholding had been made by the applicable Loan Party or the Administrative Agent.

3.02Illegality.  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Term Loans whose interest is determined by reference to the Eurodollar Rate, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, (i) any obligation of such Lender to make or continue Eurodollar Rate Loans or to convert Base Rate Loans to Eurodollar Rate Loans shall be suspended, and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the Eurodollar Rate component of the Base Rate, the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate, in each case until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, (x) the Borrower shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Rate Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Eurodollar Rate component of the Base Rate), either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Loans and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Eurodollar Rate, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the Eurodollar Rate component thereof until the Administrative is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the Eurodollar Rate.  Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

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3.03Inability to Determine Rates.  If the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan or in connection with an existing or proposed Base Rate Loan, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender.  Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Loans shall be suspended, and (y) in the event of a determination described in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the Eurodollar Rate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice.  Upon receipt of such notice, the Borrower may revoke any pending request for a conversion to or continuation of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a request for a conversion to or continuation of Base Rate Loans in the amount specified therein.

3.04Increased Costs; Reserves on Eurodollar Rate Loans.

(a)Increased Costs Generally.  If any Change in Law shall:

(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement; or

(ii)impose on any Lender or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any portion of such Lender’s Term Loan the interest on which is determined by reference to the Eurodollar Rate (or, in the case of clause (ii) above, such Lender’s Term Loan), or of maintaining its obligation to make any such Loan), or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered; provided, however, that Borrower’s obligations with respect to any Taxes shall be governed solely by Section 3.01.

(b)Capital Requirements.  If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitment of such Lender or the Term Loan made by

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such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

(c)Certificates for Reimbursement.  A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent demonstrable error.  The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

(d)Delay in Requests.  Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

(e)Reserves on Eurodollar Rate Loans.  The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan equal to the actual costs of such reserves allocated to such Eurodollar Rate Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive), which shall be due and payable on each date on which interest is payable on such Eurodollar Rate Loan, provided the Borrower shall have received at least ten (10) days’ prior notice (with a copy to the Administrative Agent) of such additional interest from such Lender.  If a Lender fails to give notice ten (10) days prior to the relevant Interest Payment Date, such additional interest shall be due and payable ten (10) days from receipt of such notice.

3.05Compensation for Losses.  Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

(a)any continuation, conversion, payment or prepayment of a Borrowing (other than a Base Rate Loan) on a day other than the last day of the Interest Period applicable thereto (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

(b)any failure by the Borrower (for a reason other than the failure of such Lender to make a Term Loan) to prepay, borrow, continue or convert any portion of the Term Loans (other than a Base Rate Loan) on the date or in the amount notified by the Borrower; or

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(c)any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 11.13;

including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain the Term Loans or from fees payable to terminate the deposits from which such funds were obtained.  The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing.

For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for the Term Loans by a matching deposit or other borrowing in the London interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Rate Loan was in fact so funded.

3.06Mitigation Obligations; Replacement of Lenders.

(a)Designation of a Different Lending Office.  If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall, as applicable, use reasonable efforts to designate a different Lending Office for funding or booking its Term Loan hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b)Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, the Borrower may replace such Lender in accordance with Section 11.13.

3.07Survival.  All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments, repayment of all other Obligations hereunder, and resignation of the Administrative Agent.

ARTICLE IV.  CONDITIONS PRECEDENT

The effectiveness of this Agreement and obligation of each Lender to make its Term Loan hereunder is subject to satisfaction of the following conditions precedent:

(a)The Administrative Agent’s receipt of the following, each of which shall be originals, .pdf copies sent via electronic mail or telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of certificates of governmental officials, a

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recent date before the Closing Date) and each in form and substance satisfactory to the Administrative Agent and each of the Lenders:

(i)executed counterparts of this Agreement, sufficient in number for distribution to the Administrative Agent, each Lender and the Borrower;

(ii)[intentionally omitted];

(iii)each of the Pledge Agreement and the Security Agreement, duly executed by the applicable Loan Party, together with:

(A)certificates or instruments representing any Certificated Securities included in the Collateral Documents, accompanied by all endorsements and/or powers required by such Collateral Documents,

(B)acknowledgment copies or stamped receipt copies of proper financing statements, duly filed under the Uniform Commercial Code of all jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under such Collateral Documents, covering the Collateral described in such Collateral Documents,

(C)completed requests for information listing all effective financing statements filed in the jurisdictions referred to in clause (B) above that name the applicable Grantor as debtor, together with copies of such other financing statements,

(D)the Control Agreement as referred to in Section 2.05(a) and duly executed by each of the parties thereto, and

(E)evidence that all other actions, recordings and filings that the Administrative Agent may deem necessary or desirable in order to perfect the Liens created under such Collateral Documents have been taken;

(iv)such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party;

(v)such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing, in good standing and qualified to engage in business in its jurisdiction of organization or formation;

(vi)a favorable opinion of Sidley Austin LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents as the Administrative Agent may reasonably request;

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(vii)a favorable opinion of DLA Piper LLP (US), Maryland counsel to the Parent, addressed to the Administrative Agent and each Lender, as to such matters concerning the Parent and the Loan Documents to which the Parent is a party as the Administrative Agent may reasonably request;

(viii)a certificate of a Responsible Officer of each Loan Party either (A) attaching copies of all consents, licenses and approvals required in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required;

(ix)a certificate signed by a Responsible Officer of the Borrower certifying (A) that the conditions specified in subsections (e) and (f) below have been satisfied and (B) that there has been no event or circumstance since the date of the Audited Financial Statements that has had or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

(x)the absence of any action, suit, investigation or proceeding, pending or threatened, in any court or before any arbitrator or governmental authority that purports to materially affect any of the Borrower, the Guarantors or any of their respective Subsidiaries, or any transaction contemplated hereby, or that could have a material adverse effect on any of the Borrower or the Guarantors, or any of their respective Subsidiaries, or any transaction contemplated hereby or on the ability of any of the Borrower or the Guarantors to perform its obligations under the Loan Documents;

(xi)a Solvency Certificate from the Loan Parties demonstrating that each Loan Party is Solvent;

(xii)[intentionally omitted];

(xiii)a certificate from a Responsible Officer of the Parent certifying that the Loan Parties are in compliance with each of the covenants set forth in Section 7.12 on a pro forma basis as of September 30, 2010 after giving effect to the making of the Term Loans hereunder as if made on the first day of the Test Period ended on such date, which certificate will include reasonably detailed calculations demonstrating such compliance; and

(xiv)such other assurances, certificates, documents, consents or opinions as the Administrative Agent or the Required Lenders reasonably may require.

(b)Any fees required to be paid on or before the Closing Date shall have been paid.

(c)Unless waived by the Administrative Agent, the Borrower shall have paid all reasonable fees, charges and disbursements of counsel to the Administrative Agent (directly to such counsel if requested by the Administrative Agent) to the extent invoiced prior to or on the Closing Date, plus such additional amounts of such reasonable fees, charges and disbursements as shall constitute its reasonable estimate of such reasonable fees, charges and disbursements

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incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude a final settling of accounts between the Borrower and the Administrative Agent).

(d)The Lenders shall have completed a due diligence investigation of the Parent and its Subsidiaries in scope, and with results, satisfactory to the Lenders, and shall have been given such access to the management, records, books of account, contracts and properties of the Parent and its Subsidiaries and shall have received such financial, business and other information regarding each of the foregoing Persons and businesses as they shall have requested.

(e)The representations and warranties of the Borrower and each other Loan Party contained in Article V or any other Loan Document, or which are contained in any document furnished at any time under or in connection herewith or therewith, shall be true and correct as of the Closing Date (except to the extent any such representation or warranty only speaks of a different date).

(f)No Default shall exist, or would result from the making of the Term Loans or from the application of the proceeds thereof.

Without limiting the generality of the provisions of the last paragraph of Section 9.03, for purposes of determining compliance with the conditions specified in this Article IV, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received written notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

ARTICLE V.  REPRESENTATIONS AND WARRANTIES

Each Loan Party represents and warrants to the Administrative Agent and the Lenders that, as of the Closing Date and as of the Initial Maturity Date (if the Initial Maturity Date has been extended pursuant to Section 2.12):

5.01Existence, Qualification and Power.  Each Loan Party and each Subsidiary thereof (a) is duly organized or formed, validly existing and, as applicable, in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority and all requisite governmental licenses, authorizations, consents and approvals to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is licensed and, as applicable, in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in each case referred to in clause (b)(i) or (c), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

5.02Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or

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result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law; except in each case referred to in clause (b)(i) to the extent that such conflict or violation could not reasonably be expected to have a Material Adverse Effect.

5.03Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents, (c) except for the filing of UCC financing statements, the perfection or maintenance of the Liens created under the Collateral Documents (including the first priority nature thereof) or (d) the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents.

5.04Binding Effect.  This Agreement has been, and each other Loan Document, when delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other Loan Document when so delivered will constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, except to the extent that the enforceability thereof may be subject to bankruptcy, insolvency, reorganization, receivership, conservatorship, moratorium or other similar laws now or hereafter in effect relating to creditors’ rights in general and to general principles of equity.

5.05Financial Statements; No Material Adverse Effect.

(a)The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations, cash flows and changes in shareholders’ equity for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Parent and its Subsidiaries as of the date thereof, including liabilities for Taxes, material commitments and Indebtedness.

(b)The unaudited consolidated balance sheets of the Parent and its Subsidiaries dated September 30, 2010, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of the Parent and its Subsidiaries as of the date thereof and their results of operations, cash flows and changes in shareholders’ equity for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.  Schedule 5.05 sets forth all

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material indebtedness and other liabilities, direct or contingent, of the Parent and its consolidated Subsidiaries as of the date of such financial statements, including liabilities for Taxes, material commitments and Indebtedness.

(c)Since the date of the balance sheet included in the Audited Financial Statements, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

5.06Litigation.  There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of such Loan Party after due and diligent investigation, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against such Loan Party or any of its Subsidiaries or against any of their properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby, or (b) either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

5.07No Default.  Neither any Loan Party nor any Subsidiary thereof is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  No Default has occurred and is continuing or would result from the consummation of the transactions contemplated by this Agreement or any other Loan Document.

5.08Ownership of Property; Liens.  Each Loan Party and each of its Subsidiaries has good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of its business, except for such defects in title as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  The property of each Loan Party and its Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.

5.09Environmental Compliance.  Except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Loan Parties and their respective Subsidiaries: (i) are, and within the period of all applicable statutes of limitation have been, in compliance with all applicable Environmental Laws; (ii) hold all Environmental Permits (each of which is in full force and effect) required for any of their current or intended operations or for any property owned, leased, or otherwise operated by any of them; (iii) are, and within the period of all applicable statutes of limitation have been, in compliance with all of their Environmental Permits; and (iv) to the extent within the control of the Loan Parties and their respective Subsidiaries, each of their Environmental Permits will be timely renewed and complied with, any additional Environmental Permits that may be required of any of them will be timely obtained and complied with, without material expense, and compliance with any Environmental Law that is or is expected to become applicable to any of them will be timely attained and maintained, without material expense.

5.10Insurance.  The properties of the Parent and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Parent, in such amounts with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Parent or the

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applicable Subsidiary operates, except in the case of Subsidiaries that are not Loan Parties where the failure to maintain such insurance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.11Taxes.  The Parent and each of its Subsidiaries have timely filed all federal, state and other material tax returns and reports required to be filed, and have timely paid all federal, state and other material Taxes (whether or not shown on a tax return), including in its capacity as a withholding agent, levied or imposed upon it or its properties, income or assets otherwise due and payable, except those Taxes which are being contested in good faith by appropriate proceedings diligently conducted and for which adequate reserves have been provided in accordance with GAAP, except in the case of Subsidiaries that are not Loan Parties where the failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  There is no proposed material tax assessment or other claim against, and no material tax audit with respect to, any Loan Party or any Subsidiary.  Neither any Loan Party nor any Subsidiary thereof is party to any tax sharing agreement.  Except as could not, individually or in the aggregate, reasonably be reasonably expected to result in a Material Adverse Effect, neither any Loan Party nor any of its Subsidiaries has ever “participated” in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4.

5.12ERISA Compliance.

(a)Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state laws.  Each Pension Plan that is intended to be a qualified plan under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service to the effect that the form of such Plan is qualified under Section 401(a) of the Code and the trust related thereto has been determined by the Internal Revenue Service to be exempt from federal income tax under Section 501(a) of the Code, or an application for such a letter is currently being processed by the Internal Revenue Service or will be filed with the Internal Revenue Service within the remedial amendment period.  To the best knowledge of such Loan Party, nothing has occurred that would prevent or cause the loss of such tax-qualified status.

(b)There are no pending or, to the best knowledge of such Loan Party, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect.  There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

(c)Except for any of the following which could not reasonably be expected to result in a Material Adverse Effect (i) no ERISA Event has occurred, and neither such Loan Party nor any ERISA Affiliate is aware of any fact, event or circumstance that could reasonably be expected to constitute or result in an ERISA Event with respect to any Pension Plan or Multiemployer Plan; (ii) as of the most recent valuation date for any Pension Plan, the funding target attainment percentage (as defined in Section 430(d)(2) of the Code) is 60% or higher and neither such Loan Party nor any ERISA Affiliate knows of any facts or circumstances that could reasonably be expected to cause the funding target attainment percentage for any such plan to drop below 60% as of the most recent valuation date; (iii) neither such Loan Party nor any

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ERISA Affiliate has incurred any liability to the PBGC other than for the payment of premiums, and there are no premium payments which have become due that are unpaid; (iv) neither such Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or Section 4212(c) of ERISA; and (v) no Pension Plan has been terminated by the plan administrator thereof nor by the PBGC, and no event or circumstance has occurred or exists that could reasonably be expected to cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Pension Plan.

(d)On the Closing Date, neither such Loan Party nor any ERISA Affiliate maintains or contributes to, or has any unsatisfied obligation to contribute to, or liability under, any active or terminated Pension Plan other than those listed on Schedule 5.12(d) hereto.

5.13Subsidiaries; Equity Interests.  As of the Closing Date, no Loan Party has any Subsidiaries other than as specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by a Loan Party or a Subsidiary thereof in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens other than Liens permitted to exist under Section 7.01.  All of the outstanding Equity Interests in each Loan Party have been validly issued and are fully paid and nonassessable.  Set forth on Part (b) of Schedule 5.13 is a complete and accurate list of all Loan Parties, showing as of the Closing Date (as to each Loan Party) the jurisdiction of its incorporation and the address of its principal place of business.  As of the Closing Date, the copy of the charter of each Loan Party and each amendment thereto provided pursuant to subsection (a)(v) of Article IV is a true and correct copy of each such document, each of which is valid and in full force and effect.

5.14Margin Regulations; Investment Company Act.

(a)Such Loan Party is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying margin stock.  Immediately following the application of the proceeds of the Term Loans not more than 25% of the value of the assets (either of such Loan Party only or of the Loan Parties and their Subsidiaries on a consolidated basis) subject to the provisions of Section 7.01 or subject to any restriction contained in any agreement or instrument between such Loan Party and any Lender or any Affiliate of any Lender relating to Indebtedness and within the scope of Section 8.01(e) will be margin stock.

(b)None of the Parent, any Person Controlling the Parent, or any Subsidiary of the Parent is or is required to be registered as an “investment company” under the Investment Company Act of 1940.

5.15Disclosure.  No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein,

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in the light of the circumstances under which they were made, not misleading; provided that (a) with respect to projected financial information and other forecasts, such Loan Party represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and (b) no representation is made hereunder with respect to any reports, certificates of other information received by the Borrower or any other Loan Party and delivered to the Administrative Agent or any Lender with respect to the Eligible Assets.

5.16Compliance with Laws.  Each Loan Party and each Subsidiary thereof is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

5.17Taxpayer Identification Number.  Each Loan Party’s true and correct U.S. taxpayer identification number (or the equivalent thereof, in the case of a Loan Party that is not organized under the laws of the United States, any State thereof or the District of Columbia) is set forth on Schedule 11.02.

5.18Intellectual Property; Licenses, Etc..  The Parent and its Subsidiaries own, or possess the right to use, all of the trademarks, service marks, trade names, copyrights, patents, patent rights, franchises, licenses and other intellectual property rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person, except in the case of Subsidiaries that are not Loan Parties where the failure to possess same could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

5.19Solvency.  Each Loan Party is individually, and together with its Subsidiaries on a consolidated basis, Solvent.

5.20Casualty, Etc.  Neither the businesses nor the properties of any Loan Party or any of its Subsidiaries are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

5.21[Intentionally Omitted].

5.22Collateral Documents.  The provisions of the Collateral Documents are effective to create in favor of the Administrative Agent for the benefit of the Secured Parties a legal, valid and enforceable first priority Lien (subject to Liens permitted by Section 7.01) on all right, title and interest of the respective Loan Parties in the Collateral described therein.  Except for filings completed prior to the Closing Date and as contemplated hereby and by the Collateral Documents, no filing or other action will be necessary to perfect or protect such Liens.

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5.23Anti-Money Laundering and Economic Sanctions Laws.

(a)No Loan Party, none of its Subsidiaries and, to the knowledge of senior management of each Loan Party, none of its Affiliates and none of the respective officers, directors, brokers or agents of such Loan Party, such Subsidiary or Affiliate (i) has violated or is in violation of any applicable Anti-Money Laundering Law or (ii) has engaged or engages in any transaction, investment, undertaking or activity that conceals the identity, source or destination of the proceeds from any category of offenses designated in any applicable law, regulation or other binding measure implementing the “Forty Recommendations” and “Nine Special Recommendations” published by the Organisation for Economic Cooperation and Development’s Financial Action Task Force on Money Laundering.

(b)No Loan Party, none of its Subsidiaries and, to the knowledge of senior management of each Loan Party, none of its Affiliates and none of the respective officers, directors, brokers or agents of such Loan Party, such Subsidiary or such Affiliate that is acting or benefiting in any capacity in connection with the Term Loans is an Embargoed Person.

(c)Except as otherwise authorized by OFAC, no Loan Party, none of its Subsidiaries and, to the knowledge of senior management of each Loan Party, none of its Affiliates and none of the respective officers, directors, brokers or agents of such Loan Party, such Subsidiary or such Affiliate acting or benefiting in any capacity in connection with the Term Loans (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Embargoed Person, (ii) deals in, or otherwise engages in any transaction related to, any property or interests in property blocked pursuant to any applicable Economic Sanctions Laws or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the applicable prohibitions set forth in any Economic Sanctions Laws.

5.24REIT Status; Stock Exchange Listing.  Commencing with the Parent’s initial taxable year ending on December 31, 2009, the Parent has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT.  The shares of common Equity Interests of the Parent are listed on the New York Stock Exchange.

5.25Eligible Assets. (a) Each of the transfer of Eligible Assets to the Borrower, and the pledge of Eligible Assets by the Borrower to the Administrative Agent pursuant to the Security Agreement, was effected in compliance with the terms of the “Hilton Credit Agreement” and other “Hilton Loan Documents” (as such terms are defined in the Security Agreement, (b) the seller of such Eligible Assets received reasonably equivalent value in consideration for the transfer of such Eligible Assets, (c) no such transfer was made for or on account of an antecedent debt owed by such seller to the Borrower or an Affiliate of the Borrower and (d) such transfer is not voidable or subject to avoidance under the Bankruptcy Code.

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ARTICLE VI.  AFFIRMATIVE COVENANTS

So long as any Obligation hereunder shall remain unpaid or unsatisfied, each Loan Party shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03, 6.11, 6.12, 6.14, 6.15and 6.16) cause each Subsidiary thereof to:

6.01Financial Statements.  Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

(a)as soon as available, but in any event within 90 days after the end of each fiscal year of the Parent (or, if earlier, 15 days after the date required to be filed with the SEC (without giving effect to any extension permitted by the SEC)) (commencing with the fiscal year ended December 31, 2010), a consolidated balance sheet of the Parent and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, changes in shareholders’ equity, and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Required Lenders, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

(b)as soon as available, but in any event within 50 days after the end of each of the first three fiscal quarters of each fiscal year of the Parent (or, if earlier, 5 days after the date required to be filed with the SEC (without giving effect to any extension permitted by the SEC)) (commencing with the fiscal quarter ending March 31, 2011), a consolidated balance sheet of the Parent and its Subsidiaries as at the end of such fiscal quarter, the related consolidated statements of income or operations for such fiscal quarter and for the portion of the Parent’s fiscal year then ended, and the related consolidated statements of changes in shareholders’ equity, and cash flows for the portion of the Parent’s fiscal year then ended, in each case setting forth in comparative form, as applicable, the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by the chief executive officer, chief financial officer, treasurer or controller of the Parent as fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of the Parent and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

(c)[intentionally omitted]; and

(d)promptly, and in any event within three (3) Business Days following the receipt thereof by any Loan Party, monthly financial statements furnished to such Loan Party pursuant to the “Hilton Loan Documents” (as defined in the Security Agreement).

As to any information contained in materials furnished pursuant to Section 6.02(d), the Borrower shall not be separately required to furnish such information under subsections (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Borrower to furnish the

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information and materials described in subsections (a) and (b) above at the times specified therein.

6.02Certificates; Other Information.  Deliver to the Administrative Agent and each Lender, in form and detail satisfactory to the Administrative Agent and the Required Lenders:

(a)[intentionally omitted];

(b)concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) (commencing with the delivery of the financial statements for the fiscal quarter ending December 31, 2010), (i) a duly completed Compliance Certificate signed by the chief executive officer, chief financial officer, treasurer or controller of the Parent, (ii) a schedule listing all assets and liabilities excluded from the calculation of the Leverage Ratio for the relevant Test Period, (iii) a schedule (x) listing each of the Parent’s Subsidiaries and setting forth, with respect to each Subsidiary, the total assets and gross revenues for such Subsidiary as a percentage of the consolidated total assets and consolidated gross revenue, respectively, of the Parent and its Subsidiaries for the applicable period and (y) to the extent the foregoing schedule demonstrates that one or more Wholly Owned Unrestricted Subsidiaries which are not Guarantors constitute a Significant Subsidiary, identifying each Wholly Owned Unrestricted Subsidiary that will become a Guarantor in accordance with the provisions of Section 6.12, and (iv) a written certification from the Borrower and the Parent of the market value of all Near Cash Securities as of the date of such financial statements, in substantially the form attached hereto as Exhibit I, setting forth each of the bids obtained from the applicable broker-dealers (by name), each of whom shall be reasonably acceptable to the Administrative Agent, and showing all calculations and supporting materials (which delivery may, unless the Administrative Agent, or a Lender requests executed originals, be by electronic communication including fax or email and shall be deemed to be an original authentic counterpart thereof for all purposes);

(c)promptly after any reasonable request by the Administrative Agent or any Lender, copies of any detailed audit reports, management letters or recommendations submitted to the board of directors (or the audit committee of the board of directors) of the Parent by independent accountants in connection with the accounts or books of the Parent or any Subsidiary, or any audit of any of them;

(d)promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of the Parent, and copies of all annual, regular, periodic and special reports and registration statements which the Parent may file or be required to file with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to the Administrative Agent pursuant hereto;

(e)[intentionally omitted];

(f)promptly, and in any event within five (5) Business Days after receipt thereof by any Loan Party or any Subsidiary thereof, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any

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investigation or possible investigation or other inquiry by such agency regarding financial or other operational results of any Loan Party or any Subsidiary thereof;

(g)as soon as available, the annual tax returns of the Parent filed with the U.S. Internal Revenue Service;

(h)promptly, and in any event, within five (5) Business Days after receipt thereof by a Loan Party, any material agreements, correspondence, documents or other information related to the Eligible Assets and entered into or delivered after the Closing Date;

(i)within three (3) Business Days following each date that a Loan Party receives monthly financial statements furnished pursuant to the “Hilton Loan Documents” (as defined in the Security Agreement), the Borrower shall furnish to the Administrative Agent a written report that includes reasonably detailed calculations of the Senior Debt Yield and the Facility Debt Yield as of the last day of the applicable month; and

(j)promptly, such additional information regarding the business, financial or corporate affairs of any Loan Party or any Subsidiary thereof (including, without limitation, forecasts of consolidated balance sheets and statements of income or operations and cash flows of the Parent and its Subsidiaries), or compliance with the terms of the Loan Documents, or any information with respect to the Eligible Assets, in each case as the Administrative Agent or any Lender may from time to time reasonably request.

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Parent posts such documents, or provides a link thereto on the Parent’s website on the Internet at the website address listed on Schedule 11.02; or (ii) on which such documents are posted on the Parent’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that:  (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent or any Lender upon its request to the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Borrower shall notify the Administrative Agent and each Lender (by telecopier or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.  The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

Each Loan Party hereby acknowledges that the Administrative Agent will make available to the Lenders materials and/or information provided by or on behalf of the Loan Parties hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”).

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6.03Notices.  Notify the Administrative Agent and each Lender promptly following its becoming aware of:

(a)the occurrence of any Default or Event of Default;

(b)any matter that has resulted or could reasonably be expected to result in a Material Adverse Effect, including any Material Adverse Effect that arises by virtue of (i) any breach or non-performance of, or any default under, a Contractual Obligation of any Loan Party or any Subsidiary thereof; (ii) any dispute, litigation, investigation, proceeding or suspension between any Loan Party or any Subsidiary thereof and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting any Loan Party or any Subsidiary thereof, including pursuant to any applicable Environmental Laws;

(c)the occurrence of any default or event of default under or related to the Eligible Assets;

(d)the occurrence of any ERISA Event; and

(e)any material change in accounting policies or financial reporting practices by any Loan Party or any Subsidiary thereof.

Each notice pursuant to this Section 6.03 shall be accompanied by a statement of a Responsible Officer of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and propose to take with respect thereto.  Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached.

6.04Payment of Obligations.  (a) Except to the extent the same are being contested in good faith by appropriate proceedings diligently conducted (which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien) and adequate reserves in accordance with GAAP are being maintained by the applicable Loan Party, pay and discharge as the same shall become due and payable, (i) all material Tax liabilities, assessments and governmental charges or levies upon it or its properties or assets; (ii) all lawful claims which, if unpaid, would by law become a Lien not permitted by the provisions of Section 7.01 upon its property; and (iii) all Indebtedness, as and when due and payable, unless the failure to do so could not reasonably be expected to result in an Event of Default; and (b) timely file all material tax returns required to be filed.

6.05Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full force and effect its legal existence and good standing under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.04 or 7.05; (b) take all reasonable action to maintain all rights, privileges, permits, licenses and franchises necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect and (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect.

6.06[Intentionally Omitted].

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6.07Maintenance of Insurance.  Maintain with financially sound and reputable insurance companies not Affiliates of the Loan Parties, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons.

6.08Compliance with Laws.  Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

6.09Books and Records.  (a) Maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of such Loan Party or such Subsidiary, as the case may be; and (b) maintain such books of record and account in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over such Loan Party or such Subsidiary, as the case may be.

6.10Inspection Rights.  Permit representatives and independent contractors of the Administrative Agent and each Lender to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (provided the Borrower will have the right to be present during any discussions with such accountants), all at the expense of the Borrower and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Borrower; provided, however, that (a) so long as no Event of Default exists the Administrative Agent and the Lenders may not exercise the foregoing rights more than two (2) times in any calendar year, and (b) so long as an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and without advance notice.

6.11Use of Proceeds.  Use the proceeds of the Term Loan only to finance the purchase of the Eligible Assets by the Borrower.

6.12Additional Loan Parties.  In accordance with the terms of this Section 6.12, cause each Wholly Owned Unrestricted Subsidiary of the Parent (other than the Borrower) to be a Guarantor hereunder, other than each Wholly Owned Unrestricted Subsidiary that, when taken together with all other Wholly Owned Unrestricted Subsidiaries of the Parent that are not Guarantors, is not a Significant Subsidiary.  Promptly and in any event within 10 Business Days following the date the Loan Parties become aware that one or more Wholly Owned Unrestricted Subsidiaries which are not Guarantors constitute a Significant Subsidiary (and in no event later than 10 Business Days after the date the Loan Parties deliver a schedule as required by Section 6.02(b) demonstrating that one or more Wholly Owned Unrestricted Subsidiaries which are not Guarantors constitute a Significant Subsidiary), the Loan Parties shall (i) cause one or more

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Wholly Owned Unrestricted Subsidiaries that are not already a Loan Party to execute a joinder agreement to the Guaranty in form and substance reasonably satisfactory to the Administrative Agent such that the Wholly Owned Unrestricted Subsidiaries of the Parent which continue to not be Guarantors do not constitute a Significant Subsidiary, (ii) deliver to the Administrative Agent the items referenced in clauses (iv), (v) and (vi) of subsection (a) of Article IV with respect to each such Person and (iii) provide the Administrative Agent with the U.S. taxpayer identification for each such Person (or the equivalent thereof, in the event any such Person is not organized under the laws of the United States, any State thereof or the District of Columbia).

6.13Compliance with Environmental Laws.  Comply, and cause all lessees and other Persons operating or occupying its properties to comply, in all material respects, with all applicable Environmental Laws and Environmental Permits; obtain and renew all Environmental Permits necessary for its operations and properties, in each case except to the extent that the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

6.14Further Assurances.  Promptly upon the reasonable request by the Administrative Agent, or any Lender through the Administrative Agent, do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent, or any Lender through the Administrative Agent, may reasonably require from time to time in order to (i) carry out more effectively the purposes of the Loan Documents, (ii) to the full extent permitted by applicable Law, subject any Loan Party’s properties, assets, rights or interests to the Liens now or hereafter intended to be covered by any of the Collateral Documents, (iii) perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents and any of the Liens intended to be created thereunder and (iv) assure, convey, grant, assign, transfer, preserve, protect and confirm more effectively unto the Secured Parties the rights granted or now or hereafter intended to be granted to the Secured Parties under any Loan Document or under any other instrument executed in connection with any Loan Document to which any Loan Party is or is to be a party.

6.15Maintenance of REIT Status; New York Stock Exchange Listing.  The Parent will continue its method of operation so as to enable it to meet the requirements for qualification and taxation as a REIT for its taxable year ending on December 31, 2010 and thereafter.  The Parent will also at all times be listed on the New York Stock Exchange.

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6.16Information Regarding Collateral.  (a) Not effect, with respect to any Grantor, any change (i) in such Grantor’s legal name, (ii) in the location of the Borrower’s chief executive office, (iii) in such Grantor’s identity or organizational structure, (iv) in such Grantor’s Federal Taxpayer Identification Number (or equivalent thereof) or organizational identification number, if any, or (v) in such Grantor’s jurisdiction of organization (in each case, including by merging with or into any other entity, reorganizing, dissolving, liquidating, reorganizing or organizing in any other jurisdiction), until (A) it shall have given the Administrative Agent not less than 30 days’ prior written notice (in the form of certificate signed by a Responsible Officer), or such lesser notice period agreed to by the Administrative Agent, of its intention so to do, clearly describing such change and providing such other information in connection therewith as the Administrative Agent may reasonably request and (B) it shall have taken all action reasonably satisfactory to the Administrative Agent to maintain the perfection and priority of the security interest of the Administrative Agent for the benefit of the Secured Parties in the Collateral, if applicable.  The Borrower agrees to promptly provide the Administrative Agent with certified Organization Documents reflecting any of the changes described in the preceding sentence.

(b)With respect to the Eligible Assets, the Borrower shall take all action necessary or required by the Loan Documents or by Law, or requested by the Administrative Agent, to perfect, protect and more fully evidence the Borrower’s ownership of the Eligible Assets.

ARTICLE VII.  NEGATIVE COVENANTS

So long as any Obligation hereunder shall remain unpaid or unsatisfied:

7.01Liens.  (A)  The Borrower shall not, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than Liens pursuant to any Loan Document.

(B)No Guarantor shall, nor shall it permit any of its Subsidiaries (other than the Borrower) to, directly or indirectly create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than any of the following:

(i)Liens pursuant to any Loan Document;

(ii)Liens, the incurrence or the existence of which, shall not result in a Material Adverse Effect or an Event of Default; and

(iii)Liens securing Indebtedness permitted under Section 7.03(B).

7.02Investments.  (A)  The Borrower shall not, directly or indirectly, make any Investments, except Eligible Assets and Investments held (or deemed held) by the Borrower in the Collection Account.

(B)No Guarantor shall, nor shall it permit any of its Subsidiaries (other than the Borrower) to, directly or indirectly, make any Investment, except any of the following:

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(i)Investments held by such Guarantor or such Subsidiary in the form of Cash Equivalents and Near Cash Securities;

(ii)Investments by the Guarantors and such Subsidiaries in their respective Subsidiaries;

(iii)Investments, the making of which, in the reasonable opinion of the applicable Guarantor at the time of the making of (or the commitment to make) such investment, shall not result in a Material Adverse Effect or an Event of Default;

(iv)the Guaranty;

(v)to the extent any Investment constitutes Indebtedness, such Indebtedness is permitted to be incurred pursuant to Section 7.03(B); and

(vi)any other Investment, provided, that, taking into account the making of such Investment, the Loan Parties shall be in compliance, on a pro forma basis, with the provisions of Section 7.12.

7.03Indebtedness.  (A)  The Borrower shall not, directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except Indebtedness under the Loan Documents.

(B)No Guarantor shall, nor shall it permit any of its Subsidiaries (other than the Borrower) to, directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except any of the following:

(i)Indebtedness under the Loan Documents;

(ii)Indebtedness outstanding on the Closing Date and any refinancings, refundings, renewals or extensions thereof; provided, that taking into account such refinancing, refunding, renewal or extension, the Loan Parties shall be in compliance, on a pro forma basis, with the provisions of Section 7.12; and

(iii)any other Indebtedness, provided, that, taking into account the incurrence of such Indebtedness, the Loan Parties shall be in compliance, on a pro forma basis, with the provisions of Section 7.12.

7.04Fundamental Changes.  (A)  The Borrower shall not, directly or indirectly, merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, other than a Disposition consummated at least 90 days following the Closing Date that consists of an exchange of Eligible Assets as described in clause (ii) of the definition thereof.

(B)No Guarantor shall, nor shall it permit any of its Subsidiaries (other than the Borrower) to, directly or indirectly, merge, dissolve, liquidate, consolidate with or into another

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Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that, so long as no Default has occurred and is continuing or would result therefrom:

(i)any Loan Party (other than the Borrower) may Dispose of all or substantially all of its assets (including any Disposition that is in the nature of a liquidation, dissolution, merger or consolidation) to another Loan Party (other than the Borrower);

(ii)any Subsidiary that is not a Loan Party may dispose of all or substantially all its assets (including any Disposition that is in the nature of a liquidation, dissolution, merger or consolidation) to (i) another Subsidiary that is not a Loan Party or (ii) to a Loan Party (other than the Borrower);

(iii)any Subsidiary (other than the Borrower) may merge into or consolidate with any other Person or permit any other Person to merge into or consolidate with it; provided, however, that in each case, immediately after giving effect thereto in the case of any such merger to which any Loan Party (other than the Borrower) is a party, the survivor is, or upon such merger will by operation of law or otherwise be, a Loan Party; and

(iv)any Disposition (including any Disposition of Equity Interests) that is permitted by clause (B)(ii) or (B)(iv) of Section 7.05.

7.05Dispositions.  (A)  The Borrower shall not, directly or indirectly, make any Disposition or enter into any agreement to make any Disposition, other than a Disposition consummated at least 90 days following the Closing Date that consists of an exchange of Eligible Assets as described in clause (ii) of the definition thereof.

(B)No Guarantor shall, nor shall it permit any of its Subsidiaries (other than the Borrower) to, directly or indirectly, make any Disposition or enter into any agreement to make any Disposition, except:

(i)Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;

(ii)Dispositions of property by any Subsidiary (other than the Borrower) to a Guarantor; provided that if the transferor of such property is a Guarantor, the transferee thereof must be a Guarantor;

(iii)Dispositions permitted by clause (B)(i), (B)(ii) or (B)(iii) of  Section 7.04; and

(iv)any other Disposition of assets not constituting Collateral, provided, that (i) such Disposition shall not, in the reasonable opinion of the applicable Loan Party at the time of such Disposition (or the commitment to enter into such Disposition), be reasonably expected to result in a Material Adverse

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Effect, (ii) at the time of such Disposition, no Default shall have occurred and be continuing or would result therefrom and (iii) taking into account such Disposition, the Loan Parties shall be in compliance, on a pro forma basis, with provisions of Section 7.12.

7.06Restricted Payments.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, declare or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that:

(a)each Subsidiary of the Parent may make Restricted Payments to Subsidiaries that are Guarantors and any other Person that owns a direct Equity Interest in such Subsidiary, ratably according to their respective holdings of the type of Equity Interest in respect of which such Restricted Payment is being made;

(b)the Parent and each Subsidiary thereof may declare and make dividend payments or other distributions payable solely in the common stock or other common Equity Interests of such Person;

(c)so long as no Default shall have occurred and be continuing at the time of any action described below or would result therefrom, the Parent and each Subsidiary thereof may purchase, redeem or otherwise acquire Equity Interests issued by it with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common Equity Interests;

(d)the Parent shall be permitted to declare and pay dividends on its Equity Interests or make distributions with respect thereto in an amount for any fiscal year of the Parent equal to such amount as is necessary for the Parent to maintain its status as a REIT; and

(e)the Parent and each Subsidiary of the Parent may make any other Restricted Payment of any asset not constituting Collateral, provided, that (i) at the time of such Restricted Payment, no Default shall have occurred and be continuing or would result therefrom and (ii) taking into account such Restricted Payment, the Loan Parties shall be in compliance, on a pro forma basis, with provisions of Section 7.12.

7.07Change in Nature of Business.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, engage in any line of business which is not permitted to be engaged in by real estate investment trusts or taxable REIT subsidiaries thereof.

7.08Transactions with Affiliates.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into any transaction of any kind with any Affiliate of the Borrower, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm’s length transaction with a Person other than an Affiliate, provided that the foregoing restriction shall not apply to (i) transactions between or among the Loan Parties not prohibited hereunder, (ii) Investments and Restricted Payments not prohibited hereunder and (iii) transactions identified on Schedule 7.08.

7.09[Intentionally Omitted].

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7.10Use of Proceeds.  The Borrower shall not use the proceeds of the Term Loans, whether directly or indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock (within the meaning of Regulation U of the FRB) or to extend credit to others for the purpose of purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.

7.11Amendments, Waivers and Terminations of Certain Agreements.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, amend or otherwise change, cancel, terminate or waive in any respect (A) the terms of any Contractual Obligation of a Loan Party or a Subsidiary thereof except to the extent that same could not reasonably be expected to have a Material Adverse Effect, (B) the terms of any Organization Document of any Loan Party (other than the Borrower) or any Subsidiary thereof except to the extent that same could not reasonably be expected to have a material and adverse effect on the ability of any Loan Party to perform its obligations under the Loan Documents or (C) the terms of any Organization Document of the Borrower or any of the terms or provisions of any agreement constituting or related to the Eligible Assets, other than amendments and modifications that (1) do not have an adverse effect on the ability of any Loan Party to perform its obligations under any Loan Document to which it is a party or (2) are not adverse in any respect to the Administrative Agent or the Lenders.

7.12Financial Covenants.  The Loan Parties shall not:

(a)Minimum Liquidity.  At any time permit (i) Cash Liquidity to be less than $10,000,000 or (ii) the sum of Cash Liquidity and Near Cash Liquidity to be less than $30,000,000.

(b)Fixed Charge Coverage Ratio.  Permit the Fixed Charge Coverage Ratio for any Test Period to be less than 1.50:1.00.

(c)Leverage Ratio.  Permit the Leverage Ratio for any Test Period to be greater than 0.75:1.00, in each case adjusted to remove the impact of FIN 46 and FAS 166 and 167 to the extent of related transfers to special purpose entities in connection with bona fide securitization transactions.

(d)Tangible Net Worth.  Permit Tangible Net Worth at any time to be less than the sum of (i) $750,000,000 plus (ii) 75% of Net Cash Proceeds received by the Parent from issuances or sales of its Equity Interests occurring after the Closing Date.

7.13Accounting or Tax Changes.  No Loan Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, (i) make any change in accounting policies or reporting practices of the Parent or any of its Subsidiaries that are permitted by but not required under, GAAP, in each case without providing prompt written notice of such change to the Administrative Agent or (ii) make any change in fiscal year except with the written consent of the Administrative Agent.

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ARTICLE VIII.  EVENTS OF DEFAULT AND REMEDIES

8.01Events of Default.  Any of the following shall constitute an Event of Default:

(a)Non-Payment.  The Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of the Term Loans, or (ii) within three (3) Business Days after the same becomes due, any interest on the Term Loans, or any fee due hereunder, or (iii) within five (5) Business Days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or

(b)Specific Covenants.  The Borrower or any Loan Party, as applicable, fails to perform or observe any term, covenant or agreement contained in any of Section 2.05, 6.01, 6.02, 6.03, 6.05, 6.10, 6.11, 6.12 or 6.15 or Article VII, or any Grantor fails to perform or observe any term, covenant or agreement contained in the applicable Collateral Document; or

(c)Other Defaults.  Any Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days; or

(d)Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect (except to the extent that any such representation or warranty is already by its terms qualified as to “materiality,” “Material Adverse Effect” or similar language, in which case it shall be true and correct in all respects as of such date after giving effect to such qualification) when made or deemed made (or with respect to any representation or warranty that is expressly stated to have been made as of a specific date, as of such specific date); or

(e)Cross-Default.  (i) Any Loan Party or any Significant Subsidiary thereof (A) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and Indebtedness under Swap Contracts) or (B) fails to observe or perform any other agreement or condition relating to any such Indebtedness or Guarantee or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect thereof to be demanded, or (ii) there occurs under any Swap Contract an “Early Termination Date” (as defined in such Swap Contract, or any similar term defined therein) resulting from any event of default under such Swap Contract as to which a Loan Party is the “Defaulting Party” (as defined in such Swap Contract, or any similar term defined therein); provided, that a default, event, occurrence or condition described in this subsection (e) shall not at any time constitute an Event of Default

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unless, at such time, the aggregate outstanding amount of Indebtedness that is subject to defaults, events, occurrences or conditions of the type described in clause (i) above, together with the Swap Termination Value of all Swap Contracts that are subject to defaults, events, occurrences or conditions of the type described in clause (ii) above, exceeds in the aggregate the applicable Threshold Amount; or

(f)Insolvency Proceedings, Etc.  Any Loan Party or any Significant Subsidiary thereof institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or

(g)Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Significant Subsidiary thereof becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within thirty (30) days after its issue or levy; or

(h)Judgments.  There is entered (i) one or more final judgments or orders for the payment of money against one or more Loan Parties or Significant Subsidiaries thereof in an aggregate amount (with respect to all such judgments and orders) exceeding the applicable Threshold Amount (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such judgment or order, or (B) there is a period of 10 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect; or

(i)ERISA.  (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of one or more Loan Parties or Subsidiaries thereof to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount (with respect to all such ERISA Events) in excess of $25,000,000, or (ii) one or more Loan Parties or ERISA Affiliates shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount (with respect to all such failures) in excess of $25,000,000; or

(j)Invalidity of Loan Documents.  Any provision of any Loan Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder or satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party or any other Person contests in any manner the validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it has any

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or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any provision of any Loan Document; or

(k)Change of Control.  There occurs any Change of Control; or

(l)Collateral Documents.  Any Collateral Document after delivery thereof shall for any reason cease to create a valid and perfected first priority Lien (subject to Liens permitted by Section 7.01) on the Collateral purported to be covered thereby; or

(m)REIT Status.  The Parent shall, for any reason, lose or fail to maintain its status as a REIT.

8.02Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

(a)declare the unpaid principal amount of all outstanding Term Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; and

(b)exercise on behalf of itself and the Lenders all rights and remedies available to it, the Lenders under the Loan Documents;

provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the unpaid principal amount of all outstanding Term Loans and all interest and other amounts as aforesaid shall automatically become due and payable, without further act of the Administrative Agent or any Lender.

8.03Application of Funds.  After the exercise of remedies provided for in Section 8.02 (or after the Term Loans have automatically become immediately due and payable as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall, subject to the provisions of Section 2.13, be applied by the Administrative Agent in the following order:

First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including fees, charges and disbursements of counsel to the respective Lenders and amounts payable under Article III), ratably among them in proportion to the respective amounts described in this clause Second payable to them;

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Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and other Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them;

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Term Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them; and

Last, the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by Law.

ARTICLE IX.  ADMINISTRATIVE AGENT

9.01Appointment and Authority.  Each of the Lenders hereby irrevocably appoints Bank of America to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  The provisions of this Article are solely for the benefit of the Administrative Agent and the Lenders, and neither the Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such provisions.

9.02Rights as a Lender.  The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

9.03Exculpatory Provisions.  The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents.  Without limiting the generality of the foregoing, the Administrative Agent:

(a)shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

(b)shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law; and

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(c)shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 11.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct.  The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent by the Borrower or a Lender.

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

9.04Reliance by Administrative Agent.  The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of the Term Loans on the Closing Date that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of the Term Loans.  The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

9.05Delegation of Duties.  The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent.  The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties.  The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any

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such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

9.06Resignation of Administrative Agent.  The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower.  Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States, in each case that has (or is a subsidiary of a holding company that has) combined capital and surplus of at least $500,000,000.  If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (2) all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Administrative Agent as provided for above in this Section.  Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section).  The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor.  After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 11.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

9.07Non-Reliance on Administrative Agent and Other Lenders.  Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

9.08[Intentionally Omitted].

9.09Administrative Agent May File Proofs of Claim.  In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any

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Loan Party, the Administrative Agent (irrespective of whether the principal of the Term Loans shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

(a)to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Term Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.07 and 11.04) allowed in such judicial proceeding; and

(b)to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.07 and 11.04.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

9.10Collateral and Guaranty Matters.  The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion,

(a)to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon payment in full of all Obligations (other than contingent indemnification obligations) or (ii) subject to Section 11.01, if approved, authorized or ratified in writing by the Required Lenders; and

(b)to release the Borrower or any Guarantor from its obligations under this Agreement or the Guaranty, as applicable, if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder.

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release any Guarantor from its obligations under the Guaranty pursuant to this Section 9.10.

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ARTICLE X.  CONTINUING GUARANTY

10.01Guaranty.  Each Guarantor hereby absolutely and unconditionally guarantees, jointly and severally, as a guaranty of payment and performance and not merely as a guaranty of collection, prompt payment when due, whether at stated maturity, by required prepayment, upon acceleration, demand or otherwise, and at all times thereafter, of any and all of the Obligations, whether for principal, interest, premiums, fees, indemnities, damages, costs, expenses or otherwise, of the Borrower to the Secured Parties, and whether arising hereunder or under any other Loan Document (including all renewals, extensions, amendments, refinancings and other modifications thereof and all costs, attorneys’ fees and expenses incurred by the Secured Parties in connection with the collection or enforcement thereof).  The Administrative Agent’s books and records showing the amount of the Obligations shall be admissible in evidence in any action or proceeding, and shall be binding upon each Guarantor, and conclusive for the purpose of establishing the amount of the Obligations absent demonstrable error.  This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations or any instrument or agreement evidencing any Obligations, or by the existence, validity, enforceability, perfection, non-perfection or extent of any collateral therefor, or by any fact or circumstance relating to the Obligations which might otherwise constitute a defense to the obligations of any Guarantor under this Guaranty, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to any or all of the foregoing.

Anything contained in this Guaranty to the contrary notwithstanding, it is the intention of each Guarantor and the Secured Parties that the obligations of each Guarantor (other than the Parent) hereunder at any time shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any comparable provisions of any similar federal or state law.  To that end, but only in the event and to the extent that after giving effect to Section 10.11, such Guarantor’s obligations with respect to the Obligations or any payment made pursuant to such Obligations would, but for the operation of the first sentence of this paragraph, be subject to avoidance or recovery in any such proceeding under applicable Debtor Relief Laws after giving effect to Section 10.11, the amount of such Guarantor’s obligations with respect to the Obligations shall be limited to the largest amount which, after giving effect thereto, would not, under applicable Debtor Relief Laws, render such Guarantor’s obligations with respect to the Obligations unenforceable or avoidable or otherwise subject to recovery under applicable Debtor Relief Laws.  To the extent any payment actually made pursuant to the Obligations exceeds the limitation of the first sentence of this paragraph and is otherwise subject to avoidance and recovery in any such proceeding under applicable Debtor Relief Laws, the amount subject to avoidance shall in all events be limited to the amount by which such actual payment exceeds such limitation, and the Obligations as limited by the first sentence of this paragraph shall in all events remain in full force and effect and be fully enforceable against such Guarantor.  The first sentence of this paragraph is intended solely to preserve the rights of the Secured Parties hereunder against such Guarantor in such proceeding to the maximum extent permitted by applicable Debtor Relief Laws and neither such Guarantor, the Borrower, any other Guarantor nor any other Person shall have any right or claim under such sentence that would not otherwise be available under applicable Debtor Relief Laws in such proceeding.

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10.02Rights of Lenders.  Each Guarantor consents and agrees that the Secured Parties may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness hereof:  (a) amend, extend, renew, compromise, discharge, accelerate or otherwise change the time for payment or the terms of the Obligations or any part thereof; (b) take, hold, exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any security for the payment of this Guaranty or any Obligations; (c) apply such security and direct the order or manner of sale thereof as the Administrative Agent and the Lenders in their sole discretion may determine; and (d) release or substitute one or more of any endorsers or other guarantors of any of the Obligations.  Without limiting the generality of the foregoing, each Guarantor consents to the taking of, or failure to take, any action which might in any manner or to any extent vary the risks of such Guarantor under this Guaranty or which, but for this provision, might operate as a discharge of such Guarantor.

10.03Certain Waivers.  Each Guarantor waives (a) any defense arising by reason of any disability or other defense of the Borrower or any other guarantor, or the cessation from any cause whatsoever (including any act or omission of any Secured Party, but excluding satisfaction thereof by way of payment) of the liability of the Borrower; (b) any defense based on any claim that such Guarantor’s obligations exceed or are more burdensome than those of the Borrower; (c) the benefit of any statute of limitations affecting such Guarantor’s liability hereunder; (d) any right to proceed against the Borrower, proceed against or exhaust any security for the Obligations, or pursue any other remedy in the power of any Secured Party whatsoever; (e) any benefit of and any right to participate in any security now or hereafter held by any Secured Party; and (f) to the fullest extent permitted by law, any and all other defenses or benefits that may be derived from or afforded by applicable law limiting the liability of or exonerating guarantors or sureties.  Each Guarantor expressly waives all setoffs and counterclaims and all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Obligations, and all notices of acceptance of this Guaranty or of the existence, creation or incurrence of new or additional Obligations.

10.04Obligations Independent.  The obligations of each Guarantor hereunder are those of a primary obligor, and not merely as surety, and are independent of the Obligations and the obligations of any other guarantor, and a separate action may be brought against each Guarantor to enforce this Guaranty whether or not the Borrower or any other person or entity is joined as a party.

10.05Subrogation.  Each Guarantor shall not exercise any right of subrogation, contribution, indemnity, reimbursement or similar rights with respect to any payments it makes under this Guaranty until all of the Obligations and any amounts payable under this Guaranty have been indefeasibly paid and performed in full.  If any amounts are paid to any Guarantor in violation of the foregoing limitation, then such amounts shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Secured Parties to reduce the amount of the Obligations, whether matured or unmatured.

10.06Termination; Reinstatement.  This Guaranty is a continuing and irrevocable guaranty of all Obligations now or hereafter existing and shall remain in full force and effect until all Obligations and any other amounts payable under this Guaranty are indefeasibly paid in

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full in cash.  Notwithstanding the foregoing, this Guaranty shall continue in full force and effect or be revived, as the case may be, if any payment by or on behalf of the Borrower or any other Guarantor is made, or any of the Secured Parties exercises its right of setoff, in respect of the Obligations and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by any of the Secured Parties in their discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Laws or otherwise, all as if such payment had not been made or such setoff had not occurred and whether or not the Secured Parties are in possession of or have released this Guaranty and regardless of any prior revocation, rescission, termination or reduction.  The obligations of the Guarantors under this paragraph shall survive termination of this Guaranty.

10.07Subordination.  Each Guarantor hereby subordinates the payment of all obligations and indebtedness of the Borrower owing to such Guarantor, whether now existing or hereafter arising, including but not limited to any obligation of the Borrower to such Guarantor as subrogee of the Secured Parties or resulting from such Guarantor’s performance under this Guaranty, to the indefeasible payment in full in cash of all Obligations.  If the Secured Parties so request, any such obligation or indebtedness of the Borrower to such Guarantor shall be enforced and performance received by such Guarantor as trustee for the Secured Parties and the proceeds thereof shall be paid over to the Secured Parties on account of the Obligations, but without reducing or affecting in any manner the liability of any Guarantor under this Guaranty.

10.08Stay of Acceleration.  If acceleration of the time for payment of any of the Obligations is stayed, in connection with any case commenced by or against any Guarantor or the Borrower under any Debtor Relief Laws, or otherwise, all such amounts shall nonetheless be payable by a Guarantor immediately upon demand by the Secured Parties.

10.09Condition of the Borrower.  Each Guarantor acknowledges and agrees that it has the sole responsibility for, and has adequate means of, obtaining from the Borrower and any other guarantor such information concerning the financial condition, business and operations of the Borrower and any such other guarantor as such Guarantor requires, and that none of the Secured Parties has any duty, and such Guarantor is not relying on the Secured Parties at any time, to disclose to such Guarantor any information relating to the business, operations or financial condition of the Borrower or any other guarantor (each Guarantor waiving any duty on the part of the Secured Parties to disclose such information and any defense relating to the failure to provide the same).

10.10Limitations on Enforcement.  If, in any action to enforce this Guaranty or any proceeding to allow or adjudicate a claim under this Guaranty, a court of competent jurisdiction determines that enforcement of this Guaranty against any Guarantor for the full amount of the Obligations is not lawful under, or would be subject to avoidance under, Section 548 of the Bankruptcy Code or any applicable provision of comparable state law, the liability of such Guarantor under this Guaranty shall be limited to the maximum amount lawful and not subject to avoidance under such law.

10.11Contribution.  At any time a payment in respect of the Obligations is made under this Guaranty, the right of contribution of each Guarantor (other than the Parent) against each

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other Guarantor (other than the Parent) shall be determined as provided in the immediately following sentence, with the right of contribution of each Guarantor to be revised and restated as of each date on which a payment (a “Relevant Payment”) is made on the Obligations under this Guaranty.  At any time that a Relevant Payment is made by a Guarantor (other than the Parent) that results in the aggregate payments made by such Guarantor in respect of the Obligations to and including the date of the Relevant Payment exceeding such Guarantor’s Contribution Percentage (as defined below) of the aggregate payments made by all Guarantors (other than the Parent) in respect of the Obligations to and including the date of the Relevant Payment (such excess, the “Aggregate Excess Amount”), each such Guarantor shall have a right of contribution against each other Guarantor (other than the Parent) who either has not made any payments or has made payments in respect of the Obligations to and including the date of the Relevant Payment in an aggregate amount less than such other Guarantor’s Contribution Percentage of the aggregate payments made to and including the date of the Relevant Payment by all Guarantors (other than the Parent) in respect of the Obligations (the aggregate amount of such deficit, the “Aggregate Deficit Amount”) in an amount equal to (x) a fraction the numerator of which is the Aggregate Excess Amount of such Guarantor and the denominator of which is the Aggregate Excess Amount of all Guarantors (other than the Parent) multiplied by (y) the Aggregate Deficit Amount of such other Guarantor.  A Guarantor’s right of contribution pursuant to the preceding sentences shall arise at the time of each computation, subject to adjustment at the time of each computation; provided, that no Guarantor may take any action to enforce such right until all of the Obligations and any amounts payable under this Guaranty have been indefeasibly paid and performed in full in immediately available funds, it being expressly recognized and agreed by all parties hereto that any Guarantor’s right of contribution arising pursuant to this Section 10.11 against any other Guarantor shall be expressly junior and subordinate to such other Guarantor’s obligations and liabilities in respect of the Obligations and any other obligations owing under this Guaranty.  As used in this Section 10.11, (i) each Guarantor’s “Contribution Percentage” shall mean the percentage obtained by dividing (x) the Adjusted Net Worth (as defined below) of such Guarantor by (y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the “Adjusted Net Worth” of each Guarantor shall mean the greater of (x) the Net Worth (as defined below) of such Guarantor and (y) zero; and (iii) the “Net Worth” of each Guarantor shall mean the amount by which the fair saleable value of such Guarantor’s assets on the date of any Relevant Payment exceeds its existing debts and other liabilities (including contingent liabilities, but without giving effect to any Obligations arising under this Guaranty) on such date.  All parties hereto recognize and agree that, except for any right of contribution arising pursuant to this Section 10.11, each Guarantor who makes any payment in respect of the Obligations shall have no right of contribution or subrogation against any other Guarantor in respect of such payment until all of the Obligations have been indefeasibly paid and performed in full in cash.  Each of the Guarantors recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an asset in favor of the party entitled to such contribution.  In this connection, each Guarantor has the right to waive its contribution right against any Guarantor to the extent that after giving effect to such waiver such Guarantor would remain solvent, in the determination of the Required Lenders.

ARTICLE XI.  MISCELLANEOUS

11.01Amendments, Etc.  No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan

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Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that (i) the Administrative Agent may, without the consent of any Lender, waive a covenant or other provision in, or a Default or Event of Default under, this Agreement or any Loan Document if the Administrative Agent determines in its sole discretion that such covenant, provision, Default or Event of Default, as applicable, does not materially and adversely affect the Lenders and (ii) notwithstanding the foregoing provisions of this Section 11.01 (including the first proviso above), no such amendment, waiver or consent shall:

(a)waive any condition set forth in Article IV without the written consent of each Lender;

(b)extend (except as provided in Section 2.12) or increase the Commitment of any Lender (or reinstate its Commitment) without the written consent of such Lender;

(c)postpone any date fixed by this Agreement or any other Loan Document for any payment (excluding mandatory prepayments) of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby;

(d)reduce the principal of, or the rate of interest specified herein on, any Loan, or (subject to clause (ii) of the second proviso to this Section 11.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender directly affected thereby; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

(e)change any provision of this Section or the definition of “Required Lenders” or any other provision hereof specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender;

(f)release the Borrower or any Guarantor from its obligations under this Agreement or any other Loan Document, without the written consent of each Lender, except as expressly provided in the Loan Documents; or

(g)release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender;

and, provided further, that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document and (ii) the Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the

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consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender.

11.02Notices; Effectiveness; Electronic Communication.

(a)Notices Generally.  Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i)if to a Loan Party, the initial Lender or the Administrative Agent, to the address, telecopier number, electronic mail address or telephone number specified for such Person on Schedule 11.02; and

(ii)if to any other Lender, to the address, telecopier number, electronic mail address or telephone number specified in its Administrative Questionnaire (including, as appropriate, notices delivered solely to the Person designated by a Lender on its Administrative Questionnaire then in effect for the delivery of notices that may contain material non-public information relating to the Borrower).

Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient).  Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b).

(b)Electronic Communications.  Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.  The Administrative Agent or the Borrower may, in their discretion, agree to accept notices and other communications to them hereunder by electronic communications pursuant to procedures approved by them, provided that approval of such procedures may be limited to particular notices or communications.

Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested”

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function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

(c)The Platform.  THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to any Loan Party, any Lender or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of any Loan Party’s or the Administrative Agent’s transmission of Borrower Materials through the Internet; provided, however, that in no event shall any Agent Party have any liability to any Loan Party, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

(d)Change of Address, Etc.  Each of the Borrower and the Administrative Agent may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the other parties hereto.  Each Lender may change its address, telecopier or telephone number for notices and other communications hereunder by notice to the Borrower and the Administrative Agent.  In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

(e)Reliance by Administrative Agent and Lenders.  The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Loan Notices) purportedly given by or on behalf of a Loan Party even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrower shall indemnify the Administrative Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of a Loan Party and believed by such Person in good faith to be genuine.  All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

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11.03No Waiver; Cumulative Remedies; Enforcement.  No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.02 for the benefit of all the Lenders; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) any Lender from exercising setoff rights in accordance with Section 11.08 (subject to the terms of Section 2.11), or (c) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section 2.11, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

11.04Expenses; Indemnity; Damage Waiver.

(a)Costs and Expenses.  The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable invoiced fees, charges and disbursements of counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), provided, that the Borrower shall not be obliged to reimburse the fees, charges and disbursements of more than one law firm for the Administrative Agent and all Lenders in connection with the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents, and (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender (including the reasonable invoiced fees, charges and disbursements of any counsel for the Administrative Agent or any Lender), and shall pay all documented fees and time charges for attorneys who may be employees of the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Term Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

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(b)Indemnification by the Borrower.  Subject to and without duplication of the foregoing subsection (a), the Borrower hereby indemnifies the Administrative Agent (and any sub-agent thereof), each Lender and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and holds each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), and shall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee, incurred by any Indemnitee or asserted against any Indemnitee by any third party or by the Borrower or any other Loan Party arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub-agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) the Term Loans or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or Release of Hazardous Materials at, on, under or emanating from any property owned, leased or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or any other Loan Party or the Borrower’s or such Loan Party’s directors, shareholders or creditors, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee; and provided, further that any indemnity with respect to Taxes shall be governed solely by Section 3.01.

(c)Reimbursement by Lenders.  To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of the Administrative Agent, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent) or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent).  The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.10(d).

(d)Waiver of Consequential Damages, Etc.  To the fullest extent permitted by applicable law, no Loan Party shall assert, and the Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof.  No Indemnitee referred to in subsection (b) above shall be liable for any damages

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arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

(e)Payments.  All amounts due under this Section shall be payable not later than ten (10) Business Days after demand therefor.

(f)Survival.  The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

11.05Payments Set Aside.  To the extent that any payment by or on behalf of any Loan Party is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

11.06Successors and Assigns.

(a)Successors and Assigns Generally.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section; or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

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(b)Assignments by Lenders.  Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Term Loan at the time owing to it); provided that any such assignment shall be subject to the following conditions:

(i)Minimum Amounts.

(A)in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Term Loan at the time owing to it or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

(B)in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment or, if the Commitment is not then in effect, the principal outstanding balance of the Term Loan of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $2,500,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed); provided, however, that concurrent assignments to members of an Assignee Group and concurrent assignments from members of an Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and members of its Assignee Group) will be treated as a single assignment for purposes of determining whether such minimum amount has been met.

(ii)Qualified Purchaser/Qualified Institutional Buyer. The assignee shall be, and shall certify in the applicable Assignment and Assumption that it is, both a “qualified purchaser” (within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder) and a “qualified institutional buyer” (within the meaning of Rule 144A under the Securities Act of 1933, as amended).  Any failure to include such a certification in an Assignment and Assumption shall render such Assignment and Assumption void ab initio and of no force or effect for any purpose.

(iii)Required Consents.  No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:

(A)the consent of the Borrower (such consent not to be unreasonably withheld) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof; and

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(B)the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender.

(iv)Assignment and Assumption.  The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment.  The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

(v)No Assignment to Certain Persons.  No such assignment shall be made (A) to the Parent or any of the Parent’s Affiliates or Subsidiaries, or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) to a natural person.

(vi)Certain Additional Payments.  In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of the Term Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata share of the Term Loans in accordance with its Applicable Percentage.  Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

Subject to compliance with the foregoing provisions of this subsection (b) and acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, and 11.04 with respect to facts and

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circumstances occurring prior to the effective date of such assignment.  Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.

(c)Register.  The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower (and such agency being solely for tax purposes), shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Term Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive absent demonstrable error and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  In addition, the Administrative Agent shall maintain on the Register information regarding the designation, and revocation of designation, of any Lender as a Defaulting Lender.  The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(d)Participations.  Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person which is, and which certifies in writing to such Lender that it is, both a “qualified purchaser” (within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder) and a “qualified institutional buyer” (within the meaning of Rule 144A under the Securities Act of 1933, as amended) (but excluding a natural person, a Defaulting Lender or the Borrower or the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Term Loan owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.

Any agreement or instrument pursuant to which a Lender sells such a participation shall include a certification by the participant that it is both a “qualified purchaser” (within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder) and a “qualified institutional buyer” (within the meaning of Rule 144A under the Securities Act of 1933, as amended), and shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 11.01 that affects such Participant.  Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 (subject to the requirements and limitations of such Sections) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.11 as though it were a Lender.

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Each Lender that sells a participation, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall retain a copy of each Participant’s certification as to its status as a “qualified purchaser” and “qualified institutional buyer” described above (and upon request of the Borrower shall provide a copy thereof to the Borrower), and shall maintain a register on which it enters the name and address of each Participant and the principal amounts (and related interest amounts) of each participant’s interest in the Loans or other obligations under this Agreement (the “Participant Register”).  The entries in the Participant Register shall be conclusive, absent demonstrable error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

(e)Limitations upon Participant Rights.  A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation and the participating Lender would have been entitled to receive such greater payment.

(f)Certain Pledges.  Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(g)Transfers to Non-Qualified Purchasers/Qualified Institutional Buyers.  Notwithstanding anything herein to the contrary, in no event may any Term Loan or any interest therein be assigned to or otherwise acquired by (whether by assignment or participation or through a swap or other derivative transaction) any Person which is not both a “qualified purchaser” (within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder) and a “qualified institutional buyer” (within the meaning of Rule 144A under the Securities Act of 1933, as amended).  Any assignment or acquisition not in compliance with the foregoing sentence shall be void ab initio and of no force or effect, and shall not be effective to transfer any interest whatsoever herein.

(h)Certain Transactions.  Notwithstanding anything herein to the contrary, no Lender will incur any indebtedness that it believes would subject the Borrower (or any part of the Borrower) to the “taxable mortgage pool” provisions under Code Section 7701(i) under the anti-avoidance rules of Treasury Regulation Section 301.7701(i)-1(g).

11.07Treatment of Certain Information; Confidentiality.  Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, trustees, advisors and representatives (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority purporting to have

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jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or any Eligible Assignee invited to be a Lender pursuant to Section 2.14(c) or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to any Loan Party and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent, any Lender, or any of their respective Affiliates on a nonconfidential basis from a source other than the Borrower.  For purposes of this Section, “Information” means all information received from the Parent, the Borrower or any Subsidiary thereof relating to the Loan Parties or any Subsidiary thereof or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Parent or any Subsidiary thereof, provided that, in the case of information received from the Parent or any Subsidiary thereof after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may include material non-public information concerning the Parent or a Subsidiary thereof, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including United States Federal and state securities Laws.

11.08Right of Setoff.  If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of any Loan Party against any and all of the obligations of such Loan Party now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such obligations of such Loan Party may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness; provided, that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.13 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to

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the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff.  The rights of each Lender and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or their respective Affiliates may have.  Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

11.09Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower.  In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder.

11.10Counterparts; Integration; Effectiveness.  This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.  Except as otherwise provided in Article IV, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto.  Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement.

11.11Survival of Representations and Warranties.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of making any Loan, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.

11.12Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or

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impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  Without limiting the foregoing provisions of this Section 11.12, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, then such provisions shall be deemed to be in effect only to the extent not so limited.

11.13Replacement of Lenders.  If any Lender requests compensation under Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, if any Lender is a Defaulting Lender, or if any other circumstance exists hereunder that gives the Borrower the right to replace a Lender as a party hereto, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 11.06), all of its interests, rights and obligations under this Agreement and the related Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that:

(a)the Borrower shall have paid to the Administrative Agent the assignment fee specified in Section 11.06(b);

(b)such Lender shall have received payment of an amount equal to 100% of the outstanding principal of its Term Loan from the assignee and any amounts payable by the Borrower pursuant to Section 3.01, 3.04 or 3.05 from the Borrower (it being understood that the Assignment and Assumption relating to such assignment shall provide that any interest and fees that accrued prior to the effective date of the assignment shall be for the account of the replaced Lender and such amounts that accrue on and after the effective date of the assignment shall be for the account of the replacement Lender);

(c)in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; and

(d)such assignment does not conflict with applicable Laws.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.  Each Lender agrees that, if the Borrower elects to replace such Lender in accordance with this Section 11.13, it shall promptly execute and deliver to the Administrative Agent an Assignment and Assumption to evidence the assignment and shall deliver to the Administrative Agent any Note (if Notes have been issued in respect of such Lender’s Term Loan) subject to such Assignment and Assumption; provided that the failure of any such Lender to execute an Assignment and

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Assumption shall not render such assignment invalid and such assignment shall be recorded in the Register.

11.14Governing Law; Jurisdiction; Etc.

(a)GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS, BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES).

(b)SUBMISSION TO JURISDICTION.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c)WAIVER OF VENUE.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d)SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 11.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

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11.15      Waiver of Jury Trial.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

11.16      No Advisory or Fiduciary Responsibility.  In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each Loan Party acknowledges and agrees, and acknowledges its Affiliates’ understanding, that:  (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent are arm’s-length commercial transactions between such Loan Party and its Affiliates, on the one hand, and the Administrative Agent, on the other hand, (B) each Loan Party has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each Loan Party is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) the Administrative Agent is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for any Loan Party or any of its Affiliates, or any other Person and (B) the Administrative Agent has no obligation to any Loan Party or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent and its Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and the Administrative Agent has no obligation to disclose any of such interests to the Loan Parties or any of their respective Affiliates.  To the fullest extent permitted by law, each Loan Party hereby waives and releases any claims that it may have against the Administrative Agent with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

11.17      Electronic Execution of Assignments and Certain Other Documents.  The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption or in any amendment or other modification hereof (including waivers and consents) shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

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11.18      USA PATRIOT Act.  Each Lender that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Loan Parties that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with the Act.  Each Loan Party shall, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

11.19      ENTIRE AGREEMENT.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

BORROWER:
SPT REAL ESTATE SUB II, LLC
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory
GUARANTORS:
STARWOOD PROPERTY TRUST, INC.
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory
SPT REAL ESTATE SUB I, LLC
By:	STARWOOD PROPERTY TRUST, INC., its sole member
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory
SPT OPERATIONS, LLC
By:	STARWOOD PROPERTY TRUST, INC., its sole member
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory

STARWOOD PROPERTY MORTGAGE, L.L.C.
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory
88TH STREET PARTNERS LLC
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory
STARWOOD MORTGAGE WD, L.L.C.
By:	SPT REAL ESTATE SUB I, LLC, its sole member
By:	STARWOOD PROPERTY TRUST, INC., its sole member
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory

BANK OF AMERICA, N.A., as
Administrative Agent
By:
	Name: Eyal Namordi
	Title: SVP - Real Estate Corporate Bank

BANK OF AMERICA, N.A., as
a Lender
By:
	Name: Eyal Namordi
	Title: SVP - Real Estate Corporate Bank

Schedules to Credit Agreement

SCHEDULE I

Guarantors

SPT Operations, LLC

SPT Real Estate Sub I, LLC

Starwood Property Mortgage, LLC

88th Street Partners LLC

Starwood Mortgage WD, L.L.C.

SCHEDULE 2.01

Commitments and Applicable Percentages

Lender	Commitment		Applicable Percentage
Bank of America, N.A.	$	125,195,000	100	%

2

SCHEDULE 5.05

Supplement to Interim Financial Statements

1.Master Repurchase and Securities Contract, dated as of March 31, 2010, between Starwood Property Mortgage Sub-1, L.L.C., as seller, and Wells Fargo Bank, National Association, as buyer, with an outstanding balance of $276,425,953

2.Guarantee Agreement, dated as of March 31, 2010, made by Starwood Property Trust, Inc. in favor of Wells Fargo Bank, National Association in connection with transaction described in item 1 above.

3.Master Repurchase and Securities Contract, dated as of August 6, 2010, between Starwood Property Mortgage Sub-2, L.L.C., as seller, and Wells Fargo Bank, National Association, as buyer with an outstanding balance of $5,000,000.

4.Guarantee and Security Agreement, dated as of August 6, 2010, made by Starwood Property Trust, Inc. in favor of Wells Fargo Bank, National Association in connection with transaction described in item 3 above.

5.Pledge Agreement, dated as of August 6, 2010, made by Starwood Property Trust, Inc. in favor of Wells Fargo Bank, National Association in connection with transaction described in item 3 above and covering a pledge of outstanding equity interests of Starwood Property Mortgage Sub-2, L.L.C.

6.ISDA Mater Agreement, dated as of March 1, 2010, between Deutsche Bank AG and Starwood Property Trust, Inc. (DB” ISDA”)

7.1 LIBOR Hedge executed on March 1, 2010 under the DB ISDA in a notional amount of $275,776,218

8.13 FX Forwards executed on May 24, 2010 under the DB ISDA in an aggregate notional amount of GBP 70,668,641

9.5 FX Forwards executed on July 15, 2010 under the DB ISDA in an aggregate notional amount of GBP 31,283,016

10.Customer Agreement (the “Customer Agreement”), dated as of August 3, 2009 among Deutsche Bank Securities Inc., as dealer, SPT-VIII TALF, L.L.C., as borrower, and Starwood U.S. Opportunity Fund VIII-1, L.P., Starwood U.S. Opportunity Fund VIII-2, L.P., Starwood Global Opportunity Fund VIII, L.P. and Starwood Property Trust, Inc., as guarantors

a.TALF indebtedness pursuant to the Customer Agreement with an outstanding balance of $171,305,496

11.An unfunded commitment totaling $3.7 million related to an investment in C-III Holdings II LLC

12.An unfunded commitment totaling $62,281,592 related to a loan secured by the Hyatt Regence located in New Orleans, LA

13. In connection with Starwood Property Trust, Inc.’s initial public offering, Starwood Property Trust, Inc. is required to pay $27.2 million of underwriters’ fees if Core Earnings exceed an 8% performance threshold over four consecutive quarters as defined in the purchase agreement entered into with Starwood Property Trust, Inc.’s underwriters

14.Collateralized debt obligation in a securitization trust in an amount equal to $54,305,000

3

SCHEDULE 5.12(d)

Pension Plans

None.

4

SCHEDULE 5.13
Subsidiaries; Equity Interests

PART (a)

1.Starwood Property Trust, Inc. has following subsidiaries:

·SPT Operations, LLC (100%)

·SPT Real Estate Sub I, LLC (100%)

·SPT Real Estate Sub II, LLC (100%)

·SPT TALF Sub I, LLC (100%)

2.SPT Real Estate Sub I, LLC has the following subsidiaries:

·Starwood Property Mortgage, LLC (100%)

·88th Street Partners, LLC (100%)

·SPT-HII-VIII Partners II, LLC (100%)

·Starwood Mortgage WD, L.L.C. (100%)

·SPT-VIII Partners, L.L.C. (75%)

·SPT-HII-VIII Partners, L.L.C. (75%)

3.SPT TALF Sub I LLC has the following subsidiaries:

·SPT-HII-VIII-TALF, L.L.C. (75%)

·SPT TALF Sub II, L.L.C. (100%)

·SPT-VIII-TALF, L.L.C. (75%)

4.Starwood Property Mortgage, L.L.C. has the following subsidiaries:

·Starwood Property Mortgage Holdings I, L.L.C. (100%)

·Starwood Property Mortgage Sub-2, L.L.C. (100%)

·Starwood Property Mortgage Sub-1, L.L.C. (100%)

·SPTA CA Fundings, LLC (100%)

·Starwood Property Mortgage BC, LLC (100%)

5.SPT-VIII Partners, L.L.C. has the following subsidiary:

5

·SPT-VIII CA Fundings, L.L.C. (100%)

6.SPT-HII-VIII L.L.C. has the following subsidiary:

·SPT-HII-VIII CA Fundings, L.L.C. (100%)

7.Starwood Property Mortgage BC, LLC has the following subsidiaries:

·CorAmerica Realty Financing Company, LLC (99%)

·Starwood Property Mortgage Sub-3, LLC (100%)

PART (b)

Loan Parties:

SPT Real Estate Sub II, LLC, a Delaware limited liability company

Starwood Property Trust, Inc., a Maryland corporation

SPT Real Estate Sub I, LLC, a Delaware limited liability company

SPT Operations, LLC, a Delaware limited liability company

Starwood Property Mortgage, LLC, a Delaware limited liability company

88th Street Partners LLC, a Delaware limited liability company

Starwood Mortgage WD, L.L.C, a Delaware limited liability company

The principal place of business of each Loan Party is located at 591 West Putnam Avenue, Greenwich, Connecticut 06830

6

SCHEDULE 7.08

Transactions with Affiliates

1.Management Agreement, dated as of August 17, 2009, between Starwood Property Trust, Inc. and SPT Management, LLC

2.Investments made pursuant to the Co-Investment and Allocation Agreement dated as of August 17, 2009, by and among Starwood Property Trust, Inc., SPT Management, LLC and Starwood Capital Group Global, L.P.

7

SCHEDULE 11.02

Administrative Agent’s Office; Certain Addresses for Notices

If to any Loan Party:

[Name of entity]

c/o Starwood Capital Group

591 West Putnam Avenue

Greenwich, Connecticut  06830

Attention:  Andrew J. Sossen

Tel: (203) 422-8191

Fax: (203) 422-8192

Email: asossen@starwood.com

If to the initial Lender or the Administrative Agent:

Bank of America, N.A.
135 S. LaSalle St

IL4-135-12-25

Chicago, IL 60642
Attention:  Eyal Namordi
Tel:  (312) 828-2575  
Fax:  (415) 503-5142

Email: eyal.namordi@baml.com

8

EXHIBIT A

FORM OF LOAN NOTICE

Date:                        ,         

To:Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as of December 3, 2010 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among SPT Real Estate Sub II, LLC, a Delaware limited liability company (the “Borrower”), Starwood Property Trust, Inc., a Maryland corporation (the “Parent”), the Subsidiaries of the Parent party thereto as guarantors, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.

The undersigned hereby requests (select one):

o  A Borrowing of Term Loanso  A conversion of the Term Loans or a Borrowing

o  A continuation of Eurodollar Rate Loans

1.		On                                                                                                  (a Business Day).
2.		In the amount of $                                             .
3.		Comprised of                                                    .
[Type of Term Loan/Borrowing requested]
4.	For Eurodollar Rate Loans: with an Interest Period of             months.
5.	The Term Loans, if any, borrowed hereunder shall be disbursed to the following deposit account:

A-1

SPT REAL ESTATE SUB II, LLC

By:

Name: Andrew J. Sossen

Title: Authorized Signatory

A-2

EXHIBIT B

FORM OF NOTE

, 20    

FOR VALUE RECEIVED, SPT REAL ESTATE SUB II, LLC, a Delaware limited liability company (the “Borrower”), hereby promises to pay to                                            or registered assigns (the “Lender”), in accordance with the provisions of the Agreement (as hereinafter defined), the principal amount of the Term Loan made by the Lender to the Borrower under that certain Credit Agreement, dated as of December 3, 2010 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among the Borrower, Starwood Property Trust, Inc. (the “Parent”), the subsidiaries of the Parent from time to time party thereto as guarantors, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.

The Borrower promises to pay interest on the unpaid principal amount of the Term Loan from the date hereof until such principal amount is paid in full, at such interest rates and at such times as provided in the Agreement.  All payments of principal and interest shall be made to the Administrative Agent for the account of the Lender in Dollars in immediately available funds at the Administrative Agent’s Office.  If any amount is not paid in full when due hereunder, such unpaid amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as after judgment) computed at the per annum rate set forth in the Agreement.

This Note is one of the Notes referred to in the Agreement, is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein.  This Note is also entitled to the benefits of the Guaranty and is secured by the Collateral.  Upon the occurrence and continuation of one or more of the Events of Default specified in the Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided in the Agreement.  The Term Loan made by the Lender shall be evidenced by one or more loan accounts or records maintained by the Lender in the ordinary course of business. The Lender may also attach schedules to this Note and endorse thereon the date, amount and maturity of its Term Loan and payments with respect thereto.

The Borrower, for itself, its successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment of this Note.

B-1

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS, BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES).

SPT REAL ESTATE SUB II, LLC

By:

Name: Andrew J. Sossen

Title: Authorized Signatory

B-2

TERM LOAN AND PAYMENTS WITH RESPECT THERETO

Date Type of
Term Loan
Made Amount of
Term Loan
Made End of
Interest
Period Amount of
Principal or
Interest
Paid This
Date Outstanding
Principal
Balance
This Date Notation
Made By

B-3

EXHIBIT C

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date:              ,

To:Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

Reference is made to that certain Credit Agreement, dated as December 3, 2010 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among SPT Real Estate Sub II, LLC, a Delaware limited liability company (the “Borrower”), Starwood Property Trust, Inc., a Maryland corporation (the “Parent”), the Subsidiaries of the Parent party thereto as guarantors, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent.

The undersigned Responsible Officer of the Parent hereby certifies as of the date hereof that he/she is the                                  (1) of the Parent, and that, as such, he/she is authorized to execute and deliver this Compliance Certificate to the Administrative Agent on the behalf of the Parent, and that:

[Use following paragraph 1 for fiscal year-end financial statements]

1.             The Loan Parties have delivered the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Loan Parties ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section.

[Use following paragraph 1 for fiscal quarter-end financial statements]

1.             The Loan Parties have delivered the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Loan Parties ended as of the above date.  Such financial statements fairly present the financial condition, results of operations, shareholders’ equity and cash flows of the Parent and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.

2.             The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Loan Parties during the accounting period covered by such financial statements.

(1)           Pursuant to the Agreement, the Compliance Certificate shall be executed by the chief executive officer, chief financial officer, treasurer or controller of the Parent.

C-1

3.             A review of the activities of the Loan Parties during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Loan Parties performed and observed all their Obligations under the Loan Documents, and

[select one:]

[to the best knowledge of the undersigned, during such fiscal period each of the Loan Parties performed and observed each covenant and condition of the Loan Documents applicable to it, and no Default has occurred and is continuing.]

--or--

[to the best knowledge of the undersigned, during such fiscal period the following covenants or conditions have not been performed or observed and the following is a list of each such Default and its nature and status:]

4.             The financial covenant analyses and information set forth on Schedule 1 attached hereto are true and accurate on and as of the date of this Compliance Certificate.

IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate as of                             ,                           .

STARWOOD PROPERTY TRUST, INC.

By:

Name:

Title:

C-2

For the Quarter/Year ended                                       (“Statement Date”)

SCHEDULE 1
to the Compliance Certificate

I.	Section 7.12(a) — Minimum Liquidity.
	A.	1.	Cash Liquidity at Statement Date:		$
		2.	Minimum required:		$10,000,000
		3.	Excess (deficient) for covenant compliance (Line I.A.1–I.A.2):		$
	B.	1.	Cash Liquidity at Statement Date:		$
		2.	Near Cash Liquidity at Statement Date:		$
		3.	Liquidity (Line I.B.1 + I.B.2):		$
		4.	Minimum required:		$30,000,000
		3.	Excess (deficient) for covenant compliance (Line I.B.3–I.B.4):		$
II.	Section 7.12 (b) — Fixed Charge Coverage Ratio.
	A.	EBITDA for the applicable Test Period:
		1.		Net Income (or loss) (prior to any impact from minority interests or joint venture net income and before deduction of any dividends on preferred stock) for such Test Period:	$
		2.		Depreciation and amortization expense during such Test Period (to the extent actually included in determination of Net Income (or loss)):	$
		3.		Interest Expense during such Test Period (to the extent actually included in determination of Net Income (or loss)):	$
		4.		Income tax expense during such Test Period (to the extent actually included in determination of Net Income (or loss)):	$
		5.		Extraordinary or non-recurring gains and losses during such Test Period (to the extent actually included in determination of Net Income (or loss)):	$
		6.		Parent’s and its Subsidiaries’ proportionate share of Net Income of the joint venture investments and unconsolidated Affiliates of the Parent and its

C-3

			Subsidiaries during such Test Period:	$
		7.	Amounts deducted in accordance with GAAP in respect of other non-cash expenses in determining Net Income for the Parent and its Subsidiaries during such Test Period:	$
		8.	EBITDA (Lines II.A.1 + 2 + 3 + 4 + 5 + 6 + 7):	$
	B.	Fixed Charges for the applicable Test Period:
		1.	Debt service:	$
		2.	All preferred dividends:	$
		3.	Capital Lease Obligations paid or accrued during such Test Period:	$
		4.	Capital expenditures:	$
		5.	Any amounts payable under any Ground Lease:	$
		6.	Fixed Charges (Lines II.B.1 +2 +3 +4 +5 ):	$
	C.	Fixed Charge Coverage Ratio (Line II.A.8 ¸ Line II.B.6):		to 1.00
		Minimum required:		1.50 to 1.00
III.	Section 7.12 (c) — Leverage Ratio.
	A.	Total Indebtedness of the Parent at Statement Date:		$
	B.	Total Assets of the Parent at Statement Date:		$
	C.	Leverage Ratio (Line III.A ¸ Line III.B):		to 1.00
		Maximum permitted:		0.75 to 1.00(2)
IV.	Section 7.12(d) — Tangible Net Worth.
	A.	Actual Tangible Net Worth at Statement Date:
		1.	All amounts which would be included under capital or shareholder’s equity (or any like caption) on a balance sheet of the Parent and its Subsidiaries on Statement Date:	$
		2.	Amounts owing to the Parent and its Subsidiaries from any Affiliate thereof, or from officers, employees, partners, members, directors, shareholders or other Persons similarly

(2)           [In each case adjusted to remove the impact of FIN 46 and FAS 166 and 167 to the extent of related transfers to special purpose entities in connection with bona fide securitization transactions.]

C-4

		affiliated with the Parent or its Subsidiaries or any Affiliate thereof as of the Statement Date:	$
	3.	Intangible Assets as of the Statement Date:	$
	4.	Prepaid taxes and/or expenses on the Statement Date:	$
	5.	Tangible Net Worth (Line I.A.1 - 2 - 3 - 4):	$
B.	75% of Net Cash Proceeds received by the Parent from issuances or sales of its Equity Interests occurring after the Closing Date:		$
C.	Minimum required Tangible Net Worth: ($750,000,000 + Line IV.B):		$
D.	Excess (deficient) for covenant compliance (Line IV.A.5 - IV.C):		$

C-5

EXHIBIT D-1

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [the][each](3) Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each](4) Assignee identified in item 2 below ([the][each, an] “Assignee”).  [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees](5) hereunder are several and not joint.](6)  Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by [the][each] Assignee.  The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the respective facilities identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”).  Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any] Assignor.

(3)  For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language.  If the assignment is from multiple Assignors, choose the second bracketed language.

(4)  For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language.  If the assignment is to multiple Assignees, choose the second bracketed language.

(5)  Select as appropriate.

(6)  Include bracketed language if there are either multiple Assignors or multiple Assignees.

D-1-1

1.	Assignor[s]:
2.	Assignee[s]:
	[for each Assignee, indicate [Affiliate][Approved Fund] of [identify Lender]]
3.	Borrower:SPT Real Estate Sub II, LLC, a Delaware limited liability company
4.	Administrative Agent:Bank of America, N.A., as the administrative agent under the Credit Agreement
5.	Credit Agreement:Credit Agreement, dated as of December 3, 2010, among Borrower, Starwood Property Trust, Inc. (the “Parent”), the subsidiaries of the Parent from time to time party thereto as guarantors, the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent
6.	Assigned Interest[s]:

Assignor[s](7)	Assignee[s](8)	Aggregate Amount of Commitment/Term Loans for all Lenders(9)	Amount of Commitment/ Term Loan Assigned	Percentage Assigned of Commitment/ Term Loan(10)
		$	$		%
		$	$		%
		$	$		%

[7. Trade Date: ](11)

(7)  List each Assignor, as appropriate.

(8)  List each Assignee, as appropriate.

(9)  Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.

(10)  Set forth, to at least 9 decimals, as a percentage of the Commitment/Term Loans of all Lenders thereunder.

(11)  To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.

D-1-2

Effective Date:                                     , 20     [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR
[NAME OF ASSIGNOR]
By:
	Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
	Title:

[Consented to and](12) Accepted:

BANK OF AMERICA, N.A., as
Administrative Agent
By:
	Title:
[Consented to:(13)
SPT REAL ESTATE SUB II, LLC, as Borrower
By:
Name: Andrew J. Sossen
Title: Authorized Signatory

(12)  To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.

(13)  To be added only if the consent of Borrower is required by the terms of the Credit Agreement.

D-1-3

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.Representations and Warranties.

1.1.Assignor.  [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrower, the Parent, any of their respective Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower, the Parent, any of their respective Subsidiaries or Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2.Assignee.  [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it is both a “qualified purchaser” (within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder) and a “qualified institutional buyer” (within the meaning of Rule 144A under the Securities Act of 1933, as amended), and it meets all the requirements to be an assignee under Section 11.06(b)(ii), (iii) and (v) of the Credit Agreement (subject to such consents, if any, as may be required under Section 11.06(b)(iii) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 6.01 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent,

D-1-4

[the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2.Payments.  From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.

3.General Provisions.  This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption.  This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

D-1-5

EXHIBIT D-2

FORM OF ADMINISTRATIVE QUESTIONNAIRE

See Attached.

D-2-1

EXHIBIT G

FORM OF SOLVENCY CERTIFICATE

I, the undersigned, chief financial officer of STARWOOD PROPERTY TRUST, INC., a Maryland corporation (the “Parent”), DO HEREBY CERTIFY on behalf of the Loan Parties that:

1.             This certificate is furnished pursuant to Article IV(a)(xi) of the Credit Agreement, (as in effect on the date of this certificate; the capitalized terms defined therein being used herein as therein defined) dated as of December 3, 2010, among SPT Real Estate Sub II, LLC, the Parent, certain Subsidiaries of the Parent party thereto, as guarantors, Bank of America, N.A., as Administrative Agent, and the Lenders party thereto (as from time to time in effect, the “Credit Agreement”).

2.             Immediately following the consummation of the transactions contemplated by the Credit Agreement and immediately following the making of the Term Loans, if any, on the date hereof and after giving effect to the application of the proceeds of the Term Loans, (a) the fair value of the property of each Loan Party (individually and on a consolidated basis with its Subsidiaries) is greater than the total amount of liabilities, including contingent liabilities, of such Loan Party, (b) the present fair salable value of the assets of each Loan Party (individually and on a consolidated basis with its Subsidiaries) is not less than the amount that will be required to pay the probable liability on its debts as they become absolute and matured, (c) each Loan Party (individually and on a consolidated basis with its Subsidiaries) does not intend to, and does not believe it will, incur debts or liabilities beyond its ability to pay such debts and liabilities as they mature, (d) each Loan Party (individually and on a consolidated basis with its Subsidiaries) is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Loan Party’s property would constitute an unreasonably small capital, and (e) each Loan Party (individually and on a consolidated basis with its Subsidiaries) is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business.

[Signature Page Follows]

G-1

IN WITNESS WHEREOF, I have hereunto set my hand this [  ] day of [                  ], 20[      ].

STARWOOD PROPERTY TRUST, INC.
By:
Name:
Title:	Chief Financial Officer

G-2

EXHIBIT H-1

FORM OF
UNITED STATES TAX COMPLIANCE CERTIFICATE
(For Non-U.S. Lenders That Are Not Partnerships
For U.S. Federal Income Tax Purposes)

Reference is made to the Credit Agreement (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement”), dated as of December 3, 2010, by and among SPT Real Estate Sub II, LLC, a Delaware limited liability company (the “Borrower”), Starwood Property Trust, Inc., a Maryland corporation (the “Parent”), the Subsidiaries of the Parent party thereto as guarantors, Bank of America, N.A., as Administrative Agent, and the Lenders party thereto.  Capitalized terms used herein but not otherwise defined shall have the meaning given to such term in the Agreement.

Pursuant to the provisions of Section 3.01(e) of the Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the Term Loan (as well as any Note(s) evidencing such Term Loan) in respect of which it is providing this certificate, (ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”), (iii) it is not a ten percent shareholder of the Parent or the Borrower within the meaning of Code Section 881(c)(3)(B), (iv) it is not a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and (v) no payments in connection with any Loan Document are effectively connected with a United States trade or business conducted by the undersigned.

The undersigned has furnished the Administrative Agent, the Borrower and the other Loan Parties with a certificate of its non-U.S. person status on Internal Revenue Service Form W-8BEN.  By executing this certificate, the undersigned agrees that (1) if the information provided on any of these certificates (including Form W-8BEN) changes, the undersigned shall promptly so inform the Borrower, the other Loan Parties and the Administrative Agent in writing and (2) the undersigned shall furnish the Borrower, the other Loan Parties and the Administrative Agent  properly completed and currently effective certificates in either the calendar year in which payment is to be made by the Borrower, any of the Loan Parties or the Administrative Agent to the undersigned, or in either of the two calendar years preceding such payment.

[Signature Page Follows]

H-1

		[Lender]
By:
	Name:
	Title:
		[Address]

Dated:                        , 20[  ]

H-2

EXHIBIT H-2

FORM OF
UNITED STATES TAX COMPLIANCE CERTIFICATE
(For Non-U.S. Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Credit Agreement (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement”), dated as of December 3, 2010, by and among SPT Real Estate Sub II, LLC, a Delaware limited liability company (the “Borrower”), Starwood Property Trust, Inc., a Maryland corporation (the “Parent”), the Subsidiaries of the Parent party thereto as guarantors, Bank of America, N.A., as Administrative Agent, and the Lenders party thereto.  Capitalized terms used herein but not otherwise defined shall have the meaning given to such term in the Agreement.

Pursuant to the provisions of Section 3.01(e) of the Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the Term Loan (as well as any Note(s) evidencing such Term Loan) in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Term Loan), (iii) neither the undersigned nor any of its partners/members is a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”), (iv) none of its partners/members is a ten percent shareholder of the Parent or the Borrower within the meaning of Code Section 881(c)(3)(B), (v) none of its partners/members is a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and (vi) no payments in connection with any Loan Document are effectively connected with a United States trade or business conducted by the undersigned or its partners/members.

The undersigned has furnished the Administrative Agent, the Borrower and the other Loan Parties with Internal Revenue Service Form W-8IMY accompanied by an Internal Revenue Service Form W-8BEN from each of its partners/members claiming the portfolio interest exemption, provided that, for the avoidance of doubt, the foregoing shall not limit the obligation of the Lender to provide, in the case of a partner/member not claiming the portfolio interest exemption, a Form W-8ECI, Form W-9 or Form W-8IMY (including appropriate underlying certificates from each interest holder of such partner/member), in each case establishing such partner/member’s available exemption from U.S. federal withholding tax.  By executing this certificate, the undersigned agrees that (1) if the information provided on any of these certificates (including Form W-8BEN or W-8ECI) changes, the undersigned shall promptly so inform the Borrower, the other Loan Parties and the Administrative Agent and (2) the undersigned shall have at all times furnished the Borrower, the other Loan Parties, and the Administrative Agent in writing with  properly completed and currently effective certificates in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

[Signature Page Follows]

H-3

			[Lender]
		By:
			Name:
			Title:
			[Address]
Dated:	, 20[  ]

H-4

EXHIBIT H-3

FORM OF
UNITED STATES TAX COMPLIANCE CERTIFICATE
(For Non-U.S. Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Credit Agreement (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement”), dated as of December 3, 2010, by and among SPT Real Estate Sub II, LLC, a Delaware limited liability company (the “Borrower”), Starwood Property Trust, Inc., a Maryland corporation (the “Parent”), the Subsidiaries of the Parent party thereto as guarantors, Bank of America, N.A., as Administrative Agent, and the Lenders party thereto.  Capitalized terms used herein but not otherwise defined shall have the meaning given to such term in the Agreement.

Pursuant to the provisions of Section 3.01(e) and Section 11.06(d) of the Agreement, the undersigned hereby certifies that (i) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”), (iii) it is not a ten percent shareholder of the Parent or the Borrower within the meaning of Code Section 881(c)(3)(B), (iv) it is not a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and (v) no payments in connection with any Loan Document are effectively connected with a United States trade or business conducted by the undersigned.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. person status on Internal Revenue Service Form W-8BEN.  By executing this certificate, the undersigned (1) agrees that if the information provided on any of these certificates (including Form W-8BEN) changes, the undersigned shall promptly so inform such participating Lender in writing, (2) agrees that the undersigned shall have at all times furnished such participating Lender with properly completed and currently effective certificates in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments and (3) acknowledges that such participating Lender will be furnishing all of these certificates (including the Form W-8BEN) to the Administrative Agent, the Borrower and the other Loan Parties, in accordance with Section 3.01(e) of the Agreement.

[Signature Page Follows]

H-5

		[Participant]
		By:
			Name:
			Title:
			[Address]
Dated:	, 20[  ]

H-6

EXHIBIT H-4

FORM OF
UNITED STATES TAX COMPLIANCE CERTIFICATE
(For Non-U.S. Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is made to the Credit Agreement (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement”), dated as of December 3, 2010, by and among SPT Real Estate Sub II, LLC, a Delaware limited liability company (the “Borrower”), Starwood Property Trust, Inc., a Maryland corporation (the “Parent”), the Subsidiaries of the Parent party thereto as guarantors, Bank of America, N.A., as Administrative Agent, and the Lenders party thereto.  Capitalized terms used herein but not otherwise defined shall have the meaning given to such term in the Agreement.

Pursuant to the provisions of Section 3.01(e) and Section 11.06(d) of the Agreement, the undersigned hereby certifies that (i) it is the sole record owner of the participation in respect of which it is providing this certificate, (ii) its partners/members are the sole beneficial owners of such participation, (iii) neither the undersigned nor any of its partners/members is a bank within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended, (the “Code”), (iv) none of its partners/members is a ten percent shareholder of the Parent or the Borrower within the meaning of Code Section 881(c)(3)(B), (v) none of its partners/members is a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code, and (vi) no payments in connection with any Loan Document are effectively connected with a United States trade or business conducted by the undersigned or its partners/members.

The undersigned has furnished its participating Lender with Internal Revenue Service Form W-8IMY accompanied by an Internal Revenue Service Form W-8BEN from each of its partners/members claiming the portfolio interest exemption, provided that, for the avoidance of doubt, the foregoing shall not limit the obligation of the undersigned to provide, in the case of a partner/member not claiming the portfolio interest exemption, a Form W-8ECI, Form W-9 or Form W-8IMY (including appropriate underlying certificates from each interest holder of such partner/member), in each case establishing such partner/member’s available exemption from U.S. federal withholding tax. By executing this certificate, the undersigned (1) agrees that if the information provided on any of these certificates (including Form W-8BEN or W-8ECI) changes, the undersigned shall promptly so inform such participating Lender in writing, (2) agrees that the undersigned shall have at all times furnished such participating Lender with properly completed and currently effective certificates in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments and (3) acknowledges that such participating Lender will be furnishing all of these certificates (including the Form W-8BEN) to the Administrative Agent, the Borrower and the other Loan Parties, in accordance with Section 3.01(e) of the Agreement.

[Signature Page Follows]

H-7

		[Participant]
		By:
			Name:
			Title:
			[Address]
Dated:	, 20[  ]

H-8

ADMINISTRATIVE DETAILS REPLY FORM – US DOLLAR ONLY

CONFIDENTIAL

FAX ALONG WITH COMMITMENT LETTER TO:
FAX #
I.  Borrower Name:
	$	Type of Credit Facility

II. Legal Name of Lender of Record for Signature Page:

·Signing Credit Agreement	o YES	o NO
·Coming in via Assignment	o YES	o NO

III. Type of Lender:

(Bank, Asset Manager, Broker/Dealer, CLO/CDO, Finance Company, Hedge Fund, Insurance, Mutual Fund, Pension Fund, Other Regulated Investment Fund, Special Purpose Vehicle, Other — please specify)

IV. Domestic Address: V. Eurodollar Address:

VI.  Contact Information:

Syndicate level information (which may contain material non-public information about the Borrower and its related parties or their respective securities will be made available to the Credit Contact(s).  The Credit Contacts identified must be able to receive such information in accordance with his/her institution’s compliance procedures and applicable laws, including Federal and State securities laws.

		Primary	Secondary
	Credit Contact	Operations Contact	Operations Contact
Name:
Title:
Address:
Telephone:
Facsimile:
E Mail Address:

Does Secondary Operations Contact need copy of notices?   o YES   o NO

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ADMINISTRATIVE DETAILS REPLY FORM – US DOLLAR ONLY

CONFIDENTIAL

	Letter of Credit	Draft Documentation
	Contact	Contact	Legal Counsel
Name:
Title:
Address:
Telephone:
Facsimile:
E Mail Address:

VII. Lender’s Standby Letter of Credit, Commercial Letter of Credit, and Bankers’ Acceptance Fed Wire Payment Instructions (if applicable):

Pay to:

(Bank Name)

(ABA #)

(Account #)

(Attention)

VIII. Lender’s Fed Wire Payment Instructions:

Pay to:

(Bank Name)
(ABA#)	(City/State)
(Account #)	(Account Name)
(Attention)

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ADMINISTRATIVE DETAILS REPLY FORM – US DOLLAR ONLY

CONFIDENTIAL

IX. Organizational Structure and Tax Status

Please refer to the enclosed withholding tax instructions below and then complete this section accordingly:

Lender Taxpayer Identification Number (TIN):                           -

Tax Withholding Form Delivered to Bank of America*:

o W-9

o W-8BEN

o W-8ECI

o W-8EXP

o W-8IMY

NON—U.S. LENDER INSTITUTIONS

1. Corporations:

If your institution is incorporated outside of the United States for U.S. federal income tax purposes, and is the beneficial owner of the interest and other income it receives, you must complete one of the following three tax forms, as applicable to your institution: a.) Form W-8BEN (Certificate of Foreign Status of Beneficial Owner), b.) Form W-8ECI (Income Effectively Connected to a U.S. Trade or Business), or c.) Form W-8EXP (Certificate of Foreign Government or Governmental Agency).

A U.S. taxpayer identification number is required for any institution submitting a Form W-8 ECI.  It is also required on Form W-8BEN for certain institutions claiming the benefits of a tax treaty with the U.S.  Please refer to the instructions when completing the form applicable to your institution.  In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms.  An original tax form must be submitted.

2. Flow-Through Entities

If your institution is organized outside the U.S., and is classified for U.S. federal income tax purposes as either a Partnership, Trust, Qualified or Non-Qualified Intermediary, or other non-U.S. flow-through entity, an original Form W-8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. branches for United States Tax Withholding) must be completed by the intermediary together with a withholding statement.  Flow-through entities other than Qualified Intermediaries are required to include tax forms for each of the underlying beneficial owners.

Please refer to the instructions when completing this form.  In addition, please be advised that U.S. tax regulations do not permit the acceptance of faxed forms.  Original tax form(s) must be submitted.

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ADMINISTRATIVE DETAILS REPLY FORM – US DOLLAR ONLY

CONFIDENTIAL

U.S. LENDER INSTITUTIONS:

If your institution is incorporated or organized within the United States, you must complete and return Form W-9 (Request for Taxpayer Identification Number and Certification).  Please be advised that we require an original form W-9.

Pursuant to the language contained in the tax section of the Credit Agreement, the applicable tax form for your institution must be completed and returned on or prior to the date on which your institution becomes a lender under this Credit Agreement.  Failure to provide the proper tax form when requested will subject your institution to U.S. tax withholding.

*Additional guidance and instructions as to where to submit this documentation can be found at this link:

X. Bank of America Payment Instructions:

Pay to:	Bank of America, N.A.
	New York, NY

3/1/07 Revision

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EXHIBIT E

FORM OF PLEDGE AGREEMENT

PLEDGE AGREEMENT, dated as of December 3, 2010 (as amended, restated, modified and/or supplemented from time to time, this “Agreement”), made by STARWOOD PROPERTY TRUST, INC. (the “Pledgor”), in favor of BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, together with any successors and assigns in such capacity, the “Administrative Agent”) for the benefit of the Secured Parties.

W I T N E S S E T H :

WHEREAS, SPT Real Estate Sub II, LLC, a Delaware limited liability company (the “Borrower”), the affiliates of the Borrower that are guarantors thereunder, the lenders from time to time party thereto (the “Lenders”) and the Administrative Agent have entered into a Credit Agreement, dated as of the date of this Agreement (as amended, modified, restated and/or supplemented from time to time, the “Credit Agreement”), providing for the making of Term Loans to the Borrower, all as contemplated therein.

WHEREAS, it is a condition precedent to the effectiveness of the Credit Agreement and the making of the Term Loans thereunder that the Pledgor shall have executed and delivered to the Administrative Agent this Agreement.

WHEREAS, the Pledgor desires to execute this Agreement to satisfy the condition described in the preceding paragraph.

NOW, THEREFORE, in consideration of the benefits accruing to the Pledgor, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby makes the following representations and warranties to the Administrative Agent, for the benefit of the Secured Parties, and hereby covenants and agrees with the Administrative Agent, for the benefit of the Secured Parties, as follows:

1.SECURITY FOR OBLIGATIONS.  This Agreement is made by the Pledgor for the benefit of the Secured Parties to secure the Obligations.

2.DEFINITIONS.  All capitalized terms used herein and not otherwise defined herein shall have the meanings specified in the Credit Agreement.  The following capitalized terms used herein shall have the definitions specified below:

“Certificated Security” shall have the meaning given such term in Section 8-102(a)(4) of the UCC.

“Clearing Corporation” shall have the meaning given such term in Section 8-102(a)(5) of the UCC.

“Collateral” shall have the meaning provided in Section 3.1 of this Agreement.

“Collateral Accounts” shall mean any and all accounts established and maintained by the Administrative Agent in the name of the Pledgor to which Collateral may be credited.

“Financial Asset” shall have the meaning given such term in Section 8-102(a)(9) of the UCC.

“Instrument” shall have the meaning given such term in Section 9-102(a)(47) of the UCC.

“Investment Property” shall have the meaning given such term in Section 9-102(a)(49) of the UCC.

“Location” of the Pledgor has the meaning determined in accordance with Section 9-307 of the UCC.

“Membership Interest” shall mean the entire membership interest at any time owned by the Pledgor in the Borrower.

“Proceeds” shall have the meaning given such term in Section 9-102(a)(64) of the UCC.

“Registered Organization” shall have the meaning given such term in Section 9-102(a)(70) of the UCC.

“Securities Intermediary” shall have the meaning given such term in Section 8-102(14) of the UCC.

“Security Entitlement” shall have the meaning given such term in Section 8-102(a)(17) of the UCC.

“Termination Date” has the meaning specified in Section 18(a) of this Agreement.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New York from time to time; provided that all references herein to specific Sections or subsections of the UCC are references to such Sections or subsections, as the case may be, of the Uniform Commercial Code as in effect in the State of New York on the date of this Agreement.

“Uncertificated Security” shall have the meaning given such term in Section 8-102(a)(18) of the UCC.

3.GRANT OF SECURITY, PLEDGE OF SECURITIES, ETC.

3.1Grant of Security.  As security for the payment and performance in full of the Obligations, the Pledgor does hereby grant, pledge, hypothecate, mortgage, charge and assign to the Administrative Agent for the benefit of the Secured Parties, and does hereby grant and create a continuing security interest in favor of the Administrative Agent for the benefit of the Secured Parties in, all of its right, title and interest in and to the following, whether now existing or hereafter from time to time acquired (collectively, the “Collateral”):

(i)all Membership Interests owned or held by the Pledgor from time to time and all options and warrants owned by the Pledgor from time to time to purchase

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Membership Interests (and all certificates or instruments evidencing such Membership Interests);

(ii)all of the Pledgor’s right, title and interest in the Borrower, including, without limitation:

(a)all the capital thereof and its interest in all profits, losses and other distributions to which the Pledgor shall at any time be entitled in respect of the Membership Interests;

(b)all other payments due or to become due to the Pledgor in respect of the Membership Interests, whether under the limited liability company agreement of the Borrower or otherwise, whether as contractual obligations, damages, insurance proceeds or otherwise;

(c)all of its claims, rights, powers, privileges, authority, options, security interests, liens and remedies, if any, under the limited liability company agreement of the Borrower or at law or otherwise in respect of the Membership Interests;

(d)all present and future claims, if any, of the Pledgor against the Borrower for moneys loaned or advanced, for services rendered or otherwise;

(e)all of the Pledgor’s rights under any limited liability company agreement or at law to exercise and enforce every right, power, remedy, authority, option and privilege of the Pledgor relating to the Membership Interests, including any power to terminate, cancel or modify the limited liability company agreement of the Borrower, to execute any instruments and to take any and all other action on behalf of and in the name of the Pledgor in respect of the Membership Interests and the Borrower to make determinations, to exercise any election (including, but not limited to, election of remedies) or option or to give or receive any notice, consent, amendment, waiver or approval, together with full power and authority to demand, receive, enforce or collect any of the foregoing, to enforce or execute any checks or other instruments or orders, to file any claims and to take any action in connection with any of the foregoing; and

(f)all other property hereafter delivered in substitution for or in addition to any of the foregoing interests or other assets or property described in any of sub clauses (a) through (e) above, all certificates and instruments representing or evidencing such other property and all cash, securities, interest, dividends, rights and other property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all thereof;

(iii)each Collateral Account, including any and all assets of whatever type or kind deposited by the Pledgor in any such Collateral Account, whether now owned or hereafter acquired, existing or arising (including, without limitation, all Financial Assets, Investment Property, monies, checks, drafts, Instruments or interests therein of any type

3

or nature deposited or required by the Credit Agreement or any other Loan Document to be deposited in such Collateral Account, and all investments and all certificates and other instruments (including depository receipts, if any) from time to time representing or evidencing the same, and all dividends, interest, distributions, cash and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing);

(iv)all Security Entitlements owned by the Pledgor from time to time in any and all of the foregoing assets or property described in any of clauses (i) through (iii) above; and

(v)all Proceeds of any and all of the foregoing assets or property described in any of clauses (i) through (iv) above.

3.2Procedures.  (a) To the extent that the Pledgor at any time or from time to time owns, acquires or obtains any right, title or interest in any Collateral, such Collateral shall automatically (and without the taking of any action by the Pledgor) be pledged pursuant to Section 3.1 of this Agreement and, in addition thereto, the Pledgor shall forthwith take the following actions as set forth below:

(i)with respect to a Certificated Security (other than a Certificated Security credited on the books of a Clearing Corporation or Securities Intermediary), the Pledgor shall physically deliver such Certificated Security to the Administrative Agent, endorsed to the Administrative Agent or endorsed in blank;

(ii)with respect to an Uncertificated Security (other than an Uncertificated Security credited on the books of a Clearing Corporation or Securities Intermediary), the Pledgor shall cause the issuer of such Uncertificated Security to duly authorize, execute, and deliver to the Administrative Agent an agreement for the benefit of the Administrative Agent and the other Secured Parties substantially in the form of Annex A hereto (appropriately completed to the reasonable satisfaction of the Administrative Agent and with such modifications, if any, as shall be reasonably satisfactory to the Administrative Agent);

(iii)with respect to any Collateral consisting of a Certificated Security, Uncertificated Security, Partnership Interest or Membership Interest credited on the books of a Clearing Corporation or Securities Intermediary (including a Federal Reserve Bank, Participants Trust Company or The Depository Trust Company), the Pledgor shall promptly notify the Administrative Agent thereof and shall promptly take (x) all actions required (i) to comply with the applicable rules of such Clearing Corporation or Securities Intermediary and (ii) to perfect the security interest of the Administrative Agent under applicable law (including, in any event, under Sections 9-314(a), (b) and (c), 9-106 and 8-106(d) of the UCC) and (y) such other actions as the Administrative Agent reasonably deems necessary or desirable to effect the foregoing; and

(iv)with respect to a Membership Interest (other than a Membership Interest credited on the books of a Clearing Corporation or Securities Intermediary), (1) if such

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Membership Interest is represented by a certificate and is a “Security” for purposes of the UCC, the procedure set forth in Section 3.2(a)(i) of this Agreement; and (2) if such Partnership Interest or Membership Interest is not represented by a certificate or is not a “Security” for purposes of the UCC, the procedure set forth in Section 3.2(a)(ii) of this Agreement.

(b)In addition to the actions required to be taken pursuant to Section 3.2(a) of this Agreement, the Pledgor shall take the following additional actions with respect to the Collateral:

(i)with respect to all Collateral of the Pledgor whereby or with respect to which the Administrative Agent may obtain “control” thereof within the meaning of Section 8-106 of the UCC (or under any provision of the UCC as same may be amended or supplemented from time to time, or under the laws of any relevant State other than the State of New York), the Pledgor shall take all actions as may be reasonably requested from time to time by the Administrative Agent so that “control” of such Collateral is obtained and at all times held by the Administrative Agent; and

(ii)the Pledgor shall from time to time cause appropriate financing statements (on appropriate forms) under the Uniform Commercial Code as in effect in the various relevant jurisdictions, covering all Collateral hereunder (with the form of such financing statements to be reasonably satisfactory to the Administrative Agent), to be filed in the relevant filing offices so that at all times the Administrative Agent’s security interest in all Investment Property constituting Collateral and other Collateral which can be perfected by the filing of such financing statements (in each case to the maximum extent perfection by filing may be obtained under the laws of the relevant jurisdictions, including, without limitation, Section 9-312(a) of the UCC) is so perfected.

3.3Subsequently Acquired Collateral.  If the Pledgor shall acquire (by purchase, dividend or otherwise) any additional Collateral at any time or from time to time after the date of this Agreement, the Pledgor will forthwith thereafter take (or cause to be taken) all actions with respect to such Collateral in accordance with the procedures set forth in Section 3.2 of this Agreement.

3.4Ownership.  The Pledgor represents, warrants and covenants that the Membership Interests constitute and will continue to constitute one hundred percent (100%) the entire ownership interest of the Borrower.

4.APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC.  With respect to any Collateral consisting of a Certificated Security, the Administrative Agent shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of such Collateral, which may be held (in the discretion of the Administrative Agent) in the name of the Pledgor, endorsed or assigned in blank or in favor of the Administrative Agent or any nominee or nominees of the Administrative Agent or a sub-agent appointed by the Administrative Agent.

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5.VOTING, ETC., WHILE NO EVENT OF DEFAULT.  Unless and until there shall have occurred and be continuing an Event of Default, the Pledgor shall be entitled to exercise all voting rights attaching to any and all Membership Interests owned by it, and to give consents, waivers or ratifications in respect thereof, provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate, result in breach of any covenant contained in, or be inconsistent with, any of the terms of this Agreement, the Credit Agreement or any other Loan Document, or which would have the effect of materially impairing the value of the Collateral or any part thereof or the security interest of the Administrative Agent, for the benefit of the Secured Parties, therein.  All such rights of the Pledgor to vote and to give consents, waivers and ratifications shall cease upon the occurrence and during the continuance of an Event of Default, whereupon Section 7 of this Agreement shall become applicable.

6.DIVIDENDS AND OTHER DISTRIBUTIONS.  Unless and until an Event of Default shall have occurred and be continuing, all cash dividends, distributions or other amounts payable in respect of the Membership Interests shall be paid to the Pledgor, provided that all dividends, distributions or other amounts payable in respect of the Membership Interests which are determined by the Administrative Agent, in its absolute discretion, to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital not permitted by the Credit Agreement shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital not permitted by the Credit Agreement, to the Administrative Agent and retained by it as part of the Collateral (unless such cash dividends or distributions are applied to repay the Obligations pursuant to Section 9 of this Agreement).  The Administrative Agent shall also be entitled to receive directly, and to retain as part of the Collateral:

(i)all other or additional stock, notes, membership interests, partnership interests or other securities or property (other than cash) paid or distributed by way of dividend or otherwise in respect of the Collateral;

(ii)all other or additional stock, notes, membership interests, partnership interests or other securities or property (including cash) paid or distributed in respect of the Collateral by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and

(iii)all other or additional stock, notes, membership interests, partnership interests or other securities or property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization.

Nothing contained in this Section 6 shall limit or restrict in any way the Administrative Agent’s right to receive the proceeds of the Collateral in any form in accordance with Section 3 of this Agreement.  All dividends, distributions or other payments which are received by the Pledgor contrary to the provisions of this Section 6 or Section 7 of this Agreement shall be received in trust for the benefit of the Administrative Agent and shall be forthwith paid over to the Administrative Agent as Collateral in the same form as so received (with any necessary endorsement).

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7.REMEDIES IN CASE OF AN EVENT OF DEFAULT.  If an Event of Default shall have occurred and be continuing, the Administrative Agent shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or any other Loan Document or by law) for the protection and enforcement of its rights in respect of the Collateral, including, without limitation, all the rights and remedies of a secured creditor upon default under the UCC, and the Administrative Agent shall be entitled, without limitation, to exercise any or all of the following rights, which the Pledgor hereby agrees to be commercially reasonable:

(i)to receive all amounts payable in respect of the Collateral otherwise payable under Section 6 of this Agreement to the Pledgor,

(ii)to transfer all or any part of the Collateral into the Administrative Agent’s name or the name of its nominee or nominees;

(iii)to vote all or any part of the Collateral (whether or not transferred into the name of the Administrative Agent) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (the Pledgor hereby irrevocably constituting and appointing the Administrative Agent the proxy and attorney-in-fact of the Pledgor, with full power of substitution to do so);

(iv)to set off any and all Collateral against any and all Obligations, and to withdraw any and all cash or other Collateral from any and all Collateral Accounts and to apply such cash and other Collateral to the payment of any and all Obligations; and

(v)at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by the Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Administrative Agent in its absolute discretion may determine, provided that at least 10 days’ notice of the time and place of any such sale shall be given to the Pledgor.  The Administrative Agent shall not be obligated to make such sale of Collateral regardless of whether any such notice of sale has theretofore been given.  Each purchaser at any such sale shall hold the property so sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives and releases to the full extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise, and all rights, if any, of stay and/or appraisal which it now has or may at any time in the future have under rule of law or statute now existing or hereafter enacted.  At any such sale, unless prohibited by applicable law, the Administrative Agent on behalf of all Secured Parties (or certain of them) may bid for and purchase (by bidding in Obligations or otherwise) all or any part of the Collateral so sold free from any such right or equity of redemption.  Neither the Administrative Agent nor any Secured Party shall be liable for failure to

7

collect or realize upon any or all of the Collateral or for any delay in so doing nor shall it be under any obligation to take any action whatsoever with regard thereto.

