10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2015

OR

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

Commission file number 001-34436

Starwood Property Trust, Inc.

(Exact name of registrant as specified in its charter)

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

Registrant’s telephone number, including area code:

(203) 422-8100

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 ☒ No ☐

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 ☒ No ☐

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 ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
(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 ☐ No ☒

The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of October30,  2015 was 237,672,948.

Special Note Regarding Forward-Looking Statements

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

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

· factors described in our Annual Report on Form 10-K for the year ended December 31, 2014, this Quarterly Report on Form 10-Q and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015, including those set forth under the captions “Risk Factors” and “Business”;

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

· impairment in the value of real estate property securing our loans or in which we invest;

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

· 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	17
	Note 4 Loans	19
	Note 5 Investment Securities	24
	Note 6 Properties	29
	Note 7 Investment in Unconsolidated Entities	30
	Note 8 Goodwill and Intangible Assets	30
	Note 9 Secured Financing Agreements	32
	Note 10 Convertible Senior Notes	35
	Note 11 Loan Securitization/Sale Activities	36
	Note 12 Derivatives and Hedging Activity	37
	Note 13 Offsetting Assets and Liabilities	39
	Note 14 Variable Interest Entities	40
	Note 15 Related-Party Transactions	41
	Note 16 Stockholders’ Equity	43
	Note 17 Earnings per Share	45
	Note 18 Accumulated Other Comprehensive Income	46
	Note 19 Fair Value	47
	Note 20 Income Taxes	52
	Note 21 Commitments and Contingencies	54
	Note 22 Segment Data	54
	Note 23 Subsequent Events	61
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	62
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	91
Item 4.	Controls and Procedures	93
Part II	Other Information
Item 1.	Legal Proceedings	94
Item 1A.	Risk Factors	94
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	94
Item 3.	Defaults Upon Senior Securities	94
Item 4.	Mine Safety Disclosures	94
Item 5.	Other Information	94
Item 6.	Exhibits	96

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 of		As of
	September 30, 2015		December 31, 2014
Assets:
Cash and cash equivalents	$	372,768	$	255,187
Restricted cash		43,620		48,704
Loans held-for-investment, net		5,814,886		5,779,238
Loans held-for-sale ($423,630 and $391,620 held at fair value)		450,828		391,620
Loans transferred as secured borrowings		142,456		129,427
Investment securities ($421,456 and $556,253 held at fair value)		786,461		998,248
Properties, net		530,438		39,854
Intangible assets ($123,892 and $132,303 held at fair value)		191,080		144,152
Investment in unconsolidated entities		199,171		193,983
Goodwill		140,437		140,437
Derivative assets		36,307		26,628
Accrued interest receivable		36,042		40,102
Other assets		137,296		95,652
Variable interest entity (“VIE”) assets, at fair value		82,937,617		107,816,065
Total Assets	$	91,819,407	$	116,099,297
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	137,786	$	144,516
Related-party payable		22,804		40,751
Dividends payable		115,191		108,189
Derivative liabilities		14,901		5,476
Secured financing agreements, net		3,682,274		3,137,789
Convertible senior notes, net		1,320,207		1,418,022
Secured borrowings on transferred loans		143,926		129,441
VIE liabilities, at fair value		82,181,138		107,232,201
Total Liabilities		87,618,227		112,216,385
Commitments and contingencies (Note 21)
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Preferred stock, $0.01 per share, 100,000,000 shares authorized, no shares issued and outstanding		—		—
Common stock, $0.01 per share, 500,000,000 shares authorized, 240,665,588 issued and 237,658,615 outstanding as of September 30, 2015 and 224,752,053 issued and 223,538,303 outstanding as of December 31, 2014		2,407		2,248
Additional paid-in capital		4,184,538		3,835,725
Treasury stock (3,006,973 shares and 1,213,750 shares)		(61,525)		(23,635)
Accumulated other comprehensive income		39,510		55,896
Retained earnings (accumulated deficit)		5,843		(9,378)
Total Starwood Property Trust, Inc. Stockholders’ Equity		4,170,773		3,860,856
Non-controlling interests in consolidated subsidiaries		30,407		22,056
Total Equity		4,201,180		3,882,912
Total Liabilities and Equity	$	91,819,407	$	116,099,297

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				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Revenues:
Interest income from loans	$	120,598	$	110,669	$	357,319	$	321,034
Interest income from investment securities		24,674		28,640		76,228		85,714
Servicing fees		32,528		34,641		90,939		101,533
Rental income		10,045		3,385		17,731		6,520
Other revenues		4,300		4,033		7,437		9,296
Total revenues		192,145		181,368		549,654		524,097
Costs and expenses:
Management fees		28,082		24,943		82,871		77,849
Interest expense		50,688		39,739		151,021		115,265
General and administrative		38,693		47,640		115,361		136,835
Acquisition and investment pursuit costs		3,682		759		9,735		1,924
Costs of rental operations		2,352		1,783		5,261		3,889
Depreciation and amortization		7,234		3,017		17,147		12,807
Loan loss allowance, net		(2,667)		1,575		311		1,933
Other expense		3		918		378		6,527
Total costs and expenses		128,067		120,374		382,085		357,029
Income before other income, income taxes and non-controlling interests		64,078		60,994		167,569		167,068
Other income:
Change in net assets related to consolidated VIEs		49,665		87,778		153,399		190,810
Change in fair value of servicing rights		(4,217)		(7,897)		(8,411)		(18,671)
Change in fair value of investment securities, net		2,617		1,860		3,564		15,180
Change in fair value of mortgage loans held-for-sale, net		19,082		15,517		51,044		48,018
Earnings from unconsolidated entities		5,706		3,805		20,747		13,432
Gain on sale of investments and other assets, net		3,348		1,332		20,755		12,965
Gain on derivative financial instruments, net		2,230		29,275		7,323		11,619
Foreign currency loss, net		(17,782)		(21,466)		(27,235)		(16,212)
Total other-than-temporary impairment (“OTTI”)		—		(264)		—		(2,256)
Noncredit portion of OTTI recognized in other comprehensive income		—		264		—		1,246
Net impairment losses recognized in earnings		—		—		—		(1,010)
Loss on extinguishment of debt		—		—		(5,921)		—
Other income, net		64		28		119		738
Total other income		60,713		110,232		215,384		256,869
Income from continuing operations before income taxes		124,791		171,226		382,953		423,937
Income tax provision		(7,675)		(3,836)		(27,418)		(13,733)
Income from continuing operations		117,116		167,390		355,535		410,204
Loss from discontinued operations, net of tax (Note 3)		—		—		—		(1,551)
Net income		117,116		167,390		355,535		408,653
Net income attributable to non-controlling interests		(381)		(2,346)		(1,289)		(5,140)
Net income attributable to Starwood Property Trust, Inc.	$	116,735	$	165,044	$	354,246	$	403,513
Earnings per share data attributable to Starwood Property Trust, Inc.:
Basic:
Income from continuing operations	$	0.49	$	0.73	$	1.51	$	1.89
Loss from discontinued operations		—		—		—		(0.01)
Net income	$	0.49	$	0.73	$	1.51	$	1.88
Diluted:
Income from continuing operations	$	0.49	$	0.73	$	1.51	$	1.88
Loss from discontinued operations		—		—		—		(0.01)
Net income	$	0.49	$	0.73	$	1.51	$	1.87
Dividends declared per common share	$	0.48	$	0.48	$	1.44	$	1.44

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				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Net income	$	117,116	$	167,390	$	355,535	$	408,653
Other comprehensive (loss) income (net change by component):
Cash flow hedges		(208)		530		(348)		559
Available-for-sale securities		(9,095)		3,954		(18,915)		(2,166)
Foreign currency remeasurement		2,912		(9,765)		2,877		(4,161)
Other comprehensive loss		(6,391)		(5,281)		(16,386)		(5,768)
Comprehensive income		110,725		162,109		339,149		402,885
Less: Comprehensive income attributable to non-controlling interests		(381)		(2,346)		(1,289)		(5,140)
Comprehensive income attributable to Starwood Property Trust, Inc.	$	110,344	$	159,763	$	337,860	$	397,745

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)

													Total
											Accumulated		Starwood
									(Accumulated		Other		Property
	Common stock			Additional					Deficit)		Comprehensive		Trust, Inc.		Non-
		Par		Paid-in		Treasury Stock			Retained		Income		Stockholders’		Controlling		Total
	Shares	Value		Capital		Shares	Amount		Earnings		(Loss)		Equity		Interests		Equity
Balance, January 1, 2015	224,752,053	$	2,248	$	3,835,725	1,213,750	$	(23,635)	$	(9,378)	$	55,896	$	3,860,856	$	22,056	$	3,882,912
Proceeds from public offering of common stock	13,800,000		138		326,004	—		—		—		—		326,142		—		326,142
Proceeds from DRIP Plan	9,400		—		219	—		—		—		—		219		—		219
Equity offering costs	—		—		(945)	—		—		—		—		(945)		—		(945)
Common stock repurchased	—		—		—	1,793,223		(37,890)		—		—		(37,890)		—		(37,890)
Equity component of 4.0% Convertible Senior Notes repurchase	—		—		(17,727)	—		—		—		—		(17,727)		—		(17,727)
Share-based compensation	1,484,879		15		26,440	—		—		—		—		26,455		—		26,455
Manager incentive fee paid in stock	619,256		6		14,822	—		—		—		—		14,828		—		14,828
Net income	—		—		—	—		—		354,246		—		354,246		1,289		355,535
Dividends declared, $1.44 per share	—		—		—	—		—		(339,025)		—		(339,025)		—		(339,025)
Other comprehensive loss, net	—		—		—	—		—		—		(16,386)		(16,386)		—		(16,386)
VIE non-controlling interests	—		—		—	—		—		—		—		—		4,188		4,188
Contributions from non-controlling interests	—		—		—	—		—		—		—		—		4,133		4,133
Distributions to non-controlling interests	—		—		—	—		—		—		—		—		(1,259)		(1,259)
Balance, September 30, 2015	240,665,588	$	2,407	$	4,184,538	3,006,973	$	(61,525)	$	5,843	$	39,510	$	4,170,773	$	30,407	$	4,201,180
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	2,430		—		58	—		—		—		—		58		—		58
Equity offering costs	—		—		(1,623)	—		—		—		—		(1,623)		—		(1,623)
Common stock repurchased	—		—		—	587,900		(12,993)		—		—		(12,993)		—		(12,993)
Share-based compensation	1,025,144		10		21,491	—		—		—		—		21,501		—		21,501
Manager incentive fee paid in stock	376,932		4		8,986	—		—		—		—		8,990		—		8,990
Net income	—		—		—	—		—		403,513		—		403,513		5,140		408,653
Dividends declared,  $1.44 per share	—		—		—	—		—		(311,492)		—		(311,492)		—		(311,492)
Spin-off of Starwood Waypoint Residential Trust	—		—		(1,118,743)	—		—		—		—		(1,118,743)		(1,594)		(1,120,337)
Other comprehensive loss, net	—		—		—	—		—		—		(5,768)		(5,768)		—		(5,768)
VIE non-controlling interests	—		—		—	—		—		—		—		—		382		382
Distributions to non-controlling interests	—		—		—	—		—		—		—		—		(33,582)		(33,582)
Balance, September 30, 2014	223,602,551	$	2,236	$	3,793,428	1,213,750	$	(23,635)	$	7,302	$	69,681	$	3,849,012	$	14,951	$	3,863,963

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 Nine Months Ended
	September 30,
	2015		2014
Cash Flows from Operating Activities:
Net income	$	355,535	$	408,653
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs		11,055		8,501
Amortization of convertible debt discount and deferred fees		15,631		9,376
Accretion of net discount on investment securities		(20,312)		(17,174)
Accretion of net deferred loan fees and discounts		(26,615)		(16,756)
Amortization of net premium (discount) from secured borrowings on transferred loans		4		(862)
Share-based compensation		26,455		21,501
Share-based component of incentive fees		14,828		8,990
Change in fair value of fair value option investment securities		(3,564)		(15,180)
Change in fair value of consolidated VIEs		17,438		(71,105)
Change in fair value of servicing rights		8,411		18,671
Change in fair value of loans held-for-sale		(51,044)		(48,018)
Change in fair value of derivatives		(12,765)		(14,595)
Foreign currency loss, net		27,372		15,767
Gain on sale of investments and other assets		(20,755)		(13,907)
Other-than-temporary impairment		—		1,010
Loan loss allowance, net		311		1,933
Depreciation and amortization		15,873		13,178
Earnings from unconsolidated entities		(20,747)		(13,432)
Distributions of earnings from unconsolidated entities		18,665		9,354
Loss on extinguishment of debt		5,921		—
Originations of loans held-for-sale, net of principal collections		(1,424,837)		(1,159,058)
Proceeds from sale of loans held-for-sale		1,443,871		1,165,583
Changes in operating assets and liabilities:
Related-party payable, net		(17,947)		7,073
Accrued and capitalized interest receivable, less purchased interest		(48,310)		(29,770)
Other assets		(29,576)		(6,192)
Accounts payable, accrued expenses and other liabilities		(25,211)		(46,997)
Net cash provided by operating activities		259,687		236,544
Cash Flows from Investing Activities:
Origination and purchase of loans held-for-investment		(1,670,124)		(2,123,947)
Proceeds from principal collections on loans		1,057,700		966,350
Proceeds from loans sold		599,504		341,472
Purchase of investment securities		(163,018)		(67,230)
Proceeds from sales of investment securities		6,301		100,166
Proceeds from principal collections on investment securities		348,090		40,999
Real estate business combinations, net of cash acquired		(239,933)		—
Proceeds from sale of properties		33,056		1,784
Purchase of other assets		(309)		(18,731)
Investment in unconsolidated entities		(32,063)		(21,973)
Distribution of capital from unconsolidated entities		29,003		38,946
Payments for purchase or termination of derivatives		(18,271)		(16,081)
Proceeds from termination of derivatives		30,194		5,611
Return of investment basis in purchased derivative asset		260		1,222
Decrease in restricted cash, net		9,404		8,890
Spin-off of Starwood Waypoint Residential Trust		—		(111,960)
Acquisition and improvement of single family homes		—		(61,901)
Proceeds from sale of non-performing loans		—		1,153
Net cash used in investing activities		(10,206)		(915,230)

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 Nine Months Ended
	September 30,
	2015		2014
Cash Flows from Financing Activities:
Borrowings under financing agreements	$	3,423,328	$	2,917,281
Principal repayments on and repurchases of borrowings		(3,289,937)		(2,459,837)
Payment of deferred financing costs		(13,876)		(11,536)
Proceeds from common stock issuances		326,361		583,099
Payment of equity offering costs		(945)		(1,623)
Payment of dividends		(332,023)		(293,607)
Distributions to non-controlling interests		(1,259)		(33,582)
Purchase of treasury stock		(29,792)		—
Issuance of debt of consolidated VIEs		9,132		88,412
Repayment of debt of consolidated VIEs		(246,230)		(129,724)
Distributions of cash from consolidated VIEs		26,690		32,601
Net cash (used in) provided by financing activities		(128,551)		691,484
Net increase in cash and cash equivalents		120,930		12,798
Cash and cash equivalents, beginning of period		255,187		317,627
Effect of exchange rate changes on cash		(3,349)		(3,103)
Cash and cash equivalents, end of period	$	372,768	$	327,322
Supplemental disclosure of cash flow information:
Cash paid for interest	$	126,668	$	110,208
Income taxes paid		27,256		19,040
Supplemental disclosure of non-cash investing and financing activities:
Fair value of assets acquired	$	540,764	$	—
Fair value of liabilities assumed		300,831		—
Assets acquired from consolidated VIEs, net		(39,506)		—
Unsettled common stock repurchased		8,098		12,993
Dividends declared, but not yet paid		115,191		108,056
Consolidation of VIEs (VIE asset/liability additions)		8,067,859		27,094,681
Deconsolidation of VIEs (VIE asset/liability reductions)		(5,278,580)		8,502,882
Net assets distributed in spin-off of Starwood Waypoint Residential Trust		—		1,008,377

See notes to condensed consolidated financial statements.

9

Starwood Property Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of September 30, 2015

(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 investments in both the U.S. and Europe. We refer to the following as our target assets:commercial real estate mortgage loans, preferred equity interests, CMBS andother commercial real estate-related debt investments.Our target assets may also include residential mortgage-backed securities (“RMBS”), certain residential mortgage loans, distressed or non-performing commercial loans, commercial properties subject to net leases and equity interests in commercial real estate. 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 three reportable business segments as of September 30, 2015:

· Real estate lending (the “Lending Segment”)—engages primarily in originating, acquiring, financing and managing commercial first mortgages, subordinated mortgages, mezzanine loans, preferred equity, CMBS, RMBS and other real estate and real estate-related debt investments in both the U.S. and Europe that are held-for-investment.

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

· Real estate property (the “Property Segment”)—engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, including multi-family properties, that are held for investment. 

On January 31, 2014, we completed the spin-off of our former single family residential (“SFR”) segment to our stockholders as discussed further in Note 3.

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

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

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2. Summary of Significant Accounting Policies

Balance Sheet Presentation of the Investing and Servicing Segment’s Variable Interest Entities

As noted above, the Investing and Servicing Segment operates an investment 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 accounting principles generally accepted in the United States of America (“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 the Investing and Servicing Segment 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 VIEs. The assets and other instruments held by these VIEs are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the VIEs do not have any recourse to the general credit of any other consolidated entities, nor to us as the consolidator of these VIEs.

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

Refer to the segment data in Note 22 for a presentation of the Investing and Servicing Segment 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, 2014 (the “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three and nine months ended September 30, 2015 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, 2014 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. Accounting Standards Codification (“ASC”) 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its

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

We separately present the assets and liabilities of our consolidated VIEs as individual line items on our consolidated balance sheets.  The liabilities of our consolidated VIEs consist solely of obligations to the bondholders of the related CMBS trusts, and are thus presented as a single line item entitled “VIE liabilities.” The assets of our

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consolidated VIEs consist principally of loans, but at times, also include foreclosed loans which have been temporarily converted into real estate owned (“REO”).  These assets in the aggregate are likewise presented as a single line item entitled “VIE assets.”

Loans comprise the vast majority of our VIE assets and are carried at fair value due to the election of the fair value option.  When an asset becomes REO, it is due to nonperformance of the loan.  Because the loan is already at fair value, the carrying value of an REO asset is also initially at fair value.  Furthermore, when we consolidate a CMBS trust, any existing REO would be consolidated at fair value.  Once an asset becomes REO, its disposition time is relatively short. As a result, the carrying value of an REO generally approximates fair value under GAAP.

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

REO assets generally represent a very small percentage of the overall asset pool of a CMBS trust.  In a new issue CMBS trust there are no REO assets.  We estimate that REO assets constitute approximately 4% of our consolidated VIE assets, with the remaining 96% representing loans.  However, it is important to note that the fair value of our VIE assets is determined by reference to our VIE liabilities as permitted under Accounting Standards Update (“ASU”) 2014-13,  Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.  In other words, our VIE liabilities are more reliably measurable than the VIE assets, resulting in our current measurement methodology which utilizes this value to determine the fair value of our VIE assets as a whole. As a result, these percentages are not necessarily indicative of the relative fair values of each of these asset categories if the assets were to be valued individually. 

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

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

Convertible Senior Notes

ASC 470, Debt, requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. ASC 470-20 requires that the initial proceeds from the sale of these notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by the Company at such time. The equity components of the convertible notes have been reflected within additional paid-in capital in our condensed consolidated balance sheets. The resulting debt discount is being amortized over the period during which the convertible notes are expected to be outstanding (the maturity date) as additional non-cash interest expense.

Upon repurchase of convertible debt instruments, ASC 470-20 requires the issuer to allocate total settlement consideration, inclusive of transaction costs, amongst the liability and equity components of the instrument based on the fair value of the liability component immediately prior to repurchase.  The difference between the settlement consideration allocated to the liability component and the net carrying value of the liability component, including unamortized debt issuance costs, is recognized as gain (loss) on extinguishment of debt in our condensed consolidated statements of operations.  The remaining settlement consideration allocated to the equity component is recognized as a reduction of additional paid-in capital in our condensed consolidated balance sheets. 

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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 3.  In accordance with ASC 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 nine months ended September 30, 2014.

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 the Investing and Servicing Segment’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 the Investing and Servicing Segment’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.

Fair Value Measurements

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

As discussed above, we measure the assets and liabilities of consolidated VIEs at fair value pursuant to our election of the fair value option. The VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the VIE, we maximize the use of observable inputs over unobservable inputs. We also acknowledge that our principal market for selling CMBS assets is the securitization market where the market participant is considered to be a CMBS trust or a collateralized debt obligation (“CDO”). This methodology results in the fair value of the assets of a static CMBS trust being equal to the fair value of its liabilities. Refer to Note 19 for further information regarding our fair value measurements.

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-collateral value

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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.

Intangible Lease Assets

In accordance with ASC 805, Business Combinations, the acquirer in a business combination must recognize, with certain exceptions, the fair values of assets acquired, liabilities assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity.  In connection with the Ireland portfolio acquisition (refer to Note 3 for further discussion) and certain properties acquired from CMBS trusts, we recognized intangible lease assets and liabilities associated with certain noncancelable operating leases of the acquired properties. These intangible lease assets and liabilities include in-place lease intangible assets, favorable lease intangible assets and unfavorable lease liabilities.  In-place lease intangible assets reflect the acquired benefit of purchasing properties with in-place leases and are measured based on estimates of direct costs associated with leasing the property and lost rental income during projected lease-up and free rent periods, both of which are avoided due to the presence of in-place leases at the acquisition date. Favorable and unfavorable lease intangible assets and liabilities reflect the terms of in-place tenant leases being either favorable or unfavorable relative to market terms at the acquisition date.  The estimated fair values of our favorable and unfavorable lease assets and liabilities at the respective acquisition dates represent the discounted cash flow differential between the contractual cash flows of such leases and the estimated cash flows that comparable leases at market terms would generate. Our intangible lease assets and liabilities are recognized within intangible assets and other liabilities, respectively, in our condensed consolidated balance sheet.  Our in-place lease intangible assets are amortized to amortization expense while our favorable and unfavorable lease intangible assets and liabilities are amortized to rental income, both over the remaining noncancelable term of the respective leases on a straight-line basis.

Properties

Our properties consist of commercial real estate properties held-for-investment and are recorded at cost, less accumulated depreciation and impairments, if any.  Properties consist primarily of land, buildings and improvements.  Land is not depreciated, and buildings and improvements are depreciated on a straight-line basis over their estimated useful lives.  Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated on a straight-line basis over their estimated useful lives.  We review properties for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability is determined by comparing the carrying amount of the property to the undiscounted future net cash flows it is expected to generate. If such carrying amounts exceed the expected undiscounted future net cash flows, we adjust the carrying amount of the property to its estimated fair value.

Revenue Recognition

Rental Income

Rental income is recognized when earned from tenants. For leases that provide rent concessions or fixed escalations over the lease term, rental income is recognized on a straight-line basis over the noncancelable term of the lease.  In net lease arrangements, costs reimbursable from tenants are recognized in rental income in the period in which the related expenses are incurred as we are generally the primary obligor with respect to purchasing goods and services for property operations.

Acquisition and Investment Pursuit Costs

Costs incurred in connection with acquiring properties, investments, loans and businesses, as well as in pursuing unsuccessful acquisitions and investments, are recorded within acquisition and investment pursuit costs in our condensed consolidated statements of operations when incurred.  These costs reflect services performed by third parties and principally include due diligence and legal services.

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Earnings Per Share

We present both basic and diluted earnings per share (“EPS”) amounts in our financial statements.  Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from (i) our share-based compensation, consisting of unvested restricted stock (“RSAs”) and restricted stock units (“RSUs”), (ii) shares contingently issuable to our Manager, and (iii) the “in-the-money” conversion options associated with our outstanding convertible notes (see further discussion in Note 17). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.

The Company’s unvested RSUs and RSAs 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 shares of common stock and participating securities.  For the three and nine months ended September 30, 2015 and 2014, the two-class method resulted in the most dilutive EPS calculation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. 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

Certain prior period amounts have been reclassified to conform to our current period presentation.  In that regard, we have reclassified $39.9 million of commercial real estate properties from other assets to properties, net on our condensed consolidated balance sheet as of December 31, 2014.  Additionally, revenues of $3.4 million and $6.5 million previously reported in other revenue have been reclassified to rental income in our condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.  Expenses of $1.8 million and $3.9 million previously reported in other expense have been reclassified to costs of rental operations in our condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively. 

Recent Accounting Developments

On February 18, 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis, which amends the criteria for determining which entities are considered VIEs, amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2015. Early application is permitted. We are in the process of assessing what impact this ASU will have on the Company. 

On April 7, 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30), which requires entities to present debt issuance costs as a direct deduction from the carrying value of the related debt liability, consistent with debt discounts, rather than as a separate deferred asset as the previous guidance required.  The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2015.  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.  At

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issuance, the ASU was effective for the first interim or annual period beginning after December 15, 2016. On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, which delayed the effective date of ASU 2014-09 by one year, resulting in the ASU becoming effective for the first interim or annual period beginning after December 15, 2017.  Early application, which was not permissible under the initial effectiveness timeline, is now permissible though no earlier than as of the first interim or annual period beginning after December 15, 2016.  We do not expect the application of this ASU to materially impact the Company.

On September 25, 2015, the FASB issued ASU 2015-16,  Business Combinations (Topic 805) – Simplifying the Accounting for Measurement-Period Adjustments, which requires that the acquirer in a business combination recognize any measurement period adjustments in the period in which the adjustments are identified rather than retrospectively as of the acquisition date, as current GAAP dictates.  The ASU shall be applied prospectively and is effective for annual periods, and interim periods therein, beginning after December 15, 2015.  Early application is permitted.We intend to early adopt this ASU by recognizing any future measurement period adjustments in the period identified. 

3.  Acquisitions and Divestitures

Affordable Housing Portfolio Acquisition

In August 2015, we entered into an agreement to acquire 29 affordable housing communities located throughout Florida (the “Affordable Housing Portfolio”) for an aggregate acquisition price of $524.1 million.  The acquisition will be fully funded with existing cash on hand and debt totaling $362.8 million, including third party debt and the assumption of pre-existing federal, state and county sponsored financing.  The Affordable Housing Portfolio is comprised of 7,870 units concentrated primarily in the Tampa, Orlando and West Palm Beach metropolitan areas. 

On October 26, 2015, we entered into an agreement to acquire a 450-unit affordable housing community in Tampa, Florida for $29.1 million.

On October 20, 2015, we acquired seven of the properties for $143.2 million.  As of November 5, 2015, the initial accounting for these acquisitions was not sufficiently complete to allow for the inclusion of the ASC 805, Business Combinations, disclosures herein. 

Theproperties not yet acquired remain subject to customary closing conditions.  Refer to Note 23 for further discussion.

Ireland Portfolio Acquisition

On July 24, 2015, we acquired a fully occupied net leased office property located in Dublin, Ireland for $121.9 million.  This acquisition was partially financed with $80.7 million from the Lender 6 Mortgage facility.  This property, along with the 11 net leased fully occupied office properties and onemulti-family property acquired in May 2015, comprise the “Ireland Portfolio”.  The aggregate cash purchase price for the Ireland Portfolio, which collectively comprisesapproximately 600,000 square feet, was $226.6 million.  In connection with the acquisition, we extinguished $283.0 million of debt assumed, and obtained new financings totaling $328.6 million from the Lender 6 Mortgage facility.  Refer to Note 9 for further discussion of this facility.All properties within the Ireland Portfolio were acquired from entities controlled by the same third party investment fund.

We applied the provisions of ASC 805, Business Combinations, in accounting for our acquisition of the Ireland Portfolio.  In doing so, we have provisionally recorded all identifiable assets acquired and liabilities assumed at fair value as of the acquisition date.  These provisional amounts may be adjusted during the measurement period, which expires no later than one year from the acquisition date, if new information is obtained that, if known, would have affected the amounts recognized as of the acquisition date.

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The following table summarizes the provisional estimates of identified assets acquired and liabilities assumed at the respective acquisition dates (amounts in thousands):

Assets acquired:
Restricted cash	$	10,829
Properties		445,369
Intangible assets		59,529
Other assets		11,128
Total assets acquired		526,855
Liabilities assumed:
Accounts payable, accrued expenses and other liabilities		17,273
Secured financing agreements		283,010
Total liabilities assumed		300,283
Net assets acquired/purchase price	$	226,572

For the period from their respective acquisition dates through September 30, 2015, we have recognized revenues of $10.8 million and net loss of $4.1 million related to the Ireland Portfolio.  Such net loss includes one-time acquisition-related costs, such as legal and due diligence costs, of approximately $3.3 millionwhich are included in acquisition and investment pursuit costs within our condensed consolidated statements of operations.  No goodwill was recognized in connection with the Ireland Portfolio acquisition as the purchase price equaled the fair value of the net assets acquired.

The pro-forma revenues and net income attributable to STWD of the combined entity for the three and nine months ended September 30, 2015 and 2014, assuming the Ireland Portfolio acquisition occurred on January 1, 2014, are as follows (amounts in thousands, except per share amounts):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Revenues	$	192,722	$	190,198	$	564,574	$	550,586
Net income attributable to STWD		116,803		164,838		357,314		399,053
Net income per share - Basic		0.49		0.73		1.52		1.85
Net income per share - Diluted		0.49		0.73		1.52		1.85

Pro-forma net income was adjusted to include the following estimated management fees the combined entity would have incurred (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Management fee expense addition	$	46	$	1,047	$	1,605	$	3,141

SFR Spin-off

On January 31, 2014, we completed the spin-off of our former SFR segment to our stockholders. The 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. The results of operations for the SFR segment are presented within discontinued operations in our condensed consolidated statement of operations for the nine months ended September 30, 2014. 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

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summarized consolidated results of discontinued operations for the SFR segment prior to the spin-off (amounts in thousands):

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2014		September 30, 2014
Total revenues	$	—	$	3,876
Total costs and expenses		—		6,369
Loss before other income and income taxes		—		(2,493)
Total other income		—		942
Loss before income taxes		—		(1,551)
Income tax provision		—		—
Net loss	$	—	$	(1,551)

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 September 30, 2015 and December 31, 2014 (amounts in thousands):

							Weighted
					Weighted		Average Life
	Carrying		Face		Average		(“WAL”)
September 30, 2015	Value		Amount		Coupon		(years)(3)
First mortgages (1)	$	4,533,689	$	4,588,988	6.1	%	3.0
Subordinated mortgages (2)		399,381		424,957	8.6	%	3.6
Mezzanine loans (1)		888,158		873,081	10.0	%	2.2
Total loans held-for-investment		5,821,228		5,887,026
Loans held-for-sale (carrying value of $423,630 under fair value option)		450,828		447,204	4.8	%	8.9
Loans transferred as secured borrowings		142,456		143,926	6.0	%	2.2
Total gross loans		6,414,512		6,478,156
Loan loss allowance (loans held-for-investment)		(6,342)		—
Total net loans	$	6,408,170	$	6,478,156
December 31, 2014
First mortgages (1)	$	4,538,961	$	4,609,526	6.2	%	3.5
Subordinated mortgages (2)		345,091		374,859	8.1	%	3.9
Mezzanine loans (1)		901,217		889,948	10.4	%	2.6
Total loans held-for-investment		5,785,269		5,874,333
Loans held-for-sale, fair value option elected		391,620		390,342	4.5	%	8.3
Loans transferred as secured borrowings		129,427		129,570	5.4	%	2.5
Total gross loans		6,306,316		6,394,245
Loan loss allowance (loans held-for-investment)		(6,031)		—
Total net loans	$	6,300,285	$	6,394,245

(1) First mortgages include first mortgage loansand any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan.  The application of this methodology resulted in mezzanine loans with carrying values of $892.3 million and $704.2 million being classified as first mortgages as of September 30, 2015 and December 31, 2014, respectively.  

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

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

As of September 30, 2015, approximately $4.8 billion, or 81.9%, of our loans held-for-investment were variable rate and paid interest principally at LIBOR plus a weighted-average spread of 6.1%. The following table summarizes our investments in floating rate loans (amounts in thousands):

	September 30, 2015				December 31, 2014
			Carrying				Carrying
Index	Base Rate		Value		Base Rate		Value
One-month LIBOR USD	0.1930	%	$	463,214	0.1713	%	$	138,576
Three-month LIBOR GBP	0.5831	%		411,122	0.5640	%		440,222
LIBOR floor	0.15 - 3.00	% (1)		3,895,721	0.15 - 3.00	% (1)		3,889,412
Total			$	4,770,057			$	4,468,210

(1) The weighted-average LIBOR Floor was 0.31% and 0.35% as of September 30, 2015 and December 31, 2014, respectively.

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

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

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The rating categories generally include the characteristics described below, but these are utilized as guidelines and therefore not every loan will have all of the characteristics described in each category:

Rating	Characteristics
1		Sponsor capability and financial condition—Sponsor is highly rated or investment grade or, if private, the equivalent thereof with significant management experience.
		Loan collateral and performance relative to underwriting—The collateral has surpassed underwritten expectations.
		Quality and stability of collateral cash flows—Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.
		Loan structure—LTV does not exceed 65%. The loan has structural features that enhance the credit profile.
2		Sponsor capability and financial condition—Strong sponsorship with experienced management team and a responsibly leveraged portfolio.
		Loan collateral and performance relative to underwriting—Collateral performance equals or exceeds underwritten expectations and covenants and performance criteria are being met or exceeded.
		Quality and stability of collateral cash flows—Occupancy is stabilized with a diverse tenant mix.
		Loan structure—LTV does not exceed 70% and unique property risks are mitigated by structural features.
3		Sponsor capability and financial condition—Sponsor has historically met its credit obligations, routinely pays off loans at maturity, and has a capable management team.
		Loan collateral and performance relative to underwriting—Property performance is consistent with underwritten expectations.
		Quality and stability of collateral cash flows—Occupancy is stabilized, near stabilized, or is on track with underwriting.
		Loan structure—LTV does not exceed 80%.
4		Sponsor capability and financial condition—Sponsor credit history includes missed payments, past due payment, and maturity extensions. Management team is capable but thin.
		Loan collateral and performance relative to underwriting—Property performance lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers. A sale of the property may be necessary in order for the borrower to pay off the loan at maturity.
		Quality and stability of collateral cash flows—Occupancy is not stabilized and the property has a large amount of rollover.
		Loan structure—LTV is 80% to 90%.
5		Sponsor capability and financial condition—Credit history includes defaults, deeds‑in‑lieu, foreclosures, and/or bankruptcies.
		Loan collateral and performance relative to underwriting—Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Sale proceeds would not be sufficient to pay off the loan at maturity.
		Quality and stability of collateral cash flows—The property has material vacancy and significant rollover of remaining tenants.
		Loan structure—LTV exceeds 90%.

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As of September 30, 2015, the risk ratings for loans subject to our rating system, which 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
							Cost				Transferred				% of
Risk Rating	First		Subordinated		Mezzanine		Recovery		Loans Held-		As Secured				Total
Category	Mortgages		Mortgages		Loans		Loans		For-Sale		Borrowings		Total		Loans
1	$	702	$	—	$	—	$	—	$	—	$	—	$	702	—	%
2		396,967		88,195		119,702		—		—		—		604,864	9.4	%
3		3,863,862		278,140		650,859		—		—		142,456		4,935,317	76.9	%
4		272,158		33,046		117,597		—		—		—		422,801	6.6	%
5		—		—		—		—		—		—		—	—	%
N/A		—		—		—		—		450,828		—		450,828	7.1	%
	$	4,533,689	$	399,381	$	888,158	$	—	$	450,828	$	142,456	$	6,414,512	100.0	%

As of December 31, 2014, 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
							Cost				Transferred				% of
Risk Rating	First		Subordinated		Mezzanine		Recovery		Loans Held-		As Secured				Total
Category	Mortgages		Mortgages		Loans		Loans		For-Sale		Borrowings		Total		Loans
1	$	822	$	—	$	—	$	—	$	—	$	—	$	822	—	%
2		258,822		116,168		148,582		—		—		—		523,572	8.3	%
3		4,120,562		196,476		645,778		—		—		129,427		5,092,243	80.7	%
4		109,489		32,447		106,857		—		—		—		248,793	4.0	%
5		45,974		—		—		—		—		—		45,974	0.7	%
N/A		—		—		—		3,292		391,620		—		394,912	6.3	%
	$	4,535,669	$	345,091	$	901,217	$	3,292	$	391,620	$	129,427	$	6,306,316	100.0	%

As of September 30, 2015, the Lending Segment held a $61.0 million mezzanine loan on a luxury condominium project located in New York, of which $18.6million is greater than 90 days past due.  After completing our impairment evaluation process, we concluded that no impairment charges were required on this loan or any other individual loans held-for-investment as of September 30, 2015 or December 31, 2014, as we expect to collect all outstanding principal and interest.  During the three months ended September 30, 2015, the Investing and Servicing Segment received full repayments of its basis in the two remaining loans held-for-investment which were greater than 90 days past due and were acquired as part of the acquisition of LNR Property LLC (“LNR”) in April 2013.  None of our held-for-sale loans where we have elected the fair value option were 90 days or greaterpast due.

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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.” The following table presents the activity in our allowance for loan losses (amounts in thousands):

	For the Nine Months Ended
	September 30,
	2015		2014
Allowance for loan losses at January 1	$	6,031	$	3,984
Provision for loan losses		311		1,933
Charge-offs		—		—
Recoveries		—		—
Allowance for loan losses at September 30	$	6,342	$	5,917
Recorded investment in loans related to the allowance for loan loss	$	422,801	$	287,231

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

	For the Nine Months Ended
	September 30,
	2015		2014
Balance at January 1	$	6,300,285	$	4,750,804
Acquisitions/originations/additional funding		3,114,293		3,283,546
Capitalized interest (1)		51,416		31,994
Basis of loans sold (2)		(2,040,380)		(1,505,764)
Loan maturities/principal repayments		(1,055,419)		(1,009,222)
Discount accretion/premium amortization		26,615		16,756
Changes in fair value		51,044		48,018
Unrealized foreign currency remeasurement loss		(30,529)		(21,088)
Change in loan loss allowance, net		(311)		(1,933)
Transfer to/from other asset classifications		(8,844)		(3,503)
Balance at September 30	$	6,408,170	$	5,589,608

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

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

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5. Investment Securities

Investment securities were comprised of the following as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	Carrying Value as of
	September 30, 2015		December 31, 2014
RMBS, available-for-sale	$	184,785	$	207,053
Single-borrower CMBS, available-for-sale		—		100,349
CMBS, fair value option (1)		927,315		753,553
Held-to-maturity (“HTM”) securities		365,005		441,995
Equity security, fair value option		14,311		15,120
Subtotal—Investment securities		1,491,416		1,518,070
VIE eliminations (1)		(704,955)		(519,822)
Total investment securities	$	786,461	$	998,248

(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):

	Available-for-sale				CMBS, fair		HTM		Equity
	RMBS		CMBS		value option		Securities		Security		Total
Three Months Ended September 30, 2015
Purchases	$	—	$	—	$	5,665	$	9,930	$	—	$	15,595
Sales		—		—		1,203		—		—		1,203
Principal collections		8,500		91,794		1		21		—		100,316
Three Months Ended September 30, 2014
Purchases	$	—	$	—	$	13,777	$	—	$	—	$	13,777
Sales		5,588		—		—		—		—		5,588
Principal collections		21,870		—		1		14		—		21,885

	Available-for-sale				CMBS, fair		HTM		Equity
	RMBS		CMBS		value option		Securities		Security		Total
Nine Months Ended September 30, 2015
Purchases	$	—	$	—	$	14,653	$	148,365	$	—	$	163,018
Sales		—		—		6,301		—		—		6,301
Principal collections		27,114		92,018		2		228,956		—		348,090
Nine Months Ended September 30, 2014
Purchases	$	—	$	—	$	67,230	$	—	$	—	$	67,230
Sales		68,134		—		32,032		—		—		100,166
Principal collections		40,155		805		1		38		—		40,999

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

With the exception of six CMBS classified as HTM, the Company classified all of its RMBS and any CMBS investments where the fair value option has not been elected as available-for-sale as of September 30, 2015 and December 31, 2014. 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”).

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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 September 30, 2015 and December 31, 2014 (amounts in thousands):

							Unrealized Gains or (Losses)
							Recognized in AOCI
	Purchase				Recorded				Gross		Gross		Net
	Amortized		Credit		Amortized		Non-Credit		Unrealized		Unrealized		Fair Value
	Cost		OTTI		Cost		OTTI		Gains		Losses		Adjustment		Fair Value
September 30, 2015
RMBS	$	153,694	$	(10,184)	$	143,510	$	(175)	$	41,450	$	—	$	41,275	$	184,785
Single-borrower CMBS		—		—		—		—		—		—		—		—
Total	$	153,694	$	(10,184)	$	143,510	$	(175)	$	41,450	$	—	$	41,275	$	184,785
December 31, 2014
RMBS	$	163,733	$	(10,197)	$	153,536	$	(197)	$	53,714	$	—	$	53,517	$	207,053
Single-borrower CMBS		93,685		—		93,685		—		6,664		—		6,664		100,349
Total	$	257,418	$	(10,197)	$	247,221	$	(197)	$	60,378	$	—	$	60,181	$	307,402

	Weighted Average		Weighted Average
	Coupon(1)		Rating (Standard & Poor’s)	WAL (Years)(2)
September 30, 2015
RMBS	1.1	%	B−	6.3
Single-borrower CMBS	—	%	—	—
December 31, 2014
RMBS	1.1	%	B−	5.8
Single-borrower CMBS	11.6	%	BB+	3.2

(1) Calculated using the September 30, 2015 and December 31, 2014 one-month LIBOR rate of 0.193% and 0.171%, respectively, for floating rate securities.

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

As of September 30, 2015, there were no variable rate single-borrower CMBS. As of December 31, 2014, $0.2 million, or 0.2%, of the single-borrower CMBS were variable rate. As of September 30, 2015, approximately $128.4 million, or 69.5%, of the RMBS were variable rate and paid interest at LIBOR plus a weighted average spread of 0.43%. As of December 31, 2014, approximately $140.1 million, or 67.7%, of the RMBS were variable rate and paid interest at LIBOR plus a weighted average spread of 0.44%. 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 September 30, 2015 and December 31, 2014, excluding CMBS where we have elected the fair value option (amounts in thousands):

	September 30, 2015				December 31, 2014
	RMBS		CMBS		RMBS		CMBS
Principal balance	$	242,219	$	—	$	270,783	$	93,685
Accretable yield		(73,361)		—		(85,495)		—
Non-accretable difference		(25,348)		—		(31,752)		—
Total discount		(98,709)		—		(117,247)		—
Amortized cost	$	143,510	$	—	$	153,536	$	93,685

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The principal balance of credit deteriorated RMBS was $205.2 million and $222.9 million as of September 30, 2015 and December 31, 2014, respectively. Accretable yield related to these securities totaled $61.9 million and $66.6 million as of September 30, 2015 and December 31, 2014, respectively.

The following table discloses the changes to accretable yield and non-accretable difference for our RMBS during the three and nine months ended September 30, 2015 (amounts in thousands):

			Non-Accretable
Three Months Ended September 30, 2015	Accretable Yield		Difference
Balance as of July 1, 2015	$	74,184	$	28,609
Accretion of discount		(3,600)		—
Principal write-downs		—		(484)
Purchases		—		—
Sales		—		—
OTTI		—		—
Transfer to/from non-accretable difference		2,777		(2,777)
Balance as of September 30, 2015	$	73,361	$	25,348
Nine Months Ended September 30, 2015
Balance as of January 1, 2015	$	85,495	$	31,752
Accretion of discount		(17,087)		—
Principal write-downs		—		(1,451)
Purchases		—		—
Sales		—		—
OTTI		—		—
Transfer to/from non-accretable difference		4,953		(4,953)
Balance as of September 30, 2015	$	73,361	$	25,348

Subject to certain limitations on durations, we have allocated an amount to invest in RMBS that cannot exceed 10% of our total assets excluding Investing and Servicing Segment VIEs. We have engaged a third party manager who specializes in RMBS to execute the trading of RMBS, the cost of which was $0.4million for both the three months ended September 30, 2015 and 2014, and $1.1million and $1.5 million for the nine months ended September 30, 2015 and 2014, 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 September 30, 2015 and December 31, 2014, 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		Securities with a		Securities with a		Securities with a
	loss less than		loss greater than		loss less than		loss greater than
	12 months		12 months		12 months		12 months
As of September 30, 2015
RMBS	$	12,320	$	678	$	(25)	$	(150)
Single-borrower CMBS		—		—		—		—
Total	$	12,320	$	678	$	(25)	$	(150)
As of December 31, 2014
RMBS	$	—	$	682	$	—	$	(197)
Single-borrower CMBS		—		—		—		—
Total	$	—	$	682	$	—	$	(197)

As of September 30, 2015 and December 31, 2014, there weretwo securities with unrealized losses reflected in the table above. After evaluating these securities and recording adjustments for credit-related other-than-temporary

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impairment, we concluded that the remaining unrealized losses reflected above were noncredit-related and would be recovered from the securities’ estimated future cash flows. We considered a number of factors in reaching this conclusion, including that we did not intend to sell the securities, it was not considered more likely than not that we would be forced to sell the securities prior to recovering our amortized cost, and there were no material credit events that would have caused us to otherwise conclude that we would not recover our cost. Credit losses, which represent most of the other-than-temporary impairments we record on securities, 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 the Investing and Servicing Segment’s CMBS in an effort to eliminate accounting mismatches resulting from the current or potential consolidation of securitization VIEs. As of September 30, 2015, the fair value and unpaid principal balance of CMBS where we have elected the fair value option, before consolidation of securitization VIEs, were $927.3 million and $4.5billion, 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 ($705.0 million at September 30, 2015) is eliminated against VIE liabilities before arriving at our GAAP balance for fair value option CMBS. During the three and nine months ended September 30, 2015, we purchased $115.0 million and $213.2million of CMBS, respectively, for which we elected the fair value option. Due to our consolidation of securitization VIEs, $109.4million and $198.6million, respectively, of these amounts are eliminated and reflected primarily as repayment of debt of consolidated VIEs in our condensed consolidated statement of cash flows.

As of September 30, 2015, 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 September 30, 2015 and December 31, 2014 (amounts in thousands):

	Weighted		Weighted
	Average		Average Rating	WAL
	Coupon		(Standard & Poor’s) (1)	(Years)(2)
September 30, 2015
CMBS, fair value option	3.5	%	CCC+	7.4
December 31, 2014
CMBS, fair value option	3.9	%	CCC−	7.7

(1) As of September 30, 2015 and December 31, 2014, excludes $35.8million and $41.7 million, respectively, in fair value option CMBS that are not rated.

(2) 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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HTM Securities

The table below summarizes unrealized gains and losses of our investments in HTM securities as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	Net Carrying Amount		Gross Unrealized		Gross Unrealized
	(Amortized Cost)		Holding Gains		Holding Losses		Fair Value
September 30, 2015
Preferred interests	$	81,968	$	—	$	(827)	$	81,141
CMBS		283,037		43		(2,195)		280,885
Total	$	365,005	$	43	$	(3,022)	$	362,026
December 31, 2014
Preferred interests	$	307,465	$	—	$	(1,366)	$	306,099
CMBS		134,530		—		—		134,530
Total	$	441,995	$	—	$	(1,366)	$	440,629

The table below summarizes the maturities of our HTM preferred equity interests in limited liability companies that own commercial real estate and our HTM CMBS as of September 30, 2015 (amounts in thousands):

	Preferred
	Interests		CMBS		Total
Less than one year	$	—	$	—	$	—
One to three years		—		283,037		283,037
Three to five years		62,704		—		62,704
Thereafter		19,264		—		19,264
Total	$	81,968	$	283,037	$	365,005

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 USD was $14.3million and $15.1 million as of September 30, 2015 and December 31, 2014, respectively.

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6. Properties

On July 24, 2015, we acquired a fully occupied net leased office property located in Dublin, Ireland for $121.9 million.  This acquisition was partially financed with $80.7 million from the Lender 6 Mortgage facility (see Note 9 for facility terms).  This property, with the 11 net leased fully occupied office properties and one multi-family property acquired in May 2015, comprise the Ireland Portfolio discussed in Note 3. 

Also during the three and nine months ended September 30, 2015, our Investing and Servicing Segment acquired three and six commercial real estate properties, respectively, from CMBS trusts for $32.5 million and $65.9 million, respectively.  These properties are generally acquired from CMBS trusts that are consolidated as VIEs on our balance sheet.  As a result, the acquisitions are generally reflected as repayment of debt of consolidated VIEs in our condensed consolidated statement of cash flows. 

The below table summarizes our properties held as of September 30, 2015 and December 31, 2014 (dollar amounts in thousands):

	Depreciable Life	September 30, 2015		December 31, 2014
Property Segment
Land	—	$	162,274	$	—
Buildings	30 years		286,913		—
Investing and Servicing Segment
Land	—		20,972		8,225
Land improvements	5 – 15 years		70		—
Buildings	20 – 40 years		63,619		30,637
Building improvements	5 – 10 years		240		—
Furniture & fixtures	3 years		680		1,635
Properties, cost			534,768		40,497
Less: accumulated depreciation			(4,330)		(643)
Properties, net		$	530,438	$	39,854

In March 2015, the Investing and Servicing Segment sold an operating property that we had previously acquired from a CMBS trust.  The sale resulted in a $17.1 million gain, which is included in gain on sale of investments and other assets in our condensed consolidated statement of operationsfor the nine months ended September 30, 2015.

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7. Investment in Unconsolidated Entities

The below table summarizes our investments in unconsolidated entities as of September 30, 2015 and December 31, 2014 (dollar amounts in thousands):

	Participation /	Carrying value as of
	Ownership %(1)	September 30, 2015		December 31, 2014
Equity method:
Retail Fund	33%	$	121,733	$	129,475
Investor entity which owns equity in two real estate services providers	50%		23,366		21,534
Equity interests in commercial real estate (2)	16% - 43%		28,224		—
Bridge loan venture (3)	various		—		8,417
Various	25% - 50%		7,061		16,933
			180,384		176,359
Cost method:
Investment funds which own equity in a loan servicer and other real estate assets	4% - 6%		9,225		9,225
Various	0% - 3%		9,562		8,399
			18,787		17,624
		$	199,171	$	193,983

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

(2) During the nine months ended September 30, 2015, we acquired $28.0 million of equity interests in limited liability companies that own ten office and student housing properties throughout the U.S.

(3) During the three months ended September 30, 2015, we sold our interest in the Bridge Loan Venture at par.

There were no differences between the carrying value of our investment in unconsolidated entities and the underlying equity in the net assets of the investeesas of September 30, 2015.

8. Goodwill and Intangible Assets

Goodwill

Goodwill at September 30, 2015 and December 31, 2014 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.

Intangible 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 September 30, 2015 and December 31, 2014, the balance of the domestic servicing intangible was net of $27.9million and $46.1 million, respectively, that was eliminated in consolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs.

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Before VIE consolidation, as of September 30, 2015 and December 31, 2014 the domestic servicing intangible had a balance of $151.8million and $178.4 million, respectively, which represents our economic interest in this asset.

Lease Intangibles

In connection with our acquisitions of commercial real estate, we recognized in-place lease intangible assets and favorable lease intangible assets associated with certain noncancelable operating leases of the acquired properties. The weighted-average amortization periods for the in-place lease intangible assets and the favorable lease intangible assets for the Ireland Portfolio at acquisition were 10.0 years and 11.2 years, respectively, as of September 30, 2015.

The following table summarizes our intangible assets, which are comprised of servicing rights intangibles and lease intangibles, as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	As of September 30, 2015						As of December 31, 2014
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Value		Amortization		Value		Value		Amortization		Value
Domestic servicing rights, at fair value	$	123,892	$	—	$	123,892	$	132,303	$	—	$	132,303
European servicing rights (1)		32,429		(28,657)		3,772		33,392		(21,543)		11,849
In-place lease intangible assets		54,245		(3,397)		50,848		—		—		—
Favorable lease intangible assets		13,074		(506)		12,568		—		—		—
Total net intangible assets	$	223,640	$	(32,560)	$	191,080	$	165,695	$	(21,543)	$	144,152

(1) The fair value as of September 30, 2015 and December 31, 2014 was $7.7million and $12.7 million, respectively.

The following table summarizes the activity within intangible assets for the nine months ended September 30, 2015 (amounts in thousands):

	Domestic		European		In-place Lease		Favorable Lease
	Servicing		Servicing		Intangible		Intangible
	Rights		Rights		Assets		Assets		Total
Balance as of January 1, 2015	$	132,303	$	11,849	$	—	$	—	$	144,152
Acquisition of Ireland Portfolio		—		—		47,999		11,530		59,529
Properties acquired from CMBS trusts		—		—		5,842		1,412		7,254
Amortization		—		(7,814)		(3,384)		(504)		(11,702)
Foreign exchange (loss) gain		—		(263)		391		130		258
Changes in fair value due to changes in inputs and assumptions		(8,411)		—		—		—		(8,411)
Balance as of September 30, 2015	$	123,892	$	3,772	$	50,848	$	12,568	$	191,080

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

2015 (remainder of)	$	3,839
2016		12,039
2017		8,560
2018		7,855
2019		6,700
Thereafter		28,195
Total	$	67,188

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9. Secured Financing Agreements

The following table is a summary of our secured financing agreements in place as of September 30, 2015 and December 31, 2014 (dollars in thousands):

					Pledged
					Asset		Maximum			Carrying Value at
	Current	Extended			Carrying		Facility			September 30,			December 31,
	Maturity	Maturity(a)	Pricing		Value		Size			2015			2014
Lender 1 Repo 1	(b)	(b)	LIBOR + 1.85% to 5.25%		$	1,471,791	$	1,600,000		$	916,310		$	875,111
Lender 1 Repo 2	(c)	N/A	LIBOR + 1.90%			184,785		125,000			6,948			101,886
Lender 2 Repo 1	Oct 2015	Oct 2018	LIBOR + 1.75% to 2.75%			373,917		325,000			272,824			240,188
Lender 3 Repo 1	May 2017	May 2019	LIBOR + 2.85%			229,983		162,917			162,917			124,250
Conduit Repo 1	Sep 2016	N/A	LIBOR + 1.95% to 3.35%			116,084		150,000			85,849			94,727
Conduit Repo 2	Nov 2015	Nov 2016	LIBOR + 2.10%			164,310		150,000			121,556			113,636
Conduit Repo 3	Feb 2018	Feb 2019	LIBOR + 2.10%			107,389		150,000			79,847			—
Lender 4 Repo 1	Oct 2016	Oct 2017	LIBOR + 2.00%			405,195		317,688			317,688			327,117
Lender 5 Repo 1	(d)	N/A	N/A			—		—			—			58,079
Lender 6 Repo 1	Aug 2018	N/A	LIBOR + 2.50% to 3.00%			733,579		500,000			367,010			296,967
Lender 6 Mortgage	May 2020	N/A	EURIBOR + 1.69%			502,497		328,602			328,602			—
Lender 7 Repo 1	Dec 2016	N/A	LIBOR + 2.35% to 2.70%			140,274		107,416			107,416			39,024
Investing and Servicing Segment Property Mortgages	June 2018 to Nov 2024	N/A	Various			43,688		38,975			31,835			14,000
Lender 9 Repo 1	(e)	(e)	LIBOR + 1.40% to 1.85%			319,853		225,313			225,313			—
Borrowing Base	Jul 2018	Jul 2019	LIBOR + 2.75%	(f)		222,770		450,000	(g)		—			189,871
Term Loan	Apr 2020	N/A	LIBOR + 2.75%	(f)		3,296,673		659,962			658,159	(h)		662,933	(h)
FHLB Advances	N/A	N/A	Various			—		1,000,000			—			—
					$	8,312,788	$	6,290,873		$	3,682,274		$	3,137,789

(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.  Borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions and not to exceed January 2023.

(c) The date that is 180 days after the buyer delivers notice to seller, subject to a maximum date of March 2017.

(d) Facility was terminated at our option in March 2015.

(e) Facility carries a rolling twelve month term which may reset monthly with the lender’s consent. Current maturity is September 2016.  Facility carries no maximum facility size.  Amount herein reflects the outstanding balance as of September 30, 2015.

(f) 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.

(g) Subject to certain conditions defined in the facility agreement, the maximum facility size may be increased to $650.0 million.

(h) Term loan outstanding balance is net of $1.8 million and $2.1 million of unamortized discount as of September 30, 2015 and December 31, 2014, respectively.

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

In February 2015, we executed a $150.0 million repurchase facility (“Conduit Repo 3”) with an existing lender for our Investing and Servicing Segment’s conduit platform.  The facility carries a three year initial term with a one year extension option and an annual interest rate of LIBOR +2.10%.

In March 2015, we executed a repurchase facility (“Lender 9 Repo 1”) with a new lender to finance certain CMBS holdings, including CMBS holdings previously financed under the Lender 5 Repo 1 facility which was terminated at our option in March 2015.  There is no maximum facility size specified under the facility as the lender will evaluate all eligible collateral on an individual basis.  The facility carries a rolling twelve month term which may reset

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monthly with the lender’s consent and an annual interest rate of LIBOR +1.40% to LIBOR +1.85% depending on the CMBS collateral.

In April 2015, we amended the Lender 4 Repo 1 facility to reduce pricing.

In May 2015, we executed a €294.0 million mortgage facility (“Lender 6 Mortgage”) to finance the acquisition of the Ireland Portfolio, of which €73.5 million was drawn during the three months ended September 30, 2015. The facility carries a five year term, an annual interest rate of EURIBOR + 1.69%and was fully funded as of September 30, 2015.  Refer to Note 3 for further discussion of this acquisition. During the nine months ended September 30, 2015, we incurred deferred financing costs of $5.7 million associated with this facility.

In July 2015, we exercised a one-year extension option on the Lender 6 Repo 1 facility, extending the maturity from August 2017 to August 2018.

In July 2015, we amended the Borrowing Base facility to (i) permanently upsize available borrowings from $250.0 million to $450.0 million; (ii) extend the maturity date to July 2019 assuming exercise of a one-year extension option; and (iii) reduce pricing.

In July 2015, we exercised a one-year extension option on the Lender 4 Repo 1 facility, extending the maturity from October 2015 to October 2016.

In August 2015, we amended the Lender 1 Repo 1 facility to upsize available borrowings from $1.25 billion to $1.6 billion.

During the nine months ended September 30, 2015, we executed two mortgage facilities with aggregate borrowings of $17.8 million to finance commercial real estate acquired by our Investing and Servicing Segment. At inception, these facilities carry a weighted average term of 4.2 years and weighted average interest rate of LIBOR + 2.41%.

In September 2015, we were admitted as a member of the Federal Home Loan Bank (“FHLB”) of Des Moines, which provides us an additional financing source for various multifamily and commercial real estate loans and investment securities.  As of September 30, 2015, we had no outstanding borrowings with the FHLB.

Our secured financing agreements contain certain financial tests and covenants. Should we breach certain of these covenants, it may restrict our ability to pay dividends in the future. As of September 30, 2015, we were in compliance with all such covenants.

The following table sets forth our five-year principal repayments schedule for secured financings, assuming no defaults and excluding 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

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amounts outstanding at their current maturity dates are extended where extension options are available to us (amounts in thousands):

	Repurchase		Other Secured
	Agreements		Financing			Total
2015 (remainder of)	$	302,104	$	1,692		$	303,796
2016		249,929		6,769			256,698
2017		928,144		6,769			934,913
2018		626,982		19,054			646,036
2019		556,519		6,769			563,288
Thereafter		—		979,347	(1)		979,347
Total	$	2,663,678	$	1,020,400		$	3,684,078

(1) Principal paydown of the Term Loan through 2020 excludes $1.8 million of discount amortization.

Secured financing maturities for 2015 primarily relate to $287.3 million on the Conduit Repo facilities.

As of September 30, 2015 and December 31, 2014, we had approximately $29.6 million and $26.5 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 nine months ended September 30, 2015, approximately $3.8 million and $10.8 million, respectively, of amortization was included in interest expense on our condensed consolidated statements of operations. For the three and nine months ended September 30, 2014, approximately $2.9 million and $8.2 million, respectively, of amortization was included in interest expense on our condensed consolidated statements of operations.

As of September 30, 2015 and December 31, 2014, the outstanding balance of our repurchase agreements related to the following asset collateral classes (amounts in thousands):

Class of Collateral	September 30, 2015		December 31, 2014
Loans held-for-investment	$	2,036,748	$	1,863,633
Loans held-for-sale		287,252		208,363
Investment securities		339,678		198,989
	$	2,663,678	$	2,270,985

We seek to mitigate risks associated with our repurchase agreements by managing risk related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value.  The margin call provisions under the majority of our repurchase facilities, consisting of 76% of these agreements, do not permit valuation adjustments based on capital markets activity.  Instead, margin calls on these facilities are limited to collateral-specific credit marks.  To monitor credit risk associated with the performance and value of our loans and investments, our asset management team regularly reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.  For repurchase agreements containing margin call provisions for general capital markets activity, approximately halfof these pertain to our loans held-for-sale, for which we manage credit risk through the purchase of credit index instruments.  We further seek to manage risks associated with our repurchase agreements by matching the maturities and interest rate characteristics of our loans with the related repurchase agreements.

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10. Convertible Senior Notes

On October 8, 2014, we issued $431.3 million of 3.75% Convertible Senior Notes due 2017 (the “2017 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 September 30, 2015 (amounts in thousands, except rates):

									Remaining
	Principal		Coupon		Effective		Conversion	Maturity	Period of
	Amount		Rate		Rate(1)		Rate(2)	Date	Amortization
2017 Notes	$	431,250	3.75	%	5.87	%	41.7397	10/15/2017	2.0	years
2018 Notes	$	599,981	4.55	%	6.10	%	45.8850	3/1/2018	2.4	years
2019 Notes	$	341,363	4.00	%	5.37	%	48.6931	1/15/2019	3.3	years

	As of		As of
	September 30, 2015		December 31, 2014
Total principal	$	1,372,594	$	1,491,228
Net unamortized discount		(52,387)		(73,206)
Carrying amount of debt components	$	1,320,207	$	1,418,022
Carrying amount of conversion option equity components recorded in additional paid-in capital	$	46,343	$	64,070

(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 values of the 2017 Notes, 2018 Notes and 2019 Notes were less than their principal amounts by $61.9million,  $35.0million, and $0.3million at September 30, 2015, respectively, since the closing market price of the Company’s common stock of $20.52 per share was less than the implicit conversion prices of $23.96,  $21.79,  and $20.54,  respectively. 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 62.2 million shares, was not included in the computation of diluted earnings per share (“EPS”).  No dilution related to the 2017 Notes, 2018 Notes or 2019 Notes was included in the computation of diluted EPS for the three and nine months ended September 30, 2015 as these notes were not “in-the-money”. See further discussion at Note 17.

Under the repurchase program approved by our board of directors (refer to Note 16), we repurchased $118.6million aggregate principal amount of our 2019 Notes during the nine months ended September 30, 2015 for $136.3million plus transaction expenses of $0.1million. The repurchase price was allocated between the fair value of the liability component and the fair value of the equity component of the convertible security. The portion of the repurchase price attributable to the equity component totaled $17.7million and was recognized as a reduction of additional paid-in capital during the nine months ended September 30, 2015. The remaining repurchase price was attributable to the liability component. The difference between this amount and the net carrying amount of the liability and debt issuance costs was reflected as a loss on extinguishment of debt in our condensed consolidated statement of operations. For the nine months ended September 30, 2015, the loss on extinguishment of debt totaled $5.9million, consisting principally of the write-off of unamortized debt discount. There were no repurchases of our outstanding Convertible Notes during the three months ended September 30, 2015.

As of September 30, 2015 and December 31, 2014, we had approximately $1.6million and $2.3 million, respectively, of deferred financing costs from our Convertible Senior Notes, net of amortization, which is included in other assets on our condensed consolidated balance sheets.

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Conditions for Conversion

Prior to April 15, 2017 for the 2017 Notes, 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 110% for the 2017 Notes or 130% for the 2018 Notes and 2019 Notes 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 April 15, 2017 for the 2017 Notes, 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.

11. 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 the Investing and Servicing Segment, we originate commercial mortgage loans with the intent to sell these mortgage loans to VIEs for the purposes of securitization. These VIEs then issue CMBS that are collateralized in part by these assets, as well as other assets transferred to the VIE. In certain instances, we retain a subordinated interest in the VIE and serve as special servicer for the VIE. The following summarizes the fair value and par value of loans sold from our conduit platform, as well as the amount of sale proceeds used in part to repay the outstanding balance of the repurchase agreements associated with these loans for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Fair value of loans sold	$	410,227	$	498,789	$	1,443,871	$	1,165,583
Par value of loans sold		398,654		482,129		1,396,674		1,119,537
Repayment of repurchase agreements		299,301		361,569		1,043,757		839,626

Within the Lending Segment, we originate or acquire loans and then subsequently sell a portion, which can be in various forms including first mortgages, A-Notes, senior participations and mezzanine loans. 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. In certain instances, we continue to service the loan following its sale. The following table summarizes our loans sold and loans transferred as secured borrowings by the Lending Segment net of expenses (amounts in thousands):

					Loan Transfers
	Loan Transfers Accounted				Accounted for as Secured
	for as Sales				Borrowings
	Face Amount		Proceeds		Face Amount		Proceeds
For the Three Months Ended September 30,
2015	$	225,264	$	220,928	$	—	$	—
2014		142,896		138,958		—		—
For the Nine Months Ended September 30,
2015	$	606,725	$	599,504	$	38,925	$	38,925
2014		347,755		341,472		—		—

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During the three months ended September 30, 2015 and 2014, the Lending Segment recognized gains on sales of loans of $2.7 million and $0.8 million, respectively, within gain on sale of investments in our condensed consolidated statements of operations.  During the nine months ended September 30, 2015 and 2014, the Lending Segment recognized gains on sales of loans of $3.0 million and $1.3 million, respectively.

12. Derivatives and Hedging Activity

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions. Refer to Note 12 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 eight outstanding interest rate swaps that have been designated as cash flow hedges of the interest rate risk associated with forecasted interest payments. As of September 30, 2015, the aggregate notional amount of our interest rate swaps designated as cash flow hedges of interest rate risk totaled $87.5million. 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 nine months ended September 30, 2015 and 2014 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 $0.4million 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 68 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.

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 June 2020. 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 investments.

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The following table summarizes our foreign exchange (“Fx”) forwards, interest rate swaps, interest rate caps and credit index instruments as of September 30, 2015 (notional amounts in thousands):

		Aggregate
	Number	Notional	Notional
Type of Derivative	of Contracts	Amount	Currency	Maturity
Fx contracts – Sell Euros ("EUR") (1)	87	352,420	EUR	October 2015 – June 2020
Fx contracts – Sell Pounds Sterling ("GBP")	63	257,203	GBP	October 2015 – March 2018
Fx contracts – Sell Swedish Krona ("SEK")	2	19,197	SEK	December 2015
Fx contracts – Buy SEK	1	4,083	SEK	December 2015
Fx contracts – Sell Norwegian Krone ("NOK")	1	1,218	NOK	December 2015
Fx contracts – Sell Danish Krone ("DKK")	1	3,200	DKK	December 2015
Interest rate swaps – Paying fixed rates	73	513,218	USD	July 2016 – October 2025
Interest rate swaps – Receiving fixed rates	4	14,300	USD	October 2015 – September 2025
Interest rate caps	2	294,000	EUR	May 2020
Interest rate caps	2	17,835	USD	June 2018
Credit index instruments	11	40,000	USD	January 2047
Total	247

(1) Includes 59 Fx contracts executed to hedge our Euro currency exposure created by our acquisition of the Ireland Portfolio.  As of September 30, 2015, these contracts have an aggregate notional of €259.7million and varying maturities through June 2020.

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 September 30, 2015 and December 31, 2014 (amounts in thousands):

	Fair Value of Derivatives in an				Fair Value of Derivatives in a
	Asset Position(1) As of				Liability Position(2) As of
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
Derivatives designated as hedging instruments:
Interest rate swaps	$	6	$	138	$	451	$	235
Total derivatives designated as hedging instruments		6		138		451		235
Derivatives not designated as hedging instruments:
Interest rate swaps and caps		2,981		1,128		13,508		5,216
Foreign exchange contracts		31,657		24,388		942		15
Credit index instruments		1,663		974		—		10
Total derivatives not designated as hedging instruments		36,301		26,490		14,450		5,241
Total derivatives	$	36,307	$	26,628	$	14,901	$	5,476

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

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

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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 nine months ended September 30, 2015 and 2014 (amounts in thousands):

			Gain (Loss)
	Gain (Loss)		Reclassified		Gain (Loss)
Derivatives Designated as	Recognized		from AOCI		Recognized
Hedging Instruments	in OCI		into Income		in Income		Location of Gain (Loss)
For the Three Months Ended September 30,	(effective portion)		(effective portion)		(ineffective portion)		Recognized in Income
2015	$	(395)	$	(187)	$	—	Interest expense
2014	$	186	$	(344)	$	—	Interest expense
For the Nine Months Ended September 30,
2015	$	(933)	$	(585)	$	—	Interest expense
2014	$	(522)	$	(1,081)	$	—	Interest expense

		Amount of Gain (Loss)				Amount of Gain (Loss)
		Recognized in Income for the				Recognized in Income for the
Derivatives Not Designated	Location of Gain (Loss)	Three Months Ended September 30,				Nine Months Ended September 30,
as Hedging Instruments	Recognized in Income	2015		2014		2015		2014
Interest rate swaps and caps	Gain on derivative financial instruments	$	(17,242)	$	1,054	$	(22,206)	$	(5,639)
Foreign exchange contracts	Gain on derivative financial instruments		18,957		28,123		29,129		18,293
Credit index instruments	Gain on derivative financial instruments		515		98		400		(1,035)
		$	2,230	$	29,275	$	7,323	$	11,619

13. 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):

							(iv)
							Gross Amounts Not
							Offset in the Statement
			(ii)		(iii) = (i) - (ii)		of Financial Position
			Gross Amounts		Net Amounts				Cash
	(i)		Offset in the		Presented in				Collateral
	Gross Amounts		Statement of		the Statement of		Financial		Received /		(v) = (iii) - (iv)
	Recognized		Financial Position		Financial Position		Instruments		Pledged		Net Amount
As of September 30, 2015
Derivative assets	$	36,307	$	—	$	36,307	$	1,475	$	—	$	34,832
Derivative liabilities	$	14,901	$	—	$	14,901	$	1,475	$	13,426	$	—
Repurchase agreements		2,663,678		—		2,663,678		2,663,678		—		—
	$	2,678,579	$	—	$	2,678,579	$	2,665,153	$	13,426	$	—
As of December 31, 2014
Derivative assets	$	26,628	$	—	$	26,628	$	2,016	$	—	$	24,612
Derivative liabilities	$	5,476	$	—	$	5,476	$	2,016	$	3,460	$	—
Repurchase agreements		2,270,985		—		2,270,985		2,270,985		—		—
	$	2,276,461	$	—	$	2,276,461	$	2,273,001	$	3,460	$	—

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14. Variable Interest Entities

Investment Securities

As discussed in Note 2, we evaluate all of our investments and other interests in entities for consolidation, including 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 VIE liabilities initially represent investment securities on our balance sheet (pre-consolidation). Upon consolidation of these VIEs, our associated investment securities are eliminated, as is the interest income related to those securities. Similarly, the fees we earn in our roles as special servicer of the bonds issued by the consolidated VIEs or as collateral administrator of the consolidated VIEs are also eliminated. Finally, 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 September 30, 2015, one of our 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 September 30, 2015, 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 the 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 VIEs, whether or not we are deemed to be the primary beneficiary. As such, the risk associated with our involvement in these VIEs is limited to the carrying value of our investment in the entity. As of September 30, 2015, our maximum risk of loss related to VIEs in which we were not the primary beneficiary was $222.4 million on a fair value basis.

As of September 30, 2015, the securitization VIEs which we do not consolidate had debt obligations to beneficial interest holders with unpaid principal balances of $40.5 billion. The corresponding assets are comprised

40

primarily of commercial mortgage loans with unpaid principal balances corresponding to the amounts of the outstanding debt obligations.

15. 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 15 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 September 30, 2015 and 2014, we recognized base management fees of $15.2million and $13.8 million, respectively, within management fees in our condensed consolidated statements of operations. For the nine months ended September 30, 2015 and 2014, we recognized base management fees of $44.0million and $40.7 million, respectively. As of September 30, 2015 and December 31, 2014, there were $15.2million and $13.9 million, respectively, of unpaid base management fees within related-party payable in our condensed consolidated balance sheets.

Incentive Fee.  For the three months ended September 30, 2015 and 2014, we recognized incentive fees of $5.3million and $4.3 million, respectively,within management fees in our condensed consolidated statements of operations. For the nine months ended September 30, 2015 and 2014, we recognized incentive fees of $16.1million and $15.5 million, respectively. As of September 30, 2015 and December 31, 2014, $5.4 million and $18.9 million, respectively, of unpaid incentive fees were included within related-party payable in our condensed consolidated balance sheets.

Expense Reimbursement.  For both the three months ended September 30, 2015 and 2014, we recognized expense reimbursements for executive compensation and other reimbursable expenses of $1.7million within general and administrative expenses in our condensed consolidated statements of operations. For the nine months ended September 30, 2015 and 2014, we recognized expense reimbursements for executive compensation and other reimbursable expenses of $4.6million and $5.7 million, respectively. As of September 30, 2015 and December 31, 2014, approximately $2.1 million and $3.4 million, respectively, of unpaid reimbursable executive compensation and other expenses were included within related-party payable in our condensed consolidated balance sheets.

Manager Equity Plan

In May 2015, we granted 675,000 RSUs to our Manager under the Starwood Property Trust, Inc. Manager Equity Plan (“Manager Equity Plan”).  In January 2014, we granted 2,489,281 RSUs to our Manager under the Manager Equity Plan.  In connection with these grants and prior similar grants, we recognized share-based compensation expense of $7.1million and $6.3 million within management fees in our condensed consolidated statements of operations for the three months ended September 30, 2015 and 2014, respectively. For the nine months ended September 30, 2015 and 2014, we recognized $21.4million and $19.8 million, respectively, related to these awards. Refer to Note 16 herein for further discussion of these grants.

Investments in Loans and Securities

In March 2015, we purchased a subordinate single-borrower CMBS from a third party for $58.6 million which is secured by 85 U.S. hotel properties.  The borrower is an affiliate of Starwood Distressed Opportunity Fund IX (“Fund IX”), an affiliate of our Manager.  

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In March 2015, we sold our entire interest, consisting of a $35 million participation, in a subordinate loan (the “Mammoth Loan”) at par to Mammoth Mezz Holdings, LLC, an affiliate of our Manager. We purchased the Mammoth Loan in April 2011 from an independent third party and a syndicate of financial institutions and other entities acting as subordinate lenders to Mammoth Mountain Ski Area, LLC (“Mammoth”). Mammoth is a single purpose, bankruptcy remote entity that is owned and controlled by Starwood Global Opportunity Fund VII‑A, L.P., Starwood Global Opportunity Fund VII‑B, L.P., Starwood U.S. Opportunity Fund VII‑D, L.P. and Starwood U.S. Opportunity Fund VII‑D‑2, L.P. (collectively, the “Sponsors”). Each of the Sponsors is indirectly wholly‑owned by Starwood Capital Group Global I, LLC and an affiliate of our Chief Executive Officer.

In January 2015, a junior mezzanine loan, which we co-originated with SEREF and an unaffiliated third party in 2012, was restructured to reduce both our and SEREF’s participation interests and margin. We now hold a participation interest in the junior mezzanine loan of £18 million, which bears interest at three-month LIBOR plus 8.81%.  Prior to the restructure, our participation interest was £30.0 million and carried an interest rate of three-month LIBOR plus 11.65%. The junior mezzanine loan is secured primarily by the ownership interest in entities that own a portfolio of three luxury hotels located in London, England.

Other Related-Party Arrangements

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 was within our name and was thus reflected within our restricted cash balance. As of December 31, 2014, we recognized a corresponding payable to Fund IX of $4.4 million within related-party payable in our condensed consolidated balance sheet. Our obligation was released in September 2015.

Our Investing and Servicing Segment acquires properties from CMBS trusts, some of which are consolidated as VIEs on our balance sheet.  Acquisitions from consolidated VIEs are reflected as repayment of debt of consolidated VIEs in our condensed consolidated statement of cash flows.  During the three and nine months ended September 30, 2015, we acquired in aggregate $32.5 million and $65.9 million, respectively, of properties from both consolidated and unconsolidated CMBS trusts. Refer to Note 6 for further discussion of these acquisitions.

During the three and nine months ended September 30, 2015, we provided due diligence services to an affiliate of Starwood Global Opportunity Fund X, an affiliate of our Manager, in which we received fees of $0.1 million and $0.4 million, respectively.

In the normal course of business, the Investing and Servicing Segment’s conduit lending platform provides loans to consolidated subsidiaries of the Company which are subsequently securitized and sold to third parties.  The loan, debt and applicable interest income and expense are eliminated in consolidation until such time as the loan is sold.  During the three months ended September 30, 2015, our conduit lending platform originated a $10.4 million intercompany loan which was eliminated in consolidation as of September 30, 2015. 

Refer to Note 15 to the consolidated financial statements included in our Form 10-K for further discussion of related-party agreements.

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16. Stockholders’ Equity

During the nine months ended September 30, 2015, our board of directors declared the following dividends:

Declare Date	Record Date	Ex-Dividend Date	Payment Date	Amount		Frequency
8/4/15	9/30/15	9/28/15	10/15/15	$	0.48	Quarterly
5/5/15	6/30/15	6/26/15	7/15/15	$	0.48	Quarterly
2/25/15	3/31/15	3/27/15	4/15/15	$	0.48	Quarterly

On April 20, 2015, we issued 12.0 million shares of common stock for gross proceeds of $283.6 million.  In connection with the offering, the underwriters had a30-day option to purchase an additional 1.8 million shares of common stock, which they exercised in full, resulting in additional gross proceeds of $42.5 million.

During the nine months ended September 30, 2015, there were no shares issued under our At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”).  During the nine months ended September 30, 2015, shares issued under the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) were not material.

In September 2014, our board of directors authorized and announced the repurchase of up to $250 million of our outstanding common stock over a period of one year. In December 2014, our board of directors amended the repurchase program to include the repurchase of our outstanding Convertible Notes. In June 2015, our board of directors amended the repurchase program to increase the authorized purchase amount to $450 million and provide for a one-year extension through June 2016. There were no repurchases of our outstanding Convertible Notes during the three months ended September 30, 2015. During the nine months ended September 30, 2015, we repurchased $118.6million aggregate principal amount of our 2019 Notes for $136.3million (refer to Note 10).  Also during the three and nine months ended September 30, 2015 we repurchased 1,393,223 shares and 1,793,223 shares of common stock for $29.1million and $37.9 million, respectively, under the repurchase program.As of September 30, 2015, we have $262.6million of remaining capacity to repurchase common stock or Convertible Notes under the repurchase program.

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 16 to the consolidated financial statements included in our Form 10-K for further information regarding these plans.

The table below summarizes our share awards granted under the Manager Equity Plan that were not fully vested as of September 30, 2015 (dollar amounts in thousands):

Grant Date	Type	Amount Granted	Grant Date Fair Value		Vesting Period
May 2015	RSU	675,000	$	16,511	3 years
January 2014 (1)	RSU	489,281		14,776	3 years
January 2014	RSU	2,000,000		55,420	3 years
October 2012	RSU	875,000		19,854	3 years

(1) As part of the spin-off of our SFR segment, all holders of the Company’s common stock and vested restricted common stock received one SWAY common share for every five shares of the Company’s common stock.  At the time of the spin-off, the Manager held certain unvested RSUs that were not entitled to SWAY shares.  Under the legal documentation governing the outstanding RSUs, the Manager was entitled to receive additional RSUs in an amount equal to the number of such outstanding RSUs times the amount received in the spin-off by a holder of a share of the Company’s common stock (i.e., the price per share of a SWAY common share divided by five) divided by the fair market value of a share of the Company’s common stock on the date of the spin-off.  In order to prevent dilution of the rights of our equity plan participants resulting from this make-whole issuance, the Equity Plan and

43

Manager Equity Plan provide for, and, on August 12, 2014, our board of directors authorized, an increase of 489,281 shares to the maximum number of shares available for issuance under the Equity Plan and Manager Equity Plan.

During the three and nine months ended September 30, 2015, we granted 30,608and 533,267 RSAs, respectively, under the Equity Plan to a select group of eligible participants which includes our employees and employees of our Manager who perform services for us.  The awards were granted based on the market price of the Company’s common stock on the respective grant date and vest ratably over a three-year period. Expenses related to the vesting of these awards is reflected in general and administrative expenses in our condensed consolidated statements of operations.  

As of September 30, 2015, there were 2.7 million shares available for future grants under the Manager Equity Plan, the Equity Plan and the Non-Executive Director Stock Plan.

Schedule of Non-Vested Shares and Share Equivalents

					Weighted
					Average
	Non-Executive				Grant Date
	Director		Manager		Fair Value
	Stock Plan	Equity Plan	Equity Plan	Total	(per share)
Balance as of January 1, 2015	17,105	109,708	1,854,585	1,981,398	$	27.30
Granted	—	533,267	675,000	1,208,267		24.36
Vested	(3,852)	(40,151)	(971,334)	(1,015,337)		26.47
Forfeited	—	(19,722)	—	(19,722)		23.96
Balance as of September 30, 2015	13,253	583,102	1,558,251	2,154,606		26.07

44

17. Earnings 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 (amounts in thousands, except per share amounts):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Basic Earnings
Continuing Operations:
Income from continuing operations attributable to STWD common shareholders	$	116,735	$	165,044	$	354,246	$	405,064
Less: Income attributable to unvested shares		(1,052)		(1,742)		(3,239)		(4,898)
Basic — Income from continuing operations	$	115,683	$	163,302	$	351,007	$	400,166
Discontinued Operations:
Loss from discontinued operations	$	—	$	—	$	—	$	(1,551)
Basic — Net income attributable to STWD common shareholders after allocation to participating securities	$	115,683	$	163,302	$	351,007	$	398,615
Diluted Earnings
Continuing Operations:
Basic — Income from continuing operations attributable to STWD common shareholders	$	116,735	$	165,044	$	354,246	$	405,064
Less: Income attributable to unvested shares		(1,052)		(1,742)		(3,239)		(4,898)
Add: Undistributed earnings to unvested shares		18		653		147		1,187
Less: Undistributed earnings reallocated to unvested shares		(18)		(650)		(147)		(1,182)
Diluted — Income from continuing operations	$	115,683	$	163,305	$	351,007	$	400,171
Discontinued Operations:
Basic — Loss from discontinued operations	$	—	$	—	$	—	$	(1,551)
Diluted — Net income attributable to STWD common shareholders after allocation to participating securities	$	115,683	$	163,305	$	351,007	$	398,620
Number of Shares:
Basic — Average shares outstanding		237,796		222,481		232,194		212,351
Effect of dilutive securities — Convertible Notes		—		966		—		932
Effect of dilutive securities — Contingently issuable shares		129		96		129		96
Diluted — Average shares outstanding		237,925		223,543		232,323		213,379
Earnings Per Share Attributable to STWD Common Stockholders:
Basic:
Income from continuing operations	$	0.49	$	0.73	$	1.51	$	1.89
Loss from discontinued operations		—		—		—		(0.01)
Net income	$	0.49	$	0.73	$	1.51	$	1.88
Diluted:
Income from continuing operations	$	0.49	$	0.73	$	1.51	$	1.88
Loss from discontinued operations		—		—		—		(0.01)
Net income	$	0.49	$	0.73	$	1.51	$	1.87

45

Earnings per share for the nine months ended September 30, 2015 and 2014 may not equal the sum of each quarter’s earnings per share due to rounding and other computational factors.

As of September 30, 2015 and 2014, unvested restricted shares of 2.2 million and 2.3 million, respectively, were excluded from the computation of diluted shares as their effect was already considered under the more dilutive two-class method used above.

Also as of September 30, 2015, there were 62.2 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 62.2 million shares at September 30, 2015, was not included in the computation of diluted EPS.  As  discussed in Note 10, the conversion options associated with the 2017 Notes, 2018 Notes and 2019 Notes are “out-of-the-money” because the if-converted values of those notes were less than their principal amounts by $61.9 million,  $35.0 million and $0.3 million, respectively, at September 30, 2015. Therefore, there was no dilutive effect to EPS for the 2017 Notes, 2018 Notes and 2019 Notes during the three and nine months ended September 30, 2015.

18. Accumulated Other Comprehensive Income

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

			Cumulative
			Unrealized Gain
	Effective Portion of		(Loss) on		Foreign
	Cumulative Loss on		Available-for-		Currency
	Cash Flow Hedges		Sale Securities		Translation		Total
Three Months Ended September 30, 2015
Balance at July 1, 2015	$	(237)	$	50,370	$	(4,232)	$	45,901
OCI before reclassifications		(395)		(9,095)		(3,057)		(12,547)
Amounts reclassified from AOCI		187		—		5,969		6,156
Net period OCI		(208)		(9,095)		2,912		(6,391)
Balance at September 30, 2015	$	(445)	$	41,275	$	(1,320)	$	39,510
Three Months Ended September 30, 2014
Balance at July 1, 2014	$	(575)	$	60,446	$	15,091	$	74,962
OCI before reclassifications		186		4,190		(9,765)		(5,389)
Amounts reclassified from AOCI		344		(236)		—		108
Net period OCI		530		3,954		(9,765)		(5,281)
Balance at September 30, 2014	$	(45)	$	64,400	$	5,326	$	69,681
Nine Months Ended September 30, 2015
Balance at January 1, 2015	$	(97)	$	60,190	$	(4,197)	$	55,896
OCI before reclassifications		(933)		(13,519)		(3,092)		(17,544)
Amounts reclassified from AOCI		585		(5,396)		5,969		1,158
Net period OCI		(348)		(18,915)		2,877		(16,386)
Balance at September 30, 2015	$	(445)	$	41,275	$	(1,320)	$	39,510
Nine Months Ended September 30, 2014
Balance at January 1, 2014	$	(604)	$	66,566	$	9,487	$	75,449
OCI before reclassifications		(522)		9,563		(4,161)		4,880
Amounts reclassified from AOCI		1,081		(11,729)		—		(10,648)
Net period OCI		559		(2,166)		(4,161)		(5,768)
Balance at September 30, 2014	$	(45)	$	64,400	$	5,326	$	69,681

46

The reclassifications out of AOCI impacted the condensed consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 as follows (amounts in thousands):

	Amounts Reclassified from				Amounts Reclassified from
	AOCI during the Three Months				AOCI during the Nine Months				Affected Line Item
	Ended September 30,				Ended September 30,				in the Statements
Details about AOCI Components	2015		2014		2015		2014		of Operations
Losses on cash flow hedges:
Interest rate contracts	$	(187)	$	(344)	$	(585)	$	(1,081)	Interest expense
Unrealized gains (losses) on available-for-sale securities:
Interest realized upon collection		—		—		5,396		—	Interest income from investment securities
Net realized gain on sale of investments		—		236		—		11,942	Gain on sale of investments and other assets, net
OTTI		—		—		—		(213)	OTTI
Total		—		236		5,396		11,729
Foreign currency translation:
Foreign currency loss from CMBS redemption		(5,969)		—		(5,969)		—	Foreign currency loss, net
Total reclassifications for the period	$	(6,156)	$	(108)	$	(1,158)	$	10,648

19. 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 20 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.