8.REMEDIES, ETC., CUMULATIVE.  Each right, power and remedy of the Administrative Agent provided for in this Agreement or any other Loan Document, or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy.  The exercise or beginning of the exercise by the Administrative Agent or any other Secured Party of any one or more of the rights, powers or remedies provided for in this Agreement or any other Loan Document or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Administrative Agent or any other Secured Party of all such other rights, powers or remedies, and no failure or delay on the part of the Administrative Agent or any other Secured Party to exercise any such right, power or remedy shall operate as a waiver thereof.  Unless otherwise required by the Loan Documents, no notice to or demand on the Pledgor in any case shall entitle it to any other or further notice or demand in similar other circumstances or constitute a waiver of any of the rights of the Administrative Agent or any other Secured Party to any other further action in any circumstances without demand or notice.  This Agreement may be enforced only by the action of the Administrative Agent and no other Secured Party shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby.

9.APPLICATION OF PROCEEDS.  (a) All moneys collected by the Administrative Agent upon any sale or other disposition of the Collateral, together with all other moneys received by the Administrative Agent hereunder, shall be applied in accordance with Section 8.03 of the Credit Agreement.

(b)It is understood that the Pledgor shall remain jointly and severally liable to the extent of any deficiency between (x) the amount of the Obligations for which it is liable directly or as a Guarantor that are satisfied with proceeds of the Collateral and (y) the aggregate outstanding amount of the Obligations.

10.PURCHASERS OF COLLATERAL.  Upon any sale of the Collateral by the Administrative Agent hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Administrative Agent shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Administrative Agent or be answerable in any way for the misapplication or nonapplication thereof.

11.INDEMNITY.  The Pledgor agrees (i) to indemnify and hold harmless the Administrative Agent and the other Secured Parties from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature arising under or out of, in connection with, or as a result of, this Agreement, and (ii) to reimburse (x) the Administrative Agent for all reasonable out-of-pocket costs and expenses, including reasonable attorneys’ fees, arising in connection with any amendment, waiver or modification to this Agreement and (y) the Administrative Agent and the other Secured Parties for all out-of-pocket costs and expenses (including reasonable, invoiced attorney’s fees) growing

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out of or resulting from the exercise by the Administrative Agent of any right or remedy granted to it hereunder or under any other Loan Document, except, with respect to clause (i) above, for those arising from such Person’s gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).  In no event shall the Administrative Agent be liable, in the absence of gross negligence or willful misconduct on its part (as determined by a court of competent jurisdiction in a final and non-appealable decision), for any matter or thing in connection with this Agreement other than to account for moneys or other property actually received by it in accordance with the terms of this Agreement.  If and to the extent that the obligations of the Pledgor under this Section 11 are unenforceable for any reason, the Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law.

12.FURTHER ASSURANCES; POWER OF ATTORNEY.  (a)  The Pledgor agrees that it will join with the Administrative Agent in executing and, at the Pledgor’s own expense, file and refile under the Uniform Commercial Code such financing statements, continuation statements and other documents in such offices as the Administrative Agent may reasonably deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Administrative Agent’s security interest in the Collateral hereunder and hereby authorizes the Administrative Agent to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of the Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Administrative Agent such additional conveyances, assignments, agreements and instruments as the Administrative Agent may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Administrative Agent its rights, powers and remedies hereunder or thereunder.

(b)The Pledgor hereby appoints the Administrative Agent, the Pledgor’s attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time after the occurrence and during the continuance of an Event of Default, in the Administrative Agent’s reasonable discretion to take any action and to execute any instrument which the Administrative Agent may reasonably deem necessary or advisable to accomplish the purposes of this Agreement.

13.THE ADMINSTRATIVE AGENT AS COLLATERAL AGENT.  The Administrative Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement.  It is expressly understood and agreed that the obligations of the Administrative Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement.  The Administrative Agent shall act hereunder on the terms and conditions set forth herein and in Article IX of the Credit Agreement.  If the Pledgor fails to perform or comply with any of its agreements contained in this Agreement and the Administrative Agent, as provided for by the terms of this Agreement or any other Loan Document, shall itself perform or comply, or otherwise cause performance or compliance, with such agreement, the expenses of the Administrative Agent incurred in connection with such performance or compliance, together with interest thereon at the rate then in effect in respect of the Base Rate Loans, shall be payable by the Pledgor to the Administrative Agent on demand and shall constitute Obligations secured by the Collateral.

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14.TRANSFER BY THE PLEDGOR.  The Pledgor will not sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein.

15.REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PLEDGOR.  (a) The Pledgor represents, warrants and covenants that:

(i)it is the legal, beneficial and record owner of, and has good and marketable title to, all Membership Interests pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except the Lien created by this Agreement;

(ii)it has all requisite power and authority to pledge all the Collateral pledged by it pursuant to this Agreement;

(iii)this Agreement has been duly authorized, executed and delivered by the Pledgor and constitutes a legal, valid and binding obligation of the Pledgor enforceable against the Pledgor in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors’ rights and by equitable principles (regardless of whether enforcement is sought in equity or at law);

(iv)except to the extent already obtained or made, no consent of any other party (including, without limitation, any stockholder, limited or general partner, member or creditor of the Pledgor) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by the Pledgor in connection with (a) the execution, delivery or performance of this Agreement, (b) the validity or enforceability of this Agreement, (c)  except for the filing of UCC financing statements, the perfection or enforceability of the Administrative Agent’s security interest in the Collateral or (d) except for compliance with or as may be required by applicable securities laws, the exercise by the Administrative Agent of any of its rights or remedies provided herein;

(v)the execution, delivery and performance of this Agreement by the Pledgor  has been duly authorized by all necessary corporate or other organizational action, and does not and will not (a) contravene the terms of any of the Pledgor’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which the Pledgor is a party or affecting the Pledgor or the properties of the Pledgor or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which the Pledgor or its property is subject; or (c) violate any applicable Laws; except, in each case referred to in clause (b)(i), to the extent that such conflict or violation could not reasonably be expected to have a Material Adverse Effect;

(vi)[Reserved];

(vii)[Reserved];

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(viii)it is not in default in the payment of any portion of any mandatory capital contribution, if any, required to be made under the limited liability company agreement of the Borrower, and the Pledgor is not in violation of any other provision of such limited liability company agreement, or otherwise in default or violation thereunder; No Membership Interest is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against the Pledgor by any Person with respect thereto and as of the Closing Date, there are no certificates, instruments, documents or other writings (other than certificates, if any, delivered to the Administrative Agent) which evidence any of the Membership Interests;

(ix)the pledge and assignment of the Membership Interests pursuant to this Agreement, together with the relevant filings, consents or recordings (which filings, consents and recordings have been made or obtained), creates a valid, perfected and continuing first priority security interest in such Membership Interests and the proceeds thereof, subject to no other Lien or encumbrance or to any agreement purporting to grant to any third party a Lien or other encumbrance on such Membership Interests or proceeds thereof;

(x)there are no currently effective financing statements under the UCC covering any property which is now or hereafter may be included in the Collateral and the Pledgor will not, without the prior written consent of the Administrative Agent, execute and, until the Termination Date (as hereinafter defined), allow there to be on file in any public office, any enforceable financing statement or statements covering any or all of the Collateral, except financing statements filed or to be filed in favor of the Administrative Agent as secured party;

(xi)it shall give the Administrative Agent prompt notice of any written claim relating to the Collateral and shall deliver to the Administrative Agent a copy of each other demand, notice or document received by it which may adversely affect the Administrative Agent’s security interest in the Collateral promptly upon, but in any event within 10 days after, the Pledgor’ s receipt thereof;

(xii)it shall not withdraw as a member of the Borrower, or file or pursue or take any action which may, directly or indirectly, cause a dissolution or liquidation of or with respect to the Borrower or seek a partition of any property of the Borrower;

(xiii)as of the date of this Agreement, all of the Membership Interests are uncertificated and the Pledgor covenants and agrees that it will not approve any action by the Borrower to convert such uncertificated interests into certificated interests;

(xiv)it will take no action which would have the effect of impairing the security interest of the Administrative Agent, for the benefit of the Secured Parties, in the Collateral other than as expressly permitted by the Loan Documents; and

(xv)“control” (as defined in Section 8-106 of the UCC) has been obtained by the Administrative Agent over all of the Pledgor’s Collateral with respect to which such “control” may be obtained pursuant to Section 8-106 of the UCC.

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16.PLEDGORS’ OBLIGATIONS ABSOLUTE, ETC.  The obligations of the Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation:

(i)any renewal, extension, amendment or modification of, or addition or supplement to or deletion from any of the Loan Documents, or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof,

(ii)any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement;

(iii)any furnishing of any additional security to the Administrative Agent or its assignee or any acceptance thereof or any release of any security by the Administrative Agent or its assignee;

(iv)any limitation on any party’s liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or

(v)any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to the Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not the Pledgor shall have notice or knowledge of any of the foregoing.

17.REGISTRATION, ETC.  If at any time when the Administrative Agent shall determine to exercise its right to sell all or any part of the Membership Interests pursuant to Section 7 of this Agreement, and such Membership Interests or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act, as then in effect, the Administrative Agent may, in its sole and absolute discretion, sell such Membership Interests or part thereof by private sale in such manner and under such circumstances as the Administrative Agent may deem necessary or advisable in order that such sale may legally be effected without such registration.  Without limiting the generality of the foregoing, in any such event the Administrative Agent, in its sole and absolute discretion, (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Membership Interests or part thereof shall have been filed under such Securities Act, (ii) may approach and negotiate with a single possible purchaser to effect such sale and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Membership Interests or part thereof.  In the event of any such sale, the Administrative Agent shall incur no responsibility or liability for selling all or any part of the Membership Interests at a price which the Administrative Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until the registration as aforesaid.

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18.TERMINATION.  After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein and the other Loan Documents including, without limitation, in Section 11 of this Agreement shall survive any such termination) and the Administrative Agent, at the request and expense of the Pledgor, will, if requested by the Pledgor, execute and deliver to the Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement as provided above, and will duly assign, transfer and deliver to the Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Administrative Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement, together with any moneys at the time held by the Administrative Agent hereunder and a termination of the agreement relating thereto executed and delivered by the Borrower pursuant to Section 3.2(a)(iv)(2) of this Agreement.  As used in this Agreement, “Termination Date” shall mean the date upon which all Obligations have been paid in full in cash.

19.NOTICES, ETC.  All notices and other communications hereunder shall be in writing (including telegraphic, telex, telecopier, facsimile or cable communication) and shall be delivered, telegraphed, telexed, telecopied, faxed, cabled, or mailed (by first class mail, postage prepaid):

(i)if to the Pledgor, at its address set forth opposite its signature below;

(ii)if to the Administrative Agent, at its address set forth on Schedule 11.02 of the Credit Agreement.

or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder.

20.WAIVER; AMENDMENT.  None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Administrative Agent (with the consent of the Required Lenders or all of the Lenders, to the extent required by Section 11.01 of the Credit Agreement) and the Pledgor.

21.ADMINISTRATIVE AGENT NOT BOUND.  (a) Nothing herein shall be construed to make the Administrative Agent or any other Secured Party liable as a member of the Borrower, and neither the Administrative Agent nor any Secured Party by virtue of this Agreement or otherwise (except as referred to in the following sentence) shall have any of the duties, obligations or liabilities of a member of the Borrower.  The parties hereto expressly agree that, unless the Administrative Agent shall become the absolute owner of a Membership Interest pursuant hereto, this Agreement shall not be construed as creating a partnership or joint venture or membership agreement among the Administrative Agent, any other Secured Party and/or the Pledgor.

(b)The Administrative Agent shall have only those powers set forth herein and shall assume none of the duties, obligations or liabilities of a member of the Borrower or of the Pledgor.

(c)The Administrative Agent shall not be obligated to perform or discharge any obligation of the Pledgor as a result of the collateral assignment hereby effected.

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(d)The acceptance by the Administrative Agent of this Agreement, with all the rights, powers, privileges and authority so created, shall not at any time or in any event obligate the Administrative Agent to appear in or defend any action or proceeding relating to the Collateral to which it is not a party, or to take any action hereunder or thereunder, or to expend any money or incur any expenses or perform or discharge any obligation, duty or liability under the Collateral.

22.MISCELLANEOUS.  This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect, subject to release and/or termination as set forth in Section 18 of this Agreement, (ii) be binding upon the Pledgor, its successors and assigns; provided that the Pledgor shall not assign any of its rights or obligations hereunder without the prior written consent of the Administrative Agent (with the prior written consent of the Required Lenders or all of the Lenders, to the extent required by Section 11.01 of the Credit Agreement, ), and (iii) inure, together with the rights and remedies of the Administrative Agent hereunder, to the benefit of the Administrative Agent, the other Secured Parties and their respective successors, transferees and assigns.  The headings of the several sections and subsections in this Agreement are for purposes of reference only and shall not limit or define the meaning of this Agreement.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.  In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto.

23.GOVERNING LAW, ETC.  (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE SECURED PARTIES AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS, BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES).

(b)SUBMISSION TO JURISDICTION.  THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY SECURED PARTY MAY 

14

OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE PLEDGOR OR ANY OTHER PERSON OR ANY OF THEIR REPSECTIVE PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c)WAIVER OF VENUE.  THE PLEDGOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION 23.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d)SERVICE OF PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 19 OF THIS AGREEMENT.  NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

(e)WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

24.COUNTERPARTS.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

25.LEGAL NAMES; TYPE OF ORGANIZATION (AND WHETHER A REGISTERED ORGANIZATION);  JURISDICTION OF ORGANIZATION; LOCATION; ORGANIZATIONAL IDENTIFICATION NUMBERS; CHANGES THERETO; ETC.  The Pledgor shall not change its legal name, its type of organization or its status as a Registered Organization (in the case of a Registered Organization), as the case may be, its jurisdiction of organization, its Location, or its organizational identification number (if any), except that any

15

such changes shall be permitted (so long as not in violation of the applicable requirements of the Loan Documents and so long as same do not involve (x) a Registered Organization ceasing to constitute same or (y) the Pledgor changing its jurisdiction of organization or Location from the United States or a State thereof to a jurisdiction of organization or Location, as the case may be, outside the United States or a State thereof) if (i) it shall have given to the Administrative Agent not less than 30 days’ prior written notice of each change to its legal name, its type of organization, whether or not it is a Registered Organization, its jurisdiction of organization, its Location and its organizational identification number (if any), and (ii) in connection with the respective change or changes, it shall have taken all action reasonably requested by the Administrative Agent to maintain the security interests of the Administrative Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect.  In addition, to the extent that the Pledgor does not have an organizational identification number on the date of this Agreement and later obtains one, the Pledgor shall promptly thereafter deliver a written notification to the Administrative Agent of such organizational identification number and shall take all actions reasonably satisfactory to the Administrative Agent to the extent necessary to maintain the security interest of the Administrative Agent in the Collateral intended to be granted hereby fully perfected and in full force and effect.

26.SEVERABILITY.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

27.HEADINGS DESCRIPTIVE.  The headings of the several Sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

*   *   *   *

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IN WITNESS WHEREOF THIS AGREEMENT, the Pledgor and the Administrative Agent have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written.

STARWOOD PROPERTY TRUST, INC.,
as the Pledgor
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory
c/o Starwood Capital Group
591 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Andrew J. Sossen
Tel: (203) 422-8191
Fax: (203) 422-8192
Email: asossen@starwood.com

[Signature Page to Pledge Agreement]

Accepted and Agreed to:
BANK OF AMERICA, N.A.,
as Administrative Agent
By:
	Name: Eyal Namordi
	Title: SVP - Real Estate Corporate Bank

[Signature Page to Pledge Agreement]

ANNEX A

Form of Agreement Regarding Membership Interests.

AGREEMENT (as amended, modified, restated and/or supplemented from time to time, this “Agreement”), dated as of December 3, 2010, among STARWOOD PROPERTY TRUST, INC. (the “Pledgor”), BANK OF AMERICA, N.A., not in its individual capacity but solely as Administrative Agent (in such capacity, together with its successors and assigns in such capacity, the “Administrative Agent”), and SPT REAL ESTATE SUB II, LLC, as the issuer of the Membership Interests (as defined below) (the “Issuer”).

W I T N E S S E T H :

WHEREAS, the Pledgor and the Administrative Agent have entered into a Pledge Agreement, dated as of December 3, 2010 (as amended, modified, restated and/or supplemented from time to time, the “Pledge Agreement”),(1) under which, among other things, in order to secure the payment of the Obligations, the Pledgor has pledged or will pledge to the Administrative Agent for the benefit of the Secured Parties, and grant a security interest in favor of the Administrative Agent for the benefit of the Secured Parties in, all of the right, title and interest of the Pledgor in and to any and all Membership Interests, from time to time by the Issuer, whether now existing or hereafter from time to time acquired by the Pledgor (with all of such Membership Interests being herein collectively called the “Issuer Pledged Interests”); and

WHEREAS, the Pledgor desires the Issuer to enter into this Agreement in order to perfect the security interest of the Administrative Agent under the Pledge Agreement in the Issuer Pledged Interests, to vest in the Administrative Agent control of the Issuer Pledge Interests and to provide for the rights of the parties under this Agreement;

NOW THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.The Pledgor hereby irrevocably authorizes and directs the Issuer, and the Issuer hereby agrees, to comply with any and all instructions and orders originated by the Administrative Agent (and its successors and assigns) regarding any and all of the Issuer Pledged Interests without the further consent by the registered owner (including the Pledgor), and, following its receipt of a notice from the Administrative Agent stating that the Administrative Agent is exercising exclusive control of the Issuer Pledged Interests, not to comply with any instructions or orders regarding any or all of the Issuer Pledged Interests originated by any person or entity other than the Administrative Agent (and its successors and assigns) or a court of competent jurisdiction.

(1)Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Pledge Agreement.

2.The Issuer hereby certifies that (i) no notice of any security interest, lien or other encumbrance or claim affecting the Issuer Pledged Interests (other than the security interest of the Administrative Agent) has been received by it, and (ii) the security interest of the Administrative Agent in the Issuer Pledged Interests has been registered in the books and records of the Issuer.

3.The Issuer hereby represents and warrants that the pledge by the Pledgor of, and the granting by the Pledgor of a security interest in, the Issuer Pledged Interests to the Administrative Agent, for the benefit of the Secured Parties, does not violate the charter, membership agreement or any other formation or organizational agreement governing the Issuer or the Issuer Pledged Interests.

4.All notices, statements of accounts, reports, prospectuses, financial statements and other communications to be sent to the Pledgor by the Issuer in respect of the Issuer will also be sent to the Administrative Agent at the following address:

Bank of America, N.A.
135 S. LaSalle St

IL4-135-12-25

Chicago, IL 60642
Attention:  Eyal Namordi
Tel:  (312) 828-2575  
Fax:  (415) 503-5142

5.Following its receipt of a notice from the Administrative Agent stating that the Administrative Agent is exercising exclusive control of the Issuer Pledged Interests and until the Administrative Agent shall have delivered written notice to the Issuer that all of the Obligations have been paid in full and this Agreement is terminated, the Issuer will send any and all redemptions, distributions, interest or other payments in respect of the Issuer Pledged Interests from the Issuer for the account of the Administrative Agent only by wire transfers to such account as the Administrative Agent shall instruct.

6.Except as expressly provided otherwise in Sections 4 and 5 above, all notices, instructions, orders and communications hereunder shall be sent or delivered by mail, telegraph, telex, telecopy, cable or overnight courier service and all such notices and communications shall, when mailed, telexed, telecopied, cabled or sent by overnight courier, be effective when deposited in the mails or delivered to overnight courier, prepaid and properly addressed for delivery on such or the next Business Day, or sent by telex or telecopier, except that notices and communications to the Administrative Agent or the Issuer shall not be effective until received.  All notices and other communications shall be in writing and addressed as follows:

(a)if to the Pledgor, at:

Starwood Property Trust, Inc.

c/o Starwood Capital Group

591 West Putnam Avenue

Greenwich, Connecticut  06830

Attention:  Andrew J. Sossen

Tel: (203) 422-8191

Fax: (203) 422-8192

Email: asossen@starwood.com

(b)if to the Administrative Agent, at the address given in Section 4 above;

(c)if to the Issuer, at:

SPT Real Estate Sub II, LLC

c/o Starwood Capital Group

591 West Putnam Avenue

Greenwich, Connecticut  06830

Attention:  Andrew J. Sossen

Tel: (203) 422-8191

Fax: (203) 422-8192

Email: asossen@starwood.com

or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder.

7.This Agreement shall be binding upon the successors and assigns of the Pledgor and the Issuer and shall inure to the benefit of and be enforceable by the Administrative Agent and its successors and assigns.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument.  In the event that any provision of this Agreement shall prove to be invalid or unenforceable, such provision shall be deemed to be severable from the other provisions of this Agreement which shall remain binding on all parties hereto.  None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever except in writing signed by the Administrative Agent, the Issuer and the Pledgor.

8.This Agreement shall be governed by and construed in accordance with the law of the State of New York (including Section 5-1401 of the General Obligations Laws, but otherwise without regard to conflicts of law principles).

IN WITNESS OF THIS AGREEMENT, the Pledgor, the Administrative Agent and the Issuer have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written.

STARWOOD PROPERTY TRUST, INC.,
		as Pledgor
By:
		Name: Andrew J. Sossen
		Title: Authorized Signatory
SPT REAL ESTATE SUB II, LLC, as Issuer
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory

Signature page to Agreement Regarding Membership Interests

BANK OF AMERICA, N.A.,
	not in its individual capacity but solely
	as Administrative Agent
By:
	Name:  Eyal Namordi
	Title:  SVP - Real Estate Corporate Bank

Signature page to Agreement Regarding Membership Interests

EXHIBIT F

 FORM OF SECURITY AGREEMENT

Between

SPT REAL ESTATE SUB II, LLC,

as Pledgor

and

BANK OF AMERICA, N.A.,

as Administrative Agent

Dated as of December 3, 2010

TABLE OF CONTENTS

		Page
PREAMBLE		1
RECITALS		1
AGREEMENT		1
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1.	DEFINITIONS	1
SECTION 1.2.	INTERPRETATION	5
SECTION 1.3.	RESOLUTION OF DRAFTING AMBIGUITIES	5
ARTICLE II
GRANT OF SECURITY
SECTION 2.1.	GRANT OF SECURITY INTEREST	5
ARTICLE III
PERFECTION; FURTHER ASSURANCES
SECTION 3.1.	FILINGS	7
SECTION 3.2.	PROCEDURES	8
SECTION 3.3.	TRANSFER OR REGISTRATION TO ADMINISTRATIVE AGENT	10
SECTION 3.4.	MAINTENANCE OF PERFECTED SECURITY INTEREST	10
SECTION 3.5.	DEPOSIT ACCOUNTS	10
SECTION 3.6.	SECURITIES ACCOUNTS	10
SECTION 3.7.	FURTHER ASSURANCES	11
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.1.	TITLE	12
SECTION 4.2.	VALIDITY OF SECURITY INTEREST	12
SECTION 4.3.	DEFENSE OF CLAIMS; TRANSFERABILITY OF COLLATERAL	12
SECTION 4.4.	OTHER FINANCING STATEMENTS	12
SECTION 4.5.	INITIAL COLLATERAL	12

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		Page
SECTION 4.6.	CONSENTS, ETC.	13
SECTION 4.7.	COLLATERAL	13
SECTION 4.8.	NO DEFENSES	13
SECTION 4.9.	QUALIFICATION	13
ARTICLE V
ADDITIONAL COLLATERAL; VOTING RIGHTS; DISTRIBUTIONS
SECTION 5.1.	PLEDGE OF ADDITIONAL COLLATERAL	13
SECTION 5.2.	VOTING RIGHTS; DISTRIBUTIONS; ETC.	14
ARTICLE VI
NOTE PLEDGE
SECTION 6.1.	NOTE PLEDGE	15
ARTICLE VII
RECORDS; COMPLIANCE; COMMUNICATIONS
SECTION 7.1.	MAINTENANCE OF RECORDS	15
SECTION 7.2.	COMPLIANCE WITH COLLATERAL OBLIGATIONS	15
ARTICLE VIII
TRANSFERS
SECTION 8.1.	TRANSFERS OF COLLATERAL	16
ARTICLE IX
REMEDIES
SECTION 9.1.	REMEDIES	16
SECTION 9.2.	NOTICE OF SALE	18
SECTION 9.3.	WAIVER OF NOTICE AND CLAIMS	18
SECTION 9.4.	CERTAIN SALES OF COLLATERAL	18
SECTION 9.5.	NO WAIVER; CUMULATIVE REMEDIES	19
ARTICLE X
APPLICATION OF PROCEEDS
SECTION 10.1.	APPLICATION OF PROCEEDS	20

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		Page
ARTICLE XI
MISCELLANEOUS
SECTION 11.1.	CONCERNING ADMINISTRATIVE AGENT	20
SECTION 11.2.	ADMINISTRATIVE AGENT MAY PERFORM; ADMINISTRATIVE AGENT APPOINTED ATTORNEY-IN-FACT	21
SECTION 11.3.	CONTINUING SECURITY INTEREST; ASSIGNMENT	22
SECTION 11.4.	TERMINATION	22
SECTION 11.5.	MODIFICATION IN WRITING	22
SECTION 11.6.	NOTICES	23
SECTION 11.7.	GOVERNING LAW, CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY TRIAL	23
SECTION 11.8.	SEVERABILITY OF PROVISIONS	23
SECTION 11.9.	EXECUTION IN COUNTERPARTS	23
SECTION 11.10.	BUSINESS DAYS	23
SECTION 11.11.	NO CREDIT FOR PAYMENT OF TAXES OR IMPOSITION	23
SECTION 11.12.	[RESERVED]	23
SECTION 11.13.	NO RELEASE	23
SECTION 11.14.	OBLIGATIONS ABSOLUTE	24
SIGNATURES		S-1
EXHIBIT 1	Form of Pledge Amendment
SCHEDULE 1	Filing Locations

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SECURITY AGREEMENT

This SECURITY AGREEMENT, dated as of December 3, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the provisions hereof, this “Agreement”), is made between SPT REAL ESTATE SUB II, LLC, a Delaware limited liability company (the “Pledgor”), and BANK OF AMERICA, N.A. (“BofA”), in its capacity as administrative agent pursuant to the Credit Agreement (as hereinafter defined), as pledgee, assignee and secured party (in such capacities and together with any successors in such capacities, the “Administrative Agent”).

R E C I T A L S :

A.The Pledgor, Starwood Property Trust, Inc. (the “Parent”), certain subsidiaries of the Parent, the Administrative Agent and the lending institutions listed therein have, in connection with the execution and delivery of this Agreement, entered into that certain Credit Agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”).

B.This Agreement is given by the Pledgor in favor of the Administrative Agent for the benefit of the Secured Parties to secure the payment and performance of all of the Obligations.

C.It is a condition to the obligations of the Lenders to make the Term Loans under the Credit Agreement that the Pledgor execute and deliver the applicable Loan Documents, including this Agreement.

A G R E E M E N T :

NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor and the Administrative Agent hereby agree as follows:

ARTICLE I

DEFINITIONS AND INTERPRETATION

SECTION 1.1.Definitions.

(a)Unless otherwise defined herein or in the Credit Agreement, capitalized terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC; provided that in any event, the following terms shall have the meanings assigned to them in the UCC:

“Account”; “Bank”; “Certificated Security”; “Clearing Corporation”; “Document”; “Entitlement Order”; “Financial Asset”; “Investment Property”; “Money”; “Payment Intangible”; “Proceeds”; “Securities Account”; “Securities Intermediary”; “Security Entitlement”; “Supporting Obligation”; and “Uncertificated Security.”

(b)Terms used but not otherwise defined herein that are defined in the Credit Agreement shall have the meanings given to them in the Credit Agreement.  Sections 1.02 and 1.03 of the Credit Agreement shall apply herein mutatis mutandis.

(c)The following terms shall have the following meanings:

“Administrative Agent” shall have the meaning assigned to such term in the Preamble hereof.

“Agreement” shall have the meaning assigned to such term in the Preamble hereof.

“BofA” shall have the meaning assigned to such term in the Preamble hereof.

“Co-Lender Agreement” shall have the meaning assigned to such term in the Trust Agreement.

“Collateral” shall have the meaning assigned to such term in Section 2.1 hereof.

“Collateral Support” shall mean all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property.

“Control” shall mean (i) in the case of each Deposit Account, “control,” as such term is defined in Section 9-104 of the UCC and (ii) in the case of any Certificated Security, Uncertificated Security or Security Entitlement, “control,” as such term is defined in Section 8-106 of the UCC.

“Control Agreements” shall mean, collectively, all Deposit Account Control Agreements and Securities Account Control Agreements.

“Credit Agreement” shall have the meaning assigned to such term in Recital A hereof.

“Deposit Account Control Agreement” shall mean an agreement in a form that is reasonably satisfactory to the Administrative Agent establishing the Administrative Agent’s Control with respect to any Deposit Account.

“Deposit Accounts” shall mean, collectively, (i) all “deposit accounts” as such term is defined in the UCC and in any event shall include the Collection Account and all accounts and sub-accounts relating to any of the foregoing accounts and (ii) all cash, funds, checks, notes and instruments from time to time on deposit in any of the accounts or sub-accounts described in clause (i) of this definition.

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“Distributions” shall mean, collectively, all cash, rights, instruments, distributions, returns of principal, income, interest and other property, interests (debt or equity) or proceeds from time to time received, receivable or otherwise distributed to or for the benefit of the Pledgor in respect of or in exchange for any or all of the Hilton Loan Interest, any Pass-Through Certificates or any other Collateral.

“General Intangibles” shall mean, collectively, all “general intangibles,” as such term is defined in the UCC, of the Pledgor and, in any event, shall include (i) all of the Pledgor’s rights, title and interest in, to and under the Hilton Credit Agreement, any other Hilton Loan Document or any Trust Document (including all voting rights and all rights and remedies relating to monetary damages, including indemnification rights and remedies, and claims for damages or other relief pursuant to or in respect of the Hilton Credit Agreement, any other Hilton Loan Document or any Trust Document), (ii) any and all other rights, claims, choses-in-action and causes of action of the Pledgor against any other person and the benefits of any and all collateral or other security given by any other person in connection therewith, (iii) all guarantees, endorsements and indemnifications on, or of, any of the Collateral and (iv) all lists, books, records, correspondence, ledgers, printouts, files (whether in printed form or stored electronically), tapes and other papers or materials containing information relating to any of the Collateral, including all media in which or on which any of the information or knowledge or data or records may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records or data.

“Hilton Credit Agreement” shall mean that certain Loan Agreement, dated as of October 24, 2007, by and among initially Bear Stearns Commercial Mortgage, Inc., BofA, German American Capital Corporation, Goldman Sachs Mortgage Company, Morgan Stanley Mortgage Capital Holdings LLC, Merrill Lynch Mortgage Lending, Inc. and Lehman Brothers Holdings Inc., as lenders, the various affiliates of Hilton Worldwide, Inc. (formerly known as Hilton Hotels Corporation) party thereto, as borrowers, and Bear, Stearns International Limited, as amended, amended and restated, supplemented or otherwise modified from time to time.

“Hilton Custodial Agreement” shall mean that certain Custodial Agreement, dated as of October 24, 2007, by and among BofA (as successor by merger to LaSalle Bank National Association), as custodian, the lenders party thereto and BofA, as servicer, or any successor custodial agreement, in each instance, as amended, amended and restated, supplemented or otherwise modified from time to time.

“Hilton Loan Documents” shall mean the “Loan Documents” as defined in the Hilton Credit Agreement and shall include, in any event, the Co-Lender Agreement.

“Hilton Loan Interest” shall mean any portion of the loans made under the Hilton Credit Agreement (or any interest therein, including a participation interest) now or hereafter owned by the Pledgor.

“Hilton Note” shall mean, collectively, all promissory notes now owned or hereafter acquired by the Pledgor under or with respect to the Hilton Credit Agreement (including, without limitation, the promissory note assigned by BofA to the Pledgor pursuant to the Assignment and Assumption Agreement, dated as of the date hereof, between BofA and the

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Pledgor) and all amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof.

“Hilton Note Custodian” shall mean BofA (as successor by merger to LaSalle Bank National Association), in its capacity as the custodian under the Hilton Custodial Agreement, and any successor custodian thereunder.

“Instruments” shall mean, collectively, all “instruments,” as such term is defined in Article 9, rather than Article 3, of the UCC, and shall include in any event all promissory notes (including, without limitation, the Hilton Note), drafts, bills of exchange or acceptances.

“Investment Property” shall mean a security, whether certificated or uncertificated, a Security Entitlement or a Securities Account.

“Parent” shall have the meaning assigned to such term in Recital A hereof.

“Pass-Through Certificate” shall mean a “Certificate” as defined in the Trust Agreement.

“Pass-Through Certificate Collateral” shall have the meaning assigned to such term in Section 2.1 hereof.

“Pledge Amendment” shall have the meaning assigned to such term in Section 5.1 hereof.

“Pledgor” shall have the meaning assigned to such term in the Preamble hereof.

“Securities Account Control Agreement” shall mean an agreement in a form that is reasonably satisfactory to the Administrative Agent establishing the Administrative Agent’s Control with respect to any Securities Account.

“Trust Agreement” shall mean that certain Trust Agreement, dated as of November 22, 2010, between Banc of America Large Loan, Inc., as depositor, Wells Fargo Bank, N.A., as trustee, BofA, as trust servicer, and TriMont Real Estate Advisors, Inc., as certificateholder consultant, as amended, amended and restated, supplemented or otherwise modified from time to time.

“Trust Documents” shall mean the Trust Agreement and any and all documents, agreements and instruments at any time executed and/or delivered in connection therewith and shall include, in any event, the Co-Lender Agreement.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however, that, at any time, if by reason of mandatory provisions of law, any or all of the perfection or priority of the Administrative Agent’s and the Secured Parties’ security interest in any item or portion of the Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect, at such time, in such other

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jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions relating to such provisions.

SECTION 1.2.Interpretation.  The rules of interpretation specified in the Credit Agreement (including Section 1.03 thereof) shall be applicable to this Agreement.

SECTION 1.3.Resolution of Drafting Ambiguities.  The Pledgor acknowledges and agrees that it was represented by counsel in connection with the execution and delivery hereof, that it and its counsel reviewed and participated in the preparation and negotiation hereof and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party (i.e., the Administrative Agent) shall not be employed in the interpretation hereof.

ARTICLE II

GRANT OF SECURITY

SECTION 2.1.Grant of Security Interest.  As collateral security for the payment and performance in full of all the Obligations, the Pledgor hereby pledges and grants to the Administrative Agent for the benefit of the Secured Parties a lien on and security interest in all of the right, title and interest of the Pledgor in, to and under the following property, wherever located, and whether now existing or hereafter arising or acquired from time to time (collectively, the “Collateral”):

(i)the Hilton Loan Interest, all promissory notes now or hereafter issued to evidence or represent the Hilton Loan Interest or any portion thereof (including the Hilton Note) and all rights to receive any payments under or with respect to any of the foregoing;

(ii)all other rights, benefits and remedies under or with respect to any of the Hilton Loan Documents as they relate to any or all of the Hilton Loan Interest, including, without limitation, all rights to consent, approve or otherwise vote as to any matters under or with respect to any of the Hilton Loan Documents and all rights to receive payments under or with respect to any of the Hilton Loan Documents, including rights to indemnification and reimbursement;

(iii)all rights to exchange all or any part of the Hilton Loan Interest for one or more Pass-Through Certificates (or interests therein, whether beneficial or otherwise) and all rights under any trust asset transfer agreement entered into by the Pledgor with respect to any exchange by the Pledgor of all or any part of the Hilton Loan Interest for one or more Pass-Through Certificates (or interests therein, whether beneficial or otherwise);

(iv)all Pass-Through Certificates (or interests therein, whether beneficial or otherwise) at any time received or receivable in exchange for the Hilton

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Loan Interest (or any portion thereof) and any Pass-Through Certificates or other assets or property at any time received or receivable in exchange, replacement or substitution for any of the foregoing Pass-Through Certificates (or interests therein), or any portion thereof, or otherwise received or receivable in connection with any of the foregoing Pass-Through Certificates (or interests therein), or any portion thereof, and all rights to receive any payments under or with respect to any of the foregoing (collectively, the “Pass-Through Certificate Collateral”);

(v)all other rights, benefits and remedies under or with respect to any of the Pass-Through Certificate Collateral or any of the Trust Documents as they relate to any or all of the Pass-Through Certificate Collateral, including, without limitation, all rights to consent, approve or otherwise vote as to any matters under or with respect to any of the  Pass-Through Certificate Collateral or any of the Trust Documents as they relate to any or all of the Pass-Through Certificate Collateral and all rights to receive payments under or with respect to any of the Pass-Through Certificate Collateral or any of the Trust Documents as they relate to any or all of the Pass-Through Certificate Collateral, including rights to indemnification and reimbursement;

(vi)the Collection Account and all other Deposit Accounts, now or hereafter existing, into which any payments of or with respect to any Collateral are at any time deposited or required by the terms of the Credit Agreement or any of the other Loan Documents to be deposited, all account or sub-accounts, now or hereafter existing, relating to any of the foregoing Deposit Accounts, all cash, funds, checks, notes, instruments and other assets or property from time to time on deposit in the Collection Account, any such other Deposit Account or any such account or sub-account, all investments of any such cash, funds, checks, notes, instruments or other assets or property and all interest, distributions, cash and other assets or property from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the foregoing;

(vii)all Securities Accounts holding or otherwise to which are credited any Pass-Through Certificate Collateral or any other Collateral or into which any assets or property constituting Pass-Through Certificate Collateral or any other Collateral are deposited, remitted or credited or are required by the terms of the Credit Agreement or any of the other Loan Documents to be deposited, remitted or credited, all accounts or sub-accounts, now or hereafter existing, relating to any of the foregoing Securities Accounts, all cash, funds, checks, notes, instruments and other assets or property of whatever type or kind from time to time on deposit in or credited to any such Securities Account or any such account or sub-account (including, without limitation, all Financial Assets and Investment Property), all investments of any such cash, funds, checks, notes, instruments or other assets or property, all interest, distributions, cash and other assets or

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property from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the foregoing and all certificates and other instruments (including custodial or depositary receipts, if any) from time to time representing or evidencing any of the foregoing;

(viii)all other assets or property hereafter delivered or credited in substitution for or in addition to any of the foregoing assets or property described in any of clauses (i) through (vii) above, all certificates and instruments representing or evidencing any such other assets or property and all cash, securities, interest, rights and other assets or property at any time and from time to time received, receivable or otherwise distributed in respect of or in exchange for any of the foregoing;

(ix)all Collateral Support for any of the foregoing assets or property described in any of clauses (i) through (viii) above;

(x)all Accounts, Documents, Financial Assets, General Intangibles, Instruments, Investment Property, Money, Payment Intangibles, Security Entitlements and Supporting Obligations, now existing or hereafter arising or acquired, in or with respect to any of the foregoing assets or property described in any of clauses (i) through (ix) above;

(xi)all books and records relating to any of the assets or property described in any of clauses (i) through (x) above or in clause (xii) below; and

(xii)to the extent not covered by clauses (i) through (xi) of this sentence, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing and any and all Proceeds of any insurance, indemnity, warranty or guaranty payable from time to time with respect to any of the foregoing.

ARTICLE III

PERFECTION; FURTHER ASSURANCES

SECTION 3.1.Filings.  (a)  The Pledgor hereby irrevocably authorizes the Administrative Agent at any time and from time to time to file in any relevant jurisdiction any financing statements and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Collateral, including (i) whether the Pledgor is an organization, the type of organization and any organizational identification number issued to the Pledgor and (ii) any financing or continuation statements or other documents without the signature of the Pledgor where permitted by law, including the filing of a financing statement describing the Collateral as “all assets now owned or hereafter acquired by the Pledgor or in which Pledgor otherwise has rights” or similar language.  The Pledgor agrees to provide all

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information described in the immediately preceding sentence to the Administrative Agent promptly upon request by the Administrative Agent.

(b)The Pledgor hereby ratifies its authorization for the Administrative Agent to file in any relevant jurisdiction any financing statements relating to the Collateral if filed prior to the date hereof.

(c)The Pledgor hereby further authorizes the Administrative Agent to file any other filings or other documents with the appropriate governmental authorities reasonably necessary or appropriate for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by the Pledgor hereunder.

SECTION 3.2.Procedures.  (a)  To the extent that the Pledgor at any time or from time to time owns, acquires or obtains any right, title or interest in any Collateral, such Collateral shall automatically (and without the taking of any action by the Pledgor) be pledged pursuant to Section 2.1 hereof and subject to the lien and security interest granted pursuant to such Section and, in addition thereto, the Pledgor shall forthwith take the following actions as set forth below:

(i)with respect to a Certificated Security (other than a Certificated Security credited on the books of a Clearing Corporation or Securities Intermediary) or an Instrument (other than the Hilton Note to the extent held by the Hilton Note Custodian pursuant to the Hilton Custodial Agreement), the Pledgor shall promptly (but in any event within three (3) Business Days after receipt thereof by the Pledgor) physically deliver such Certificated Security or Instrument to the Administrative Agent, in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Administrative Agent; provided that any such Certificated Security or Instrument that is in existence on the date hereof shall be delivered to the Administrative Agent on the date hereof in the foregoing required form or accompanied by the foregoing required instrument of transfer or assignment;

(ii)with respect to the Hilton Note to the extent held by the Hilton Note Custodian pursuant to the Hilton Custodial Agreement, the Pledgor shall promptly (but in any event within three (3) Business Days after receipt thereof by the Pledgor) physically deliver the Custodial Trust Receipt (as defined in the Hilton Custodial Agreement) therefor to the Administrative Agent, in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Administrative Agent, together with an undated Notice to the Custodian, substantially in the form set forth in Exhibit 4 to the Hilton Custodial Agreement, with respect to the Hilton Note duly executed in blank by the Pledgor;

(iii)with respect to an Uncertificated Security (other than an Uncertificated Security credited on the books of a Clearing Corporation or Securities Intermediary), the Pledgor shall cause the issuer of such Uncertificated Security to promptly (but in any event within three (3) Business Days after the Pledgor acquires an interest in such Uncertificated Security) duly authorize, execute, and deliver to the Administrative Agent an agreement for the benefit of the Administrative Agent, in form and substance reasonably satisfactory to the Administrative

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Agent, pursuant to which such issuer agrees to comply with any and all instructions originated by the Administrative Agent without further consent by the registered owner and not to comply with instructions regarding such Uncertificated Security originated by any other person;

(iv)with respect to any Collateral consisting of a Certificated Security or Uncertificated Security credited on the books of a Clearing Corporation or Securities Intermediary (including a Federal Reserve Bank, Participants Trust Company or The Depository Trust Company), the Pledgor shall promptly (but in any event within one (1) Business Day after the Pledgor acquires an interest, beneficial or otherwise, in such Certificated Security or Uncertificated Security) notify in writing the Administrative Agent thereof and shall promptly (but in any event within three (3) Business Days after the Pledgor acquires an interest, beneficial or otherwise, in such Certificated Security or Uncertificated Security) take (x) all actions required (i) to comply with the applicable rules of such Clearing Corporation or Securities Intermediary and (ii) to perfect the security interest of the Administrative Agent therein under applicable law (including, in any event, under Sections 9-314(a), (b) and (c), 9-106 and 8-106 of the UCC) and (y) such other actions as the Administrative Agent reasonably deems necessary or desirable to effect the foregoing;

(v)with respect to cash proceeds from any, or otherwise constituting, Collateral, the Pledgor shall promptly (but in any event within two (2) Business Days after receipt thereof by the Pledgor) deposit such cash in the Collection Account or, if agreed to in writing by the Administrative Agent, (i) the Pledgor may establish another Deposit Account in the name of the Pledgor over which the Administrative Agent shall have Control and (ii) the Pledgor shall promptly (but in any event within two (2) Business Days after receipt thereof by the Pledgor) deposit such cash in such Deposit Account; and

(vi)with respect to any other Collateral, the Pledgor shall promptly take, or cause to be taken, such actions and shall promptly execute and deliver, or cause to be executed and delivered, such agreements, in each instance, as the Administrative Agent reasonably deems necessary or desirable to perfect the security interest of the Administrative Agent therein and maintain a first priority perfected security interest therein.

(b)In addition to the actions required to be taken pursuant to Section 3.2(a) hereof, with respect to all Collateral whereby or with respect to which the Administrative Agent may obtain Control thereof, the Pledgor shall take all actions as may be reasonably requested from time to time by the Administrative Agent so that Control of such Collateral is obtained and at all times held by the Administrative Agent.

(c)If the Pledgor shall acquire (by purchase, exchange or otherwise) any additional Collateral at any time or from time to time after the date hereof, the Pledgor will forthwith thereafter take (or cause to be taken) all action with respect to such Collateral in accordance with the procedures set forth in this Section 3.2, and will promptly deliver to the Administrative Agent all information and other items reasonably requested with respect thereto.

(d)The Administrative Agent shall have the right to appoint one or more sub-agents or bailees for the purpose of retaining physical possession of any Collateral, which may be held (in the discretion of the Administrative Agent) in the name of the Pledgor, endorsed or

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assigned in blank or in favor of the Administrative Agent or any nominee or nominees of the Administrative Agent or a sub-agent or bailee appointed by the Administrative Agent.

SECTION 3.3.Transfer or Registration to Administrative Agent.  The Administrative Agent shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to register in the name of the Administrative Agent or any of its nominees or endorse for negotiation any or all of the Collateral, without any indication that such Collateral is subject to the security interest hereunder.  In addition, upon the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right at any time to exchange certificates representing or evidencing any Collateral for certificates of smaller or larger denominations.

SECTION 3.4.Maintenance of Perfected Security Interest.  The Pledgor agrees that at the sole cost and expense of the Pledgor, the Pledgor will maintain the security interest created by this Agreement in the Collateral as a perfected first priority security interest.

SECTION 3.5.Deposit Accounts.  The Pledgor shall at all times maintain the Collection Account.  The Pledgor shall not establish and maintain any other Deposit Account without the prior written consent of the Administrative Agent.  The Pledgor shall have no right to direct the disposition of funds from time to time credited to the Collection Account or to any other Deposit Account of the Pledgor subject to a Control Agreement or any withdrawal rights with respect to funds from time to time credited to the Collection Account or to any such other Deposit Account.  The Pledgor agrees that the Pledgor shall not give any instructions or orders with respect to any such Deposit Account, including, without limitation, instructions for distribution or transfer of any funds in such Deposit Account.  The Pledgor shall not grant Control of any Deposit Account to any person other than the Administrative Agent.

SECTION 3.6.Securities Accounts.  (a)  The Pledgor shall not establish and maintain any Securities Account with any Securities Intermediary unless (1) the Pledgor shall have given the Administrative Agent 30 days’ (or such lesser number of days as the Administrative Agent shall agree to in its sole discretion) prior written notice of the Pledgor’s intention to establish such new Securities Account with such Securities Intermediary, (2) such Securities Intermediary shall be reasonably acceptable to the Administrative Agent, (3) such Securities Intermediary and the Pledgor shall have duly executed and delivered a Control Agreement with respect to such Securities Account and (4) the Pledgor shall have acquired (or, within such 30 or less day period, will acquire) beneficial ownership interests in one or more Pass-Through Certificates (and not have received or to receive or be entitled to receive physical Pass-Through Certificates) and all such ownership interests in Pass-Through Certificates shall, upon acquisition thereof, be credited to such Securities Account.  The Pledgor shall accept any cash and Investment Property in trust for the benefit of the Administrative Agent and, within two (2) Business Days of receipt thereof, deposit any and all cash and Investment Property received by it into the Collection Account (in the case of cash) or a Securities Account (in the case of Investment Property) subject to the Administrative Agent’s Control.  The Pledgor shall have no right to give any instructions or directions to any Securities Intermediary with respect to the Securities Account maintained with such Securities Intermediary, and shall not exercise any withdrawal or dealing rights with respect to such Securities Account.  The Pledgor agrees that the Pledgor shall not give any instructions or orders with respect to any Securities Account,

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including, without limitation, instructions for investment, distribution or transfer of any Investment Property or financial asset maintained in such Securities Account.  The Pledgor shall not grant Control over any Investment Property to any person other than the Administrative Agent.

(b)           As between the Administrative Agent and the Pledgor, the Pledgor shall bear the investment risk with respect to the Investment Property and other Collateral, and the risk of loss of, damage to, or the destruction of the Investment Property and other Collateral, whether in the possession of, or maintained as a Security Entitlement or deposit by, or subject to the Control of, the Administrative Agent, a Securities Intermediary, the Pledgor or any other person.

SECTION 3.7.Further Assurances.  The Pledgor shall take such further actions, and execute and/or deliver to the Administrative Agent such additional financing statements, amendments, assignments, agreements, supplements, powers and instruments, as the Administrative Agent may in its reasonable judgment deem necessary or appropriate in order to create, perfect, preserve and protect the security interest in the Collateral as provided herein and the rights and interests granted to the Administrative Agent hereunder, to carry into effect the purposes hereof or better to assure and confirm the validity, enforceability and priority of the Administrative Agent’s security interest in the Collateral or permit the Administrative Agent to exercise and enforce its rights, powers and remedies hereunder with respect to any Collateral, including the filing of financing statements, continuation statements and other documents (including this Agreement) under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interest created hereby and the execution and delivery of Control Agreements, all in form reasonably satisfactory to the Administrative Agent and in such offices wherever required by law to perfect, continue and maintain the validity, enforceability and priority of the security interest in the Collateral as provided herein and to preserve the other rights and interests granted to the Administrative Agent hereunder, as against third parties, with respect to the Collateral.  Without limiting the generality of the foregoing, the Pledgor shall make, execute, endorse, acknowledge, file or refile and/or deliver to the Administrative Agent from time to time upon reasonable request by the Administrative Agent such lists, schedules, descriptions and designations of the Collateral, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments as the Administrative Agent shall reasonably request.  If an Event of Default has occurred and is continuing, the Administrative Agent may institute and maintain, in its own name or in the name of the Pledgor, such suits and proceedings as the Administrative Agent may be advised by counsel shall be necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Collateral.  All of the foregoing shall be at the sole cost and expense of the Pledgor.

ARTICLE IV

REPRESENTATIONS, WARRANTIES AND COVENANTS

The Pledgor represents, warrants and covenants as follows:

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SECTION 4.1.Title.  Except for the security interest granted to the Administrative Agent for the benefit of the Secured Parties pursuant to this Agreement, the Pledgor owns and has rights and, as to Collateral acquired by it from time to time after the date hereof, will own and have rights in each item of Collateral pledged by it hereunder, free and clear of any and all Liens or claims of others.

SECTION 4.2.Validity of Security Interest.  The security interest in and Lien on the Collateral granted to the Administrative Agent for the benefit of the Secured Parties hereunder constitutes (a) a legal and valid security interest in all the Collateral securing the payment and performance of the Obligations, and (b) subject to the filings and other actions described in Sections 3.1 and 3.2 hereto, a perfected security interest in all the Collateral.  The security interest and Lien granted to the Administrative Agent for the benefit of the Secured Parties pursuant to this Agreement in and on the Collateral will at all times constitute a first priority perfected, continuing security interest therein.  The Administrative Agent has a first priority security interest in the Collection Account, each other Deposit Account, if any, of the Pledgor and each Securities Account, if any, of the Pledgor, which security interest is perfected by Control.  Schedule 1 hereto sets forth the correct governmental office in which a financing statement naming the Pledgor, as debtor, and the Administrative Agent, as secured party, must be filed under the UCC in order to perfect the security interest of the Administrative Agent in the Collateral granted herein, to the extent that such security interest can be perfected by filing.

SECTION 4.3.Defense of Claims; Transferability of Collateral.  The Pledgor shall, at its own cost and expense, defend title to the Collateral pledged by it hereunder and the security interest therein and Lien thereon granted to the Administrative Agent and the priority thereof against all claims and demands of all persons, at its own cost and expense, at any time claiming any interest therein adverse to the Administrative Agent or any other Secured Party.  Except for the Hilton Loan Documents or the Trust Documents, there is no agreement, order, judgment or decree, and the Pledgor shall not enter into any agreement or take any other action, that would prohibit the transferability of any of the Collateral or otherwise conflict with the Pledgor’s obligations hereunder.

SECTION 4.4.Other Financing Statements.  The Pledgor has not filed, nor authorized any third party to file, any valid or effective financing statement (or similar statement, instrument of registration or public notice under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral, except such as have been filed in favor of the Administrative Agent pursuant to this Agreement.  The Pledgor shall not execute, authorize or permit to be filed in any public office any effective financing statement (or similar statement, instrument of registration or public notice under the law of any jurisdiction) relating to any Collateral.

SECTION 4.5.Initial Collateral.  On the date hereof, the Pledgor has no interest in any Certificated Security, Uncertificated Security, Instrument, Security Entitlement, Financial Asset or Investment Property or in any certificate, Document or Instrument evidencing or representing any Collateral (other than the Hilton Note) and the Hilton Note is, or promptly after issuance, will be, in the possession of the Hilton Note Custodian subject to the terms of the Hilton Custodial Agreement.  The Pledgor has no Deposit Accounts on the date hereof other than

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the Collection Account.  The Collection Account is subject to a Deposit Account Control Agreement.  The Pledgor has no Securities Accounts on the date hereof.

SECTION 4.6.Consents, etc.  In the event that the Administrative Agent desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Agreement and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other person therefor, then, upon the reasonable request of the Administrative Agent, the Pledgor agrees to use commercially reasonably efforts to assist and aid the Administrative Agent to obtain as soon as practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers.

SECTION 4.7.Collateral.  All information set forth herein, including the schedules hereto, and all information contained in any documents, schedules and lists heretofore delivered to any Secured Party in connection with this Agreement, in each case, relating to the Collateral, is accurate and complete in all material respects.

SECTION 4.8.No Defenses.  No defense, offset or counterclaim has been asserted or alleged in writing against any of the Collateral or the Pledgor by any person with respect thereto.

SECTION 4.9.Qualification.  The Pledgor is (x) a Qualified Institutional Lender and a Qualified Purchaser (as such terms are defined in the Co-Lender Agreement) and (y) an Institutional Accredited Investor or a QIB (as such terms are defined in the Trust Agreement).

ARTICLE V

ADDITIONAL COLLATERAL; VOTING RIGHTS; DISTRIBUTIONS

SECTION 5.1.Pledge of Additional Collateral.  The Pledgor shall, upon obtaining any Certificated Security, Uncertificated Security, Securities Entitlement, Financial Asset, Investment Property or Instrument, accept the same in trust for the benefit of the Administrative Agent and promptly (but in any event within five days after receipt thereof) deliver to the Administrative Agent a pledge amendment, duly executed by the Pledgor, in substantially the form of Exhibit 1 hereto (each, a “Pledge Amendment”), and the certificates and other documents, if any, required under Section 3.2 hereof in respect of the additional Collateral which are to be pledged pursuant to this Agreement, and confirming the attachment of the Lien hereby created on and in respect of such additional Collateral.  The Pledgor hereby authorizes the Administrative Agent to attach each Pledge Amendment to this Agreement and agrees that all Collateral listed on any Pledge Amendment delivered to the Administrative Agent shall for all purposes hereunder be considered Collateral.  Notwithstanding the foregoing, the failure of the Pledgor to deliver a Pledge Amendment with respect to any additional Collateral shall not affect the security interest and Lien of the Administrative Agent therein.

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SECTION 5.2.Voting Rights; Distributions; etc.

(a)So long as no Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms or purposes hereof, the Credit Agreement or any other Loan Document; provided, however, that the Pledgor shall not in any event (i) exercise such rights in any manner which could reasonably be expected to materially impair the value of the Collateral or any part thereof or the security interest of the Administrative Agent therein for the benefit of the Secured Parties or which could reasonably be expected to have a Material Adverse Effect or (ii) without the prior written consent of the Administrative Agent, consent to or approve any action that is a Majority Decision (as defined in the Co-Lender Agreement), a Two-Thirds Majority Decision (as defined in the Co-Lender Agreement), a Super Majority Decision (as defined in the Co-Lender Agreement) or any other action contemplated to be taken by the Co-Lender Agreement in which a vote of the Pledgor is required.

(b)So long as no Event of Default shall have occurred and be continuing, the Administrative Agent shall be deemed without further action or formality to have granted to the Pledgor all necessary consents relating to voting rights which it is entitled to exercise pursuant to Section 5.2(a) hereof and shall, if necessary, upon written request of the Pledgor and at the sole cost and expense of the Pledgor, from time to time execute and deliver (or cause to be executed and delivered) to the Pledgor all such instruments as the Pledgor may reasonably request in order to permit the Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 5.2(a) hereof.

(c)Upon the occurrence and during the continuance of any Event of Default, all rights of the Pledgor to exercise the voting and other consensual rights it would otherwise be entitled to exercise pursuant to Section 5.2(a) hereof shall immediately cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall thereupon have the sole right to exercise such voting and other consensual rights.

(d)The Pledgor shall, at its sole cost and expense, from time to time execute and deliver to the Administrative Agent appropriate instruments as the Administrative Agent may reasonably request in order to permit the Administrative Agent to exercise the voting and other rights which it may be entitled to exercise pursuant to Section 5.2(c) hereof.

(e)All Distributions which are received by the Pledgor (other than cash Distributions that have been deposited into the Collection Account and thereafter remitted to the Pledgor from the Collection Account in accordance with the terms of the Credit Agreement) shall be received in trust for the benefit of the Administrative Agent and shall immediately be paid over to the Administrative Agent as Collateral in the same form as so received (with any necessary endorsement) or, with respect to cash Distributions, deposited into the Collection Account.  The Pledgor shall, at its sole cost and expense, from time to time execute and deliver to the Administrative Agent appropriate instruments as the Administrative Agent may reasonably request in order to permit the Administrative Agent to receive directly all Distributions from the obligor or payor thereof.

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ARTICLE VI

NOTE PLEDGE

SECTION 6.1.Note Pledge.  The Pledgor agrees to promptly (but in any event within three (3) Business Days after the Closing Date) deliver to the other Co-Lenders and any Servicer (as such terms are defined in the Co-Lender Agreement) (with a copy to the Administrative Agent) notice, pursuant to Section 19(f) of the Co-Lender Agreement, of the pledge of the Hilton Note to the Administrative Agent (including the name of the Administrative Agent and its address).

ARTICLE VII

RECORDS; COMPLIANCE; COMMUNICATIONS

SECTION 7.1.Maintenance of Records.  The Pledgor shall keep and maintain at its own cost and expense complete records of the Collateral, in a manner consistent with prudent business practice, including records of all payments received.  The Pledgor shall, at the Pledgor’s sole cost and expense, upon the Administrative Agent’s demand made at any time after the occurrence and during the continuance of any Event of Default, deliver all tangible Collateral in the Pledgor’s possession, including all documents evidencing or representing any Collateral and any books and records relating to any Collateral, to the Administrative Agent or to its representatives (copies of which may be retained by the Pledgor).

SECTION 7.2.Compliance with Collateral Obligations.  The Pledgor shall timely fulfill all material obligations on its part to be fulfilled under or in connection with any of the Collateral.

SECTION 7.3Communications.  The Pledgor shall promptly deliver to the Administrative Agent copies of all notices, reports, statements and other written communications that it receives from time to time with respect to any of the Collateral, including, without limitation, any notices with respect to proposals to take (or not take) action under any of the Hilton Loan Documents or any of the Trust Documents and any voting packages.  Further, the Pledgor agrees, promptly upon acquiring any Pass-Through Certificate or interest (beneficial or otherwise) therein, to deliver to each of the trustee and certificateholder consultant under the Trust Agreement an Investor Certification (as defined in the Trust Agreement) in order that, among other things, the Pledgor shall have the right to receive directly certain reports, statements, communications or other information required or permitted to be provided or distributed to a Certificateholder (as defined in the Trust Agreement) under the Trust Agreement and have access to the Trustee’s internet website with respect to the transactions contemplated by the Trust Agreement.

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ARTICLE VIII

TRANSFERS

SECTION 8.1.Transfers of Collateral.  The Pledgor shall not sell, convey, assign or otherwise dispose of, or grant any option with respect to, any of the Collateral except as expressly permitted by the Credit Agreement.

ARTICLE IX

REMEDIES

SECTION 9.1.Remedies.  Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent may from time to time exercise in respect of the Collateral, in addition to the other rights and remedies provided for herein or otherwise available to it, the following remedies:

(i)Personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof from the Pledgor or any other person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Pledgor’s premises where any of the Collateral is located, remove such Collateral, remain present at such premises to receive copies of all communications and remittances relating to the Collateral and use in connection with such removal and possession any and all services, supplies, aids and other facilities of the Pledgor;

(ii)Demand, sue for, collect or receive any money or property at any time payable or receivable in respect of any of the Collateral including instructing any obligor, agent, servicer, sub-servicer or other payor on, under or with respect to any agreement, instrument or other obligation constituting part of or related to the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Administrative Agent, and in connection with any of the foregoing, compromise, settle, extend the time for payment and make other modifications with respect thereto; provided, however, that in the event that any such payments are made directly to the Pledgor prior to receipt by any such obligor, agent, servicer, sub-servicer or other payor of such instruction, the Pledgor shall hold all amounts received pursuant thereto in trust for the benefit of the Administrative Agent and shall promptly (but in no event later than two (2) Business Days after receipt thereof) pay such amounts to the Administrative Agent;

(iii)Sell, assign or otherwise liquidate, or direct the Pledgor to sell, assign or otherwise liquidate, any and all Collateral (including, without limitation,  investments made in whole or in part with the Collateral or any part thereof or otherwise constituting part of the Collateral), and take possession of the proceeds of any such sale, assignment or liquidation;

(iv)Take possession of the Collateral or any part thereof, by directing the Pledgor (or, if applicable, the Hilton Note Custodian or any other person holding possession of

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such Collateral on behalf of the Pledgor) in writing to deliver, or cause to be delivered, the same to the Administrative Agent at any place or places so designated by the Administrative Agent, in which event the Pledgor shall at its own expense (or such other person shall at the Pledgor’s expense) forthwith cause the same to be delivered to the Administrative Agent to the place or places designated by the Administrative Agent.  The Pledgor’s obligation to deliver the Collateral as contemplated in this Section 9.1(iv) is of the essence hereof.  Upon application to a court of equity having jurisdiction, the Administrative Agent shall be entitled to a decree requiring specific performance by the Pledgor of such obligation;

(v)Withdraw all moneys, instruments, securities and other assets or property in the Collection Account, in any other Deposit Account or Securities Account subject to a Control Agreement or in any other bank, financial securities, deposit or other account of the Pledgor constituting Collateral for application to the Obligations as provided in Article X hereof;

(vi)Retain and apply the Distributions to the Obligations as provided in Article X hereof;

(vii)Exercise any and all rights as beneficial and legal owner of the Collateral, including perfecting assignment of and exercising any and all voting, consensual and other rights and powers with respect to any Collateral; and

(viii)Exercise all the rights and remedies of a secured party on default under the UCC, and the Administrative Agent may also in its sole discretion, without notice except as specified in Section 9.2 hereof, sell, assign or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker’s board or at any of the Administrative Agent’s offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Administrative Agent may deem commercially reasonable.  The Administrative Agent or any other Secured Party or any of their respective Affiliates may be the purchaser, assignee or recipient of the Collateral or any part thereof at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold, assigned or otherwise disposed of at such sale, to use and apply any of the Obligations owed to such person as a credit on account of the purchase price of the Collateral or any part thereof payable by such person at such sale.  Each purchaser, assignee or recipient at any such sale shall acquire the property sold, assigned or otherwise disposed of absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives, to the fullest extent permitted by law, all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.  The Administrative Agent shall not be obligated to make any sale of the Collateral or any part thereof regardless of notice of sale having been given.  The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.  The Pledgor hereby waives, to the fullest extent permitted by law, any claims against the Administrative Agent arising by reason of the fact that the price at which the Collateral or any part thereof may have been sold, assigned or otherwise disposed of at such a private sale was less than the price which might have been obtained at a public sale, even if the Administrative Agent accepts the first offer received and does not offer such Collateral to more than one offeree.

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SECTION 9.2.Notice of Sale.  The Pledgor acknowledges and agrees that, to the extent notice of sale or other disposition of the Collateral or any part thereof shall be required by law, ten (10) days’ prior notice to the Pledgor of the time and place of any public sale or of the time after which any private sale or other intended disposition is to take place shall be commercially reasonable notification of such matters.  No notification need be given to the Pledgor if it has signed, after the occurrence of an Event of Default, a statement renouncing or modifying any right to notification of sale or other intended disposition.

SECTION 9.3.Waiver of Notice and Claims.  The Pledgor hereby waives, to the fullest extent permitted by applicable law, notice or judicial hearing in connection with the Administrative Agent’s taking possession or the Administrative Agent’s disposition of the Collateral or any part thereof, including any and all prior notice and hearing for any prejudgment remedy or remedies and any such right which the Pledgor would otherwise have under law, and the Pledgor hereby further waives, to the fullest extent permitted by applicable law:  (i) all damages occasioned by such taking of possession, (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Administrative Agent’s rights hereunder and (iii) all rights of redemption, appraisal, valuation, stay, extension or moratorium now or hereafter in force under any applicable law.  The Administrative Agent shall not be liable for any incorrect or improper payment made pursuant to this Article IX in the absence of gross negligence or willful misconduct on the part of the Administrative Agent.  Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Pledgor therein and thereto, and shall be a perpetual bar both at law and in equity against the Pledgor and against any and all persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through or under the Pledgor.

SECTION 9.4.Certain Sales of Collateral.

(a)The Pledgor recognizes that, by reason of certain prohibitions contained in law, rules, regulations or orders of any Governmental Authority, the Administrative Agent may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who meet the requirements of such Governmental Authority.  The Pledgor acknowledges that any such sales may be at prices and on terms less favorable to the Administrative Agent than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such restricted sale shall be deemed to have been made in a commercially reasonable manner and that, except as may be required by applicable law, the Administrative Agent shall have no obligation to engage in public sales.

(b)The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Administrative Agent may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to persons who will agree, among other things, to acquire such Collateral for their own account, for investment and not with a view to the distribution or resale thereof.  The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to the Administrative Agent than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have

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been made in a commercially reasonable manner and that the Administrative Agent shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would agree to do so.

(c)[Reserved].

(d)If the Administrative Agent determines to exercise its right to sell any or all of the Collateral, upon written request, the Pledgor shall from time to time furnish to the Administrative Agent all such information as the Administrative Agent may reasonably request in order to determine the number of securities included in the Collateral which may be sold by the Administrative Agent as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.

(e)The Pledgor recognizes that, by reason of certain prohibitions contained in the Hilton Loan Documents or the Trust Documents, as applicable, the Administrative Agent may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who meet the requirements of the Hilton Loan Documents or the Trust Documents, as applicable.  The Pledgor acknowledges that any such sales may be at prices and on terms less favorable to the Administrative Agent than those obtainable through a sale without such prohibitions, and, notwithstanding such circumstances, agrees that any such sale shall be deemed to have been made in a commercially reasonable manner.

(f)The Pledgor further agrees that a breach of any of the covenants contained in this Section 9.4 will cause irreparable injury to the Administrative Agent and the other Secured Parties, that the Administrative Agent and the other Secured Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 9.4 shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred and is continuing.

SECTION 9.5.No Waiver; Cumulative Remedies.

(a)No failure on the part of the Administrative Agent to exercise, no course of dealing with respect to, and no delay on the part of the Administrative Agent in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, privilege or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy; nor shall the Administrative Agent be required to look first to, enforce or exhaust any other security, collateral or guaranties.  All rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies provided by law or otherwise available.

(b)In the event that the Administrative Agent shall have instituted any proceeding to enforce any right, power, privilege or remedy under this Agreement or any other Loan Document by foreclosure, sale, entry or otherwise, and such proceeding shall have been

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discontinued or abandoned for any reason or shall have been determined adversely to the Administrative Agent, then and in every such case, the Pledgor, the Administrative Agent and each other Secured Party shall be restored to their respective former positions and rights hereunder with respect to the Collateral, and all rights, remedies, privileges and powers of the Administrative Agent and the other Secured Parties shall continue as if no such proceeding had been instituted.

ARTICLE X

APPLICATION OF PROCEEDS

SECTION 10.1.Application of Proceeds.  The proceeds received by the Administrative Agent in respect of any sale of, collection from or other realization upon all or any part of the Collateral pursuant to the exercise by the Administrative Agent of its remedies shall be applied, together with any other sums then held by the Administrative Agent pursuant to this Agreement, in accordance with the Credit Agreement.

ARTICLE XI

MISCELLANEOUS

SECTION 11.1.Concerning Administrative Agent.

(a)The Administrative Agent has been appointed as administrative agent pursuant to the Credit Agreement.  The actions of the Administrative Agent hereunder are subject to the provisions of the Credit Agreement.  The Administrative Agent shall have the right hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including the release or substitution of the Collateral), in accordance with this Agreement and the Credit Agreement.  The Administrative Agent may employ agents and attorneys-in-fact in connection herewith and shall not be liable for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith.  The Administrative Agent may resign and a successor Administrative Agent may be appointed in the manner provided in the Credit Agreement.  Upon the acceptance of any appointment as the Administrative Agent by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent under this Agreement, and the retiring Administrative Agent shall thereupon be discharged from its duties and obligations under this Agreement.  After any retiring Administrative Agent’s resignation, the provisions hereof shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Administrative Agent.

(b)The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if such Collateral is accorded treatment substantially equivalent to that which the Administrative Agent, in its

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individual capacity, accords its own property consisting of similar instruments or interests, it being understood that neither the Administrative Agent nor any of the Secured Parties shall have responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Administrative Agent or any other Secured Party has or is deemed to have knowledge of such matters or (ii) taking any necessary steps to preserve rights against any person with respect to any Collateral.

(c)The Administrative Agent shall be entitled to rely upon any written notice, statement, certificate, order or other document or any telephone message believed by it to be genuine and correct and to have been signed, sent or made by the proper person, and, with respect to all matters pertaining to this Agreement and its duties hereunder, upon advice of counsel selected by it.

(d)If any item of Collateral also constitutes collateral granted to the Administrative Agent under any other deed of trust, mortgage, security agreement, pledge or instrument of any type, in the event of any conflict between the provisions hereof and the provisions of such other deed of trust, mortgage, security agreement, pledge or instrument of any type in respect of such collateral, the Administrative Agent, in its sole discretion, shall select which provision or provisions shall control.

(e)The Administrative Agent may rely on advice of counsel as to whether any or all UCC financing statements of the Pledgor need to be amended as a result of any of the changes described in Section 6.16(a) of the Credit Agreement.  If the Pledgor fails to provide information to the Administrative Agent about such changes on a timely basis, the Administrative Agent shall not be liable or responsible to any party for any failure to maintain a perfected security interest in the Pledgor’s property constituting Collateral for which the Administrative Agent needed to have information relating to such changes.  The Administrative Agent shall have no duty to inquire about such changes if the Pledgor does not inform the Administrative Agent of such changes, the parties acknowledging and agreeing that it would not be feasible or practical for the Administrative Agent to search for information on such changes if such information is not provided by the Pledgor.

SECTION 11.2.Administrative Agent May Perform; Administrative Agent Appointed Attorney-in-Fact.  If the Pledgor shall fail to perform any covenants contained in this Agreement or if any representation or warranty on the part of the Pledgor contained herein shall be breached, the Administrative Agent may (but shall not be obligated to) do the same or cause it to be done or remedy any such breach, and may expend funds for such purpose; provided, however, that the Administrative Agent shall in no event be bound to inquire into the validity of any tax, Lien, imposition or other obligation which the Pledgor fails to pay or perform as and when required hereby and which the Pledgor does not contest in accordance with the provisions of the Credit Agreement.  Any and all amounts so expended by the Administrative Agent shall be paid by the Pledgor in accordance with the provisions of Section 11.04 of the Credit Agreement.  Neither the provisions of this Section 11.2 nor any action taken by the Administrative Agent pursuant to the provisions of this Section 11.2 shall prevent any such failure to observe any covenant contained in this Agreement nor any breach of representation or warranty from constituting an Event of Default.  The Pledgor hereby appoints the Administrative Agent its attorney-in-fact, with full power and authority in the place and stead of the Pledgor and

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in the name of the Pledgor, or otherwise, from time to time in the Administrative Agent’s discretion to take any action and to execute any instrument consistent with the terms of the Credit Agreement, this Agreement and the other Loan Documents which the Administrative Agent may deem necessary or advisable to accomplish the purposes hereof (but the Administrative Agent shall not be obligated to and shall have no liability to the Pledgor or any third party for failure to so do or take action).  The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof.  The Pledgor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.

SECTION 11.3.Continuing Security Interest; Assignment.  This Agreement shall create a continuing security interest in the Collateral and shall (i) be binding upon the Pledgor, its successors and assigns and (ii) inure, together with the rights and remedies of the Administrative Agent hereunder, to the benefit of the Administrative Agent and the other Secured Parties and each of their respective successors, transferees and assigns.  No other persons (including any other creditor of the Pledgor) shall have any interest herein or any right or benefit with respect hereto.  Without limiting the generality of the foregoing clause (ii), any Secured Party may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other person, and such other person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party, herein or otherwise, subject however, to the provisions of the Credit Agreement.  The Pledgor agrees that its obligations hereunder and the security interest created hereunder shall continue to be effective or be reinstated, as applicable, if at any time payment, or any part thereof, of all or any part of the Obligations is rescinded or must otherwise be restored by the Secured Party upon the bankruptcy or reorganization of the Pledgor or otherwise.

SECTION 11.4.Termination.  Upon payment in full in cash of all Obligations, this Agreement shall terminate (provided that all indemnities set forth herein and in the other Loan Documents shall survive any such termination).  Upon termination of this Agreement, the Collateral shall be released from the Lien of this Agreement.  Upon such release, the Administrative Agent shall, upon the request and at the sole cost and expense of the Pledgor, assign, transfer and deliver to the Pledgor, against receipt and without recourse to or warranty by the Administrative Agent except as to the fact that the Administrative Agent has not encumbered the released assets, such of the Collateral or any part thereof to be released as may be in possession of the Administrative Agent and as shall not have been sold or otherwise applied pursuant to the terms hereof, and, with respect to any other Collateral, proper documents and instruments (including UCC-3 termination financing statements or releases) acknowledging the termination hereof or the release of such Collateral, as the case may be.

SECTION 11.5.Modification in Writing.  No amendment, modification, supplement, termination or waiver of or to any provision hereof, nor consent to any departure by the Pledgor therefrom, shall be effective unless the same shall be made in accordance with the terms of the Credit Agreement and unless in writing and signed by the Administrative Agent.  Any amendment, modification or supplement of or to any provision hereof, any waiver of any provision hereof and any consent to any departure by the Pledgor from the terms of any provision hereof in each case shall be effective only in the specific instance and for the specific purpose for which made or given.  Except where notice is specifically required by this

22

Agreement or any other document evidencing the Obligations, no notice to or demand on the Pledgor in any case shall entitle the Pledgor to any other or further notice or demand in similar or other circumstances.

SECTION 11.6.Notices.  Unless otherwise provided herein or in the Credit Agreement, any notice or other communication herein required or permitted to be given shall be given in the manner and become effective as set forth in the Credit Agreement, as to the Pledgor, addressed to it at the address of the Pledgor set forth in the Credit Agreement and as to the Administrative Agent, addressed to it at the address of the Administrative Agent set forth in the Credit Agreement, or in each case at such other address as shall be designated by such party in a written notice to the other party complying as to delivery with the terms of this Section 11.6.

SECTION 11.7.Governing Law, Consent to Jurisdiction and Service of Process; Waiver of Jury Trial.  Sections 11.14 and 11.15 of the Credit Agreement are incorporated herein, mutatis mutandis, as if a part hereof.

SECTION 11.8.Severability of Provisions.  Any provision hereof which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof or affecting the validity, legality or enforceability of such provision in any other jurisdiction.

SECTION 11.9.Execution in Counterparts.  This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all such counterparts together shall constitute one and the same agreement.  Delivery of any executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 11.10.Business Days.  In the event any time period or any date provided in this Agreement ends or falls on a day other than a Business Day, then such time period shall be deemed to end and such date shall be deemed to fall on the next succeeding Business Day, and performance herein may be made on such Business Day, with the same force and effect as if made on such other day.

SECTION 11.11.No Credit for Payment of Taxes or Imposition.  The Pledgor shall not be entitled to any credit against the principal, premium, if any, or interest payable under the Credit Agreement, and the Pledgor shall not be entitled to any credit against any other sums which may become payable under the terms thereof or hereof, by reason of the payment of any Tax on the Collateral or any part thereof.

SECTION 11.12.[Reserved].

SECTION 11.13.No Release.  Nothing set forth in this Agreement or any other Loan Document, nor the exercise by the Administrative Agent of any of the rights or remedies hereunder, shall relieve the Pledgor from the performance of any term, covenant, condition or agreement on the Pledgor’s part to be performed or observed under or in respect of any of the

23

Collateral or from any liability to any person under or in respect of any of the Collateral or shall impose any obligation on the Administrative Agent or any other Secured Party to perform or observe any such term, covenant, condition or agreement on the Pledgor’s part to be so performed or observed or shall impose any liability on the Administrative Agent or any other Secured Party for any act or omission on the part of the Pledgor relating thereto or for any breach of any representation or warranty on the part of the Pledgor contained in this Agreement, the Credit Agreement or the other Loan Documents, or under or in respect of the Collateral or made in connection herewith or therewith.  Anything herein to the contrary notwithstanding, neither the Administrative Agent nor any other Secured Party shall have any obligation or liability under any contracts, agreements and other documents included in the Collateral by reason of this Agreement, nor shall the Administrative Agent or any other Secured Party be obligated to perform any of the obligations or duties of the Pledgor thereunder or to take any action to collect or enforce any such contract, agreement or other document included in the Collateral hereunder.  The obligations of the Pledgor contained in this Section 11.13 shall survive the termination hereof and the discharge of the Pledgor’s other obligations under this Agreement, the Credit Agreement and the other Loan Documents.

SECTION 11.14.Obligations Absolute.  All obligations of the Pledgor hereunder shall be absolute and unconditional irrespective of:

(i)any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of any other person;

(ii)any lack of validity or enforceability of the Credit Agreement or any other Loan Document, any Collateral or any other agreement or instrument relating to any of the foregoing;

(iii)any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement or any other Loan Document or any other agreement or instrument relating thereto;

(iv)any pledge, exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guarantee, for all or any of the Obligations;

(v)any exercise, non-exercise or waiver of any right, remedy, power or privilege under or in respect hereof, the Credit Agreement or any other Loan Document except as specifically set forth in a waiver granted pursuant to the provisions of Section 11.5 hereof; or

(vi)any other circumstances which might otherwise constitute a defense available to, or a discharge of, the Pledgor.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

24

IN WITNESS WHEREOF, the Pledgor and the Administrative Agent have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written.

SPT REAL ESTATE SUB II, LLC, as Pledgor
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory

Signature Page to Security Agreement

S-1

BANK OF AMERICA, N.A.,
as Administrative Agent
By:
	Name: Eyal Namordi
	Title: SVP - Real Estate Corporate Bank

Signature Page to Security Agreement

S-2

EXHIBIT 1

[Form of]

PLEDGE AMENDMENT

This Pledge Amendment, dated as of [                    ], is delivered pursuant to Section 5.1 of the Security Agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Security Agreement;” capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement), dated as of December 3, 2010, made  between SPT REAL ESTATE SUB II, LLC, a Delaware limited liability company (the “Pledgor”),  and BANK OF AMERICA, N.A., as administrative agent (in such capacity and together with any successors in such capacity, the “Administrative Agent”).  The undersigned hereby agrees that this Pledge Amendment may be attached to the Security Agreement and that the Certificated Securities, Uncertificated Securities, Securities Entitlements, Financial Assets, Investment Property and Instruments listed on this Pledge Amendment shall be deemed to be and shall become part of the Collateral and shall secure all Obligations.

[DESCRIBE COLLATERAL]

SPT REAL ESTATE SUB II, LLC, as Pledgor
By:
	Name: Andrew J. Sossen
	Title: Authorized Signatory

2

AGREED TO AND ACCEPTED:
BANK OF AMERICA, N.A.,
as Administrative Agent
By:
	Name: Eyal Namordi
	Title: SVP - Real Estate Corporate Bank

3

SCHEDULE 1

FILING LOCATIONS

Secretary of State for the State of Delaware

EX-31.1

Exhibit 31.1

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Barry S. Sternlicht, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Starwood Property Trust, Inc. for the period ended June 30, 2014;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2014	/s/ BARRY S. STERNLICHT
	Barry S. Sternlicht
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, Rina Paniry, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Starwood Property Trust, Inc. for the period ended June 30, 2014;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2014	/s/ RINA PANIRY
	Rina Paniry
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with Starwood Property Trust, Inc.’s (the “Company”) Quarterly Report on Form 10-Q for the period ended June 30, 2014 (the “Report”), I, Barry S. Sternlicht, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2014	/s/ BARRY S. STERNLICHT
	Barry S. Sternlicht
	Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with Starwood Property Trust, Inc.’s (the “Company”) Quarterly Report on Form 10-Q for the period ended June 30, 2014 (the “Report”), I, Rina Paniry, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 6, 2014	/s/ RINA PANIRY
	Rina Paniry
	Chief Financial Officer

XML

Loan Securitization/Sale Activities (Tables)

6 Months Ended

Jun. 30, 2014

Loan Securitization/Sale Activities

Summary of loans sold and loans transferred as secured borrowings by the Real Estate Lending segment net of expenses

The following table summarizes our loans sold and loans transferred as secured borrowings by the Lending Segment net of expenses (in thousands):

	Loan Transfers Accounted for as Sales				Loan Transfers Accounted for as Secured Borrowings
	Face Amount		Proceeds		Face Amount		Proceeds
For the three months ended June 30,
2014	$	56,975	$	56,124	$	—	$	—
2013	52,849		52,859		95,000		95,000
For the six months ended June 30,
2014	$	204,859	$	202,524	$	—	$	—
2013	97,380		97,490		95,000		95,000

XML

Investment Securities (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 item	Jun. 30, 2013	Dec. 31, 2013 item
Mortgage-Backed Securities Available-for-Sale
Investment securities	$ 902,424,000		$ 902,424,000		$ 935,107,000
Purchases	43,563,000	21,708,000	53,453,000	58,898,000
Sales	66,784,000	10,072,000	50,219,000	235,904,000
Principal collections	10,887,000	18,398,000	19,114,000	40,124,000
Number of CMBS classified as HTM			1		1
Before consolidation of securitization VIEs
Mortgage-Backed Securities Available-for-Sale
Investment securities	1,371,945,000		1,371,945,000		1,344,429,000
Mortgage-backed securities
Mortgage-Backed Securities Available-for-Sale
Purchase Amortized Cost	296,582,000		296,582,000		354,599,000
Credit OTTI	(10,322,000)		(10,322,000)		(11,134,000)
Recorded Amortized Cost	286,260,000		286,260,000		343,465,000
Non-Credit OTTI	(3,000)		(3,000)		(55,000)
Gross Unrealized Gains	62,102,000		62,102,000		68,813,000
Gross Unrealized Losses	(683,000)		(683,000)		(1,641,000)
Net Fair Value Adjustment	61,416,000		61,416,000		67,117,000
Fair Value	347,676,000		347,676,000		410,582,000
Description of variable rate basis			one-month LIBOR		one-month LIBOR
Effective variable rate basis (as a percent)	0.155%		0.155%		0.168%
RMBS, available-for-sale
Mortgage-Backed Securities Available-for-Sale
Investment securities	231,605,000		231,605,000		296,236,000
Purchases		20,090,000		20,090,000
Sales	53,236,000		62,546,000	12,712,000
Principal collections	10,466,000	15,771,000	18,285,000	32,638,000
Purchase Amortized Cost	193,084,000		193,084,000		253,912,000
Credit OTTI	(10,322,000)		(10,322,000)		(11,134,000)
Recorded Amortized Cost	182,762,000		182,762,000		242,778,000
Non-Credit OTTI	(3,000)		(3,000)		(55,000)
Gross Unrealized Gains	49,529,000		49,529,000		55,154,000
Gross Unrealized Losses	(683,000)		(683,000)		(1,641,000)
Net Fair Value Adjustment	48,843,000		48,843,000		53,458,000
Fair Value	231,605,000		231,605,000		296,236,000
Weighted Average Coupon (as a percent)	1.00%		1.00%		1.00%
WAL			7 years 4 months 24 days		6 years 9 months 18 days
Description of variable rate basis			LIBOR		LIBOR
Portion of securities with variable rate (as a percent)	84.30%		84.30%		86.50%
Variable rate, weighted average spread (as a percent)			0.44%		0.37%
Portion of securities with variable rate	195,400,000		195,400,000		256,100,000
Principal balance	312,280,000		312,280,000		414,020,000
Accretable yield	(90,876,000)		(90,876,000)		(101,046,000)
Non-accretable difference	(38,642,000)		(38,642,000)		(70,196,000)
Total discount	(129,518,000)		(129,518,000)		(171,242,000)
Amortized Cost	182,762,000		182,762,000		242,778,000
Credit deteriorated RMBS	240,800,000		240,800,000		320,400,000
Accretable yield related to credit deteriorated RMBS	73,500,000		73,500,000		78,300,000
Changes to accretable yield
Balance at the beginning of the period	99,622,000		101,046,000
Accretion of discount	(3,323,000)		(9,887,000)
Sales	(10,276,000)		(12,238,000)
OTTI			213,000
Transfer to/from non-accretable difference	4,853,000		11,742,000
Balance at the end of the period	90,876,000		90,876,000		101,046,000
Changes to non accretable difference
Balance at the beginning of the period	55,432,000		70,196,000
Principal write-downs	(509,000)		(875,000)
Sales	(11,428,000)		(18,937,000)
Transfer to/from non-accretable difference	(4,853,000)		(11,742,000)
Balance at the end of the period	38,642,000		38,642,000		70,196,000
RMBS, available-for-sale | Subsequent event
Mortgage-Backed Securities Available-for-Sale
Settlement received on sales of investment securities			44,400,000
Single-borrower CMBS, available-for-sale
Mortgage-Backed Securities Available-for-Sale
Investment securities	116,701,000		116,701,000		114,346,000
Sales				206,608,000
Principal collections	421,000	2,627,000	829,000	7,484,000
Purchase Amortized Cost	103,498,000		103,498,000		100,687,000
Recorded Amortized Cost	103,498,000		103,498,000		100,687,000
Gross Unrealized Gains	12,573,000		12,573,000		13,659,000
Net Fair Value Adjustment	12,573,000		12,573,000		13,659,000
Fair Value	116,071,000		116,071,000		114,346,000
Weighted Average Coupon (as a percent)	11.60%		11.60%		11.50%
WAL			3 years 8 months 12 days		5 years 10 months 24 days
Portion of securities with variable rate (as a percent)	0.70%		0.70%		1.20%
Portion of securities with variable rate	900,000		900,000		1,300,000
Principal balance	103,498,000		103,498,000		100,687,000
Amortized Cost	103,498,000		103,498,000		100,687,000
Single-borrower CMBS, available-for-sale | BB+
Mortgage-Backed Securities Available-for-Sale
Percentage of CMBS securities			99.30%		98.80%
CMBS, fair value option
Mortgage-Backed Securities Available-for-Sale
Investment securities	638,069,000		638,069,000		550,282,000
Purchases	43,563,000	1,618,000	53,453,000	1,618,000
Sales	13,548,000	10,072,000	32,032,000	10,072,000
Weighted Average Coupon (as a percent)	5.00%		5.00%		5.40%
WAL			5 years 3 months 18 days		4 years 4 months 24 days
CMBS, fair value option | VIE eliminations
Mortgage-Backed Securities Available-for-Sale
Investment securities	(469,521,000)		(469,521,000)		(409,322,000)
HTM Securities
Mortgage-Backed Securities Available-for-Sale
Investment securities	370,096,000		370,096,000		368,318,000
Purchases				37,190,000
Equity Security, fair value option
Mortgage-Backed Securities Available-for-Sale
Investment securities	16,104,000		16,104,000		15,247,000
Sales				$ 6,769,000

XML

Business and Organization (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended	0 Months Ended
	Jun. 30, 2014 item	Apr. 19, 2013 LNR	Jun. 30, 2014 LNR
Business and Organization
Number of reportable business segments	2
Acquisition of LNR Property LLC
Initial agreed upon purchase price		$ 859
Net purchase price		730
Cost of remaining net assets of acquiree purchased by an affiliate		194
Assets owned by TRS entities			$ 854.5

XML

Earnings per Share (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Continuing Operations:
Income from continuing operations attributable to STWD common stockholders	$ 117,868,000	$ 66,512,000	$ 240,020,000	$ 131,043,000
Less: Income attributable to unvested shares	(1,367,000)	(369,000)	(3,100,000)	(823,000)
Basic - Income from continuing operations	116,501,000	66,143,000	236,920,000	130,220,000
Discontinued Operations:
Loss from discontinued operations		(6,058,000)	(1,551,000)	(8,346,000)
Basic - Net income attributable to STWD common stockholders after allocation to participating securities	116,501,000	60,085,000	235,369,000	121,874,000
Continuing Operations:
Basic - Income from continuing operations attributable to STWD common stockholders	117,868,000	66,512,000	240,020,000	131,043,000
Less: Income attributable to unvested shares	(1,367,000)	(369,000)	(3,100,000)	(823,000)
Add: Undistributed earnings to unvested shares	128,000		480,000
Less: Undistributed earnings reallocated to unvested shares	(126,000)		(471,000)
Diluted - Income from continuing operations	116,503,000	66,143,000	236,929,000	130,220,000
Discontinued Operations:
Basic - Loss from discontinued operations		(6,058,000)	(1,551,000)	(8,346,000)
Diluted - Net income attributable to STWD common stockholders after allocation to participating securities	116,503,000	60,085,000	235,378,000	121,874,000
Number of Shares:
Basic - Average shares outstanding	218,751,000	162,448,000	207,203,000	149,037,000
Effect of dilutive securities - Convertible Notes	4,056,000		3,906,000
Effect of dilutive securities - Contingently Issuable Shares	85,000		85,000
Diluted (in shares)	222,892,000	162,448,000	211,194,000	149,037,000
Earnings Per Share Attributable to STWD Common Stockholders - Basic:
Income from continuing operations (in dollars per share)	$ 0.53	$ 0.41	$ 1.14	$ 0.87
Loss from discontinued operations (in dollars per share)		$ (0.04)	$ (0.01)	$ (0.05)
Net income (in dollars per share)	$ 0.53	$ 0.37	$ 1.13	$ 0.82
Earnings Per Share Attributable to STWD Common Stockholders - Diluted:
Income from continuing operations (in dollars per share)	$ 0.52	$ 0.41	$ 1.12	$ 0.87
Loss from discontinued operations (in dollars per share)		$ (0.04)	$ (0.01)	$ (0.05)
Net income (in dollars per share)	$ 0.52	$ 0.37	$ 1.11	$ 0.82
Restricted stock
Anti-dilutive shares
Number of anti-dilutive common shares excluded from the calculation of diluted income per share			2,600,000	900,000
Convertible Senior Notes
Anti-dilutive shares
Number of anti-dilutive common shares excluded from the calculation of diluted income per share	44,600,000		44,800,000
Potential shares of common stock contingently issuable upon conversion of the Convertible Notes			48,700,000
2018 Notes
Anti-dilutive shares
Amount by which if-converted value of the Notes exceed principal amount			36,700,000
2019 Notes
Anti-dilutive shares
Amount by which if-converted value of the Notes exceed principal amount			$ 59,900,000

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Investment Securities (Details 2) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Estimated Fair Value
Securities with a loss less than 12 months	$ 16,255,000		$ 16,255,000		$ 26,344,000
Securities with a loss greater than 12 months	1,552,000		1,552,000		1,809,000
Unrealized Losses
Securities with a loss less than 12 months	(480,000)		(480,000)		(1,444,000)
Securities with a loss greater than 12 months	(206,000)		(206,000)		(252,000)
Investment securities	902,424,000		902,424,000		935,107,000
Mortgage-backed securities
Unrealized Losses
Number of securities with unrealized loss position	3		3
RMBS
Mortgage-Backed Securities Available-for-Sale
Maximum investment in available-for-sale securities with aggregate expected modified durations of less than 12 months (as a percent)			10.00%
Cost of third party management	500,000	800,000	1,100,000	1,400,000
Estimated Fair Value
Securities with a loss less than 12 months	16,255,000		16,255,000		26,344,000
Securities with a loss greater than 12 months	1,552,000		1,552,000		1,809,000
Unrealized Losses
Securities with a loss less than 12 months	(480,000)		(480,000)		(1,444,000)
Securities with a loss greater than 12 months	(206,000)		(206,000)		(252,000)
Weighted Average Coupon (as a percent)	1.00%		1.00%		1.00%
WAL			7 years 4 months 24 days		6 years 9 months 18 days
Investment securities	231,605,000		231,605,000		296,236,000
CMBS, fair value option
Unrealized Losses
Unpaid Principal Balance of investment securities before consolidation of VIEs	4,100,000,000		4,100,000,000
Purchases in which fair value option was elected	107,100,000		151,700,000
Purchase amount reflected as repayment of debt of consolidated VIEs	63,500,000		98,300,000
Weighted Average Coupon (as a percent)	5.00%		5.00%		5.40%
WAL			5 years 3 months 18 days		4 years 4 months 24 days
Amount not rated	27,300,000		27,300,000		55,500,000
Investment securities	638,069,000		638,069,000		550,282,000
HTM Securities
Unrealized Losses
Investment securities	$ 370,096,000		$ 370,096,000		$ 368,318,000

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Current
Federal	$ 5,484	$ 9,481	$ 10,624	$ 9,931
Foreign	1,782	570	3,231	570
State	929	1,534	1,799	1,861
Total current	8,195	11,585	15,654	12,362
Deferred
Federal	(2,344)	63	(3,048)	63
Foreign	(1,192)	(465)	(2,198)	(465)
State	(382)	10	(511)	10
Total deferred	(3,918)	(392)	(5,757)	(392)
Total income tax provision	4,277	11,193	9,897	11,970
Income tax benefit reflected in discontinued operations	0	(150)	0	12
Deferred tax assets and liabilities
Net deferred tax assets	10,338		10,338		4,860
U.S.
Deferred tax assets and liabilities
Reserves and accruals	11,506		11,506		11,454
Domestic intangible assets	3,673		3,673		(714)
Investment securities and loans	(2,303)		(2,303)		(892)
Investment in unconsolidated entities	1,901		1,901		1,811
Deferred income	360		360		59
Net operating and capital loss carryforwards	1,379		1,379		967
Valuation allowance	(1,379)		(1,379)		(799)
Other temporary differences	(202)		(202)		(242)
Net deferred tax assets	14,935		14,935		11,644
Europe
Deferred tax assets and liabilities
European servicing rights	(4,224)		(4,224)		(6,257)
Net operating and capital loss carryforwards	11,064		11,064		10,951
Valuation allowance	(11,064)		(11,064)		(10,951)
Other temporary differences	(373)		(373)		(527)
Net deferred tax liabilities	$ (4,597)		$ (4,597)		$ (6,784)

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2014

Income Taxes

Schedule of income tax provision

Our income tax provision consisted of the following for the three and six months ended June 30, 2014 and 2013 (in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Current
Federal	$	5,484		$	9,481		$	10,624		$	9,931
Foreign	1,782			570			3,231			570
State	929			1,534			1,799			1,861
Total current	8,195			11,585			15,654			12,362
Deferred
Federal	(2,344		)	63			(3,048		)	63
Foreign	(1,192		)	(465		)	(2,198		)	(465		)
State	(382		)	10			(511		)	10
Total deferred	(3,918		)	(392		)	(5,757		)	(392		)
Total income tax provision (1)	$	4,277		$	11,193		$	9,897		$	11,970

(1) Includes (benefit) provision of $0 and $(150) thousand reflected in discontinued operations for the three months ended June 30, 2014 and 2013, respectively, and $0 and $12 thousand reflected in discontinued operators for the six months ended June 30, 2014 and 2013, respectively.

Schedule of tax jurisdictions and the tax effects of temporary differences on their respective net deferred tax assets and liabilities

The following table presents each of these tax jurisdictions and the tax effects of temporary differences on their respective net deferred tax assets and liabilities (in thousands):

	June 30, 2014			December 31, 2013
U.S.
Deferred tax asset, net
Reserves and accruals	$	11,506		$	11,454
Domestic intangible assets	3,673			(714		)
Investment securities and loans	(2,303		)	(892		)
Investment in unconsolidated entities	1,901			1,811
Deferred income	360			59
Net operating and capital loss carryforwards	1,379			967
Valuation allowance	(1,379		)	(799		)
Other U.S. temporary differences	(202		)	(242		)
	14,935			11,644
Europe
Deferred tax liability, net
European servicing rights	(4,224		)	(6,257		)
Net operating and capital loss carryforwards	11,064			10,951
Valuation allowance	(11,064		)	(10,951		)
Other European temporary differences	(373		)	(527		)
	(4,597		)	(6,784		)
Net deferred tax assets	$	10,338		$	4,860

Schedule of reconciliation of federal income tax determined using statutory federal tax rate to reported income tax provision

The following table is a reconciliation of our federal income tax determined using our statutory federal tax rate to our reported income tax provision for the three and six months ended June 30, 2014 and 2013 (dollar amounts in thousands):

	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2014					2013					2014					2013
Federal statutory tax rate	$	43,631		35.0	%	$	25,446		35.0	%	$	87,906		35.0	%	$	47,917		35.0	%
REIT and other non-taxable income	(38,989		)	(31.3	)%	(15,516		)	(21.3	)%	(79,372		)	(31.7	)%	(37,308		)	(27.3	)%
State income taxes	753			0.6	%	1,592			2.2	%	1,203			0.5	%	1,592			1.2	%
Federal benefit of state tax deduction	(263		)	(0.2	)%	(557		)	(0.8	)%	(421		)	(0.2	)%	(557		)	(0.4	)%
Valuation allowance	(1,100		)	(0.9	)%	—			—	%	412			0.2	%	—			—	%
Other	245			0.2	%	228			0.3	%	169			0.1	%	326			0.2	%
Effective tax rate	$	4,277		3.4	%	$	11,193		15.4	%	$	9,897		3.9	%	$	11,970		8.7	%

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Loans (Tables)

6 Months Ended

Jun. 30, 2014

Loans

Schedule of investments in mortgages and loans by subordination class

The following tables summarize our investments in mortgages and loans by subordination class as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Carrying Value			Face Amount		Weighted Average Coupon		Weighted Average Life (“WAL”) (years)(2)
June 30, 2014
First mortgages	$	3,259,428		$	3,317,358	5.4	%	3.9
Subordinated mortgages(1)	355,561			388,449		8.6	%	4.1
Mezzanine loans	1,275,207			1,281,518		10.6	%	3.3
Total loans held-for-investment	4,890,196			4,987,325
Loans held-for-sale, fair value option elected	154,412			153,724		4.7	%	9.8
Loans transferred as secured borrowings	142,867			142,883		5.5	%	2.8
Total gross loans	5,187,475			5,283,932
Loan loss allowance (loans held-for-investment)	(4,342		)	—
Total net loans	$	5,183,133		$	5,283,932
December 31, 2013
First mortgages	$	2,714,512		$	2,766,217	5.5	%	4.3
Subordinated mortgages(1)	407,462			442,475		9.7	%	4.2
Mezzanine loans	1,245,728			1,246,841		11.7	%	3.5
Total loans held-for-investment	4,367,702			4,455,533
Loans held-for-sale, fair value option elected	206,672			209,099		5.3	%	9.6
Loans transferred as secured borrowings	180,414			180,483		5.4	%	2.9
Total gross loans	4,754,788			4,845,115
Loan loss allowance (loans held-for-investment)	(3,984		)	—
Total net loans	$	4,750,804		$	4,845,115

(1) Subordinated mortgages include B-notes and junior participations in first mortgages where we do not own the senior A-note or senior participation.  If we own both the A-note and B-note we categorize the loan as a first mortgage loan.

(2) Represents the WAL of each respective group of loans as of the respective balance sheet date. The WAL of each individual loan is calculated as a fraction, the numerator of which is the sum of the timing (in years) of each expected future principal payment multiplied by the balance of the respective payment, and with a denominator equal to the sum of the expected principal payments using the contractually extended maturity dates of the assets. Assumptions for the calculation of the WAL are adjusted as necessary for changes in projected principal repayments and/or maturity dates of the loan.

Schedule of investments in floating rate loans

As of June 30, 2014, approximately $3.9 billion, or 74.8%, of the loans were variable rate and paid interest principally at LIBOR plus a weighted-average spread of 5.65%. The following table summarizes our investments in floating rate loans (amounts in thousands):

	June 30, 2014			December 31, 2013
Index	Base Rate	Carrying Value		Base Rate	Carrying Value
1 Month LIBOR	0.1552%	$	137,092	0.1677%	$	150,076
3 Month LIBOR	0.5525%	406,392		0.5253%	392,950
LIBOR Floor	0.15% - 3.00%(1)	3,333,849		0.19% - 3.00%(1)	2,688,308
Total		$	3,877,333		$	3,231,334

(1) The weighted-average LIBOR Floor was 0.36% and 0.49% as of June 30, 2014 and December 31, 2013, respectively.

Schedule of risk ratings by class of loan

As of June 30, 2014, the risk ratings for loans subject to our rating system, which are described in our Form 10-K and excludes loans on the cost recovery method and loans for which the fair value option has been elected, by class of loan were as follows (amounts in thousands):

	Balance Sheet Classification
	Loans Held-For-Investment										Loans
Risk Rating Category	First Mortgages		Subordinated Mortgages		Mezzanine Loans		Cost Recovery Loans		Loans Held- For-Sale		Transferred As Secured Borrowings		Total
1	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	101,875		104,821		209,690		—		—		12,971		429,357
3	3,010,516		218,685		950,268		—		—		129,896		4,309,365
4	142,166		32,055		115,249		—		—		—		289,470
5	—		—		—		—		—		—		—
N/A	455		—		—		4,416		154,412		—		159,283
	$	3,255,012	$	355,561	$	1,275,207	$	4,416	$	154,412	$	142,867	$	5,187,475

As of December 31, 2013, the risk ratings for loans subject to our rating system by class of loan were as follows (amounts in thousands):

	Balance Sheet Classification
	Loans Held-For-Investment										Loans
Risk Rating Category	First Mortgages		Subordinated Mortgages		Mezzanine Loans		Cost Recovery Loans		Loans Held- For-Sale		Transferred As Secured Borrowings		Total
1	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	94,981		103,369		153,119		—		—		13,022		364,491
3	2,452,763		272,375		1,012,674		—		—		167,392		3,905,204
4	153,987		31,718		79,935		—		—		—		265,640
5	—		—		—		—		—		—		—
N/A	—		—		—		12,781		206,672		—		219,453
	$	2,701,731	$	407,462	$	1,245,728	$	12,781	$	206,672	$	180,414	$	4,754,788

Schedule of activity in allowance for loan losses

The following table presents the activity in our allowance for loan losses (amounts in thousands):

	For the Six Months EndedJune 30,
	2014			2013
Allowance for loan losses at January 1	$	3,984		$	2,061
Provision for loan losses	577			755
Charge-offs	—			—
Recoveries	(219		)	—
Allowance for loan losses at June 30	$	4,342		$	2,816
Recorded investment in loans related to the allowance for loan loss	$	289,470		$	160,893

Schedule of activity in loan portfolio

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

	For the Six Months EndedJune 30,
	2014			2013
Balance at January 1	$	4,750,804		$	3,000,335
Acquisitions/originations/additional funding	1,860,026			1,308,602
Capitalized interest(1)	19,022			5,279
Basis of loans sold(2)	(868,804		)	(573,825		)
Loan maturities/principal repayments	(633,425		)	(140,596		)
Discount accretion/premium amortization	10,147			14,243
Changes in fair value	32,501			458
Unrealized foreign currency remeasurement gain (loss)	16,462			(4,572		)
Capitalized costs written off	—			(1,517		)
Loan loss allowance, net	(358		)	(755		)
Transfer to other assets	(3,242		)	—
Balance at June 30	$	5,183,133		$	3,607,652

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

(2) See Note 10 for additional disclosure on these transactions.

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Income Taxes (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Reconciliation of statutory tax to effective tax
Federal statutory tax rate	$ 43,631	$ 25,446	$ 87,906	$ 47,917
REIT and other non-taxable income	(38,989)	(15,516)	(79,372)	(37,308)
State income taxes	753	1,592	1,203	1,592
Federal benefit of state tax deduction	(263)	(557)	(421)	(557)
Valuation allowance	(1,100)		412
Other	245	228	169	326
Total income tax provision	$ 4,277	$ 11,193	$ 9,897	$ 11,970
Reconciliation of statutory tax rate to effective tax rate
Federal statutory tax rate (as a percent)	35.00%	35.00%	35.00%	35.00%
REIT and other non-taxable income (as a percent)	(31.30%)	(21.30%)	(31.70%)	(27.30%)
State income taxes (as a percent)	0.60%	2.20%	0.50%	1.20%
Federal benefit of state tax deduction (as a percent)	(0.20%)	(0.80%)	(0.20%)	(0.40%)
Valuation allowance (as a percent)	(0.90%)		0.20%
Other (as a percent)	0.20%	0.30%	0.10%	0.20%
Effective tax rate (as a percent)	3.40%	15.40%	3.90%	8.70%

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Fair Value (Details) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Assets and liabilities measured at fair value
Marketable securities	$ 902,424,000	$ 902,424,000	$ 935,107,000
Intangible assets - servicing rights at fair value	138,318,000	138,318,000	150,149,000
Derivative assets	4,681,000	4,681,000	7,769,000
VIE Assets	114,091,158,000	114,091,158,000	103,151,624,000
Derivative liabilities	26,294,000	26,294,000	24,192,000
VIE Liabilities	113,541,151,000	113,541,151,000	102,649,263,000
RMBS
Assets and liabilities measured at fair value
Marketable securities	231,605,000	231,605,000	296,236,000
CMBS
Assets and liabilities measured at fair value
Marketable securities	116,701,000	116,701,000	114,346,000
Transfer of investment from Level II to Level III	5,500,000	52,800,000
Equity Securities
Assets and liabilities measured at fair value
Marketable securities	16,104,000	16,104,000	15,247,000
Fair value measurements on recurring basis | Total fair value
Assets and liabilities measured at fair value
Loans held-for-sale, fair value option	154,412,000	154,412,000	206,672,000
Derivative assets	4,681,000	4,681,000	7,769,000
VIE Assets	114,091,158,000	114,091,158,000	103,151,624,000
Total	114,920,897,000	114,920,897,000	104,083,003,000
Derivative liabilities	26,294,000	26,294,000	24,192,000
VIE Liabilities	113,541,151,000	113,541,151,000	102,649,263,000
Total	113,567,445,000	113,567,445,000	102,673,455,000
Fair value measurements on recurring basis | Total fair value | Domestic Servicing Rights
Assets and liabilities measured at fair value
Intangible assets - servicing rights at fair value	138,318,000	138,318,000	150,149,000
Fair value measurements on recurring basis | Total fair value | RMBS
Assets and liabilities measured at fair value
Available-for-sale securities	231,605,000	231,605,000	296,236,000
Fair value measurements on recurring basis | Total fair value | CMBS
Assets and liabilities measured at fair value
Available-for-sale securities	284,619,000	284,619,000	255,306,000
Fair value measurements on recurring basis | Total fair value | Equity Securities
Assets and liabilities measured at fair value
Marketable securities	16,104,000	16,104,000	15,247,000
Fair value measurements on recurring basis | Level I
Assets and liabilities measured at fair value
Total	16,104,000	16,104,000	15,247,000
Fair value measurements on recurring basis | Level I | Equity Securities
Assets and liabilities measured at fair value
Marketable securities	16,104,000	16,104,000	15,247,000
Fair value measurements on recurring basis | Level II
Assets and liabilities measured at fair value
Derivative assets	4,681,000	4,681,000	7,769,000
Total	6,939,000	6,939,000	55,069,000
Derivative liabilities	26,294,000	26,294,000	24,192,000
VIE Liabilities	108,355,026,000	108,355,026,000	101,051,279,000
Total	108,381,320,000	108,381,320,000	101,075,471,000
Fair value measurements on recurring basis | Level II | CMBS
Assets and liabilities measured at fair value
Available-for-sale securities	2,258,000	2,258,000	47,300,000
Fair value measurements on recurring basis | Level III
Assets and liabilities measured at fair value
Loans held-for-sale, fair value option	154,412,000	154,412,000	206,672,000
VIE Assets	114,091,158,000	114,091,158,000	103,151,624,000
Total	114,897,854,000	114,897,854,000	104,012,687,000
VIE Liabilities	5,186,125,000	5,186,125,000	1,597,984,000
Total	5,186,125,000	5,186,125,000	1,597,984,000
Fair value measurements on recurring basis | Level III | Domestic Servicing Rights
Assets and liabilities measured at fair value
Intangible assets - servicing rights at fair value	138,318,000	138,318,000	150,149,000
Fair value measurements on recurring basis | Level III | RMBS
Assets and liabilities measured at fair value
Available-for-sale securities	231,605,000	231,605,000	296,236,000
Fair value measurements on recurring basis | Level III | CMBS
Assets and liabilities measured at fair value
Available-for-sale securities	$ 282,361,000	$ 282,361,000	$ 208,006,000

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Investment Securities (Details 4) (SEREF, USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Jun. 30, 2014	Dec. 31, 2013
SEREF
Residential Real Estate
Number of shares acquired	9,140,000
Ownership percentage	4.00%
Fair value of investment		$ 16.1	$ 15.2

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Fair Value (Details 4) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Carrying Value	$ 121,363,503	$ 110,770,575
Recurring basis | Level III | Loans held-for-sale, fair value option | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Carrying Value	154,412
Recurring basis | Level III | Loans held-for-sale, fair value option | Discounted cash flow | Minimum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Yield (as a percent)	4.50%	5.20%
Duration	5 years	5 years
Recurring basis | Level III | Loans held-for-sale, fair value option | Discounted cash flow | Maximum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Yield (as a percent)	5.20%	5.90%
Duration	10 years	10 years
Recurring basis | Level III | RMBS | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Carrying Value	231,605
Portfolio percentage	85.00%	90.00%
Recurring basis | Level III | RMBS | Discounted cash flow | Minimum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Constant prepayment rate (as a percent)	0.30%	(0.60%)
Constant default rate (as a percent)	1.50%	1.40%
Loss severity (as a percent)	12.00%	15.00%
Delinquency rate (as a percent)	3.00%	3.00%
Servicer advances (as a percent)	23.00%	24.00%
Annual coupon deterioration (as a percent)	0.00%	0.00%
Putback amount per projected total collateral loss (as a percent)	0.00%	0.00%
Loss severity for specified percentage of portfolio (as a percent)	45.00%	45.00%
Recurring basis | Level III | RMBS | Discounted cash flow | Maximum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Constant prepayment rate (as a percent)	16.80%	16.60%
Constant default rate (as a percent)	9.50%	11.30%
Loss severity (as a percent)	81.00%	92.00%
Delinquency rate (as a percent)	32.00%	48.00%
Servicer advances (as a percent)	96.00%	95.00%
Annual coupon deterioration (as a percent)	0.80%	0.70%
Putback amount per projected total collateral loss (as a percent)	11.00%	9.00%
Loss severity for specified percentage of portfolio (as a percent)	80.00%	80.00%
Recurring basis | Level III | CMBS | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Carrying Value	282,361
Recurring basis | Level III | CMBS | Discounted cash flow | Minimum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Yield (as a percent)	0.00%	0.00%
Duration	0 years	0 years
Recurring basis | Level III | CMBS | Discounted cash flow | Maximum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Yield (as a percent)	527.90%	890.00%
Duration	11 years 6 months	11 years
Recurring basis | Level III | Domestic Servicing Rights | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Carrying Value	138,318
Yield (as a percent)	8.75%	8.75%
Discount rates (as a percent)	15.00%	15.00%
Recurring basis | Level III | Domestic Servicing Rights | Discounted cash flow | Minimum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Control migration (as a percent)	0.00%	0.00%
Recurring basis | Level III | Domestic Servicing Rights | Discounted cash flow | Maximum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Control migration (as a percent)	80.00%	80.00%
Recurring basis | Level III | VIE Assets | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Carrying Value	$ 114,091,158
Recurring basis | Level III | VIE Assets | Discounted cash flow | Minimum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Yield (as a percent)	0.00%	0.00%
Duration	0 years	0 years
Recurring basis | Level III | VIE Assets | Discounted cash flow | Maximum
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Yield (as a percent)	912.20%	952.30%
Duration	21 years 10 months 24 days	22 years 8 months 12 days