47

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 September 30, 2015 and December 31, 2014 (amounts in thousands):

	September 30, 2015
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	423,630	$	—	$	—	$	423,630
RMBS		184,785		—		—		184,785
CMBS		222,360		—		—		222,360
Equity security		14,311		14,311		—		—
Domestic servicing rights		123,892				—		123,892
Derivative assets		36,307		—		36,307		—
VIE assets		82,937,617		—		—		82,937,617
Total	$	83,942,902	$	14,311	$	36,307	$	83,892,284
Financial Liabilities:
Derivative liabilities	$	14,901	$	—	$	14,901	$	—
VIE liabilities		82,181,138		—		79,177,561		3,003,577
Total	$	82,196,039	$	—	$	79,192,462	$	3,003,577

	December 31, 2014
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	391,620	$	—	$	—	$	391,620
RMBS		207,053		—		—		207,053
CMBS		334,080		—		—		334,080
Equity security		15,120		15,120		—		—
Domestic servicing rights		132,303		—		—		132,303
Derivative assets		26,628		—		26,628		—
VIE assets		107,816,065		—		—		107,816,065
Total	$	108,922,869	$	15,120	$	26,628	$	108,881,121
Financial Liabilities:
Derivative liabilities	$	5,476	$	—	$	5,476	$	—
VIE liabilities		107,232,201		—		102,339,081		4,893,120
Total	$	107,237,677	$	—	$	102,344,557	$	4,893,120

48

The changes in financial assets and liabilities classified as Level III were as follows for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

							Domestic
	Loans						Servicing				VIE
Three Months Ended September 30, 2015	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
July 1, 2015 balance	$	279,352	$	193,150	$	314,152	$	128,109	$	92,719,092	$	(2,111,011)	$	91,522,844
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		19,082		—		(2,835)		(4,217)		(10,394,490)		615,263		(9,767,197)
OTTI		—		—		—		—		—		—		—
Net accretion		—		3,600		—		—		—		—		3,600
Included in OCI		—		(3,465)		(2,164)		—		—		—		(5,629)
Purchases / Originations		535,580		—		5,665		—		—		—		541,245
Sales		(410,227)		—		(1,203)		—		—		—		(411,430)
Issuances		—		—		—		—		—		(1,619)		(1,619)
Cash repayments / receipts		(157)		(8,500)		(91,795)		—		—		96,896		(3,556)
Transfers into Level III		—		—		—		—		—		(1,773,898)		(1,773,898)
Transfers out of Level III		—		—		—		—		—		232,484		232,484
Consolidations of VIEs		—		—		—		—		2,410,232		(80,149)		2,330,083
Deconsolidations of VIEs		—		—		540		—		(1,797,217)		18,457		(1,778,220)
September 30, 2015 balance	$	423,630	$	184,785	$	222,360	$	123,892	$	82,937,617	$	(3,003,577)	$	80,888,707
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2015	$	5,482	$	3,600	$	3,212	$	(4,217)	$	(10,394,490)	$	615,263	$	(9,771,150)

							Domestic
	Loans						Servicing				VIE
Three Months Ended September 30, 2014	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
July 1, 2014 balance	$	154,412	$	231,605	$	282,361	$	138,318	$	114,091,158	$	(5,186,125)	$	109,711,729
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		15,517		535		2,471		(7,898)		(5,261,507)		237,693		(5,013,189)
Net accretion		—		4,035		—		—		—		—		4,035
Included in OCI		—		7,602		(9,662)		—		—		—		(2,060)
Purchases / Originations		577,216		—		13,777		—		—		—		590,993
Sales		(498,789)		(5,588)		—		—		—		—		(504,377)
Issuances		—		—		—		—		—		(16,655)		(16,655)
Cash repayments / receipts		(191)		(21,870)		23		—		—		20,189		(1,849)
Transfers into Level III		—		—		1,440		—		—		(770,785)		(769,345)
Transfers out of Level III		—		—		—		—		—		1,940,522		1,940,522
Consolidations of VIEs		—		—		—		—		3,103,150		(48,745)		3,054,405
Deconsolidations of VIEs		—		—		635		—		(2,464,508)		12,167		(2,451,706)
September 30, 2014 balance	$	248,165	$	216,319	$	291,045	$	130,420	$	109,468,293	$	(3,811,739)	$	106,542,503
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2014	$	(455)	$	3,963	$	2,471	$	(7,898)	$	(5,261,507)	$	237,693	$	(5,025,733)

49

							Domestic
	Loans						Servicing				VIE
Nine Months Ended September 30, 2015	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
January 1, 2015 balance	$	391,620	$	207,053	$	334,080	$	132,303	$	107,816,065	$	(4,893,120)	$	103,988,001
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		51,044		—		(2,059)		(8,411)		(27,667,727)		3,566,846		(24,060,307)
OTTI		—		—		—		—		—		—		—
Net accretion		—		17,087		—		—		—		—		17,087
Included in OCI		—		(12,241)		(2,362)		—		—		—		(14,603)
Purchases / Originations		1,425,499		—		14,653		—		—		—		1,440,152
Sales		(1,443,871)		—		(6,301)		—		—		—		(1,450,172)
Issuances		—		—		—		—		—		(9,132)		(9,132)
Cash repayments / receipts		(662)		(27,114)		(92,018)		—		—		171,884		52,090
Transfers into Level III		—		—		—		—		—		(2,589,916)		(2,589,916)
Transfers out of Level III		—		—		—		—		—		956,230		956,230
Consolidations of VIEs		—		—		(24,310)		—		8,067,859		(225,354)		7,818,195
Deconsolidations of VIEs		—		—		677		—		(5,278,580)		18,985		(5,258,918)
September 30, 2015 balance	$	423,630	$	184,785	$	222,360	$	123,892	$	82,937,617	$	(3,003,577)	$	80,888,707
Amount of total gains (losses) included in earnings attributable to assets still held at September 30, 2015	$	5,126	$	11,594	$	4,171	$	(8,411)	$	(27,667,727)	$	3,566,846	$	(24,088,401)

							Domestic
	Loans						Servicing				VIE
Nine Months Ended September 30, 2014	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		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 gains (losses):
Included in earnings:
Change in fair value / gain on sale		47,955		11,676		12,070		(18,671)		(12,275,130)		337,529		(11,884,571)
OTTI		—		(214)		—		—		—		—		(214)
Net accretion		—		13,922		—		—		—		—		13,922
Included in OCI		—		2,988		(7,455)		—		—		—		(4,467)
Purchases / Originations		1,159,607		—		60,348		—		—		—		1,219,955
Sales		(1,052,862)		(68,134)		(29,301)		—		—		—		(1,150,297)
Issuances		—		—		—		—		—		(88,412)		(88,412)
Cash repayments / receipts		(487)		(40,155)		(806)		—		—		106,538		65,090
Transfers into Level III		—		—		54,221		—		—		(3,325,922)		(3,271,701)
Transfers out of Level III		(112,720)		—		(180)		(1,058)		—		2,653,379		2,539,421
Consolidations of VIEs		—		—		(6,715)		—		27,094,681		(1,941,689)		25,146,277
Deconsolidations of VIEs		—		—		857		—		(8,502,882)		44,822		(8,457,203)
September 30, 2014 balance	$	248,165	$	216,319	$	291,045	$	130,420	$	109,468,293	$	(3,811,739)	$	106,542,503
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2014	$	(455)	$	11,742	$	14,907	$	(18,671)	$	(12,275,130)	$	337,529	$	(11,930,078)

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

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

	September 30, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets not carried at fair value:
Loans held-for-investment, loans held-for-sale and loans transferred as secured borrowings	$	5,984,540	$	6,083,182	$	5,908,665	$	6,034,838
Securities, held-to-maturity		365,005		362,026		441,995		440,629
European servicing rights		3,772		7,684		11,849		12,741
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	$	3,826,200	$	3,815,875	$	3,267,230		3,251,035
Convertible senior notes		1,320,207		1,339,173		1,418,022		1,444,975

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	Unobservable	Range as of (1)
	September 30, 2015		Technique	Input	September 30, 2015	December 31, 2014
Loans held-for-sale, fair value option	$	423,630	Discounted cash flow	Yield (b)	4.3% - 4.9%	4.2% - 4.9%
				Duration (c)	5.0 - 10.0 years	5.0 - 10.0 years
RMBS		184,785	Discounted cash flow	Constant prepayment rate (a)	2.6% - 14.7%	1.2% - 15.9%
				Constant default rate (b)	0.9% - 9.1%	1.1% - 8.9%
				Loss severity (b)	9% - 79% (e)	15% - 80% (e)
				Delinquency rate (c)	2% - 29%	2% - 43%
				Servicer advances (a)	28% - 92%	14% - 75%
				Annual coupon deterioration (b)	0% - 0.5%	0% - 0.6%
				Putback amount per projected total collateral loss (d)	0% - 11%	0% - 11%
CMBS		222,360	Discounted cash flow	Yield (b)	0% - 779.7%	0% - 421.4%
				Duration (c)	0 - 13.2 years	0 - 11.8 years
Domestic servicing rights		123,892	Discounted cash flow	Debt yield (a)	8.25%	8.25%
				Discount rate (b)	15%	15%
				Control migration (b)	0% - 80%	0% - 80%
VIE assets		82,937,617	Discounted cash flow	Yield (b)	0% - 907.4%	0% - 925.0%
				Duration (c)	0 - 18.6 years	0 - 21.0 years
VIE liabilities		3,003,577	Discounted cash flow	Yield (b)	0% - 907.4%	0% - 925.0%
				Duration (c)	0 - 18.6 years	0 - 21.0 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) 75% and 85% of the portfolio falls within a range of 45%-80% as of September 30, 2015 and December 31, 2014, respectively.

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20.  Income Taxes

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

Our TRSs engage in various real estate related operations, including special servicing of commercial real estate, originating and securitizing commercial mortgage loans, and investing in entities which engage in real estate related operations. The majority of our TRSs are held within the Investing and Servicing Segment.  As of September 30, 2015 and December 31, 2014, approximately $1.1billion and $1.0 billion, respectively, of the Investing and Servicing Segment’s assets were owned by TRS entities, including $129.6 million and $88.6 million in cash, respectively. 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.

Our income tax provision consisted of the following for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Current
Federal	$	6,074	$	10,044	$	21,825	$	20,668
Foreign		1,718		905		3,996		4,136
State		1,009		2,041		3,634		3,840
Total current		8,801		12,990		29,455		28,644
Deferred
Federal		(689)		(7,390)		(74)		(10,438)
Foreign		(322)		(539)		(1,945)		(2,737)
State		(115)		(1,225)		(18)		(1,736)
Total deferred		(1,126)		(9,154)		(2,037)		(14,911)
Total income tax provision	$	7,675	$	3,836	$	27,418	$	13,733

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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 September 30, 2015 and December 31, 2014, 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 (amounts in thousands):

	September 30, 2015		December 31, 2014
U.S.
Deferred tax asset, net
Reserves and accruals	$	12,790	$	13,818
Domestic intangible assets		12,292		9,617
Investment securities and loans		(2,482)		(2,327)
Investment in unconsolidated entities		(412)		883
Deferred income		432		427
Net operating and capital loss carryforwards		5,173		2,498
Valuation allowance		(5,173)		(2,498)
Other U.S. temporary differences		405		515
		23,025		22,933
Europe
Deferred tax liability, net
European servicing rights		(845)		(2,681)
Net operating and capital loss carryforwards		8,149		8,702
Valuation allowance		(8,149)		(8,702)
Other European temporary differences		(131)		(337)
		(976)		(3,018)
Net deferred tax assets	$	22,049	$	19,915

Unrecognized tax benefits were not material as of and during the three and nine months ended September 30, 2015.

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 nine months ended September 30, 2015 and 2014 (dollar amounts in thousands):

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2015				2014				2015				2014
Federal statutory tax rate	$	43,677	35.0	%	$	59,929	35.0	%	$	134,034	35.0	%	$	147,836	35.0	%
REIT and other non-taxable income		(36,250)	(29.0)	%		(52,979)	(30.9)	%		(111,732)	(29.1)	%		(133,483)	(31.6)	%
State income taxes		937	0.8	%		930	0.5	%		3,117	0.8	%		1,953	0.5	%
Federal benefit of state tax deduction		(328)	(0.3)	%		(326)	(0.2)	%		(1,091)	(0.3)	%		(683)	(0.2)	%
Valuation allowance		(221)	(0.2)	%		712	0.4	%		2,652	0.7	%		1,160	0.3	%
Other		(140)	(0.1)	%		(4,430)	(2.6)	%		438	0.1	%		(3,050)	(0.7)	%
Effective tax rate	$	7,675	6.2	%	$	3,836	2.2	%	$	27,418	7.2	%	$	13,733	3.3	%

53

21. Commitments and Contingencies

As of September 30, 2015, we had future funding commitments on 55 loanstotaling $1.7 billion, of which we expect to fund $1.5 billion. These future funding commitments primarily relate 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.

In the ordinary course of business, we may provide various forms of guarantees.  In limited instances, specifically involving construction loans, the Company has guaranteed the future funding obligations of certain third party lenders in the event that such third parties fail to fund their proportionate share of the obligation in a timely manner.  We are currently unaware of any circumstances which would require us to make payments under any of these guarantees. 

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.

22.  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.  Effective January 1, 2015, we established a separate presentation for corporate overhead, which includes our corporate debt facilities and the associated expenses, management fee expenses and general and administrative expenses not directly allocable to our segments.  Also effective January 1, 2015, we transferred a performing loan with a balance of $25.0 million as of December 31, 2014 from our Investing and Servicing Segment to our Lending Segment.  Effective upon our Ireland Portfolio acquisition discussed in Note 3, we established a third business segment, the Property Segment, and transferred our existing equity method investment in four regional shopping malls (the “Retail Fund”) from our Lending Segment to our Property Segment.  As of December 31, 2014, the carrying value of the Retail Fund was $129.5 million.  We have retrospectively reclassified prior periods to conform to these changes in presentation.

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The table below presents our results of operations for the three months ended September 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	116,049	$	4,549	$	—	$	—	$	120,598	$	—	$	120,598
Interest income from investment securities		18,137		40,615		—		—		58,752		(34,078)		24,674
Servicing fees		114		61,394		—		—		61,508		(28,980)		32,528
Rental income		—		2,758		7,287		—		10,045		—		10,045
Other revenues		154		4,372		—		—		4,526		(226)		4,300
Total revenues		134,454		113,688		7,287		—		255,429		(63,284)		192,145
Costs and expenses:
Management fees		364		18		—		27,614		27,996		86		28,082
Interest expense		20,148		2,793		1,713		26,034		50,688		—		50,688
General and administrative		5,901		30,187		226		2,201		38,515		178		38,693
Acquisition and investment pursuit costs		935		552		2,233		(38)		3,682		—		3,682
Costs of rental operations		—		1,562		790		—		2,352		—		2,352
Depreciation and amortization		—		2,492		4,742		—		7,234		—		7,234
Loan loss allowance, net		(2,667)		—		—		—		(2,667)		—		(2,667)
Other expense		—		3		—		—		3		—		3
Total costs and expenses		24,681		37,607		9,704		55,811		127,803		264		128,067
Income (loss) before other income, income taxes and non-controlling interests		109,773		76,081		(2,417)		(55,811)		127,626		(63,548)		64,078
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		49,665		49,665
Change in fair value of servicing rights		—		(13,331)		—		—		(13,331)		9,114		(4,217)
Change in fair value of investment securities, net		(518)		(1,941)		—		—		(2,459)		5,076		2,617
Change in fair value of mortgage loans held-for-sale, net		—		19,082		—		—		19,082		—		19,082
Earnings from unconsolidated entities		818		2,652		2,436		—		5,906		(200)		5,706
Gain on sale of investments and other assets, net		2,688		660		—		—		3,348		—		3,348
Gain (loss) on derivative financial instruments, net		10,693		(9,582)		1,119		—		2,230		—		2,230
Foreign currency (loss) gain, net		(18,705)		896		27		—		(17,782)		—		(17,782)
Other income, net		—		64		—		—		64		—		64
Total other (loss) income		(5,024)		(1,500)		3,582		—		(2,942)		63,655		60,713
Income (loss) before income taxes		104,749		74,581		1,165		(55,811)		124,684		107		124,791
Income tax provision		(166)		(7,509)		—		—		(7,675)		—		(7,675)
Net income (loss)		104,583		67,072		1,165		(55,811)		117,009		107		117,116
Net income attributable to non-controlling interests		(350)		76		—		—		(274)		(107)		(381)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	104,233	$	67,148	$	1,165	$	(55,811)	$	116,735	$	—	$	116,735

55

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

			Investing						Investing
	Lending		and Servicing						and Servicing
	Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	106,369	$	4,300	$	—	$	110,669	$	—	$	110,669
Interest income from investment securities		15,729		30,136		—		45,865		(17,225)		28,640
Servicing fees		63		58,826		—		58,889		(24,248)		34,641
Rental income		—		3,385		—		3,385		—		3,385
Other revenues		130		4,219		—		4,349		(316)		4,033
Total revenues		122,291		100,866		—		223,157		(41,789)		181,368
Costs and expenses:
Management fees		470		18		24,413		24,901		42		24,943
Interest expense		16,865		1,602		21,272		39,739		—		39,739
General and administrative		8,362		37,723		1,378		47,463		177		47,640
Acquisition and investment pursuit costs		583		176		—		759		—		759
Costs of rental operations		—		1,783		—		1,783		—		1,783
Depreciation and amortization		—		3,017		—		3,017		—		3,017
Loan loss allowance, net		1,575		—		—		1,575		—		1,575
Other expense		—		918		—		918		—		918
Total costs and expenses		27,855		45,237		47,063		120,155		219		120,374
Income (loss) before other income, income taxes and non-controlling interests		94,436		55,629		(47,063)		103,002		(42,008)		60,994
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		87,778		87,778
Change in fair value of servicing rights		—		(18,312)		—		(18,312)		10,415		(7,897)
Change in fair value of investment securities, net		(140)		52,067		—		51,927		(50,067)		1,860
Change in fair value of mortgage loans held-for-sale, net		—		15,517		—		15,517		—		15,517
Earnings from unconsolidated entities		1,875		5,905		—		7,780		(3,975)		3,805
Gain on sale of investments, net		1,332		—		—		1,332		—		1,332
Gain on derivative financial instruments, net		26,540		2,735		—		29,275		—		29,275
Foreign currency loss, net		(21,019)		(447)		—		(21,466)		—		(21,466)
Other income, net		—		28		—		28		—		28
Total other income		8,588		57,493		—		66,081		44,151		110,232
Income (loss) before income taxes		103,024		113,122		(47,063)		169,083		2,143		171,226
Income tax benefit (provision)		233		(4,069)		—		(3,836)		—		(3,836)
Net income (loss)		103,257		109,053		(47,063)		165,247		2,143		167,390
Net income attributable to non-controlling interests		(203)		—		—		(203)		(2,143)		(2,346)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	103,054	$	109,053	$	(47,063)	$	165,044	$	—	$	165,044

56

The table below presents our results of operations for the nine months ended September 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	343,449	$	13,870	$	—	$	—	$	357,319	$	—	$	357,319
Interest income from investment securities		57,483		112,583		—		—		170,066		(93,838)		76,228
Servicing fees		296		166,691		—		—		166,987		(76,048)		90,939
Rental income		—		6,908		10,823		—		17,731		—		17,731
Other revenues		567		7,603		—		—		8,170		(733)		7,437
Total revenues		401,795		307,655		10,823		—		720,273		(170,619)		549,654
Costs and expenses:
Management fees		1,119		54		—		81,511		82,684		187		82,871
Interest expense		61,868		7,663		2,590		78,900		151,021		—		151,021
General and administrative		16,842		92,002		402		5,573		114,819		542		115,361
Acquisition and investment pursuit costs		1,932		1,270		6,495		38		9,735		—		9,735
Costs of rental operations		—		4,138		1,123		—		5,261		—		5,261
Depreciation and amortization		—		10,790		6,357		—		17,147		—		17,147
Loan loss allowance, net		311		—		—		—		311		—		311
Other expense		—		378		—		—		378		—		378
Total costs and expenses		82,072		116,295		16,967		166,022		381,356		729		382,085
Income (loss) before other income, income taxes and non-controlling interests		319,723		191,360		(6,144)		(166,022)		338,917		(171,348)		167,569
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		153,399		153,399
Change in fair value of servicing rights		—		(26,587)		—		—		(26,587)		18,176		(8,411)
Change in fair value of investment securities, net		(347)		3,181		—		—		2,834		730		3,564
Change in fair value of mortgage loans held-for-sale, net		—		51,044		—		—		51,044		—		51,044
Earnings from unconsolidated entities		3,034		10,704		7,631		—		21,369		(622)		20,747
Gain on sale of investments and other assets, net		2,995		17,760		—		—		20,755		—		20,755
Gain (loss) on derivative financial instruments, net		19,602		(13,315)		1,036		—		7,323		—		7,323
Foreign currency (loss) gain, net		(26,860)		(395)		20		—		(27,235)		—		(27,235)
Loss on extinguishment of debt		—		—		—		(5,921)		(5,921)		—		(5,921)
Other income, net		—		105		—		14		119		—		119
Total other (loss) income		(1,576)		42,497		8,687		(5,907)		43,701		171,683		215,384
Income (loss) before income taxes		318,147		233,857		2,543		(171,929)		382,618		335		382,953
Income tax provision		(136)		(27,282)		—		—		(27,418)		—		(27,418)
Net income (loss)		318,011		206,575		2,543		(171,929)		355,200		335		355,535
Net income attributable to non-controlling interests		(1,030)		76		—		—		(954)		(335)		(1,289)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	316,981	$	206,651	$	2,543	$	(171,929)	$	354,246	$	—	$	354,246

57

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

			Investing				Single				Investing
	Lending		and Servicing				Family				and Servicing
	Segment		Segment		Corporate		Residential		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	311,348	$	9,686	$	—	$	—	$	321,034	$	—	$	321,034
Interest income from investment securities		49,196		83,225		—		—		132,421		(46,707)		85,714
Servicing fees		253		172,845		—		—		173,098		(71,565)		101,533
Rental income		—		6,520		—		—		6,520		—		6,520
Other revenues		318		9,917		—		—		10,235		(939)		9,296
Total revenues		361,115		282,193		—		—		643,308		(119,211)		524,097
Costs and expenses:
Management fees		1,653		54		76,022		—		77,729		120		77,849
Interest expense		48,310		3,529		63,426		—		115,265		—		115,265
General and administrative		18,974		112,049		5,268		—		136,291		544		136,835
Acquisition and investment pursuit costs		1,303		606		15		—		1,924		—		1,924
Costs of rental operations		—		3,889		—		—		3,889		—		3,889
Depreciation and amortization		—		12,807		—		—		12,807		—		12,807
Loan loss allowance, net		1,933		—		—		—		1,933		—		1,933
Other expense		52		6,475		—		—		6,527		—		6,527
Total costs and expenses		72,225		139,409		144,731		—		356,365		664		357,029
Income (loss) before other income, income taxes and non-controlling interests		288,890		142,784		(144,731)		—		286,943		(119,875)		167,068
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		190,810		190,810
Change in fair value of servicing rights		—		(43,291)		—		—		(43,291)		24,620		(18,671)
Change in fair value of investment securities, net		565		105,313		—		—		105,878		(90,698)		15,180
Change in fair value of mortgage loans held-for-sale, net		—		48,018		—		—		48,018		—		48,018
Earnings from unconsolidated entities		6,847		9,741		—		—		16,588		(3,156)		13,432
Gain on sale of investments, net		12,965		—		—		—		12,965		—		12,965
Gain (loss) on derivative financial instruments, net		16,142		(4,523)		—		—		11,619		—		11,619
Foreign currency loss, net		(15,376)		(836)		—		—		(16,212)		—		(16,212)
OTTI		(214)		(796)		—		—		(1,010)		—		(1,010)
Other income, net		54		684		—		—		738		—		738
Total other income		20,983		114,310		—		—		135,293		121,576		256,869
Income (loss) from continuing operations before income taxes		309,873		257,094		(144,731)		—		422,236		1,701		423,937
Income tax provision		(293)		(13,440)		—		—		(13,733)		—		(13,733)
Income (loss) from continuing operations		309,580		243,654		(144,731)		—		408,503		1,701		410,204
Loss from discontinued operations, net of tax		—		—		—		(1,551)		(1,551)		—		(1,551)
Net income (loss)		309,580		243,654		(144,731)		(1,551)		406,952		1,701		408,653
Net income attributable to non-controlling interests		(3,439)		—		—		—		(3,439)		(1,701)		(5,140)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	306,141	$	243,654	$	(144,731)	$	(1,551)	$	403,513	$	—	$	403,513

58

The table below presents our condensed consolidated balance sheet as of September 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Assets:
Cash and cash equivalents	$	112,635	$	56,454	$	—	$	202,766	$	371,855	$	913	$	372,768
Restricted cash		15,352		23,978		4,290		—		43,620		—		43,620
Loans held-for-investment, net		5,814,886		—		—		—		5,814,886		—		5,814,886
Loans held-for-sale		27,198		423,630		—		—		450,828		—		450,828
Loans transferred as secured borrowings		142,456		—		—		—		142,456		—		142,456
Investment securities		564,101		927,315		—		—		1,491,416		(704,955)		786,461
Properties, net		—		84,558		445,880		—		530,438		—		530,438
Intangible assets		—		162,343		56,616		—		218,959		(27,879)		191,080
Investment in unconsolidated entities		30,155		54,627		121,733		—		206,515		(7,344)		199,171
Goodwill		—		140,437		—		—		140,437		—		140,437
Derivative assets		26,102		4,389		5,816		—		36,307		—		36,307
Accrued interest receivable		35,214		828		—		—		36,042		—		36,042
Other assets		21,722		64,086		40,604		12,784		139,196		(1,900)		137,296
VIE assets, at fair value		—		—		—		—		—		82,937,617		82,937,617
Total Assets	$	6,789,821	$	1,942,645	$	674,939	$	215,550	$	9,622,955	$	82,196,452	$	91,819,407
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	17,143	$	85,208	$	10,344	$	24,431	$	137,126	$	660	$	137,786
Related-party payable		—		120		—		22,684		22,804		—		22,804
Dividends payable		—		—		—		115,191		115,191		—		115,191
Derivative liabilities		8,387		6,359		155		—		14,901		—		14,901
Secured financing agreements, net		2,209,851		485,662		328,602		658,159		3,682,274		—		3,682,274
Convertible senior notes, net		—		—		—		1,320,207		1,320,207		—		1,320,207
Secured borrowings on transferred loans		143,926		—		—		—		143,926		—		143,926
VIE liabilities, at fair value		—		—		—		—		—		82,181,138		82,181,138
Total Liabilities		2,379,307		577,349		339,101		2,140,672		5,436,429		82,181,798		87,618,227
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock		—		—		—		2,407		2,407		—		2,407
Additional paid-in capital		2,689,426		1,183,262		329,960		(18,110)		4,184,538		—		4,184,538
Treasury stock		—		—		—		(61,525)		(61,525)		—		(61,525)
Accumulated other comprehensive income (loss)		40,830		(2,478)		1,158		—		39,510		—		39,510
Retained earnings (accumulated deficit)		1,668,561		180,456		4,720		(1,847,894)		5,843		—		5,843
Total Starwood Property Trust, Inc. Stockholders’ Equity		4,398,817		1,361,240		335,838		(1,925,122)		4,170,773		—		4,170,773
Non-controlling interests in consolidated subsidiaries		11,697		4,056		—		—		15,753		14,654		30,407
Total Equity		4,410,514		1,365,296		335,838		(1,925,122)		4,186,526		14,654		4,201,180
Total Liabilities and Equity	$	6,789,821	$	1,942,645	$	674,939	$	215,550	$	9,622,955	$	82,196,452	$	91,819,407

59

The table below presents our condensed consolidated balance sheet as of December 31, 2014 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Assets:
Cash and cash equivalents	$	125,132	$	85,252	$	—	$	44,017	$	254,401	$	786	$	255,187
Restricted cash		34,941		13,763		—		—		48,704		—		48,704
Loans held-for-investment, net		5,771,307		7,931		—		—		5,779,238		—		5,779,238
Loans held-for-sale		—		391,620		—		—		391,620		—		391,620
Loans transferred as secured borrowings		129,427		—		—		—		129,427		—		129,427
Investment securities		764,517		753,553		—		—		1,518,070		(519,822)		998,248
Properties, net		—		39,854		—		—		39,854		—		39,854
Intangible assets		—		190,207		—		—		190,207		(46,055)		144,152
Investment in unconsolidated entities		22,537		48,693		129,475		—		200,705		(6,722)		193,983
Goodwill		—		140,437		—		—		140,437		—		140,437
Derivative assets		23,579		3,049		—		—		26,628		—		26,628
Accrued interest receivable		39,188		914		—		—		40,102		—		40,102
Other assets		21,329		61,048		—		14,739		97,116		(1,464)		95,652
VIE assets, at fair value		—		—		—		—		—		107,816,065		107,816,065
Total Assets	$	6,931,957	$	1,736,321	$	129,475	$	58,756	$	8,856,509	$	107,242,788	$	116,099,297
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	23,015	$	97,424	$	—	$	23,620	$	144,059	$	457	$	144,516
Related-party payable		—		4,405		—		36,346		40,751		—		40,751
Dividends payable		—		—		—		108,189		108,189		—		108,189
Derivative liabilities		3,662		1,814		—		—		5,476		—		5,476
Secured financing agreements, net		2,252,493		222,363		—		662,933		3,137,789		—		3,137,789
Convertible senior notes, net		—		—		—		1,418,022		1,418,022		—		1,418,022
Secured borrowings on transferred loans		129,441		—		—		—		129,441		—		129,441
VIE liabilities, at fair value		—		—		—		—		—		107,232,201		107,232,201
Total Liabilities		2,408,611		326,006		—		2,249,110		4,983,727		107,232,658		112,216,385
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock		—		—		—		2,248		2,248		—		2,248
Additional paid-in capital		3,126,845		1,413,608		127,299		(832,027)		3,835,725		—		3,835,725
Treasury stock		—		—		—		(23,635)		(23,635)		—		(23,635)
Accumulated other comprehensive income		55,781		115		—		—		55,896		—		55,896
Retained earnings (accumulated deficit)		1,328,794		(3,408)		2,176		(1,336,940)		(9,378)		—		(9,378)
Total Starwood Property Trust, Inc. Stockholders’ Equity		4,511,420		1,410,315		129,475		(2,190,354)		3,860,856		—		3,860,856
Non-controlling interests in consolidated subsidiaries		11,926		—		—		—		11,926		10,130		22,056
Total Equity		4,523,346		1,410,315		129,475		(2,190,354)		3,872,782		10,130		3,882,912
Total Liabilities and Equity	$	6,931,957	$	1,736,321	$	129,475	$	58,756	$	8,856,509	$	107,242,788	$	116,099,297

60

23. Subsequent Events

Our significant events subsequent to September 30, 2015 were as follows:

Affordable Housing Property Acquisitions

On October 20, 2015, we acquired seven of the properties comprising the Affordable Housing Portfolio for $143.2 million.  These acquisitions were financed in part by newly established property specific debt facilities with an aggregate outstanding balance of $101.0 million, a 10-year term and a fixed interest rate of 3.7%.  The remaining 22 properties remain subject to customary closing conditions. 

On October 26, 2015, we entered into an agreement to acquire a 450-unit affordable housing community in Tampa, Florida for $29.1 million.

Secured Financing Agreements

In October 2015, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $325.0 million to $500.0 million and extend the maturity from October 2018 to October 2020, assuming exercise of available extension options.

In October 2015, we exercised a one-year extension option on the Conduit Repo 2 facility extending the maturity from November 2015 to November 2016.

Dividend Declaration

On November 5, 2015, our board of directors declared a dividend of $0.48 per share for the fourth quarter of 2015, which is payable on January 15, 2016 to common stockholders of record as of December 31, 2015.

61

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

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the information included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (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 investments in both the U.S. and Europe. We refer to the following as our target assets:commercial real estate mortgage loans, preferred equity interests, CMBS andother commercial real estate-related debt investments.

Our target assets may also include residential mortgage-backed securities (“RMBS”), certain residential mortgage loans, distressed or non-performing commercial loans, commercial properties subject to net leases and equity interests in commercial real estate. 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 three reportable business segments as of September 30, 2015:

· Real estate lending (the “Lending Segment”)— engages primarily in originating, acquiring, financing and managing commercial first mortgages, subordinated mortgages, mezzanine loans, preferred equity, CMBS, RMBS and other real estate and real estate-related debt investments in both the U.S. and Europe that are held-for-investment.

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

· Real estate property (the “Property Segment”)—engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, including multi-family properties, that are held for investment.

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

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Developments during the Third Quarter of 2015

Affordable Housing Portfolio Acquisition

In August 2015, we entered into an agreement to acquire 29 affordable housing communities located throughout Florida (the “Affordable Housing Portfolio”) for an aggregate acquisition price of $524.1 million.  The acquisition will be fully funded with existing cash on hand and debt totaling $362.8 million, including third party debt and the assumption of pre-existing federal, state and county sponsored financing. 

The Affordable Housing Portfolio is comprised of 7,870 units concentrated primarily in the Tampa, Orlando and West Palm Beach metropolitan areas.  The communities are 98% occupied.  Due to the lack of supply and resulting high demand for affordable housing product generally, coupled with the fact that these properties represent some of the highest quality low income properties in the state, we expect occupancy levels in this portfolio to remain high.  

The transaction is expected to close in phases, the first of which closed on October 20, 2015 and comprised seven properties with an aggregate acquisition price of $143.2 million.  The remaining properties are expected to close during the fourth quarter and are subject to customary closing conditions.

In October 2015, we entered into an agreement to acquire a 450-unit affordable housing community in Tampa, Florida for $29.1 million.  We also expect this transaction to close during the fourth quarter. 

Other Developments

· Acquired a fully occupied, net leasedoffice property located in Dublin, Ireland for approximately $121.9 million.  This property, with the 12 Ireland properties acquired during the second quarter of 2015, comprise the “Ireland Portfolio.”

· Admitted as a member of the Federal Home Loan Bank (“FHLB”) of Des Moines.

· The Lending Segment originated the following loans during the quarter:

· $156.2 million first mortgage and mezzanine loan for the acquisition and renovation of a 29-property, 1.6 million square foot portfolio of office buildings located in the Greater Philadelphia area,  of which the Company funded $133.4 million during the third quarter.

· $86.5 million first mortgage and mezzanine loan for the acquisition and renovation of a 548-room hotel and 6-story parking garage located in Las Vegas, Nevada, which the Company fully funded at closing.

· $67.2 million first mortgage and mezzanine loan forthe refinancing of a 30-story office building and adjacent 12-story parking garage located in Miami, Florida, of which the Company funded $63.0 million during the third quarter. 

· Funded $132.7 million of previously originated loan commitments during the third quarter.

· Received proceeds of $356.6 million and $91.8 million from maturities and principal repayments on loans and available-for-sale CMBS, respectively, during the third quarter.

· Sold $220.9 million of previously originated senior loans while retaining the subordinated loan.

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· Named special servicer on four new issue CMBS deals, two of which we acquired a portion of the B-pieces, with a total unpaid principal balance of $4.2 billion.

· Purchased $115.0 million of CMBS, including $65.2 million in new issue B-pieces.

· Originated new conduit loans of $535.6 million.

· Received proceeds of $410.2 million from sales of conduit loans.

· Acquired $32.5 million of commercial real estate from CMBS trusts.

· Repurchased 1,393,223 shares of common stock at a total cost of $29.1 million.

Developments during the Second Quarter of 2015

· Acquired eleven office properties and one multi-family residential property within the Ireland Portfolio, all located in Dublin, Ireland. The aggregate purchase price for all twelve properties, which collectively comprise approximately 520,000 square feet, was $106.7 million net of debt refinanced.   We executed a €294.0 million, five year mortgage facility to finance the acquisition, of which €220.5 million was drawn down during the quarter.

· The Lending Segment originated or acquired the following loans during the quarter:

· $257.9 million first mortgage for the development of a 194-acre coastal residential community in Orange County, California, of which the Company funded $76.3 million during the second quarter. 

· $175.0 million first mortgage and mezzanine loan for the refinancing of a 1,054-room, five-property hotel portfolio located in California, of which the Company funded $170.0 million during the second quarter.

· $83.5 million first mortgage and mezzanine loan for the refinancing and development of a 77-acre retail center located in Albuquerque, New Mexico, of which the Company funded $33.7 million during the second quarter.

· $82.8 million first mortgage and mezzanine loan for the refinancing of a 270-unit luxury condominium tower located in Philadelphia, Pennsylvania, which the Company fully funded during the second quarter. 

· Funded $131.9 million of previously originated loan commitments during the second quarter.

· Received proceeds of $373.5 million and $228.9 million from maturities and principal repayments on loans and held-to-maturity investment securities, respectively, during the second quarter.

· Sold $293.2 million of loans and loan commitments during the second quarter.

· Named special servicer on one new issue CMBS deal with a total unpaid principal balance of $1.1 billion.

· Purchased $37.9 million of CMBS, including $17.5 million in new issue B-pieces.

· Originated new conduit loans of $476.7 million.

· Acquired $33.4 million of commercial real estate from CMBS trusts.

· Received proceeds of $551.6 million from sales of conduit loans.

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· Sold 13.8 million shares of common stock for gross proceeds of $326.1 million. 

· Repurchased 400,000 shares of common stock at a total cost of $8.8 million.

· Repurchased $14.5 million par value of our 2019 Notes for $16.5 million, recognizing a loss on extinguishment of debt of $0.6 million.

Developments during the First Quarter of 2015

· Entered into agreements to acquirethe Ireland Portfolio. 

· The Lending Segment originated or acquired the following loans during the quarter:

· $111.6 million first mortgage and mezzanine loan for the acquisition of a 129-acre office park in Boca Raton, Florida, of which the Company funded $85.0 million during the first quarter. 

· $105.6 million mezzanine loan secured by a 6,530-room, 24-property U.S. hotel portfolio.

· $73.3 million first mortgage and mezzanine loan for the acquisition of a 367-room full service hotel in New Orleans, Louisiana, of which the Company funded $64.6 million during the first quarter. 

· $61.6 million first mortgage and mezzanine loan for the acquisition of a 499-room full service hotel in Indianapolis, Indiana, of which the Company funded $55.0 million during the first quarter. 

· $58.9 million first mortgage and mezzanine loan for the acquisition of an 11-building office portfolio in Sonoma County, California, of which the Company funded $55.7 million during the first quarter. 

· Funded $130.4 million of previously originated loan commitments during the first quarter.

· Sold $85.5 million of loans and loan commitments during the first quarter.

· Sold a commercial real estate asset from our Investing and Servicing Segment for a gain of $17.1 million.

· Named special servicer on three new issue CMBS deals with total unpaid principal balances of $3.0 billion.

· Purchased $60.3 million of CMBS, including $47.5 million in new issue B-pieces.

· Originated new conduit loans of $413.2 million.

· Received proceeds of $482.0 million from sales of conduit loans.

· Executed a $150.0 million repurchase facility with an existing lender to fund the origination of commercial mortgage loans for future securitization through the Investing and Servicing Segment’s conduit platform.  The facility carries a three year initial term with a one year extension option and an annual interest rate of LIBOR +2.10%.

· Executed a repurchase facility with a new lender to finance certain CMBS holdings.  There is no maximum facility size specified under the facility as the lender will evaluate all eligible collateral on an individual basis.  The facility carries a rolling twelve month term which may reset monthly with the lender’s consent and an annual interest rate of LIBOR +1.40% to LIBOR +1.85% depending on the CMBS collateral.

· Repurchased $104.1 million par value of our 2019 Notes for $119.9 million, recognizing a loss on extinguishment of debt of $5.3 million.

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Subsequent Events

Refer to Note 23 of our condensed consolidated financial statements included herein for disclosure regarding significant transactions that occurred subsequent to September 30, 2015.

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.

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The following table compares our summarized results of operations for the three and nine months ended September 30, 2015 and 2014 by business segment (amounts in thousands):

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2015		2014		$ Change		2015		2014		$ Change
Revenues:
Lending Segment	$	134,454	$	122,291	$	12,163	$	401,795	$	361,115	$	40,680
Investing and Servicing Segment		113,688		100,866		12,822		307,655		282,193		25,462
Property Segment		7,287		—		7,287		10,823		—		10,823
Investing and Servicing VIEs		(63,284)		(41,789)		(21,495)		(170,619)		(119,211)		(51,408)
		192,145		181,368		10,777		549,654		524,097		25,557
Costs and expenses (1):
Lending Segment		24,681		27,855		(3,174)		82,072		72,225		9,847
Investing and Servicing Segment		37,607		45,237		(7,630)		116,295		139,409		(23,114)
Property Segment		9,704		—		9,704		16,967		—		16,967
Corporate		55,811		47,063		8,748		166,022		144,731		21,291
Investing and Servicing VIEs		264		219		45		729		664		65
		128,067		120,374		7,693		382,085		357,029		25,056
Other income (expense):
Lending Segment		(5,024)		8,588		(13,612)		(1,576)		20,983		(22,559)
Investing and Servicing Segment		(1,500)		57,493		(58,993)		42,497		114,310		(71,813)
Property Segment		3,582		—		3,582		8,687		—		8,687
Corporate		—		—		—		(5,907)		—		(5,907)
Investing and Servicing VIEs		63,655		44,151		19,504		171,683		121,576		50,107
		60,713		110,232		(49,519)		215,384		256,869		(41,485)
Income (loss) from continuing operations before income taxes:
Lending Segment		104,749		103,024		1,725		318,147		309,873		8,274
Investing and Servicing Segment		74,581		113,122		(38,541)		233,857		257,094		(23,237)
Property Segment		1,165		—		1,165		2,543		—		2,543
Corporate		(55,811)		(47,063)		(8,748)		(171,929)		(144,731)		(27,198)
Investing and Servicing VIEs		107		2,143		(2,036)		335		1,701		(1,366)
		124,791		171,226		(46,435)		382,953		423,937		(40,984)
Income tax provision		(7,675)		(3,836)		(3,839)		(27,418)		(13,733)		(13,685)
Loss from discontinued operations, net of tax		—		—		—		—		(1,551)		1,551
Net income attributable to non-controlling interests		(381)		(2,346)		1,965		(1,289)		(5,140)		3,851
Net income attributable to Starwood Property Trust, Inc.	$	116,735	$	165,044	$	(48,309)	$	354,246	$	403,513	$	(49,267)

(1) Allocations of certain prior period costs and expenses among segments have been reclassified to a newly-established separate presentation for corporate overhead to conform to our current period presentation of both GAAP and non-GAAP financial measures. Refer to Note 22 of our condensed consolidated financial statements included herein for further information.