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Segment Data (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Interest income from loans	$ 105,455	$ 74,936	$ 210,365	$ 142,626
Interest income from investment securities	27,620	18,577	57,074	34,817
Servicing fees	32,681	39,135	66,892	39,135
Other revenues	4,994	1,795	8,398	1,874
Total revenues	170,750	134,443	342,729	218,452
Costs and expenses:
Management fees	25,085	16,146	52,906	31,215
Interest expense	37,695	22,648	75,526	40,074
General and administrative	43,094	44,335	89,195	48,373
Business combination costs		13,420		17,616
Acquisition and investment pursuit costs	771	916	1,165	997
Depreciation and amortization	5,154	2,228	9,790	2,228
Loan loss allowance, net	(139)	725	358	755
Other expense	6,026	196	7,715	229
Total costs and expenses	117,686	100,614	236,655	141,487
Income before other income, income taxes and non controlling interests	53,064	33,829	106,074	76,965
Other income:
Income of consolidated VIEs, net	47,028	31,949	103,032	31,949
Change in fair value of servicing rights	(5,523)	2,898	(10,774)	2,898
Change in fair value of investment securities, net	4,959	(1,392)	13,320	(987)
Change in fair value of mortgage loans held-for-sale, net	11,608	458	32,501	458
Earnings from unconsolidated entities	9,563	3,770	9,627	4,511
Gain (loss) on sale of investments, net	10,078	(18)	11,633	13,506
(Loss) gain on derivative financial instruments, net	(9,790)	6,158	(17,656)	22,386
Foreign currency gain (loss), net	3,777	1,580	5,254	(6,085)
OTTI	(797)	(359)	(1,010)	(401)
Other income, net	692	39	710	39
Total other income	71,595	45,083	146,637	68,274
Income from continuing operations before income taxes	124,659	78,912	252,711	145,239
Income tax provision	(4,277)	(11,343)	(9,897)	(11,958)
Income from continuing operations	120,382	67,569	242,814	133,281
Loss from discontinued operations, net of tax		(6,058)	(1,551)	(8,346)
Net income	120,382	61,511	241,263	124,935
Net income attributable to non-controlling interests	(2,514)	(1,057)	(2,794)	(2,238)
Net income attributable to Starwood Property Trust, Inc.	117,868	60,454	238,469	122,697
Operating segment
Revenues:
Interest income from loans	105,455	74,936	210,365	142,626
Interest income from investment securities	45,259	25,396	86,556	41,636
Servicing fees	57,987	52,860	114,209	52,860
Other revenues	5,344	2,068	9,021	2,147
Total revenues	214,045	155,260	420,151	239,269
Costs and expenses:
Management fees	25,045	16,128	52,828	31,197
Interest expense	37,695	22,648	75,526	40,074
General and administrative	42,913	44,188	88,828	48,226
Business combination costs		13,420		17,616
Acquisition and investment pursuit costs	771	916	1,165	997
Depreciation and amortization	5,154	2,228	9,790	2,228
Loan loss allowance, net	(139)	725	358	755
Other expense	6,026	196	7,715	229
Total costs and expenses	117,465	100,449	236,210	141,322
Income before other income, income taxes and non controlling interests	96,580	54,811	183,941	97,947
Other income:
Change in fair value of servicing rights	(12,804)	6,114	(24,979)	6,114
Change in fair value of investment securities, net	17,155	6,057	53,951	6,462
Change in fair value of mortgage loans held-for-sale, net	11,608	458	32,501	458
Earnings from unconsolidated entities	8,651	3,966	8,808	4,707
Gain (loss) on sale of investments, net	10,078	(18)	11,633	13,506
(Loss) gain on derivative financial instruments, net	(9,790)	6,158	(17,656)	22,386
Foreign currency gain (loss), net	3,777	1,580	5,254	(6,085)
OTTI	(797)	(359)	(1,010)	(401)
Other income, net	692	39	710	39
Total other income	28,570	23,995	69,212	47,186
Income from continuing operations before income taxes	125,150	78,806	253,153	145,133
Income tax provision	(4,277)	(11,343)	(9,897)	(11,958)
Income from continuing operations	120,873	67,463	243,256	133,175
Loss from discontinued operations, net of tax		(6,058)	(1,551)	(8,346)
Net income	120,873	61,405	241,705	124,829
Net income attributable to non-controlling interests	(3,005)	(951)	(3,236)	(2,132)
Net income attributable to Starwood Property Trust, Inc.	117,868	60,454	238,469	122,697
Operating segment | Real Estate Investment Lending
Revenues:
Interest income from loans	102,892	72,676	204,979	140,366
Interest income from investment securities	15,178	13,638	33,467	29,878
Servicing fees	153		190
Other revenues	108	96	188	175
Total revenues	118,331	86,410	238,824	170,419
Costs and expenses:
Management fees	20,423	13,854	41,778	28,923
Interest expense	31,557	19,941	62,811	37,367
General and administrative	7,921	3,615	15,066	7,653
Business combination costs		13,420		17,616
Acquisition and investment pursuit costs	523	525	735	606
Loan loss allowance, net	(139)	725	358	755
Other expense	66	58	52	91
Total costs and expenses	60,351	52,138	120,800	93,011
Income before other income, income taxes and non controlling interests	57,980	34,272	118,024	77,408
Other income:
Change in fair value of investment securities, net	861	(331)	705	74
Earnings from unconsolidated entities	3,432	1,851	4,972	2,592
Gain (loss) on sale of investments, net	10,078	(18)	11,633	13,506
(Loss) gain on derivative financial instruments, net	(7,610)	(2,001)	(10,398)	14,227
Foreign currency gain (loss), net	4,082	1,647	5,643	(6,018)
OTTI		(359)	(213)	(401)
Other income, net	35		53
Total other income	10,878	789	12,395	23,980
Income from continuing operations before income taxes	68,858	35,061	130,419	101,388
Income tax provision	(443)	(411)	(526)	(1,026)
Income from continuing operations	68,415	34,650	129,893	100,362
Net income	68,415	34,650	129,893	100,362
Net income attributable to non-controlling interests	(3,005)	(951)	(3,236)	(2,132)
Net income attributable to Starwood Property Trust, Inc.	65,410	33,699	126,657	98,230
Operating segment | LNR
Revenues:
Interest income from loans	2,563	2,260	5,386	2,260
Interest income from investment securities	30,081	11,758	53,089	11,758
Servicing fees	57,834	52,860	114,019	52,860
Other revenues	5,236	1,972	8,833	1,972
Total revenues	95,714	68,850	181,327	68,850
Costs and expenses:
Management fees	4,622	2,274	10,259	2,274
Interest expense	6,138	2,707	11,624	2,707
General and administrative	34,992	40,573	73,762	40,573
Acquisition and investment pursuit costs	248	391	430	391
Depreciation and amortization	5,154	2,228	9,790	2,228
Other expense	5,960	138	7,663	138
Total costs and expenses	57,114	48,311	113,528	48,311
Income before other income, income taxes and non controlling interests	38,600	20,539	67,799	20,539
Other income:
Change in fair value of servicing rights	(12,804)	6,114	(24,979)	6,114
Change in fair value of investment securities, net	16,294	6,388	53,246	6,388
Change in fair value of mortgage loans held-for-sale, net	11,608	458	32,501	458
Earnings from unconsolidated entities	5,219	2,115	3,836	2,115
(Loss) gain on derivative financial instruments, net	(2,180)	8,159	(7,258)	8,159
Foreign currency gain (loss), net	(305)	(67)	(389)	(67)
OTTI	(797)		(797)
Other income, net	657	39	657	39
Total other income	17,692	23,206	56,817	23,206
Income from continuing operations before income taxes	56,292	43,745	124,616	43,745
Income tax provision	(3,834)	(10,932)	(9,371)	(10,932)
Income from continuing operations	52,458	32,813	115,245	32,813
Net income	52,458	32,813	115,245	32,813
Net income attributable to Starwood Property Trust, Inc.	52,458	32,813	115,245	32,813
Operating segment | Single Family Residential
Costs and expenses:
Management fees			791
Interest expense			1,091
Total costs and expenses			1,882
Income before other income, income taxes and non controlling interests			(1,882)
Other income:
Income from continuing operations before income taxes			(1,882)
Income from continuing operations			(1,882)
Loss from discontinued operations, net of tax		(6,058)	(1,551)	(8,346)
Net income		(6,058)	(3,433)	(8,346)
Net income attributable to Starwood Property Trust, Inc.		(6,058)	(3,433)	(8,346)
LNR VIEs
Revenues:
Interest income from investment securities	(17,639)	(6,819)	(29,482)	(6,819)
Servicing fees	(25,306)	(13,725)	(47,317)	(13,725)
Other revenues	(350)	(273)	(623)	(273)
Total revenues	(43,295)	(20,817)	(77,422)	(20,817)
Costs and expenses:
Management fees	40	18	78	18
General and administrative	181	147	367	147
Total costs and expenses	221	165	445	165
Income before other income, income taxes and non controlling interests	(43,516)	(20,982)	(77,867)	(20,982)
Other income:
Income of consolidated VIEs, net	47,028	31,949	103,032	31,949
Change in fair value of servicing rights	7,281	(3,216)	14,205	(3,216)
Change in fair value of investment securities, net	(12,196)	(7,449)	(40,631)	(7,449)
Earnings from unconsolidated entities	912	(196)	819	(196)
Total other income	43,025	21,088	77,425	21,088
Income from continuing operations before income taxes	(491)	106	(442)	106
Income from continuing operations	(491)	106	(442)	106
Net income	(491)	106	(442)	106
Net income attributable to non-controlling interests	$ 491	$ (106)	$ 442	$ (106)

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Fair Value (Details 5) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Quantitative information for Level 3 Fair Value Measurements Liabilities
Carrying Value	$ 117,548,670	$ 106,443,442
Recurring basis | Level III | VIE liabilities | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements Liabilities
Carrying Value	$ 5,186,125
Recurring basis | Level III | VIE liabilities | Discounted cash flow | Minimum
Quantitative information for Level 3 Fair Value Measurements Liabilities
Yield (as a percent)	0.00%	0.00%
Duration	0 years	0 years
Recurring basis | Level III | VIE liabilities | Discounted cash flow | Maximum
Quantitative information for Level 3 Fair Value Measurements Liabilities
Yield (as a percent)	912.20%	952.30%
Duration	21 years 10 months 24 days	22 years 8 months 12 days

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accumulated Other Comprehensive Income
Beginning balance	$ 80,115	$ 70,544	$ 75,449	$ 79,675
OCI before reclassifications	6,386	(10,307)	10,462	(5,580)
Amounts reclassified from AOCI	(11,539)	48	(10,949)	(13,810)
Net period OCI	(5,153)	(10,259)	(487)	(19,390)
Ending balance	74,962	60,285	74,962	60,285
Effective Portion of Cumulative Loss on Cash Flow Hedges
Accumulated Other Comprehensive Income
Beginning balance	(482)	(2,292)	(604)	(2,571)
OCI before reclassifications	(457)	1,094	(708)	926
Amounts reclassified from AOCI	364	407	737	854
Net period OCI	(93)	1,501	29	1,780
Ending balance	(575)	(791)	(575)	(791)
Cumulative Unrealized Gain (Loss) on Available-for-Sale Securities
Accumulated Other Comprehensive Income
Beginning balance	70,064	79,897	66,566	82,246
OCI before reclassifications	2,285	(11,419)	5,566	537
Amounts reclassified from AOCI	(11,903)	(359)	(11,686)	(14,664)
Net period OCI	(9,618)	(11,778)	(6,120)	(14,127)
Ending balance	60,446	68,119	60,446	68,119
Foreign Currency Translation
Accumulated Other Comprehensive Income
Beginning balance	10,533	(7,061)	9,487
OCI before reclassifications	4,558	18	5,604	(7,043)
Net period OCI	4,558	18	5,604	(7,043)
Ending balance	$ 15,091	$ (7,043)	$ 15,091	$ (7,043)

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

17. Accumulated Other Comprehensive Income

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

	Effective Portion of Cumulative Loss on Cash Flow Hedges			Cumulative Unrealized Gain (Loss) on Available-for- Sale Securities			Foreign Currency Translation			Total
Three Months ended June 30, 2014
Balance at March 31, 2014	$	(482	)	$	70,064		$	10,533		$	80,115
OCI before reclassifications	(457		)	2,285			4,558			6,386
Amounts reclassified from AOCI	364			(11,903		)	—			(11,539		)
Net period OCI	(93		)	(9,618		)	4,558			(5,153		)
Balance at June 30, 2014	$	(575	)	$	60,446		$	15,091		$	74,962
Three Months ended June 30, 2013
Balance at March 31, 2013	$	(2,292	)	$	79,897		$	(7,061	)	$	70,544
OCI before reclassifications	1,094			(11,419		)	18			(10,307		)
Amounts reclassified from AOCI	407			(359		)	—			48
Net period OCI	1,501			(11,778		)	18			(10,259		)
Balance at June 30, 2013	$	(791	)	$	68,119		$	(7,043	)	$	60,285

	Effective Portion of Cumulative Loss on Cash Flow Hedges			Cumulative Unrealized Gain (Loss) on Available-for- Sale Securities			Foreign Currency Translation			Total
Six Months ended June 30, 2014
Balance at January 1, 2014	$	(604	)	$	66,566		$	9,487		$	75,449
OCI before reclassifications	(708		)	5,566			5,604			10,462
Amounts reclassified from AOCI	737			(11,686		)	—			(10,949		)
Net period OCI	29			(6,120		)	5,604			(487		)
Balance at June 30, 2014	$	(575	)	$	60,446		$	15,091		$	74,962
Six Months ended June 30, 2013
Balance at January 1, 2013	$	(2,571	)	$	82,246		$	—		$	79,675
OCI before reclassifications	926			537			(7,043		)	(5,580		)
Amounts reclassified from AOCI	854			(14,664		)	—			(13,810		)
Net period OCI	1,780			(14,127		)	(7,043		)	(19,390		)
Balance at June 30, 2013	$	(791	)	$	68,119		$	(7,043	)	$	60,285

The reclassifications out of AOCI impacted the condensed consolidated statements of operations for the three and six months ended June 30, 2014 and 2013 as follows:

	Amounts Reclassified from AOCI during the Three Months Ended June 30,						Amounts Reclassified from AOCI during the Six Months Ended June 30,						Affected Line Item
Details about AOCI Components	2014			2013			2014			2013			in the Statements
Losses on cash flow hedges:
Interest rate contracts	$	(364	)	$	(407	)	$	(737	)	$	(854	)	Interest expense
Unrealized gains on available for sale securities:
Net realized gain on sale of investments	11,903			718			11,899			15,065			Gain (loss) on sale of investments, net
OTTI	—			(359		)	(213		)	(401		)	OTTI
Total	11,903			359			11,686			14,664
Total reclassifications for the period	$	11,539		$	(48	)	$	10,949		$	13,810

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Summary of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Proceeds from sale of loans held-for-sale			$ 666,793	$ 476,453
Earnings from unconsolidated entities	9,563	3,770	9,627	4,511
Net income	120,382	61,511	241,263	124,935
Reclassification Adjustment
Proceeds from sale of loans held-for-sale				177,000
Earnings from unconsolidated entities		(1,800)		(1,800)
Net income		$ (1,800)		$ (1,800)

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2014

Stockholders' Equity

Schedule of Non-Vested Shares and Share Equivalents

	Non-Executive Director Stock Plan	Equity Plan		Manager Equity Plan		Total		Weighted Average Grant Date Fair Value (per share)
Balance as of January 1, 2014	11,228	22,502		510,415		544,145		$	22.88
Granted	—	162,458		2,489,281		2,651,739		27.94
Vested	—	(42,475	)	(572,556	)	(615,031	)	26.65
Forfeited	—	—		—		—		—
Balance as of June 30, 2014	11,228	142,485		2,427,140		2,580,853		$	27.18

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Fair Value (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Financial assets not carried at fair value:
Securities, held-to-maturity	$ 370,096	$ 368,318
Non-performing residential loans		215,371
Financial liabilities not carried at fair value:
Convertible senior notes	1,003,847	997,851
Carrying Value
Financial assets not carried at fair value:
Loans held-for-investment and loans transferred as secured borrowings	5,028,721	4,544,132
Securities, held-to-maturity	370,096	368,318
European servicing rights	18,528	27,024
Non-performing residential loans		215,371
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	2,704,082	2,438,798
Convertible senior notes	1,003,847	997,851
Fair Value
Financial assets not carried at fair value:
Loans held-for-investment and loans transferred as secured borrowings	5,163,988	4,609,040
Securities, held-to-maturity	371,603	368,453
European servicing rights	18,528	29,327
Non-performing residential loans		215,371
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	2,705,452	2,436,708
Convertible senior notes	$ 1,190,700	$ 1,160,000

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Secured Financing Agreements (Tables)

6 Months Ended

Jun. 30, 2014

Secured Financing Agreements

Summary of secured financing agreements

The following table is a summary of our secured financing agreements in place as of June 30, 2014 and December 31, 2013 (dollars in thousands):

Pledged Asset

Maximum

Carrying Value at

Facility Type

Revolver

Eligible Assets

Current Maturity

Extended Maturity(a)

Pricing

Carrying Value

Facility Size

June 30, 2014

December 31, 2013

Lender 1 Repo 1

Repurchase

Yes

Identified Loans and CMBS

(b)

(b)

LIBOR + 1.85% to 5.25%

$

1,349,733

$

1,000,000

$

753,032

$

449,323

Lender 1 Repo 2

Repurchase

Yes

Identified RMBS

(c)

N/A

LIBOR + 1.90%

230,129

175,000

120,627

127,943

Lender 1 Repo 3

Repurchase

No

Identified Loans

Dec 2014

Dec 2016

LIBOR + 2.75%

210,041

148,860

148,860

154,133

Lender 2 Repo 1

Repurchase

Yes

Identified Loans

Oct 2015

Oct 2018

LIBOR + 2.00% to 2.75%

269,290

225,000

(d)

181,151

100,886

Lender 3 Repo 1

Repurchase

No

Identified Loans

May 2017

May 2019

LIBOR + 2.85%

135,132

93,836

93,836

50,871

Conduit Repo 1

Repurchase

Yes

Identified Loans

Sep 2014

Sep 2014

LIBOR + 2.20%

—

250,000

—

129,843

Conduit Repo 2

Repurchase

Yes

Identified Loans

Nov 2014

Nov 2014

LIBOR + 2.10%

128,083

150,000

95,568

—

Lender 4 Repo 1

Repurchase

No

Identified Loans

Oct 2015

Oct 2017

LIBOR + 2.60%

456,758

359,226

359,226

347,697

Lender 5 Repo 1

Repurchase

No

Identified CMBS

Dec 2014

Dec 2014

LIBOR + 2.00%

84,150

58,467

58,467

58,467

Borrowing Base

Bank Credit Facility

Yes

Identified Loans

Sep 2015

Sep 2017

LIBOR + 3.25%(e)

661,164

250,000

84,386

169,104

Term Loan

Syndicated Facility

No

Specifically Identified Assets

Apr 2020

Apr 2020

LIBOR + 2.75%(e)

2,936,771

668,423

666,114

(f)

669,293

(f)

$

6,461,251

$

3,378,812

$

2,561,267

$

2,257,560

(a) Subject to certain conditions as defined in the respective facility agreement.

(b) Maturity date for borrowings collateralized by loans of January 2017 before extension options and January 2019 assuming initial extension options.  Maturity date for borrowings collateralized by CMBS of January 2015 before extension options and January 2016 assuming initial extension options.

(c) The date that is 180 days after the buyer delivers notice to seller, subject to a maximum date of March 13, 2015.

(d) On July 24, 2014, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $225 million to $325 million and reduce pricing 25-50 basis points depending on the collateral type.

(e) Subject to borrower’s option to choose alternative benchmark based rates pursuant to the terms of the credit agreement. The Term Loan is also subject to a 75 basis point floor.

(f) Term loan outstanding balance is net of $2.3 million and $2.5 million of unamortized discount as of June 30, 2014 and December 31, 2013.

Schedule of five-year principal repayments for secured financings

The amount reflected in each period includes principal repayments on our credit facilities that would be required if (i) we received the repayments that we expect to receive on the investments that have been pledged as collateral under the credit facilities, as applicable, and (ii) the credit facilities that are expected to have amounts outstanding at their current maturity dates are extended where extension options are available to us (amounts in thousands):

2014 (remainder of)	$	194,472
2015	155,464
2016	296,329
2017	568,760
2018	223,683
Thereafter(1)	1,124,868
Total	$	2,563,576

(1) Principal paydown of the Term Loan through 2020 excludes $2.3 million of discount amortization.

XML

Acquisitions and Divestitures (Details 2) (LNR, USD $) In Millions, unless otherwise specified	0 Months Ended
	Apr. 19, 2013
LNR
Acquisitions
Initial agreed upon purchase price	$ 859
Purchase price	$ 730

XML

Variable Interest Entities (Details) (Not primary beneficiary, USD $)	3 Months Ended
	Mar. 31, 2014 item	Jun. 30, 2014 item
Variable interest entities
Number of CDO structures currently in default		1
Number of CDO structures currently ceased to be in default	1
Maximum risk of loss related to VIEs, on fair value basis		$ 168,500,000
Securitization SPEs
Variable interest entities
Debt obligations to beneficial interest holders, unpaid principal balances		$ 106,400,000,000

XML

Convertible Senior Notes (Details) (USD $)	3 Months Ended	6 Months Ended							3 Months Ended	6 Months Ended	12 Months Ended	2 Months Ended	6 Months Ended			2 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Conversion upon satisfaction of closing market price condition D item	Jun. 30, 2014 Conversion upon satisfaction of closing market price condition Minimum	Jun. 30, 2014 Conversion upon satisfaction of closing market price condition Maximum	Jun. 30, 2014 Conversion upon satisfaction of trading price condition	Jun. 30, 2014 Conversion upon satisfaction of trading price condition Maximum	Jun. 30, 2014 Convertible Senior Notes	Jun. 30, 2014 Convertible Senior Notes	Dec. 31, 2013 Convertible Senior Notes	Feb. 03, 2014 2018 Notes	Jun. 30, 2014 2018 Notes	Jan. 31, 2014 2018 Notes	Feb. 15, 2013 2018 Notes	Feb. 03, 2014 2019 Notes	Jun. 30, 2014 2019 Notes	Jan. 31, 2014 2019 Notes	Jul. 03, 2013 2019 Notes
Convertible Senior Notes
Amount issued															$ 600,000,000				$ 460,000,000
Interest rate (as a percent)													4.55%				4.00%
Principal Amount									1,059,978,000	1,059,978,000	1,060,000,000		599,981,000				459,997,000
Effective Rate (as a percent)													6.08%				5.37%
Conversion Rate													44.6455				47.5456
Remaining Period of Amortization													3 years 8 months 12 days				4 years 6 months
Net unamortized discount									(56,131,000)	(56,131,000)	(62,149,000)
Total									1,003,847,000	1,003,847,000	997,851,000
Carrying amount of conversion option equity components recorded in additional paid-in capital			28,107,000							48,502,000	48,502,000
Principal amount of notes, basis for conversion									1,000	1,000
Amount by which if-converted value of the Notes exceed principal amount													36,700,000				59,900,000
Closing share price (in dollars per share)													$ 23.77				$ 23.77
Conversion price (in dollars per share)													$ 22.40				$ 21.03
Number of anti-dilutive common shares excluded from the calculation of diluted income per share									44,600,000	44,800,000
Conversion spread value included in computation of diluted EPS	4,056,000	3,906,000							4,100,000	3,900,000
Deferred financing costs, net of amortization									1,500,000	1,500,000	1,600,000
Minimum number of conditions to be satisfied for conversion of debt				1
Percentage of conversion price as a basis for debt conversion					130.00%
Minimum trading period as a basis for debt conversion				20
Consecutive trading period as a basis for debt conversion				30 days			5 days
Percentage of conversion price and last reported sales price as a basis for debt conversion								98.00%
Period of average closing market price of common stock as a basis for debt conversion						10 days
Percentage of per share value of distributions that exceeds the market price of the entity's common stock as a basis for debt conversion					10.00%
Notice of conversion, principal amount												$ 19,000				$ 3,000
Quarterly dividend threshold amount per share of common stock												$ 0.3548		$ 0.44		$ 0.3710		$ 0.46

XML

Segment Data (Tables)

6 Months Ended

Jun. 30, 2014

Segment Data

Schedule of results of operations by business segment

The table below presents our results of operations for the three months ended June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	102,892		$	2,563		$	105,455		$	—		$	105,455
Interest income from investment securities	15,178			30,081			45,259			(17,639		)	27,620
Servicing fees	153			57,834			57,987			(25,306		)	32,681
Other revenues	108			5,236			5,344			(350		)	4,994
Total revenues	118,331			95,714			214,045			(43,295		)	170,750
Costs and expenses:
Management fees (1)	20,423			4,622			25,045			40			25,085
Interest expense (1)	31,557			6,138			37,695			—			37,695
General and administrative	7,921			34,992			42,913			181			43,094
Acquisition and investment pursuit costs	523			248			771			—			771
Depreciation and amortization	—			5,154			5,154			—			5,154
Loan loss allowance, net	(139		)	—			(139		)	—			(139		)
Other expense	66			5,960			6,026			—			6,026
Total costs and expenses	60,351			57,114			117,465			221			117,686
Income before other income, income taxes and non-controlling interests	57,980			38,600			96,580			(43,516		)	53,064
Other income:
Income of consolidated VIEs, net	—			—			—			47,028			47,028
Change in fair value of servicing rights	—			(12,804		)	(12,804		)	7,281			(5,523		)
Change in fair value of investment securities, net	861			16,294			17,155			(12,196		)	4,959
Change in fair value of mortgage loans held- for-sale, net	—			11,608			11,608			—			11,608
Earnings from unconsolidated entities	3,432			5,219			8,651			912			9,563
Gain on sale of investments, net	10,078			—			10,078			—			10,078
Loss on derivative financial instruments, net	(7,610		)	(2,180		)	(9,790		)	—			(9,790		)
Foreign currency gain (loss), net	4,082			(305		)	3,777			—			3,777
OTTI	—			(797		)	(797		)	—			(797		)
Other income, net	35			657			692			—			692
Total other income	10,878			17,692			28,570			43,025			71,595
Income from continuing operations before income taxes	68,858			56,292			125,150			(491		)	124,659
Income tax provision	(443		)	(3,834		)	(4,277		)	—			(4,277		)
Income from continuing operations	68,415			52,458			120,873			(491		)	120,382
Loss from discontinued operations, net of tax	—			—			—			—			—
Net income	68,415			52,458			120,873			(491		)	120,382
Net income attributable to non-controlling interests	(3,005		)	—			(3,005		)	491			(2,514		)
Net income attributable to Starwood Property Trust, Inc.	$	65,410		$	52,458		$	117,868		$	—		$	117,868

(1) Due to the structure of our business, certain costs incurred by one segment may benefit other segments. Costs that are identifiable are allocated to the segments that benefit so that one segment is not solely burdened by this cost. Allocated costs currently include interest expense related to our consolidated debt (excluding VIEs) and management fees payable to our Manager, both of which represent shared costs. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated.  During the three months ended June 30, 2014, management fees and interest expense of $4.6 million and $5.2 million, respectively, were allocated to the LNR segment.

The table below presents our results of operations for the three months ended June 30, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	72,676		$	2,260		$	—		$	74,936		$	—		$	74,936
Interest income from investment securities	13,638			11,758			—			25,396			(6,819		)	18,577
Servicing fees	—			52,860			—			52,860			(13,725		)	39,135
Other revenues	96			1,972			—			2,068			(273		)	1,795
Total revenues	86,410			68,850			—			155,260			(20,817		)	134,443
Costs and expenses:
Management fees	13,854			2,274			—			16,128			18			16,146
Interest expense	19,941			2,707			—			22,648			—			22,648
General and administrative	3,615			40,573			—			44,188			147			44,335
Business combination costs	13,420			—			—			13,420			—			13,420
Acquisition and investment pursuit costs	525			391			—			916			—			916
Depreciation and amortization	—			2,228			—			2,228			—			2,228
Loan loss allowance	725			—			—			725			—			725
Other expense	58			138			—			196			—			196
Total costs and expenses	52,138			48,311			—			100,449			165			100,614
Income before other income, income taxes and non-controlling interests	34,272			20,539			—			54,811			(20,982		)	33,829
Other income:							—
Income of consolidated VIEs, net	—			—			—			—			31,949			31,949
Change in fair value of servicing rights	—			6,114			—			6,114			(3,216		)	2,898
Change in fair value of investment securities, net	(331		)	6,388			—			6,057			(7,449		)	(1,392		)
Change in fair value of mortgage loans held- for-sale, net	—			458			—			458			—			458
Earnings from unconsolidated entities	1,851			2,115			—			3,966			(196		)	3,770
Loss on sale of investments	(18		)	—			—			(18		)	—			(18		)
(Loss) gain on derivative financial instruments	(2,001		)	8,159			—			6,158			—			6,158
Foreign currency gain (loss), net	1,647			(67		)	—			1,580			—			1,580
OTTI	(359		)	—			—			(359		)	—			(359		)
Other income, net	—			39			—			39			—			39
Total other income	789			23,206			—			23,995			21,088			45,083
Income from continuing operations before income taxes	35,061			43,745			—			78,806			106			78,912
Income tax provision	(411		)	(10,932		)	—			(11,343		)	—			(11,343		)
Income from continuing operations	34,650			32,813			—			67,463			106			67,569
Loss from discontinued operations, net of tax	—			—			(6,058		)	(6,058		)	—			(6,058		)
Net income	34,650			32,813			(6,058		)	61,405			106			61,511
Net income attributable to non-controlling interests	(951		)	—			—			(951		)	(106		)	(1,057		)
Net income attributable to Starwood Property Trust, Inc.	$	33,699		$	32,813		$	(6,058	)	$	60,454		$	—		$	60,454

The table below presents our results of operations for the six months ended June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	204,979		$	5,386		$	—		$	210,365		$	—		$	210,365
Interest income from investment securities	33,467			53,089			—			86,556			(29,482		)	57,074
Servicing fees	190			114,019			—			114,209			(47,317		)	66,892
Other revenues	188			8,833			—			9,021			(623		)	8,398
Total revenues	238,824			181,327			—			420,151			(77,422		)	342,729
Costs and expenses:
Management fees (1)	41,778			10,259			791			52,828			78			52,906
Interest expense (1)	62,811			11,624			1,091			75,526			—			75,526
General and administrative	15,066			73,762			—			88,828			367			89,195
Acquisition and investment pursuit costs	735			430			—			1,165			—			1,165
Depreciation and amortization	—			9,790			—			9,790			—			9,790
Loan loss allowance, net	358			—			—			358			—			358
Other expense	52			7,663			—			7,715			—			7,715
Total costs and expenses	120,800			113,528			1,882			236,210			445			236,655
Income before other income, income taxes and non-controlling interests	118,024			67,799			(1,882		)	183,941			(77,867		)	106,074
Other income:
Income of consolidated VIEs, net	—			—			—			—			103,032			103,032
Change in fair value of servicing rights	—			(24,979		)	—			(24,979		)	14,205			(10,774		)
Change in fair value of investment securities, net	705			53,246			—			53,951			(40,631		)	13,320
Change in fair value of mortgage loans held- for-sale, net	—			32,501			—			32,501			—			32,501
Earnings from unconsolidated entities	4,972			3,836			—			8,808			819			9,627
Gain on sale of investments, net	11,633			—			—			11,633			—			11,633
Loss on derivative financial instruments, net	(10,398		)	(7,258		)	—			(17,656		)	—			(17,656		)
Foreign currency gain (loss), net	5,643			(389		)	—			5,254			—			5,254
OTTI	(213		)	(797		)	—			(1,010		)	—			(1,010		)
Other income, net	53			657			—			710			—			710
Total other income	12,395			56,817			—			69,212			77,425			146,637
Income from continuing operations before income taxes	130,419			124,616			(1,882		)	253,153			(442		)	252,711
Income tax provision	(526		)	(9,371		)	—			(9,897		)	—			(9,897		)
Income from continuing operations	129,893			115,245			(1,882		)	243,256			(442		)	242,814
Loss from discontinued operations, net of tax	—			—			(1,551		)	(1,551		)	—			(1,551		)
Net income	129,893			115,245			(3,433		)	241,705			(442		)	241,263
Net income attributable to non-controlling interests	(3,236		)	—			—			(3,236		)	442			(2,794		)
Net income attributable to Starwood Property Trust, Inc.	$	126,657		$	115,245		$	(3,433	)	$	238,469		$	—		$	238,469

(1) Refer to Note 1 to the table above for the three months ended June 30, 2014. During the six months ended June 30, 2014, management fees and interest expense of $10.2 million and $9.7 million, respectively, were allocated to the LNR segment while $0.8 million and $1.1 million, respectively, were allocated to the SFR segment.

The table below presents our results of operations for the six months ended June 30, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	140,366		$	2,260		$	—		$	142,626		$	—		$	142,626
Interest income from investment securities	29,878			11,758			—			41,636			(6,819		)	34,817
Servicing fees	—			52,860			—			52,860			(13,725		)	39,135
Other revenues	175			1,972			—			2,147			(273		)	1,874
Total revenues	170,419			68,850			—			239,269			(20,817		)	218,452
Costs and expenses:
Management fees	28,923			2,274			—			31,197			18			31,215
Interest expense	37,367			2,707			—			40,074			—			40,074
General and administrative	7,653			40,573			—			48,226			147			48,373
Business combination costs	17,616			—			—			17,616			—			17,616
Acquisition and investment pursuit costs	606			391			—			997			—			997
Depreciation and amortization	—			2,228			—			2,228			—			2,228
Loan loss allowance	755			—			—			755			—			755
Other expense	91			138			—			229			—			229
Total costs and expenses	93,011			48,311			—			141,322			165			141,487
Income before other income, income taxes and non-controlling interests	77,408			20,539			—			97,947			(20,982		)	76,965
Other income:							—
Income of consolidated VIEs, net	—			—			—			—			31,949			31,949
Change in fair value of servicing rights	—			6,114			—			6,114			(3,216		)	2,898
Change in fair value of investment securities	74			6,388			—			6,462			(7,449		)	(987		)
Change in fair value of mortgage loans held- for-sale, net	—			458			—			458			—			458
Earnings from unconsolidated entities	2,592			2,115			—			4,707			(196		)	4,511
Gain on sale of investments	13,506			—			—			13,506			—			13,506
Gain on derivative financial instruments	14,227			8,159			—			22,386			—			22,386
Foreign currency loss, net	(6,018		)	(67		)	—			(6,085		)	—			(6,085		)
OTTI	(401		)	—			—			(401		)	—			(401		)
Other income, net	—			39			—			39			—			39
Total other income	23,980			23,206			—			47,186			21,088			68,274
Income from continuing operations before income taxes	101,388			43,745			—			145,133			106			145,239
Income tax provision	(1,026		)	(10,932		)	—			(11,958		)	—			(11,958		)
Income from continuing operations	100,362			32,813			—			133,175			106			133,281
Loss from discontinued operations, net of tax	—			—			(8,346		)	(8,346		)	—			(8,346		)
Net income	100,362			32,813			(8,346		)	124,829			106			124,935
Net income attributable to non-controlling interests	(2,132		)	—			—			(2,132		)	(106		)	(2,238		)
Net income attributable to Starwood Property Trust, Inc.	$	98,230		$	32,813		$	(8,346	)	$	122,697		$	—		$	122,697

Schedule of condensed consolidated balance sheet by business segment

The table below presents our condensed consolidated balance sheet as of June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Subtotal			LNR VIEs			Total
Assets:
Cash and cash equivalents	$	382,285		$	136,148		$	518,433		$	194		$	518,627
Restricted cash	34,324			10,237			44,561			—			44,561
Loans held-for-investment, net	4,881,439			4,415			4,885,854			—			4,885,854
Loans held-for-sale	8,750			145,662			154,412			—			154,412
Loans transferred as secured borrowings	142,867			—			142,867			—			142,867
Investment securities	733,876			638,069			1,371,945			(469,521		)	902,424
Intangible assets—servicing rights	—			224,676			224,676			(67,830		)	156,846
Investment in unconsolidated entities	52,541			68,644			121,185			(2,564		)	118,621
Goodwill	—			140,437			140,437			—			140,437
Derivative assets	2,321			2,360			4,681			—			4,681
Accrued interest receivable	36,904			579			37,483			—			37,483
Other assets	80,279			86,432			166,711			(1,179		)	165,532
VIE assets, at fair value	—			—			—			114,091,158			114,091,158
Total Assets	$	6,355,586		$	1,457,659		$	7,813,245		$	113,550,258		$	121,363,503
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	50,540		$	89,904		$	140,444		$	365		$	140,809
Related-party payable	19,784			4,691			24,475			—			24,475
Dividends payable	108,012			—			108,012			—			108,012
Derivative liabilities	25,019			1,275			26,294			—			26,294
Secured financing agreements, net	2,465,699			95,568			2,561,267			—			2,561,267
Convertible senior notes, net	1,003,847			—			1,003,847			—			1,003,847
Secured borrowings on transferred loans	142,815			—			142,815			—			142,815
VIE liabilities, at fair value	—			—			—			113,541,151			113,541,151
Total Liabilities	3,815,716			191,438			4,007,154			113,541,516			117,548,670
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock	—			—			—			—			—
Common stock	2,232			—			2,232			—			2,232
Additional paid-in capital	2,417,704			1,366,871			3,784,575			—			3,784,575
Treasury stock	(10,642		)	—			(10,642		)	—			(10,642		)
Accumulated other comprehensive income	65,712			9,250			74,962			—			74,962
Retained earnings (deficit)	60,214			(109,900		)	(49,686		)	—			(49,686		)
Total Starwood Property Trust, Inc. Stockholders’ Equity	2,535,220			1,266,221			3,801,441			—			3,801,441
Non-controlling interests in consolidated subsidiaries	4,650			—			4,650			8,742			13,392
Total Equity	2,539,870			1,266,221			3,806,091			8,742			3,814,833
Total Liabilities and Equity	$	6,355,586		$	1,457,659		$	7,813,245		$	113,550,258		$	121,363,503

The table below presents our condensed consolidated balance sheet as of December 31, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential		Subtotal			LNR VIEs			Total
Assets:
Cash and cash equivalents	$	232,270		$	40,274		$	44,807	$	317,351		$	276		$	317,627
Restricted cash	36,593			32,208			251		69,052			—			69,052
Loans held-for-investment, net	4,350,937			12,781			—		4,363,718			—			4,363,718
Loans held-for-sale	—			206,672			—		206,672			—			206,672
Loans transferred as secured borrowings	180,414			—			—		180,414			—			180,414
Investment securities	794,147			550,282			—		1,344,429			(409,322		)	935,107
Intangible assets-servicing rights	—			257,736			—		257,736			(80,563		)	177,173
Residential real estate, net	—			—			749,214		749,214			—			749,214
Non-performing residential loans	—			—			215,371		215,371			—			215,371
Investment in unconsolidated entities	50,167			76,170			—		126,337			(3,383		)	122,954
Goodwill	—			140,437			—		140,437			—			140,437
Derivative assets	3,138			4,631			—		7,769			—			7,769
Accrued interest receivable	35,501			2,129			—		37,630			—			37,630
Other assets	31,020			57,620			8,045		96,685			(872		)	95,813
VIE assets, at fair value	—			—			—		—			103,151,624			103,151,624
Total Assets	$	5,714,187		$	1,380,940		$	1,017,688	$	8,112,815		$	102,657,760		$	110,770,575
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	66,127		$	135,882		$	23,056	$	225,065		$	309		$	225,374
Related-party payable	11,245			6,548			—		17,793			—			17,793
Dividends payable	90,171			—			—		90,171			—			90,171
Derivative liabilities	24,149			43			—		24,192			—			24,192
Secured financing agreements, net	2,127,717			129,843			—		2,257,560			—			2,257,560
Convertible senior notes, net	997,851			—			—		997,851			—			997,851
Secured borrowings on transferred loans	181,238			—			—		181,238			—			181,238
VIE liabilities, at fair value	—			—			—		—			102,649,263			102,649,263
Total Liabilities	3,498,498			272,316			23,056		3,793,870			102,649,572			106,443,442
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock	—			—			—		—			—			—
Common stock	1,961			—			—		1,961			—			1,961
Additional paid-in capital	1,987,133			1,308,500			1,004,846		4,300,479			—			4,300,479
Treasury stock	(10,642		)	—			—		(10,642		)	—			(10,642		)
Accumulated other comprehensive income	68,092			7,357			—		75,449			—			75,449
Retained earnings (deficit)	132,625			(207,233		)	(10,111		(84,719		)	—			(84,719		)
Total Starwood Property Trust, Inc. Stockholders’ Equity	2,179,169			1,108,624			994,735		4,282,528			—			4,282,528
Non-controlling interests in consolidated subsidiaries	36,520			—			(103		36,417			8,188			44,605
Total Equity	2,215,689			1,108,624			994,632		4,318,945			8,188			4,327,133
Total Liabilities and Equity	$	5,714,187		$	1,380,940		$	1,017,688	$	8,112,815		$	102,657,760		$	110,770,575

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Business and Organization

6 Months Ended

Jun. 30, 2014

Business and Organization

Business and Organization

1. Business and Organization

Starwood Property Trust, Inc. (“STWD” together with its subsidiaries, “we” or the “Company”) is a Maryland corporation that commenced operations in August 2009, upon the completion of our initial public offering (“IPO”). We are focused primarily on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt investments, commercial mortgage-backed securities (“CMBS”), and other commercial real estate-related debt investments in both the U.S. and Europe. We refer to the following as our target assets:

· commercial real estate mortgage loans, including preferred equity interests;

· CMBS; and

· other commercial real estate-related debt investments.

We may also invest in residential mortgage-backed securities (“RMBS”), certain residential mortgage loans, distressed or non-performing commercial loans, commercial properties subject to net leases and commercial real estate owned. As market conditions change over time, we may adjust our strategy to take advantage of changes in interest rates and credit spreads as well as economic and credit conditions.

We have two reportable business segments as of June 30, 2014:

· Real estate investment lending (the “Lending Segment”)—includes all business activities of the Company, excluding the LNR business, which generally represents investments in real estate-related loans and securities that are held-for-investment.

· LNR—includes all business activities of the acquired LNR Property LLC (“LNR”) business excluding the consolidation of securitization VIEs.

On April 19, 2013, we acquired the equity of LNR and certain of its subsidiaries for an initial agreed upon purchase price of approximately $859 million, which was reduced for transaction expenses and distributions occurring after September 30, 2012, resulting in cash consideration of approximately $730 million. Immediately prior to the acquisition, an affiliate of the Company acquired the remaining equity comprising LNR’s commercial property division for a purchase price of $194 million. The portion of the LNR business acquired by us includes the following: (i) servicing businesses in both the U.S. and Europe that manage and work out problem assets, (ii) a finance business that is focused on selectively acquiring and managing real estate finance investments, including unrated, investment grade and non-investment grade rated CMBS, including subordinated interests of securitization and resecuritization transactions, and high yielding real estate loans; and (iii) a mortgage loan business which originates conduit loans for the primary purpose of selling these loans into securitization transactions.

On January 31, 2014, we completed the spin-off of our former single family residential (“SFR”) segment to our stockholders. The newly-formed real estate investment trust, Starwood Waypoint Residential Trust (“SWAY”), is listed on the New York Stock Exchange (“NYSE”) and trades under the ticker symbol “SWAY.” Our stockholders received one common share of SWAY for every five shares of our common stock held at the close of business on January 24, 2014. As part of the spin-off, we contributed $100 million to the unlevered balance sheet of SWAY to fund its growth and operations. As of January 31, 2014, SWAY held net assets of $1.1 billion. The net assets of SWAY consisted of approximately 7,200 units of single-family homes and residential non-performing mortgage loans as of January 31, 2014. In connection with the spin-off, 40.1 million shares of SWAY were issued. Refer to Note 3 herein for additional information regarding SFR segment financial information, which has been presented within discontinued operations in the condensed consolidated statements of operations included herein.

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

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

These TRSs engage in various real estate related operations, including special servicing of commercial real estate, originating and securitizing commercial mortgage loans, and investing in entities which engage in real estate related operations. As of June 30, 2014, $854.5 million of the LNR assets were owned by TRS entities. Our TRSs are not consolidated for federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earnings recognized by us with respect to our interest in TRSs.

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

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Loan Securitization/Sale Activities (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Loan Transfer Activities
Par value of loans held-for-sale, sold during period	$ 348,000,000		$ 637,400,000
Fair value of loans held-for-sale, sold during period	364,300,000		666,800,000
Amount repaid for outstanding balance	261,000,000		478,100,000
Loan Transfers Accounted for as Secured Borrowings
Proceeds				95,000,000
Securitizations | Real Estate Investment Lending
Loan Transfers Accounted for as Sales
Face Amount	56,975,000	52,849,000	204,859,000	97,380,000
Proceeds	56,124,000	52,859,000	202,524,000	97,490,000
Loan Transfers Accounted for as Secured Borrowings
Face Amount		95,000		95,000
Proceeds		$ 95,000		$ 95,000

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Earnings per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings per Share

Net Income (Loss) per Share

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

	For the Three Month EndedJune 30,						For the Six Month EndedJune 30,
	2014			2013			2014			2013
Basic Earnings
Continuing Operations:
Income from continuing operations attributable to STWD common stockholders	$	117,868		$	66,512		$	240,020		$	131,043
Less: Income attributable to unvested shares	(1,367		)	(369		)	(3,100		)	(823		)
Basic — Income from continuing operations	$	116,501		$	66,143		$	236,920		$	130,220
Discontinued Operations:
Loss from discontinued operations	$	—		$	(6,058	)	$	(1,551	)	$	(8,346	)
Basic — Net income attributable to STWD common stockholders after allocation to participating securities	$	116,501		$	60,085		$	235,369		$	121,874
Diluted Earnings
Continuing Operations:
Basic — Income from continuing operations attributable to STWD common stockholders	$	117,868		$	66,512		$	240,020		$	131,043
Less: Income attributable to unvested shares	(1,367		)	(369		)	(3,100		)	(823		)
Add: Undistributed earnings to unvested shares	128			—			480			—
Less: Undistributed earnings reallocated to unvested shares	(126		)	—			(471		)	—
Diluted — Income from continuing operations	$	116,503		$	66,143		$	236,929		$	130,220
Discontinued Operations:
Basic — Loss from discontinued operations	$	—		$	(6,058	)	$	(1,551	)	$	(8,346	)
Diluted — Net income attributable to STWD common stockholders after allocation to participating securities	$	116,503		$	60,085		$	235,378		$	121,874
Number of Shares:
Basic — Average shares outstanding	218,751			162,448			207,203			149,037
Effect of dilutive securities — Convertible Notes	4,056			—			3,906			—
Effect of dilutive securities — Contingently Issuable Shares	85			—			85			—
Diluted — Average shares outstanding	222,892			162,448			211,194			149,037
Earnings Per Share Attributable to STWD Common Stockholders
Basic:
Income from continuing operations	$	0.53		$	0.41		$	1.14		$	0.87
Loss from discontinued operations	—			(0.04		)	(0.01		)	(0.05		)
Net income	$	0.53		$	0.37		$	1.13		$	0.82
Diluted:
Income from continuing operations	$	0.52		$	0.41		$	1.12		$	0.87
Loss from discontinued operations	—			(0.04		)	(0.01		)	(0.05		)
Net income	$	0.52		$	0.37		$	1.11		$	0.82

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Segment Data

6 Months Ended

Jun. 30, 2014

Segment Data

Segment Data

21.  Segment Data

In its operation of the business, management, including our chief operating decision maker, who is our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis prior to the impact of consolidating VIEs under ASC 810. The segment information within this note is reported on that basis.  Refer to Note 24 to the consolidated financial statements included in our Form 10-K for further discussion of the composition of our reportable business segments.

The table below presents our results of operations for the three months ended June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	102,892		$	2,563		$	105,455		$	—		$	105,455
Interest income from investment securities	15,178			30,081			45,259			(17,639		)	27,620
Servicing fees	153			57,834			57,987			(25,306		)	32,681
Other revenues	108			5,236			5,344			(350		)	4,994
Total revenues	118,331			95,714			214,045			(43,295		)	170,750
Costs and expenses:
Management fees (1)	20,423			4,622			25,045			40			25,085
Interest expense (1)	31,557			6,138			37,695			—			37,695
General and administrative	7,921			34,992			42,913			181			43,094
Acquisition and investment pursuit costs	523			248			771			—			771
Depreciation and amortization	—			5,154			5,154			—			5,154
Loan loss allowance, net	(139		)	—			(139		)	—			(139		)
Other expense	66			5,960			6,026			—			6,026
Total costs and expenses	60,351			57,114			117,465			221			117,686
Income before other income, income taxes and non-controlling interests	57,980			38,600			96,580			(43,516		)	53,064
Other income:
Income of consolidated VIEs, net	—			—			—			47,028			47,028
Change in fair value of servicing rights	—			(12,804		)	(12,804		)	7,281			(5,523		)
Change in fair value of investment securities, net	861			16,294			17,155			(12,196		)	4,959
Change in fair value of mortgage loans held- for-sale, net	—			11,608			11,608			—			11,608
Earnings from unconsolidated entities	3,432			5,219			8,651			912			9,563
Gain on sale of investments, net	10,078			—			10,078			—			10,078
Loss on derivative financial instruments, net	(7,610		)	(2,180		)	(9,790		)	—			(9,790		)
Foreign currency gain (loss), net	4,082			(305		)	3,777			—			3,777
OTTI	—			(797		)	(797		)	—			(797		)
Other income, net	35			657			692			—			692
Total other income	10,878			17,692			28,570			43,025			71,595
Income from continuing operations before income taxes	68,858			56,292			125,150			(491		)	124,659
Income tax provision	(443		)	(3,834		)	(4,277		)	—			(4,277		)
Income from continuing operations	68,415			52,458			120,873			(491		)	120,382
Loss from discontinued operations, net of tax	—			—			—			—			—
Net income	68,415			52,458			120,873			(491		)	120,382
Net income attributable to non-controlling interests	(3,005		)	—			(3,005		)	491			(2,514		)
Net income attributable to Starwood Property Trust, Inc.	$	65,410		$	52,458		$	117,868		$	—		$	117,868

(1) Due to the structure of our business, certain costs incurred by one segment may benefit other segments. Costs that are identifiable are allocated to the segments that benefit so that one segment is not solely burdened by this cost. Allocated costs currently include interest expense related to our consolidated debt (excluding VIEs) and management fees payable to our Manager, both of which represent shared costs. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated.  During the three months ended June 30, 2014, management fees and interest expense of $4.6 million and $5.2 million, respectively, were allocated to the LNR segment.

The table below presents our results of operations for the three months ended June 30, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	72,676		$	2,260		$	—		$	74,936		$	—		$	74,936
Interest income from investment securities	13,638			11,758			—			25,396			(6,819		)	18,577
Servicing fees	—			52,860			—			52,860			(13,725		)	39,135
Other revenues	96			1,972			—			2,068			(273		)	1,795
Total revenues	86,410			68,850			—			155,260			(20,817		)	134,443
Costs and expenses:
Management fees	13,854			2,274			—			16,128			18			16,146
Interest expense	19,941			2,707			—			22,648			—			22,648
General and administrative	3,615			40,573			—			44,188			147			44,335
Business combination costs	13,420			—			—			13,420			—			13,420
Acquisition and investment pursuit costs	525			391			—			916			—			916
Depreciation and amortization	—			2,228			—			2,228			—			2,228
Loan loss allowance	725			—			—			725			—			725
Other expense	58			138			—			196			—			196
Total costs and expenses	52,138			48,311			—			100,449			165			100,614
Income before other income, income taxes and non-controlling interests	34,272			20,539			—			54,811			(20,982		)	33,829
Other income:							—
Income of consolidated VIEs, net	—			—			—			—			31,949			31,949
Change in fair value of servicing rights	—			6,114			—			6,114			(3,216		)	2,898
Change in fair value of investment securities, net	(331		)	6,388			—			6,057			(7,449		)	(1,392		)
Change in fair value of mortgage loans held- for-sale, net	—			458			—			458			—			458
Earnings from unconsolidated entities	1,851			2,115			—			3,966			(196		)	3,770
Loss on sale of investments	(18		)	—			—			(18		)	—			(18		)
(Loss) gain on derivative financial instruments	(2,001		)	8,159			—			6,158			—			6,158
Foreign currency gain (loss), net	1,647			(67		)	—			1,580			—			1,580
OTTI	(359		)	—			—			(359		)	—			(359		)
Other income, net	—			39			—			39			—			39
Total other income	789			23,206			—			23,995			21,088			45,083
Income from continuing operations before income taxes	35,061			43,745			—			78,806			106			78,912
Income tax provision	(411		)	(10,932		)	—			(11,343		)	—			(11,343		)
Income from continuing operations	34,650			32,813			—			67,463			106			67,569
Loss from discontinued operations, net of tax	—			—			(6,058		)	(6,058		)	—			(6,058		)
Net income	34,650			32,813			(6,058		)	61,405			106			61,511
Net income attributable to non-controlling interests	(951		)	—			—			(951		)	(106		)	(1,057		)
Net income attributable to Starwood Property Trust, Inc.	$	33,699		$	32,813		$	(6,058	)	$	60,454		$	—		$	60,454

The table below presents our results of operations for the six months ended June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	204,979		$	5,386		$	—		$	210,365		$	—		$	210,365
Interest income from investment securities	33,467			53,089			—			86,556			(29,482		)	57,074
Servicing fees	190			114,019			—			114,209			(47,317		)	66,892
Other revenues	188			8,833			—			9,021			(623		)	8,398
Total revenues	238,824			181,327			—			420,151			(77,422		)	342,729
Costs and expenses:
Management fees (1)	41,778			10,259			791			52,828			78			52,906
Interest expense (1)	62,811			11,624			1,091			75,526			—			75,526
General and administrative	15,066			73,762			—			88,828			367			89,195
Acquisition and investment pursuit costs	735			430			—			1,165			—			1,165
Depreciation and amortization	—			9,790			—			9,790			—			9,790
Loan loss allowance, net	358			—			—			358			—			358
Other expense	52			7,663			—			7,715			—			7,715
Total costs and expenses	120,800			113,528			1,882			236,210			445			236,655
Income before other income, income taxes and non-controlling interests	118,024			67,799			(1,882		)	183,941			(77,867		)	106,074
Other income:
Income of consolidated VIEs, net	—			—			—			—			103,032			103,032
Change in fair value of servicing rights	—			(24,979		)	—			(24,979		)	14,205			(10,774		)
Change in fair value of investment securities, net	705			53,246			—			53,951			(40,631		)	13,320
Change in fair value of mortgage loans held- for-sale, net	—			32,501			—			32,501			—			32,501
Earnings from unconsolidated entities	4,972			3,836			—			8,808			819			9,627
Gain on sale of investments, net	11,633			—			—			11,633			—			11,633
Loss on derivative financial instruments, net	(10,398		)	(7,258		)	—			(17,656		)	—			(17,656		)
Foreign currency gain (loss), net	5,643			(389		)	—			5,254			—			5,254
OTTI	(213		)	(797		)	—			(1,010		)	—			(1,010		)
Other income, net	53			657			—			710			—			710
Total other income	12,395			56,817			—			69,212			77,425			146,637
Income from continuing operations before income taxes	130,419			124,616			(1,882		)	253,153			(442		)	252,711
Income tax provision	(526		)	(9,371		)	—			(9,897		)	—			(9,897		)
Income from continuing operations	129,893			115,245			(1,882		)	243,256			(442		)	242,814
Loss from discontinued operations, net of tax	—			—			(1,551		)	(1,551		)	—			(1,551		)
Net income	129,893			115,245			(3,433		)	241,705			(442		)	241,263
Net income attributable to non-controlling interests	(3,236		)	—			—			(3,236		)	442			(2,794		)
Net income attributable to Starwood Property Trust, Inc.	$	126,657		$	115,245		$	(3,433	)	$	238,469		$	—		$	238,469

(1) Refer to Note 1 to the table above for the three months ended June 30, 2014. During the six months ended June 30, 2014, management fees and interest expense of $10.2 million and $9.7 million, respectively, were allocated to the LNR segment while $0.8 million and $1.1 million, respectively, were allocated to the SFR segment.

The table below presents our results of operations for the six months ended June 30, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential			Subtotal			LNR VIEs			Total
Revenues:
Interest income from loans	$	140,366		$	2,260		$	—		$	142,626		$	—		$	142,626
Interest income from investment securities	29,878			11,758			—			41,636			(6,819		)	34,817
Servicing fees	—			52,860			—			52,860			(13,725		)	39,135
Other revenues	175			1,972			—			2,147			(273		)	1,874
Total revenues	170,419			68,850			—			239,269			(20,817		)	218,452
Costs and expenses:
Management fees	28,923			2,274			—			31,197			18			31,215
Interest expense	37,367			2,707			—			40,074			—			40,074
General and administrative	7,653			40,573			—			48,226			147			48,373
Business combination costs	17,616			—			—			17,616			—			17,616
Acquisition and investment pursuit costs	606			391			—			997			—			997
Depreciation and amortization	—			2,228			—			2,228			—			2,228
Loan loss allowance	755			—			—			755			—			755
Other expense	91			138			—			229			—			229
Total costs and expenses	93,011			48,311			—			141,322			165			141,487
Income before other income, income taxes and non-controlling interests	77,408			20,539			—			97,947			(20,982		)	76,965
Other income:							—
Income of consolidated VIEs, net	—			—			—			—			31,949			31,949
Change in fair value of servicing rights	—			6,114			—			6,114			(3,216		)	2,898
Change in fair value of investment securities	74			6,388			—			6,462			(7,449		)	(987		)
Change in fair value of mortgage loans held- for-sale, net	—			458			—			458			—			458
Earnings from unconsolidated entities	2,592			2,115			—			4,707			(196		)	4,511
Gain on sale of investments	13,506			—			—			13,506			—			13,506
Gain on derivative financial instruments	14,227			8,159			—			22,386			—			22,386
Foreign currency loss, net	(6,018		)	(67		)	—			(6,085		)	—			(6,085		)
OTTI	(401		)	—			—			(401		)	—			(401		)
Other income, net	—			39			—			39			—			39
Total other income	23,980			23,206			—			47,186			21,088			68,274
Income from continuing operations before income taxes	101,388			43,745			—			145,133			106			145,239
Income tax provision	(1,026		)	(10,932		)	—			(11,958		)	—			(11,958		)
Income from continuing operations	100,362			32,813			—			133,175			106			133,281
Loss from discontinued operations, net of tax	—			—			(8,346		)	(8,346		)	—			(8,346		)
Net income	100,362			32,813			(8,346		)	124,829			106			124,935
Net income attributable to non-controlling interests	(2,132		)	—			—			(2,132		)	(106		)	(2,238		)
Net income attributable to Starwood Property Trust, Inc.	$	98,230		$	32,813		$	(8,346	)	$	122,697		$	—		$	122,697

The table below presents our condensed consolidated balance sheet as of June 30, 2014 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Subtotal			LNR VIEs			Total
Assets:
Cash and cash equivalents	$	382,285		$	136,148		$	518,433		$	194		$	518,627
Restricted cash	34,324			10,237			44,561			—			44,561
Loans held-for-investment, net	4,881,439			4,415			4,885,854			—			4,885,854
Loans held-for-sale	8,750			145,662			154,412			—			154,412
Loans transferred as secured borrowings	142,867			—			142,867			—			142,867
Investment securities	733,876			638,069			1,371,945			(469,521		)	902,424
Intangible assets—servicing rights	—			224,676			224,676			(67,830		)	156,846
Investment in unconsolidated entities	52,541			68,644			121,185			(2,564		)	118,621
Goodwill	—			140,437			140,437			—			140,437
Derivative assets	2,321			2,360			4,681			—			4,681
Accrued interest receivable	36,904			579			37,483			—			37,483
Other assets	80,279			86,432			166,711			(1,179		)	165,532
VIE assets, at fair value	—			—			—			114,091,158			114,091,158
Total Assets	$	6,355,586		$	1,457,659		$	7,813,245		$	113,550,258		$	121,363,503
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	50,540		$	89,904		$	140,444		$	365		$	140,809
Related-party payable	19,784			4,691			24,475			—			24,475
Dividends payable	108,012			—			108,012			—			108,012
Derivative liabilities	25,019			1,275			26,294			—			26,294
Secured financing agreements, net	2,465,699			95,568			2,561,267			—			2,561,267
Convertible senior notes, net	1,003,847			—			1,003,847			—			1,003,847
Secured borrowings on transferred loans	142,815			—			142,815			—			142,815
VIE liabilities, at fair value	—			—			—			113,541,151			113,541,151
Total Liabilities	3,815,716			191,438			4,007,154			113,541,516			117,548,670
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock	—			—			—			—			—
Common stock	2,232			—			2,232			—			2,232
Additional paid-in capital	2,417,704			1,366,871			3,784,575			—			3,784,575
Treasury stock	(10,642		)	—			(10,642		)	—			(10,642		)
Accumulated other comprehensive income	65,712			9,250			74,962			—			74,962
Retained earnings (deficit)	60,214			(109,900		)	(49,686		)	—			(49,686		)
Total Starwood Property Trust, Inc. Stockholders’ Equity	2,535,220			1,266,221			3,801,441			—			3,801,441
Non-controlling interests in consolidated subsidiaries	4,650			—			4,650			8,742			13,392
Total Equity	2,539,870			1,266,221			3,806,091			8,742			3,814,833
Total Liabilities and Equity	$	6,355,586		$	1,457,659		$	7,813,245		$	113,550,258		$	121,363,503

The table below presents our condensed consolidated balance sheet as of December 31, 2013 by business segment (amounts in thousands):

	Real Estate Investment Lending			LNR			Single Family Residential		Subtotal			LNR VIEs			Total
Assets:
Cash and cash equivalents	$	232,270		$	40,274		$	44,807	$	317,351		$	276		$	317,627
Restricted cash	36,593			32,208			251		69,052			—			69,052
Loans held-for-investment, net	4,350,937			12,781			—		4,363,718			—			4,363,718
Loans held-for-sale	—			206,672			—		206,672			—			206,672
Loans transferred as secured borrowings	180,414			—			—		180,414			—			180,414
Investment securities	794,147			550,282			—		1,344,429			(409,322		)	935,107
Intangible assets-servicing rights	—			257,736			—		257,736			(80,563		)	177,173
Residential real estate, net	—			—			749,214		749,214			—			749,214
Non-performing residential loans	—			—			215,371		215,371			—			215,371
Investment in unconsolidated entities	50,167			76,170			—		126,337			(3,383		)	122,954
Goodwill	—			140,437			—		140,437			—			140,437
Derivative assets	3,138			4,631			—		7,769			—			7,769
Accrued interest receivable	35,501			2,129			—		37,630			—			37,630
Other assets	31,020			57,620			8,045		96,685			(872		)	95,813
VIE assets, at fair value	—			—			—		—			103,151,624			103,151,624
Total Assets	$	5,714,187		$	1,380,940		$	1,017,688	$	8,112,815		$	102,657,760		$	110,770,575
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	66,127		$	135,882		$	23,056	$	225,065		$	309		$	225,374
Related-party payable	11,245			6,548			—		17,793			—			17,793
Dividends payable	90,171			—			—		90,171			—			90,171
Derivative liabilities	24,149			43			—		24,192			—			24,192
Secured financing agreements, net	2,127,717			129,843			—		2,257,560			—			2,257,560
Convertible senior notes, net	997,851			—			—		997,851			—			997,851
Secured borrowings on transferred loans	181,238			—			—		181,238			—			181,238
VIE liabilities, at fair value	—			—			—		—			102,649,263			102,649,263
Total Liabilities	3,498,498			272,316			23,056		3,793,870			102,649,572			106,443,442
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock	—			—			—		—			—			—
Common stock	1,961			—			—		1,961			—			1,961
Additional paid-in capital	1,987,133			1,308,500			1,004,846		4,300,479			—			4,300,479
Treasury stock	(10,642		)	—			—		(10,642		)	—			(10,642		)
Accumulated other comprehensive income	68,092			7,357			—		75,449			—			75,449
Retained earnings (deficit)	132,625			(207,233		)	(10,111		(84,719		)	—			(84,719		)
Total Starwood Property Trust, Inc. Stockholders’ Equity	2,179,169			1,108,624			994,735		4,282,528			—			4,282,528
Non-controlling interests in consolidated subsidiaries	36,520			—			(103		36,417			8,188			44,605
Total Equity	2,215,689			1,108,624			994,632		4,318,945			8,188			4,327,133
Total Liabilities and Equity	$	5,714,187		$	1,380,940		$	1,017,688	$	8,112,815		$	102,657,760		$	110,770,575

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies.

Commitments and Contingencies

20. Commitments and Contingencies

As of June 30, 2014, we had future funding commitments on 43 loans totaling $1.8 billion, primarily related to construction projects, capital improvements, tenant improvements, and leasing commissions. Generally, funding commitments are subject to certain conditions that must be met, such as customary construction draw certifications, minimum debt service coverage ratios or executions of new leases before advances are made to the borrower.

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

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Investment Securities (Details 3) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
HTM Securities
Net Carrying Amount (Amortized Cost)	$ 370,096,000	$ 368,318,000
Gross Unrealized Holdings Gains	2,083,000	135,000
Gross Unrealized Holdings Losses	(576,000)
Fair Value	371,603,000	368,453,000
Preferred interests
HTM Securities
Net Carrying Amount (Amortized Cost)	285,946,000	284,087,000
Gross Unrealized Holdings Gains	2,083,000	135,000
Fair Value	288,029,000	284,222,000
Number of securities originated		2
Preferred equity interests one
HTM Securities
Origination of preferred equity interest in limited liability company mandatory redemption		246,100,000
Preferred equity interests two
HTM Securities
Origination of preferred equity interest in limited liability company mandatory redemption		37,200,000
Single-borrower CMBS, available-for-sale
HTM Securities
Net Carrying Amount (Amortized Cost)	84,150,000	84,231,000
Gross Unrealized Holdings Losses	(576,000)
Fair Value	83,574,000	84,231,000
Purchase of investments		$ 84,100,000

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income

Schedule of changes in AOCI

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

	Effective Portion of Cumulative Loss on Cash Flow Hedges			Cumulative Unrealized Gain (Loss) on Available-for- Sale Securities			Foreign Currency Translation			Total
Three Months ended June 30, 2014
Balance at March 31, 2014	$	(482	)	$	70,064		$	10,533		$	80,115
OCI before reclassifications	(457		)	2,285			4,558			6,386
Amounts reclassified from AOCI	364			(11,903		)	—			(11,539		)
Net period OCI	(93		)	(9,618		)	4,558			(5,153		)
Balance at June 30, 2014	$	(575	)	$	60,446		$	15,091		$	74,962
Three Months ended June 30, 2013
Balance at March 31, 2013	$	(2,292	)	$	79,897		$	(7,061	)	$	70,544
OCI before reclassifications	1,094			(11,419		)	18			(10,307		)
Amounts reclassified from AOCI	407			(359		)	—			48
Net period OCI	1,501			(11,778		)	18			(10,259		)
Balance at June 30, 2013	$	(791	)	$	68,119		$	(7,043	)	$	60,285

	Effective Portion of Cumulative Loss on Cash Flow Hedges			Cumulative Unrealized Gain (Loss) on Available-for- Sale Securities			Foreign Currency Translation			Total
Six Months ended June 30, 2014
Balance at January 1, 2014	$	(604	)	$	66,566		$	9,487		$	75,449
OCI before reclassifications	(708		)	5,566			5,604			10,462
Amounts reclassified from AOCI	737			(11,686		)	—			(10,949		)
Net period OCI	29			(6,120		)	5,604			(487		)
Balance at June 30, 2014	$	(575	)	$	60,446		$	15,091		$	74,962
Six Months ended June 30, 2013
Balance at January 1, 2013	$	(2,571	)	$	82,246		$	—		$	79,675
OCI before reclassifications	926			537			(7,043		)	(5,580		)
Amounts reclassified from AOCI	854			(14,664		)	—			(13,810		)
Net period OCI	1,780			(14,127		)	(7,043		)	(19,390		)
Balance at June 30, 2013	$	(791	)	$	68,119		$	(7,043	)	$	60,285

Schedule of reclassifications out of AOCI that impacted the condensed consolidated statements of operations

	Amounts Reclassified from AOCI during the Three Months Ended June 30,						Amounts Reclassified from AOCI during the Six Months Ended June 30,						Affected Line Item
Details about AOCI Components	2014			2013			2014			2013			in the Statements
Losses on cash flow hedges:
Interest rate contracts	$	(364	)	$	(407	)	$	(737	)	$	(854	)	Interest expense
Unrealized gains on available for sale securities:
Net realized gain on sale of investments	11,903			718			11,899			15,065			Gain (loss) on sale of investments, net
OTTI	—			(359		)	(213		)	(401		)	OTTI
Total	11,903			359			11,686			14,664
Total reclassifications for the period	$	11,539		$	(48	)	$	10,949		$	13,810

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events

Subsequent Events

22. Subsequent Events

Our significant events subsequent to June 30, 2014 were as follows:

Secured Financing Agreements

On July 24, 2014, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $225 million to $325 million and reduce pricing 25-50 basis points depending on the collateral type.

On August 1, 2014, we entered into a new $250 million warehouse line to finance our more transitional assets.

Dividend Declaration

On August 6, 2014, our board of directors declared a dividend of $0.48 per share for the third quarter of 2014, which is payable on October 15, 2014 to common stockholders of record as of September 30, 2014.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Summary of Significant Accounting Policies

Basis of Accounting and Principles of Consolidation

Basis of Accounting and Principles of Consolidation

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

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the operating results for the full year.

Refer to our Form 10-K for a description of our recurring accounting policies. We have included disclosure in this Note 2 regarding principles of consolidation and other accounting policies that (i) are required to be disclosed quarterly, (ii) we view as critical, or (iii) became significant since December 31, 2013 due to a corporate action or increase in the significance of the underlying business activity.

Variable Interest Entities

Variable Interest Entities

We evaluate all of our interests in VIEs for consolidation. When our interests are determined to be variable interests, we assess whether we are deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. ASC 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. We consider our variable interests as well as any variable interests of our related parties in making this determination. Where both of these factors are present, we are deemed to be the primary beneficiary and we consolidate the VIE. Where either one of these factors is not present, we are not the primary beneficiary and do not consolidate the VIE.

To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

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

Our purchased investment securities include CMBS, which are unrated and non-investment grade rated securities issued by CMBS trusts. In certain cases, we may contract to provide special servicing activities for these CMBS trusts, or, as holder of the controlling class, we may have the right to name and remove the special servicer for these trusts. In our role as special servicer, we provide services on defaulted loans within the trusts, such as foreclosure or work-out procedures, as permitted by the underlying contractual agreements. In exchange for these services, we receive a fee. These rights give us the ability to direct activities that could significantly impact the trust’s economic performance. However, in those instances where an unrelated third party has the right to unilaterally remove us as special servicer, we do not have the power to direct activities that most significantly impact the trust’s economic performance. We evaluated all of our positions in such investments for consolidation.

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

We perform ongoing reassessments of: (1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework, and (2) whether changes in the facts and circumstances regarding our involvement with a VIE causes our consolidation conclusion regarding the VIE to change.

We have elected the fair value option in measuring the assets and liabilities of any VIEs we consolidate. Fluctuations in the fair values of the VIE assets and liabilities, along with trust interest income and trust interest and administrative expenses, are presented net in income of consolidated VIEs in our consolidated statements of operations.

Discontinued Operations

Discontinued Operations

On January 31, 2014, we completed the spin-off of our former SFR segment to our stockholders as discussed in Note 1.  In accordance with Accounting Standards Codification (“ASC”) Topic 205, Presentation of Financial Statements, the results of the SFR segment are presented within discontinued operations in our condensed consolidated statements of operations for the six months ended June 30, 2014 and the three and six months ended June 30, 2013.

Fair Value Option

Fair Value Option

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

We have elected the fair value option for eligible financial assets and liabilities of our consolidated VIEs, loans held-for-sale originated by LNR’s conduit platform, purchased CMBS issued by VIEs we could consolidate in the future and certain investments in marketable equity securities. The fair value elections for VIE and securitization related items were made in order to mitigate accounting mismatches between the carrying value of the instruments and the related assets and liabilities that we consolidate at fair value. The fair value elections for mortgage loans held-for-sale originated by LNR’s conduit platform were made due to the short-term nature of these instruments. The fair value elections for investments in marketable equity securities were made because the shares are listed on an exchange, which allows us to determine the fair value using a quoted price from an active market.

Loans Receivable and Provision for Loan Losses

Loans Receivable and Provision for Loan Losses

In our Lending Segment we purchase and originate commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. We are required to periodically evaluate each of these loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan. If a loan is determined to be impaired, we write down the loan through a charge to the provision for loan losses. Actual losses, if any, could ultimately differ from these estimates.

We perform a quarterly review of our portfolio of loans. In connection with this review, we assess the performance of each loan and assign a risk rating based on several factors including risk of loss, loan-to-value ratio (“LTV”), collateral performance, structure, exit plan, and sponsorship. Loans are rated “1” through “5”, from less risk to greater risk, in connection with this review.

Use of Estimates

Use of Estimates

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

Reclassifications and Measurement Period Adjustments

Reclassifications and Measurement Period Adjustments

As a result of the spin-off, the results from our SFR segment have been reclassified as discontinued operations in our condensed consolidated statements of operations for the three and six months ended June 30, 2013.  In addition, certain prior period amounts have been reclassified to conform to the current period presentation, which had no effect on our previously reported net income.  In that regard, we reclassified $177.0 million of proceeds from sales of loans held-for-sale by LNR to cash flows from operating activities in the condensed consolidated statement of cash flows for the six months ended June 30, 2013 in order to conform to the current period presentation, which is also consistent with the presentation in our Form 10-K.  These proceeds were previously reported as a non-cash financing activity and reflected net against principal repayments on borrowings for the related repurchase agreements that were settled net with those proceeds.

The prior period financial statements included herein reflect the retrospective measurement period adjustment related to the LNR acquisition as described in Note 3 to the consolidated financial statements included in our Form 10-K.  Such adjustment reduced earnings from unconsolidated entities and net income by $1.8 million in the three and six months ended June 30, 2013.

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash Flows from Operating Activities:
Net income	$ 241,263	$ 124,935
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs	5,543	4,986
Amortization of convertible debt discount and deferred fees	6,209	2,652
Accretion of net discount on investment securities	(11,680)	(16,568)
Accretion of net deferred loan fees and discounts	(10,147)	(14,243)
Amortization of premium from secured borrowings on transferred loans	(824)	(731)
Share-based compensation	14,731	8,829
Share-based component of incentive fees	6,962	365
Change in fair value of fair value option investment securities	(13,320)	988
Change in fair value of consolidated VIEs	(25,610)	(11,132)
Change in fair value of servicing rights	10,774	(2,898)
Change in fair value of loans held-for-sale	(32,501)	(458)
Change in fair value of derivatives	16,494	(23,760)
Foreign currency (gain) loss, net	(5,464)	5,867
Gain on non-performing loans and sale of investments	(12,575)	(15,666)
Other-than-temporary impairment	1,010	859
Loan loss allowance, net	358	755
Depreciation and amortization	10,550	3,366
Earnings from unconsolidated entities	(9,627)	(1,919)
Distributions of earnings from unconsolidated entities	6,016	787
Changes in operating assets and liabilities:
Related-party payable, net	6,682	22,093
Accrued interest receivable, less purchased interest	(18,840)	(4,985)
Other assets	(10,535)	(4,969)
Accounts payable, accrued expenses and other liabilities	(29,787)	30,393
Originations of loans held-for-sale, net of principal collections	(582,033)	(390,669)
Proceeds from sale of loans held-for-sale	666,793	476,453
Net cash provided by operating activities	230,442	195,330
Cash Flows from Investing Activities:
Spin-off of Starwood Waypoint Residential Trust	(111,960)
Purchase of LNR, net of cash acquired		(586,383)
Purchase of investment securities	(53,453)	(59,476)
Proceeds from sales of investment securities	50,219	235,904
Proceeds from principal collections on investment securities	19,114	40,124
Origination and purchase of loans held-for-investment	(1,277,636)	(651,897)
Proceeds from principal collections on loans	587,018	140,478
Proceeds from loans sold	202,514	97,490
Acquisition and improvement of single family homes	(61,901)	(262,315)
Proceeds from sale of single family homes	1,784	4,095
Purchase of other assets	(15,502)	(136)
Purchase of non-performing loans		(132,957)
Proceeds from sale of non-performing loans	1,153	10,742
Investment in unconsolidated entities	(21,973)	(5,000)
Distribution of capital from unconsolidated entities	30,544	1,569
Payments for purchase or termination of derivatives	(14,253)	(39)
Proceeds from termination of derivatives	2,092	3,544
Return of investment basis in purchased derivative asset	798	1,028
Increase in restricted cash, net	(5,941)	(41,797)
Net cash used in investing activities	(667,383)	(1,205,026)
Cash Flows from Financing Activities:
Borrowings under financing agreements	1,807,229	1,614,133
Proceeds from issuance of convertible senior notes		587,700
Principal repayments on borrowings	(1,510,052)	(1,650,974)
Payment of deferred financing costs	(7,881)	(8,529)
Proceeds from secured borrowings		95,000
Proceeds from common stock issuances	583,053	822,368
Payment of equity offering costs	(1,636)	(617)
Payment of dividends	(185,594)	(133,944)
Contributions from non-controlling interests		1,007
Distributions to non-controlling interests	(33,409)	(47,534)
Issuance of debt of consolidated VIEs	71,756
Repayment of debt of consolidated VIEs	(99,763)	(81,870)
Distributions of cash from consolidated VIEs	13,413	2,124
Net cash provided by financing activities	637,116	1,198,864
Net increase in cash and cash equivalents	200,175	189,168
Cash and cash equivalents, beginning of period	317,627	177,671
Effect of exchange rate changes on cash	825	(52)
Cash and cash equivalents, end of period	518,627	366,787
Supplemental disclosure of cash flow information:
Cash paid for interest	65,229	22,580
Income taxes paid	14,792	2,214
Supplemental disclosure of non-cash investing and financing activities:
Net assets distributed in spin-off of Starwood Waypoint Residential Trust	1,008,377
Dividends declared, but not yet paid	108,012	76,900
Consolidation of VIEs (VIE asset/liability additions)	23,991,532	10,674,125
Deconsolidation of VIEs (VIE asset/liability reductions)	6,038,375	584,460
Fair value of assets acquired		1,152,360
Fair value of liabilities assumed		562,279
Unsettled trades and loans receivable	$ 52,815

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Acquisitions and Divestitures (Tables)

6 Months Ended

Jun. 30, 2014

Acquisitions and Divestitures

Summary of consolidated results of operations for the SFR segment prior to spin-off, excluding segment allocations

The following table presents the summarized consolidated results of operations for the SFR segment prior to the spin-off, excluding segment allocations during the six months ended June 30, 2014 (in thousands):

	For the Three Months EndedJune 30,					For the Six Months EndedJune 30,
	2014		2013			2014			2013
Total revenues	$	—	$	2,594		$	3,876		$	3,758
Total costs and expenses	—		9,870			6,369			13,495
Loss before other income and income taxes	—		(7,276		)	(2,493		)	(9,737		)
Total other income	—		1,068			942			1,403
Loss before income taxes	—		(6,208		)	(1,551		)	(8,334		)
Income tax benefit (provision)	—		150			—			(12		)
Net loss	$	—	$	(6,058	)	$	(1,551	)	$	(8,346	)

Summary of consolidated balance sheet of the SFR segment

The following table presents the summarized consolidated balance sheet of the SFR segment as of January 31, 2014, the date of the spin-off (in thousands):

	January 31, 2014
Assets:
Cash and cash equivalents	$	111,960
Restricted cash	189
Residential real estate, net	812,017
Non-performing residential loans	211,019
Other assets	9,498
Total Assets	$	1,144,683
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	24,346
Equity:
Additional paid-in capital	1,130,405
Accumulated deficit	(11,662		)
Total Stockholders’ Equity	1,118,743
Non-controlling interests in consolidated subsidiaries	1,594
Total Equity	1,120,337
Total Liabilities and Equity	$	1,144,683

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Subsequent Events (Details) (USD $)	0 Months Ended		3 Months Ended		6 Months Ended			0 Months Ended		0 Months Ended
	May 06, 2014	Feb. 24, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Lender 2 Repo 1 Facility	Aug. 06, 2014 Subsequent event	Jul. 24, 2014 Subsequent event Lender 2 Repo 1 Facility	Jul. 24, 2014 Subsequent event Lender 2 Repo 1 Facility Minimum	Jul. 24, 2014 Subsequent event Lender 2 Repo 1 Facility Maximum	Aug. 01, 2014 Subsequent event Warehouse line
Subsequent Events
Available borrowings under the facility before amendment									$ 225,000,000
Maximum facility size			$ 3,378,812,000		$ 3,378,812,000		$ 225,000,000		$ 325,000,000			$ 250,000,000
Debt instrument reduction in basis spread										0.25%	0.50%
Dividend declared (in dollars per share)	$ 0.48	$ 0.48	$ 0.48	$ 0.46	$ 0.96	$ 0.90		$ 0.48

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Derivatives and Hedging Activity (Tables)

6 Months Ended

Jun. 30, 2014

Derivatives and Hedging Activity

Tabular disclosure of fair values of derivative instruments

The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Fair Value of Derivatives in an Asset Position(1) As of				Fair Value of Derivatives in a Liability Position(2) As of
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Interest rate swaps	$	63	$	125	$	638	$	729
Total derivatives designated as hedging instruments	63		125		638		729
Derivatives not designated as hedging instruments:
Interest rate swaps	1,874		5,102		1,819		983
Foreign exchange contracts	502		269		23,837		22,480
Credit index instruments	2,242		2,273		—		—
Total derivatives not designated as hedging instruments	4,618		7,644		25,656		23,463
Total derivatives	$	4,681	$	7,769	$	26,294	$	24,192

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

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

Schedule of effect of derivative financial instruments on the condensed consolidated statements of operations and of comprehensive income

Derivatives Designated as Hedging Instruments For the Three Months Ended June 30,	(Loss) Gain Recognized in OCI (effective portion)			(Loss) Gain Reclassified from AOCI into Income (effective portion)			(Loss) Gain Recognized in Income (ineffective portion)		Location of (Loss) Gain Recognized in Income
2014	$	(457	)	$	(364	)	$	—	Interest expense
2013	$	1,094		$	(407	)	$	—	Interest expense
For the Six Months Ended June 30,
2014	$	(708	)	$	(737	)	$	—	Interest expense
2013	$	926		$	(854	)	$	—	Interest expense

Derivatives Not Designated as	Location of (Loss) Gain	Amount of (Loss) Gain Recognized in Income for theThree Months Ended June 30,						Amount of (Loss) Gain Recognized in Income for theSix Months Ended June 30,
Hedging Instruments	Recognized in Income	2014			2013			2014			2013
Interest rate swaps	(Loss) gain on derivative financial instruments	$	(2,314	)	$	6,863		$	(6,511	)	$	7,013
Foreign exchange contracts	(Loss) gain on derivative financial instruments	(6,965		)	(1,311		)	(10,012		)	14,767
Credit index instruments	(Loss) gain on derivative financial instruments	(511		)	606			(1,133		)	606
		$	(9,790	)	$	6,158		$	(17,656	)	$	22,386

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Loans (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Investments in loans
Total gross loans	$ 5,187,475,000		$ 5,187,475,000		$ 4,754,788,000
Face value	5,283,932,000		5,283,932,000		4,845,115,000
Loan loss allowance (loans held-for-investment)	(4,342,000)	(2,816,000)	(4,342,000)	(2,816,000)	(3,984,000)
Carrying Value	5,183,133,000		5,183,133,000		4,750,804,000
Loans with variable rates of interest	3,877,333,000		3,877,333,000		3,231,334,000
Loans with variable rates of interest (as a percent)	74.80%		74.80%
Variable rate basis of loans			LIBOR
Weighted average spread of loans (as a percent)	5.65%		5.65%
Amount of loan impairment charges on individual loans held for investment			0		0
Allowance for loan losses as a percent of carrying amount			5.60%		5.60%
Activity in allowance for loan losses
Allowance for loan losses at the beginning of the period			3,984,000	2,061,000	2,061,000
Provision for loan losses			577,000	755,000
Recoveries			(219,000)
Allowance for loan losses at the end of the period	4,342,000	2,816,000	4,342,000	2,816,000	3,984,000
Recorded investment in loans related to the allowance for loan loss	289,470,000	160,893,000	289,470,000	160,893,000
Movement of loans held for investment
Balance at the beginning of the period			4,750,804,000	3,000,335,000	3,000,335,000
Acquisitions/origination/additional funding			1,860,026,000	1,308,602,000
Capitalized Interest			19,022,000	5,279,000
Basis of loans sold			(868,804,000)	(573,825,000)
Loan maturities/principal repayments			(633,425,000)	(140,596,000)
Discount accretion/premium amortization			10,147,000	14,243,000
Changes in fair value	11,608,000	458,000	32,501,000	458,000
Unrealized foreign currency remeasurement gain (loss)			16,462,000	(4,572,000)
Capitalized cost written off				(1,517,000)
Loan loss allowance, net			(358,000)	(755,000)
Transfer to other assets			(3,242,000)
Balance at the end of the period	5,183,133,000	3,607,652,000	5,183,133,000	3,607,652,000	4,750,804,000
1-month LIBOR
Investments in loans
Loans with variable rates of interest	137,092,000		137,092,000		150,076,000
Effective variable rate basis (as a percent)	0.1552%		0.1552%		0.1677%
3 Month LIBOR
Investments in loans
Loans with variable rates of interest	406,392,000		406,392,000		392,950,000
Effective variable rate basis (as a percent)	0.5525%		0.5525%		0.5233%
LIBOR floor
Investments in loans
Loans with variable rates of interest	3,333,849,000		3,333,849,000		2,688,308,000
Weighted average spread of loans (as a percent)	0.36%		0.36%		0.49%
LIBOR floor | Minimum
Investments in loans
Effective variable rate basis (as a percent)	0.15%		0.15%		0.19%
LIBOR floor | Maximum
Investments in loans
Effective variable rate basis (as a percent)	3.00%		3.00%		3.00%
Rating 2
Investments in loans
Total gross loans	429,357,000		429,357,000		364,491,000
Rating 3
Investments in loans
Total gross loans	4,309,365,000		4,309,365,000		3,905,204,000
Rating 4
Investments in loans
Total gross loans	289,470,000		289,470,000		265,640,000
Allowance for loan losses as a percent of carrying amount			1.50%
Rating 5
Investments in loans
Allowance for loan losses as a percent of carrying amount			5.00%
N/A
Investments in loans
Total gross loans	159,283,000		159,283,000		219,453,000
Total loans held-for-investment
Investments in loans
Total gross loans	4,890,196,000		4,890,196,000		4,367,702,000
Face value	4,987,325,000		4,987,325,000		4,455,533,000
Carrying Value of loan in default	4,400,000		4,400,000
Total loans held-for-investment | First Mortgages
Investments in loans
Total gross loans	3,259,428,000		3,259,428,000		2,714,512,000
Face value	3,317,358,000		3,317,358,000		2,766,217,000
Weighted Average Coupon (as a percent)			5.40%		5.50%
Weighted Average Life			3 years 10 months 24 days		4 years 3 months 18 days
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans
Investments in loans
Total gross loans	3,255,012,000		3,255,012,000		2,701,731,000
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | Rating 2
Investments in loans
Total gross loans	101,875,000		101,875,000		94,981,000
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | Rating 3
Investments in loans
Total gross loans	3,010,516,000		3,010,516,000		2,452,763,000
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | Rating 4
Investments in loans
Total gross loans	142,166,000		142,166,000		153,987,000
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | N/A
Investments in loans
Total gross loans	455,000		455,000
Total loans held-for-investment | Subordinated mortgages
Investments in loans
Total gross loans	355,561,000		355,561,000		407,462,000
Face value	388,449,000		388,449,000		442,475,000
Weighted Average Coupon (as a percent)			8.60%		9.70%
Weighted Average Life			4 years 1 month 6 days		4 years 2 months 12 days
Total loans held-for-investment | Subordinated mortgages | Rating 2
Investments in loans
Total gross loans	104,821,000		104,821,000		103,369,000
Total loans held-for-investment | Subordinated mortgages | Rating 3
Investments in loans
Total gross loans	218,685,000		218,685,000		272,375,000
Total loans held-for-investment | Subordinated mortgages | Rating 4
Investments in loans
Total gross loans	32,055,000		32,055,000		31,718,000
Total loans held-for-investment | Mezzanine Loans
Investments in loans
Total gross loans	1,275,207,000		1,275,207,000		1,245,728,000
Face value	1,281,518,000		1,281,518,000		1,246,841,000
Weighted Average Coupon (as a percent)			10.60%		11.70%
Weighted Average Life			3 years 3 months 18 days		3 years 6 months
Total loans held-for-investment | Mezzanine Loans | Rating 2
Investments in loans
Total gross loans	209,690,000		209,690,000		153,119,000
Total loans held-for-investment | Mezzanine Loans | Rating 3
Investments in loans
Total gross loans	950,268,000		950,268,000		1,012,674,000
Total loans held-for-investment | Mezzanine Loans | Rating 4
Investments in loans
Total gross loans	115,249,000		115,249,000		79,935,000
Total loans held-for-investment | Cost Recovery Loans
Investments in loans
Total gross loans	4,416,000		4,416,000		12,781,000
Total loans held-for-investment | Cost Recovery Loans | N/A
Investments in loans
Total gross loans	4,416,000		4,416,000		12,781,000
Loans Held-for-sale
Investments in loans
Total gross loans	154,412,000		154,412,000		206,672,000
Face value	153,724,000		153,724,000		209,099,000
Weighted Average Coupon (as a percent)			4.70%		5.30%
Weighted Average Life			9 years 9 months 18 days		9 years 7 months 6 days
Loans Held-for-sale | N/A
Investments in loans
Total gross loans	154,412,000		154,412,000		206,672,000
Loans transferred as secured borrowings
Investments in loans
Total gross loans	142,867,000		142,867,000		180,414,000
Face value	142,883,000		142,883,000		180,483,000
Weighted Average Coupon (as a percent)			5.50%		5.40%
Weighted Average Life			2 years 9 months 18 days		2 years 10 months 24 days
Loans transferred as secured borrowings | Rating 2
Investments in loans
Total gross loans	12,971,000		12,971,000		13,022,000
Loans transferred as secured borrowings | Rating 3
Investments in loans
Total gross loans	$ 129,896,000		$ 129,896,000		$ 167,392,000

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Accumulated Other Comprehensive Income (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accumulated Other Comprehensive Income
Interest expense	$ (37,695)	$ (22,648)	$ (75,526)	$ (40,074)
OTTI	(797)	(359)	(1,010)	(401)
Total	120,382	61,511	241,263	124,935
Amounts Reclassified from AOCI
Accumulated Other Comprehensive Income
Total	11,539	(48)	10,949	13,810
Losses on cash flow hedges | Interest rate contracts | Amounts Reclassified from AOCI
Accumulated Other Comprehensive Income
Interest expense	(364)	(407)	(737)	(854)
Unrealized gains on available for sale securities | Amounts Reclassified from AOCI
Accumulated Other Comprehensive Income
Gain (loss) on sale of investments, net	11,903	718	11,899	15,065
OTTI		(359)	(213)	(401)
Total	$ 11,903	$ 359	$ 11,686	$ 14,664

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets:
Cash and cash equivalents	$ 518,627	$ 317,627
Restricted cash	44,561	69,052
Loans held-for-investment, net	4,885,854	4,363,718
Loans held-for-sale, at fair value	154,412	206,672
Loans transferred as secured borrowings	142,867	180,414
Investment securities ($532,328 and $566,789 held at fair value)	902,424	935,107
Intangible assets-servicing rights ($138,318 and $150,149 held at fair value)	156,846	177,173
Residential real estate, net		749,214
Non-performing residential loans		215,371
Investment in unconsolidated entities	118,621	122,954
Goodwill	140,437	140,437
Derivative assets	4,681	7,769
Accrued interest receivable	37,483	37,630
Other assets	165,532	95,813
Variable interest entity ("VIE") assets, at fair value	114,091,158	103,151,624
Total Assets	121,363,503	110,770,575
Liabilities:
Accounts payable, accrued expenses and other liabilities	140,809	225,374
Related-party payable	24,475	17,793
Dividends payable	108,012	90,171
Derivative liabilities	26,294	24,192
Secured financing agreements, net	2,561,267	2,257,560
Convertible senior notes, net	1,003,847	997,851
Secured borrowings on transferred loans	142,815	181,238
VIE liabilities, at fair value	113,541,151	102,649,263
Total Liabilities	117,548,670	106,443,442
Commitments and contingencies (Note 20)
Starwood Property Trust, Inc. Stockholders' Equity:
Preferred stock, $0.01 per share, 100,000,000 shares authorized, no shares issued and outstanding
"Common stock, $0.01 per share, 500,000,000 shares authorized, 223,224,144 issued and 222,598,294 outstanding as of June 30, 2014 and 196,139,045 issued and 195,513,195 outstanding as of December 31, 2013 "	2,232	1,961
Additional paid-in capital	3,784,575	4,300,479
Treasury stock (625,850 shares)	(10,642)	(10,642)
Accumulated other comprehensive income	74,962	75,449
Accumulated deficit	(49,686)	(84,719)
Total Starwood Property Trust, Inc. Stockholders' Equity	3,801,441	4,282,528
Non-controlling interests in consolidated subsidiaries	13,392	44,605
Total Equity	3,814,833	4,327,133
Total Liabilities and Equity	$ 121,363,503	$ 110,770,575

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Fair Value (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value

Schedule of financial assets and liabilities carried at fair value on a recurring basis

The following tables present our financial assets and liabilities carried at fair value on a recurring basis in the condensed consolidated balance sheets by their level in the fair value hierarchy as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	June 30, 2014
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	154,412	$	—	$	—	$	154,412
RMBS	231,605		—		—		231,605
CMBS	284,619		—		2,258		282,361
Equity security	16,104		16,104		—		—
Domestic servicing rights	138,318		—		—		138,318
Derivative assets	4,681		—		4,681		—
VIE assets	114,091,158		—		—		114,091,158
Total	$	114,920,897	$	16,104	$	6,939	$	114,897,854
Financial Liabilities:
Derivative liabilities	$	26,294	$	—	$	26,294	$	—
VIE liabilities	113,541,151		—		108,355,026		5,186,125
Total	$	113,567,445	$	—	$	108,381,320	$	5,186,125

	December 31, 2013
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	206,672	$	—	$	—	$	206,672
RMBS	296,236		—		—		296,236
CMBS	255,306		—		47,300		208,006
Equity security	15,247		15,247		—		—
Domestic servicing rights	150,149		—		—		150,149
Derivative assets	7,769		—		7,769		—
VIE assets	103,151,624		—		—		103,151,624
Total	$	104,083,003	$	15,247	$	55,069	$	104,012,687
Financial Liabilities:
Derivative liabilities	$	24,192	$	—	$	24,192	$	—
VIE liabilities	102,649,263		—		101,051,279		1,597,984
Total	$	102,673,455	$	—	$	101,075,471	$	1,597,984

Schedule of changes in financial assets and liabilities classified as Level III

The changes in financial assets and liabilities classified as Level III were as follows for the three and six months ended June 30, 2014 and 2013 (amounts in thousands):

Three Months ended June 30, 2014	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights			VIE Assets			VIE Liabilities			Total
April 1, 2014 balance	$	74,117		$	291,217		$	240,665		$	144,898		$	118,451,518		$	(3,482,922	)	$	115,719,493
Total realized and unrealized (losses) gains:
Included in earnings:
Change in fair value / gain on sale	11,546			10,130			4,393			(5,523		)	(3,332,084		)	(1,664		)	(3,313,202		)
Net accretion	—			3,323			—			—			—			—			3,323
Included in OCI	—			(9,363		)	2,740			—			—			—			(6,623		)
Purchases / Originations	320,566			—			42,740			—			—			—			363,306
Sales	(251,612		)	(53,236		)	(13,457		)	—			—			—			(318,305		)
Issuances	—			—			—			—			—			(25,995		)	(25,995		)
Cash repayments / receipts	(205		)	(10,466		)	(421		)	—			—			50,984			39,892
Transfers into Level III	—			—			5,480			—			—			(1,983,525		)	(1,978,045		)
Transfers out of Level III	—			—			—			(1,057		)	—			293,115			292,058
Consolidations of VIEs	—			—			—			—			3,720,885			(68,772		)	3,652,113
Deconsolidations of VIEs	—			—			221			—			(4,749,161		)	32,654			(4,716,286		)
June 30, 2014 balance	$	154,412		$	231,605		$	282,361		$	138,318		$	114,091,158		$	(5,186,125	)	$	109,711,729
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2014	$	688		$	2,804		$	4,513		$	(5,523	)	$	(3,332,084	)	$	(1,664	)	$	(3,331,266	)

Three Months ended June 30, 2013	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights		VIE Assets			VIE Liabilities			Total
April 1, 2013 balance	$	—		$	321,043		$	—		$	—	$	—		$	—		$	321,043
Acquisition of LNR	256,502			—			62,432			156,993		90,989,793			(1,994,243		)	89,471,477
Total realized and unrealized (losses) gains:	—			—			18			—		—			—			18
Included in earnings:	—			—			—			—		—			—			—
Change in fair value	458						(1,187		)	2,898		(3,794,641		)	94,448			(3,698,024		)
Impairment	—			(359		)	—			—		—			—			(359		)
Net accretion	—			5,755			—			—		—			—			5,755
Included in OCI	—			(11,103		)	1,908			—		—			—			(9,195		)
Purchases / Originations	390,669			20,090			39			—		—			—			410,798
Sales	(476,336		)	—			(10,072		)	—		—			—			(486,408		)
Issuances	—			—			—			—		—			—			—
Cash repayments / receipts	(117		)	(15,771		)	—			—		—			79,735			63,847
Transfers into Level III	—			—			115,814			—		—			(489,513		)	(373,699		)
Transfers out of Level III	—			—			(3,499		)	—		—			152,683			149,184
Consolidations of VIEs	—			—			—			—		10,674,125			(178,631		)	10,495,494
Deconsolidations of VIEs	—			—			(1,054		)	—		(584,804		)	861			(584,997		)
June 30, 2013 balance	$	171,176		$	319,655		$	164,399		$	159,891	$	97,284,473		$	(2,334,660	)	$	95,764,934
Amount of total (losses) gains included in earnings attributable to assets still held at June 30, 2013	(8,344		)	6,627			(3,430		)	2,898		(3,794,641		)	94,448			(3,702,442		)

Six Months ended June 30, 2014	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights			VIE Assets			VIE Liabilities			Total
January 1, 2014 balance	$	206,672		$	296,236		$	208,006		$	150,149		$	103,151,624		$	(1,597,984	)	$	102,414,703
Total realized and unrealized (losses) gains:
Included in earnings:
Change in fair value / gain on sale	32,439			11,141			9,600			(10,774		)	(7,013,623		)	99,837			(6,871,380		)
OTTI	—			(213		)	—			—			—			—			(213		)
Net accretion	—			9,887			—			—			—			—			9,887
Included in OCI	—			(4,615		)	2,207			—			—			—			(2,408		)
Purchases / Originations	582,391			—			46,571			—			—			—			628,962
Sales	(554,073		)	(62,546		)	(29,301		)	—			—			—			(645,920		)
Issuances	—			—			—			—			—			(71,756		)	(71,756		)
Cash repayments / receipts	(297		)	(18,285		)	(829		)	—			—			86,349			66,938
Transfers into Level III	—			—			52,780			—			—			(2,555,137		)	(2,502,357		)
Transfers out of Level III	(112,720		)	—			(179		)	(1,057		)	—			712,856			598,900
Consolidations of VIEs	—			—			(6,715		)	—			23,991,532			(1,892,944		)	22,091,873
Deconsolidations of VIEs	—			—			221			—			(6,038,375		)	32,654			(6,005,500		)
June 30, 2014 balance	$	154,412		$	231,605		$	282,361		$	138,318		$	114,091,158		$	(5,186,125	)	$	109,711,729
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2014	$	688		$	7,971		$	9,018		$	(10,774	)	$	(7,013,623	)	$	99,837		$	(6,906,883	)

Six Months ended June 30, 2013	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights		VIE Assets			VIE Liabilities			Total
January 1, 2013 balance	$	—		$	333,153		$	—		$	—	$	—		$	—		$	333,153
Acquisition of LNR	256,502			—			62,432			156,993		90,989,793			(1,994,243		)	89,471,477
Total realized and unrealized (losses) gains:	—			2,129			18			—		—			—			2,147
Included in earnings:	—			—			—			—		—			—			—
Change in fair value	458			—			(1,187		)	2,898		(3,794,641		)	94,448			(3,698,024		)
Impairment	—			(402		)	—			—		—			—			(402		)
Net accretion	—			11,906			—			—		—			—			11,906
Included in OCI	—			(1,871		)	1,908			—		—			—			37
Purchases / Originations	390,669			20,090			39			—		—			—			410,798
Sales	(476,336		)	(12,712		)	(10,072		)	—		—			—			(499,120		)
Issuances	—			—			—			—		—			—			—
Cash repayments / receipts	(117		)	(32,638		)	—			—		—			79,735			46,980
Transfers into Level III	—			—			115,814			—		—			(489,513		)	(373,699		)
Transfers out of Level III	—			—			(3,499		)	—		—			152,683			149,184
Consolidations of VIEs	—			—			—			—		10,674,125			(178,631		)	10,495,494
Deconsolidations of VIEs	—			—			(1,054		)	—		(584,804		)	861			(584,997		)
June 30, 2013 balance	$	171,176		$	319,655		$	164,399		$	159,891	$	97,284,473		$	(2,334,660	)	$	95,764,934
Amount of total (losses) gains included in earnings attributable to assets still held at June 30, 2013	(8,344		)	14,306			(3,430		)	2,898		(3,794,641		)	94,448			(3,694,763		)

Schedule of fair value of financial instruments not carried at fair value (level III)

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

	June 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets not carried at fair value:
Loans held-for-investment and loans transferred as secured borrowings	$	5,028,721	$	5,163,988	$	4,544,132	$	4,609,040
Securities, held-to-maturity	370,096		371,603		368,318		368,453
European servicing rights	18,528		18,528		27,024		29,327
Non-performing residential loans	—		—		215,371		215,371
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	$	2,704,082	$	2,705,452	$	2,438,798	$	2,436,708
Convertible senior notes	1,003,847		1,190,700		997,851		1,160,000

Schedule of quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis

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

	Carrying Value at		Valuation		Range as of (1)
	June 30, 2014		Technique	Unobservable Input	June 30, 2014	December 31, 2013
Loans held-for-sale, fair value option	$	154,412	Discounted cash flow	Yield (b)	4.5% - 5.2%	5.2% - 5.9%
				Duration(c)	5.0 - 10.0 years	5.0 - 10.0 years
RMBS	231,605		Discounted cash flow	Constant prepayment rate(a)	0.3% - 16.8%	(0.6)% - 16.6%
				Constant default rate(b)	1.5% - 9.5%	1.4% - 11.3%
				Loss severity(b)	12% - 81%(e)	15% - 92%(e)
				Delinquency rate(c)	3% - 32%	3% - 48%
				Servicer advances(a)	23% - 96%	24% - 95%
				Annual coupon deterioration(b)	0% - 0.8%	0% - 0.7%
				Putback amount per projected total collateral loss(d)	0% - 11%	0% - 9%
CMBS	282,361		Discounted cash flow	Yield(b)	0% - 527.9%	0% - 890.0%
				Duration(c)	0 – 11.5 years	0 - 11.0 years
Domestic servicing rights	138,318		Discounted cash flow	Debt yield(a)	8.75%	8.75%
				Discount rate(b)	15%	15%
				Control migration(b)	0% - 80%	0% - 80%
VIE assets	114,091,158		Discounted cash flow	Yield(b)	0% - 912.2%	0% - 952.3%
				Duration(c)	0 – 21.9 years	0 - 22.7 years
VIE liabilities	5,186,125		Discounted cash flow	Yield(b)	0% - 912.2%	0% - 952.3%
				Duration(c)	0 – 21.9 years	0 - 22.7 years

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

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Condensed Consolidated Statements of Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Total Starwood Property Trust, Inc. Stockholders' Equity	Common stock	Additional Paid-In Capital	Treasury Stock	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)	Non-Controlling Interests
Balance at Dec. 31, 2012	$ 2,797,205	$ 2,719,346	$ 1,361	$ 2,721,353	$ (10,642)	$ (72,401)	$ 79,675	$ 77,859
Balance (in shares) at Dec. 31, 2012			136,125,356		625,850
Increase (Decrease) in Stockholders' Equity
Proceeds from public offering of common stock	822,368	822,368	305	822,063
Proceeds from public offering of common stock (in shares)			30,475,000
Equity offering costs	(617)	(617)		(617)
Convertible senior notes	28,107	28,107		28,107
Stock-based compensation	8,829	8,829	4	8,825
Stock-based compensation (in shares)			350,002
Manager incentive fee paid in stock	365	365		365
Manager incentive fee paid in stock (in shares)			13,188
Net income	124,935	122,697				122,697		2,238
Dividends declared, $0.90 and $0.48 per share for period ended June 30, 2013 and 2014, respectively	(137,046)	(137,046)				(137,046)
Other comprehensive income (loss), net	(19,390)	(19,390)					(19,390)
Non-controlling interest assumed through LNR acquisition	8,277							8,277
Contributions from non-controlling interests	1,007							1,007
Distribution to non-controlling interests	(47,534)							(47,534)
Balance at Jun. 30, 2013	3,586,506	3,544,659	1,670	3,580,096	(10,642)	(86,750)	60,285	41,847
Balance (in shares) at Jun. 30, 2013			166,963,546		625,850
Balance at Dec. 31, 2013	4,327,133	4,282,528	1,961	4,300,479	(10,642)	(84,719)	75,449	44,605
Balance (in shares) at Dec. 31, 2013	196,139,045		196,139,045		625,850
Increase (Decrease) in Stockholders' Equity
Proceeds from public offering of common stock	564,695	564,695	253	564,442
Proceeds from public offering of common stock (in shares)			25,300,000
Proceeds from ATM Agreement	18,346	18,346	8	18,338
Proceeds from ATM Agreement (in shares)			759,000
Proceeds from DRIP Plan	12	12		12
Proceeds from DRIP Plan (in shares)			481
Equity offering costs	(1,636)	(1,636)		(1,636)
Stock-based compensation	14,731	14,731	7	14,724
Stock-based compensation (in shares)			735,014
Manager incentive fee paid in stock	6,962	6,962	3	6,959
Manager incentive fee paid in stock (in shares)			290,604
Net income	241,263	238,469				238,469		2,794
Dividends declared, $0.90 and $0.48 per share for period ended June 30, 2013 and 2014, respectively	(203,436)	(203,436)				(203,436)
Spin-off of SWAY	(1,120,337)	(1,118,743)		(1,118,743)				(1,594)
Other comprehensive income (loss), net	(487)	(487)					(487)
VIE non-controlling interests	996							996
Distribution to non-controlling interests	(33,409)							(33,409)
Balance at Jun. 30, 2014	$ 3,814,833	$ 3,801,441	$ 2,232	$ 3,784,575	$ (10,642)	$ (49,686)	$ 74,962	$ 13,392
Balance (in shares) at Jun. 30, 2014	223,224,144		223,224,144		625,850

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Goodwill and Intangible Assets (Details) (USD $)				6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Jun. 30, 2014 European servicing rights	Jun. 30, 2013 European servicing rights	Jun. 30, 2014 Domestic servicing rights	Jun. 30, 2013 Domestic servicing rights	Jun. 30, 2014 Domestic servicing rights Before consolidation of securitization VIEs	Dec. 31, 2013 Domestic servicing rights Before consolidation of securitization VIEs	Jun. 30, 2014 Domestic servicing rights VIE eliminations	Dec. 31, 2013 Domestic servicing rights VIE eliminations
Servicing rights, at fair value
Fair value at the beginning of the period						$ 150,149,000		$ 206,100,000	$ 230,700,000	$ 67,800,000	$ 80,600,000
Acquisition of LNR							156,993,000
Changes in fair value due to changes in inputs and assumptions						(10,774,000)	2,898,000
Other						(1,057,000)
Fair value at the end of the period						138,318,000	159,891,000	206,100,000	230,700,000	67,800,000	80,600,000
Servicing rights
Net carrying value at the beginning of the period				27,024,000
Acquisition of LNR					32,649,000
Foreign exchange gain (loss)				713,000	(18,000)
Amortization and OTTI				(9,209,000)	(1,876,000)
Net carrying value at the end of the period				18,528,000	30,755,000
Total servicing rights	156,846,000	177,173,000	190,646,000
Fair value at the beginning of the period				29,300,000
Fair value at the end of the period				$ 18,500,000	$ 33,900,000

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Investment in Unconsolidated Entities (Tables)

6 Months Ended

Jun. 30, 2014

Investment in Unconsolidated Entities

Summary of investments in unconsolidated entities

The below table summarizes our investments in unconsolidated entities as of June 30, 2014 and December 31, 2013 (dollar amounts in thousands):

	Participation /	Carrying value as of				Carrying value over (under) equity in net assets as of
	Ownership %(1)	June 30, 2014		December 31, 2013		June 30, 2014(2)
Equity method:
Investor entity which owns equity interests in two real estate services providers	50%	$	20,010	$	19,371	$	—
Small balance bridge loan financing venture	50%	26,445		26,121		—
European investment fund	50%	7,974		23,779		(4,235		)
Mezzanine loan venture	49%	23,335		23,676		—
Healthcare bridge loan venture	various	14,945		14,163		—
Various	25% - 50%	5,118		4,371		—
		97,827		111,481		$	(4,235	)
Cost method:
Loan servicing venture	4% - 6%	9,225		8,014
Various	2% - 10%	11,569		3,459
		20,794		11,473
		$	118,621	$	122,954

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

(2) Differences between the carrying value of our investment and the underlying equity in net assets of the investee are accounted for as if the investee were a consolidated entity in accordance with ASC 323, Investments—Equity Method and Joint Ventures.

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Derivatives and Hedging Activity (Details 3) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Credit-risk-related Contingent Features
Ratio of indebtedness to total assets above which will the Company could be declared in default (as a percent)			75.00%
Derivatives in net liability position	$ 24,500,000		$ 24,500,000
Collateral posted	19,100,000		19,100,000
Termination liability value	24,500,000		24,500,000
Derivatives not designated as hedging instruments
Gain loss derivative instruments
Amount of (Loss) Gain Recognized in Income	(9,790,000)	6,158,000	(17,656,000)	22,386,000
Interest rate contracts | Derivatives not designated as hedging instruments
Gain loss derivative instruments
Amount of (Loss) Gain Recognized in Income	(2,314,000)	6,863,000	(6,511,000)	7,013,000
Foreign exchange contracts | Derivatives not designated as hedging instruments
Gain loss derivative instruments
Amount of (Loss) Gain Recognized in Income	(6,965,000)	(1,311,000)	(10,012,000)	14,767,000
Credit spread instrument | Derivatives not designated as hedging instruments
Gain loss derivative instruments
Amount of (Loss) Gain Recognized in Income	(511,000)	606,000	(1,133,000)	606,000
Cash flow hedges | Interest rate contracts | Derivatives designated as hedging instruments
Gain loss derivative instruments
(Loss) Gain Recognized in OCI (effective portion)	(457,000)	1,094,000	(708,000)	926,000
(Loss) Gain Reclassified from AOCI into Income (effective portion)	$ (364,000)	$ (407,000)	$ (737,000)	$ (854,000)

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Related-Party Transactions

6 Months Ended

Jun. 30, 2014

Related-Party Transactions

Related-Party Transactions

14. Related-Party Transactions

Management Agreement

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

Base Management Fee.  For the three months ended June 30, 2014 and 2013, approximately $13.6 million and $12.7 million, respectively, was incurred for base management fees. For the six months ended June 30, 2014 and 2013, approximately $26.8 million and $22.4 million, respectively, was incurred for base management fees. As of June 30, 2014 and December 31, 2013, there were $13.5 million and $0, respectively, of unpaid base management fees included in related-party payable in our condensed consolidated balance sheets.

Incentive Fee.  For the three months ended June 30, 2014 and 2013, approximately $4.1 million and $0, respectively, was incurred for incentive fees. For the six months ended June 30, 2014 and 2013, approximately $11.3 million and $0, respectively, was incurred for incentive fees.  As of June 30, 2014 and December 31, 2013, approximately $4.1 million and $6.8 million, respectively, of unpaid incentive fees were included in related-party payable in our condensed consolidated balance sheets.

Expense Reimbursement.  For the three months ended June 30, 2014 and 2013, approximately $2.0 million and $1.8 million, respectively, was incurred for executive compensation and other reimbursable expenses. For the six months ended June 30, 2014 and 2013, approximately $3.9 million and $4.3 million, respectively, was incurred for executive compensation and other reimbursable expenses. As of June 30, 2014 and December 31, 2013, approximately $2.4 million and $4.4 million, respectively, of unpaid reimbursable executive compensation and other expenses were included in related-party payable in our condensed consolidated balance sheets.

Manager Equity Plan

In January 2014, we granted 2,489,281 restricted stock units to our Manager under the Starwood Property Trust, Inc. Manager Equity Plan (“Manager Equity Plan”).  In connection with these grants and prior similar grants, we recognized share-based compensation expense of $6.8 million and $4.0 million within management fees in our condensed consolidated statements of operations for the three months ended June 30, 2014 and 2013, respectively.  In the six months ended June 30, 2014 and 2013, we recognized $13.6 million and $8.5 million, respectively, related to these awards. Refer to Note 15 herein for further discussion of these grants.

Investment in Loan

In October 2012, we co-originated $475.0 million in financing for the acquisition and redevelopment of a 10-story retail building located at 701 Seventh Avenue in the Times Square area of Manhattan through a joint venture with Starwood Distressed Opportunity Fund IX (“Fund IX”), an affiliate of our Manager.  In January 2014, we refinanced the initial financing with an $815.0 million first mortgage and mezzanine financing to facilitate the further development of the property.  Fund IX did not participate in the refinancing. As such, the joint venture distributed $31.6 million to Fund IX for the liquidation of Fund IX’s interest in the joint venture.

LNR Related-Party Arrangement

In connection with the LNR acquisition, we were required to cash collateralize certain obligations of LNR, including letters of credit and performance obligations. Fund IX funded $6.2 million of this obligation, but the account is within our name and is thus reflected within our restricted cash balance. We have recognized a corresponding payable to Fund IX of $4.4 million and $6.2 million within related-party payable in our condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013, respectively.

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets

Schedule of information about servicing intangibles

The table below presents information about our GAAP servicing intangibles for the six months ended June 30, 2014 and 2013 (in thousands):

	2014			2013
Domestic servicing rights, at fair value
Fair value at January 1	$	150,149		$	—
Acquisition of LNR	—			156,993
Changes in fair value due to changes in inputs and assumptions	(10,774		)	2,898
Other	(1,057		)	—
Fair value at June 30	138,318			159,891
European servicing rights
Net carrying amount at January 1 (fair value of $29.3 million)	27,024			—
Acquisition of LNR	—			32,649
Foreign exchange gain (loss)	713			(18		)
Amortization and OTTI	(9,209		)	(1,876		)
Net carrying value at June 30 (fair value of $18.5 million and $33.9 million)	18,528			30,755
Total servicing rights at June 30	$	156,846		$	190,646

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Earnings per Share

6 Months Ended

Jun. 30, 2014

Earnings per Share

Earnings per Share

16. Earnings per Share

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

The Company’s unvested restricted share units and awards contain rights to receive non-forfeitable dividends and thus are participating securities.  Due to the existence of these participating securities, the two-class method of computing EPS is required, unless another method is determined to be more dilutive. Under the two-class method, undistributed earnings are reallocated between common shares and participating securities.  For the three and six months ended June 30, 2014 and 2013, the two-class method resulted in the most dilutive EPS calculation.

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

	For the Three Month EndedJune 30,						For the Six Month EndedJune 30,
	2014			2013			2014			2013
Basic Earnings
Continuing Operations:
Income from continuing operations attributable to STWD common stockholders	$	117,868		$	66,512		$	240,020		$	131,043
Less: Income attributable to unvested shares	(1,367		)	(369		)	(3,100		)	(823		)
Basic — Income from continuing operations	$	116,501		$	66,143		$	236,920		$	130,220
Discontinued Operations:
Loss from discontinued operations	$	—		$	(6,058	)	$	(1,551	)	$	(8,346	)
Basic — Net income attributable to STWD common stockholders after allocation to participating securities	$	116,501		$	60,085		$	235,369		$	121,874
Diluted Earnings
Continuing Operations:
Basic — Income from continuing operations attributable to STWD common stockholders	$	117,868		$	66,512		$	240,020		$	131,043
Less: Income attributable to unvested shares	(1,367		)	(369		)	(3,100		)	(823		)
Add: Undistributed earnings to unvested shares	128			—			480			—
Less: Undistributed earnings reallocated to unvested shares	(126		)	—			(471		)	—
Diluted — Income from continuing operations	$	116,503		$	66,143		$	236,929		$	130,220
Discontinued Operations:
Basic — Loss from discontinued operations	$	—		$	(6,058	)	$	(1,551	)	$	(8,346	)
Diluted — Net income attributable to STWD common stockholders after allocation to participating securities	$	116,503		$	60,085		$	235,378		$	121,874
Number of Shares:
Basic — Average shares outstanding	218,751			162,448			207,203			149,037
Effect of dilutive securities — Convertible Notes	4,056			—			3,906			—
Effect of dilutive securities — Contingently Issuable Shares	85			—			85			—
Diluted — Average shares outstanding	222,892			162,448			211,194			149,037
Earnings Per Share Attributable to STWD Common Stockholders
Basic:
Income from continuing operations	$	0.53		$	0.41		$	1.14		$	0.87
Loss from discontinued operations	—			(0.04		)	(0.01		)	(0.05		)
Net income	$	0.53		$	0.37		$	1.13		$	0.82
Diluted:
Income from continuing operations	$	0.52		$	0.41		$	1.12		$	0.87
Loss from discontinued operations	—			(0.04		)	(0.01		)	(0.05		)
Net income	$	0.52		$	0.37		$	1.11		$	0.82

As of June 30, 2014 and 2013, unvested restricted shares of 2.6 million and 0.9 million, respectively, were excluded from the computation of diluted EPS as their effect was determined to be anti-dilutive.

Also as of June 30, 2014, there were 48.7 million potential shares of common stock contingently issuable upon the conversion of the Convertible Notes.  The Company has asserted its intent and ability to settle the principal amount of the Convertible Notes in cash.  As a result, this principal amount, representing 44.6 million and 44.8 million shares for the three and six months ended June 30, 2014, respectively, was not included in the computation of diluted EPS.  However, as discussed in Note 9, the conversion options associated with both Convertible Notes are “in-the-money.”  The if-converted value of the 2018 Notes and the 2019 Notes exceeded their respective principal amounts by $36.7 million and $59.9 million, respectively, at June 30, 2014.  The dilutive effect to EPS is determined by dividing this “conversion spread value” by the average share price. The “conversion spread value” is the value that would be delivered to investors in shares based on the terms of the Convertible Notes, upon an assumed conversion. In calculating the dilutive effect of these shares, the treasury stock method was used and resulted in a dilution of 4.1 million shares and 3.9 million shares for the three and six months ended June 30, 2014, respectively.