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Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014

Lending Segment

Revenues

For the three months ended September 30, 2015, revenues of our Lending Segment increased $12.2 million to $134.5 million, compared to $122.3 million for the three months ended September 30, 2014. This increase was primarily due to (i) a $9.7 million increase in interest income from loans, which reflects a $647.2 million net increase in loan investments of our Lending Segment between September 30, 2014 and 2015, mainly resulting from new loan originations exceeding maturities, and (ii) a $2.4 million increase in interest income from investment securities principally due to CMBS.

Costs and Expenses

For the three months ended September 30, 2015, costs and expenses of our Lending Segment decreased $3.2 million to $24.7 million, compared to $27.9 million for the three months ended September 30, 2014. This decrease was primarily due to a $4.2 million decrease in our loan loss allowance due to the repayment in full of certain loans risk rated in the 4 and 5 rating categories and a $2.5 million decrease in general and administrative (“G&A”) expenses primarily due to lower incentive compensation and legal fees. These were both partially offset by a $3.3 million increase in interest expense associated with the various secured financing facilities used to fund the growth of our investment portfolio.  The outstanding balance under the secured financing facilities increased $336.8 million between September 30, 2014 and 2015. 

Net Interest Income (amounts in thousands)

	For the Three Months Ended
	September 30,
	2015		2014		Change
Interest income from loans	$	116,049	$	106,369	$	9,680
Interest income from investment securities		18,137		15,729		2,408
Interest expense		(20,148)		(16,865)		(3,283)
Net interest income	$	114,038	$	105,233	$	8,805

For the three months ended September 30, 2015, net interest income of our Lending Segment increased $8.8 million to $114.0 million compared to $105.2 million for the three months ended September 30, 2014.  This increase primarily reflects a $502.0 million net increase in investments of our Lending Segment between September 30, 2014 and 2015, which was financed in part by unallocated corporate-level debt. 

During the three months ended September 30, 2015, the weighted average unlevered and levered yields on the Lending Segment’s loans and investment securities were 8.0% and 10.7%, respectively.During the three months ended September 30, 2014, the weighted average unlevered and levered yields on the Lending Segment’s loans and investment securities were 8.3% and 10.7%, respectively. The slight decrease in the weighted average unlevered yields is primarily due to a gradual tightening of interest rate spreads in credit markets over the last twelve months.  Corresponding decreases in our borrowing rates resulted in the weighted average levered yields remaining unchanged.

During the three months ended September 30, 2015 and 2014, the Lending Segment’s weighted average secured borrowing rates, inclusive of interest rate hedging costs and the amortization of deferred financing fees, were 3.3% and 3.5%, respectively. This decrease in borrowing rates primarily reflects lower interest rate spreads on both our new and amended debt facilities over the last twelve months. 

Other Income (Loss)

For the three months ended September 30, 2015, other income (loss) of our Lending Segment decreased $13.6 million to a loss of $5.0 million, compared to income of $8.6 million for the three months ended September 30, 2014. The decrease was primarily due to a lower gain of $15.8 million on derivatives partially offset by a $2.3 million decrease in

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foreign currency loss.  The lower gain on derivatives reflects a $10.3 million decrease in gain on foreign currency hedges and a $5.5 million increased loss on interest rate swaps.  The foreign currency hedges are used to fix the U.S. dollar amounts of cash flows (both interest and principal payments) we expect to receive from our foreign currency denominated loans and CMBS investments.  The interest rate swaps are used primarily to fix our interest rate payments on variable rate borrowings.  The decrease in gain on foreign currency hedges is greater than the offsetting decrease in foreign currency loss mainly because the portion of unrealized foreign currency loss associated with investment securities was reported in accumulated other comprehensive income (“AOCI”) rather than earnings, in accordance with GAAP, whereas the full change in fair value of the related currency hedge was reported in earnings since it was not a designated hedge. 

Investing and Servicing Segment and VIEs

Revenues

For the three months ended September 30, 2015, revenues of our Investing and Servicing Segment decreased $8.7 million to $50.4 million after consolidated VIE eliminations of $63.3 million, compared to $59.1 million after consolidated VIE eliminations of $41.8 million for the three months ended September 30, 2014. 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 decrease in revenues in the third quarter of 2015 was primarily due to decreases of $6.4 million in interest income from CMBS investments and $2.2 million in servicing fees.  The $6.4 million decrease in CMBS interest income was due to a $16.9 million increase in VIE eliminations related to the CMBS trusts we consolidate.  Excluding the effect of these eliminations, CMBS interest income increased by $10.5 million.

Costs and Expenses

For the three months ended September 30, 2015, costs and expenses of our Investing and Servicing Segment decreased $7.6 million to $37.9 million, compared to $45.5 million for the three months ended September 30, 2014. The VIE eliminations were nominal for both periods. The decrease in costs and expenses was primarily due to lower incentive compensation and legal fees.

Other Income (Loss)

For the three months ended September 30, 2015, other income of our Investing and Servicing Segment decreased $39.4 million to $62.2 million including additive net VIE eliminations of $63.7 million, from $101.6 million including additive net VIE eliminations of $44.2 million for the three months ended September 30, 2014. The decrease in other income (loss) in the third quarter of 2015 compared to the third quarter of 2014 was primarily due to a lesser increase of $38.1 million in the value of net assets related to consolidated VIEs. The change in net assets related to consolidated VIEs reflects amounts associated with the Investing and Servicing Segment’s variable interests in 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.  Before VIE eliminations, there was a decrease in fair value of CMBS securities of $1.9 million and an increase of $52.1 million in the three months ended September 30, 2015 and 2014, respectively.

Income Tax Provision

Most of our consolidated income tax provision relates to the taxable nature of the Investing and Servicing Segment’s loan servicing and loan conduit businesses which are housed in TRSs.  Our tax provision for the three months ended September 30, 2015, as well as the overall effective tax rate, is higher than for the three months ended September 30, 2014 primarily due to an increase in our TRS income.

Property Segment

During the three months ended September 30, 2014, there was no activity in the Property Segment. Therefore a comparison of results of this segment for the three months ended September 30, 2014 to the three months ended September 30, 2015 is not meaningful.

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Revenues

For the three months ended September 30, 2015, revenues of our Property Segment consisted of $7.3 million of rental income relating to our Ireland Portfolio.

Costs and Expenses

For the three months ended September 30, 2015, costs and expenses of our Property Segment of $9.7 million consisted of $2.2 million of acquisition and investment pursuit costs, of which $1.5 million relate to the Affordable Housing Portfolio, and $7.5 million of other rental related costs, including $4.7 million of depreciation and amortization and $1.7 million of interest expense on the secured financing for the Ireland Portfolio.

Other Income

For the three months ended September 30, 2015, other income of our Property Segment of $3.6 million consisted primarily of $2.4 million of equity in earnings from our investment in four regional shopping malls (the “Retail Fund”) which we acquired in the fourth quarter of 2014 and a $2.2 million gain on foreign currency contracts that economically hedge our Euro currency exposure with respect to the Ireland Portfolio partially offset by a $1.1 million loss on interest rate derivatives associated with the debt financing for the Ireland Portfolio.

Corporate

For the three months ended September 30, 2015, corporate expenses increased $8.7 million to $55.8 million, compared to $47.1 million for the three months ended September 30, 2014. The increase was primarily due to a $4.8 million increase in interest expense related to our October 2014 issuance of Convertible Notes due 2017 and a $3.2 million increase in management fees.  The increase in management fees reflects the impacts of (i) higher levels of invested capital which resulted in an increased base management fee, (ii) higher levels of Core Earnings (see “Non-GAAP Financial Measures” section below) which resulted in an increased incentive fee and (iii) higher manager stock compensation expense resulting from awards granted during the second quarter of 2015.

Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014

Lending Segment

Revenues

For the nine months ended September 30, 2015, revenues of our Lending Segment increased $40.7 million to $401.8 million, compared to $361.1 million for the nine months ended September 30, 2014. This increase was primarily due to (i) a $32.1 million increase in interest income from loans, which reflects a $647.2 million net increase in loan investments of our Lending Segment between September 30, 2014 and 2015, mainly resulting from new loan originations exceeding maturities, and (ii) an $8.3 million increase in interest income from investment securities.

Costs and Expenses

For the nine months ended September 30, 2015, costs and expenses of our Lending Segment increased $9.9 million to $82.1 million, compared to $72.2 million for the nine months ended September 30, 2014. The increase was primarily due to a $13.6 million increase in interest expense associated with the various secured financing facilities used to fund the growth of our investment portfolio, partially offset by decreases of $2.1 million in G&A expenses and $1.6 million in our loan loss allowance.  The outstanding balance under the secured financing facilities increased $336.8 million between September 30, 2014 and 2015.

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Net Interest Income (amounts in thousands)

	For the Nine Months Ended
	September 30,
	2015		2014		Change
Interest income from loans	$	343,449	$	311,348	$	32,101
Interest income from investment securities		57,483		49,196		8,287
Interest expense		(61,868)		(48,310)		(13,558)
Net interest income	$	339,064	$	312,234	$	26,830

For the nine months ended September 30, 2015, net interest income of our lending segment increased $26.8 million to $339.1 million compared to $312.2 million for the nine months ended September 30, 2014.  The increase primarily reflects a $502.0 million net increase in investments of our Lending Segment between September 30, 2014 and 2015 which was financed in part by unallocated corporate-level debt. 

During the nine months ended September 30, 2015, the weighted average unlevered and levered yields on the Lending Segment’s loans and investment securities were 8.1% and 10.7%, respectively.During the nine months ended September 30, 2014, the weighted average unlevered and levered yields on the Lending Segment’s loans and investment securities were 8.4% and 10.5%, respectively.The slight decrease in the weighted average unlevered yields is primarily due to a gradual tightening of interest rate spreads in credit markets over the last twelve months.  Corresponding decreases in our borrowing rates and modest increases in leverage more than offset the impact of spread tightening, resulting in increased weighted average levered yields. 

During the nine months ended September 30, 2015 and 2014, the Lending Segment’s weighted average secured borrowing rates, inclusive of interest rate hedging costs and the amortization of deferred financing fees, were 3.4% and 3.7%, respectively. This decrease in borrowing rates reflects lower interest rate spreads on both our new and amended debt facilities over the last twelve months.

Other Income (Loss)

For the nine months ended September 30, 2015, other income (loss) of our Lending Segment decreased $22.6 million to a loss of $1.6 million, from income of $21.0 million for the nine months ended September 30, 2014. The decrease was primarily due to an $11.5 million increase in foreign currency loss, a $10.0 million decrease in gain on sale of investments due to higher sales activity, particularly of RMBS, in 2014 and a $3.8 million decrease in equity in earnings of unconsolidated entities.  These decreases were partially offset by a $3.5 million increased net gain on derivatives.

Investing and Servicing Segment and VIEs

Revenues

For the nine months ended September 30, 2015, revenues of our Investing and Servicing Segment decreased $26.0 million to $137.0 million after consolidated VIE eliminations of $170.6 million, compared to $163.0 million after consolidated VIE eliminations of $119.2 million for the nine months ended September 30, 2014. 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 decrease in revenues was due to decreases of $17.8 million in interest income from CMBS investments, $10.6 million in servicing fees and $1.7 million in rental and other revenues, all partially offset by an increase of $4.1 million in interest income from loans.  The $17.8 million decrease in CMBS interest income was due to a $47.1 million increase in VIE eliminations related to the CMBS trusts we consolidate.  Excluding the effect of these eliminations, CMBS interest income increased by $29.3 million.

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Costs and Expenses

For the nine months ended September 30, 2015, costs and expenses of our Investing and Servicing Segment decreased $23.1 million to $117.0 million, compared to $140.1 million for the nine months ended September 30, 2014. The VIE eliminations were nominal for both periods. The decrease in costs and expenses was primarily due to (i) lower incentive and other compensation and (ii) accruals for contingencies and legal fees incurred in the 2014 period which did not recur in the 2015 period, partially offset by a $4.1 million increase in interest expense related to higher balances under our conduit loan and CMBS financing facilities.

Other Income

For the nine months ended September 30, 2015, other income of our Investing and Servicing Segment decreased $21.7 million to $214.2 million including additive net VIE eliminations of $171.7 million, from $235.9 million including additive net VIE eliminations of $121.6 million for the nine months ended September 30, 2014. The decrease in other income was primarily due to a lesser increase of $37.4 million in the value of net assets related to consolidated VIEs partially offset by a $17.1 million gain on sale of a commercial real estate asset. The change in net assets related to consolidated VIEs reflects amounts associated with the Investing and Servicing Segment’s variable interests in 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.  Before VIE eliminations, there were increases in fair value of CMBS securities of $3.2 million and $105.3 million in the nine months ended September 30, 2015 and 2014, respectively.

Income Tax Provision

Most of our consolidated income tax provision relates to the taxable nature of the Investing and Servicing Segment’s loan servicing and loan conduit businesses which are housed in TRSs.  Our tax provision for the nine months ended September 30, 2015, as well as the overall effective tax rate, is higher than for the nine months ended September 30, 2014 primarily due to the taxable gain on sale of a commercial real estate asset and other increases in our TRS income.

Property Segment

During the nine months ended September 30, 2014, there was no activity in the Property Segment. Therefore a comparison of results of this segment for the nine months ended September 30, 2014 to the nine months ended September 30, 2015 is not meaningful.

Revenues

For the nine months ended September 30, 2015, revenues of our Property Segment consisted of $10.8 million of rental income relating to our Ireland Portfolio.

Costs and Expenses

For the nine months ended September 30, 2015, costs and expenses of our Property Segment of $17.0 million consisted of $6.5 million of acquisition and investment pursuit costs, of which $3.3 million and $1.8 million relate to the acquisitions of the Ireland Portfolio and Affordable Housing Portfolio, respectively, and $10.5 million of other rental related costs, including $6.4 million of depreciation and amortization and $2.6 million of interest expense on the secured financing for the Ireland Portfolio.

Other Income

For the nine months ended September 30, 2015, other income of our Property Segment of $8.7 million consisted primarily of $7.6 million of equity in earnings from the Retail Fund which we acquired in the fourth quarter of 2014 and

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a $2.2 million gain on foreign currency contracts that economically hedge our Euro currency exposure with respect to the Ireland Portfolio, partially offset by a $1.2 million loss on interest rate derivatives related to the debt financing for the Ireland Portfolio.

Corporate

For the nine months ended September 30, 2015, corporate expenses increased $21.3 million to $166.0 million, compared to $144.7 million for the nine months ended September 30, 2014.  The increase was primarily due to a $15.5 million increase in interest expense related to our October 2014 issuance of Convertible Notes due 2017 and a $5.5 million increase in management fees.  The increase in management fees reflects the impacts of (i) higher levels of invested capital which resulted in an increased base management fee, (ii) higher levels of Core Earnings (see “Non-GAAP Financial Measures” section below) which resulted in an increased incentive fee and (iii) higher manager stock compensation expense resulting from awards granted during the second quarter of 2015.  Corporate other expense of $5.9 million for the nine months ended September 30, 2015 represents a loss on the repurchase of $118.6 million principal amount of our Convertible Notes due 2019.

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, 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 adjustments 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 adjustments 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.

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 attributes of our current GAAP diluted share methodology: (i) our participating securities were determined to be anti-dilutive and were thus excluded from the denominator of the EPS calculation; and (ii) the portion of the convertible notes that are “in-the-money” (referred to as the “conversion spread value”), representing the value that would be delivered to investors in shares upon an assumed conversion, is included in 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, for purposes of determining Core EPS, our GAAP EPS methodology was adjusted to include (instead of exclude) participating securities. Further, conversion of the convertible notes is an event that is contingent upon numerous factors, none of which are in our control, and is an event that may or may not occur.  Consistent with the treatment of other unrealized adjustments to Core Earnings, our GAAP EPS methodology was adjusted to exclude (instead of include) the conversion spread value in determining Core EPS

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until a conversion actually occurs. We have adjusted prior periods to conform to the above definition. The following table presents our diluted weighted average shares used in our GAAP EPS calculation reconciled to our diluted weighted average shares used in our Core EPS calculation (amounts in thousands):

	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2015	2014	2015	2014
Diluted weighted average shares - GAAP	237,925	223,543	232,323	213,379
Add: Participating securities	2,500	2,577	2,271	2,776
Less: Conversion spread value	—	(966)	—	(932)
Diluted weighted average shares - Core	240,425	225,154	234,594	215,223

The definition of Core Earnings allows management to make adjustments, subject to the approval of a majority of the independent directors, in situations where such adjustments are considered appropriate in order for Core Earnings to be calculated in a manner consistent with its definition and objective.  We encountered this type of situation during the first quarter of 2015 when we incurred a loss on extinguishment of debt associated with our convertible notes.  The definition of Core Earnings did not contemplate the treatment of a loss on extinguishment of debt, so we modified the definition during the first quarter of 2015 to incorporate this type of transaction.

For the nine months ended September 30, 2015, we repurchased $118.6 million of our 2019 Notes for total consideration of $136.3 million.  We did not repurchase any 2019 Notes during the three months ended September 30, 2015. The resulting GAAP loss for the nine months ended September 30, 2015 of $5.9 million reflects the difference between the book value of the liability component and the related allocable liability component of the repurchase price.  The portion of the repurchase price attributable to the equity component during the nine months ended September 30, 2015 totaled $17.7 million, of which $3.8 million reflects a write-off of the unamortized conversion discount.  For the nine months ended September 30, 2015, the $3.8 million write-off is already included in the GAAP loss of $5.9 million and as such, is already reflected in Core Earnings. 

For the remaining $13.9 million reduction to equity for the nine months ended September 30, 2015, we believe this amount is effectively a reduction of the $20.4 million equity balance that was recognized upon issuance of the 2019 Notes.  This portion will not be considered realized until the earlier of (i) the entire issuance of the 2019 Notes has been extinguished; or (2) the $20.4 million has been fully amortized.  As a result, for the nine months ended September 30, 2015, we reflected the $13.9 million as accelerated amortization of our original $20.4 million.  If and when the original equity balance is fully amortized, the incremental equity component differential, if any, will be reflected as an adjustment to Core Earnings.

We also encountered this type of situation during the third quarter of 2015.  Our continued expansion of the Property Segment has resulted in our incurring significant acquisition and pursuit costs. GAAP requires these costs to be expensed as incurred, although they arguably benefit the asset over a longer period.  The current definition of Core Earnings does not contemplate the treatment of property acquisition costs, so we modified the definition during the third quarter of 2015 to allow these costs to be capitalized and amortized over the property’s estimated useful life.  During the quarter ended September 30, 2015, we incurred costs of $1.5 million related to successful acquisitions that were added back to Core Earnings pursuant to this modified definition.

The following table summarizes our quarterly Core Earnings per weighted average diluted share for the nine months ended September 30, 2015 and 2014:

	Core Earnings For the Three-Month Periods Ended
	March 31		June 30		September 30
2015	$	0.55	$	0.53	$	0.56
2014		0.61		0.52		0.55

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Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014

The following table presents our summarized results of operations and reconciliation to Core Earnings for the three months ended September 30, 2015, by business segment (amounts in thousands):

			Investing
	Lending		and Servicing		Property
	Segment		Segment		Segment		Corporate		Total
Revenues	$	134,454	$	113,688	$	7,287	$	—	$	255,429
Costs and expenses		(24,681)		(37,607)		(9,704)		(55,811)		(127,803)
Other (loss) income		(5,024)		(1,500)		3,582		—		(2,942)
Income (loss) before income taxes		104,749		74,581		1,165		(55,811)		124,684
Income tax provision		(166)		(7,509)		—		—		(7,675)
Income attributable to non-controlling interests		(350)		76		—		—		(274)
Net income (loss) attributable to Starwood Property Trust, Inc.		104,233		67,148		1,165		(55,811)		116,735
Add / (Deduct):
Non-cash equity compensation expense		676		850		—		7,106		8,632
Management incentive fee		—		—		—		5,359		5,359
Acquisition and investment pursuit costs		—		—		1,465		—		1,465
Depreciation and amortization		—		1,099		4,658		—		5,757
Loan loss allowance, net		(2,667)		—		—		—		(2,667)
Interest income adjustment for securities		(290)		2,618		—		—		2,328
Other non-cash items		—		—		—		—		—
Reversal of unrealized (gains) / losses on:
Loans held-for-sale		—		(19,082)		—		—		(19,082)
Securities		518		1,941		—		—		2,459
Derivatives		(11,482)		8,618		(1,119)		—		(3,983)
Foreign currency		18,707		(896)		(27)		—		17,784
Earnings from unconsolidated entities		—		(2,652)		—		—		(2,652)
Recognition of realized gains / (losses) on:
Loans held-for-sale		—		11,573		—		—		11,573
Securities		—		(6,669)		—		—		(6,669)
Derivatives		4,339		(2,281)		—		—		2,058
Foreign currency		(6,203)		896		27		—		(5,280)
Earnings from unconsolidated entities		—		1,611		—		—		1,611
Core Earnings (Loss)	$	107,831	$	64,774	$	6,169	$	(43,346)	$	135,428
Core Earnings (Loss) per Weighted Average Diluted Share	$	0.44	$	0.27	$	0.03	$	(0.18)	$	0.56

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

			Investing
	Lending		and Servicing
	Segment		Segment		Corporate		Total
Revenues	$	122,291	$	100,866	$	—	$	223,157
Costs and expenses (1)		(27,855)		(45,237)		(47,063)		(120,155)
Other income		8,588		57,493		—		66,081
Income (loss) before income taxes		103,024		113,122		(47,063)		169,083
Income tax benefit (provision)		233		(4,069)		—		(3,836)
Income attributable to non-controlling interests		(203)		—		—		(203)
Net income (loss) attributable to Starwood Property Trust, Inc.		103,054		109,053		(47,063)		165,044
Add / (Deduct):
Non-cash equity compensation expense		142		272		6,356		6,770
Management incentive fee		—		—		4,288		4,288
Depreciation and amortization		—		532		—		532
Loan loss allowance, net		1,575		—		—		1,575
Interest income adjustment for securities		542		3,085		—		3,627
Other non-cash items		—		338		—		338
Reversal of unrealized (gains) / losses on:
Loans held-for-sale		—		(15,517)		—		(15,517)
Securities		(396)		(52,067)		—		(52,463)
Derivatives		(27,088)		(4,001)		—		(31,089)
Foreign currency		21,020		—		—		21,020
Earnings from unconsolidated entities		—		(4,671)		—		(4,671)
Recognition of realized gains / (losses) on:
Loans held-for-sale		—		16,660		—		16,660
Securities		413		8,175		—		8,588
Derivatives		12		947		—		959
Foreign currency		(858)		—		—		(858)
Earnings from unconsolidated entities		—		—		—		—
Core Earnings (Loss)	$	98,416	$	62,806	$	(36,419)	$	124,803
Core Earnings (Loss) per Weighted Average Diluted Share (2)	$	0.43	$	0.28	$	(0.16)	$	0.55

(1) Allocations of certain prior period costs and expenses among segments have been reclassified to a newly-established separate presentation for corporate overhead to conform to our current period presentation of both GAAP and non-GAAP financial measures. Refer to Note 22 of our condensed consolidated financial statements included herein for further information.

(2) We have conformed our calculation of weighted average diluted shares to our current methodology of excluding the conversion spread value of our convertible notes.

Lending Segment

The Lending Segment’s Core Earnings increased by $9.4 million, from $98.4 million during the third quarter of 2014 to $107.8 million in the third quarter of 2015. After making adjustments for the calculation of Core Earnings, revenues were $134.2 million, costs and expenses were $26.7 million and other income was $0.9 million.

Core revenues, consisting principally of interest income on loans, increased by $11.3 million in the third quarter of 2015 due to growth of $647.2 million in our loan portfolio since September 30, 2014 and, to a lesser extent, increased interest income on investment securities.

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Core costs and expenses increased by $0.5 million in the third quarter of 2015 primarily due to an increase in interest expense associated with the various facilities utilized to fund the growth of our investment portfolio partially offset by lower incentive compensation and legal fees.  The outstanding balance of the Lending Segment’s secured financing agreements increased by $336.8 million since September 30, 2014.

Core other income decreased by $0.8 million, principally due to a decrease in income from unconsolidated entities partially offset by an increase in gains on sold loans.

Investing and Servicing Segment

The Investing and Servicing Segment’s Core Earnings increased by $2.0 million, from $62.8 million during the third quarter of 2014 to $64.8 million in the third quarter of 2015.  After making adjustments for the calculation of Core Earnings, revenues were $116.4 million, costs and expenses were $35.7 million, other loss was $8.4 million and income taxes were $7.5 million.

Core revenues increased by $12.4 million in the third quarter of 2015, primarily due to increases of $10.0 million in interest income from our CMBS portfolio and $2.6 million in servicing fees. 

Core costs and expenses decreased by $8.4 million in the third quarter of 2015, primarily due to lower incentive compensation and legal fees partially offset by an increase of $1.2 million in interest expense on our conduit loan and CMBS financing facilities.

Core other income decreased by $15.5 million to a loss in the third quarter of 2015, primarily reflecting a $10.4 million decrease in gains on sales of CMBS and a $5.1 million decrease in gains on sales of conduit loans.

Income taxes, which principally relate to the operating results of our servicing and conduit businesses which are held in TRSs, increased $3.4 million due to an increase in our TRS income.

Property Segment

During the three months ended September 30, 2014, there was no activity in the Property Segment. Therefore a comparison of results of this segment for the three months ended September 30, 2015 to the three months ended September 30, 2014 is not meaningful.

The Property Segment contributed Core Earnings of $6.2 million during the third quarter of 2015. After making adjustments for the calculation of Core Earnings, revenues were $7.2 million, costs and expenses were $3.5 million and other income was $2.5 million.

Core revenues consisted of $7.2 million of rental income from the Ireland Portfolio acquired in May 2015.

Core costs and expenses of $3.5 million consisted of  (i) $1.7 million of interest expense on secured financing for the Ireland Portfolio, (ii) $1.0 million of other rental related costs and (iii) $0.8 million of costs related to unsuccessful acquisitions.

Core other income of $2.5 million consisted primarily of equity in earnings of the Retail Fund.

Corporate

Core corporate costs and expenses increased by $6.9 million, from $36.4 million in the third quarter of 2014 to $43.3 million in the third quarter of 2015. This increase was primarily due to a $4.8 million increase in interest expense primarily related to our October 2014 issuance of Convertible Notes due 2017 and a $1.4 million increase in base management fees.

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Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014

The following table presents our summarized results of operations and reconciliation to Core Earnings for the nine months ended September 30, 2015, by business segment (amounts in thousands):

			Investing
	Lending		and Servicing		Property
	Segment		Segment		Segment		Corporate		Total
Revenues	$	401,795	$	307,655	$	10,823	$	—	$	720,273
Costs and expenses		(82,072)		(116,295)		(16,967)		(166,022)		(381,356)
Other (loss) income		(1,576)		42,497		8,687		(5,907)		43,701
Income (loss) before income taxes		318,147		233,857		2,543		(171,929)		382,618
Income tax provision		(136)		(27,282)		—		—		(27,418)
Income attributable to non-controlling interests		(1,030)		76		—		—		(954)
Net income (loss) attributable to Starwood Property Trust, Inc.		316,981		206,651		2,543		(171,929)		354,246
Add / (Deduct):
Non-cash equity compensation expense		1,988		3,404		—		21,641		27,033
Management incentive fee		—		—		—		16,126		16,126
Acquisition and investment pursuit costs		—		—		1,465		—		1,465
Depreciation and amortization		—		1,955		6,195		—		8,150
Loan loss allowance, net		311		—		—		—		311
Interest income adjustment for securities		(654)		(827)		—		—		(1,481)
Other non-cash items		—		(775)		—		—		(775)
Reversal of unrealized (gains) / losses on:
Loans held-for-sale		—		(51,044)		—		—		(51,044)
Securities		347		(3,181)		—		—		(2,834)
Derivatives		(21,989)		10,260		(1,036)		—		(12,765)
Foreign currency		26,861		395		(20)		—		27,236
Earnings from unconsolidated entities		—		(10,704)		—		—		(10,704)
Recognition of realized gains / (losses) on:
Loans held-for-sale		—		47,196		—		—		47,196
Securities		—		(16,790)		—		—		(16,790)
Derivatives		15,845		(6,776)		—		—		9,069
Foreign currency		(16,442)		(669)		20		—		(17,091)
Earnings from unconsolidated entities		—		7,674		—		—		7,674
Core Earnings (Loss)	$	323,248	$	186,769	$	9,167	$	(134,162)	$	385,022
Core Earnings (Loss) per Weighted Average Diluted Share	$	1.38	$	0.79	$	0.04	$	(0.57)	$	1.64

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

			Investing
	Lending		and Servicing				Single Family
	Segment		Segment		Corporate		Residential		Total
Revenues	$	361,115	$	282,193	$	—	$	—	$	643,308
Costs and expenses (1)		(72,225)		(139,409)		(144,731)		—		(356,365)
Other income		20,983		114,310		—		—		135,293
Income (loss) from continuing operations before income taxes		309,873		257,094		(144,731)		—		422,236
Income tax provision		(293)		(13,440)		—		—		(13,733)
Loss from discontinued operations, net of tax		—		—		—		(1,551)		(1,551)
Income attributable to non-controlling interests		(3,439)		—		—		—		(3,439)
Net income (loss) attributable to Starwood Property Trust, Inc.		306,141		243,654		(144,731)		(1,551)		403,513
Add / (Deduct):
Non-cash equity compensation expense		734		714		20,053		—		21,501
Management incentive fee		—		—		15,511		—		15,511
Change in Control Plan		—		1,279		—		—		1,279
Depreciation and amortization		—		1,602		—		1,540		3,142
Loan loss allowance, net		1,933		—		—		—		1,933
Interest income adjustment for securities		(808)		8,940		—		—		8,132
Other non-cash items		—		587		—		—		587
Reversal of unrealized (gains) / losses on:
Loans held-for-sale		—		(48,018)		—		—		(48,018)
Securities		(12,027)		(105,313)		—		—		(117,340)
Derivatives		(16,408)		2,082		—		—		(14,326)
Foreign currency		15,376		—		—		—		15,376
Earnings from unconsolidated entities		—		(5,263)		—		—		(5,263)
Recognition of realized gains / (losses) on:
Loans held-for-sale		—		46,045		—		—		46,045
Securities		10,992		22,306		—		—		33,298
Derivatives		(851)		(1,810)		—		—		(2,661)
Foreign currency		(1,139)		—		—		—		(1,139)
Earnings from unconsolidated entities		—		—		—		—		—
Core Earnings (Loss)	$	303,943	$	166,805	$	(109,167)	$	(11)	$	361,570
Core Earnings (Loss) per Weighted Average Diluted Share (2)	$	1.41	$	0.78	$	(0.51)	$	—	$	1.68

(1) Allocations of certain prior period costs and expenses among segments have been reclassified to a newly-established separate presentation for corporate overhead to conform to our current period presentation of both GAAP and  non-GAAP financial measures. Refer to Note 22 of our condensed consolidated financial statements included herein for further information.

(2) We have conformed our calculation of weighted average diluted shares to our current methodology of excluding the conversion spread value of our convertible notes.

Lending Segment

The Lending Segment’s Core Earnings increased by $19.3 million, from $303.9 million during the nine months ended September 30, 2014 to $323.2 million during the nine months ended September 30, 2015. After making adjustments for the calculation of Core Earnings, revenues were $401.1 million, costs and expenses were $79.8 million and other income was $3.0 million.

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Core revenues, consisting principally of interest income on loans, increased by $40.8 million in 2015 due to growth of $647.2 million in our loan portfolio since September 30, 2014 and, to a lesser extent, increased interest income on investment securities.

Core costs and expenses increased by $10.2 million due to an increase in interest expense associated with the various facilities utilized to fund the growth of our investment portfolio partially offset by lower incentive compensation and legal fees.  The outstanding balance of the Lending Segment’s secured financing agreements increased by $336.8 million since September 30, 2014.

Core other income decreased by $13.9 million, principally due to gains on sales of RMBS during the 2014 period not recurring during the 2015 period.

Investing and Servicing Segment

The Investing and Servicing Segment’s Core Earnings increased by $20.0 million, from $166.8 million during the nine months ended September 30, 2014 to $186.8 million during the nine months ended September 30, 2015. After making adjustments for the calculation of Core Earnings, revenues were $306.9 million, costs and expenses were $111.2 million, other income was $18.3 million and income taxes were $27.3 million.

Core revenues increased by $15.7 million, primarily due to increases of $19.6 million in interest income from our CMBS portfolio and $4.2 million in interest income on our conduit loans partially offset by a decrease of $6.2 million in servicing fees and $1.9 million in rental and other revenues.

Core costs and expenses decreased by $24.0 million, primarily due to accruals for contingencies and legal fees incurred in the 2014 period, which did not recur in the 2015 period, and lower incentive and other compensation, all partially offset by an increase of $4.1 million in interest expense on our conduit loan and CMBS financing facilities.

Core other income decreased by $6.0 million, primarily due to lower gains on CMBS sales partially offset by a gain on sale of a commercial real estate asset.

Income taxes, which principally relate to the operating results of our servicing and conduit businesses which are held in TRSs, increased $13.8 million due to a taxable gain on the sale of a commercial real estate asset as well as other increases in our TRS income.

Property Segment

During the nine months ended September 30, 2014, there was no activity in the Property Segment. Therefore a comparison of results of this segment for the nine months ended September 30, 2015 to the nine months ended September 30, 2014 is not meaningful.

The Property Segment contributed Core Earnings of $9.2 million during the nine months ended September 30, 2015. After making adjustments for the calculation of Core Earnings, revenues were $10.7 million, costs and expenses were $9.1 million and other income was $7.6 million.

Core revenues consisted of $10.7 million of rental income from the Ireland Portfolio following its acquisition in May 2015.

Core costs and expenses of $9.1 million consisted of (i) acquisition and investment pursuit costs of $5.0 million, of which $3.3 million related to the Ireland Portfolio, (ii) $2.6 million of interest expense on secured financing for the Ireland Portfolio and (iii) $1.5 million of other rental related costs.

Core other income of $7.6 million consisted primarily of equity in earnings of the Retail Fund.

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Corporate

Core corporate costs and expenses increased by $25.0 million, from $109.2 million during the nine months ended September 30, 2014 to $134.2 million during the nine months ended September 30, 2015. This increase was primarily due to a $15.5 million increase in interest expense primarily related to our October 2014 issuance of Convertible Notes due 2017, a $5.9 million loss on extinguishment of a portion of our Convertible Notes due 2019 and a $3.3 million increase in base management fees.

Single Family Residential Segment

As discussed in Note 3 to our condensed consolidated financial statements included herein, our former single family residential (“SFR”) segment was spun off to our stockholders on January 31, 2014.

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Liquidity and Capital Resources

Liquidity is a measure of our ability to meet our cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make new investments where appropriate, pay dividends to our stockholders, and other general business needs. We closely monitor our liquidity position and believe that we have sufficient current liquidity and access to additional liquidity to meet our financial obligations for at least the next 12 months. Our strategy for managing liquidity and capital resources has not changed since December 31, 2014, other than as set forth below.  Refer to our Form 10-K for a description of these strategies.

Cash and Cash Equivalents

As of September 30, 2015, we had cash and cash equivalents of $372.8 million.

Cash Flows for the Nine Months Ended September  30, 2015 (amounts in thousands)

			VIE		Excluding Investing
	GAAP		Adjustments		and Servicing VIEs
Net cash provided by operating activities	$	259,687	$	(127)	$	259,560
Cash Flows from Investing Activities:
Origination and purchase of loans held-for-investment		(1,670,124)		(8,670)		(1,678,794)
Proceeds from principal collections and sale of loans		1,657,204		—		1,657,204
Purchase of investment securities		(163,018)		(198,574)		(361,592)
Proceeds from sales and collections of investment securities		354,391		36,342		390,733
Real estate business combinations, net of cash acquired		(239,933)		(39,506)		(279,439)
Proceeds from sale of properties		33,056		—		33,056
Net cash flows from other investments and assets		8,814		—		8,814
Decrease in restricted cash, net		9,404		—		9,404
Net cash used in investing activities		(10,206)		(210,408)		(220,614)
Cash Flows from Financing Activities:
Borrowings under financing agreements		3,423,328		—		3,423,328
Principal repayments on and repurchases of borrowings		(3,289,937)		—		(3,289,937)
Payment of deferred financing costs		(13,876)		—		(13,876)
Proceeds from common stock issuances, net of offering costs		325,416		—		325,416
Payment of dividends		(332,023)		—		(332,023)
Distributions to non-controlling interests		(1,259)		—		(1,259)
Purchase of treasury stock		(29,792)		—		(29,792)
Issuance of debt of consolidated VIEs		9,132		(9,132)		—
Repayment of debt of consolidated VIEs		(246,230)		246,230		—
Distributions of cash from consolidated VIEs		26,690		(26,690)		—
Net cash (used in) provided by financing activities		(128,551)		210,408		81,857
Net increase in cash and cash equivalents		120,930		(127)		120,803
Cash and cash equivalents, beginning of period		255,187		(786)		254,401
Effect of exchange rate changes on cash		(3,349)		—		(3,349)
Cash and cash equivalents, end of period	$	372,768	$	(913)	$	371,855

The discussion below is on a non-GAAP basis, after removing adjustments principally resulting from the consolidation of Investing and Servicing Segment’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.

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Cash and cash equivalents increased by $120.8 million during the nine months ended September 30, 2015, reflecting net cash provided by operating activities of $259.6 million and net cash provided by financing activities of $81.8 million partially offset by net cash used in investing activities of $220.6 million.

Net cash provided by operating activities of $259.6 million for the nine months ended September 30, 2015 related primarily to cash interest income of $296.9 million from our loan origination and conduit programs, plus cash interest income on investment securities of $154.2 million. Servicing fees provided cash of $167.0 million, rental income provided cash of $12.5 million and other revenues provided $21.7 million. Offsetting these revenues were cash interest expense of $126.7 million, general and administrative expenses of $89.5 million, a net change in operating assets and liabilities of $80.9 million, management fees of $58.6 million, income tax payments of $27.3 million and acquisition and investment pursuit costs of $9.7 million.

Net cash used in investing activities of $220.6 million for the nine months ended September 30, 2015 related primarily to the origination and acquisition of new loans held-for-investment of $1.7 billion, the purchase of investment securities of $361.6 million and the purchase of real estate property of $279.4 million, partially offset by proceeds received from principal repayments and sales of loans of $1.7 billion and investment securities of $390.7 million.

Net cash provided by financing activities of $81.8 million for the nine months ended September 30, 2015 related primarily to proceeds from the issuance of common stock of $325.4 million, net borrowings after repayments and repurchases of our secured debt and convertible notes of $133.4 million, partially offset by dividend distributions of $332.0 million, payment of deferred financing costs of $13.9 million and share repurchases of $29.8 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 September 30, 2015 and December 31, 2014 (amounts in thousands):

										Unlevered
	Face		Carrying		Asset Specific		Net			Return on
	Amount		Value		Financing		Investment		Vintage	Asset
September 30, 2015
First mortgages (1)	$	4,588,988	$	4,533,689	$	2,034,748	$	2,498,941	1989-2015	7.0	%
Subordinated mortgages		424,957		399,381		2,000		397,381	1998-2015	11.3	%
Mezzanine loans (1)		873,081		888,158		—		888,158	2006-2015	10.9	%
Loans held-for-sale		28,700		27,198		—		27,198	2007
Loans transferred as secured borrowings		143,926		142,456		143,926		(1,470)	N/A
Loan loss allowance		—		(6,342)		—		(6,342)	N/A
RMBS—AFS (2)		242,219		184,785		6,948		177,837	2003-2007	11.6	%
HTM securities (3)		364,529		365,005		166,155		198,850	2013-2015	7.2	%
Equity security		13,827		14,311		—		14,311	N/A
Investments in unconsolidated entities		N/A		30,155		—		30,155	N/A
	$	6,680,227	$	6,578,796	$	2,353,777	$	4,225,019
December 31, 2014
First mortgages (1)	$	4,599,841	$	4,531,030	$	1,861,633	$	2,669,397	1989-2014	6.9	%
Subordinated mortgages		374,859		345,091		2,000		343,091	1998-2014	11.0	%
Mezzanine loans (1)		889,948		901,217		—		901,217	2006-2014	11.4	%
Loans transferred as secured borrowings		129,570		129,427		129,441		(14)	N/A
Loan loss allowance		—		(6,031)		—		(6,031)	N/A
RMBS—AFS (2)		270,783		207,053		101,886		105,167	2003-2007	12.3	%
CMBS—AFS (2)		93,686		100,349		—		100,349	2012-2013	12.1	%
HTM securities (3)		440,253		441,995		97,103		344,892	2013-2014	8.6	%
Equity security		14,237		15,120		—		15,120	N/A
Investments in unconsolidated entities (4)		N/A		22,537		—		22,537	N/A
	$	6,813,177	$	6,687,788	$	2,192,063	$	4,495,725

(1) First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan.  The application of this methodology resulted in mezzanine loans with carrying values of $892.3 million and $704.2 million being classified as first mortgages as of September 30, 2015 and December 31, 2014, respectively.  

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

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

(4) Retrospectively reclassified our $129,475 investment in the Retail Fund to our newly established Property Segment.

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As of September 30, 2015 and December 31, 2014, our Lending Segment’s investment portfolio, excluding RMBS and other investments, had the following characteristics based on carrying values:

Collateral Property Type	September 30, 2015		December 31, 2014
Office	43.2	%	42.1	%
Hospitality	24.9	%	24.7	%
Multi-family	11.7	%	13.1	%
Mixed Use	10.0	%	8.8	%
Retail	6.3	%	8.3	%
Industrial	2.0	%	1.9	%
Residential	1.9	%	1.1	%
	100.0	%	100.0	%

Geographic Location	September 30, 2015		December 31, 2014
North East	30.3	%	26.8	%
West	25.8	%	25.6	%
South East	14.6	%	12.4	%
International	13.4	%	14.2	%
Midwest	5.8	%	8.5	%
South West	5.5	%	6.1	%
Mid Atlantic	4.6	%	6.4	%
	100.0	%	100.0	%

Investing and Servicing Segment

The following table sets forth the amount of each category of investments we owned within our Investing and Servicing Segment as of September 30, 2015 and December 31, 2014 (amounts in thousands):

						Asset
	Face		Carrying			Specific		Net
	Amount		Value			Financing		Investment
September 30, 2015
CMBS, fair value option	$	4,525,287	$	927,315	(1)	$	166,575	$	760,740
Intangible assets - servicing rights		N/A		155,543	(2)		—		155,543
Intangible assets - lease intangibles		N/A		6,800			—		6,800
Loans held-for-sale, fair value option		418,504		423,630			287,252		136,378
Investment in unconsolidated entities		N/A		54,627			—		54,627
Properties, net		N/A		84,558			31,835		52,723
	$	4,943,791	$	1,652,473		$	485,662	$	1,166,811
December 31, 2014
CMBS, fair value option	$	4,281,364	$	753,553	(1)	$	—	$	753,553
Intangible assets - servicing rights		N/A		190,207	(2)		—		190,207
Loans held-for-sale, fair value option		390,342		391,620			208,363		183,257
Loans held-for-investment		9,685		7,931			—		7,931
Investment in unconsolidated entities		N/A		48,693			—		48,693
Properties, net		N/A		39,854			14,000		25,854
	$	4,681,391	$	1,431,858		$	222,363	$	1,209,495

(1) Includes $705.0million and $519.8 million of CMBS reflected in “VIE liabilities” in accordance with ASC 810 as of September 30, 2015 and December 31, 2014, respectively.