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Related-Party Transactions (Details) (USD $)	6 Months Ended		1 Months Ended		6 Months Ended	0 Months Ended	1 Months Ended	3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jan. 31, 2014 Co-origination of financing through joint venture with Fund IX First Mortgages:	Oct. 31, 2012 Co-origination of financing through joint venture with Fund IX First Mortgages:	Jun. 30, 2014 Starwood Property Trust, Inc. Manager Equity Plan	Jan. 02, 2014 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jan. 31, 2014 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jun. 30, 2014 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jun. 30, 2013 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jun. 30, 2014 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jun. 30, 2013 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jun. 30, 2014 Manager	Jun. 30, 2013 Manager	Jun. 30, 2014 Manager	Jun. 30, 2013 Manager	Dec. 31, 2013 Manager	Jun. 30, 2014 Fund IX LNR	Dec. 31, 2013 Fund IX LNR
Related-Party Transactions
Base management fee incurred												$ 13,600,000	$ 12,700,000	$ 26,800,000	$ 22,400,000
Base management Fee Payable												13,500,000		13,500,000		0
Incentive fee incurred												4,100,000	0	11,300,000	0
Incentive fees payable												4,100,000		4,100,000		6,800,000
Executive compensation and other reimbursable expenses												2,000,000	1,800,000	3,900,000	4,300,000
Executive compensation and other reimbursable expense payable												2,400,000		2,400,000		4,400,000
Obligation funded by an affiliate																	6,200,000
Related party payable																	4,400,000	6,200,000
Number of units granted to Manager under plan	2,651,739				2,489,281	2,000,000	2,489,281
Share-based compensation expense								6,800,000	4,000,000	13,600,000	8,500,000
Co-origination of mortgage financing	1,860,026,000	1,308,602,000	815,000,000	475,000,000
Distribution for liquidation of interest in joint venture			$ 31,600,000

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Condensed Consolidated Statements of Equity (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Condensed Consolidated Statements of Equity
Dividends declared per share (in dollars per share)	$ 0.48	$ 0.90

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Condensed Consolidated Balance Sheets
Investment securities, fair value	$ 532,328	$ 566,789
Intangible assets - servicing rights at fair value	$ 138,318	$ 150,149
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	100,000,000	100,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	223,224,144	196,139,045
Common stock, shares outstanding	222,598,294	195,513,195
Treasury stock, shares	625,850	625,850

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Convertible Senior Notes

6 Months Ended

Jun. 30, 2014

Convertible Senior Notes

Convertible Senior Notes

9. Convertible Senior Notes

On February 15, 2013, we issued $600.0 million of 4.55% Convertible Senior Notes due 2018 (the “2018 Notes”). On July 3, 2013, we issued $460.0 million of 4.00% Convertible Senior Notes due 2019 (the “2019 Notes”). The following summarizes the unsecured convertible senior notes (collectively, the “Convertible Notes”) outstanding as of June 30, 2014 (amounts in thousands, except rates):

	Principal Amount		Coupon Rate		Effective Rate(1)		Conversion Rate(2)	Maturity Date	Remaining Period of Amortization
2018 Notes	$	599,981	4.55	%	6.08	%	44.6455	3/1/2018	3.7 years
2019 Notes	$	459,997	4.00	%	5.37	%	47.5456	1/15/2019	4.5 years

	As ofJune 30, 2014			As ofDecember 31, 2013
Total principal	$	1,059,978		$	1,060,000
Net unamortized discount	(56,131		)	(62,149		)
Carrying amount of debt components	$	1,003,847		$	997,851
Carrying amount of conversion option equity components recorded in additional paid-in capital	$	48,502		$	48,502

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

(2) The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of Convertible Notes converted, as adjusted in accordance with the applicable indentures as a result of the spin-off of the SFR segment and cash dividend payments. The if-converted value of the 2018 Notes exceeded their principal amount by $36.7 million at June 30, 2014 since the closing market price of the Company’s common stock of $23.77 per share exceeded the implicit conversion price of $22.40 per share. The if-converted value of the 2019 Notes exceeded their principal amount by $59.9 million at June 30, 2014 since the closing market price of $23.77 per share exceeded the implicit conversion price of $21.03 per share for the 2019 Notes.  The Company has asserted its intent and ability to settle the principal amount of the Convertible Notes in cash.  As a result, conversion of this principal amount, totaling 44.6 million and 44.8 million shares for the three and six months ended June 30, 2014, respectively, was not included in the computation of diluted earnings per share (“EPS”).  However, the conversion spread value, representing 4.1 million and 3.9 million shares for the three and six months ended June 30, 2014, respectively, was included in the computation of diluted EPS.  See further discussion at Note 16.

As of June 30, 2014 and December 31, 2013, we had approximately $1.5 million and $1.6 million, respectively, of deferred financing costs from our Convertible Notes, net of amortization, which is included in other assets on our condensed consolidated balance sheets.

Conditions for Conversion

Prior to September 1, 2017 for the 2018 Notes and July 15, 2018 for the 2019 Notes, the Convertible Notes will be convertible only upon satisfaction of one or more of the following conditions: (1) the closing market price of the Company’s common stock is at least 130% of the conversion price of the respective Convertible Notes for at least 20 out of 30 trading days prior to the end of the preceding fiscal quarter, (2) the trading price of the Convertible Notes is less than 98% of the product of (i) the conversion rate and (ii) the closing price of the Company’s common stock during any five consecutive trading day period, (3) the Company issues certain equity instruments at less than the 10-day average closing market price of its common stock or the per-share value of certain distributions exceeds the market price of the Company’s common stock by more than 10% or (4) other specified corporate events (significant consolidation, sale, merger, share exchange, fundamental change, etc.) occur.

On or after September 1, 2017 for the 2018 Notes and July 15, 2018 for the 2019 Notes, holders may convert each of their notes at the applicable conversion rate at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date.

Impact of Spin-off on Convertible Senior Notes

As described in Note 1, on January 31, 2014, the Company distributed all of its interest in the SFR segment to the Company’s stockholders of record as of January 24, 2014.  As the per-share value of the distribution was expected to exceed 10% of the last reported market price of the Company’s common stock on the trading day prior to the announcement for such distribution, holders of the Convertible Notes were eligible to surrender their notes for conversion at any time during the period beginning November 26, 2013 (the 45th trading day immediately prior to the scheduled ex-dividend date for the distribution) and ending on the close of the business day immediately preceding February 3, 2014, the ex-dividend date for such distribution.  During this period, the Company received notices of conversion totaling $19 thousand and $3 thousand in principal for the 2018 Notes and 2019 Notes, respectively.  The cash settlement of these conversions occurred in April 2014.

Due to the distribution, the quarterly dividend threshold amounts for the Convertible Notes were adjusted to $0.3548 and $0.3710 (from $0.44 and $0.46) per share of common stock for the 2018 Notes and 2019 Notes, respectively, effective February 3, 2014.

Refer to Note 11 to the consolidated financial statements included in our Form 10-K for further discussion regarding our accounting for the Convertible Notes.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 01, 2014
Document and Entity Information
Entity Registrant Name	STARWOOD PROPERTY TRUST, INC.
Entity Central Index Key	0001465128
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		222,602,294
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Loan Securitization/Sale Activities

6 Months Ended

Jun. 30, 2014

Loan Securitization/Sale Activities

Loan Securitization/Sale Activities

10. Loan Securitization/Sale Activities

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

Within LNR, we originate commercial mortgage loans with the intent to sell these mortgage loans to SPEs for the purposes of securitization. These SPEs then issue CMBS that are collateralized in part by these assets, as well as other assets transferred to the SPE. In certain instances, we retain a subordinated interest in the SPE and serve as special servicer for the SPE. During the three and six months ended June 30, 2014, we sold $348.0 million and $637.4 million, respectively, par value of loans held-for-sale from our conduit platform for their fair values of $364.3 million and $666.8 million, respectively. During the three and six months ended June 30, 2014, the sale proceeds were used in part to repay $261.0 million and $478.1 million, respectively, of the outstanding balance of the repurchase agreements associated with these loans.

Within the Lending Segment (refer to Note 21), we originate or acquire loans and then subsequently sell a senior portion, which can be represented in various forms including first mortgages, A-Notes and senior participations. Typically, our motivation for entering into these transactions is to effectively create leverage on the subordinated position that we will retain and hold for investment. The following table summarizes our loans sold and loans transferred as secured borrowings by the Lending Segment net of expenses (in thousands):

	Loan Transfers Accounted for as Sales				Loan Transfers Accounted for as Secured Borrowings
	Face Amount		Proceeds		Face Amount		Proceeds
For the three months ended June 30,
2014	$	56,975	$	56,124	$	—	$	—
2013	52,849		52,859		95,000		95,000
For the six months ended June 30,
2014	$	204,859	$	202,524	$	—	$	—
2013	97,380		97,490		95,000		95,000

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Commitments and Contingencies (Details) (Commitment to invest in venture, USD $) In Billions, unless otherwise specified	Jun. 30, 2014 loan
Commitment to invest in venture
Commitments
Number of loans with future funding commitments	43
Value of loans with future funding commitments	$ 1.8

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Interest income from loans	$ 105,455	$ 74,936	$ 210,365	$ 142,626
Interest income from investment securities	27,620	18,577	57,074	34,817
Servicing fees	32,681	39,135	66,892	39,135
Other revenues	4,994	1,795	8,398	1,874
Total revenues	170,750	134,443	342,729	218,452
Costs and expenses:
Management fees	25,085	16,146	52,906	31,215
Interest expense	37,695	22,648	75,526	40,074
General and administrative	43,094	44,335	89,195	48,373
Business combination costs		13,420		17,616
Acquisition and investment pursuit costs	771	916	1,165	997
Depreciation and amortization	5,154	2,228	9,790	2,228
Loan loss allowance	(139)	725	358	755
Other expense	6,026	196	7,715	229
Total costs and expenses	117,686	100,614	236,655	141,487
Income before other income, income taxes and non-controlling interests	53,064	33,829	106,074	76,965
Other income:
Income of consolidated VIEs, net	47,028	31,949	103,032	31,949
Change in fair value of servicing rights	(5,523)	2,898	(10,774)	2,898
Change in fair value of investment securities, net	4,959	(1,392)	13,320	(987)
Change in fair value of mortgage loans held-for-sale, net	11,608	458	32,501	458
Earnings from unconsolidated entities	9,563	3,770	9,627	4,511
Gain (loss) on sale of investments, net	10,078	(18)	11,633	13,506
(Loss) gain on derivative financial instruments, net	(9,790)	6,158	(17,656)	22,386
Foreign currency gain (loss), net	3,777	1,580	5,254	(6,085)
Total other-than-temporary impairment ("OTTI")	(800)	(846)	(1,992)	(1,373)
Noncredit portion of OTTI recognized in other comprehensive income	3	487	982	972
Net impairment losses recognized in earnings	(797)	(359)	(1,010)	(401)
Other income, net	692	39	710	39
Total other income	71,595	45,083	146,637	68,274
Income from continuing operations before income taxes	124,659	78,912	252,711	145,239
Income tax provision	(4,277)	(11,343)	(9,897)	(11,958)
Income from continuing operations	120,382	67,569	242,814	133,281
Loss from discontinued operations, net of tax (Note 3)		(6,058)	(1,551)	(8,346)
Net income	120,382	61,511	241,263	124,935
Net income attributable to non-controlling interests	(2,514)	(1,057)	(2,794)	(2,238)
Net income attributable to Starwood Property Trust, Inc.	$ 117,868	$ 60,454	$ 238,469	$ 122,697
Basic:
Income from continuing operations (in dollars per share)	$ 0.53	$ 0.41	$ 1.14	$ 0.87
Loss from discontinued operations (in dollars per share)		$ (0.04)	$ (0.01)	$ (0.05)
Net income (in dollars per share)	$ 0.53	$ 0.37	$ 1.13	$ 0.82
Diluted:
Income from continuing operations (in dollars per share)	$ 0.52	$ 0.41	$ 1.12	$ 0.87
Loss from discontinued operations (in dollars per share)		$ (0.04)	$ (0.01)	$ (0.05)
Net income (in dollars per share)	$ 0.52	$ 0.37	$ 1.11	$ 0.82
Dividends declared per common share (in dollars per share)	$ 0.48	$ 0.46	$ 0.96	$ 0.90

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Loans

6 Months Ended

Jun. 30, 2014

Loans

Loans

4. Loans

Our loans held-for-investment are accounted for at amortized cost and our loans held-for-sale are accounted for at the lower of cost or fair value, unless we have elected the fair value option. The following tables summarize our investments in mortgages and loans by subordination class as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Carrying Value			Face Amount		Weighted Average Coupon		Weighted Average Life (“WAL”) (years)(2)
June 30, 2014
First mortgages	$	3,259,428		$	3,317,358	5.4	%	3.9
Subordinated mortgages(1)	355,561			388,449		8.6	%	4.1
Mezzanine loans	1,275,207			1,281,518		10.6	%	3.3
Total loans held-for-investment	4,890,196			4,987,325
Loans held-for-sale, fair value option elected	154,412			153,724		4.7	%	9.8
Loans transferred as secured borrowings	142,867			142,883		5.5	%	2.8
Total gross loans	5,187,475			5,283,932
Loan loss allowance (loans held-for-investment)	(4,342		)	—
Total net loans	$	5,183,133		$	5,283,932
December 31, 2013
First mortgages	$	2,714,512		$	2,766,217	5.5	%	4.3
Subordinated mortgages(1)	407,462			442,475		9.7	%	4.2
Mezzanine loans	1,245,728			1,246,841		11.7	%	3.5
Total loans held-for-investment	4,367,702			4,455,533
Loans held-for-sale, fair value option elected	206,672			209,099		5.3	%	9.6
Loans transferred as secured borrowings	180,414			180,483		5.4	%	2.9
Total gross loans	4,754,788			4,845,115
Loan loss allowance (loans held-for-investment)	(3,984		)	—
Total net loans	$	4,750,804		$	4,845,115

(1) Subordinated mortgages include B-notes and junior participations in first mortgages where we do not own the senior A-note or senior participation.  If we own both the A-note and B-note we categorize the loan as a first mortgage loan.

(2) Represents the WAL of each respective group of loans as of the respective balance sheet date. The WAL of each individual loan is calculated as a fraction, the numerator of which is the sum of the timing (in years) of each expected future principal payment multiplied by the balance of the respective payment, and with a denominator equal to the sum of the expected principal payments using the contractually extended maturity dates of the assets. Assumptions for the calculation of the WAL are adjusted as necessary for changes in projected principal repayments and/or maturity dates of the loan.

As of June 30, 2014, approximately $3.9 billion, or 74.8%, of the loans were variable rate and paid interest principally at LIBOR plus a weighted-average spread of 5.65%. The following table summarizes our investments in floating rate loans (amounts in thousands):

	June 30, 2014			December 31, 2013
Index	Base Rate	Carrying Value		Base Rate	Carrying Value
1 Month LIBOR	0.1552%	$	137,092	0.1677%	$	150,076
3 Month LIBOR	0.5525%	406,392		0.5253%	392,950
LIBOR Floor	0.15% - 3.00%(1)	3,333,849		0.19% - 3.00%(1)	2,688,308
Total		$	3,877,333		$	3,231,334

(1) The weighted-average LIBOR Floor was 0.36% and 0.49% as of June 30, 2014 and December 31, 2013, respectively.

As of June 30, 2014, the risk ratings for loans subject to our rating system, which are described in our Form 10-K and excludes loans on the cost recovery method and loans for which the fair value option has been elected, by class of loan were as follows (amounts in thousands):

	Balance Sheet Classification
	Loans Held-For-Investment										Loans
Risk Rating Category	First Mortgages		Subordinated Mortgages		Mezzanine Loans		Cost Recovery Loans		Loans Held- For-Sale		Transferred As Secured Borrowings		Total
1	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	101,875		104,821		209,690		—		—		12,971		429,357
3	3,010,516		218,685		950,268		—		—		129,896		4,309,365
4	142,166		32,055		115,249		—		—		—		289,470
5	—		—		—		—		—		—		—
N/A	455		—		—		4,416		154,412		—		159,283
	$	3,255,012	$	355,561	$	1,275,207	$	4,416	$	154,412	$	142,867	$	5,187,475

As of December 31, 2013, the risk ratings for loans subject to our rating system by class of loan were as follows (amounts in thousands):

	Balance Sheet Classification
	Loans Held-For-Investment										Loans
Risk Rating Category	First Mortgages		Subordinated Mortgages		Mezzanine Loans		Cost Recovery Loans		Loans Held- For-Sale		Transferred As Secured Borrowings		Total
1	$	—	$	—	$	—	$	—	$	—	$	—	$	—
2	94,981		103,369		153,119		—		—		13,022		364,491
3	2,452,763		272,375		1,012,674		—		—		167,392		3,905,204
4	153,987		31,718		79,935		—		—		—		265,640
5	—		—		—		—		—		—		—
N/A	—		—		—		12,781		206,672		—		219,453
	$	2,701,731	$	407,462	$	1,245,728	$	12,781	$	206,672	$	180,414	$	4,754,788

After completing our impairment evaluation process as described in our Form 10-K, we concluded that no impairment charges were required on any individual loans held-for-investment as of June 30, 2014 or December 31, 2013. As of June 30, 2014, approximately $4.4 million of our loans held-for-investment were in default, all of which are within the LNR Segment and were acquired as non-performing loans prior to the April 19, 2013 acquisition.

In accordance with our policies, we record an allowance for loan losses equal to (i) 1.5% of the aggregate carrying amount of loans rated as a “4,” plus (ii) 5% of the aggregate carrying amount of loans rated as a “5.” These groups accounted for 5.6% of our loan portfolios as of both June 30, 2014 and December 31, 2013.  The following table presents the activity in our allowance for loan losses (amounts in thousands):

	For the Six Months EndedJune 30,
	2014			2013
Allowance for loan losses at January 1	$	3,984		$	2,061
Provision for loan losses	577			755
Charge-offs	—			—
Recoveries	(219		)	—
Allowance for loan losses at June 30	$	4,342		$	2,816
Recorded investment in loans related to the allowance for loan loss	$	289,470		$	160,893

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

	For the Six Months EndedJune 30,
	2014			2013
Balance at January 1	$	4,750,804		$	3,000,335
Acquisitions/originations/additional funding	1,860,026			1,308,602
Capitalized interest(1)	19,022			5,279
Basis of loans sold(2)	(868,804		)	(573,825		)
Loan maturities/principal repayments	(633,425		)	(140,596		)
Discount accretion/premium amortization	10,147			14,243
Changes in fair value	32,501			458
Unrealized foreign currency remeasurement gain (loss)	16,462			(4,572		)
Capitalized costs written off	—			(1,517		)
Loan loss allowance, net	(358		)	(755		)
Transfer to other assets	(3,242		)	—
Balance at June 30	$	5,183,133		$	3,607,652

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

(2) See Note 10 for additional disclosure on these transactions.

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Acquisitions and Divestitures

6 Months Ended

Jun. 30, 2014

Acquisitions and Divestitures

Acquisitions and Divestitures

3.  Acquisitions and Divestitures

SFR Spin-off

As described in Note 1, on January 31, 2014, we completed the spin-off of our former SFR segment to our stockholders.  The results of operations for the SFR segment are presented within discontinued operations in our condensed consolidated statements of operations for all periods presented. We have no continuing involvement with the SFR segment following the spin-off.  Subsequent to the spin-off, SWAY entered into a management agreement with an affiliate of our Manager. The following table presents the summarized consolidated results of operations for the SFR segment prior to the spin-off, excluding segment allocations during the six months ended June 30, 2014 (in thousands):

	For the Three Months EndedJune 30,					For the Six Months EndedJune 30,
	2014		2013			2014			2013
Total revenues	$	—	$	2,594		$	3,876		$	3,758
Total costs and expenses	—		9,870			6,369			13,495
Loss before other income and income taxes	—		(7,276		)	(2,493		)	(9,737		)
Total other income	—		1,068			942			1,403
Loss before income taxes	—		(6,208		)	(1,551		)	(8,334		)
Income tax benefit (provision)	—		150			—			(12		)
Net loss	$	—	$	(6,058	)	$	(1,551	)	$	(8,346	)

The following table presents the summarized consolidated balance sheet of the SFR segment as of January 31, 2014, the date of the spin-off (in thousands):

	January 31, 2014
Assets:
Cash and cash equivalents	$	111,960
Restricted cash	189
Residential real estate, net	812,017
Non-performing residential loans	211,019
Other assets	9,498
Total Assets	$	1,144,683
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	24,346
Equity:
Additional paid-in capital	1,130,405
Accumulated deficit	(11,662		)
Total Stockholders’ Equity	1,118,743
Non-controlling interests in consolidated subsidiaries	1,594
Total Equity	1,120,337
Total Liabilities and Equity	$	1,144,683

LNR Acquisition

As described in Note 1, on April 19, 2013, we acquired the equity of LNR for an initial agreed upon purchase price of $859 million, which was reduced for transaction expenses and distributions occurring after September 30, 2012, resulting in cash consideration of approximately $730 million.  We applied the provisions of ASC 805 in accounting for our acquisition of LNR. Refer to Note 3 to the consolidated financial statements included in our Form 10-K for further discussion of the LNR acquisition including the final purchase price allocation and retrospective measurement period adjustments.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2014

Stockholders' Equity

Stockholders' Equity

15. Stockholders’ Equity

On February 24, 2014, our board of directors declared a dividend of $0.48 per share for the first quarter of 2014, which was paid on April 15, 2014 to common stockholders of record as of March 31, 2014.

On May 6, 2014, our board of directors declared a dividend of $0.48 per share for the second quarter of 2014, which was paid on July 15, 2014 to common stockholders of record as of June 30, 2014.

On April 11, 2014, we issued 22.0 million shares of common stock for gross proceeds of $491.0 million.  In connection with this offering, the underwriters had a 30-day option to purchase an additional 3.3 million shares of common stock, which they exercised in full, resulting in additional gross proceeds of $73.7 million.

On May 15, 2014, we established the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) which provides stockholders with a means of purchasing additional shares of our common stock by reinvesting the cash dividends paid on our common stock and by making additional optional cash purchases.  Shares of our common stock purchased under the DRIP Plan will either be issued directly by the Company or purchased in the open market by the plan administrator.  The Company may issue up to 11 million shares of common stock under the DRIP Plan.   During the three months ended June 30, 2014, shares issued under the DRIP Plan were not material.

On May 27, 2014, we entered into an amended and restated At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated to sell shares of the Company’s common stock of up to $500 million from time to time, through an “at the market” equity offering program. Sales of shares under the ATM Agreement will be made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale or at negotiated prices.  During the three months ended June 30, 2014, we issued 759 thousand shares under the ATM Agreement for gross proceeds of $18.3 million.

Equity Incentive Plans

The Company currently maintains the Manager Equity Plan, the Starwood Property Trust, Inc. Equity Plan (the “Equity Plan”), and the Starwood Property Trust, Inc. Non-Executive Director Stock Plan (“Non-Executive Director Stock Plan”).  Refer to Note 17 to the consolidated financial statements included in our Form 10-K for further information regarding these plans.

On January 2, 2014, the Company granted 2,000,000 restricted stock units to our Manager under the Manager Equity Plan. These awards vest ratably on a quarterly basis over a three-year period beginning on March 31, 2014 and had a grant date fair value of $55.4 million. On January 31, 2014, in connection with the spin-off of the SFR segment, the Company granted our Manager 489,281 restricted stock units of the Company in consideration of the Company’s currently unvested restricted stock units. Of these restricted stock units, 99,480 vest ratably on a quarterly basis over a 21-month period beginning on March 31, 2014 and 389,801 vest ratably on a quarterly basis over a three-year period beginning on March 31, 2014.  These restricted stock units had a grant date fair value of $14.8 million.

As of June 30, 2014, there were 3.4 million shares available for future grants under the Manager Equity Plan and the Equity Plan.

Schedule of Non-Vested Shares and Share Equivalents

	Non-Executive Director Stock Plan	Equity Plan		Manager Equity Plan		Total		Weighted Average Grant Date Fair Value (per share)
Balance as of January 1, 2014	11,228	22,502		510,415		544,145		$	22.88
Granted	—	162,458		2,489,281		2,651,739		27.94
Vested	—	(42,475	)	(572,556	)	(615,031	)	26.65
Forfeited	—	—		—		—		—
Balance as of June 30, 2014	11,228	142,485		2,427,140		2,580,853		$	27.18

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Derivatives and Hedging Activity

6 Months Ended

Jun. 30, 2014

Derivatives and Hedging Activity

Derivatives and Hedging Activity

11. Derivatives and Hedging Activity

Risk Management Objective of Using Derivatives

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

Designated Hedges

Our objective in using interest rate derivatives is to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

In connection with our repurchase agreements, we have entered into seven outstanding interest rate swaps that have been designated as cash flow hedges of the interest rate risk associated with forecasted interest payments. As of June 30, 2014, the aggregate notional amount of our interest rate swaps designated as cash flow hedges of interest rate risk totaled $162.9 million. Under these agreements, we will pay fixed monthly coupons at fixed rates ranging from 0.56% to 2.23% of the notional amount to the counterparty and receive floating rate LIBOR. Our interest rate swaps designated as cash flow hedges of interest rate risk have maturities ranging from November 2015 to May 2021.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three and six months ended June 30, 2014 and 2013 we did not recognize any hedge ineffectiveness in earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the associated variable-rate debt. Over the next twelve months, we estimate that an additional $1.0 million will be reclassified as an increase to interest expense. We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of 83 months.

Non-designated Hedges

Derivatives not designated as hedges are derivatives that do not meet the criteria for hedge accounting under GAAP or which we have not elected to designate as hedges. We do not use these derivatives for speculative purposes but instead they are used to manage our exposure to foreign exchange rates, interest rate changes, and certain credit spreads. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in gain (loss) on derivative financial instruments in our condensed consolidated statements of operations. The LNR conduit platform uses interest rate and credit index instruments to manage exposures related to commercial mortgage loans held-for-sale.

We have entered into a series of forward contracts whereby we agreed to sell an amount of foreign currency for an agreed upon amount of USD at various dates through January 2018. These forward contracts were executed to economically fix the USD amounts of foreign denominated cash flows expected to be received by us related to foreign denominated loan investments.

As of June 30, 2014, we had 66 foreign exchange forward derivatives to sell pounds sterling (“GBP”) with a total notional amount of £226.2 million, 29 foreign exchange forward derivatives to sell Euros (“EUR”) with a total notional amount of €147.9 million, two foreign exchange forward derivatives to sell Swedish Krona (“SEK”) with a total notional of SEK 23.0 million, one foreign exchange forward derivative to sell Norwegian Krone (“NOK”) with a notional of NOK 1.3 million and one foreign exchange forward to sell Danish Krone (“DKK”) with a notional of DKK 3.2 million that were not designated as hedges in qualifying hedging relationships.  We also had one foreign exchange forward contract to buy EUR with a total notional of €60.3 million.  As of June 30, 2014, there were 34 interest rate swaps where the Company is paying fixed rates, with maturities ranging from 2 to 10 years and a total notional amount of $203.1 million, four interest rate swaps where the Company is receiving fixed rates with maturities ranging from 0 to 3 years and a total notional of $59.9 million and eight credit index instruments with a total notional amount of $50.0 million.  The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Fair Value of Derivatives in an Asset Position(1) As of				Fair Value of Derivatives in a Liability Position(2) As of
	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013
Derivatives designated as hedging instruments:
Interest rate swaps	$	63	$	125	$	638	$	729
Total derivatives designated as hedging instruments	63		125		638		729
Derivatives not designated as hedging instruments:
Interest rate swaps	1,874		5,102		1,819		983
Foreign exchange contracts	502		269		23,837		22,480
Credit index instruments	2,242		2,273		—		—
Total derivatives not designated as hedging instruments	4,618		7,644		25,656		23,463
Total derivatives	$	4,681	$	7,769	$	26,294	$	24,192

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

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

The tables below present the effect of our derivative financial instruments on the condensed consolidated statements of operations and of comprehensive income for the three and six months ended June 30, 2014 and 2013:

Derivatives Designated as Hedging Instruments For the Three Months Ended June 30,	(Loss) Gain Recognized in OCI (effective portion)			(Loss) Gain Reclassified from AOCI into Income (effective portion)			(Loss) Gain Recognized in Income (ineffective portion)		Location of (Loss) Gain Recognized in Income
2014	$	(457	)	$	(364	)	$	—	Interest expense
2013	$	1,094		$	(407	)	$	—	Interest expense
For the Six Months Ended June 30,
2014	$	(708	)	$	(737	)	$	—	Interest expense
2013	$	926		$	(854	)	$	—	Interest expense

Derivatives Not Designated as	Location of (Loss) Gain	Amount of (Loss) Gain Recognized in Income for theThree Months Ended June 30,						Amount of (Loss) Gain Recognized in Income for theSix Months Ended June 30,
Hedging Instruments	Recognized in Income	2014			2013			2014			2013
Interest rate swaps	(Loss) gain on derivative financial instruments	$	(2,314	)	$	6,863		$	(6,511	)	$	7,013
Foreign exchange contracts	(Loss) gain on derivative financial instruments	(6,965		)	(1,311		)	(10,012		)	14,767
Credit index instruments	(Loss) gain on derivative financial instruments	(511		)	606			(1,133		)	606
		$	(9,790	)	$	6,158		$	(17,656	)	$	22,386

Credit-risk-related Contingent Features

We have entered into agreements with certain of our derivative counterparties that contain provisions providing that if we were to default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, we may also be declared in default on our derivative obligations. We also have certain agreements that contain provisions providing that if our ratio of principal amount of indebtedness to total assets at any time exceeds 75%, then we could be declared in default of our derivative obligations.

As of June 30, 2014, the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk related to these agreements, was $24.5 million. As of June 30, 2014, we had posted collateral of $19.1 million related to these agreements. If we had breached any of these provisions at June 30, 2014, we could have been required to settle our obligations under the agreements at their termination liability value of $24.5 million.

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets

Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Goodwill

Goodwill at June 30, 2014 and December 31, 2013 represents the excess of consideration transferred over the fair value of net assets of LNR acquired on April 19, 2013. The goodwill recognized is attributable to value embedded in LNR’s existing platform, which includes an international network of commercial real estate asset managers, work-out specialists, underwriters and administrative support professionals as well as proprietary historical performance data on commercial real estate assets.

Servicing Rights Intangibles

In connection with the LNR acquisition, we identified domestic and European servicing rights that existed at the purchase date, based upon the expected future cash flows of the associated servicing contracts. All of our servicing fees are specified by these Pooling and Servicing Agreements. At June 30, 2014 and December 31, 2013, the balance of the domestic servicing intangible was net of $67.8 million and $80.6 million, respectively, that was eliminated in consolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs. Before VIE consolidation, as of June 30, 2014 and December 31, 2013, the domestic servicing intangible had a balance of $206.1 million and $230.7 million, respectively, which represents our economic interest in this asset.

The table below presents information about our GAAP servicing intangibles for the six months ended June 30, 2014 and 2013 (in thousands):

	2014			2013
Domestic servicing rights, at fair value
Fair value at January 1	$	150,149		$	—
Acquisition of LNR	—			156,993
Changes in fair value due to changes in inputs and assumptions	(10,774		)	2,898
Other	(1,057		)	—
Fair value at June 30	138,318			159,891
European servicing rights
Net carrying amount at January 1 (fair value of $29.3 million)	27,024			—
Acquisition of LNR	—			32,649
Foreign exchange gain (loss)	713			(18		)
Amortization and OTTI	(9,209		)	(1,876		)
Net carrying value at June 30 (fair value of $18.5 million and $33.9 million)	18,528			30,755
Total servicing rights at June 30	$	156,846		$	190,646

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Secured Financing Agreements (Details) (USD $)			3 Months Ended		6 Months Ended			6 Months Ended			6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended			6 Months Ended	0 Months Ended	6 Months Ended	0 Months Ended	1 Months Ended	6 Months Ended		6 Months Ended		6 Months Ended			6 Months Ended		6 Months Ended		6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 Secured financing agreements	Jun. 30, 2013 Secured financing agreements	Jun. 30, 2014 Secured financing agreements	Jun. 30, 2013 Secured financing agreements	Dec. 31, 2013 Secured financing agreements	Jun. 30, 2014 Lender 1 Repo 1 Facility	Jan. 27, 2014 Lender 1 Repo 1 Facility	Dec. 31, 2013 Lender 1 Repo 1 Facility	Jun. 30, 2014 Lender 1 Repo 1 Facility Minimum	Jan. 31, 2014 Lender 1 Repo 1 Facility Minimum	Jun. 30, 2014 Lender 1 Repo 1 Facility Maximum	Jan. 31, 2014 Lender 1 Repo 1 Facility Maximum	Jun. 30, 2014 Lender 1 Repo 2 Facility	Dec. 31, 2013 Lender 1 Repo 2 Facility	Jun. 30, 2014 Lender 1 Repo 3 Facility	Dec. 31, 2013 Lender 1 Repo 3 Facility	Jun. 30, 2014 Lender 2 Repo 1 Facility	Dec. 31, 2013 Lender 2 Repo 1 Facility	Jul. 24, 2014 Lender 2 Repo 1 Facility Subsequent event	Jun. 30, 2014 Lender 2 Repo 1 Facility Minimum	Jul. 24, 2014 Lender 2 Repo 1 Facility Minimum Subsequent event	Jun. 30, 2014 Lender 2 Repo 1 Facility Maximum	Jul. 24, 2014 Lender 2 Repo 1 Facility Maximum Subsequent event	May 31, 2014 Lender 3 Repo I item	Jun. 30, 2014 Lender 3 Repo I	Dec. 31, 2013 Lender 3 Repo I	Jun. 30, 2014 Conduit Repo 1 Facility	Dec. 31, 2013 Conduit Repo 1 Facility	Jun. 30, 2014 Conduit Repo 2 Facility	Jun. 30, 2014 Lender 4 Repo 1 Facility	Dec. 31, 2013 Lender 4 Repo 1 Facility	Jun. 30, 2014 Lender 5 Repo 1 Facility	Dec. 31, 2013 Lender 5 Repo 1 Facility	Jun. 30, 2014 Borrowing Base	Dec. 31, 2013 Borrowing Base	Jun. 30, 2014 Term Loan	Dec. 31, 2013 Term Loan
Debt Instrument:
Pricing rate, basis								LIBOR							LIBOR		LIBOR		LIBOR								LIBOR		LIBOR		LIBOR	LIBOR		LIBOR		LIBOR		LIBOR
Pricing margin (as a percent)											1.85%		5.25%		1.90%		2.75%					2.00%		2.75%			2.85%		2.20%		2.10%	2.60%		2.00%		3.25%		2.75%
Pledged Asset Carrying Value	$ 6,461,251,000							$ 1,349,733,000							$ 230,129,000		$ 210,041,000		$ 269,290,000								$ 135,132,000				$ 128,083,000	$ 456,758,000		$ 84,150,000		$ 661,164,000		$ 2,936,771,000
Maximum Facility Size	3,378,812,000							1,000,000,000	1,000,000,000						175,000,000		148,860,000		225,000,000		325,000,000						93,836,000		250,000,000		150,000,000	359,226,000		58,467,000		250,000,000		668,423,000
Carrying Value	2,561,267,000	2,257,560,000						753,032,000		449,323,000					120,627,000	127,943,000	148,860,000	154,133,000	181,151,000	100,886,000							93,836,000	50,871,000		129,843,000	95,568,000	359,226,000	347,697,000	58,467,000	58,467,000	84,386,000	169,104,000	666,114,000	669,293,000
Current maturity period, after which the buyer delivers notice to seller, subject to a maximum date of March 13, 2015															180 days
Debt instrument reduction in basis spread																							0.25%		0.50%
Floor interest rate (as a percent)																																						0.75%
Discount amortization																																						2,300,000	2,500,000
Available borrowings under the facility before amendment									550,000,000												225,000,000
Maximum liability guaranteed (as a percent)											25.00%	25.00%	100.00%	100.00%
Amount of increase in additional borrowings																										42,700,000
Number of extension options																										2
Extended term																										1 year
Repayment of secured financings
2014 (remainder of)			194,472,000		194,472,000												26,200,000														95,600,000			58,500,000
2015			155,464,000		155,464,000
2016			296,329,000		296,329,000
2017			568,760,000		568,760,000
2018			223,683,000		223,683,000
Thereafter			1,124,868,000		1,124,868,000
Total			2,563,576,000		2,563,576,000
Deferred financing costs, net of amortization			24,900,000		24,900,000		22,500,000
Additional non-cash interest expense			$ 2,600,000	$ 1,800,000	$ 5,300,000	$ 5,000,000

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Investment Securities

6 Months Ended

Jun. 30, 2014

Investment Securities

Investment Securities

5. Investment Securities

Investment securities were comprised of the following as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Carrying Value as of
	June 30, 2014			December 31, 2013
RMBS, available-for-sale	$	231,605		$	296,236
Single-borrower CMBS, available-for-sale	116,071			114,346
CMBS, fair value option (1)	638,069			550,282
Held-to-maturity (“HTM”) securities	370,096			368,318
Equity security, fair value option	16,104			15,247
Subtotal - Investment securities	1,371,945			1,344,429
VIE eliminations (1)	(469,521		)	(409,322		)
Total investment securities	$	902,424		$	935,107

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

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

Three Months ended	Available-for-sale					CMBS, fair		HTM		Equity
June 30, 2014	RMBS			CMBS		value option		Securities		Security		Total
Purchases	$	—		$	—	$	43,563	$	—	$	—	$	43,563
Sales	53,236			—		13,548		—		—		66,784
Principal collections	10,466			421		—		—		—		10,887
June 30, 2013
Purchases	20,090			—		1,618		—		—		21,708
Sales	—			—		10,072		—		—		10,072
Principal collections	15,771			2,627		—		—		—		18,398
Six Months ended
June 30, 2014
Purchases	$	—		$	—	$	53,453	$	—	$	—	$	53,453
Sales	62,546		(1)	—		32,032		—		—		94,578
Principal collections	18,285			829		—		—		—		19,114
June 30, 2013
Purchases	20,090			—		1,618		37,190		—		58,898
Sales	12,712			206,608		10,072		—		6,769		236,161
Principal collections	32,638			7,484		—		—		—		40,122

(1) Settlement of $44.4 million occurred subsequent to June 30, 2014.  We account for all investment securities transactions on a trade-date basis.

RMBS and Single-borrower CMBS, Available-for-Sale

With the exception of one CMBS classified as HTM, the Company classified all of its RMBS and CMBS investments where the fair value option has not been elected as available-for-sale as of June 30, 2014 and December 31, 2013. These RMBS and CMBS are reported at fair value in the balance sheet with changes in fair value recorded in accumulated other comprehensive income (“AOCI”).

The tables below summarize various attributes of our investments in available-for-sale RMBS and single-borrower CMBS where the fair value option has not been elected as of June 30, 2014 and December 31, 2013 (amounts in thousands):

								Unrealized Gains or (Losses) Recognized in AOCI
	Purchase Amortized Cost		Credit OTTI			Recorded Amortized Cost		Non-Credit OTTI			Gross Unrealized Gains		Gross Unrealized Losses			Net Fair Value Adjustment		Fair Value
June 30, 2014
RMBS	$	193,084	$	(10,322	)	$	182,762	$	(3	)	$	49,529	$	(683	)	$	48,843	$	231,605
Single-borrower CMBS	103,498		—			103,498		—			12,573		—			12,573		116,071
Total	$	296,582	$	(10,322	)	$	286,260	$	(3	)	$	62,102	$	(683	)	$	61,416	$	347,676
December 31, 2013
RMBS	$	253,912	$	(11,134	)	$	242,778	$	(55	)	$	55,154	$	(1,641	)	$	53,458	$	296,236
Single-borrower CMBS	100,687		—			100,687		—			13,659		—			13,659		114,346
Total	$	354,599	$	(11,134	)	$	343,465	$	(55	)	$	68,813	$	(1,641	)	$	67,117	$	410,582

	Weighted Average Coupon(1)		Weighted Average Rating (Standard & Poor’s)		WAL (Years)(3)
June 30, 2014
RMBS	1.0	%	B-		7.4
Single-borrower CMBS	11.6	%	BB+	(2)	3.7
December 31, 2013
RMBS	1.0	%	B-		6.8
Single-borrower CMBS	11.5	%	BB+	(2)	5.9

(1) Calculated using the June 30, 2014 and December 31, 2013 one-month LIBOR rate of 0.155% and 0.168%, respectively, for floating rate securities.

(2) As of June 30, 2014 and December 31, 2013, approximately 99.3% and 98.8%, respectively, of the CMBS securities were rated BB+.

(3) Represents the WAL of each respective group of securities calculated as of the respective balance sheet date. The WAL of each individual security or loan is calculated as a fraction, the numerator of which is the sum of the timing (in years) of each expected future principal payment multiplied by the balance of the respective payment, and with a denominator equal to the sum of the expected principal payments using the contractually extended maturity dates of the assets. Assumptions for the calculation of the WAL are adjusted as necessary for changes in projected principal repayments and/or maturity dates of the security.

As of June 30, 2014, $0.9 million, or 0.7%, of the single-borrower CMBS were variable rate. As of December 31, 2013, $1.3 million, or 1.2%, of the single-borrower CMBS were variable rate. As of June 30, 2014, approximately $195.4 million, or 84.3%, of RMBS were variable rate and paid interest at LIBOR plus a weighted average spread of 0.44%. As of December 31, 2013, approximately $256.1 million, or 86.5%, of RMBS were variable rate and paid interest at LIBOR plus a weighted average spread of 0.37%. We purchased all of the RMBS at a discount that will be accreted into income over the expected remaining life of the security. The majority of the income from this strategy is earned from the accretion of these discounts.

The following table contains a reconciliation of aggregate principal balance to amortized cost for our RMBS and single-borrower CMBS as of June 30, 2014 and December 31, 2013, excluding CMBS where we have elected the fair value option (amounts in thousands):

	June 30, 2014					December 31, 2013
	RMBS			CMBS		RMBS			CMBS
Principal balance	$	312,280		$	103,498	$	414,020		$	100,687
Accretable yield	(90,876		)	—		(101,046		)	—
Non-accretable difference	(38,642		)	—		(70,196		)	—
Total discount	(129,518		)	—		(171,242		)	—
Amortized cost	$	182,762		$	103,498	$	242,778		$	100,687

The principal balance of credit deteriorated RMBS was $240.8 million and $320.4 million as of June 30, 2014 and December 31, 2013, respectively. Accretable yield related to these securities totaled $73.5 million and $78.3 million as of June 30, 2014 and December 31, 2013, respectively.

The following table discloses the changes to accretable yield and non-accretable difference for our RMBS and single-borrower CMBS during the three and six months ended June 30, 2014, excluding CMBS where we have elected the fair value option (amounts in thousands):

	Accretable Yield					Non-Accretable Difference
	RMBS			CMBS		RMBS			CMBS
Three Months ended June 30, 2014
Balance as of April 1, 2014	$	99,622		$	—	$	55,432		$	—
Accretion of discount	(3,323		)	—		—			—
Principal write-downs	—			—		(509		)	—
Purchases	—			—		—			—
Sales	(10,276		)	—		(11,428		)	—
OTTI	—			—		—			—
Transfer to/from non-accretable difference	4,853			—		(4,853		)	—
Balance as of June 30, 2014	$	90,876		$	—	$	38,642		$	—
Six Months ended June 30, 2014
Balance as of January 1, 2014	$	101,046		$	—	$	70,196		$	—
Accretion of discount	(9,887		)	—		—			—
Principal write-downs	—			—		(875		)	—
Purchases	—			—		—			—
Sales	(12,238		)	—		(18,937		)	—
OTTI	213			—		—			—
Transfer to/from non-accretable difference	11,742			—		(11,742		)	—
Balance as of June 30, 2014	$	90,876		$	—	$	38,642		$	—

Subject to certain limitations on durations, we have allocated an amount to invest in RMBS that cannot exceed 10% of our total assets excluding LNR VIEs. We have engaged a third party manager who specializes in RMBS to execute the trading of RMBS, the cost of which was $0.5 million and $0.8 million for the three months ended June 30, 2014 and 2013, respectively, and $1.1 million and $1.4 million for the six months ended June 30, 2014 and 2013, respectively, which has been recorded as management fees in the accompanying condensed consolidated statements of operations.

The following table presents the gross unrealized losses and estimated fair value of the available-for-sale securities (i) where we have not elected the fair value option, (ii) that were in an unrealized loss position as of June 30, 2014 and December 31, 2013, and (iii) for which OTTIs (full or partial) have not been recognized in earnings (amounts in thousands):

	Estimated Fair Value				Unrealized Losses
	Securities with a loss less than 12 months		Securities with a loss greater than 12 months		Securities with a loss less than 12 months			Securities with a loss greater than 12 months
As of June 30, 2014
RMBS	$	16,255	$	1,552	$	(480	)	$	(206	)
Single-borrower CMBS	—		—		—			—
Total	$	16,255	$	1,552	$	(480	)	$	(206	)
As of December 31, 2013
RMBS	$	26,344	$	1,809	$	(1,444	)	$	(252	)
Single-borrower CMBS	—		—		—			—
Total	$	26,344	$	1,809	$	(1,444	)	$	(252	)

As of June 30, 2014, there were three securities with unrealized losses reflected in the table above. After evaluating each security and recording adjustments, as necessary, for other-than-temporary impairments, the remaining unrealized losses reflected above were not considered to represent credit-related other-than-temporary impairments. We considered a number of factors in reaching this conclusion, including that we did not intend to sell any individual security, it was not considered more likely than not that we would be forced to sell any individual security prior to recovering our amortized cost, and there were no material credit events that would have caused us to otherwise conclude that we would not recover our cost. Credit losses, which represent most of the other-than-temporary impairments we record, are calculated by comparing (i) the estimated future cash flows of each security discounted at the yield determined as of the initial acquisition date or, if since revised, as of the last date previously revised, to (ii) our amortized cost basis. Significant judgment is used in projecting cash flows for our non-agency RMBS. As a result, actual income and/or impairments could be materially different from what is currently projected and/or reported.

CMBS, Fair Value Option

As discussed in the “Fair Value Option” section of Note 2 herein, we elect the fair value option for LNR’s CMBS in an effort to eliminate accounting mismatches resulting from the current or potential consolidation of securitization VIEs. As of June 30, 2014, the fair value and unpaid principal balance of CMBS where we have elected the fair value option, before consolidation of securitization VIEs, was $638.1 million and $4.1 billion, respectively. These balances represent our economic interests in these assets. However, as a result of our consolidation of securitization VIEs, the vast majority of this fair value ($469.5 million at June 30, 2014) is eliminated against VIE liabilities before arriving at our GAAP balance for fair value option CMBS. During the three and six months ended June 30, 2014, we purchased $107.1 million and $151.7 million of CMBS, respectively, for which we elected the fair value option. Due to our consolidation of securitization VIEs, $63.5 million and $98.3 million, respectively, of these amounts are reflected as repayment of debt of consolidated VIEs in our condensed consolidated statement of cash flows.

As of June 30, 2014 and December 31, 2013, none of our CMBS where we have elected the fair value option were variable rate. The table below summarizes various attributes of our investment in fair value option CMBS as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Weighted Average Coupon		Weighted Average Rating		WAL (Years)(1)
June 30, 2014
CMBS, fair value option	5.0	%	CCC	(2)	5.3
December 31, 2013
CMBS, fair value option	5.4	%	CC	(2)	4.4

(1) The WAL of each security is calculated based on the period of time over which we expect to receive principal cash flows. Expected principal cash flows are based on contractual payments net of expected losses.

(2) As of June 30, 2014 and December 31, 2013, excludes $27.3 million and $55.5 million, respectively, in fair value option CMBS that are not rated.

HTM Securities

The table below summarizes various attributes of our investments in HTM securities as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Net Carrying Amount (Amortized Cost)		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
June 30, 2014
Preferred interests	$	285,946	$	2,083	$	—		$	288,029
CMBS	84,150		—		(576		)	83,574
Total	$	370,096	$	2,083	$	(576	)	$	371,603
December 31, 2013
Preferred interests	$	284,087	$	135	$	—		$	284,222
CMBS	84,231		—		—			84,231
Total	$	368,318	$	135	$	—		$	368,453

During 2013, we originated two preferred equity interests of $246.1 million and $37.2 million, respectively, in limited liability companies that own commercial real estate. These preferred equity interests mature in December 2018 and October 2014, respectively.  During 2013, we also purchased a CMBS security with a face value and purchase price of $84.1 million, which we expect to hold to maturity. The stated maturity of this security is November 2016.

Equity Security, Fair Value Option

During 2012, we acquired 9,140,000 ordinary shares from a related-party (approximately a 4% interest) in Starwood European Real Estate Finance Limited (“SEREF”), a debt fund that is externally managed by an affiliate of our Manager and is listed on the London Stock Exchange. We have elected to report the investment using the fair value option because the shares are listed on an exchange, which allows us to determine the fair value using a quoted price from an active market, and also due to potential lags in reporting resulting from differences in the respective regulatory requirements. The fair value of the investment remeasured in U.S. dollars (“USD”) was $16.1 million and $15.2 million as of June 30, 2014 and December 31, 2013, respectively.

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Investment in Unconsolidated Entities

6 Months Ended

Jun. 30, 2014

Investment in Unconsolidated Entities

Investment in Unconsolidated Entities

6. Investment in Unconsolidated Entities

The below table summarizes our investments in unconsolidated entities as of June 30, 2014 and December 31, 2013 (dollar amounts in thousands):

	Participation /	Carrying value as of				Carrying value over (under) equity in net assets as of
	Ownership %(1)	June 30, 2014		December 31, 2013		June 30, 2014(2)
Equity method:
Investor entity which owns equity interests in two real estate services providers	50%	$	20,010	$	19,371	$	—
Small balance bridge loan financing venture	50%	26,445		26,121		—
European investment fund	50%	7,974		23,779		(4,235		)
Mezzanine loan venture	49%	23,335		23,676		—
Healthcare bridge loan venture	various	14,945		14,163		—
Various	25% - 50%	5,118		4,371		—
		97,827		111,481		$	(4,235	)
Cost method:
Loan servicing venture	4% - 6%	9,225		8,014
Various	2% - 10%	11,569		3,459
		20,794		11,473
		$	118,621	$	122,954

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

(2) Differences between the carrying value of our investment and the underlying equity in net assets of the investee are accounted for as if the investee were a consolidated entity in accordance with ASC 323, Investments—Equity Method and Joint Ventures.

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Secured Financing Agreements

6 Months Ended

Jun. 30, 2014

Secured Financing Agreements

Secured Financing Agreements

8. Secured Financing Agreements

The following table is a summary of our secured financing agreements in place as of June 30, 2014 and December 31, 2013 (dollars in thousands):

Pledged Asset

Maximum

Carrying Value at

Facility Type

Revolver

Eligible Assets

Current Maturity

Extended Maturity(a)

Pricing

Carrying Value

Facility Size

June 30, 2014

December 31, 2013

Lender 1 Repo 1

Repurchase

Yes

Identified Loans and CMBS

(b)

(b)

LIBOR + 1.85% to 5.25%

$

1,349,733

$

1,000,000

$

753,032

$

449,323

Lender 1 Repo 2

Repurchase

Yes

Identified RMBS

(c)

N/A

LIBOR + 1.90%

230,129

175,000

120,627

127,943

Lender 1 Repo 3

Repurchase

No

Identified Loans

Dec 2014

Dec 2016

LIBOR + 2.75%

210,041

148,860

148,860

154,133

Lender 2 Repo 1

Repurchase

Yes

Identified Loans

Oct 2015

Oct 2018

LIBOR + 2.00% to 2.75%

269,290

225,000

(d)

181,151

100,886

Lender 3 Repo 1

Repurchase

No

Identified Loans

May 2017

May 2019

LIBOR + 2.85%

135,132

93,836

93,836

50,871

Conduit Repo 1

Repurchase

Yes

Identified Loans

Sep 2014

Sep 2014

LIBOR + 2.20%

—

250,000

—

129,843

Conduit Repo 2

Repurchase

Yes

Identified Loans

Nov 2014

Nov 2014

LIBOR + 2.10%

128,083

150,000

95,568

—

Lender 4 Repo 1

Repurchase

No

Identified Loans

Oct 2015

Oct 2017

LIBOR + 2.60%

456,758

359,226

359,226

347,697

Lender 5 Repo 1

Repurchase

No

Identified CMBS

Dec 2014

Dec 2014

LIBOR + 2.00%

84,150

58,467

58,467

58,467

Borrowing Base

Bank Credit Facility

Yes

Identified Loans

Sep 2015

Sep 2017

LIBOR + 3.25%(e)

661,164

250,000

84,386

169,104

Term Loan

Syndicated Facility

No

Specifically Identified Assets

Apr 2020

Apr 2020

LIBOR + 2.75%(e)

2,936,771

668,423

666,114

(f)

669,293

(f)

$

6,461,251

$

3,378,812

$

2,561,267

$

2,257,560

(a) Subject to certain conditions as defined in the respective facility agreement.

(b) Maturity date for borrowings collateralized by loans of January 2017 before extension options and January 2019 assuming initial extension options.  Maturity date for borrowings collateralized by CMBS of January 2015 before extension options and January 2016 assuming initial extension options.

(c) The date that is 180 days after the buyer delivers notice to seller, subject to a maximum date of March 13, 2015.

(d) On July 24, 2014, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $225 million to $325 million and reduce pricing 25-50 basis points depending on the collateral type.

(e) Subject to borrower’s option to choose alternative benchmark based rates pursuant to the terms of the credit agreement. The Term Loan is also subject to a 75 basis point floor.

(f) Term loan outstanding balance is net of $2.3 million and $2.5 million of unamortized discount as of June 30, 2014 and December 31, 2013.

In January 2014, we amended the Lender 1 Repo 1 facility to (i) upsize available borrowings to $1.0 billion from $550 million; (ii) extend the maturity date for loan collateral to January 2019 and for CMBS collateral to January 2016, each from August 2014, and each assuming initial extension options; (iii) allow for up to four additional one-year extension options with respect to any loan collateral that remains financed at maturity, in an effort to match the term of the maturity dates of these assets; (iv) reduce pricing and debt-yield thresholds for purchased assets; and (v) amend certain financial covenants to contemplate the spin-off of the SFR segment.  STWD guarantees certain of the obligations of the consolidated subsidiary, which is the borrower under the repurchase agreement, up to a maximum liability of either 25% or 100% of the then-currently outstanding repurchase price of purchased assets, depending upon the type of asset being financed.

In May 2014, we amended our Lender 3 Repo 1 facility to (i) increase additional borrowings by $42.7 million; (ii) extend the maturity date for loan collateral to May 2019, assuming the exercise of two one-year extension options; (iii) reduce pricing for all purchased assets; and (iv) increase advance rates for certain purchased assets.

Our secured financing agreements contain certain financial tests and covenants. As of June 30, 2014, we were in compliance with all such covenants.

The following table sets forth our five-year principal repayments schedule for the secured financings, assuming no defaults or expected extensions and excluding the loans transferred as secured borrowings. Our credit facilities generally require principal to be paid down prior to the facilities’ respective maturities if and when we receive principal payments on, or sell, the investment collateral that we have pledged. The amount reflected in each period includes principal repayments on our credit facilities that would be required if (i) we received the repayments that we expect to receive on the investments that have been pledged as collateral under the credit facilities, as applicable, and (ii) the credit facilities that are expected to have amounts outstanding at their current maturity dates are extended where extension options are available to us (amounts in thousands):

2014 (remainder of)	$	194,472
2015	155,464
2016	296,329
2017	568,760
2018	223,683
Thereafter(1)	1,124,868
Total	$	2,563,576

(1) Principal paydown of the Term Loan through 2020 excludes $2.3 million of discount amortization.

Secured financing maturities for 2014 primarily relate to $95.6 million on the Conduit Repo 2 facility, $58.5 million on the Lender 5 Repo 1 facility, and $26.2 million on the Lender 1 Repo 3 facility.

As of June 30, 2014 and December 31, 2013, we had approximately $24.9 million and $22.5 million, respectively, of deferred financing costs from secured financing agreements, net of amortization, which is included in other assets on our condensed consolidated balance sheets. For the three and six months ended June 30, 2014, approximately $2.6 million, and $5.3 million, respectively, of amortization was included in interest expense on our condensed consolidated statements of operations. For the three and six months ended June 30, 2013, approximately $1.8 million, and $5.0 million, respectively, of amortization was included in interest expense on our condensed consolidated statements of operations.

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Derivatives and Hedging Activity (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	$ 4,681	$ 7,769
Fair Value of Derivatives in a Liability Position	26,294	24,192
Derivatives designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	63	125
Fair Value of Derivatives in a Liability Position	638	729
Derivatives not designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	4,618	7,644
Fair Value of Derivatives in a Liability Position	25,656	23,463
Interest rate contracts | Derivatives designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	63	125
Fair Value of Derivatives in a Liability Position	638	729
Interest rate contracts | Derivatives not designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	1,874	5,102
Fair Value of Derivatives in a Liability Position	1,819	983
Foreign exchange contracts | Derivatives not designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	502	269
Fair Value of Derivatives in a Liability Position	23,837	22,480
Credit spread instrument | Derivatives not designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	$ 2,242	$ 2,273

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Offsetting Assets and Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets
Net Amounts of Assets Presented in the Statement of Financial Position	$ 4,681	$ 7,769
Liabilities
Gross Amounts of Recognized Liabilities	1,837,061	1,443,355
Net Amounts of Liabilities Presented in the Statement of Financial Position	1,837,061	1,443,355
Gross Amounts Not Offset in the Statement of Financial Position
Financial Instruments	1,811,373	1,419,855
Cash Collateral Pledged	18,412	7,150
Net Amount	7,276	16,350
Derivatives
Assets
Gross Amounts of Recognized Assets	4,681	7,769
Net Amounts of Assets Presented in the Statement of Financial Position	4,681	7,769
Gross Amounts Not Offset in the Statement of Financial Position
Financial Instruments	606	692
Cash Collateral Received	1,564	1,916
Net Amount	2,511	5,161
Liabilities
Gross Amounts of Recognized Liabilities	26,294	24,192
Net Amounts of Liabilities Presented in the Statement of Financial Position	26,294	24,192
Gross Amounts Not Offset in the Statement of Financial Position
Financial Instruments	606	692
Cash Collateral Pledged	18,412	7,150
Net Amount	7,276	16,350
Repurchase agreements (2)
Liabilities
Gross Amounts of Recognized Liabilities	1,810,767	1,419,163
Net Amounts of Liabilities Presented in the Statement of Financial Position	1,810,767	1,419,163
Gross Amounts Not Offset in the Statement of Financial Position
Financial Instruments	$ 1,810,767	$ 1,419,163

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Derivatives and Hedging Activity (Details) In Millions, unless otherwise specified	6 Months Ended		6 Months Ended			6 Months Ended
	Jun. 30, 2014 Interest rate swaps Derivatives designated as hedging instruments USD ($) instrument	Jun. 30, 2014 Interest rate swaps Derivatives not designated as hedging instruments Long USD ($) instrument	Jun. 30, 2014 Interest rate swaps Derivatives not designated as hedging instruments Long Minimum	Jun. 30, 2014 Interest rate swaps Derivatives not designated as hedging instruments Long Maximum	Jun. 30, 2014 Interest rate swaps Derivatives not designated as hedging instruments Short USD ($) instrument	Jun. 30, 2014 Interest rate swaps Derivatives not designated as hedging instruments Short Minimum	Jun. 30, 2014 Interest rate swaps Derivatives not designated as hedging instruments Short Maximum	Jun. 30, 2014 Foreign exchange contracts Derivatives not designated as hedging instruments GBP instrument	Jun. 30, 2014 Foreign exchange contracts Derivatives not designated as hedging instruments GBP Short GBP (£)	Jun. 30, 2014 Foreign exchange contracts Derivatives not designated as hedging instruments EUR instrument	Jun. 30, 2014 Foreign exchange contracts Derivatives not designated as hedging instruments EUR Long EUR (€) instrument	Jun. 30, 2014 Foreign exchange contracts Derivatives not designated as hedging instruments EUR Short EUR (€)	Jun. 30, 2014 Foreign exchange contracts Derivatives not designated as hedging instruments SEK Short USD ($) instrument	Jun. 30, 2014 Foreign exchange contracts Derivatives not designated as hedging instruments NOK Short USD ($) instrument	Jun. 30, 2014 Foreign exchange contracts Derivatives not designated as hedging instruments DKK Short USD ($) instrument	Jun. 30, 2014 Credit spread instrument Derivatives not designated as hedging instruments USD ($) instrument
Derivatives
Number of derivative instruments held	7	34			4						1		2	1	1	8
Notional amount of derivative instruments	$ 162.9	$ 203.1			$ 59.9				£ 226.2		€ 60.3	€ 147.9	$ 23.0	$ 1.3	$ 3.2	$ 50.0
Fixed monthly coupons at fixed rate, low end of range (as a percent)	0.56%
Fixed monthly coupons at fixed rate, high end of range (as a percent)	2.23%
Floating rate	LIBOR
Amount expected to be reclassified from other comprehensive income to interest expense over the next twelve months	$ 1.0
Hedging period for covering exposure to the variability in future cash flows	83 months
Number of derivative instruments held								66		29
Maturity period			2 years	10 years		0 years	3 years

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Investment Securities (Tables)

6 Months Ended

Jun. 30, 2014

Investment Securities

Schedule of investment securities

Investment securities were comprised of the following as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Carrying Value as of
	June 30, 2014			December 31, 2013
RMBS, available-for-sale	$	231,605		$	296,236
Single-borrower CMBS, available-for-sale	116,071			114,346
CMBS, fair value option (1)	638,069			550,282
Held-to-maturity (“HTM”) securities	370,096			368,318
Equity security, fair value option	16,104			15,247
Subtotal - Investment securities	1,371,945			1,344,429
VIE eliminations (1)	(469,521		)	(409,322		)
Total investment securities	$	902,424		$	935,107

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

Schedule of purchases, sales and principal collections for all investment securities

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

Three Months ended	Available-for-sale					CMBS, fair		HTM		Equity
June 30, 2014	RMBS			CMBS		value option		Securities		Security		Total
Purchases	$	—		$	—	$	43,563	$	—	$	—	$	43,563
Sales	53,236			—		13,548		—		—		66,784
Principal collections	10,466			421		—		—		—		10,887
June 30, 2013
Purchases	20,090			—		1,618		—		—		21,708
Sales	—			—		10,072		—		—		10,072
Principal collections	15,771			2,627		—		—		—		18,398
Six Months ended
June 30, 2014
Purchases	$	—		$	—	$	53,453	$	—	$	—	$	53,453
Sales	62,546		(1)	—		32,032		—		—		94,578
Principal collections	18,285			829		—		—		—		19,114
June 30, 2013
Purchases	20,090			—		1,618		37,190		—		58,898
Sales	12,712			206,608		10,072		—		6,769		236,161
Principal collections	32,638			7,484		—		—		—		40,122

(1) Settlement of $44.4 million occurred subsequent to June 30, 2014.  We account for all investment securities transactions on a trade-date basis.