(2) Includes $27.9 million and $46.1 million of servicing rights intangibles reflected in “VIE assets” in accordance with ASC 810 as of September 30, 2015 and December 31, 2014, respectively.

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Property Segment

The following table sets forth the amount of each category of investments, which are comprised of properties, the Retail Fund and intangible lease assets, held within our Property Segment as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	September 30, 2015		December 31, 2014
Properties, net	$	445,880	$	—
Intangible assets - lease intangibles		56,616		—
Investment in unconsolidated entities		121,733		129,475
	$	624,229	$	129,475

The following table sets forth our net investment and other information regarding the Property Segment’s properties and intangible lease assets as of September 30, 2015 (dollar amounts in thousands):

	Net		Asset						Weighted
	Carrying		Specific		Net		Occupancy		Average
	Value		Financing		Investment		Rate		Lease Term
Office	$	485,108	$	317,227	$	167,881	99.8	%	10.0 years
Multi-family residential		17,388		11,375		6,013	100.0	%	0.3 years
	$	502,496	$	328,602	$	173,894

New Credit Facilities and Amendments

Refer to Note 9 of our condensed consolidated financial statements herein for a detailed discussion of new credit facilities and amendments to existing credit facilities executed since December 31, 2014.

Borrowings under Various Secured Financing Arrangements

The following table is a summary of our secured financing facilities as of September 30, 2015 (dollar amounts in thousands):

				Pledged								Approved
				Asset		Maximum						but		Unallocated
	Current	Extended		Carrying		Facility			Outstanding			Undrawn		Financing
	Maturity	Maturity(a)	Pricing	Value		Size			Balance			Capacity(b)		Amount(c)
Lender 1 Repo 1	(d)	(d)	LIBOR + 1.85% to 5.25%	$	1,471,791	$	1,600,000		$	916,310		$	126,556	$	557,134
Lender 1 Repo 2	(e)	N/A	LIBOR + 1.90%		184,785		125,000			6,948			99,158		18,894
Lender 2 Repo 1	Oct 2015	Oct 2018	LIBOR + 1.75% to 2.75%		373,917		325,000			272,824			—		52,176
Lender 3 Repo 1	May 2017	May 2019	LIBOR + 2.85%		229,983		162,917			162,917			—		—
Conduit Repo 1	Sep 2016	N/A	LIBOR + 1.95% to 3.35%		116,084		150,000			85,849			—		64,151
Conduit Repo 2	Nov 2015	Nov 2016	LIBOR + 2.10%		164,310		150,000			121,556			—		28,444
Conduit Repo 3	Feb 2018	Feb 2019	LIBOR + 2.10%		107,389		150,000			79,847			—		70,153
Lender 4 Repo 1	Oct 2016	Oct 2017	LIBOR + 2.00%		405,195		317,688			317,688			—		—
Lender 6 Repo 1	Aug 2018	N/A	LIBOR + 2.50% to 3.00%		733,579		500,000			367,010			67,212		65,778
Lender 6 Mortgage	May 2020	N/A	EURIBOR + 1.69%		502,497		328,602			328,602			—		—
Lender 7 Repo 1	Dec 2016	N/A	LIBOR + 2.35% to 2.70%		140,274		107,416			107,416			—		—
Investing and Servicing Segment Property Mortgages	June 2018 to Nov 2024	N/A	Various		43,688		38,975			31,835			—		7,140
Lender 9 Repo 1	(f)	(f)	LIBOR + 1.40% to 1.85%		319,853		225,313			225,313			—		—
Borrowing Base	Jul 2018	Jul 2019	LIBOR + 2.75%(g)		222,770		450,000	(h)		—			—		450,000
Term Loan	Apr 2020	N/A	LIBOR + 2.75%(g)		3,296,673		659,962			658,159	(i)		—		—
FHLB Advances	N/A	N/A	Various		—		1,000,000			—			—		1,000,000
				$	8,312,788	$	6,290,873		$	3,682,274		$	292,926	$	2,313,870

(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. Borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions and not to exceed January 2023.  

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(e) The date that is 180 days after the buyer delivers notice to seller, subject to a maximum date of March 2017.

(f) Facility carries a rolling twelve month term which may reset monthly with the lender’s consent. Current maturity is September 2016.

(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) Subject to certain conditions defined in the facility agreement, the maximum facility size may be increased to $650.0 million.

(i) Term loan outstanding balance is net of $1.8 million of unamortized discount.

As of September 30, 2015, Wells Fargo Bank, N.A. (“Lender 1”) is our largest creditor through two repurchase facilities.

Refer to Note 9 of our condensed consolidated financial statements included herein for further disclosure regarding the terms of our financing arrangements.

Borrowings under Convertible Senior Notes

The following table is a summary of our unsecured convertible senior notes outstanding as of September 30, 2015 (amounts in thousands, except rates):

									Remaining
	Principal		Coupon		Effective		Conversion	Maturity	Period of
	Amount		Rate		Rate		Rate	Date	Amortization
2017 Notes	$	431,250	3.75	%	5.87	%	41.7397	10/15/2017	2.0	years
2018 Notes	$	599,981	4.55	%	6.10	%	45.8850	3/1/2018	2.4	years
2019 Notes	$	341,363	4.00	%	5.37	%	48.6931	1/15/2019	3.3	years

During both the three and nine months ended September 30, 2015, the weighted average effective borrowing rate on our convertible notes was5.7%.  During both the three and nine months ended September 30, 2014, the weighted average effective borrowing rate on our convertible notes was 5.5%. These effective borrowing rates include the effects of underwriter purchase discount and the adjustment for the conversion option, the initial value of which reduced the balance of the notes.

Refer to Note 10 of our condensed consolidated financial statements included herein for further disclosure regarding the terms of our convertible senior notes.

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 (dollar amounts in thousands):

			Weighted-Average				Explanations
	Quarter-End		Balance During				for Significant
Quarter Ended	Balance		Quarter		Variance		Variances
December 31, 2014	$	3,137,789	$	2,745,631	$	392,158	(a)
March 31, 2015		3,711,834		3,455,082		256,752	(b)
June 30, 2015		3,579,503		3,509,209		70,294	(c)
September 30, 2015		3,682,274		3,581,082		101,192	(d)

(a) Variance primarily due to the following: (i) $125.8 million drawn on the Lender 1 Repo 1 facility in December 2014; (ii) $153.7 million drawn on the Borrowing Base facility in December 2014; (iii) $87.0 million drawn on the Conduit Repo 2 facility in December 2014; and (iv) $71.0 million drawn on the Lender 6 Repo 1 facility in December 2014; offset by (v) $119.4 million repayment of the Lender 1 Repo 3 facility in December 2014; and (vi) $89.1 million repayment of the Borrowing Base facility in November 2014.

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(b) Variance primarily due to the following: (i) $131.7 million drawn on the Lender 9 Repo 1 facility in March 2015; (ii) $67.7 million drawn on the Lender 1 Repo 1 facility in March 2015; and (iii) $63.1 million drawn on Lender 2 Repo 1 facility in March 2015.

(c) Variance primarily due to the following: (i) $245.6 million drawn on the Lender 6 Mortgage in May 2015; partially offset by (ii) $82.0 million repaid on the Borrowing Base facility in May 2015.

(d) Variance primarily due to the following: (i) $83.0 million drawn on Lender 6 Mortgage in July 2015; and (ii) $40.6 million draw on Conduit Repo 1 in September 2015.

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 September 30, 2015 (amounts in thousands):

	Scheduled Principal		Scheduled/Projected		Projected/Required		Scheduled Principal
	Repayments on Loans		Principal Repayments		Repayments of		Inflows Net of
	and Preferred Interests		on RMBS and CMBS		Financing		Financing Outflows
Fourth Quarter 2015	$	459,403	$	28,803	$	(303,796)	$	184,410
First Quarter 2016		138,593		36,726		(5,371)		169,948
Second Quarter 2016		57,962		17,709		(5,367)		70,304
Third Quarter 2016		379,941		30,085		(128,476)		281,550
Total	$	1,035,899	$	113,323	$	(443,010)	$	706,212

In the normal course of business, 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 September 30, 2015, we had 100,000,000 shares of preferred stock available for issuance and 262,341,385 shares of common stock available for issuance.

Refer to Note 16 of our condensed consolidated financial statements included herein for a discussion of our issuances of equity securities during the nine months ended September 30, 2015.

Other Potential Sources of Financing

In the future, we may use other sources of financing to fund the acquisition of our target assets, including other secured as well as unsecured forms of borrowing and sale of certain investment securities which no longer meet our return requirements.

Repurchases of Equity Securities and Convertible Notes

In September 2014, our board of directors authorized and announced the repurchase of up to $250 million of our outstanding common stock over a period of one year. In December 2014, our board of directors amended the repurchase program to allow for the repurchase of our outstanding convertible senior notes.  In June 2015, our board of directors amended the repurchase program to increase the authorized purchase amount to $450 million and provide for a one year extension through June 2016. Purchases made pursuant to the program will be made in either the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases are discretionary and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be

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suspended or discontinued at any time. There were no repurchases of outstanding convertible senior notes during the three months ended September 30, 2015.During the nine months ended September 30, 2015, we repurchased $118.6 million aggregate principal of our 2019 Notes for $136.3 million plus related transaction expenses of $0.1 million.  During the three and nine months ended September 30, 2015, we also repurchased $29.1 million and $37.9 million, respectively, of common stock under the repurchase program.  As of September 30, 2015, we have $262.6 million of remaining capacity to repurchase common stock or convertible notes under the repurchase program.

Off-Balance Sheet Arrangements

We have relationships with unconsolidated entities and financial partnerships, such as entities often referred to as VIEs. We are not obligated to provide, nor have we provided, any financial support for any VIEs. As such, the risk associated with our involvement is limited to the carrying value of our investment in the entity. Refer to Note 14 of 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. Refer to our Form 10-K for a detailed dividend history.

The Company’s board of directors declared the following dividends during the nine months ended September 30, 2015:

Declare Date	Record Date	Payment Date	Amount		Frequency
8/4/15	9/30/15	10/15/15	$	0.48	Quarterly
5/5/15	6/30/15	7/15/15	$	0.48	Quarterly
2/25/15	3/31/15	4/15/15	$	0.48	Quarterly

On November 5, 2015, our board of directors declared a dividend of $0.48 per share for the fourth quarter of 2015, which is payable on January 15, 2016 to common stockholders of record as of December 31, 2015.

Leverage Policies

Our strategies with regards to use of leverage have not changed significantly since December 31, 2014.  Refer to our Form 10-K for a description of our strategies regarding use of leverage.

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Contractual Obligations and Commitments

Contractual obligations as of September 30, 2015 are as follows (amounts in thousands):

			Less than						More than
	Total		1 year		1 to 3 years		3 to 5 years		5 years
Secured financings(a)	$	3,684,078	$	443,010	$	1,553,911	$	1,673,157	$	14,000
Convertible senior notes		1,372,594		—		1,031,231		341,363		—
Secured borrowings on transferred loans(b)		195,000		—		95,000		100,000		—
Loan funding commitments(c)		1,528,994		979,429		549,565		—		—
Future lease commitments		37,111		7,122		13,566		12,453		3,970
Total	$	6,817,777	$	1,429,561	$	3,243,273	$	2,126,973	$	17,970

(a) Includes available extension options.

(b) 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.

(c) Excludes $173.4 million of loan funding commitments which management projects the Company will not be obligated to fund in the future due to repayments made by the borrower either earlier than, or in excess of, expectations.  In addition, this amount excludes any funding commitments which may be required pursuant to Company guarantees.  In limited instances, specifically with loans involving multiple construction lenders, the Company has guaranteed the future funding obligations of certain third party lenders in the event that such third parties fail to fund their proportionate share of the obligation in a timely manner.  We are currently unaware of any circumstances which would require us to make payments under any of these guarantees and, as a result, have not included any such amounts in the above table. 

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.

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, 2014.

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Item 3.   Quantitative and Qualitative Disclosures About Market Risk

We seek to manage our risks related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value while, at the same time, seeking to provide an opportunity to stockholders to realize attractive risk-adjusted returns through ownership of our capital stock. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience and seek to actively manage that risk, to earn sufficient compensation to justify taking those risks and to maintain capital levels consistent with the risks we undertake.  Our strategies for managing risk and our exposure to such risks have not changed materially since December 31, 2014.  Refer to our Form 10-K Item 7A for further discussion.

Credit Risk

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

We seek to further manage credit risk associated with our Investing and Servicing Segment loans held-for-sale through the purchase of credit index instruments.  The following table presents our credit index instruments as of September 30, 2015 and December 31, 2014 (dollar amounts in thousands):

	Face Value of		Aggregate Notional Value of		Number of
	Loans Held-for-Sale		Credit Index Instruments		Credit Index Instruments
September 30, 2015	$	418,504	$	40,000	11
December 31, 2014	$	390,342	$	45,000	12

Refer to Note 5 of our condensed consolidated financial statements for a discussion of weighted average ratings of our investment securities.

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.

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

91

presents financial instruments where we have utilized interest rate derivatives to hedge interest rate risk and the related interest rate derivatives as of September 30, 2015 and December 31, 2014 (dollar amounts in thousands):

			Aggregate Notional
	Face Value of		Value of Interest		Number of Interest
	Hedged Instruments		Rate Derivatives		Rate Derivatives
Instrument hedged as of September 30, 2015
Loans held-for-investment	$	9,000	$	9,000	2
Loans held-for-sale		418,504		355,800	71
RMBS, available-for-sale		242,219		74,000	3
Secured financing agreements		532,655		522,610	13
	$	1,202,378	$	961,410	89
Instrument hedged as of December 31, 2014
Loans held-for-investment	$	9,000	$	9,000	2
Loans held-for-sale		390,342		338,500	54
RMBS, available-for-sale		270,783		74,000	3
Secured financing agreements		220,729		218,165	8
	$	890,854	$	639,665	67

The following table summarizes the estimated annual change in net investment income for our LIBOR-based investments and our LIBOR-based debt assuming increases or a decrease in LIBOR and adjusted for the effects of our interest rate hedging activities (amounts in thousands, except per share amounts):

	Variable-rate
	investments and		3.0%		2.0%		1.0%		1.0%
Income (Expense) Subject to Interest Rate Sensitivity	indebtedness		Increase		Increase		Increase		Decrease (1)
Investment income from variable-rate investments	$	5,134,440	$	173,102	$	112,813	$	52,767	$	(9,731)
Interest expense from variable-rate debt		(3,670,077)		(110,102)		(73,402)		(36,701)		8,777
Net investment income from variable rate instruments	$	1,464,363	$	63,000	$	39,411	$	16,066	$	(954)
Impact per diluted average shares outstanding			$	0.26	$	0.17	$	0.07	$	—

(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 income, rental income and principal payments) we expect to receive from our foreign currency denominated investments. Accordingly, the notional values and expiration dates of our foreign currency hedges approximate the amounts and timing of future payments we expect to receive on the related investments. 

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The following table represents our currency hedge exposure as it relates to our investments 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 September 30, 2015 pound sterling (“GBP”) closing rate of 1.5128, Euro (“EUR”) closing rate of 1.1177, Swedish Krona (“SEK”) closing rate of 0.1195, Norwegian Krone (“NOK”) closing rate of 0.1174, Danish Krone (“DKK”) closing rate of 0.1498):

Carrying Value of		Local	Number of Foreign		Aggregate Notional Value
Net Investment		Currency	Exchange Contracts		of Hedges Applied		Expiration Range of Contracts
$	116,365	GBP	9		$	131,727	July 2016
	33,809	GBP	10			40,236	January 2017
	10,504	GBP	11			10,463	October 2015 – March 2016
	41,067	GBP	6			51,348	January 2018
	6,395	EUR, DKK, NOK, SEK	6			11,313	December 2015
	90,041	GBP	7			103,938	October 2015 – April 2017
	26,407	GBP	6			30,706	November 2015 – February 2017
	3,153	GBP	3			4,431	June 2016 – March 2018
	178,948	EUR	59	(1)		290,237	October 2015 – June 2020
	14,311	GBP	11			16,247	October 2015 – January 2018
	40,928	EUR	11			39,744	October 2015 – October 2016
	50,811	EUR	16			56,008	February 2016 – October 2016
$	612,739		155		$	786,398

(1) During the nine months ended September 30, 2015, we entered into 59 foreign exchange contracts to hedge our Euro currency exposure created by our acquisition of the Ireland Portfolio.  As of September 30, 2015, these contracts have an aggregate notional of $290.2 million and varying maturities through June 2020.

Item 4.    Controls and Procedures.

Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including 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 September 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings.

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

Item 1A.    Risk Factors.

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2014.

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

Issuer Purchases of Equity Securities

The following table provides information regarding our purchases of common stock during the three months ended September 30, 2015:

				Number of shares	Value of shares available
		Average		purchased as part of	for purchase
	Total number of	repurchase		publicly announced	under the program
Period	shares purchased	price per share		program (1)	(in thousands)
September 2015	1,393,223	$	20.86	1,393,223	$	262,649

(1)In September 2014, our board of directors authorized and announced the repurchase of up to $250 million of our outstanding common stock over a period of one year. In December 2014, our board of directors amended the repurchase program to include the repurchase of our outstanding convertible senior notes. In June 2015, our board of directors amended the repurchase program to increase the authorized purchase amount to $450 million and provide for a one-year extension through June 2016.

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: November 5, 2015	By:	/s/ BARRY S. STERNLICHT
		Barry S. Sternlicht Chief Executive Officer Principal Executive Officer
Date: November 5, 2015	By:	/s/ RINA PANIRY
		Rina Paniry Chief Financial Officer, Treasurer, Chief Accounting Officer and Principal Financial Officer

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Item 6.  Exhibits.

(a)Index to Exhibits

INDEX TO EXHIBITS

Exhibit No.	Description
10.1	Fourth Amended and Restated Master Repurchase and Securities Contract, dated August 3, 2015, between and among Starwood Property Mortgage Sub 2, L.L.C., Starwood Property Mortgage Sub-2-A, L.L.C. and Wells Fargo Bank, National Association
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

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EX-10.1

Exhibit 10.1

Execution Version

FOURTH AMENDED AND RESTATED MASTER REPURCHASE AND SECURITIES CONTRACT

among

STARWOOD PROPERTY MORTGAGE SUB 2, L.L.C.,
a Delaware limited liability company

and

STARWOOD PROPERTY MORTGAGE SUB-2-A, L.L.C.,
a Delaware limited liability company,

as Sellers

and

WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association,

as Buyer

Dated as of
August 3, 2015

TABLE OF CONTENTS

		Page
	ARTICLE 1
	APPLICABILITY
Section 1.01	Applicability	1
	ARTICLE 2
	DEFINITIONS AND INTERPRETATION
Section 2.01	Rules of Interpretation	31
	ARTICLE 3
	THE TRANSACTIONS
Section 3.01	Procedures	32
Section 3.02	Transfer of Purchased Assets; Servicing Rights	35
Section 3.03	Maximum Amount	35
Section 3.04	Early Repurchases; Mandatory Repurchases; Partial Prepayments	35
Section 3.05	Repurchase	35
Section 3.06	Payment of Price Differential and Fees	36
Section 3.07	Extension of the Maturity Date	37
Section 3.08	Payment, Transfer and Custody	38
Section 3.09	Repurchase Obligations Absolute	38
Section 3.10	Future Funding Transaction	39
Section 3.11	Additional Purchase Advance Transactions	40
	ARTICLE 4
	MARGIN MAINTENANCE
Section 4.01	Margin Deficit	41
	ARTICLE 5
	APPLICATION OF INCOME
Section 5.01	Waterfall Account; Servicing Agreement Accounts	41
Section 5.02	No Material Default or Event of Default Exists; Maximum Amount Not Exceeded; Second Extended Maturity Date Has Not Occurred	42
Section 5.03	A Material Default or Event of Default Exists; Maximum Amount Exceeded; Second Extended Maturity Date Has Occurred	42
Section 5.04	Seller to Remain Liable	43
	ARTICLE 6
	CONDITIONS PRECEDENT
Section 6.01	Conditions Precedent to Initial Transaction	44

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Section 6.02	Conditions Precedent to All Transactions	44
	ARTICLE 7
	REPRESENTATIONS AND WARRANTIES OF SELLER
Section 7.01	Seller	46
Section 7.02	Repurchase Documents	46
Section 7.03	Solvency	46
Section 7.04	Taxes	46
Section 7.05	Financial Condition	46
Section 7.06	True and Complete Disclosure	47
Section 7.07	Compliance with Laws	48
Section 7.08	Compliance with ERISA	48
Section 7.09	No Default or Material Adverse Effect	49
Section 7.10	Purchased Assets	49
Section 7.11	Purchased Assets Acquired from Transferors	49
Section 7.12	Transfer and Security Interest	49
Section 7.13	No Broker	50
Section 7.14	Separateness	50
Section 7.15	Interest Rate Protection Agreements	50
Section 7.16	Investment Company Act	50
	ARTICLE 8
	COVENANTS OF SELLER
Section 8.01	Existence; Governing Documents; Conduct of Business	50
Section 8.02	Compliance with Laws, Contractual Obligations and Repurchase Documents	50
Section 8.03	Structural Changes	51
Section 8.04	Protection of Buyer’s Interest in Purchased Assets	51
Section 8.05	Actions of Seller Relating to Distributions, Indebtedness, Guarantee Obligations, Contractual Obligations, Investments and Liens	52
Section 8.06	Maintenance of Records	52
Section 8.07	Financial Covenants	52
Section 8.08	Delivery of Income	52
Section 8.09	Delivery of Financial Statements and Other Information	53
Section 8.10	Delivery of Notices	54
Section 8.11	Hedging	54
Section 8.12	Escrow Imbalance	54
Section 8.13	Guarantee Agreement	54
Section 8.14	Pledge and Security Agreement	55
Section 8.15	Taxes	55
Section 8.16	Management Internalization	55
Section 8.17	REIT Status	55
Section 8.18	Post-Closing Obligations	55
	ARTICLE 9
	SINGLE‑PURPOSE ENTITY
Section 9.01	Covenants Applicable to Seller	55

ii

Section 9.02	Additional Covenants Applicable to Seller	57
	ARTICLE 10
	EVENTS OF DEFAULT AND REMEDIES
Section 10.01	Events of Default	57
Section 10.02	Remedies of Buyer as Owner of the Purchased Assets	59
	ARTICLE 11
	SECURITY INTEREST
Section 11.01	Grant	61
Section 11.02	Effect of Grant	61
Section 11.03	Seller to Remain Liable	62
Section 11.04	Waiver of Certain Laws	62
	ARTICLE 12
	INCREASED COSTS; CAPITAL ADEQUACY
Section 12.01	Market Disruption	62
Section 12.02	Illegality	62
Section 12.03	Breakfunding	62
Section 12.04	Increased Costs	63
Section 12.05	Capital Adequacy	63
Section 12.06	Taxes	63
Section 12.07	Payment and Survival of Obligations	65
		65
	ARTICLE 13
	INDEMNITY AND EXPENSES
Section 13.01	Indemnity	65
Section 13.02	Expenses	67
	ARTICLE 14
	INTENT
Section 14.01	Safe Harbor Treatment	67
Section 14.02	Liquidation	68
Section 14.03	Qualified Financial Contract	68
Section 14.04	Netting Contract	68
Section 14.05	Master Netting Agreement	68
	ARTICLE 15
	DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
	ARTICLE 16
	NO RELIANCE
	ARTICLE 17
	SERVICING

iii

Section 17.01	Servicing Rights	69
Section 17.02	Accounts Related to Purchased Assets	69
Section 17.03	Servicing Reports	70
Section 17.04	Servicing Agreement Accounts	70
	ARTICLE 18
	MISCELLANEOUS
Section 18.01	Governing Law	70
Section 18.02	Submission to Jurisdiction; Service of Process	70
Section 18.03	IMPORTANT WAIVERS	70
Section 18.04	Integration	72
Section 18.05	Single Agreement	72
Section 18.06	Use of Employee Plan Assets	72
Section 18.07	Survival and Benefit of Seller’s Agreements	72
Section 18.08	Assignments and Participations	72
Section 18.09	Ownership and Hypothecation of Purchased Assets	74
Section 18.10	Confidentiality	74
Section 18.11	No Implied Waivers; Amendments	74
Section 18.12	Notices and Other Communications	75
Section 18.13	Counterparts; Electronic Transmission	75
Section 18.14	No Personal Liability	75
Section 18.15	Protection of Buyer’s Interests in the Purchased Assets; Further Assurances	75
Section 18.16	Default Rate	76
Section 18.17	Set-off	76
Section 18.18	Seller’s Waiver of Set‑off	77
Section 18.19	Power of Attorney	77
Section 18.20	Periodic Due Diligence Review	77
Section 18.21	Time of the Essence	78
Section 18.22	PATRIOT Act Notice	78
Section 18.23	Successors and Assigns; No Third Party Beneficiaries	78
Section 18.24	Joint and Several Repurchase Obligations	78
Section 18.25	Effect of Amendment and Restatement	80
Section 18.26	PATRIOT Act Notice	80
Section 18.27	Successors and Assigns; No Third Party Beneficiaries	80
Section 18.28	Acknowledgement of Anti Predatory Lending Policies	80

iv

THIS FOURTH AMENDED AND RESTATED MASTER REPURCHASE AND SECURITIES CONTRACT, dated as of August 3, 2015 (this “Agreement”), is made by and among STARWOOD PROPERTY MORTGAGE SUB‑2, L.L.C. (“Seller 2”), a Delaware limited liability company, and STARWOOD PROPERTY MORTGAGE SUB-2-A, L.L.C., a Delaware limited liability company (“Seller 2‑A”, and together with Seller 2, individually and collectively as the context may require, “Seller”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Buyer”).

WHEREAS, Seller 2, Seller 2-A and Buyer entered into that certain Third Amended and Restated Master Repurchase and Securities Contract, dated as of October 23, 2014 (the “Third Amended and Restated Master Repurchase Agreement”).

WHEREAS, Seller 2, Seller 2-A and Buyer desire to amend and restate the Third Amended and Restated Master Repurchase Agreement upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, Seller 2, Seller 2-A and Buyer (each a “Party”) hereby agree that the Third Amended and Restated Master Repurchase Agreement is hereby amended and restated in its entirety to read as follows:

ARTICLE 1


APPLICABILITY

Section 1.01Applicability.Subject to the terms and conditions of the Repurchase Documents, from time to time during the Funding Period and at the request of Seller, the Parties may enter into transactions in which Seller agrees to sell, transfer and assign to Buyer certain Assets and all related rights in, and interests related to, such Assets on a servicing released basis, against the transfer of funds by Buyer representing the Purchase Price for such Assets, with a simultaneous agreement by Buyer to transfer such Assets to Seller for subsequent repurchase on the related Repurchase Date, which date shall not be later than the Maturity Date applicable to such Purchased Asset, against the transfer of funds by Seller representing the Repurchase Price for such Assets.

ARTICLE 2


DEFINITIONS AND INTERPRETATION

“Accelerated Repurchase Date”:  Defined in Section 10.02.

“Account Control Agreement”:  A deposit account control agreement in favor of Buyer with respect to any bank account related to a Purchased Asset, substantially in the form attached as Exhibit G-1 hereto.

“Actual Knowledge”:  With respect to any Person, the actual knowledge of such Person without further inquiry or investigation; provided, that for the avoidance of doubt, with respect to Seller, Guarantor, Manager, the Intermediate Starwood Entities and Sub-Servicer, such actual knowledge shall include the knowledge of all such Persons collectively and each of their respective employees, officers, directors and agents (and with respect to agents, solely to those agents who worked on the acquisition of the Assets or this Transaction) of any of them.

“Additional Purchase Advance”:  Defined in Section 3.11(a).

“Additional Purchase Advance Available Amount”: With respect to any proposed Additional Purchase Advance Transaction with respect to any Purchased Asset, the excess, if any, of (a) the Maximum Advance Purchase Price for such Purchased Asset as of the date of such proposed Additional Purchase Advance Transaction minus (b) the outstanding Purchase Price of such Purchased Asset as of such date.

“Additional Purchase Advance Transaction”:  Defined in Section 3.11(a).

“Affiliate”:  With respect to any Person, any other Person directly or indirectly Controlling, Controlled by, or under common Control with, such Person.

“Affiliated Hedge Counterparty”:  Buyer, or an Affiliate of Buyer, in its capacity as a party to any Interest Rate Protection Agreement with a Seller Party.

“Alternative Rate”:  A per annum rate based on an index approximating the behavior of LIBOR, as determined by Buyer.

“Anti-Terrorism Laws”:  Any Requirements of Law relating to money laundering or terrorism, including Executive Order 13224 signed into law on September 23, 2001, the regulations promulgated by the Office of Foreign Assets Control of the Treasury Department, and the PATRIOT Act.

“Applicable Percentage”:  For each Purchased Asset as of any date, the applicable percentage determined by Buyer for such Purchased Asset on the related Purchase Date and set forth in the Confirmation for such Purchased Asset, which shall be no higher than the Maximum Applicable Percentage.

“Appraisal”:  An appraisal of the related Mortgaged Property conducted by an Independent Appraiser in accordance with the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, and, in addition, certified by such Independent Appraiser as having been prepared in accordance with the requirements of the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, addressed to (either directly or pursuant to a reliance letter in favor of Buyer or reliance language in such Appraisal running to the benefit of Buyer as a successor and/or assign) and reasonably satisfactory to Buyer.

“Approved Representation Exception”:  Any Representation Exception furnished by Seller to Buyer and approved by Buyer prior to the related Purchase Date including any Representation Exception attached to the Confirmation for any Purchased Asset.

“Asset”:  Any Whole Loan, Senior Interest or Subordinate Interest, the Mortgaged Property for which is included in the categories for Types of Mortgaged Property.

“Assignment and Acceptance”:  Defined in Section 18.08(c).

“Bailee”: With respect to any Transaction involving a Wet Mortgage Asset, (i) a national title insurance company or Sidley Austin LLP, or (ii) any other entity approved by Buyer, which may be a title company, escrow company or attorney in accordance with local law and practice in the appropriate jurisdiction of the related Wet Mortgage Asset.

“Bailee Agreement”:  As defined in the Custodial Agreement.

“Bankruptcy Code”:  Title 11 of the United States Code.

“Blank Assignment Documents”:  Defined in Section 6.02(j).

2

“Book Value”:  For each Purchased Asset, as of any date, an amount, as certified by Seller in the related Transaction Request and Confirmation, equal to the lesser of (a) the outstanding principal amount or par value thereof as of such date (after giving effect to any additional advances to the Underlying Obligor made by Seller pursuant to the Purchased Asset Documents on or prior to such date), and (b) the price that Seller initially paid or advanced in respect thereof plus any additional amounts advanced by Seller that were funded in connection with Seller’s future funding obligations under the related Purchased Asset Documents minus Principal Payments received by Seller and as further reduced by losses realized and write‑downs taken by Seller, together with all other reductions in the unpaid balance due in connection with the related Whole Loan (including, with respect to any Senior Interest that is a participation, any reduction in the principal balance of the related Whole Loan that is allocable to such Senior Interest pursuant to the Senior Interest Documents).

“Business Day”:  Any day other than (a) a Saturday or a Sunday, (b) a day on which banks in the States of New York, Minnesota or North Carolina are authorized or obligated by law or executive order to be closed, (c) any day on which the New York Stock Exchange, the Federal Reserve Bank of New York or the Custodian is authorized or obligated by law or executive order to be closed, or (d) if the term “Business Day” is used in connection with the determination of LIBOR, a day on which dealings in Dollar deposits are not carried on in the London interbank market.

“Buyer”:  Wells Fargo Bank, National Association, in its capacity as Buyer under this Agreement and the other Repurchase Documents, together with its successors and permitted assigns.

“Buyer’s Margin Percentage”:  For any Purchased Asset as of any date, the percentage equivalent of the quotient obtained by dividing (a) one (1) by (b) the Applicable Percentage used to calculate the Purchase Price on the related Purchase Date.

“Capital Lease Obligations”:  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.

“Capital Stock”:  Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent equity ownership interests in a Person which is not a corporation, including, without limitation, any and all member or other equivalent interests (certificated or uncertificated) in any limited liability company, and any and all partnership or other equivalent interests in any partnership or limited partnership, and any and all warrants or options to purchase any of the foregoing.

“Cash Liquidity”:  With respect to Guarantor on any date, the amount of cash and cash equivalents(other than restricted cash) held by Guarantor and its direct or indirect Subsidiaries as of such date.

“Change of Control”:  The occurrence of any of the following events: (a) prior to an internalization of management by Guarantor, if Manager or its Affiliate is no longer the manager of Guarantor; (b) after such time as Guarantor is internally managed, any “person” or “group” (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a percentage of the total voting power of all classes of Capital Stock of Guarantor entitled to vote generally in the election of directors, of 20% or more; (c) prior to an internalization of management by Guarantor, any change in Control of 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) each of either Guarantor or the Intermediate Starwood Entities shall cease to own and control, of record and beneficially, directly or indirectly 100% of the outstanding Capital Stock of Seller.  Notwithstanding the foregoing, Buyer shall not be deemed to approve or to have approved any internalization of management by

3

Guarantor as a result of this definition or any other provision herein, other than to the extent actually approved pursuant to Section 8.16 or Section 10.01(g).

“Class”:  With respect to an Asset, such Asset’s classification as one of the following: Whole Loan, Senior Interest, Junior Interest, Mezzanine Loan or Mezzanine Participation Interest.

“Closing Certificate”:  A true and correct certificate in the form of Exhibit D, executed by a Responsible Officer of Seller.

“Closing Date”:  August 3, 2015.

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

“CMBS Pricing Margin”:  Defined in Schedule 2 to the Fee and Pricing Letter, which definition is incorporated herein by reference.

“CMBS Pricing Margin Table”:  Shall mean the table set forth under “CMBS Pricing Margin” on Schedule 2to the Fee and Pricing Letter.

“CMBS Purchased Asset Maturity Date”:  For all CMBS Purchased Assets, the earliest of (a) August 3, 2016, or, if such date is extended pursuant to Section 3.07(b),  August 3, 2017, (b) any Accelerated Repurchase Date, and (c) such earlier date upon which the Maturity Date occurs in accordance with the Repurchase Documents or Requirements of Law.

“CMBS Purchased Assets”:  Each Purchased Asset which is either a Whole Loan or a Senior Interest that accrues interest at a fixed rate and which is designated by Buyer and Seller as a CMBS Purchased Asset on the related Confirmation and that are, in each case, directly or indirectly secured by Liens on underlying Mortgaged Properties that, as of the Purchase Date therefor, (a) satisfy the LTV Test applicable to CMBS Purchased Assets and (b) generate a Debt Yield that is equal to or greater than the Debt Yield Purchase Threshold applicable to CMBS Purchased Assets. 

“Code”:  The Internal Revenue Code of 1986, as amended.

“Collection Account”: Any collection, escrow, reserve, collateral or lock-box accounts pledged to Seller with respect to any Purchased Asset. 

“Compliance Certificate”:  A true and correct certificate in the form of Exhibit E, executed by a Responsible Officer of Seller.

“Confirmation”:  For any Purchased Asset, a purchase confirmation in the form of Exhibit B, duly completed, executed and delivered by Seller and Buyer in accordance with Section 3.01, as same may be updated, amended, modified and/or restated from time to time in connection with any Additional Purchase Advance Transaction or Future Funding Transaction with respect to such Purchased Asset or otherwise.

“Connection Income Taxes”:  Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“Contingent Liabilities”:  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 Guarantee Obligations) of such Person in respect of “off-balance sheet arrangements” (as defined in the Off-Balance Sheet Rules defined below in this

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definition), (b) obligations, including Guarantee Obligations, 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 that have not yet been called on or quantified, of such Person or any other Person, and (c) forward commitments or obligations to fund or provide proceeds with respect to any loan or other financing that 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 at 17 CFR Parts 228, 229 and 249).

“Contractual Obligation”:  With respect to any Person, any provision of any securities issued by such Person or 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”:  With respect to any Person, the direct or indirect possession of the power to direct or cause the direction of the management or policies of such Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling,” “Controlled” and “under common Control” have correlative meanings.

“Controlled Account Agreement”:  The SecondAmended and Restated Controlled Account Agreements with respect to the Waterfall Account and the Servicing Agreement Account established and maintained in connection with the Servicing and Sub-Servicing Agreement, respectively, each dated as of January 27, 2014, each among Seller, Buyer and Deposit Account Bank, and as each may subsequently be amended, modified and/or restated from time to time.

“Convertible Debt Securities”: Means the Existing Convertible Debt Securities and any other debt securities of Guarantor, the terms of which provide for conversion into Capital Stock, cash by reference to such Capital Stock, or a combination thereof.

“Core Pricing Margin”:  Defined in Schedule 2 to the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Core Purchased Assets”:  All Purchased Assets that as of the Purchase Date therefor, consist either of eligible Whole Loans or eligible Senior Interests that are, in each case, directly or indirectly secured by Liens on underlying Mortgaged Properties that, as of the Purchase Date therefor, (a) satisfy the LTV Test applicable to Core Purchased Assets of the applicable Type, and (b) generate a Debt Yield that is equal to or greater than the Debt Yield Purchase Threshold applicable to Core Purchased Assets of the applicable type. 

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“Credit Event”:Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Current Mark‑to‑Market Value”:  For any Purchased Asset as of any date, the market value for such Purchased Asset as of such date (after giving effect to any additional advances to the Underlying Obligor made by Seller pursuant to the Purchased Asset Documents on or prior to such date) as determined by Buyer by (a) reference to Buyer’s assessment of the market value of the Mortgaged Property, and (b) taking into account such other criteria (other than current interest rates and spreads) as and to the extent that Buyer deems appropriate, including, as appropriate, market conditions, credit quality, liquidity of position, subordination and delinquency status and aging which market value, in each case, may be determined to be zero.  The Current Mark-to-Market Value of each Purchased Asset as of the related Purchase Date will be set forth in the Confirmation executed in connection with the related Transaction, and the Current Mark-to-Market Value of any Purchased Asset other than any CMBS Purchased Asset will not be adjusted by Buyer after the related Purchase Date unless a Credit Event shall occur with respect to the related Purchased Asset, provided that (a) the Current Mark‑to‑Market Value of (i) any CMBS Purchased Asset and (ii) any Hedge Required Assetmay be, in each case, adjusted by Buyer at any time due to changes in interest rates and spreads (unless with respect to Hedge Required Assets only,  Seller has complied with the requirements set forth in Section 8.11), and (b) there shall be no restrictions on Buyer’s ability to recalculate, solely for internal purposes, the Current Mark-to-Market Value of any Purchased Asset at any time.

“Custodial Agreement”:  The Amended and Restated Custodial Agreement, dated as of February 28, 2011, among Buyer, Seller and Custodian, as such agreement has been or may hereafter be amended, modified and/or restated from time to time.

“Custodian”:  Wells Fargo Bank, National Association, solely in its capacity as Custodian or any successor permitted by the Custodial Agreement.

“Debt Yield”:  With respect to any Purchased Asset(s) and for any relevant calendar quarter, the percentage equivalent of the quotient obtained by dividing (i) the product of (A) the underwritten net cash flow for such period from the related Mortgaged Property or Mortgaged Properties securing the Purchased Asset(s), as determined by Buyer in its sole and absolute discretion, multiplied by (B) a fraction, (1) the numerator of which shall be 360, and (2) the denominator of which shall be the number of days in the relevant Test Period, by (ii) the then-current Purchase Price of such Purchased Asset(s) on the last day of such calendar quarter.

“Debt Yield Purchase Threshold”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Debt Yield Test”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Default”:  Any event which, with the giving of notice or the lapse of time, or both, would become an Event of Default.

“Default Rate”:  As of any date, the Pricing Rate in effect on such date plus 400 basis points (4.00%), determined after any Repurchase Date on the basis of periods corresponding to Pricing Periods.

“Defaulted Asset”:  Any Asset, Purchased Asset(or, if the Purchased Asset is a Senior Interest or a Subordinate Interest, the related Whole Loan or the related Mezzanine Loan), as applicable, (a) that is thirty (30) or more days (or, in the case of payments due at maturity, one (1) day) delinquent in the payment of principal, interest, fees, distributions or any other amounts payable under the related Purchased Asset Documents, (b) for

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which there is a non–monetary default under the related Purchased Asset Documents, beyond any applicable notice or cure period, (c) as to whose Underlying Obligor (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligor with respect to the related Whole Loan),an Insolvency Event has occurred, or (d) for which Seller, Servicer or Sub-Servicer has received notice of the foreclosure or proposed foreclosure of any Lien on the related Mortgaged Property;  provided that with respect to any Junior Interest, Senior Interest or Mezzanine Participation Interest, in addition to the foregoing such Junior Interest, Senior Interest or Mezzanine Participation Interest will also be considered a Defaulted Asset to the extent that the underlying Whole Loanor underlying Mezzanine Loan would be considered a Defaulted Asset as described in this definition.

“Deposit Account Bank”:  Wells Fargo Bank, National Association, or any other bank requested by Seller and approved by Buyer.

“Derivatives Contract”:  Any rate swap transaction, basis swap, credit derivative transaction, forward rate transaction, commodity swap, commodity option, forward commodity contract, equity or equity index swap or option, bond or bond price or bond index swap or option or forward bond or forward bond price or forward bond index transaction, interest rate option, forward foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option, spot contract, or any other similar transaction 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, including any obligations or liabilities thereunder.

“Derivatives Termination Value”:  With respect to any one or more Derivatives Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Derivatives Contracts, (a) for any date on or after the date such Derivatives 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 the preceding clause (a), the amount(s) determined as the mark-to-market value(s) for such Derivatives Contracts, as determined based on one or more mid-market or other readily available quotations provided by any recognized dealer in such Derivatives Contracts (which may include Buyer).

“Dollars” and “$”:  Lawful money of the United States of America.

“Early Repurchase Date”:  Defined in Section 3.04.

“EBITDA”:  With respect to any Person and for any Test Period, an amount equal to the sum of (a) Net Income (or loss) of such Person (prior to any impact from minority interests or joint venture net income and before deduction of any dividends on preferred stock of such Person), 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.

“Eligible Asset”:  An Asset:

(a)with respect to which no Representation Breach exists;

(b)that is not a Defaulted Asset;

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(c)with respect to which there are no future funding obligations on the part of Seller, Buyer or any other Person (except to the extent such Asset has been approved as a Future Funding Asset by Buyer pursuant to Section 3.10);

(d)whose Mortgaged Property is located in the United States, whose Underlying Obligors (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligors with respect to the related Whole Loan)are domiciled in the United States, and all obligations thereunder and under the underlying Purchased Asset Documents are denominated and payable in Dollars;

(e)whose Underlying Obligors (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligors with respect to the related Whole Loan) are not Sanctioned Entities;and

(f)that is secured by a perfected, first priority security interest in a commercial or multi-family property (or, in the case of a Mezzanine Loan or a Mezzanine Participation Interest, secured by first priority pledges of all of the Equity Interests of Persons that directly or indirectly own a commercial or multi-family property); provided, that notwithstanding the failure of an Asset or Purchased Asset to conform to the requirements of this definition, Buyer may, subject to such terms, conditions and requirements and Applicable Percentage adjustments as Buyer may require, designate in writing any such non-conforming Asset or Purchased Asset as an Eligible Asset, which designation (1) may include a temporary or permanent asset specific waiver of one or more Eligible Asset requirements, and (2) shall not be deemed a waiver of the requirement that all other Assets and Purchased Assets must be Eligible Assets (including any Assets that are similar or identical to the Asset or Purchased Asset subject to the waiver).

“Eligible Assignee”:  Any of the following Persons designated by Buyer for purposes of Section 18.08(c):  (a) a bank, financial institution, pension fund, insurance company or similar Person, an Affiliate of any of the foregoing, and an Affiliate of Buyer, and (b) any other Person to which Seller has consented; provided, that such consent of Seller shall not be unreasonably withheld, delayed or conditioned, and shall not be required at any time when an Event of Default exists.

“Eligible Institution”:  A depository institution or trust company insured by the Federal Deposit Insurance Corporation, the short term unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of accounts in which funds are held for more than thirty (30) days, the long term unsecured debt obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by Moody’s).

“Environmental Laws”:  Any federal, state, foreign or local statute, law, rule, regulation, ordinance, code, guideline, written policy and rule of common law now or hereafter in effect, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, employee health and safety or hazardous materials, including CERCLA, RCRA, the Federal Water Pollution Control Act, the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water Act, the Oil Pollution Act of 1990, the Emergency Planning and the Community Right‑to‑Know Act of 1986, the Hazardous Material Transportation Act, the Occupational Safety and Health Act, and any state and local or foreign counterparts or equivalents.

“Equity Interests”:  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

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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 but unissued on any date.

“ERISA”:  The Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.  Section references to ERISA are to ERISA, as in effect at the date of this Agreement and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate”:  Any trade or business (whether or not incorporated) that is a member of Seller’s or Guarantor’s controlled group or under common control with Seller or Guarantor, within the meaning of Section 414 of the Code.

“Event of Default”:  Defined in Section 10.01.

“Exchange Act”:  The Securities Exchange Act of 1934, as amended.

“Excluded Taxes”:  Any of the following Taxes imposed on or with respect to Buyer or required to be withheld or deducted from a payment to Buyer:  (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of Buyer being organized under the laws of, or having its principal office or the office from which it books the Transactions located in, the jurisdiction imposing such Taxes (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S. federal withholding Taxes imposed on amounts payable to or for the account of Buyer with respect to an interest in the Repurchase Obligations pursuant to a law in effect on the date on which Buyer (i) acquires such interest in the Repurchase Obligations or (ii) changes the office from which it books the Transactions, except in each case to the extent that, pursuant to Section 12.06, amounts with respect to such Taxes were payable either to Buyer’s assignor immediately before Buyer became a party hereto or to Buyer immediately before it changed the office from which it books the Transactions, (c) Taxes attributable to Buyer’s failure to comply with Section 12.06(e) and (d) any U.S. federal withholding Taxes imposed under FATCA.

“Existing Convertible Debt Securities”: Means debt securities of Guarantor existing as of April 19, 2013 and issued pursuant to the First Supplemental Indenture.

“Exit Fee”:  Defined in the Fee and Pricing Letter (as amended hereby), which definition is incorporated herein by reference.

“Extended Term Maturity Date”:  Defined in Section 3.07(d)(B).

“Extended Term Purchased Assets”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Extension Conditions”:  Defined in Section 3.07(a).

“Extension Fee”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Extension Option”:  Defined in Section 3.07(a).

“Extension Terms”:  Defined in Section 3.07(a).

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“FATCA”:  Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

“FDIA”:  Defined in Section 14.03.

“FDICIA”:  Defined in Section 14.04.

“Fee and Pricing Letter”:  The Fourth Amended and Restated Fee and Pricing Letter, dated as of the Closing Date, by and between Buyer and Seller, as such letter may subsequently be amended, modified and/or restated or replaced from time to time.

“First Extended Maturity Date”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“First Extension Term”:  Defined in Section 3.07(a).

“First Supplemental Indenture”:  Means that certain First Supplemental Indenture, dated as of February 15, 2013, to the Senior Debt Indenture, dated as of February 15, 2013, by and among Guarantor, as issuer, and The Bank of New York Mellon, as trustee.

“Fitch”:  Fitch, Inc. or, if Fitch, Inc. is no longer issuing ratings, another nationally recognized rating agency reasonably acceptable to Buyer.

“Fixed Charge Coverage Ratio”:  With respect to any Person and for any Test Period at any time, the EBITDA for such period, divided by the Fixed Charges for the same period.

“Fixed Charges”:  With respect to any Person and for any Test Period at any time, the sum of (a) debt service, (b) all preferred dividends, (c) Capital Lease Obligations paid or accrued during such period, (d) capital expenditures (if any), and (e) any amounts payable under any Ground Lease.

“Flex Pricing Margin”:  Defined in Schedule 2 to the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Flex Purchased Assets”:  (a) All Purchased Assets that as of the Purchase Date therefor, consist of eligible Junior Interests, eligible Mezzanine Loans, and eligible Mezzanine Participation Interests that are directly or indirectly secured by Liens on underlying Mortgaged Properties that, as of the Purchase Date therefor (i) satisfy the LTV Test for Flex Purchased Assets of the applicable Type, and (ii) generate a Debt Yield that is equal to or greater than the Debt Yield Purchase Threshold applicable to Flex Purchased Assets that are Subordinate Interests and (b) all Purchased Assets that as of the Purchase Date therefor, consist of eligible Whole Loans or eligible Senior Interests that otherwise meet all of the criteria to qualify as eligible Whole Loans or eligible Senior Interests, except that they are directly or indirectly secured by Liens on underlying Mortgaged Properties that, as of the Purchase Date therefor, generate a Debt Yield lower than the Debt Yield Purchase Threshold applicable to Core Purchased Assets of the applicable Type but equal to or greater than the Debt Yield Purchase Threshold applicable to Flex Purchased Assets that are Whole Loans or Senior Interests of the applicable Type.

“Foreign Buyer”:  A Buyer that is not a U.S. Person.

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“Funding Period”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Future Funding Amount”:  With respect to any Purchased Asset for which a Future Funding Transaction has been requested by Seller and approved by Buyer pursuant to Section 3.10, the product of (a) the amount that Seller is funding or has funded to the Underlying Obligor as a post-closing advance on or prior to the related Future Funding Date as required by the Underlying Loan Documents relating to such Purchased Asset (other than any such post-closing advance which was the subject of a prior Future Funding Transaction funded by Buyer prior to such Future Funding Date) and (b) the Applicable Percentage for such Purchased Asset, provided, in no event shall the aggregate amount so requested by Seller exceed the maximum amount of future funding set forth on the related Confirmation for such Purchased Asset.

“Future Funding Asset”:  Any Purchased Asset which has been approved by Buyer as a Future Funding Asset as set forth in the Confirmation for such Purchased Asset.

“Future Funding Confirmation”:  Defined in Section 3.10(a).

“Future Funding Date”:  With respect to any Purchased Asset for which a Future Funding Transaction has been requested by Seller and approved by Buyer, the date on which Buyer funds a Future Funding Amount with respect to such Purchased Asset pursuant to Section 3.10.

“Future Funding Request Package”:  With respect to any Future Funding Transaction, the following, to the extent applicable and available, unless any such items were previously delivered to Buyer and have not been modified since the date of each such delivery:  (a) the related request for advance, executed by the related Underlying Obligor; (b) any officer’s certificate or affidavit executed by the related Underlying Obligor and delivered to Seller pursuant to the Purchased Asset Documents; (c) any title policy endorsement or updated title search required to be delivered as a condition to such advance pursuant to the Purchased Asset Documents; (d) copies of any new tenant leases or lease amendments entered into by the related Underlying Obligor as a condition to such advance pursuant to the Purchased Asset Documents; (e) any updated financial statements, operating statements and/or rent rolls with respect to the related Underlying Obligor; and (f) copies of any additional documentation required to be delivered by the Underlying Obligor in connection with the related Purchased Asset Documents, or as otherwise reasonably requested by Buyer, in each case, to the extent in Seller’s or any Affiliate of Seller’s possession.

“Future Funding Transaction”:  Any Transaction approved by Buyer pursuant to Section 3.10.

“GAAP”:  Generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

“Governing Documents”:  With respect to any Person, its articles or certificate of incorporation or formation, by‑laws, partnership, limited liability company, memorandum and articles of association, operating or trust agreement and/or other organizational, charter or governing documents.

“Governmental Authority”:  Any (a) nation or government, (b) state or local or other political subdivision thereof, (c) central bank or similar monetary or regulatory authority, (d) Person, agency, authority, instrumentality, court, regulatory body, central bank or other body or entity exercising executive, legislative, judicial, taxing, quasi-judicial, quasi-legislative, regulatory or administrative functions or powers of or pertaining to government, (e) court or arbitrator having jurisdiction over such Person, its Affiliates or its assets or properties, (f) stock exchange on which shares of stock of such Person are listed or admitted for trading, (g) accounting board or authority that is responsible for the establishment or interpretation of national or international accounting

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principles, in each case, whether foreign or domestic, and (h) supra‑national body such as the European Union or the European Central Bank.

“Ground Lease”:  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 Purchase Date of the related Asset, (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 Agreement”: An Amended and Restated Guarantee Agreement, substantially in the form of Exhibit H, made by Guarantor in favor of Buyer.

“Guarantee Default”:  Defined in Section 8.13.

“Guarantee Obligation”:  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, Derivatives 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,  however, that the term “Guarantee Obligation” shall not include endorsements of instruments for deposit or collection in the ordinary course of business.  The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the maximum stated amount of the primary obligation relating to such Guarantee Obligation (or, if less, the maximum stated liability set forth in the instrument embodying such Guarantee Obligation); and provided,  further, that in the absence of any such stated amount or stated liability, the amount of such Guarantee Obligation shall be such guaranteeing person’s maximum anticipated liability in respect thereof as reasonably determined by such Person in good faith.

“Guarantor”:  Starwood Property Trust, Inc., a Maryland corporation.

“Hedge Counterparty”:  Either (a) an Affiliated Hedge Counterparty, or (b) any other counterparty approved by Buyer to any Interest Rate Protection Agreement with a Seller Party that satisfies the requirements of Section 8.11.

“Hedge Required Asset”:  (a) A Purchased Asset other than a CMBS Purchased Asset that has a fixed rate of interest or (b) any Purchased Asset that has a floating rate of interest based on a rate other than the one-month London Interbank Offered Rate and, in each case, is designated as a Hedge Required Asset by Buyer on or prior to the Purchase Date for such Purchased Asset.

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“Hotel Assets”:  All Purchased Assets that are directly or indirectly secured by hotels.

“Income”:  With respect to any Purchased Asset, all of the following (in each case with respect to the entire par amount of the Asset represented by such Purchased Asset and not just with respect to the portion of the par amount represented by the Purchase Price advanced against such Asset) without duplication:  (a) all Principal Payments, (b) all Interest Payments, (c) all 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, in connection with or in respect of such Purchased Asset, including Principal Payments, Interest Payments, principal and interest payments, prepayment fees, extension fees, exit fees, defeasance fees, transfer fees, make whole fees, late charges, late fees and all other fees or charges of any kind or nature, premiums, yield maintenance charges, penalties, default interest, dividends, gains, receipts, allocations, rents, interests, profits, payments in kind, returns or repayment of contributions, net sale, foreclosure, liquidation, securitization or other disposition proceeds, insurance payments, settlements and proceeds, and (d) all payments received from Hedge Counterparties pursuant to Interest Rate Protection Agreements related to such Purchased Asset;  provided, that any amounts that under the applicable Purchased Asset Documents are required to be deposited into and held in escrow or reserve to be used for a specific purpose, such as taxes and insurance, shall not be included in the term “Income” unless and until (i) an event of default exists under such Purchased Asset Documents, (ii) the holder of the related Purchased Asset has exercised or is entitled to exercise rights and remedies with respect to such amounts, (iii) such amounts are no longer required to be held for such purpose under such Purchased Asset Documents, or (iv) such amounts may be applied to all or a portion of the outstanding indebtedness under such Purchased Asset Documents, and provided,  further, that “Income” from Junior Interests, Senior Interests and Mezzanine Participation Interests shall include, without limitation, Seller’s share of all amounts payable in respect of each such Junior Interest, Senior Interest and Mezzanine Participation Interest and the underlying Whole Loan or the underlying Mezzanine Loan pursuant to the Junior Interest Documents, Senior Interest Documents and Mezzanine Participation Documents.

“Indebtedness”:  With respect to any Person and any date, all of the following with respect to such Person as of such date:  (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 obligations of others) in respect of any keep well arrangements, credit enhancements, contingent or future funding obligations under any Purchased Asset or any obligation senior to any Purchased Asset, unfunded interest reserve amount under any Purchased Asset or any other obligation of such Person with respect to such Purchased Asset that is senior to any Purchased Asset, purchase obligation, repurchase obligation, sale/buy-back agreement, takeout commitment or forward equity commitment, 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 Derivatives Contract not entered into as a hedge

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against existing indebtedness, in an amount equal to the Derivatives Termination Value thereof, (i) all Non-Recourse Indebtedness, recourse indebtedness and all indebtedness of other Persons that 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, except with respect to any Purchased Asset, any Permitted Liens) 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 Governing Document, subscription agreement or otherwise.

“Indemnified Amounts”:  Defined in Section 13.01(a).

“Indemnified Person” and “Indemnified Persons”:  Defined in Section 13.01(a).

“Indemnified Taxes”:  (a)Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of Seller under any Repurchase Document and (b) to the extent not otherwise described in (a), Other Taxes.

“Independent Appraiser”:  An independent professional real estate appraiser who is a member in good standing of the American Appraisal Institute, and, if the state in which the subject Mortgaged Property is located certifies or licenses appraisers, is certified or licensed in such state, and in each such case, who has a minimum of five years’ experience in the subject property Type.

“Independent Director” or “Independent Manager”:  An individual who has prior experience as an independent director, independent manager or independent member with at least three (3) years of employment experience and who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, or Lord Securities Corporation or, if none of those companies is then providing professional Independent Directors or Independent Managers, independent members, another nationally recognized company reasonably approved by Buyer, in each case that is not an Affiliate of Seller and that provides professional independent directors, independent managers and/or other corporate services in the ordinary course of its business, and which individual is duly appointed as a member of the board of directors or board of managers of such corporation or limited liability company and is not, has never been, and will not while serving as Independent Director or Independent Manager be, any of the following:

(a)a member, partner, equity holder, manager, director, officer or employee of Seller, any Pledgor, any of their respective equity holders or Affiliates (other than (i) as an Independent Director or Independent Manager or “special member” of Seller or Pledgor and (ii) as an Independent Director or Independent Manager or “special member” of an Affiliate of Seller or Pledgor or any of their respective single-purpose entity equity holder that is not in the direct chain of ownership of Seller or Pledgor and that is required by a creditor to be a single purpose bankruptcy remote entity, provided,  however,  that such Independent Director or Independent Manager is employed by a company that routinely provides professional Independent Directors or Independent Managers);

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(b)a creditor, supplier or service provider (including provider of professional services) to Selleror any of their respective equity holders or Affiliates (other than through a nationally‑recognized company that routinely provides professional independent directors, independent managers and/or other corporate services to Seller, any single‑purpose entity equity holder, or any of their respective equity holders or Affiliates in the ordinary course of business);

(c)a family member of any such member, partner, equity holder, manager, director, officer, employee, creditor, supplier or service provider; or

(d)a Person who controls (whether directly, indirectly or otherwise) any of the individuals described in the preceding clauses (a), (b) or (c).

An individual who otherwise satisfies the preceding definition other than clause (a) by reason of being the Independent Director or Independent Manager of a Special Purpose Entity affiliated with Seller or Pledgor shall not be disqualified from serving as an Independent Director or Independent Manager of Seller or Pledgor ifthe fees that such individual earns from serving as Independent Director or Independent Manager of Affiliates of Seller in any given year constitute in the aggregate less than five percent (5%) of such individual’s annual income for that year.

“Initial Maturity Date”:  January26, 2017.

“Insolvency Action”:  With respect to any Person, the taking by such Person of any action resulting in an Insolvency Event, other than solely under clause (g) of the definition thereof.

“Insolvency Event”:  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”:  The Bankruptcy 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.

“Insolvency Proceeding”:  Any case, action or proceeding before any court or other Governmental Authority relating to any Insolvency Event.

“Interest Expense”:  With respect to any Person and for any 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 period.

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“Interest Payments”:  With respect to any Purchased Asset and any period, all payments of interest, income, receipts, dividends, and any other collections and distributions received from time to time in connection with any such Purchased Asset.

“Interest Rate Protection Agreement”:  With respect to any or all Purchased Assets, any futures contract, options related contract, short sale of United States Treasury securities or any interest rate swap, cap, floor or collar agreement, total return swap or any other similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations either generally or under specific contingencies in form and substance reasonably acceptable to Buyer, in each case with a Hedge Counterparty and that is acceptable to Buyer.  It is acknowledged and agreed that Interest Rate Protection Agreements relating to Purchased Assets may cover Other Hedged Assets.  For the avoidance of doubt, any Interest Rate Protection Agreement with respect to a Purchased Asset shall be included in the definitions of “Purchased Asset” and “Repurchase Document” but any payments or proceeds of an Interest Rate Protection Agreement that relates to Other Hedged Assets shall not be included in the definitions of “Purchased Asset” and “Repurchase Document”.

“Intermediate Starwood Entities”:  Individually or collectively, Pledgor and SPT Real Estate Sub I, LLC, a Delaware limited liability company.

“Internal Control Event”:  Material weakness in, or fraud that involves management or other employees who have a significant role in, the internal controls of Seller, Manager, any Intermediate Starwood Entity or Guarantor over financial reporting, in each case as described in the Securities Laws.

“Investment”: With respect to any Person, any acquisition or investment (whether or not of a controlling interest) by such Person, whether by means of (a) the purchase or other acquisition of any Equity Interest in another Person, (b) a loan, advance or extension of credit to, capital contribution to, guaranty or credit enhancement of Indebtedness of, or purchase or other acquisition of any Indebtedness of, another Person, including any partnership or joint venture interest in 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 the business or a division or operating unit of another Person.  Any binding commitment or option to make an Investment in any other Person shall constitute an Investment.  Except as expressly provided otherwise, for purposes of determining compliance with any covenant contained in this Agreement, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

“Investment Company Act”:  The Investment Company Act of 1940, as amended, restated or modified from time to time, including all rules and regulations promulgated thereunder.

“Irrevocable Redirection Notice”:  A notice in form reasonably acceptable to Buyer, sent by Seller in respect of each Purchased Asset(or by Seller’s Affiliate or a Transferor in connection with the origination of any such Purchased Asset) or by Servicer or Sub-Servicer on Seller’s behalf directing the remittance of Income with respect to a Purchased Asset to one of the Servicing Agreement Accounts(or other applicable account under the related Purchased Asset Documents) and/or the Waterfall Account, as applicable, and, to the extent required by either Buyer or Seller, executed by the applicable Underlying Obligor, Servicer, Sub-Servicer or other Person with respect to such Purchased Asset.

“IRS”:  The United States Internal Revenue Service.

“Junior Interest”: (a) A junior participation interest in a performing commercial real estate loan, or (b) a “B-note” in an “A/B structure” (or a more subordinate note in an “A/B/C”, “A/B/C/D” or similar structure) in a performing commercial real estate loan, each as determined by Buyer;  provided,  however, that notwithstanding anything to the contrary contained herein, any junior participation interest or “B-note” (or more

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subordinate note) as to which each of the related senior participation interests or senior notes, as applicable, are Purchased Assets hereunder shall not be “Junior Interests” for any purposes under this Agreement, the Fee and Pricing Letter or any of the other Repurchase Documents (and instead such junior interest(s) and senior interest(s) shall be collectively treated as a Whole Loan for all purposes hereunder and thereunder).

“Junior Interest Documents”:  Shall mean, for any Junior Interest, the Junior Interest Note together with any co-lender agreements, participation agreements and/or other intercreditor agreements or other documents governing or otherwise relating to such Junior Interest, and the Mortgage Loan Documents for the related Whole Loan, including, without limitation, those documents which are required to be delivered to Custodian under the Custodial Agreement (which documents so required to be delivered to Custodian shall only be required to include, for the avoidance of doubt, copies of the Mortgage Loan Documents for the related Whole Loan).

“Junior Interest Note”:  (a) If the Junior Interest is evidenced by  a promissory note, the related original Mortgage Note or (b) if the Junior Interest is a participation,  the related original participation certificate.

“Knowledge”:  With respect to any Person, means collectively (i) the Actual Knowledge of such Person, (ii) notice of any fact, event, condition or circumstance that would cause a reasonably prudent Person to conduct an inquiry that would give such Person Actual Knowledge, whether or not such Person actually undertook such an inquiry, and (iii) all knowledge that is imputed to a Person under any statute, rule, regulation, ordinance, or official decree or order.

“Leverage Covenant”:  The financial covenant set forth in Section 15(b) of the Guarantee Agreement.

“LIBOR”:  The rate of interest per annum determined by Buyer on the basis of the rate for deposits in Dollars for delivery on the first (1st) day of each Pricing Period, for a period approximately equal to such Pricing Period, as reported on Reuters Screen LIBOR01 Page (or any successor page) at approximately 11:00 a.m., London time, on the Pricing Rate Reset Date (or if not so reported, then as determined by Buyer from another recognized source or interbank quotation; provided that, Buyer shall not use a method of determination that is different from that used by Buyer for all of its other similarly-situated sellers under repurchase transactions).  Each calculation by Buyer of LIBOR shall be conclusive and binding for all purposes, absent manifest error.  If the calculation of LIBOR results in a LIBOR rate of less than zero (0), LIBOR shall be deemed to be zero (0) for all purposes of this Agreement.

“Lien”:  Any mortgage, statutory or other lien, pledge, charge, right, claim, adverse claim, attachment, levy, hypothecation, assignment, deposit arrangement, security interest, UCC financing statement or encumbrance of any kind on or otherwise relating to any Person’s assets or properties in favor of any other Person or any preference, priority or other security agreement or preferential arrangement of any kind.

“Liquidity”:  With respect to Guarantor on any date, the total of Cash Liquidity and Near Cash Liquidity of Guarantor and its direct or indirect Subsidiaries as of such date.

“LTV Test”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“LTV Ratio”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

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

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“Margin Call”:  Defined in Section 4.01.

“Margin Deficit”:  Defined in Section 4.01.

“Market Value”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Material Adverse Effect”:  Any event, development or circumstance that has a material adverse effect on or material adverse change in or to (a) the property, assets, business, operations, financial condition, credit quality or prospects of Seller, any Intermediate Starwood Entity or Guarantor, (b) the ability of Seller to pay and perform the Repurchase Obligations, (c) the validity, legality, binding effect or enforceability of any Repurchase Document, Purchased Asset Document, Purchased Asset or security interest granted hereunder or thereunder, (d) the rights and remedies of Buyer or any Indemnified Person under any Repurchase Document, Purchased Asset Document or Purchased Asset, or (e) the perfection or priority of any Lien granted under any Repurchase Document or Purchased Asset Document.

“Material Default”:  The occurrence of any of the events described in clauses (a), (f), (g), (j), (l), (q) and (s) of Section 10.01 which, with the giving of notice or lapse of time, or both, would constitute an Event of Default.

“Material Modification”:  Any material extension, amendment, waiver, termination, rescission, cancellation, release or other modification to the terms of, or any collateral, guaranty or indemnity for, or the exercise of any material right or remedy of a holder (including all lending, corporate and voting rights, remedies, consents, approvals and waivers) of, any Purchased Asset, or Purchased Asset Document.

“Materials of Environmental Concern”:  Any hazardous, toxic or harmful substances, materials, wastes, pollutants or contaminants defined as such in or regulated under any Environmental Law.

“Maturity Date”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Maximum Advance Purchase Price” shall mean, with respect to a Purchased Asset with respect to which an Additional Purchase Advance Transaction is requested in accordance with the terms of this Agreement, an amount (expressed in dollars) equal to the product obtained by multiplying (i) the lesser of (A) the Market Value of such Purchased Asset as of the Purchase Date for such Purchased Asset and (B) the Market Value of such Purchased Asset as determined by Buyer in Buyer’s sole discretion as of the proposed date of such requestedAdditional Purchase Advance Transaction by (ii) the Maximum Applicable Percentage for such Purchased Asset as set forth in the related Confirmation.

“Maximum Amount”: (a) Prior to the Initial Maturity Date, $1,600,000,000; (b) if the Initial Maturity Date is extended to the First Extended Maturity Date, then, at all times during the First Extension Term, either (i) if the sum of the aggregate Repurchase Price for all Purchased Assets for each day of the 365 days immediately prior to the Initial Maturity Date, divided by 365, is greater than or equal to $1,280,000,000, then the Maximum Amount shall be $1,600,000,000, or (ii) if the sum of the aggregate Repurchase Price for all Purchased Assets for each day of the 365 days immediately prior to the Initial Maturity Date, divided by 365, is less than $1,280,000,000, then the Maximum Amount shall be an amount equal to the sum of (A) such quotient plus (B) (x) any Additional Purchase Advance Available Amount approved but not yet funded under Section 3.11(a) and (y) with respect to any Purchased Asset subject to a Future Funding Transaction, any unfunded Future Funding Amounts available under Future Funding Transactions entered into in accordance with Section 3.10, but in no event shall the Maximum Amount under this clause b(ii) be more than $1,280,000,000, and (c) if the First

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Extended Maturity Date is extended to the Second Extended Maturity Date, then, at all times during the Second Extension Term, an amount equal to the sum of (x) the aggregate Repurchase Price for all Purchased Assets outstanding on the First Extended Maturity Date, as such amount declines as Purchased Assets are repurchased and Margin Deficits are satisfied, plus (y) with respect to any Purchased Asset subject to a Future Funding Transaction, any unfunded Future Funding Amounts available under Future Funding Transactions entered into in accordance with Section 3.10; it being understood that, during the Second Extension Term, Buyer and Seller may enter into Future Funding Transactions and Additional Purchase Advance Transactions in accordance with Section 3.10 and Section 3.11 that would otherwise cause the aggregate Repurchase Price for all Purchased Assets outstanding to exceed the Maximum Amount otherwise set forth in sub-clause(x) of clause (c) of this definition.

“Maximum Applicable Percentage”: Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Mezzanine Loan”:  A performing mezzanine loan secured by pledges of 100% of the Equity Interests of the Mortgagor or an Affiliate of the Mortgagor under the related Whole Loan.

“Mezzanine Loan Documents”:  With respect to any Purchased Asset that is a Mezzanine Loan, the Mezzanine Note, those documents executed in connection with, evidencing or governing such Mezzanine Loan and the Mortgage Loan Documents for the related Whole Loanincluding, without limitation, those documents which are required to be delivered to Custodian under the Custodial Agreement (which documents so required to be delivered to Custodian shall only be required to include, for the avoidance of doubt, copies of the Mortgage Loan Documents for the related Whole Loan).

“Mezzanine Note”:  The original executed promissory note or other tangible evidence of the Mezzanine Loan indebtedness.

“Mezzanine Participation Certificate”:  The original executed participation certificate (if any) that evidences a Mezzanine Participation Interest.

“Mezzanine Participation Documents”:  Shall mean, for any Mezzanine Participation Interest, the Mezzanine Participation Certificate, if any, together with any participation agreements and/or other intercreditor agreements or other documents governing or otherwise relating to such Mezzanine Participation Interest, and the Mezzanine Loan Documents for the related Mezzanine Loan, including, without limitation, those documents which are required to be delivered to Custodian under the Custodial Agreement (which documents so required to be delivered to Custodian shall only be required to include, for the avoidance of doubt, copies of the Mezzanine Loan Documents for the related Mezzanine Loan).

“Mezzanine Participation Interest”:  A senior or junior participation interest in a performing Mezzanine Loan.

“Moody’s”:  Moody’s Investors Service, Inc., or, if Moody’s Investors Service, Inc. is no longer issuing ratings, another nationally recognized rating agency reasonably acceptable to Buyer.

“Mortgage”:  Any mortgage, deed of trust, assignment of rents, security agreement and fixture filing, or other instruments creating and evidencing a lien on real property and other property and rights incidental thereto.

“Mortgage Asset File”:  The meaning specified in the Custodial Agreement.

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“Mortgage Loan Documents”:  With respect to any Whole Loan, those documents executed in connection with and/or evidencing or governing such Whole Loan, including, without limitation, those that are required to be delivered to Custodian under the Custodial Agreement.

“Mortgage Note”:  The original executed promissory note or other evidence of the indebtedness of a Mortgagor with respect to a commercial mortgage loan.

“Mortgaged Property”:  (I) In the case of a Whole Loan, a Senior Interest or a Junior Interest, the real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral directly or indirectly securing repayment of the debt evidenced by (a) a Mortgage Note (in the case of a Whole Loan), and (b) the Mortgage Note of the Whole Loan to which such Senior Interest or Junior Interest relates (in the case of a Senior Interest or a Junior Interest), and (II) in the case of a  Mezzanine Loan or a Mezzanine Participation Interest, the real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral owned by the Person (or Affiliate of such Person) the equity of which is pledged as collateral for such Mezzanine Loan or, in the case of a Mezzanine Participation Interest, the related Mezzanine Loan.

“Mortgagor”:  The obligor on a Mortgage Note, including any Person who has assumed or guaranteed the obligations of the obligor thereunder.

“Multiemployer Plan”:  A Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Multifamily Assets”:  Purchased Assets with respect to which the Mortgaged Property consists of real property with five or more residential rental units (including mixed use multi-family/office and multi-family retail) as to which the majority of the underwritten revenue is from residential rental units.

“Near Cash Liquidity”: Shall mean, with respect to Guarantor on any date, the market value of Near Cash Securities held by Guarantor or its direct or indirect Subsidiaries as of such date.  Market value of Near Cash Securities shall be determined on a monthly basis by at least one independent third party financial institution reasonably acceptable to Buyer.

“Near Cash Securities”:  Shall mean (i) CMBS having, at all times, a maturity or weighted average life of twelve (12) months or less, as determined by the applicable servicer, (ii) RMBS having a duration of twelve (12) months or less as determined by Tilden Park Capital Management (and, at Buyer’s request, the assumptions used in such determination shall be provided to Buyer for Buyer’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 Buyer.

“Net Income”:  With respect to any Person for any period, the net income of such Person for such period as determined in accordance with GAAP.

“Non-Recourse Indebtedness”:  With respect to any Person and any date, indebtedness of such Person as of such date 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.

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“Non-Utilization Fee”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Off-Balance Sheet Obligations”:  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 that, upon the application of any Insolvency Laws, would be characterized as indebtedness, (b) monetary obligations under any sale and leaseback transaction that 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 that (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 that 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).

“Original Closing Date”:  October 23, 2014.

“Other Connection Taxes”:  With respect to Buyer, Taxes imposed as a result of a present or former connection between Buyer and the jurisdiction imposing such Taxes (other than a connection arising from Buyer having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Repurchase Document, or sold or assigned an interest in any Transaction or Repurchase Document).

“Other Hedged Asset”: Shall mean any loan or other asset covered by an Interest Rate Protection Agreement that is not a Purchased Asset. 

“Other Taxes”: Any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under any Repurchase Document or from the execution, delivery, performance, or enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Repurchase Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

“Participant”:Defined in Section 18.08(b).

“Participant Register”:  Defined in Section 18.08(g).

“Party”:  The meaning set forth in the preamble to this Agreement.

“PATRIOT Act”:  The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,as amended, modified or replaced from time to time.

“Paying Seller”:  Defined in Section 18.24(c).

“Permitted Liens”:  Any of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding has been commenced:  (a) Liens for state, municipal, local or other local taxes not yet due and payable, (b) Liens imposed by Requirements of Law, such as materialmen’s, mechanics’, carriers’, workmen’s, repairmen’s and similar Liens, arising in the ordinary course of business securing obligations that are not overdue for more than thirty (30) days, (c) Liens on cash collateral granted by a Seller Party in connection with any Interest Rate Protection Agreement which such Seller Party is required to enter in accordance with Section 8.11, and (d) Liens granted pursuant to or by the Repurchase Documents.

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“Person”:  An individual, corporation, limited liability company, business trust, partnership, trust, unincorporated organization, joint stock company, sole proprietorship, joint venture, Governmental Authority or any other form of entity.

“Plan”:  An employee benefitor other plan established or maintained by Seller or any ERISA Affiliate during the five year period ended prior to the date of this Agreement or to which Seller or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Agreement, been required to make contributions and that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code, other than a Multiemployer Plan.

“Plan Asset Regulation”:  The regulation of the United States Department of Labor at 29 C.F.R. § 2510.3-101 (as modified by Section 3(42) of ERISA).

“Pledge Agreement”: The Amended and Restated Pledge and Security Agreement, dated as of February 28, 2011 between the Buyer and Pledgor, as such agreement has been or may hereafter be amended, modified and/or restated from time to time.

“Pledged Collateral”:  Defined in the Pledge Agreement.

“Pledgor”:  Individually and collectively as the context may require, Starwood Property Mortgage, L.L.C., a Delaware limited liability company, in its capacity as the sole member of Seller 2, and Starwood Property Mortgage BC, L.L.C., a Delaware limited liability company, the sole member of Seller 2-A.

“Power of Attorney”:  A power of attorney made by Seller in favor of Buyer, substantially in the form attached as Exhibit C hereto.

“Preferred Equity”:  A performing current pay preferred equity position (with a put or synthetic maturity date structure replicating a debt instrument and excluding any perpetual preferred equity positions) evidenced by a stock share certificate or other similar ownership certificate representing the entire equity ownership interest in entities that own income producing commercial real estate.

“Price Differential”:  For any Pricing Period or portion thereof and (a) for any Transaction outstanding, the sum of the products, for each day during such Pricing Period or portion thereof, of (i) 1/360th of the Pricing Rate in effect for each Purchased Asset subject to such Transaction during such Pricing Period, times (ii) the outstanding Purchase Price for such Purchased Asset on each such day, or (b) for all Transactions outstanding, the sum of the amounts calculated in accordance with the preceding clause (a) for all Transactions.

“Pricing Margin”:  With respect to each Flex Purchased Asset, the applicable Flex Pricing Margin, for each Core Purchased Asset, the applicable Core Pricing Margin, and for each CMBS Purchased Asset, the applicable CMBS Pricing Margin.

“Pricing Period”:  For any Purchased Asset, (a) in the case of the first Remittance Date for such Purchased Asset, the period from the Purchase Date for such Purchased Asset to but excluding such Remittance Date, and (b)  in the case of any subsequent Remittance Date, the one-month period commencing on and including the prior Remittance Date and ending on but excluding suchRemittance Date; provided, that no Pricing Period for a Purchased Asset shall end after the Repurchase Date for such Purchased Asset to the extent such Purchased Asset is actually repurchased on such Repurchase Date.

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“Pricing Rate”:  For any Pricing Period, LIBORfor such Pricing Period plus the applicable Pricing Margin, which shall be subject to adjustment and/or conversion as provided in Sections 12.01 and 12.02;  provided, that while an Event of Default is continuing, the Pricing Rate shall be the Default Rate.

“Pricing Rate Reset Date”:  (a) In the case of the first Pricing Period for any Purchased Asset, the related Purchase Date for such Purchased Asset, and (b) in the case of each subsequent Pricing Period, two (2) Business Days prior to the Remittance Date on which such Pricing Period begins.

“Principal Payments”:  For any Purchased Asset, all payments and prepayments of principal received for such Purchased Asset, including insurance and condemnation proceedswhich are permitted by the terms of the Purchased Asset Documents to be applied to principal and are, in fact, so applied and recoveries of principal from liquidation or foreclosure which are permitted by the terms of the Purchased Asset Documents to be applied to principal and are, in fact, so applied.

“Purchase Agreement”:  Any purchase agreement between Seller and any Transferor pursuant to which Seller purchased or acquired an Asset that is subsequently sold to Buyer hereunder.

“Purchase Date”:  For any Purchased Asset, the date on which such Purchased Asset is transferred by Seller to Buyer.

“Purchase Price”:  For any Purchased Asset, (a) as of the Purchase Date for such Purchased Asset, an amount equal to the product of the Market Value of such Purchased Asset, times the Applicable Percentage for such Purchased Asset, and (b) as of any other date, the amount described in the preceding clause (a), (i) increased by any Future Funding Amounts disbursed by Buyer to Seller (or the related borrower with respect to such Purchased Asset), (ii) increased by any Additional Purchase Advances disbursed by Buyer to Seller, (iii) reduced by any amount of Margin Deficit transferred by Seller to Buyer pursuant to Section 4.01 and applied to the Purchase Price of such Purchased Asset, (iv) reduced by any Principal Payments remitted to the Waterfall Account and which were applied to the Purchase Price of such Purchased Asset by Buyer and (v) reduced by any payments made by Seller in reduction of the outstanding Purchase Price, in each case before or as of such determination date with respect to such Purchased Asset.

“Purchased Asset Documents”:  Individually or collectively, as the context may require, the related Mortgage Loan Documents, Senior Interest Documents, Junior Interest Documents, Mezzanine Loan Documents and/or Mezzanine Participation Documents, evidencing, governing or relating to such Purchased Asset, each as amended, modified and/or restated from time to time (with Buyer’s consent as and to the extent required under this Agreement).  

“Purchased Assets”:  (a) For any Transaction, each Asset sold by Seller to Buyer in such Transaction, and (b) for the Transactions in general, all Assets sold by Seller to Buyer, in each case including, to the extent relating to such Asset or Assets, all of Seller’s right, title and interest in and to (i) Purchased Asset Documents, (ii) Servicing Rights, (iii) Servicing Files, (iv) mortgage guaranties and insurance (issued by Governmental Authorities or otherwise) and claims, payments and proceeds thereunder, (v) insurance policies, certificates of insurance and claims, payments and proceeds thereunder, (vi) the principal balance of such Assets, not just the amount advanced, (vii) amounts and property from time to time on deposit in the Waterfall Account, and the Waterfall Account itself, and amounts and property from time to time on deposit in the Servicing Agreement Accounts established and maintained under the Servicing and Sub-Servicing Agreement, and such Servicing Agreement Accountitself, (viii) all collection, escrow, reserve, collateral or lock-box accounts and all amounts and property from time to time on deposit therein, to the extent of Seller’s or the holder’s interest therein, (ix) Income, (x) security interests of Seller in Derivatives Contracts entered into by Underlying Obligors, (xi) rights of Seller under any letter of credit, guarantee, warranty, indemnity or other credit support or

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enhancement, (xii) Interest Rate Protection Agreements relating to such Assets, (xiii) all of the “Pledged Collateral”, as such term is defined in the Pledge Agreement, and (xiv) all supporting obligations of any kind; provided, that (A) Purchased Assets shall not include any obligations of Seller or any Retained Interests, and (B) for purposes of the grant of security interest by Seller to Buyer set forth in Section 11.01 together with the other provisions of Article 11, Purchased Assets shall include all of the following: general intangibles, accounts, chattel paper, deposit accounts, securities accounts, instruments, securities, financial assets, uncertificated securities, security entitlements and investment property (as such terms are defined in the UCC) and replacements, substitutions, conversions, distributions or proceeds relating to or constituting any of the items described in the preceding clauses (i) through (xv).

“Rating Agency” or “Rating Agencies”:  Each of Fitch, Moody’s and S&P.

“Register”: Defined in Section 18.08(f).

“REIT”:  A Person satisfying the conditions and limitations set forth in Section 856(b), Section 856(c) and Section 857(a) of the Code and qualifying as a real estate investment trust, as defined in Section 856(a) of the Code.

“Related Repurchase Agreement”:  The Master Repurchase and Securities Contract between and among Buyer and the Related Sellers dated December 30, 2011, as amended, restated or modified from time to time.

“Related Repurchase Obligations”:  Collectively, all of the obligations of the Related Sellers now or hereafter in existence under the Related Repurchase Agreement.

“Related Sellers”:  Collectively, Starwood Property Mortgage Sub 5, L.L.C. and Starwood Property Mortgage Sub-5-A, L.L.C.

“Release”:  Any generation, treatment, use, storage, transportation, manufacture, refinement, handling, production, removal, remediation, disposal, presence or migration of Materials of Environmental Concern on, about, under or within all or any portion of any property or Mortgaged Property.

“Remedial Work”:  Any investigation, inspection, site monitoring, containment, clean‑up, removal, response, corrective action, mitigation, restoration or other remedial work of any kind or nature because of, or in connection with, the current or future presence, suspected presence, Release or threatened Release in or about the air, soil, ground water, surface water or soil vapor at, on, about, under or within all or any portion of any property or Mortgaged Property of any Materials of Environmental Concern, including any action to comply with any applicable Environmental Laws or directives of any Governmental Authority with regard to any Environmental Laws.

“REMIC”:  A REMIC, as that term is used in the REMIC Provisions.

“REMIC Provisions”:  Sections 860A through 860G of the Code.

“Remittance Date”:  The fourteenth (14th) day of each month (or if such day is not a Business Day, the next following Business Day), or such other day as is mutually agreed to by Seller and Buyer.

“REOC”:  A Real Estate Operating Company within the meaning of Regulation Section 2510.3‑101(e) of the Plan Asset Regulations.

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“Representation Breach”:  Any representation, warranty, certification, statement or affirmation made or deemed made by Seller, Pledgor or Guarantor in any Repurchase Document (including in Schedule 1(a),  1(b),  1(c) or 1(d)) or in any certificate, notice, report or other document prepared and delivered by or on behalf of Seller, Manager, any Intermediate Starwood Entity or Guarantor pursuant to any Repurchase Document proves to be incorrect, false or misleading in any material respect when made, and in the case of the representations and warranties contained in Schedule 1(a),  1(b),  1(c) or 1(d) only, without regard to any Knowledge or lack of Knowledge thereof by such Person or (unless otherwise waived in writing), by Buyer, and without regard to any qualification, representation or warranty relating to such Knowledge or lack of Knowledge; provided that no representation or warranty with respect to which an Approved Representation Exception exists shall constitute a Representation Breach.

“Representation Exceptions”:  With respect to each Purchased Asset, a written list prepared by Seller and delivered to Buyer prior to the Purchase Date of such Purchased Asset specifying, in reasonable detail, the representations and warranties (or portions thereof) set forth in this Agreement (including in Schedule 1) that are not satisfied with respect to an Asset or Purchased Asset.