Schedule of investments in available-for-sale RMBS and single-borrower CMBS where the fair value option has not been elected

The tables below summarize various attributes of our investments in available-for-sale RMBS and single-borrower CMBS where the fair value option has not been elected as of June 30, 2014 and December 31, 2013 (amounts in thousands):

								Unrealized Gains or (Losses) Recognized in AOCI
	Purchase Amortized Cost		Credit OTTI			Recorded Amortized Cost		Non-Credit OTTI			Gross Unrealized Gains		Gross Unrealized Losses			Net Fair Value Adjustment		Fair Value
June 30, 2014
RMBS	$	193,084	$	(10,322	)	$	182,762	$	(3	)	$	49,529	$	(683	)	$	48,843	$	231,605
Single-borrower CMBS	103,498		—			103,498		—			12,573		—			12,573		116,071
Total	$	296,582	$	(10,322	)	$	286,260	$	(3	)	$	62,102	$	(683	)	$	61,416	$	347,676
December 31, 2013
RMBS	$	253,912	$	(11,134	)	$	242,778	$	(55	)	$	55,154	$	(1,641	)	$	53,458	$	296,236
Single-borrower CMBS	100,687		—			100,687		—			13,659		—			13,659		114,346
Total	$	354,599	$	(11,134	)	$	343,465	$	(55	)	$	68,813	$	(1,641	)	$	67,117	$	410,582

	Weighted Average Coupon(1)		Weighted Average Rating (Standard & Poor’s)		WAL (Years)(3)
June 30, 2014
RMBS	1.0	%	B-		7.4
Single-borrower CMBS	11.6	%	BB+	(2)	3.7
December 31, 2013
RMBS	1.0	%	B-		6.8
Single-borrower CMBS	11.5	%	BB+	(2)	5.9

(1) Calculated using the June 30, 2014 and December 31, 2013 one-month LIBOR rate of 0.155% and 0.168%, respectively, for floating rate securities.

(2) As of June 30, 2014 and December 31, 2013, approximately 99.3% and 98.8%, respectively, of the CMBS securities were rated BB+.

(3) Represents the WAL of each respective group of securities calculated as of the respective balance sheet date. The WAL of each individual security or loan is calculated as a fraction, the numerator of which is the sum of the timing (in years) of each expected future principal payment multiplied by the balance of the respective payment, and with a denominator equal to the sum of the expected principal payments using the contractually extended maturity dates of the assets. Assumptions for the calculation of the WAL are adjusted as necessary for changes in projected principal repayments and/or maturity dates of the security.

Schedule of reconciliation of aggregate principal balance to amortized cost for the entity's RMBS and single-borrower CMBS, excluding CMBS where the entity have elected the fair value option

The following table contains a reconciliation of aggregate principal balance to amortized cost for our RMBS and single-borrower CMBS as of June 30, 2014 and December 31, 2013, excluding CMBS where we have elected the fair value option (amounts in thousands):

	June 30, 2014					December 31, 2013
	RMBS			CMBS		RMBS			CMBS
Principal balance	$	312,280		$	103,498	$	414,020		$	100,687
Accretable yield	(90,876		)	—		(101,046		)	—
Non-accretable difference	(38,642		)	—		(70,196		)	—
Total discount	(129,518		)	—		(171,242		)	—
Amortized cost	$	182,762		$	103,498	$	242,778		$	100,687

Schedule of changes to accretable yield and non-accretable difference for the entity's RMBS and single-borrower CMBS, excluding CMBS where the entity have elected the fair value option

The following table discloses the changes to accretable yield and non-accretable difference for our RMBS and single-borrower CMBS during the three and six months ended June 30, 2014, excluding CMBS where we have elected the fair value option (amounts in thousands):

	Accretable Yield					Non-Accretable Difference
	RMBS			CMBS		RMBS			CMBS
Three Months ended June 30, 2014
Balance as of April 1, 2014	$	99,622		$	—	$	55,432		$	—
Accretion of discount	(3,323		)	—		—			—
Principal write-downs	—			—		(509		)	—
Purchases	—			—		—			—
Sales	(10,276		)	—		(11,428		)	—
OTTI	—			—		—			—
Transfer to/from non-accretable difference	4,853			—		(4,853		)	—
Balance as of June 30, 2014	$	90,876		$	—	$	38,642		$	—
Six Months ended June 30, 2014
Balance as of January 1, 2014	$	101,046		$	—	$	70,196		$	—
Accretion of discount	(9,887		)	—		—			—
Principal write-downs	—			—		(875		)	—
Purchases	—			—		—			—
Sales	(12,238		)	—		(18,937		)	—
OTTI	213			—		—			—
Transfer to/from non-accretable difference	11,742			—		(11,742		)	—
Balance as of June 30, 2014	$	90,876		$	—	$	38,642		$	—

Schedule of gross unrealized losses and estimated fair value of securities in an unrealized loss position, excluding CMBS where we have elected the fair value option

The following table presents the gross unrealized losses and estimated fair value of the available-for-sale securities (i) where we have not elected the fair value option, (ii) that were in an unrealized loss position as of June 30, 2014 and December 31, 2013, and (iii) for which OTTIs (full or partial) have not been recognized in earnings (amounts in thousands):

	Estimated Fair Value				Unrealized Losses
	Securities with a loss less than 12 months		Securities with a loss greater than 12 months		Securities with a loss less than 12 months			Securities with a loss greater than 12 months
As of June 30, 2014
RMBS	$	16,255	$	1,552	$	(480	)	$	(206	)
Single-borrower CMBS	—		—		—			—
Total	$	16,255	$	1,552	$	(480	)	$	(206	)
As of December 31, 2013
RMBS	$	26,344	$	1,809	$	(1,444	)	$	(252	)
Single-borrower CMBS	—		—		—			—
Total	$	26,344	$	1,809	$	(1,444	)	$	(252	)

Schedule of various attributes of investment in fair value option CMBS

As of June 30, 2014 and December 31, 2013, none of our CMBS where we have elected the fair value option were variable rate. The table below summarizes various attributes of our investment in fair value option CMBS as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Weighted Average Coupon		Weighted Average Rating		WAL (Years)(1)
June 30, 2014
CMBS, fair value option	5.0	%	CCC	(2)	5.3
December 31, 2013
CMBS, fair value option	5.4	%	CC	(2)	4.4

(1) The WAL of each security is calculated based on the period of time over which we expect to receive principal cash flows. Expected principal cash flows are based on contractual payments net of expected losses.

(2) As of June 30, 2014 and December 31, 2013, excludes $27.3 million and $55.5 million, respectively, in fair value option CMBS that are not rated.

Summary of various attributes of investments in HTM securities

The table below summarizes various attributes of our investments in HTM securities as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	Net Carrying Amount (Amortized Cost)		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
June 30, 2014
Preferred interests	$	285,946	$	2,083	$	—		$	288,029
CMBS	84,150		—		(576		)	83,574
Total	$	370,096	$	2,083	$	(576	)	$	371,603
December 31, 2013
Preferred interests	$	284,087	$	135	$	—		$	284,222
CMBS	84,231		—		—			84,231
Total	$	368,318	$	135	$	—		$	368,453

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Acquisitions and Divestitures (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2013 SFR Spin-off	Jun. 30, 2014 SFR Spin-off	Jun. 30, 2013 SFR Spin-off	Jan. 31, 2014 SFR Spin-off
Results of operations for the SFR segment prior to spin-off, excluding segment allocations
Total revenues					$ 2,594	$ 3,876	$ 3,758
Total costs and expenses					9,870	6,369	13,495
Loss before other income and income taxes					(7,276)	(2,493)	(9,737)
Total other income					1,068	942	1,403
Loss before income taxes					(6,208)	(1,551)	(8,334)
Income tax benefit (provision)	0	150	0	(12)	150		(12)
Net loss		(6,058)	(1,551)	(8,346)	(6,058)	(1,551)	(8,346)
Assets:
Cash and cash equivalents								111,960
Restricted cash								189
Residential real estate, net								812,017
Non-performing residential loans								211,019
Other assets								9,498
Total Assets								1,144,683
Liabilities:
Accounts payable, accrued expenses and other liabilities								24,346
Equity:
Additional paid-in capital								1,130,405
Accumulated deficit								(11,662)
Total Stockholders' Equity								1,118,743
Non-controlling interests in consolidated subsidiaries								1,594
Total Equity								1,120,337
Total Liabilities and Equity								$ 1,144,683

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Variable Interest Entities

6 Months Ended

Jun. 30, 2014

Variable Interest Entities

Variable Interest Entities

13. Variable Interest Entities

Investment Securities

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

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

VIEs in which we are the Primary Beneficiary

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

VIEs in which we are not the Primary Beneficiary

In certain instances, we hold a variable interest in a VIE in the form of CMBS, but either (i) we are not appointed, or do not serve as, special servicer or (ii) an unrelated third party has the rights to unilaterally remove us as special servicer. In these instances, we do not have the power to direct activities that most significantly impact the VIE’s economic performance. In other cases, the variable interest we hold does not obligate us to absorb losses or provide us with the right to receive benefits from the VIE which could potentially be significant. For these structures, we are not deemed to be the primary beneficiary of the VIE, and we do not consolidate these VIEs.

As of June 30, 2014, one of our collateralized debt obligation (“CDO”) structures was in default, which pursuant to the underlying indentures, changes the rights of the variable interest holders. Upon default of a CDO, the trustee or senior note holders are allowed to exercise certain rights, including liquidation of the collateral, which at that time, is the activity which would most significantly impact the CDO’s economic performance. Further, when the CDO is in default, the collateral administrator no longer has the option to purchase securities from the CDO. In cases where the CDO is in default and we do not have the ability to exercise rights which would most significantly impact the CDO’s economic performance, we do not consolidate the VIE. As of June 30, 2014, this CDO structure was not consolidated.  During the three months ended March 31, 2014, one of our CDOs, which was previously in default as of December 31, 2013, ceased to be in default.  This event triggered the initial consolidation of CDO and its underlying assets during the three months ended March 31, 2014.

As noted above, we are not obligated to provide, nor have we provided, any financial support for any of our securitization SPEs, whether or not we are deemed to be the primary beneficiary. As such, the risk associated with our involvement in these VIEs is limited to the carrying value of our investment in the entity. As of June 30, 2014, our maximum risk of loss related to VIEs in which we were not the primary beneficiary was $168.5 million on a fair value basis.

As of June 30, 2014, the securitization SPEs which we do not consolidate had debt obligations to beneficial interest holders with unpaid principal balances of $106.4 billion. The corresponding assets are comprised primarily of commercial mortgage loans with unpaid principal balances corresponding to the amounts of the outstanding debt obligations.

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Fair Value

6 Months Ended

Jun. 30, 2014

Fair Value

Fair Value

18. Fair Value

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

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

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

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

Valuation Process

We have valuation control processes in place to validate the fair value of the Company’s financial assets and liabilities measured at fair value including those derived from pricing models. These control processes are designed to assure that the values used for financial reporting are based on observable inputs wherever possible.  Refer to Note 21 to the consolidated financial statements included in our Form 10-K for further discussion of our valuation process.

We determine the fair value of our assets and liabilities measured at fair value on a recurring and nonrecurring basis in accordance with the methodology described in our Form 10-K.

The following tables present our financial assets and liabilities carried at fair value on a recurring basis in the condensed consolidated balance sheets by their level in the fair value hierarchy as of June 30, 2014 and December 31, 2013 (amounts in thousands):

	June 30, 2014
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	154,412	$	—	$	—	$	154,412
RMBS	231,605		—		—		231,605
CMBS	284,619		—		2,258		282,361
Equity security	16,104		16,104		—		—
Domestic servicing rights	138,318		—		—		138,318
Derivative assets	4,681		—		4,681		—
VIE assets	114,091,158		—		—		114,091,158
Total	$	114,920,897	$	16,104	$	6,939	$	114,897,854
Financial Liabilities:
Derivative liabilities	$	26,294	$	—	$	26,294	$	—
VIE liabilities	113,541,151		—		108,355,026		5,186,125
Total	$	113,567,445	$	—	$	108,381,320	$	5,186,125

	December 31, 2013
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	206,672	$	—	$	—	$	206,672
RMBS	296,236		—		—		296,236
CMBS	255,306		—		47,300		208,006
Equity security	15,247		15,247		—		—
Domestic servicing rights	150,149		—		—		150,149
Derivative assets	7,769		—		7,769		—
VIE assets	103,151,624		—		—		103,151,624
Total	$	104,083,003	$	15,247	$	55,069	$	104,012,687
Financial Liabilities:
Derivative liabilities	$	24,192	$	—	$	24,192	$	—
VIE liabilities	102,649,263		—		101,051,279		1,597,984
Total	$	102,673,455	$	—	$	101,075,471	$	1,597,984

The changes in financial assets and liabilities classified as Level III were as follows for the three and six months ended June 30, 2014 and 2013 (amounts in thousands):

Three Months ended June 30, 2014	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights			VIE Assets			VIE Liabilities			Total
April 1, 2014 balance	$	74,117		$	291,217		$	240,665		$	144,898		$	118,451,518		$	(3,482,922	)	$	115,719,493
Total realized and unrealized (losses) gains:
Included in earnings:
Change in fair value / gain on sale	11,546			10,130			4,393			(5,523		)	(3,332,084		)	(1,664		)	(3,313,202		)
Net accretion	—			3,323			—			—			—			—			3,323
Included in OCI	—			(9,363		)	2,740			—			—			—			(6,623		)
Purchases / Originations	320,566			—			42,740			—			—			—			363,306
Sales	(251,612		)	(53,236		)	(13,457		)	—			—			—			(318,305		)
Issuances	—			—			—			—			—			(25,995		)	(25,995		)
Cash repayments / receipts	(205		)	(10,466		)	(421		)	—			—			50,984			39,892
Transfers into Level III	—			—			5,480			—			—			(1,983,525		)	(1,978,045		)
Transfers out of Level III	—			—			—			(1,057		)	—			293,115			292,058
Consolidations of VIEs	—			—			—			—			3,720,885			(68,772		)	3,652,113
Deconsolidations of VIEs	—			—			221			—			(4,749,161		)	32,654			(4,716,286		)
June 30, 2014 balance	$	154,412		$	231,605		$	282,361		$	138,318		$	114,091,158		$	(5,186,125	)	$	109,711,729
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2014	$	688		$	2,804		$	4,513		$	(5,523	)	$	(3,332,084	)	$	(1,664	)	$	(3,331,266	)

Three Months ended June 30, 2013	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights		VIE Assets			VIE Liabilities			Total
April 1, 2013 balance	$	—		$	321,043		$	—		$	—	$	—		$	—		$	321,043
Acquisition of LNR	256,502			—			62,432			156,993		90,989,793			(1,994,243		)	89,471,477
Total realized and unrealized (losses) gains:	—			—			18			—		—			—			18
Included in earnings:	—			—			—			—		—			—			—
Change in fair value	458						(1,187		)	2,898		(3,794,641		)	94,448			(3,698,024		)
Impairment	—			(359		)	—			—		—			—			(359		)
Net accretion	—			5,755			—			—		—			—			5,755
Included in OCI	—			(11,103		)	1,908			—		—			—			(9,195		)
Purchases / Originations	390,669			20,090			39			—		—			—			410,798
Sales	(476,336		)	—			(10,072		)	—		—			—			(486,408		)
Issuances	—			—			—			—		—			—			—
Cash repayments / receipts	(117		)	(15,771		)	—			—		—			79,735			63,847
Transfers into Level III	—			—			115,814			—		—			(489,513		)	(373,699		)
Transfers out of Level III	—			—			(3,499		)	—		—			152,683			149,184
Consolidations of VIEs	—			—			—			—		10,674,125			(178,631		)	10,495,494
Deconsolidations of VIEs	—			—			(1,054		)	—		(584,804		)	861			(584,997		)
June 30, 2013 balance	$	171,176		$	319,655		$	164,399		$	159,891	$	97,284,473		$	(2,334,660	)	$	95,764,934
Amount of total (losses) gains included in earnings attributable to assets still held at June 30, 2013	(8,344		)	6,627			(3,430		)	2,898		(3,794,641		)	94,448			(3,702,442		)

Six Months ended June 30, 2014	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights			VIE Assets			VIE Liabilities			Total
January 1, 2014 balance	$	206,672		$	296,236		$	208,006		$	150,149		$	103,151,624		$	(1,597,984	)	$	102,414,703
Total realized and unrealized (losses) gains:
Included in earnings:
Change in fair value / gain on sale	32,439			11,141			9,600			(10,774		)	(7,013,623		)	99,837			(6,871,380		)
OTTI	—			(213		)	—			—			—			—			(213		)
Net accretion	—			9,887			—			—			—			—			9,887
Included in OCI	—			(4,615		)	2,207			—			—			—			(2,408		)
Purchases / Originations	582,391			—			46,571			—			—			—			628,962
Sales	(554,073		)	(62,546		)	(29,301		)	—			—			—			(645,920		)
Issuances	—			—			—			—			—			(71,756		)	(71,756		)
Cash repayments / receipts	(297		)	(18,285		)	(829		)	—			—			86,349			66,938
Transfers into Level III	—			—			52,780			—			—			(2,555,137		)	(2,502,357		)
Transfers out of Level III	(112,720		)	—			(179		)	(1,057		)	—			712,856			598,900
Consolidations of VIEs	—			—			(6,715		)	—			23,991,532			(1,892,944		)	22,091,873
Deconsolidations of VIEs	—			—			221			—			(6,038,375		)	32,654			(6,005,500		)
June 30, 2014 balance	$	154,412		$	231,605		$	282,361		$	138,318		$	114,091,158		$	(5,186,125	)	$	109,711,729
Amount of total gains (losses) included in earnings attributable to assets still held at June 30, 2014	$	688		$	7,971		$	9,018		$	(10,774	)	$	(7,013,623	)	$	99,837		$	(6,906,883	)

Six Months ended June 30, 2013	Loans Held-for-sale			RMBS			CMBS			Domestic Servicing Rights		VIE Assets			VIE Liabilities			Total
January 1, 2013 balance	$	—		$	333,153		$	—		$	—	$	—		$	—		$	333,153
Acquisition of LNR	256,502			—			62,432			156,993		90,989,793			(1,994,243		)	89,471,477
Total realized and unrealized (losses) gains:	—			2,129			18			—		—			—			2,147
Included in earnings:	—			—			—			—		—			—			—
Change in fair value	458			—			(1,187		)	2,898		(3,794,641		)	94,448			(3,698,024		)
Impairment	—			(402		)	—			—		—			—			(402		)
Net accretion	—			11,906			—			—		—			—			11,906
Included in OCI	—			(1,871		)	1,908			—		—			—			37
Purchases / Originations	390,669			20,090			39			—		—			—			410,798
Sales	(476,336		)	(12,712		)	(10,072		)	—		—			—			(499,120		)
Issuances	—			—			—			—		—			—			—
Cash repayments / receipts	(117		)	(32,638		)	—			—		—			79,735			46,980
Transfers into Level III	—			—			115,814			—		—			(489,513		)	(373,699		)
Transfers out of Level III	—			—			(3,499		)	—		—			152,683			149,184
Consolidations of VIEs	—			—			—			—		10,674,125			(178,631		)	10,495,494
Deconsolidations of VIEs	—			—			(1,054		)	—		(584,804		)	861			(584,997		)
June 30, 2013 balance	$	171,176		$	319,655		$	164,399		$	159,891	$	97,284,473		$	(2,334,660	)	$	95,764,934
Amount of total (losses) gains included in earnings attributable to assets still held at June 30, 2013	(8,344		)	14,306			(3,430		)	2,898		(3,794,641		)	94,448			(3,694,763		)

During the three and six months ended June 30, 2014, we transferred $5.5 million and $52.8 million, respectively of CMBS investments from Level II to Level III due to a decrease in the observable relevant market activity.  During both the three and six months ended June 30, 2013, we transferred $115.8 million of CMBS investments from Level II to Level III due to a decrease in the observable relevant market activity.

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

	June 30, 2014				December 31, 2013
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets not carried at fair value:
Loans held-for-investment and loans transferred as secured borrowings	$	5,028,721	$	5,163,988	$	4,544,132	$	4,609,040
Securities, held-to-maturity	370,096		371,603		368,318		368,453
European servicing rights	18,528		18,528		27,024		29,327
Non-performing residential loans	—		—		215,371		215,371
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	$	2,704,082	$	2,705,452	$	2,438,798	$	2,436,708
Convertible senior notes	1,003,847		1,190,700		997,851		1,160,000

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

	Carrying Value at		Valuation		Range as of (1)
	June 30, 2014		Technique	Unobservable Input	June 30, 2014	December 31, 2013
Loans held-for-sale, fair value option	$	154,412	Discounted cash flow	Yield (b)	4.5% - 5.2%	5.2% - 5.9%
				Duration(c)	5.0 - 10.0 years	5.0 - 10.0 years
RMBS	231,605		Discounted cash flow	Constant prepayment rate(a)	0.3% - 16.8%	(0.6)% - 16.6%
				Constant default rate(b)	1.5% - 9.5%	1.4% - 11.3%
				Loss severity(b)	12% - 81%(e)	15% - 92%(e)
				Delinquency rate(c)	3% - 32%	3% - 48%
				Servicer advances(a)	23% - 96%	24% - 95%
				Annual coupon deterioration(b)	0% - 0.8%	0% - 0.7%
				Putback amount per projected total collateral loss(d)	0% - 11%	0% - 9%
CMBS	282,361		Discounted cash flow	Yield(b)	0% - 527.9%	0% - 890.0%
				Duration(c)	0 – 11.5 years	0 - 11.0 years
Domestic servicing rights	138,318		Discounted cash flow	Debt yield(a)	8.75%	8.75%
				Discount rate(b)	15%	15%
				Control migration(b)	0% - 80%	0% - 80%
VIE assets	114,091,158		Discounted cash flow	Yield(b)	0% - 912.2%	0% - 952.3%
				Duration(c)	0 – 21.9 years	0 - 22.7 years
VIE liabilities	5,186,125		Discounted cash flow	Yield(b)	0% - 912.2%	0% - 952.3%
				Duration(c)	0 – 21.9 years	0 - 22.7 years

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

Sensitivity of the Fair Value to Changes in the Unobservable Inputs

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

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

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

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

(e) 85% and 90% of the portfolio falls within a range of 45%-80% as of June 30, 2014 and December 31, 2013, respectively.

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Business and Organization (Details 2) (USD $)	0 Months Ended	6 Months Ended	0 Months Ended		0 Months Ended
	Apr. 11, 2014	Jun. 30, 2014	Feb. 21, 2014 SWAY	Jun. 30, 2014 SWAY item	Jan. 31, 2014 Spin off Single Family Residential	Jan. 24, 2014 Spin off Single Family Residential
Business and Organization
Minimum annual REIT taxable income distributable to stockholders (as a percent)		90.00%
Spin-off transaction
Share exchange ratio						0.20
Cash contribution					$ 100,000,000
Net assets				$ 1,100,000,000
Number of units of single-family homes				7,200
Shares issued	22,000,000		40,100,000

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Offsetting Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2014

Offsetting Assets and Liabilities

Schedule of offsetting assets and liabilities

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

			(ii)		(iii) = (i) - (ii)		(iv) Gross Amounts Not Offset in the Statement of Financial Position
	(i) Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received / Pledged		(v) = (iii) - (iv) Net Amount
As of June 30, 2014
Derivative assets	$	4,681	$	—	$	4,681	$	606	$	1,564	$	2,511
Derivative liabilities	$	26,294	$	—	$	26,294	$	606	$	18,412	$	7,276
Repurchase agreements	1,810,767		—		1,810,767		1,810,767		—		—
	$	1,837,061	$	—	$	1,837,061	$	1,811,373	$	18,412	$	7,276
As of December 31, 2013
Derivative assets	$	7,769	$	—	$	7,769	$	692	$	1,916	$	5,161
Derivative liabilities	$	24,192	$	—	$	24,192	$	692	$	7,150	$	16,350
Repurchase agreements	1,419,163		—		1,419,163		1,419,163		—		—
	$	1,443,355	$	—	$	1,443,355	$	1,419,855	$	7,150	$	16,350

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Condensed Consolidated Statements of Comprehensive Income
Net income	$ 120,382	$ 61,511	$ 241,263	$ 124,935
Other comprehensive loss (net change by component):
Cash flow hedges	(93)	1,501	29	1,780
Available-for-sale securities	(9,618)	(11,778)	(6,120)	(14,127)
Foreign currency remeasurement	4,558	18	5,604	(7,043)
Other comprehensive loss	(5,153)	(10,259)	(487)	(19,390)
Comprehensive income	115,229	51,252	240,776	105,545
Less: Comprehensive income attributable to non-controlling interests	(2,514)	(1,057)	(2,794)	(2,238)
Comprehensive income attributable to Starwood Property Trust, Inc.	$ 112,715	$ 50,195	$ 237,982	$ 103,307

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Balance Sheet Presentation of LNR Variable Interest Entities

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

Because LNR often serves as the special servicer of the trusts in which it invests, consolidation of these structures is required pursuant to GAAP as outlined in detail below. This results in a consolidated balance sheet which presents the gross assets and liabilities of the SPEs. The assets and other instruments held by these SPEs are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the SPEs do not have any recourse to the general credit of any other consolidated entities, nor to us as the consolidator of these SPEs.

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

Please refer to the segment data in Note 21 herein for a presentation of the LNR business without consolidation of these VIEs.

Basis of Accounting and Principles of Consolidation

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

These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the operating results for the full year.

Refer to our Form 10-K for a description of our recurring accounting policies. We have included disclosure in this Note 2 regarding principles of consolidation and other accounting policies that (i) are required to be disclosed quarterly, (ii) we view as critical, or (iii) became significant since December 31, 2013 due to a corporate action or increase in the significance of the underlying business activity.

Variable Interest Entities

We evaluate all of our interests in VIEs for consolidation. When our interests are determined to be variable interests, we assess whether we are deemed to be the primary beneficiary of the VIE. The primary beneficiary of a VIE is required to consolidate the VIE. ASC 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. We consider our variable interests as well as any variable interests of our related parties in making this determination. Where both of these factors are present, we are deemed to be the primary beneficiary and we consolidate the VIE. Where either one of these factors is not present, we are not the primary beneficiary and do not consolidate the VIE.

To assess whether we have the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, we consider all facts and circumstances, including our role in establishing the VIE and our ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

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

Our purchased investment securities include CMBS, which are unrated and non-investment grade rated securities issued by CMBS trusts. In certain cases, we may contract to provide special servicing activities for these CMBS trusts, or, as holder of the controlling class, we may have the right to name and remove the special servicer for these trusts. In our role as special servicer, we provide services on defaulted loans within the trusts, such as foreclosure or work-out procedures, as permitted by the underlying contractual agreements. In exchange for these services, we receive a fee. These rights give us the ability to direct activities that could significantly impact the trust’s economic performance. However, in those instances where an unrelated third party has the right to unilaterally remove us as special servicer, we do not have the power to direct activities that most significantly impact the trust’s economic performance. We evaluated all of our positions in such investments for consolidation.

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

We perform ongoing reassessments of: (1) whether any entities previously evaluated under the majority voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework, and (2) whether changes in the facts and circumstances regarding our involvement with a VIE causes our consolidation conclusion regarding the VIE to change.

We have elected the fair value option in measuring the assets and liabilities of any VIEs we consolidate. Fluctuations in the fair values of the VIE assets and liabilities, along with trust interest income and trust interest and administrative expenses, are presented net in income of consolidated VIEs in our consolidated statements of operations.

Discontinued Operations

On January 31, 2014, we completed the spin-off of our former SFR segment to our stockholders as discussed in Note 1.  In accordance with Accounting Standards Codification (“ASC”) Topic 205, Presentation of Financial Statements, the results of the SFR segment are presented within discontinued operations in our condensed consolidated statements of operations for the six months ended June 30, 2014 and the three and six months ended June 30, 2013.

Fair Value Option

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

We have elected the fair value option for eligible financial assets and liabilities of our consolidated VIEs, loans held-for-sale originated by LNR’s conduit platform, purchased CMBS issued by VIEs we could consolidate in the future and certain investments in marketable equity securities. The fair value elections for VIE and securitization related items were made in order to mitigate accounting mismatches between the carrying value of the instruments and the related assets and liabilities that we consolidate at fair value. The fair value elections for mortgage loans held-for-sale originated by LNR’s conduit platform were made due to the short-term nature of these instruments. The fair value elections for investments in marketable equity securities were made because the shares are listed on an exchange, which allows us to determine the fair value using a quoted price from an active market.

Loans Receivable and Provision for Loan Losses

In our Lending Segment we purchase and originate commercial real estate debt and related instruments generally to be held as long-term investments at amortized cost. We are required to periodically evaluate each of these loans for possible impairment. Impairment is indicated when it is deemed probable that we will not be able to collect all amounts due according to the contractual terms of the loan. If a loan is determined to be impaired, we write down the loan through a charge to the provision for loan losses. Actual losses, if any, could ultimately differ from these estimates.

We perform a quarterly review of our portfolio of loans. In connection with this review, we assess the performance of each loan and assign a risk rating based on several factors including risk of loss, loan-to-value ratio (“LTV”), collateral performance, structure, exit plan, and sponsorship. Loans are rated “1” through “5”, from less risk to greater risk, in connection with this review.

Use of Estimates

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

Reclassifications and Measurement Period Adjustments

As a result of the spin-off, the results from our SFR segment have been reclassified as discontinued operations in our condensed consolidated statements of operations for the three and six months ended June 30, 2013.  In addition, certain prior period amounts have been reclassified to conform to the current period presentation, which had no effect on our previously reported net income.  In that regard, we reclassified $177.0 million of proceeds from sales of loans held-for-sale by LNR to cash flows from operating activities in the condensed consolidated statement of cash flows for the six months ended June 30, 2013 in order to conform to the current period presentation, which is also consistent with the presentation in our Form 10-K.  These proceeds were previously reported as a non-cash financing activity and reflected net against principal repayments on borrowings for the related repurchase agreements that were settled net with those proceeds.

The prior period financial statements included herein reflect the retrospective measurement period adjustment related to the LNR acquisition as described in Note 3 to the consolidated financial statements included in our Form 10-K.  Such adjustment reduced earnings from unconsolidated entities and net income by $1.8 million in the three and six months ended June 30, 2013.

Recent Accounting Developments

On April 10, 2014 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which requires only those disposals which represent a strategic shift that has or will have a major impact on an entity’s operations or financial results be presented as discontinued operations.  The ASU is effective for annual periods beginning on or after December 15, 2014, and interim periods within those annual periods, and requires prospective application.  Early adoption is permitted for disposals not already reported in previously issued financial statements.  We do not expect the application of this ASU to materially impact the Company.

On May 28, 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which establishes key principles by which an entity determines the amount and timing of revenue recognized from customer contracts.  The ASU is effective for the first interim or annual period beginning after December 15, 2016. Early application is not permitted.  We do not expect the application of this ASU to materially impact the Company.

On June 12, 2014 the FASB issued ASU 2014-11, Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures, which requires entities to account for repurchase-to-maturity transactions as secured borrowings rather than as sales and expands disclosure requirements related to certain transfers of financial assets. The ASU is effective for the first interim or annual period beginning after December 15, 2014. Early application is not permitted.  We do not expect the application of this ASU to materially impact the Company.

On July 16, 2014, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 12-G, Measuring the Financial Liabilities of a Consolidated Collateralized Financing Entity.  Final issuance of the ASU is pending.  At its June 2014 meeting, the EITF reached a consensus which enables the application of a measurement alternative for collateralized financing entities (“CFEs”).  This measurement alternative allows qualifying entities to measure both the CFE’s financial assets and financial liabilities based on the fair value of the financial assets or financial liabilities, whichever is more observable.  The measurement alternative is only available upon initial consolidation of the CFE or adoption of 12-G and can be applied on a CFE-by-CFE basis.  We expect to be eligible to apply the measurement alternative and will elect to do so.  Application of this alternative is consistent with our current accounting treatment for consolidated CFEs.

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Investment in Unconsolidated Entities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Investment in Unconsolidated Entities
Equity method, Carrying value	$ 97,827	$ 111,481
Carrying value over (under) equity in net assets	(4,235)
Cost method, Carrying value	20,794	11,473
Investment in unconsolidated entities	118,621	122,954
Investor entity which owns equity interests in two real estate services providers
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	50.00%
Equity method, Carrying value	20,010	19,371
Small balance bridge loan financing venture
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	50.00%
Equity method, Carrying value	26,445	26,121
European investment fund
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	50.00%
Equity method, Carrying value	7,974	23,779
Carrying value over (under) equity in net assets	(4,235)
Mezzanine loan venture
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	49.00%
Equity method, Carrying value	23,335	23,676
Healthcare bridge loan venture
Investment in Unconsolidated Entities
Equity method, Carrying value	14,945	14,163
Various - Equity method
Investment in Unconsolidated Entities
Equity method, Carrying value	5,118	4,371
Various - Equity method | Minimum
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	25.00%
Various - Equity method | Maximum
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	50.00%
Loan servicing venture
Investment in Unconsolidated Entities
Cost method, Carrying value	9,225	8,014
Loan servicing venture | Minimum
Investment in Unconsolidated Entities
Cost method, Ownership %	4.00%
Loan servicing venture | Maximum
Investment in Unconsolidated Entities
Cost method, Ownership %	6.00%
Various
Investment in Unconsolidated Entities
Cost method, Carrying value	$ 11,569	$ 3,459
Various | Minimum
Investment in Unconsolidated Entities
Cost method, Ownership %	2.00%
Various | Maximum
Investment in Unconsolidated Entities
Cost method, Ownership %	10.00%

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Segment Data (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Assets:
Cash and cash equivalents	$ 518,627		$ 317,627	$ 366,787		$ 177,671
Restricted cash	44,561		69,052
Loans held-for-investment, net	4,885,854		4,363,718
Loans held-for-sale	154,412		206,672
Loans transferred as secured borrowings	142,867		180,414
Investment securities	902,424		935,107
Intangible assets - servicing rights	156,846		177,173	190,646
Residential real estate, net			749,214
Non-performing residential loans			215,371
Investment in unconsolidated entities	118,621		122,954
Goodwill	140,437		140,437
Derivative assets	4,681		7,769
Accrued interest receivable	37,483		37,630
Other assets	165,532		95,813
VIE assets, at fair value	114,091,158		103,151,624
Total Assets	121,363,503		110,770,575
Liabilities:
Accounts payable, accrued expenses and other liabilities	140,809		225,374
Related-party payable	24,475		17,793
Dividends payable	108,012		90,171	76,900
Derivative liabilities	26,294		24,192
Secured financing agreements, net	2,561,267		2,257,560
Convertible senior notes, net	1,003,847		997,851
Secured borrowings on transferred loans	142,815		181,238
VIE liabilities, at fair value	113,541,151		102,649,263
Total Liabilities	117,548,670		106,443,442
Starwood Property Trust, Inc. Stockholders' Equity:
Preferred stock
Common stock	2,232		1,961
Additional paid-in capital	3,784,575		4,300,479
Treasury stock	(10,642)		(10,642)
Accumulated other comprehensive income	74,962	80,115	75,449	60,285	70,544	79,675
Retained earnings (deficit)	(49,686)		(84,719)
Total Starwood Property Trust, Inc. Stockholders' Equity	3,801,441		4,282,528
Non-controlling interests in consolidated subsidiaries	13,392		44,605
Total Equity	3,814,833		4,327,133	3,586,506		2,797,205
Total Liabilities and Equity	121,363,503		110,770,575
Operating segment
Assets:
Cash and cash equivalents	518,433		317,351
Restricted cash	44,561		69,052
Loans held-for-investment, net	4,885,854		4,363,718
Loans held-for-sale	154,412		206,672
Loans transferred as secured borrowings	142,867		180,414
Investment securities	1,371,945		1,344,429
Intangible assets - servicing rights	224,676		257,736
Residential real estate, net			749,214
Non-performing residential loans			215,371
Investment in unconsolidated entities	121,185		126,337
Goodwill	140,437		140,437
Derivative assets	4,681		7,769
Accrued interest receivable	37,483		37,630
Other assets	166,711		96,685
Total Assets	7,813,245		8,112,815
Liabilities:
Accounts payable, accrued expenses and other liabilities	140,444		225,065
Related-party payable	24,475		17,793
Dividends payable	108,012		90,171
Derivative liabilities	26,294		24,192
Secured financing agreements, net	2,561,267		2,257,560
Convertible senior notes, net	1,003,847		997,851
Secured borrowings on transferred loans	142,815		181,238
Total Liabilities	4,007,154		3,793,870
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock	2,232		1,961
Additional paid-in capital	3,784,575		4,300,479
Treasury stock	(10,642)		(10,642)
Accumulated other comprehensive income	74,962		75,449
Retained earnings (deficit)	(49,686)		(84,719)
Total Starwood Property Trust, Inc. Stockholders' Equity	3,801,441		4,282,528
Non-controlling interests in consolidated subsidiaries	4,650		36,417
Total Equity	3,806,091		4,318,945
Total Liabilities and Equity	7,813,245		8,112,815
Operating segment | Real Estate Investment Lending
Assets:
Cash and cash equivalents	382,285		232,270
Restricted cash	34,324		36,593
Loans held-for-investment, net	4,881,439		4,350,937
Loans held-for-sale	8,750
Loans transferred as secured borrowings	142,867		180,414
Investment securities	733,876		794,147
Investment in unconsolidated entities	52,541		50,167
Derivative assets	2,321		3,138
Accrued interest receivable	36,904		35,501
Other assets	80,279		31,020
Total Assets	6,355,586		5,714,187
Liabilities:
Accounts payable, accrued expenses and other liabilities	50,540		66,127
Related-party payable	19,784		11,245
Dividends payable	108,012		90,171
Derivative liabilities	25,019		24,149
Secured financing agreements, net	2,465,699		2,127,717
Convertible senior notes, net	1,003,847		997,851
Secured borrowings on transferred loans	142,815		181,238
Total Liabilities	3,815,716		3,498,498
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock	2,232		1,961
Additional paid-in capital	2,417,704		1,987,133
Treasury stock	(10,642)		(10,642)
Accumulated other comprehensive income	65,712		68,092
Retained earnings (deficit)	60,214		132,625
Total Starwood Property Trust, Inc. Stockholders' Equity	2,535,220		2,179,169
Non-controlling interests in consolidated subsidiaries	4,650		36,520
Total Equity	2,539,870		2,215,689
Total Liabilities and Equity	6,355,586		5,714,187
Operating segment | Single Family Residential
Assets:
Cash and cash equivalents			44,807
Restricted cash			251
Residential real estate, net			749,214
Non-performing residential loans			215,371
Other assets			8,045
Total Assets			1,017,688
Liabilities:
Accounts payable, accrued expenses and other liabilities			23,056
Total Liabilities			23,056
Starwood Property Trust, Inc. Stockholders' Equity:
Additional paid-in capital			1,004,846
Retained earnings (deficit)			(10,111)
Total Starwood Property Trust, Inc. Stockholders' Equity			994,735
Non-controlling interests in consolidated subsidiaries			(103)
Total Equity			994,632
Total Liabilities and Equity			1,017,688
Operating segment | LNR
Assets:
Cash and cash equivalents	136,148		40,274
Restricted cash	10,237		32,208
Loans held-for-investment, net	4,415		12,781
Loans held-for-sale	145,662		206,672
Investment securities	638,069		550,282
Intangible assets - servicing rights	224,676		257,736
Investment in unconsolidated entities	68,644		76,170
Goodwill	140,437		140,437
Derivative assets	2,360		4,631
Accrued interest receivable	579		2,129
Other assets	86,432		57,620
Total Assets	1,457,659		1,380,940
Liabilities:
Accounts payable, accrued expenses and other liabilities	89,904		135,882
Related-party payable	4,691		6,548
Derivative liabilities	1,275		43
Secured financing agreements, net	95,568		129,843
Total Liabilities	191,438		272,316
Starwood Property Trust, Inc. Stockholders' Equity:
Additional paid-in capital	1,366,871		1,308,500
Accumulated other comprehensive income	9,250		7,357
Retained earnings (deficit)	(109,900)		(207,233)
Total Starwood Property Trust, Inc. Stockholders' Equity	1,266,221		1,108,624
Total Equity	1,266,221		1,108,624
Total Liabilities and Equity	1,457,659		1,380,940
LNR VIEs
Assets:
Cash and cash equivalents	194		276
Investment securities	(469,521)		(409,322)
Intangible assets - servicing rights	(67,830)		(80,563)
Investment in unconsolidated entities	(2,564)		(3,383)
Other assets	(1,179)		(872)
VIE assets, at fair value	114,091,158		103,151,624
Total Assets	113,550,258		102,657,760
Liabilities:
Accounts payable, accrued expenses and other liabilities	365		309
VIE liabilities, at fair value	113,541,151		102,649,263
Total Liabilities	113,541,516		102,649,572
Starwood Property Trust, Inc. Stockholders' Equity:
Non-controlling interests in consolidated subsidiaries	8,742		8,188
Total Equity	8,742		8,188
Total Liabilities and Equity	$ 113,550,258		$ 102,657,760

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Stockholders' Equity (Details) (USD $)	0 Months Ended			3 Months Ended		6 Months Ended		0 Months Ended			6 Months Ended	0 Months Ended	6 Months Ended		6 Months Ended		0 Months Ended	1 Months Ended	6 Months Ended
	May 06, 2014	Apr. 11, 2014	Feb. 24, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Aug. 06, 2014 Subsequent event	Jan. 31, 2014 Restricted stock units SFR Spin-off	Jan. 31, 2014 Restricted stock units Vests ratably on a quarterly basis over a 21-month period SFR Spin-off	Jun. 30, 2014 Restricted stock units Vests ratably on a quarterly basis over a 21-month period SFR Spin-off	Jan. 31, 2014 Restricted stock units Vest ratably on a quarterly basis over a three-year period SFR Spin-off	Jun. 30, 2014 Restricted stock units Vest ratably on a quarterly basis over a three-year period SFR Spin-off	Jun. 30, 2014 Starwood Property Trust, Inc. Equity Plan and Manager Equity Plan	Jun. 30, 2014 Starwood Property Trust, Inc. Equity Plan	Jun. 30, 2014 Starwood Property Trust, Inc. Manager Equity Plan	Jan. 02, 2014 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jan. 31, 2014 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jun. 30, 2014 Starwood Property Trust, Inc. Manager Equity Plan Restricted stock units	Jun. 30, 2014 Starwood Property Trust, Inc. Non-Executive Director Stock Plan	Dec. 31, 2013 Starwood Property Trust, Inc. Non-Executive Director Stock Plan
Stockholders' Equity
Dividend declared (in dollars per share)	$ 0.48		$ 0.48	$ 0.48	$ 0.46	$ 0.96	$ 0.90	$ 0.48
Number of shares of common stock issued		22,000,000
Gross proceeds from issuance of common stock		$ 491,000,000				$ 583,053,000	$ 822,368,000
Optional period of time for underwriters to purchase additional shares of common sock		30 days
Additional shares available to purchase by underwriters during 30-day option period		3,300,000
Additional gross proceeds from issuance of additional shares of common stock granted to underwriter		73,700,000
Number of shares that may be issued under the DRIP Plan				11,000,000		11,000,000
Value of shares that may be issued under the ATM Agreement				500,000,000		500,000,000
Proceeds from ATM Agreement (in shares)				759,000
Proceeds from ATM Agreement				18,300,000		18,346,000
Equity Incentive Plans
Awards granted, fair value									$ 14,800,000								$ 55,400,000
Award vesting period											21 months		3 years						3 years
Number of shares available for future grants														3,400,000
Non-Vested Shares and Share Equivalents activity
Beginning Balance (in shares)						544,145									22,502	510,415				11,228	11,228
Granted (in shares)						2,651,739			489,281	99,480		389,801			162,458	2,489,281	2,000,000	2,489,281
Vested (in shares)						(615,031)									(42,475)	(572,556)
Balance at the end of period (in shares)				2,580,853		2,580,853									142,485	2,427,140				11,228	11,228
Weighted Average Grant Date Fair Value (per share)
Balance at the beginning of period (in dollars per share)						$ 22.88
Granted (in dollars per share)						$ 27.94
Vested (in dollars per share)						$ 26.65
Balance at the end of period (in dollars per share)				$ 27.18		$ 27.18

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes

Income Taxes

19.  Income Taxes

As described in Note 1, we established additional TRSs to hold certain operations of the LNR Segment. Our income tax provision consisted of the following for the three and six months ended June 30, 2014 and 2013 (in thousands):

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2014			2013			2014			2013
Current
Federal	$	5,484		$	9,481		$	10,624		$	9,931
Foreign	1,782			570			3,231			570
State	929			1,534			1,799			1,861
Total current	8,195			11,585			15,654			12,362
Deferred
Federal	(2,344		)	63			(3,048		)	63
Foreign	(1,192		)	(465		)	(2,198		)	(465		)
State	(382		)	10			(511		)	10
Total deferred	(3,918		)	(392		)	(5,757		)	(392		)
Total income tax provision (1)	$	4,277		$	11,193		$	9,897		$	11,970

(1) Includes (benefit) provision of $0 and $(150) thousand reflected in discontinued operations for the three months ended June 30, 2014 and 2013, respectively, and $0 and $12 thousand reflected in discontinued operators for the six months ended June 30, 2014 and 2013, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are presented net by tax jurisdiction and are reported in other assets and other liabilities, respectively. At June 30, 2014 and December 31, 2013, our U.S. tax jurisdiction was in a net deferred tax asset position, while our European tax jurisdiction was in a net deferred tax liability position. The following table presents each of these tax jurisdictions and the tax effects of temporary differences on their respective net deferred tax assets and liabilities (in thousands):

	June 30, 2014			December 31, 2013
U.S.
Deferred tax asset, net
Reserves and accruals	$	11,506		$	11,454
Domestic intangible assets	3,673			(714		)
Investment securities and loans	(2,303		)	(892		)
Investment in unconsolidated entities	1,901			1,811
Deferred income	360			59
Net operating and capital loss carryforwards	1,379			967
Valuation allowance	(1,379		)	(799		)
Other U.S. temporary differences	(202		)	(242		)
	14,935			11,644
Europe
Deferred tax liability, net
European servicing rights	(4,224		)	(6,257		)
Net operating and capital loss carryforwards	11,064			10,951
Valuation allowance	(11,064		)	(10,951		)
Other European temporary differences	(373		)	(527		)
	(4,597		)	(6,784		)
Net deferred tax assets	$	10,338		$	4,860

Unrecognized tax benefits were not material as of and during the three and six months ended June 30, 2014.

The following table is a reconciliation of our federal income tax determined using our statutory federal tax rate to our reported income tax provision for the three and six months ended June 30, 2014 and 2013 (dollar amounts in thousands):

	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2014					2013					2014					2013
Federal statutory tax rate	$	43,631		35.0	%	$	25,446		35.0	%	$	87,906		35.0	%	$	47,917		35.0	%
REIT and other non-taxable income	(38,989		)	(31.3	)%	(15,516		)	(21.3	)%	(79,372		)	(31.7	)%	(37,308		)	(27.3	)%
State income taxes	753			0.6	%	1,592			2.2	%	1,203			0.5	%	1,592			1.2	%
Federal benefit of state tax deduction	(263		)	(0.2	)%	(557		)	(0.8	)%	(421		)	(0.2	)%	(557		)	(0.4	)%
Valuation allowance	(1,100		)	(0.9	)%	—			—	%	412			0.2	%	—			—	%
Other	245			0.2	%	228			0.3	%	169			0.1	%	326			0.2	%
Effective tax rate	$	4,277		3.4	%	$	11,193		15.4	%	$	9,897		3.9	%	$	11,970		8.7	%

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Fair Value (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Total realized and unrealized (losses) gains:
OTTI/Impairment	$ (797)	$ (359)	$ (1,010)	$ (401)
Net accretion			11,680	16,568
Level III
Total realized and unrealized (losses) gains:
OTTI/Impairment		(359)	(213)	(402)
Net accretion	3,323	5,755	9,887	11,906
Changes in financial instruments classified as Level III
Balance at the beginning of the period	115,719,493	321,043	102,414,703	333,153
Acquisition of LNR		89,471,477		89,471,477
Total realized and unrealized (losses) gains:
Included in earnings: Change in fair value / gain on sale	(3,313,202)	(3,698,024)	6,871,380	(3,698,024)
Total realized and unrealized (losses) gains		18		2,147
Included in OCI	(6,623)	(9,195)	(2,408)	37
Purchases / Originations	363,306	410,798	628,962	410,798
Sales	(318,305)	(486,408)	(645,920)	(499,120)
Issuances	(25,995)		(71,756)
Cash repayments / receipts	39,892	63,847	66,938	46,980
Transfers into level III	(1,978,045)	(373,699)	(2,502,357)	(373,699)
Transfers out of level III	292,058	149,184	598,900	149,184
Consolidations of VIEs	3,652,113	10,495,494	22,091,873	10,495,494
Deconsolidations of VIEs	(4,716,286)	(584,997)	(6,005,500)	(584,997)
Balance at the end of the period	109,711,729	95,764,934	109,711,729	95,764,934
Amount of total gains (losses) included in earnings attributable to assets still held at period end	(3,331,266)	(3,702,442)	(6,906,883)	(3,694,763)
VIE Liabilities | Level III
Changes in financial liabilities classified as Level III
Balance at the beginning of the period	(3,482,922)		(1,597,984)
Acquisition of LNR		(1,994,243)		(1,994,243)
Total realized and unrealized (losses) gains:
Included in earnings: Change in fair value/ gain on sale	(1,664)	94,448	99,837	94,448
Issuances	(25,995)		(71,756)
Cash repayments / receipts	50,984	79,735	86,349	79,735
Transfers into Level III	(1,983,525)	(489,513)	(2,555,137)	(489,513)
Transfers out of Level III	293,115	152,683	712,856	152,683
Consolidations of VIEs	(68,772)	(178,631)	(1,892,944)	(178,631)
Deconsolidations of VIEs	32,654	861	32,654	861
Balance at the end of the period	(5,186,125)	(2,334,660)	(5,186,125)	(2,334,660)
Amount of total gains (losses) included in earnings attributable to assets still held at period end	(1,664)	94,448	99,837	94,448
Loans Held-for-sale | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	74,117		206,672
Acquisition of LNR		256,502		256,502
Total realized and unrealized (losses) gains:
Included in earnings: Change in fair value / gain on sale	11,546	458	32,439	458
Purchases / Originations	320,566	390,669	582,391	390,669
Sales	(251,612)	(476,336)	(554,073)	(476,336)
Cash repayments / receipts	(205)	(117)	(297)	(117)
Transfers out of Level III			(112,720)
Balance at the end of the period	154,412	171,176	154,412	171,176
Amount of total gains (losses) included in earnings attributable to assets still held at period end	688	(8,344)	688	(8,344)
RMBS | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	291,217	321,043	296,236	333,153
Total realized and unrealized (losses) gains:
Included in earnings: Change in fair value / gain on sale	10,130		11,141
Total realized and unrealized (losses) gains				2,129
OTTI/Impairment		(359)	(213)	(402)
Net accretion	3,323	5,755	9,887	11,906
Included in OCI	(9,363)	(11,103)	(4,615)	(1,871)
Purchases / Originations		20,090		20,090
Sales	(53,236)		(62,546)	(12,712)
Cash repayments / receipts	(10,466)	(15,771)	(18,285)	(32,638)
Balance at the end of the period	231,605	319,655	231,605	319,655
Amount of total gains (losses) included in earnings attributable to assets still held at period end	2,804	6,627	7,971	14,306
CMBS | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	240,665		208,006
Acquisition of LNR		62,432		62,432
Total realized and unrealized (losses) gains:
Included in earnings: Change in fair value / gain on sale	4,393	(1,187)	9,600	(1,187)
Total realized and unrealized (losses) gains		18		18
Included in OCI	2,740	1,908	2,207	1,908
Purchases / Originations	42,740	39	46,571	39
Sales	(13,457)	(10,072)	(29,301)	(10,072)
Cash repayments / receipts	(421)		(829)
Transfers into Level III	5,480	115,814	52,780	115,814
Transfers out of Level III		(3,499)	(179)	(3,499)
Consolidations of VIEs			(6,715)
Deconsolidations of VIEs	221	(1,054)	221	(1,054)
Balance at the end of the period	282,361	164,399	282,361	164,399
Amount of total gains (losses) included in earnings attributable to assets still held at period end	4,513	(3,430)	9,018	(3,430)
Domestic Servicing Rights | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	144,898		150,149
Acquisition of LNR		156,993		156,993
Total realized and unrealized (losses) gains:
Included in earnings: Change in fair value / gain on sale	(5,523)	2,898	(10,774)	2,898
Transfers out of Level III	(1,057)		(1,057)
Balance at the end of the period	138,318	159,891	138,318	159,891
Amount of total gains (losses) included in earnings attributable to assets still held at period end	(5,523)	2,898	(10,774)	2,898
VIE Assets | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	118,451,518		103,151,624
Acquisition of LNR		90,989,793		90,989,793
Total realized and unrealized (losses) gains:
Included in earnings: Change in fair value / gain on sale	(3,332,084)	(3,794,641)	(7,013,623)	(3,794,641)
Consolidations of VIEs	3,720,885	10,674,125	23,991,532	10,674,125
Deconsolidations of VIEs	(4,749,161)	(584,804)	(6,038,375)	(584,804)
Balance at the end of the period	114,091,158	97,284,473	114,091,158	97,284,473
Amount of total gains (losses) included in earnings attributable to assets still held at period end	$ (3,332,084)	$ (3,794,641)	$ (7,013,623)	$ (3,794,641)

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Convertible Senior Notes (Tables)

6 Months Ended

Jun. 30, 2014

Convertible Senior Notes

Schedule of the unsecured convertible senior notes outstanding

The following summarizes the unsecured convertible senior notes (collectively, the “Convertible Notes”) outstanding as of June 30, 2014 (amounts in thousands, except rates):

	Principal Amount		Coupon Rate		Effective Rate(1)		Conversion Rate(2)	Maturity Date	Remaining Period of Amortization
2018 Notes	$	599,981	4.55	%	6.08	%	44.6455	3/1/2018	3.7 years
2019 Notes	$	459,997	4.00	%	5.37	%	47.5456	1/15/2019	4.5 years

	As ofJune 30, 2014			As ofDecember 31, 2013
Total principal	$	1,059,978		$	1,060,000
Net unamortized discount	(56,131		)	(62,149		)
Carrying amount of debt components	$	1,003,847		$	997,851
Carrying amount of conversion option equity components recorded in additional paid-in capital	$	48,502		$	48,502

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

(2) The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of Convertible Notes converted, as adjusted in accordance with the applicable indentures as a result of the spin-off of the SFR segment and cash dividend payments. The if-converted value of the 2018 Notes exceeded their principal amount by $36.7 million at June 30, 2014 since the closing market price of the Company’s common stock of $23.77 per share exceeded the implicit conversion price of $22.40 per share. The if-converted value of the 2019 Notes exceeded their principal amount by $59.9 million at June 30, 2014 since the closing market price of $23.77 per share exceeded the implicit conversion price of $21.03 per share for the 2019 Notes.  The Company has asserted its intent and ability to settle the principal amount of the Convertible Notes in cash.  As a result, conversion of this principal amount, totaling 44.6 million and 44.8 million shares for the three and six months ended June 30, 2014, respectively, was not included in the computation of diluted earnings per share (“EPS”).  However, the conversion spread value, representing 4.1 million and 3.9 million shares for the three and six months ended June 30, 2014, respectively, was included in the computation of diluted EPS.  See further discussion at Note 16.

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Offsetting Assets and Liabilities

6 Months Ended

Jun. 30, 2014

Offsetting Assets and Liabilities

Offsetting Assets and Liabilities

12. Offsetting Assets and Liabilities

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

			(ii)		(iii) = (i) - (ii)		(iv) Gross Amounts Not Offset in the Statement of Financial Position
	(i) Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received / Pledged		(v) = (iii) - (iv) Net Amount
As of June 30, 2014
Derivative assets	$	4,681	$	—	$	4,681	$	606	$	1,564	$	2,511
Derivative liabilities	$	26,294	$	—	$	26,294	$	606	$	18,412	$	7,276
Repurchase agreements	1,810,767		—		1,810,767		1,810,767		—		—
	$	1,837,061	$	—	$	1,837,061	$	1,811,373	$	18,412	$	7,276
As of December 31, 2013
Derivative assets	$	7,769	$	—	$	7,769	$	692	$	1,916	$	5,161
Derivative liabilities	$	24,192	$	—	$	24,192	$	692	$	7,150	$	16,350
Repurchase agreements	1,419,163		—		1,419,163		1,419,163		—		—
	$	1,443,355	$	—	$	1,443,355	$	1,419,855	$	7,150	$	16,350