“Repurchase Date”:  For (A) any Purchased Asset other than a CMBS Purchased Asset, the earliest to occur of (a) the Maturity Date, (b) any Early Repurchase Date therefor, (c) the Business Day on which Seller is to repurchase such Purchased Asset as specified by Seller and agreed to by Buyer in the related Confirmation; and (d) the date that is two (2) Business Days prior to the maturity date (under the related Purchased Asset Documents with respect to such Purchased Asset including, with respect to each Senior Interest that is a participation, the related Whole Loan) for such Purchased Asset, without giving effect to any extension of such maturity date, whether by modification, waiver, forbearance or otherwise (other than extensions at the Underlying Obligor’s option and which do not require consent of the lender(s) thereunder pursuant to the terms of the Purchased Asset Documents with respect to such Purchased Asset and other than extensions that have been approved by Buyer as and to the extent required under this Agreement);  provided that, solely with respect to this clause (A)(d), the settlement date for payment of the Repurchase Price with respect to such Repurchase Date and Purchased Asset may occur two (2) Business Days thereafter as provided in Section 3.05) and (B) any Purchased Asset that is a CMBS Purchased Asset, the earliest of (a) the CMBS Purchased Asset Maturity Date, (b) any Early Repurchase Date therefor, and (c) the Business Day on which Seller is to repurchase such CMBS Purchased Asset as specified by Seller and agreed to by Buyer in the related Confirmation.

“Repurchase Documents”:  Collectively, this Agreement, the Fee and Pricing Letter, the Custodial Agreement, the Controlled Account Agreements, the Pledge Agreement, all Interest Rate Protection Agreements, the Guarantee Agreement, the Servicing and Sub-Servicing Agreement,  the Powers of Attorney,all Confirmations, all UCC financing statements, amendments and continuation statements filed pursuant to any other Repurchase Document, and all additional documents, certificates, agreements or instruments, the execution of which is required, necessary or incidental to or desirable for performing or carrying out any other Repurchase Document.

“Repurchase Obligations”:  All obligations of Seller to pay the Repurchase Price on the Repurchase Date and all other obligations and liabilities of Seller to Buyer arising under or in connection with the Repurchase Documents (for the avoidance of doubt, including all obligations and liabilities of a Seller Party to any Affiliated Hedge Counterparties arising under or in connection with the Interest Rate Protection Agreements), whether now existing or hereafter arising, and all interest and fees that accrue after the commencement by or against Seller, any Intermediate Starwood Entity or Guarantor of any Insolvency Proceeding naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding (in each case, whether due or accrued).

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“Repurchase Price”:  For any Purchased Asset as of any date, an amount equal to the sum of (a) the outstanding Purchase Price as of such date, (b) the accrued and unpaid Price Differential for such Purchased Asset as of such date, (c) all amounts that are, or otherwise would be, due and payable as of such date by the Seller Parties to Buyer under this Agreement or any other Repurchase Document, and any other Affiliated Hedge Counterparty in connection with the termination of any Interest Rate Protection Agreement with Buyer and any other Affiliated Hedge Counterparty relating to such Purchased Asset if such Interest Rate Protection Agreement were terminated as of such date,  (d) any accrued and unpaid fees and expenses and indemnity amounts, late fees, default interest, breakage costs and any other amounts owed by Seller or Guarantor to Buyer or any of its Affiliates under this Agreement, any Repurchase Document or otherwise, and (e) all other amounts due and payable as of such date by Seller to Buyer under this Agreement or any Repurchase Document.

“Requirements of Law”:  With respect to any Person or property or assets of such Person and as of any date, all of the following applicable thereto as of such date: all Governing Documents and existing and future laws, statutes, rules, regulations, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by any Governmental Authority (including Environmental Laws, ERISA, regulations of the Board of Governors of the Federal Reserve System, and laws, rules and regulations relating to usury, licensing, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), judgments, decrees, injunctions, writs, awards or orders of any court, arbitrator or other Governmental Authority.

“Responsible Officer”:  With respect to any Person, the chief executive officer, the chief financial officer, the chief accounting officer, the treasurer or the chief operating officer of such Person.

“Retained Interest”:  (a) With respect to any Purchased Asset, (i) all duties, obligations and liabilities of Seller thereunder, including payment and indemnity obligations, (ii) all obligations of agents, trustees, servicers, administrators or other Persons under the documentation evidencing such Purchased Asset, and (iii) if any portion of the Indebtedness related to such Purchased Asset is owned by another lender or is being retained by Seller, the interests, rights and obligations under such documentation to the extent they relate to such portion, and (b) with respect to any Purchased Asset with an unfunded commitment on the part of Seller, all obligations to provide additional funding, contributions, payments or credits.

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

“S&P”:  Standard and Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc. or, if Standard & Poor’s Ratings Services is no longer issuing ratings, another nationally recognized rating agency reasonably acceptable to Buyer.

“Sanctioned Entity”:  (a) A country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, that (in the case of the preceding clauses (a), (b), (c) and this clause (d) is subject to a country sanctions program administered and enforced by the Office of Foreign Assets Control, or (e) a Person named on the list of Specially Designated Nationals maintained by the Office of Foreign Assets Control.

“Second Extended Maturity Date”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Second Extension Term”:  Defined in Section 3.07(a).

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“Seller”:  Individually and collectively, as the context may require, Seller 2 and Seller 2‑A.

“Seller 2”:  Starwood Property Mortgage Sub‑2, L.L.C., a Delaware limited liability company, together with its successors and permitted assigns.

“Seller 2‑A”:  Starwood Property Mortgage Sub‑2‑A, L.L.C., a Delaware limited liability company, together with its successors and permitted assigns.

“Seller Party”: Collectively, or individually, as the context may otherwise require, Seller, Guarantor or any Intermediate Starwood Entity, in its capacity as a party to an Interest Rate Protection Agreement with a Hedge Counterparty.

“Senior Interest”: (a) A senior or pari passu participation interest (for which the counterparty shall not be either Seller, Guarantor or any of their respective Affiliates) in a performing commercial real estate loan, or (b) an “A note” in an “A/B structure” in a performing commercial real estate loan; provided that, notwithstanding anything to the contrary contained herein, any senior participation interest or “A-note” as to which each of the related junior participation interests or junior notes, as applicable, are Purchased Assets hereunder shall not be “Senior Interests” for any purposes under this Agreement, the Fee and Pricing Letter or any of the other Repurchase Documents (and instead such junior interest(s) and senior interest(s) shall be collectively treated as a Whole Loan for all purposes hereunder and thereunder).

“Senior Interest Documents”:  For any Senior Interest, the Senior Interest Note together with any co‑lender agreements, participation agreements and/or other intercreditor agreements or other documents governing or otherwise relating to such Senior Interest, and the Mortgage Loan Documents for the related Whole Loan, including, without limitation, those documents which are required to be delivered to Custodian under the Custodial Agreement (which documents so required to be delivered to Custodian shall only be required to include, for the avoidance of doubt, copies of the Mortgage Loan Documents for the related Whole Loan).

“Senior Interest Note”:  (a) If the Senior Interest is evidenced by  a promissory note, the related original Mortgage Note or (b) if the Senior Interest is a participation,  the related original participation certificate.

“Servicer”: For each Purchased Asset, as determined in accordance with Article 17, either (a) Wells Fargo Bank, National Association, or its designee or, (b) a servicer acceptable to Buyer, servicing such Purchased Asset under a Servicing Agreement.

“Servicing Agreement”:  The Servicing and Sub-Servicing Agreement and/or any other servicing agreement entered into by Seller and a Servicer for the servicing of Purchased Assets, acceptable to Buyer.

“Servicing Agreement Account”:  (a) The “Servicing Account” under the Servicing and Sub‑Servicing Agreement, which shall be a segregated interest bearing account established at the Deposit Account Bank, in the name of Seller, pledged to Buyer and subject to a Controlled Account Agreement or (b) any other account established by a  Servicer in connection with the servicing of any Purchased Asset.

“Servicing and Sub‑Servicing Agreement”:  The Amended and Restated Servicing and Sub‑Servicing Agreement, dated as of February 28, 2011, between and among Buyer, Seller, Servicer and Sub‑Servicer, as amended, modified and/or restated from time to time.

“Servicing File”:  With respect to any Purchased Asset, the file retained and maintained by Seller, Servicer and/or Sub-Servicer including the originals or copies of all Purchased Asset Documents and other documents and agreements relating to such Purchased Asset, including to the extent applicable all servicing

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agreements, files, documents, records, data bases, computer tapes, insurance policies and certificates, appraisals, other closing documentation, payment history and other records relating to or evidencing the servicing of such Purchased Asset, which file shall be held by Seller and/or the Servicer for and on behalf of Buyer.

“Servicing Rights”:  All right, title and interest of Seller, Guarantor or any Affiliate of Seller or Guarantor, or any other Person, in and to any and all of the following:  (a) rights to service and/or sub-service, and collect and make all decisions with respect to, the Purchased Assets and/or any related Whole Loans, (b) amounts received by Seller, Guarantor or any Affiliate of Seller or Guarantor, or any other Person, for servicing and/or sub-servicing the Purchased Assets and/or any related Whole Loans, (c) late fees, penalties or similar payments with respect to the Purchased Assets and/or any related Whole Loans, (d) agreements and documents creating or evidencing any such rights to service and/or sub-service (including, without limitation, all Servicing Agreements), together with all documents, files and records relating to the servicing and/or sub-servicing of the Purchased Assets and/or any related Whole Loans, and rights of Seller, Guarantor or any Affiliate of Seller or Guarantor, or any other Person thereunder, (e) escrow, reserve and similar amounts with respect to the Purchased Assets and/or any related Whole Loans, (f) rights to appoint, designate and retain any other servicers, sub-servicers, special servicers, agents, custodians, trustees and liquidators with respect to the Purchased Assets and/or any related Whole Loans, and (g) accounts and other rights to payment related to the Purchased Assets and/or any related Whole Loans.

“Solvent”:  With respect to any Person at any time, having a state of affairs such that all of the following conditions are met at such time:  (a) the fair value of the assets and property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code, (b) the present fair salable value of the assets and property of such Person in an orderly liquidation 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 is able to realize upon its assets and property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Person’s assets and property would constitute unreasonably small capital.

“Special Purpose Entity”:  A corporation, limited partnership or limited liability company that, since the date of its formation (unless otherwise indicated in this Agreement) and at all times on and after the date hereof, has complied with and shall at all times comply with the provisions of Article 9.

“Structuring Fee”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Subordinate Interest”: Any Junior Interest, Mezzanine Loan or Mezzanine Participation Interest.

“Sub‑Limit”: Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Sub-Servicer”:  Defined in the Fee and Pricing Letter, which definition is incorporated herein by reference.

“Sub-Servicer Event of Default”:  With respect to a Sub-Servicer, any default or event of default (however defined), beyond all applicable notice and cure periods, under the Servicing and Sub-Servicing Agreement between Servicer and such Sub-Servicer.

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“Subsidiary”: With respect to any Person, any corporation, partnership, limited liability company or other entity (heretofore, now or hereafter established) of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership, limited liability company or other entity (without regard to the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person, and shall include all Persons the accounts of which are with those of such Person pursuant to GAAP.

“Tangible Net Worth”:  With respect to any Person and any date, all amounts that 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 (other than Interest Rate Protection Agreements to the extent related to any Purchased Asset and excluding mortgage loan servicing and/or special servicing rights of such Person and its consolidated Subsidiaries), and (c) prepaid taxes and/or expenses, all on or as of such date.

“Taxes”:  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.

“Test Period”:  The time period from the first day of each calendar quarter, through and including the last day of such calendar quarter.

“Third Amended and Restated Master Repurchase Agreement”:  The meaning specified in the recitals to this Agreement.

“Total Assets”:  With respect to any Person on any date, (i) an amount equal to the aggregate book value of all assets owned by such Person and its Subsidiaries on a consolidated basis and the proportionate share of assets owned by non‑consolidated Subsidiaries of such Person, less (ii) (A) amounts owing to such Person or any of its Subsidiaries 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 (other than Interest Rate Protection Agreements specifically related to the Purchased Assets and excluding mortgage loan servicing and/or special servicing rights of such Person and its consolidated Subsidiaries) and (C) prepaid taxes and expenses, plus (iii) the amount of any future funding obligations of such Person and its Subsidiaries under any loans or financings (including any construction loans) outstanding as of any date,  all on or as of such date and determined in accordance with GAAP.

“Total Indebtedness”:  With respect to any Person and any date, all amounts of Indebtedness (other than Contingent Liabilities not reflected on such Person’s consolidated balance sheet), plus the proportionate share of all Indebtedness (other than Contingent Liabilities not reflected on such Person’s consolidated balance sheet) of all non-consolidated Affiliates of such Person, on or as of such date.

“Trailing Future Funding Obligation”:  Defined in Section 3.10(d).

“Transaction”:  With respect to any Asset, the sale and transfer of such Asset from Seller to Buyer pursuant to the Repurchase Documents against the transfer of funds from Buyer to Seller representing the Purchase Price or any additional Purchase Price for such Asset, including, without limitation, Future Funding Transactions and Additional Purchase Advance Transactions.

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“Transaction Request”:  Defined in Section 3.01(a).

“Transferor”:  The seller of an Asset under a Purchase Agreement.

“Type”:  With respect to a Mortgaged Property underlying any Purchased Asset, such Mortgaged Property’s classification as one of the following: retail, office, Multifamily Asset, industrial, Hotel Asset, student housing, medical office product, self-storage, health club, or any other property type approved by Buyer.

“UCC”:  The Uniform Commercial Code as in effect in the State of New York; provided, that, if, by reason of Requirements of Law, the perfection, effect on perfection or non-perfection or priority of the security interest in any Purchased Asset is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, then “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority.

“Underlying Obligor”:  Individually and collectively, as the context may require, (a) in the case of a Purchased Asset that is a Whole Loan, the Mortgagor and each obligor and guarantor under such Purchased Asset, including (i) any Person who has not signed the related Mortgage Note but owns an interest in the related Mortgaged Property, which interest has been encumbered to secure such Purchased Asset, and (ii) any other Person who has assumed or guaranteed the obligations of such Mortgagor under the Purchased Asset Documents relating to a Purchased Asset, (b) in the case of a Purchased Asset that is a Senior Interest or a Junior Interest, the Mortgagor and each obligor and any other Person who has assumed or guaranteed the related Whole Loan, and (c) in the case of any Purchased Asset that is a Mezzanine Loan or a Mezzanine Participation Interest, (i)the borrower under the related Mezzanine Loan, and (ii) any other Person who has assumed or guaranteed the obligation of such Mezzanine Loan borrower.

“Underwriting Package”:  With respect an Asset, the internal document or credit committee memorandum of Seller (redacted to protect confidential information) setting forth all material information relating to such Asset which is known by Seller, prepared by Seller for its evaluation of such Asset, to include at a minimum all the information required to be set forth in the relevant Confirmation.  In addition, the Underwriting Package shall include all of the following, to the extent applicable and available:

(a)copies of all Purchased Asset Documents (provided that, in the case of a Wet Mortgage Asset, the Underwriting Package delivered in connection with a Transaction Request under Section 3.01(a) shall provide PDF copies of all such Purchased Asset Documents to the extent available at such time, including substantially final drafts of any documents that will constitute Purchased Asset Documents upon their execution, together with a pledge by Seller to forward final, signed Purchased Asset Documents within five (5) Business Days of the related Purchase Date);

(b)all documents, instruments and agreement received in respect of the closing of an acquisition or origination of an Asset, including, to the extent received (i) an Appraisal, (ii) the current occupancy report, tenant stack and rent roll, (iii) at least two (2) years of property‑level financial statements, (iv) the current financial statement of the Underlying Obligor, (v) the mortgage asset file described in the Custodial Agreement, (vi) third‑party reports and agreed‑upon procedures, letters and reports (whether drafts or final forms), site inspection reports, market studies and other due diligence materials prepared by or on behalf of or delivered to Seller, (vii) aging of accounts receivable and accounts payable, (viii) such further documents or information as Buyer may request, provided same are either in Seller’s possession or are reasonably obtainable by Seller, (ix) any and all agreements, documents, reports, or other information concerning the Asset (including, without limitation, all of the related Purchased Asset Documents) received or obtained in connection with the origination of the Asset, and (x) any other material documents or reports concerning the Asset prepared or executed by Seller or Guarantor, but only

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to the extent such documents are not email correspondence, do not represent internal analysis or would otherwise not be subject to attorney-client privilege; and

(c)if the related Asset was acquired by Seller from a third party, all documents, instruments and agreements received in respect of the closing of the acquisition transaction under the related Purchase Agreement.

“U.S. Person”:  Any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate”:  Defined in Section 12.06(e).

“VCOC”: A “venture capital operating company” within the meaning of Section 2510.3‑101(d) of the Plan Asset Regulations.

“Waterfall Account”:  A segregated non-interest-bearing account established at Deposit Account Bank, in the name of Seller, pledged to Buyer and subject to a Controlled Account Agreement.

“Wet Funding”:  A Transaction for which Seller has delivered to Buyer a Transaction Request pursuant to Section 3.01(g).

“Wet Mortgage Asset”:  An Eligible Asset for which (i) the scheduled funding date is the proposed Purchase Date set forth in the Transaction Request, (ii) Seller has delivered a Transaction Request pursuant to Section 3.01(g) hereof, and (iii) a complete Mortgage Asset File has not been delivered to Custodian prior to the related Purchase Date.

“Whole Loan”:  A performing commercial real estate whole loan made to the related Underlying Obligor and secured primarily by a perfected, first priority Lien in the related underlying Mortgaged Property, including, without limitation (A) with respect to any Senior Interest or Junior Interest, the Whole Loan in which Seller owns a Senior Interest or a Junior Interest, and (B) with respect to any Mezzanine Loan, the Whole Loan made to the Mortgagor or Affiliate of such Mortgagor whose Equity Interests, directly or indirectly, secure such Mezzanine Loan.

Section 2.01Rules of Interpretation.Headings are for convenience only and do not affect interpretation.  The following rules of this Section 2.02 apply unless the context requires otherwise.  The singular includes the plural and conversely.  A gender includes all genders.  Where a word or phrase is defined, its other grammatical forms have a corresponding meaning.  A reference to an Article, Section, Subsection, Paragraph, Subparagraph, Clause, Annex, Schedule, Appendix, Attachment, Rider or Exhibit is, unless otherwise specified, a reference to an Article, Section, Subsection, Paragraph, Subparagraph or Clause of, or Annex, Schedule, Appendix, Attachment, Rider or Exhibit to, this Agreement, all of which are hereby incorporated herein by this reference and made a part hereof.  A reference to a party to this Agreement or another agreement or document includes the party’s successors, substitutes or assigns permitted by the Repurchase Documents.  A reference to an agreement or document is to the agreement or document as amended, restated, modified, novated, supplemented or replaced, except to the extent prohibited by any Repurchase Document.  A reference to legislation or to a provision of legislation includes a modification, codification, replacement, amendment or reenactment of it, a legislative provision substituted for it and a rule, regulation or statutory instrument issued under it.  A reference to writing includes a facsimile or electronic transmission and any means of reproducing words in a tangible and permanently visible form.  A reference to conduct includes an omission, statement or undertaking, whether or not in writing.  A Default or Event of Default exists until it has been cured or waived in writing by Buyer.  The words “hereof,” “herein,” “hereunder” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement,

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unless the context clearly requires or the language provides otherwise.  The word “including” is not limiting and means “including without limitation.”  The word “any” is not limiting and means “any and all” unless the context clearly requires or the language provides otherwise.  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.”  The words “will” and “shall” have the same meaning and effect.  A reference to day or days without further qualification means calendar days.  A reference to any time means New York time.  This Agreement may use several different limitations, tests or measurements to regulate the same or similar matters.  All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their respective terms.  Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed in accordance with GAAP, and all accounting determinations, financial computations and financial statements required hereunder shall be made in accordance with GAAP, without duplication of amounts, and on a consolidated basis with all Subsidiaries.  All terms used in Articles 8 and 9 of the UCC, and used but not specifically defined herein, are used herein as defined in such Articles 8 and 9.  A reference to “fiscal year” and “fiscal quarter” means the fiscal periods of the applicable Person referenced therein.  A reference to an agreement includes a security interest, guarantee, agreement or legally enforceable arrangement whether or not in writing.  A reference to a document includes an agreement (as so defined) in writing or a certificate, notice, instrument or document, or any information recorded in computer disk form.  Whenever a Person is required to provide any document to Buyer under the Repurchase Documents, the relevant document shall be provided in writing or printed form unless Buyer requests otherwise.  At the request of Buyer, the document shall be provided in computer disk form or both printed and computer disk form.  The Repurchase Documents are the result of negotiations between the Parties, have been reviewed by counsel to Buyer and counsel to Seller, and are the product of both Parties.  No rule of construction shall apply to disadvantage one Party on the ground that such Party proposed or was involved in the preparation of any particular provision of the Repurchase Documents or the Repurchase Documents themselves.  Except where otherwise expressly stated, Buyer may give or withhold, or give conditionally, approvals and consents, and may form opinions and make determinations, in its sole and absolute discretion subject in all cases to the implied covenant of good faith and fair dealing.  Reference herein or in any other Repurchase Document to Buyer’s discretion, shall mean, unless otherwise expressly stated herein or therein, Buyer’s sole and absolute discretion, and the exercise of such discretion shall be final and conclusive.  In addition, whenever Buyer has a decision or right of determination, opinion or request, exercises any right given to it to agree, disagree, accept, consent, grant waivers, take action or no action or to approve or disapprove (or any similar language or terms), or any arrangement or term is to be satisfactory or acceptable to or approved by Buyer (or any similar language or terms), the decision of Buyer with respect thereto shall be in the sole and absolute discretion of Buyer, and such decision shall be final and conclusive,  in each case, except as may be otherwise specifically provided herein or in the applicable Repurchase Document.

ARTICLE 3


THE TRANSACTIONS

Section 3.01Procedures.

(a)From time to time prior to the expiration of the applicable Funding Period but not more frequently than twice per calendar week and with no less than three (3) Business Days prior written notice to Buyer, Seller may request Buyer to enter into a proposed Transaction by sending Buyer a notice substantially in the form of Exhibit A (“Transaction Request”) (i) describing the Transaction and each proposed Asset and any related Mortgaged Property and other security therefor in reasonable detail, (ii) transmitting a complete Underwriting Package (or whatever portion thereof is then currently available to Seller) for each proposed Asset, (iii) specifying which (if any) of the representations and warranties of Seller set forth in this Agreement (including

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in Schedule 1(a),  1(b),  1(c) or 1(d) applicable to the Class of such Asset) Seller will be unable to make with respect to such Asset, (iv) indicating whether or not Seller proposes to treat such Asset as a CMBS Purchased Asset, and (v) indicating the amount of all unfunded future funding obligations.  Within five (5) Business Days after the receipt by Buyer of a Transaction Request, Buyer shall indicate to Seller its preliminary approval or disapproval of the proposed Asset.  Seller shall promptly deliver to Buyer any supplemental materials requested at any time by Buyer, provided the same are either in Seller’s possession or are reasonably obtainable by Seller.  Buyer shall conduct such review of the Underwriting Package and each such Asset as Buyer determines appropriate.  Buyer shall determine whether or not it is willing to purchase any or all of the proposed Assets, and if so, on what terms and conditions.  It is expressly agreed and acknowledged that Buyer is entering into the Transactions on the basis of all such representations and warranties and on the completeness and accuracy of the information contained in the applicable Underwriting Package, and any incompleteness or inaccuracies in the related Underwriting Package will only be acceptable to Buyer if disclosed in writing to Buyer by Seller in advance of the related Purchase Date, and then only if Buyer opts to purchase the related Purchased Asset from Seller notwithstanding such incompleteness and inaccuracies.  In the event of a Representation Breach, Seller shall immediately repurchase the related Asset or Assets in accordance with Section 3.04.

(b)If Buyer communicates to Seller a final non-binding determination that it is willing to purchase any or all of such Assets, which non binding determination shall include the principal terms for the proposed Transaction, Seller shall deliver to Buyer an executed preliminary Confirmation for such Transaction, describing each such Asset and its proposed Purchase Date, Market Value, Applicable Percentage, Purchase Price, whether such Asset is a Future Funding Asset and, if so, the amount of the future funding obligations, and such other terms and conditions as Buyer may require, and indicating whether or not Seller proposes to treat such Asset as a CMBS Purchased Asset.  If Buyer requires changes to the preliminary Confirmation, Seller shall make such changes and re execute the preliminary Confirmation.  If Buyer determines to enter into the Transaction on the terms described in the preliminary Confirmation, Buyer shall promptly execute and return the same to Seller, which shall thereupon become effective as the Confirmation of the Transaction.  Buyer’s approval of the purchase of an Asset on such terms and conditions as Buyer may require shall be evidenced only by its execution and delivery of the related Confirmation.  For the avoidance of doubt, Buyer shall not (i) be bound by any preliminary or final non-binding determination referred to above, (ii) be deemed to have approved the purchase of an Asset by virtue of the approval or entering into by Buyer of a rate lock agreement, Interest Rate Protection Agreement, total return swap or any other agreement with respect to such Asset, or (iii) be obligated to purchase an Asset notwithstanding a Confirmation executed by the Parties unless and until all applicable conditions precedent in Article 6 have been satisfied or waived by Buyer.

(c)Buyer shall communicate to Seller a final determination of whether or not it is willing to purchase each proposed Purchased Asset, and if so, on what terms and conditions, within ten (10) Business Days from the date of the delivery of the related Transaction Request to Buyer.  If Buyer has not communicated such final determination to Seller by such date, Buyer shall automatically and without further action be deemed to have determined not to purchase the related proposed Purchased Asset.

(d)Each Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Transaction covered thereby, and shall be construed to be cumulative to the extent possible.  If terms in a Confirmation are inconsistent with terms in this Agreement with respect to a particular Transaction, the Confirmation shall prevail.  Whenever the Applicable Percentage or any other term of a Transaction (other than the Pricing Rate, Market Value and outstanding Purchase Price) with respect to an Asset is revised or adjusted in accordance with this Agreement, an amended and restated Confirmation reflecting such revision or adjustment and that is otherwise acceptable to the Parties shall be prepared by Seller and executed by the Parties.

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(e)The fact that Buyer has conducted or has failed to conduct any partial or complete examination or any other due diligence review of any Asset or Purchased Asset shall in no way affect any rights Buyer may have under the Repurchase Documents or otherwise with respect to any representations or warranties or other rights or remedies thereunder or otherwise, including the right to determine at any time that such Asset or Purchased Asset is not an Eligible Asset, if such Asset or Purchased Asset does not meet the requirements therefor, as set forth in the definition of “Eligible Asset”.

(f)No Transaction shall be entered into if (i) any Margin Deficit, Default or Event of Default exists or would exist as a result of such Transaction, (ii) the Repurchase Date for the Purchased Asset subject to such Transaction would be later than (A) for all Purchased Assets other than CMBS Purchased Assets, the Maturity Date (but, if the original Maturity Date is extended pursuant to Section 3.07(a), in no event beyond the last day of the First Extension Term), and (B) for all CMBS Purchased Assets, the CMBS Purchased Asset Maturity Date, (iii) after giving effect to such Transaction, the aggregate outstanding Purchase Price of all Purchased Assets subject to Transactions then outstanding would exceed the Maximum Amount, (iv) a material adverse change with respect to the related proposed Purchased Asset, Seller and/or Guarantor has occurred, (v) any proposed Purchased Asset does not qualify as an Eligible Asset, (vi) Seller has not provided Buyer with all of the necessary or requested due diligence materials to allow Buyer to determine whether or not a proposed Purchased Asset qualifies as an Eligible Asset or (vii) the Funding Period applicable to the Purchased Asset has expired; provided,  that (A) after the last day of the Funding Period, Future Funding Transactions may be entered into to the limited extent set forth in Section 3.10(d), and (B) after the last day of the Second Extension Term, certain Purchased Assets may be considered Extended Term Purchased Assets as provided in Section 3.01(i).

(g)In addition to the foregoing provisions of this Section 3.01, solely with respect to any Wet Mortgage Asset, a copy of the related Transaction Request shall be delivered by Seller to Bailee no later than 10:00 a.m. (New York City time) one (1) Business Day prior to the requested Purchase Date, to be held in escrow by Bailee on behalf of Buyer pending finalization of the Transaction.

(h)Notwithstanding any of the foregoing provisions of this Section 3.01 or any contrary provisions set forth in the Custodial Agreement, solely with respect to any Wet Mortgage Asset:

(i)by 10:00 a.m. (New York City time) on the related Purchase Date, Seller or Bailee shall deliver signed .pdf copies of the Purchased Asset Documents to Custodian via electronic mail, and Seller shall deliver the appropriate written third-party wire transfer instructions to Buyer;

(ii)not later than 10:00 a.m. (New York City time) on the related Purchase Date, (A) Bailee shall deliver an executed .pdf copy of the Bailee Agreement to Seller, Buyer and Custodian by electronic mail and  (B) if Buyer has previously received the trust receipt in accordance with Section 3.01(b) of the Custodial Agreement, determined that all other applicable conditions in this Agreement, including without limitation those set forth in Section 6.02 hereof, have been satisfied, and otherwise has agreed to purchase the related Wet Mortgage Asset, Buyer shall (I) execute and deliver a .pdf copy of the related Confirmation to Seller and Bailee via electronic mail and (II) wire funds in the amount of the related Purchase Price for the related Wet Mortgage Asset in accordance with the wire transfer instructions that were previously delivered to Buyer by Seller; and

(iii)within three (3) Business Days after the applicable Purchase Date with respect to any Wet Mortgage Asset, Seller shall deliver, or cause to be delivered (A) to Custodian, the complete original Mortgage Asset File with respect to such Wet Mortgage Asset, pursuant to and in accordance with the terms of the Custodial Agreement, and (B) to Buyer, the complete original Underwriting Package with respect to the related Wet Mortgage Assets purchased by Buyer.

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Section 3.02Transfer of Purchased Assets; Servicing Rights.On the Purchase Date for each Purchased Asset, and subject to the satisfaction of all applicable conditions precedent in Article 6, (a) ownership of and title to such Purchased Asset shall be transferred to and vest in Buyer or its designee against the simultaneous transfer of the Purchase Price to the account of Seller specified in Annex 1 (or if not specified therein, in the related Confirmation or as directed by Seller), and (b) Seller hereby sells, transfers, conveys and assigns to Buyer on a servicing‑released basis all of Seller’s right, title and interest (except with respect to any Retained Interests) in and to such Purchased Asset, together with all related Servicing Rights.  Subject to this Agreement, until the applicable Maturity Date, Seller may sell to Buyer, repurchase from Buyer and re-sell Eligible Assets to Buyer, but may not substitute other Eligible Assets for Purchased Assets.  Buyer has the right to designate the servicer and sub-servicer of the Purchased Assets, and the Servicing Rights and other servicing provisions under this Agreement are not severable from or to be separated from the Purchased Assets under this Agreement, and such Servicing Rights and other servicing provisions of this Agreement constitute (a) “related terms” under this Agreement within the meaning of Section 101(47)(A)(i) of the Bankruptcy Code and/or (b) a security agreement or other arrangement or other credit enhancement related to the Repurchase Documents.

Section 3.03Maximum Amount.  The aggregate outstanding Purchase Price for all Purchased Assets as of any date of determination shall not exceed the Maximum Amount.  If the aggregate outstanding Purchase Price of the Purchased Assets as of any date of determination exceeds the Maximum Amount, Seller shall immediately pay to Buyer an amount necessary to reduce such aggregate outstanding Purchase Price to an amount equal to or less than the Maximum Amount.

Section 3.04Early Repurchases; Mandatory Repurchases; Partial Prepayments.

(a)The terms and provisions governing early repurchases and mandatory repurchases under Section 3.04(a) are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

(b)In addition to other rights and remedies of Buyer under any Repurchase Document, Seller shall, in accordance with the procedures set forth in this Section 3.04 and Section 3.05, repurchase (a) any Purchased Asset that no longer qualifies as an Eligible Asset, as determined by Buyer, within three (3) Business Days of the receipt by Seller of a related repurchase notice from Buyer, and (b) any Mezzanine Loan or Mezzanine Participation Interest, within three (3) Business Days after the receipt by Seller of written notice from Buyer that the related Whole Loan is no longer a Purchased Asset.

(c)Notwithstanding the foregoing and any other provision to the contrary contained elsewhere in any Repurchase Document, Seller cannot repurchase a Purchased Asset in connection with a full payoff of the underlying Whole Loan by the Underlying Obligor, unless (i) at any time during the existence of an uncured Default or Event of Default, 100% of the net proceeds due in respect of the related Purchased Asset in connection with the relevant payoff in question are paid directly to Buyer and (ii) at any time following the First Extended Maturity Date and prior to the Second Extended Maturity Date, 120% of the Repurchase Price of the related Purchased Asset in connection with the relevant payoff in question are paid directly to Buyer.  The portion of all such net proceeds in excess of the then-current Repurchase Price of the related Purchased Asset will be applied by Buyer to reduce any other amounts due and payable to Buyer under this Agreement, and then to reduce the Repurchase Prices of the other Purchased Assets in such order and in such amounts as Buyer shall determine.

Section 3.05Repurchase.On the Repurchase Date for each Purchased Asset, Seller shall transfer to Buyer the Repurchase Price for such Purchased Asset as of the Repurchase Date, and the related Seller Party shall pay all amounts due to any Affiliated Hedge Counterparty under the related Interest Rate Protection Agreement and, so long as no Event of Default has occurred and is continuing, Buyer shall transfer to Seller such Purchased Asset, whereupon such Transaction with respect to such Purchased Asset shall terminate; provided,  however, that, with respect to any Repurchase Date that occurs on the second Business Day prior to the maturity date (under the related Purchased Asset Documents) for such Purchased Asset by

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reason of clause (d) of the definition of “Repurchase Date”, settlement of the payment of the Repurchase Price and such amounts may occur up to the second Business Day after such Repurchase Date; provided,  further, that Buyer shall have no obligation to transfer to Seller, or release any interest in, such Purchased Asset until Buyer’s receipt of payment in full of the Repurchase Price therefor.  So long as no Event of Default has occurred and is continuing, upon receipt by Buyer of the Repurchase Price and all other amounts due and owing to Buyer and its Affiliates under this Agreement and each other Repurchase Document as of such Repurchase Date, Buyer shall be deemed to have simultaneously released its security interest in such Purchased Asset, shall authorize Custodian (in accordance with the terms of the Custodial Agreement) to release to Seller the Purchased Asset Documents for such Purchased Asset and, to the extent any UCC financing statement filed against Seller specifically identifies such Purchased Asset, Buyer shall deliver an amendment thereto or termination thereof evidencing the release of such Purchased Asset from Buyer’s security interest therein.  Any such transfer or release shall be without recourse to Buyer and without representation or warranty by Buyer, except that Buyer shall represent to Seller, to the extent that good title was transferred and assigned by Seller to Buyer hereunder on the related Purchase Date, that Buyer is the sole owner of such Purchased Asset, free and clear of any other interests or Liens created by Buyer.  Any Income with respect to such Purchased Asset received by Buyer or Deposit Account Bank after payment of the Repurchase Price therefor shall be remitted to Seller.  Notwithstanding the foregoing, (A) on or before the CMBS Purchased Asset Maturity Date, Seller shall repurchase all CMBS Purchased Assets by paying to Buyer the outstanding Repurchase Price therefor and all other related outstanding Repurchase Obligations, and (B) on or before the Maturity Date, Seller shall repurchase all remaining Purchased Assets by paying to Buyer the outstanding Repurchase Price therefor and all other outstanding Repurchase Obligations.

Section 3.06Payment of Price Differential and Fees.

(a)Notwithstanding that Buyer and Seller intend that each Transaction hereunder constitutea sale to Buyer of the Purchased Assets subject thereto, Seller shall pay to Buyer the accrued value of the Price Differential for each Purchased Asset on each Remittance Date.  Buyer shall give Seller notice of the Price Differential and any fees and other amounts due under the Repurchase Documents on or prior to the second (2nd) Business Day preceding each Remittance Date; provided, that Buyer’s failure to deliver such notice shall not affect (i) the accrual of such obligations in accordance with this Agreement or (ii) Seller’s obligation to pay such amounts.  If the Price Differential includes any estimated Price Differential, Buyer shall recalculate such Price Differential after the Remittance Date and, if necessary, make adjustments to the Price Differential amount due on the following Remittance Date.

(b)Seller shall pay to Buyer all fees and other amounts as and when due as set forth in this Agreement including, without limitation:

(i)the Non‑Utilization Fee, which shall be due and payable on an annual basis as set forth in the definition thereof;  provided that, with respect to any Non-Utilization Fee that becomes due and payableto Buyer by Seller, Buyer shall deliver to Seller a notice (which may be sent via facsimile or e-mail), setting forth (A) the amount due and (B) the calculations upon which such Non-Utilization Fee is based.

(ii)the Exit Fee, which will be due and payable in accordance with the provisions of Section 4of the Fee and Pricing Letter (as amended hereby);

(iii)the Structuring Fee, which shall be due and payable on the Closing Date; and

(iv)the Extension Fee, which shall be payable on the date of the exercise by Seller of each Non‑CMBS Extension Option.

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Section 3.07Extension of the Maturity Date.

(a)Seller shall have the options (each, an “Extension Option”) to (x) extend the Initial Maturity Date for an additional period of one year to the First Extended Maturity Date (the period of such first extension, the “First Extension Term”) and, (y) if the Initial Maturity Date has been so extended, to extend the First Extended Maturity Date for an additional consecutive period of one year to the Second Extended Maturity Date (the period of such second extension, the “SecondExtension Term”; together with the First Extension Term, collectively, the “Extension Terms”).  Each Extension Option may be exercised by delivery to Buyer from Seller of written notice requesting an extension of the Initial Maturity Date or First Extended Maturity Date, as applicable, no earlier than sixty (60) days and no later than thirty (30) days prior to the Initial Maturity Date or First Extended Maturity Date, as the case may be.Following the receipt of notice in the manner set forth herein, Buyer shall grant the applicable Extension Option,  subject to the requirement that, as of the Initial Maturity Date or First Extended Maturity Date, as applicable, each of the following conditions (collectively, the “Extension Conditions”) are satisfied, as determined by Buyer:  (i) no Default or Event of Default has occurred and is continuing, (ii) no Margin Deficit is outstanding, (iii) Seller is in compliance with the Debt Yield Test, (iv) all Purchased Assets qualify as Eligible Assets (or, if any Purchased Asset is not an Eligible Asset, Seller has repurchased such Purchased Asset no later than the earlier of (x) the then‑current Maturity Date, or (y) three (3) business days after the delivery of notice thereof from Buyer, provided that the failure of Buyer to deliver such written notice shall not be construed as a waiver of Buyer’s right to require Seller to satisfy all of the Extension Conditions), and (v) Seller has paid to Buyer theapplicable Extension Fee;  provided that, with respect to the Extension Condition set forth in clause (i), if a Default (but no Event of Default) has occurred and is continuing as of the Initial Maturity Date or First Extended Maturity Date, as the case may be, then the Initial Maturity Date or the First Extended Maturity Date, as applicable, shall be extended on an interim basis until the earlier of (x) the date such Default is cured to Buyer’s satisfaction (whereupon the applicable Extension Option shall be immediately effective and the then current Maturity Date shall be extended for the applicable Extension Term) or (y)the date that the applicable cure period for such Default expires and such Default has not been cured to Buyer’s satisfaction (in which case such Extension Option shall not be effective and the Maturity Date shall be deemed to immediately occur). 

(b)Seller shall have the optionto extend the CMBS Maturity Date for an additional period of one year by delivery to Buyer from Seller of written notice requesting an extension of the CMBS Maturity Date no earlier than sixty (60) days and no later than thirty (30) days prior to the CMBS Maturity Date,accompanied by a certification by a Responsible Officer of Seller that all of the Extension Conditions are satisfied or, if any of the Extension Conditions are not satisfied as of the date of such written notice, an explanation of how Seller proposes to comply with each such Extension Condition as of the CMBS Maturity Date.  Following the receipt of notice in the manner set forth herein, Buyer shall grant the applicable Extension Option,  subject to the requirement that, as of the CMBS Maturity Date,  each of theExtension Conditions, other than payment of the Extension Fee,are satisfied, as determined by Buyer;provided that, with respect to the Extension Condition set forth in clause (i) of such definition, if a Default (but no Event of Default) has occurred and is continuing as of the CMBS Maturity Date, then the CMBS Maturity Date shall be extended on an interim basis until the earlier of (x) the date such Default is cured to Buyer’s satisfaction (in which case such extension shall be deemed to have been granted) or (y)the date that the applicable cure period for such Default expires and such Default has not been cured to Buyer’s satisfaction (in which case such extension shall be deemed to have been denied and the CMBS Maturity Date shall be deemed to immediately occur).

(c)Notwithstanding any provision to the contrary set forth elsewhere in this Agreement, except for Future Funding Transactions which may be entered into by Buyer and Seller in connection with Trailing Future Funding Obligations in accordance with Section 3.10(d) hereof, no additional Transactions shall be entered into after the expiration of the Funding Period.

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(d)The terms and provisions governing further extensions of the Maturity Date under Section 3.07(d) are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

Section 3.08Payment, Transfer and Custody.

(a)Unless otherwise expressly provided herein, all amounts required to be paid or deposited by Seller hereunder shall be paid or deposited in accordance with the terms hereof no later than 3:00 p.m. on the day when due, in immediately available Dollars and without deduction, set-off or counterclaim, and if not received before such time shall be deemed to be received on the next Business Day.  Whenever any payment under the Repurchase Documents shall be stated to be due on a day other than a Business Day, such payment shall be made on the next following Business Day, and such extension of time shall in such case be included in the computation of such payment.  If Seller fails to pay all or part of any Repurchase Price amount by 5:00 p.m., New York City time on any date when due, Buyer may require Seller to pay (in addition to, and together with, such past-due Repurchase Price) a late fee equal to one percent (1%) of the total amount of the late payment, plus interest on such past due Repurchase Price as provided in Section 18.16, until any such past due Repurchase Price is received in full by Buyer.  Amounts payable to Buyer and not otherwise required to be deposited into the Waterfall Account shall be deposited into an account of Buyer.  Seller shall have no rights in, rights of withdrawal from, or rights to give notices or instructions regarding Buyer’s account or the Waterfall Account or any Servicing Agreement Account.  Amounts in the Servicing Agreement Account established and maintained in connection with the Servicing and Sub-Servicing Agreement may be invested at the direction and in the discretion of Buyer in cash equivalents before they are distributed in accordance with Article 5.

(b)Any Purchased Asset Documents not delivered to Buyer or Custodian on the relevant Purchase Date and subsequently received or held by or on behalf of Seller are and shall be held in trust by Seller or its agent for the benefit of Buyer as the owner thereof until so delivered to Buyer or Custodian.  Seller or its agent shall maintain a copy of such Purchased Asset Documents and the originals of the Purchased Asset Documents not delivered to Buyer or Custodian.  The possession of Purchased Asset Documents by Seller or its agent is in a custodial capacity only at the will of Buyer for the sole purpose of assisting Servicer and Sub‑Servicer with their duties under the Servicing and Sub‑Servicing Agreement or any other applicable Servicing Agreement.  Each Purchased Asset Document retained or held by Seller or its agent shall be segregated on Seller’s books and records from the other assets of Seller or its agent, and the books and records of Seller or its agent shall be marked to reflect clearly the sale of the related Purchased Asset to Buyer on a servicing‑released basis.  Seller or its agent shall release its custody of the Purchased Asset Documents only in accordance with written instructions from Buyer, unless such release is required as incidental to the servicing of the Purchased Assets by Servicer or is in connection with a repurchase of any Purchased Asset by Seller, in each case in accordance with the Custodial Agreement.

Section 3.09Repurchase Obligations Absolute.All amounts payable by Seller under the Repurchase Documents shall be paid without notice (except as expressly required in the Repurchase Documents), demand, counterclaim, set‑off, deduction or defense (as to any Person and for any reason whatsoever) and without abatement, suspension, deferment, diminution or reduction (as to any Person and for any reason whatsoever), and the Repurchase Obligations shall not be released, discharged or otherwise affected, except as expressly provided herein, by reason of:  (a) any damage to, destruction of, taking of, restriction or prevention of the use of, interference with the use of, title defect in, encumbrance on or eviction from, any Purchased Asset, the Pledged Collateral or related Mortgaged Property,  (b) any Insolvency Proceeding relating to Seller, any Underlying Obligor or any other loan participant under a Senior Interest or a Junior Interest, or any action taken with respect to any Repurchase Document, Purchased Asset Document by any trustee or receiver of Seller, any Underlying Obligor or any other loan participant under a Senior Interest or a Junior Interest, or by any court in any such proceeding, (c) any claim that Seller has or might have against Buyer under any Repurchase Document or otherwise, (d) any default or failure on the part of Buyer to perform or comply

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with any Repurchase Document or other agreement with Seller, (e) the invalidity or unenforceability of any Purchased Asset, Repurchase Document or Purchased Asset Document, or (f) any other occurrence whatsoever, whether or not similar to any of the foregoing, and whether or not Seller has notice or Knowledge of any of the foregoing.  The Repurchase Obligations shall be (i) full recourse to Seller and (ii) limited recourse to Guarantor to the extent of, and subject to the specified full-recourse provisions set forth in,the Guarantee Agreement.  This Section 3.09 shall survive the termination of the Repurchase Documents and the payment in full of the Repurchase Obligations.

Section 3.10Future Funding Transaction.Buyer’s agreement to enter into any Future Funding Transaction is subject to the satisfaction of the following conditions precedent, both immediately prior to entering into such Future Funding Transaction and also after giving effect to the consummation thereof:

(a)Prior to the Maturity Date (as may be extended pursuant to Section 3.07(a)) or the CMBS Maturity Date (without giving effect to any extension pursuant to Section 3.07(b)), Seller may request that Buyer enter into a Future Funding Transaction, by delivering a signed, written confirmation substantially in the form of Exhibit J attached hereto prior to the related Future Funding Date (each, a “Future Funding Confirmation”), signed by a Responsible Officer of Seller.  Each Future Funding Confirmation shall (i) identify the related Purchased Asset, (ii) specify the amount of the related future advance made or to be made by Seller to the Underlying Obligor and the requested Future Funding Amount, (iii) specify the Future Funding Date, (iv) specify the Book Value of the Purchased Asset before and after giving effect to the related future advance, (v) specify the Purchase Price of the Purchased Asset before and after giving effect to the requested Future Funding Amount and (vi) be executed by both Buyer (upon Buyer’s approval of such Future Funding Transaction) and Seller; provided,  however, that Buyer shall not be liable to Seller if it inadvertently acts on a Future Funding Confirmation that has not been signed by a Responsible Officer of Seller.  Each Future Funding Confirmation, together with this Agreement, shall be conclusive evidence of the terms of the Future Funding Transaction covered thereby.  If terms in a Future Funding Confirmation are inconsistent with terms in this Agreement with respect to a particular Future Funding Transaction, the terms of such Future Funding Confirmation shall prevail.  Notwithstanding any provision to the contrary in this Agreement, either expressed or implied, all future funding obligations set forth in any Purchased Asset Document are and shall at all times remain solely the obligations of Seller.

(b)For each proposed Future Funding Transaction, no less than seven (7) Business Days prior to the proposed Future Funding Date, Seller shall deliver to Buyer a Future Funding Request Package.  Buyer shall have the right to review the Future Funding Request Package and to update Buyer’s original due diligence and to conduct additional due diligence with respect to the applicable Purchased Asset/or the related Whole Loan, Senior Interest, Mezzanine Loan and/or Junior Interest as Buyer determines.  Prior to the approval of each proposed Future Funding Transaction by Buyer, Buyer shall have determined, in its sole and absolute discretion, that both at the time of such request and as of the Future Funding Date,  the related Purchased Asset (i) is not a Defaulted Asset, (ii) has a Debt Yieldthat is equal to or greater than the applicable Debt Yield Purchase Threshold, (iii) satisfies the Debt Yield Test, (iv) that the conditions precedent for a Transaction set forth in sub-paragraphs (b), (e), (f), (g) and (i) of Section 6.02 have been met by Seller, and (v) that all related conditions precedent set forth in the related Purchased Asset Documents have been satisfied.

(c)Upon the approval by Buyer of a particular Future Funding Transaction, Buyer shall deliver to Seller a signed copy of the related Future Funding Confirmation described in clause (i) above, on or before the related Future Funding Date.  On the related Future Funding Date, which shall occur no later than three (3) Business Days after the final approval of the Future Funding Transaction by Buyer (a) if Seller has not remitted to the applicable Underlying Obligor the applicable future advance amount due in connection with the related Future Funding Transaction pursuant to the Purchased Asset Documents on or prior to the Future Funding Date: (i) if an escrow agreement has been established in connection with such Future Funding Transaction, Buyer shall remit the related Future Funding Amount to the related escrow account, (ii) if the terms of the Purchased Asset

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Documents provide for a reserve account in connection with future advances, Buyer shall remit the related Future Funding Amount to the applicable reserve account, or (iii) otherwise, Buyer shall remit the related Future Funding Amount directly to the related Underlying Obligor; or (b) if Seller has provided Buyer with evidence satisfactory to it that Seller has remitted to the applicable Underlying Obligor the full amount due in connection with the related Future Funding Transaction on or prior to the Future Funding Date, Buyer shall remit such Future Funding Amount directly to Seller.

(d)If Seller applies to extend the Maturity Date to the Second Extension Termination Date in accordance with Section 3.07(a) within the time period permitted thereunder, Seller shall submit to Buyer a list of all Purchased Assets with unfunded future funding obligations and provide such other related information as requested by Buyer.  Buyer shall have the option to approve or reject any or all of the items on Seller’s list, as determined in its discretion on or before the first day of the Second Extension Term.  All of the approved items, if any, on Seller’s list shall, immediately thereafter, be incorporated by reference into this Agreement as Schedule 3 hereto and thereafter, each such approved item shall be referred to as a “Trailing Future Funding Obligation”.    During the Second Extension Term, Seller shall be permitted to request Future Funding Transactions which constitute Trailing Future Funding Obligations, so long as each such unfunded Future Funding Transaction satisfies all of the terms, conditions and requirements set forth in Section 3.10(b) other than the requirement that the Funding Period has not expired, so long as each such Future Funding Transaction is entered into prior to the last day of the Second Extension Term.

Section 3.11Additional Purchase Advance Transactions.

(a)Prior to the Maturity Date (as same may be extended through to the First Extended Maturity Date), Seller may request that Buyer increase the Maximum Applicable Percentage for any Purchased Asset other than a CMBS Purchased Asset,by written request delivered no less than seven (7) Business Days prior to the proposed date for the requested additional advance that would be based on such increased percentage (each such transaction pursuant to which such an advance is made, an “Additional Purchase Advance Transaction” and the amount advanced in any such transaction, an  “Additional Purchase Advance”).  In connection with any such Additional Purchase Advance Transaction, Buyer and Seller shall execute and deliver to each other an updated Confirmation setting forth the new Maximum Applicable Percentage and outstanding Purchase Price with respect to such Purchased Asset. 

(b)Any Additional Purchase Advance Transaction shall be entered into only if Buyer agrees to do so in its discretion, it being understood without limiting the generality of the foregoing that Buyer’s agreement to enter into any Additional PurchaseAdvance Transaction is subject to the satisfaction of the following conditions precedent, both immediately prior to entering into the related Additional Purchase Advance Transaction and also after giving effect to the consummation thereof: (i) no Margin Deficit, Default or Event of Default exists, (ii)  the aggregate outstanding Purchase Price of all Purchased Assets subject to Transactions then outstanding does not exceed the Maximum Amount, (iii) no Sub-Limit is exceeded, (iv) theamount of such Additional Purchase Advance does not exceed the Additional Purchase Advance Available Amount and (v) no Material Adverse Effect has occurred and is continuing.

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ARTICLE 4


MARGIN MAINTENANCE

Section 4.01Margin Deficit.

(a)If on any date (i) the Market Value for any Purchased Asset (as determined by Buyer) is less than (ii) the product of (A) the applicable Buyer’s Margin Percentage times (B) the outstanding Purchase Price for such Purchased Asset as of such date (the excess, if any, of (ii) over (i), a “Margin Deficit”), then Seller shall, within three (3) Business Days after notice from Buyer (a “Margin Call”), transfer cash to Buyer in an amount at least equal to such Margin Deficit.  Buyer shall apply the funds received in satisfaction of a Margin Deficit to the Repurchase Obligations in such manner as Buyer determines, to amounts due and owing under the Repurchase Documents on such date.  Additional terms and provisions governing Margin Deficits and Margin Calls under this Section 4.01(a) are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

(b)Buyer’s election not to deliver, or to forbear from delivering,a Margin Call notice at any time there is a Margin Deficit shall not waive or be deemed to waive such Margin Deficit or in any way limit, stop or impair Buyer’s right to deliver a Margin Call notice at any time when the same or any other Margin Deficit exists on the same or any other Purchased Asset (and the conditions to delivery of such Margin Call under Section 4.01(a) above are satisfied).  Buyer’s rights relating to Margin Deficits under this Section 4.01 are cumulative and in addition to and not in lieu of any other rights of Buyer under the Repurchase Documents or Requirements of Law.

(c)All cash transferred to Buyer pursuant to this Section 4.01 with respect to a Purchased Asset shall be deposited into the Waterfall Account, except as directed by Buyer, and notwithstanding any provision in Section 5.02 to the contrary, shall be applied to reduce the Purchase Price of such Purchased Asset.

ARTICLE 5


APPLICATION OF INCOME

Section 5.01Waterfall Account; Servicing Agreement Accounts.  The Waterfall Account and theServicing Agreement Account maintained under the Servicing and Sub-Servicing Agreement shall be established at Deposit Account Bank.  The customary related fees and expenses of Deposit Account Bank in connection with maintaining the Waterfall Account and the Servicing Agreement Account established and maintained under the Servicing and Sub-Servicing Agreement will be the sole responsibility of Seller.  Buyer shall have sole dominion and control (including, without limitation, “control” within the meaning of Section 9-104(a) of the UCC) over the Waterfall Account and the Servicing Agreement Accountestablished and maintained under the Servicing and Sub-Servicing Agreement.  Neither Seller nor any Person claiming through or under Seller shall have any claim to or interest in the Waterfall Account or any Servicing Agreement Account maintained at Wells Fargo Bank, N.A.  All Income received by Seller, each Servicer, Sub-Servicer, Buyer or Deposit Account Bank in respect of the Purchased Assets, as well as any interest received from the reinvestment of such Income (other than amounts of reinvestment income permitted to be retained by Servicer as additional servicing compensation in accordance with Section 3.03(c) of the Servicing and Sub‑Servicing Agreement or pursuant to the applicable provisions of any other Servicing Agreement and the related Irrevocable Redirection Notice signed by the related Servicer), shall be deposited directly into the Waterfall Account, except that, in the case of amounts deposited by Servicer, such deposits to the Waterfall Account shall occur from the Servicing Agreement Account established and maintained in connection with the Servicing and Sub-Servicing Agreement in accordance with Section 3.04(a)(iv) of the Servicing and Sub‑Servicing

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Agreement or in accordance with the applicable provisions of any other applicable Servicing Agreement and the related Irrevocable Redirection Notice signed by the related Servicer, and shall be applied to and remitted by Deposit Account Bank in accordance with this Article 5.  If any Underlying Obligor shall make any payment due in connection with any Purchased Asset to Seller, Seller shall cause such payment to be deposited or transferred to the Waterfall Account within two (2) Business Days.  Notwithstanding the foregoing, so long as the Servicing and Sub‑Servicing Agreement is in full force and effect and Manager is acting as Sub‑Servicer thereunder, all amounts to be paid or are otherwise received from, or on behalf of, a related Underlying Obligor shall be paid directly to the Servicing Agreement Account established and maintained in connection with the Servicing and Sub-Servicing Agreement or pursuant to the applicable provisions of any other Servicing Agreement or in accordance with the applicable provisions of any other applicable Servicing Agreementand, thereafter, remitted to the Waterfall Account in accordance with the terms of the Servicing and Sub‑Servicing Agreement.  With respect to any Purchased Asset that was originated by Seller, Seller shall establish and maintain at all times the Collection Account(s) relating to such Purchased Asset at Deposit Account Bank.

Section 5.02No Material Default or Event of Default Exists; Maximum Amount Not Exceeded; Second Extended Maturity Date Has Not Occurred.  If no Material Default or Event of Default exists, and the aggregate Repurchase Price of all Purchased Assets subject to Transactions then outstanding is less than or equal to the Maximum Amount and the Second Extended Maturity Date has not occurred, all Income described in Section 5.01 and deposited into the Waterfall Account during each Pricing Period shall be applied by Deposit Account Bank by no later than the next following Remittance Date (except as otherwise expressly provided below) in the following order of priority:

first, to pay all then-currently due and payable servicing fees to Buyer (or its designated Servicer), and to reimburse Buyer (or its designated Servicer) for any and all costs, expenses, advances and similar amounts incurred by Buyer (or its designated Servicer) in connection with the servicing of the Purchased Assets;

second, to the extent such payments are actually remitted by the Underlying Obligor to the Waterfall Account, to remit the tax (and insurance, if applicable) escrow portion and any tenant improvement, capital expenditure or other reserve portion of any payments received from each Underlying Obligor to the respective escrow agents pursuant to the escrow agreements or the Purchased Asset Documents for the underlying Whole Loans, and whether or not any event of default exists with respect to the related Whole Loan;

third, to pay to Buyer an amount equal to the Price Differential accrued with respect to all Purchased Assets as of such Remittance Date;

fourth, to pay to Buyer an amount equal to all default interest, late fees, fees, expenses and Indemnified Amounts then due and payable from Seller and other applicable Persons to Buyer under the Repurchase Documents;

fifth, to pay to Buyer an amount sufficient to eliminate any outstanding Margin Deficit (without limiting Seller’s obligation to satisfy a Margin Deficit in a timely manner as required by Section 4.01);

sixth, to pay any custodial fees and expenses due and payable under the Custodial Agreement;

seventh, (A) for each Purchased Asset other than, on and after January 27, 2015, CMBS Purchased Assets, to pay the Applicable Percentage of any Principal Payment to Buyer, but only to the extent that such remittance would not result in the creation of a Margin Deficit, to be applied by Buyer within one (1) Business Day of receipt to reduce the outstanding Purchase Price of the applicable Purchased Asset, with the balance of such Principal Payment to be paid to Seller within three (3) Business Days of receipt;

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eighth,  for each CMBS Purchased Asset on and after January 27, 2015, to pay 100% of all Income payments received with respect to any CMBS Purchased Asset to Buyer, to be applied by Buyer within one Business Day of receipt to reduce the outstanding Repurchase Price of the applicable CMBS Purchased Asset and, after payment in full of such Purchase Price, any remaining portion of such Principal Payment shall be applied to the outstanding Purchase Price of the other CMBS Purchased Assets in such order and in such amounts as determined by Buyer, until the aggregate Repurchase Price of all CMBS Purchased Assets has been reduced to zero;

ninth, to pay Buyer any other amounts due and payable from Seller and other applicable Persons to Buyer under the Repurchase Documents; and

tenth, to pay to Seller any remainder for its own account, subject, however, to the covenants and other requirements of the Repurchase Documents.

Section 5.03A Material Default or Event of Default Exists; Maximum Amount Exceeded; Second Extended Maturity Date Has Occurred.If a Material Default or an Event of Default exists, or the aggregate Repurchase Price of all Purchased Assets subject to Transactions then outstanding exceeds the Maximum Amount,  or the Second Extended Maturity Date has occurred, all Income deposited into the Waterfall Account in respect of the Purchased Assets shall be applied by Deposit Account Bank, on the Business Day next following the Business Day on which each amount of Income is so deposited, in the following order of priority:

first, to pay all then-currently due and payable servicing fees to Buyer (or its designated Servicer), and to reimburse Buyer (or its designated Servicer) for any and all costs, expenses, advances and similar amounts incurred by Buyer (or its designated Servicer) in connection with the servicing of the Purchased Assets;

second, to the extent such payments are actually remitted by the Underlying Obligor to the Waterfall Account, to remit the tax (and insurance, if applicable) escrow portion of any payments received from each Underlying Obligor to the respective escrow agents pursuant to the escrow agreements or other Purchased Asset Documents for the related Whole Loan, and whether or not any event of default exists with respect to the related Whole Loan;

third, to pay to Buyer an amount equal to the Price Differential accrued with respect to all Purchased Assets as of such Remittance Date;

fourth, to pay to Buyer an amount equal to all default interest, late fees, fees, expenses and Indemnified Amounts then due and payable from Seller and other applicable Persons to Buyer under the Repurchase Documents;

fifth, to pay any custodial fees and expenses due and payable under the Custodial Agreement;

sixth, to pay to Buyer an amount equal to the aggregate Repurchase Price of all Purchased Assets (to be applied in such order and in such amounts as determined by Buyer, until such Purchase Price has been reduced to zero) plus all other amounts due to Buyer under the Repurchase Documents;

seventh, to pay to Buyer all other Repurchase Obligations and each of the Related Repurchase Obligations due to Buyer, in such order and in such amounts as Buyer shall determine in its discretion; and

eighth, to pay to Seller any remainder for its own account.

Section 5.04Seller to Remain Liable.  If the amounts remitted to Buyer as provided in Sections 5.02 and 5.03 are insufficient to pay all amounts due and payable from Seller to Buyer under this

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Agreement or any Repurchase Document on a Remittance Date, a Repurchase Date or Maturity Date, whether due to the occurrence of an Event of Default or otherwise, Seller shall remain liable to Buyer for payment of all such amounts when due.

ARTICLE 6


CONDITIONS PRECEDENT

Section 6.01Conditions Precedent to Initial Transaction.  Buyer shall not be obligated to enter into any Transaction or purchase any Asset until the following conditions have been satisfied as determined, or waived by Buyer, on and as of the Closing Date:

(a)Buyer has received the following documents, each dated as of the Closing Date unless otherwise specified:  (i) each Repurchase Document duly executed and delivered by the parties thereto, (ii) an official good standing certificate or its documentary equivalent dated a recent date with respect to Seller and Guarantor (including, with respect to Seller, in each jurisdiction where any Mortgaged Property is located to the extent necessary for Buyer to enforce its rights and remedies thereunder), (iii) certificates of the secretary or an assistant secretary of Seller and Guarantor with respect to attached copies of the Governing Documents and applicable resolutions of Seller and Guarantor, and the incumbencies and signatures of officers of Seller and Guarantor executing the Repurchase Documents to which each is a party, evidencing the authority of Seller and Guarantor with respect to the execution, delivery and performance thereof, (iv) a Closing Certificate, (v) an executed Power of Attorney, (vi) such opinions from counsel to Seller and Guarantor as Buyer may require, including with respect to corporate matters (including, without limitation, the valid existence and good standing of Seller, Guarantor and Pledgor and the enforceability of their respective operating agreements), the due authorization, execution, delivery and enforceability of each of the Repurchase Documents, non-contravention, no consents or approvals required other than those that have been obtained, first priority perfected security interests in the Purchased Assets, the Pledged Collateral and any other collateral pledged pursuant to the Repurchase Documents, Investment Company Act matters, and the applicability of Bankruptcy Code safe harbors, (vii) a duly completed Compliance Certificate, and (viii)all other documents, certificates, information, financial statements, reports, approvals and opinions of counsel as Buyer may require;

(b)(i) UCC financing statements have been filed against Seller and Pledgor in all filing offices required by Buyer, (ii) Buyer has received such searches of UCC filings, tax liens, judgments, pending litigation and other matters relating to Seller and the Purchased Assets as Buyer may require, (iii) the results of such searches are satisfactory to Buyer and (iv) all original certificates evidencing all ownership interests in Seller, which interests shall be in certificated form pursuant to Section 8-103 of the UCC, together with executed original copies of all necessary blank transfer documents, have been delivered to Custodian; and

(c)Buyer has received payment from Seller of all fees and expenses then payable under this Agreement, as contemplated by Section 13.02 and by the applicable provisions of the Fee and Pricing Letter.

Section 6.02Conditions Precedent to All Transactions.  Buyer shall not be obligated to enter into any Transaction, purchase any Asset, or be obligated to take, fulfill or perform any other action hereunder, until the following additional conditions have been satisfied as determined by or waived by Buyer, with respect to each Asset on and as of the Purchase Date (including the first Purchase Date) therefor:

(a)Buyer has received the following documents for each prospective Purchased Asset:  (i) a Transaction Request, (ii) an Underwriting Package, (iii) a Confirmation, (iv) the related Servicing Agreement(s), if a copy was not previously delivered to Buyer, (v) fully executed Irrevocable Redirection Notices, except to the extent set forth in Section 8.18,  (vi) a trust receipt and other items required to be delivered under the Custodial Agreement, (vii) with respect to any Wet Mortgage Asset, a Bailee Agreement, and (viii) all other documents,

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certificates, information, financial statements, reports and approvals as Buyer may require (provided,  however, that with respect to any Wet Mortgage Asset, delivery of the foregoing items in accordance with the provisions of Sections 3.01(g) and (h) shall be deemed to satisfy the conditions of this Section 6.01(a) (unless otherwise determined in the discretion of Buyer));

(b)immediately before such Transaction and after giving effect thereto and to the intended use thereof, no Representation Breach (including with respect to any Purchased Asset), Default, Event of Default, Margin Deficit or Material Adverse Effect exists;

(c)Buyer has completed its due diligence review of the Underwriting Package, Purchased Asset Documents and such other documents, records and information as Buyer deems appropriate, and the results of such reviews are satisfactory to Buyer;

(d)Buyer has (i) determined that such Asset is an Eligible Asset, (ii) approved the purchase of such Asset, (iii) obtained all necessary internal credit and other approvals for such Transaction, and (iv) executed the Confirmation;

(e)immediately after giving effect to such Transaction, the aggregate outstanding Purchase Price of all Transactions does not exceed the Maximum Amount;

(f)the Repurchase Date specified in the Confirmation is not later than (i) for all Purchased Assets other than CMBS Purchased Assets, the Maturity Date, and (ii) for all CMBS Purchased Assets, the CMBS Purchased Asset Maturity Date;

(g)Seller has satisfied all requirements and conditions and has performed all covenants, duties, obligations and agreements contained in the other Repurchase Documents to be performed by Seller on or before the Purchase Date;

(h)to the extent the related Purchased Asset Documents contain notice, cure and other provisions in favor of a pledgee under a repurchase or warehouse facility, and without prejudice to the sale treatment of such Asset to Buyer, Buyer has received satisfactory evidence that Seller has given notice to the applicable Persons of Buyer’s interest in such Asset and otherwise satisfied any other applicable requirements under such pledgee provisions so that Buyer is entitled to the rights and benefits of a pledgee under such pledgee provisions;

(i)(i) Buyer has received a copy of any Interest Rate Protection Agreement and related documents entered into with respect to such Asset, (ii) the related Seller Party has assigned or pledged to Buyer all of assignor’s rights (but none of its obligations) under such Interest Rate Protection Agreement and related documents, and (iii) no termination event, default or event of default (however defined) exists thereunder;

(j)Custodian shall have received executed blank assignments of all Purchased Asset Documents, if applicable, in appropriate form for recording in the jurisdiction in which the underlying real estate is located(the “Blank Assignment Documents”); and

(k)For all Assets acquired from or originated by (whether directly or indirectly) an Affiliate of Seller (other than any Asset acquired directly or indirectly from and/or originated by Guarantor or any Intermediate Starwood Entity), if requested by Buyer, a true sale opinion from counsel to Seller in form and substance reasonably satisfactory to Buyer.

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Each Confirmation delivered by Seller shall constitute a certification by Seller that all of the conditions precedent in this Article 6 have been satisfied, unless any such condition precedent was expressly waived in the related Confirmation.

The failure of Seller to satisfy any of the conditions precedent in this Article 6 with respect to any Transaction or Purchased Asset shall, unless such failure was set forth in an exceptions schedule to the relevant Confirmation or otherwise waived in writing by Buyer on or before the related Purchase Date, give rise to the right of Buyer at any time to rescind the related Transaction, whereupon Seller shall immediately pay to Buyer the Repurchase Price of such Purchased Asset.

ARTICLE 7


REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants, on and as of the date of this Agreement, each Purchase Date, and at all times when any Repurchase Document or Transaction is in full force and effect, as follows:

Section 7.01Seller.  Seller has been duly organized and validly exists in good standing as a limited liability company under the laws of the State of Delaware.  Seller (a) has all requisite power, authority, legal right, licenses and franchises, (b) is duly qualified to do business in all jurisdictions necessary, and (c) has been duly authorized by all necessary action, to (w) own, lease and operate its properties and assets, (x) conduct its business as presently conducted, (y) execute, deliver and perform its obligations under the Repurchase Documents to which it is a party, and (z) originate, service, acquire, own, sell, assign, pledge and repurchase the Purchased Assets.  Seller’s exact legal name is set forth in the preamble and signature pages of this Agreement.  Seller’s location (within the meaning of Article 9 of the UCC), and the office where Seller keeps all records (within the meaning of Article 9 of the UCC) relating to the Purchased Assets is at the address of Seller referred to in Annex 1.  Seller has not changed its name or location within the past twelve (12) months.  Seller 2’s organizational identification number is 4792057 and its tax identification number is 27-2143719.  Seller 2-A’s organizational identification number is 4942463 and its tax identification number is 27-5082708.  Seller 2 is a wholly‑owned Subsidiary of Starwood Property Mortgage, L.L.C., a Delaware limited liability company.  Seller 2-A is a wholly-owned Subsidiary of Starwood Property Mortgage BC, L.L.C., a Delaware limited liability company.  The fiscal year of Seller is the calendar year.  Seller has no Indebtedness, Contractual Obligations or investments other than (a) ordinary trade payables, (b) in connection with Assets acquired or originated for the Transactions, and (c) the Repurchase Documents.  Each of Seller  2 and Seller 2-A have no Guarantee Obligations.  Each of Seller 2  and Seller 2-A have no Subsidiaries.

Section 7.02Repurchase Documents.  Each Repurchase Document to which Seller is a party has been duly executed and delivered by Seller and constitutes the legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms, except as such enforceability may be limited by Insolvency Laws and general principles of equity. The execution, delivery and performance by Seller of each Repurchase Document to which it is a party do not and will not (a) conflict with, result in a breach of, or constitute (with or without notice or lapse of time or both) a default under, any (i) Governing Document, Indebtedness, Guarantee Obligation or Contractual Obligation applicable to Seller or any of its properties or assets, (ii) Requirements of Law, or (iii) approval, consent, judgment, decree, order or demand of any Governmental Authority, or (b) result in the creation of any Lien (other than, except with respect to any Purchased Asset, any Liens granted pursuant to or by the Repurchase Documents) on any of the properties or assets of Seller.  All approvals, authorizations, consents, orders, filings, notices or other actions of any Person or Governmental Authority required for the execution, delivery and performance by Seller of the Repurchase Documents to which it is a party and the sale of and grant of a security interest in each Purchased Asset to Buyer, have been obtained, effected, waived or given and are in full force and effect.  The execution, delivery and performance of the Repurchase Documents do not require compliance by Seller with any “bulk sales” or

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similar law.  Except asdisclosed to Buyer by or on behalf of Seller in writing priorto the Closing Date or, as applicable, the related Purchase Date for each Transaction, there is no material litigation, proceeding or investigation pending or, to Seller’s Knowledge, threatened, against Seller, Manager, any Intermediate Starwood Entity or Guarantor before any Governmental Authority (a) asserting the invalidity of any Repurchase Document, (b) seeking to prevent the consummation of any Transaction, or (c) seeking any determination or ruling that could reasonably be expected to have a Material Adverse Effect.

Section 7.03Solvency.  None of Seller, Manager, any Intermediate Starwood Entity or Guarantor is or has ever been the subject of an Insolvency Proceeding.  Seller, Manager, each Intermediate Starwood Entity and Guarantor are Solvent and the Transactions do not and will not render Seller, Manager, any Intermediate Starwood Entity or Guarantor not Solvent.  Seller is not entering into the Repurchase Documents or any Transaction with the intent to hinder, delay or defraud any creditor of Seller, Manager, any Intermediate Starwood Entity or Guarantor.  Seller has received or will receive reasonably equivalent value for the Repurchase Documents and each Transaction.  Seller has adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.  Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due.

Section 7.04Taxes.Seller, Manager, each Intermediate Starwood Entity and Guarantor have filed all required federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by them and have paid all material taxes (including mortgage recording taxes), assessments, fees, and other governmental charges payable by them, or with respect to any of their properties or assets, which have become due, and income or franchise taxes have been paid or are being contested in good faith by appropriate proceedings diligently conducted and for which appropriate reserves have been established in accordance with GAAP.  Seller, Manager, each Intermediate Starwood Entity and Guarantor have paid, or have provided adequate reserves for the payment of, all such taxes for all prior fiscal years and for the current fiscal year to date.  There is no material action, suit, proceeding, investigation, audit or claim relating to any such taxes now pending or, to Seller’s Knowledge, threatened by any Governmental Authority which is not being contested in good faith as provided above.  None of Seller, Manager, any Intermediate Starwood Entity or Guarantor has entered into any agreement or waiver or been requested to enter into any agreement or waiver extending any statute of limitations relating to the payment or collection of taxes, or is aware of any circumstances that would cause the taxable years or other taxable periods of Seller, Manager, any Intermediate Starwood Entity or Guarantor not to be subject to the normally applicable statute of limitations.  No tax liens have been filed against any assets of Seller, Manager, any Intermediate Starwood Entity or Guarantor.  Seller does not intend to treat any Transaction as being a “reportable transaction” as defined in Treasury Regulation Section 1.6011–4.  If Seller determines to take any action inconsistent with such intention, it will promptly notify Buyer, in which case Buyer may treat each Transaction as subject to Treasury Regulation Section 301.6112–1 and will maintain the lists and other records required thereunder.

Section 7.05Financial Condition.  The audited balance sheet of Guarantor as at the fiscal year most recently ended for which such audited balance sheet is available, and the related audited statements of income and retained earnings and of cash flows for the fiscal year then ended, setting forth in each case in comparative form the figures for the previous year, reported on without a “going concern” or like qualification arising out of the audit conducted by Guarantor’s independent certified public accountants, copies of which have been delivered to Buyer, are complete and correct and present fairly the financial condition of Guarantor as of such date and the results of its operations and cash flows for the fiscal year then ended.  All such financial statements, including related schedules and notes, were prepared in accordance with GAAP except as disclosed therein.  Guarantor does not have any material contingent liability or liability for taxes or any long term lease or unusual forward or long term commitment, including any Derivative Contract, which is not reflected in the foregoing statements or notes. 

Section 7.06True and Complete Disclosure.  The information, reports, certificates, documents, financial statements, operating statements, forecasts, books, records, files, exhibits and schedules furnished by or on behalf of Seller to Buyer in connection with the Repurchase Documents and the Transactions, when taken

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as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading.  All written information furnished after the date hereof by or on behalf of Seller to Buyer in connection with the Repurchase Documents and the Transactions will be true, correct and complete in all material respects, or in the case of projections will be based on reasonable estimates prepared and presented in good faith, on the date as of which such information is stated or certified.

Section 7.07Compliance with Laws.  Seller has complied in all material respects with all Requirements of Laws, and, to Seller’s Actual Knowledge, no Purchased Asset contravenes any Requirements of Laws.  None of Seller 2-A, Seller 2  nor any Affiliate of either Seller (a) is an “enemy” or an “ally of the enemy” as defined in the Trading with the Enemy Act of 1917, (b) is in violation of any Anti‑Terrorism Laws, (c) is a blocked person described in Section 1 of Executive Order 13224 or to its Knowledge engages in any dealings or transactions or is otherwise associated with any such blocked person, (d) is in violation of any country or list based economic and trade sanction administered and enforced by the Office of Foreign Assets Control, (e) is a Sanctioned Entity, (f) has more than ten percent (10%) of its assets located in Sanctioned Entities, or (g) derives more than ten percent (10%) of its operating income from investments in or transactions with Sanctioned Entities.  The proceeds of any Transaction have not been and will not be used to fund any operations in, finance any investments or activities in or make any payments to a Sanctioned Entity. Seller is a “qualified purchaser” as defined in the Investment Company Act.  None of Seller, Manager, any Intermediate Starwood Entity or Guarantor (a) is or is controlled by an “investment company” as defined in such Act or is exempt from the provisions of the Investment Company Act, (b) is a “broker” or “dealer” as defined in, or could be subject to a liquidation proceeding under, the Securities Investor Protection Act of 1970, or (c) is subject to regulation by any Governmental Authority limiting its ability to incur the Repurchase Obligations.  No properties presently or previously owned or leased by Seller, Manager, any Intermediate Starwood Entity or Guarantor, or any of their respective predecessors contain or previously contained any Materials of Environmental Concern that constitute or constituted a violation of Environmental Laws or reasonably could be expected to give rise to liability of Seller, Manager, any Intermediate Starwood Entity or Guarantor thereunder.  Seller has no Actual Knowledge of any violation, alleged violation, non‑compliance, liability or potential liability of Seller, Manager, any Intermediate Starwood Entity or Guarantor under any Environmental Law.  Materials of Environmental Concern have not been released, transported, generated, treated, stored or disposed of in violation of Environmental Laws or in a manner that reasonably could be expected to give rise to liability of Seller, Manager, any Intermediate Starwood Entity or Guarantor thereunder.  Seller and all Affiliates of Seller are in compliance with the Foreign Corrupt Practices Act of 1977 and any foreign counterpart thereto.  Neither Seller nor any Affiliate of Seller has made, offered, promised or authorized a payment of money or anything else of value (a) in order to assist in obtaining or retaining business for or with, or directing business to, any foreign official, foreign political party, party official or candidate for foreign political office, (b) to any foreign official, foreign political party, party official or candidate for foreign political office, or (c) with the intent to induce the recipient to misuse his or her official position to direct business wrongfully to Seller, any Affiliate of Seller or any other Person, in violation of the Foreign Corrupt Practices Act.

Section 7.08Compliance with ERISA.(a)  Neither Seller has any employees as of the date of this Agreement.

(b)Each of Seller and Guarantor either (i) qualifies as a VCOC or a REOC, (ii) complies with an exception set forth in the Plan Asset Regulations such that the assets of such Person would not be subject to Title I of ERISA and/or Section 4975 of the Code, or (iii) does not hold any “plan assets” within the meaning of the Plan Asset Regulations that are subject to ERISA.

(c)Assuming that no portion of the Purchased Assets are funded by Buyer with “plan assets” within the meaning of the Plan Asset Regulations, none of the transactions contemplated by the Repurchase Documents will constitute a nonexempt prohibited transaction (as such term is defined in Section 4975 of the

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Code or Section 406 of ERISA) that could subject the Buyer to any tax or penalty or prohibited transactions imposed under Section 4975 of the Code or Section 502(i) of ERISA.

Section 7.09No Default or Material Adverse Effect.As of the Closing Date and as of the Purchase Date for each Transaction hereunder, no Event of Default and, to Seller’s Knowledge, no Default exists.  Seller believes that it is and will be able to pay and perform each agreement, duty, obligation and covenant contained in the Repurchase Documents and Purchased Asset Documents to which it is a party, and except as disclosed to Buyer by or on behalf of Seller in writing prior tothe Closing Date or, as applicable,the related Purchase Date for each Transaction, that it is not subject to any agreement, obligation, restriction or Requirements of Law which would unduly burden its ability to do so or could reasonably be expected to have a Material Adverse Effect.  Except as disclosed to Buyer by or on behalf of Seller in writing,prior to the Closing Date or, as applicable,the related Purchase Date for each Transaction,Seller has no Knowledge of any actual or prospective development, event or other fact that could reasonably be expected to have a Material Adverse Effect.  No Internal Control Event has occurred.

Section 7.10Purchased Assets.Each Purchased Asset is an Eligible Asset.  Each representation and warranty of Seller set forth in the Repurchase Documents (including those set forth in Schedule 1(a),  1(b),  1(c) or 1(d) applicable to the Class of such Purchased Asset) and the Purchased Asset Documents with respect to each Purchased Asset is true and correct.  Seller has delivered to Custodian true, correct and complete copies of the Purchased Asset Documents, as applicable, relating to each Purchased Asset.  Except as disclosed to Buyer by or on behalf of Seller in writing, Seller has no Actual Knowledge of any fact which could reasonably lead it to expect that any Purchased Asset will not be paid in full.  None of the Purchased Asset Documents has any marks or notations indicating that it has been sold, assigned, pledged, encumbered or otherwise conveyed to any Person other than Buyer.  If any Purchased Asset Document requires the holder or transferee of the related Purchased Asset to be a qualified transferee, qualified institutional lender or qualified lender (however defined), Seller meets such requirement.  Assuming that Buyer also meets such requirement, the assignment and pledge of such Purchased Asset to Buyer pursuant to the Repurchase Documents do not violate such Purchased Asset Document.  Seller and all Affiliates of Seller (a) have sold and transferred all Servicing Rights with respect to the Purchased Assets to Buyer, and (b) have no Retained Interests.

Section 7.11Purchased Assets Acquired from Transferors.With respect to each Purchased Asset purchased by Seller or an Affiliate of Seller from a Transferor, (a) such Purchased Asset was acquired and transferred pursuant to a Purchase Agreement, (b) such Transferor received reasonably equivalent value in consideration for the transfer of such Purchased Asset, (c) no such transfer was made for or on account of an antecedent debt owed by such Transferor to Seller or an Affiliate of Seller, (d) no such transfer is or may be voidable or subject to avoidance under the Bankruptcy Code, and (e) the representations and warranties made by such Transferor to Seller or such Affiliate in such Purchase Agreement are hereby incorporated herein mutatismutandis and are hereby remade by Seller to Buyer on each date as of which they speak in such Purchase Agreement.

Section 7.12Transfer and Security Interest.The Repurchase Documents constitute a valid and effective transfer to Buyer of all right, title and interest of Seller in, to and under all Purchased Assets (together with all related Servicing Rights), free and clear of any Liens, subject only tothe Permitted Liens described in clause (d) of the definition thereof.  With respect to the protective security interest granted by Seller in Section 11.01, upon the delivery of the Confirmations and the Purchased Asset Documents to Custodian, the execution and delivery of the Controlled Account Agreement and the filing of the UCC financing statements as provided herein, such security interest shall be a valid first priority perfected security interest to the extent such security interest can be perfected by possession, filing or control under the UCC (other than Liens granted pursuant to or by the Repurchase Documents).  Upon receipt by Custodian of each Purchased Asset Document required to be endorsed in blank by Seller and payment by Buyer of the Purchase Price for the related Purchased Asset, Buyer shall either (a) own such Purchased Asset and the related Purchased Asset Documents or (b) have a valid first priority perfected security interest in such Purchased Asset and the related Purchased

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Asset Documents.  At Buyer’s election (and at Buyer’s sole cost and expense, or if completed and recorded following a Material Default or Event of Default, at Seller’s sole cost and expense), Buyer or any nominee or agent of Buyer may complete and record any or all of the Blank Assignment Documents as further evidence of Buyer’s ownership interest in the related Purchased Asset Documents.Seller has not authorized the filing of and is not aware of any UCC financing statements filed against Seller as debtor that include the Purchased Assets, other than any financing statement that has been terminated or filed pursuant to this Agreement.

Section 7.13No Broker.  Neither Seller nor any Affiliate of Seller has dealt with any broker, investment banker, agent or other Person, except for Buyer or an Affiliate of Buyer, who may be entitled to any commission or compensation in connection with any Transaction.

Section 7.14Separateness.  Seller is in compliance with the requirements of Article 9.

Section 7.15Interest Rate Protection Agreements.(a) Any Interest Rate Protection Agreement entered into with respect to any Purchased Asset is in full force and effect, (b)no termination event, default or event of default (however defined) exists thereunder, and (c)the related Seller Party has effectively collaterally assignedto Buyer all of such Seller Party’s rights (but none of its obligations) under each such Interest Rate Protection Agreement.

Section 7.16Investment Company Act.None of Seller, Guarantor or any Affiliate of Seller or Guarantor is an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act, or otherwise required to register thereunder.

ARTICLE 8


COVENANTS OF SELLER

From the date hereof until the Repurchase Obligations are indefeasibly paid in full and the Repurchase Documents are terminated, Seller shall perform and observe the following covenants, which shall be given independent effect:

Section 8.01Existence; Governing Documents; Conduct of Business.  Seller shall (a) preserve and maintain its legal existence, (b) qualify and remain qualified in good standing in each jurisdiction where the failure to be so qualified would have a Material Adverse Effect, (c) comply with its Governing Documents, including all special purpose entity provisions, and (d) not modify, amend or terminate its Governing Documents in any material respect, without Buyer’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed.  Seller shall (a) continue to engage in the same (and no other) general lines of business as presently conducted by it, (b) maintain and preserve all of its material rights, privileges, licenses and franchises necessary for the operation of its business, and (c) maintain Seller’s status as a qualified transferee, qualified lender or any similar term (however defined) if and to the extent required under the Purchased Asset Documents.  Seller shall not (A) change its name, organizational number, tax identification number, fiscal year, method of accounting, identity, structure or jurisdiction of organization (or have more than one such jurisdiction), move the location of its principal place of business and chief executive office, as defined in the UCC) from the location referred to in Section 7.01, or (B) move, or consent to Custodian moving, the Purchased Asset Documents from the location thereof on the applicable Purchase Date for the related Purchased Asset, unless in each case Seller has given at least thirty (30) days prior notice to Buyer and has taken all actions required under the UCC to continue the first priority perfected security interest of Buyer in the Purchased Assets.  Seller shall enter into each Transaction as principal, unless Buyer agrees before a Transaction that Seller may enter into such Transaction as agent for a principal and under terms and conditions disclosed to Buyer.

Section 8.02Compliance with Laws, Contractual Obligations and Repurchase Documents.  Seller shall comply in all material respects with each and every Requirements of Law, including those relating to any Purchased Asset and to the reporting and payment of taxes.  No part of the proceeds of any Transaction shall be used for any purpose that violates Regulation T, U or X of the Board of Governors of the Federal

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Reserve System.  Seller shall conduct or cause to be conducted the requisite due diligence in connection with the origination or acquisition of each Purchased Asset for purposes of complying with the Anti-Terrorism Laws, including with respect to the legitimacy of the applicable Underlying Obligor (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligor with respect to the related Whole Loan) and the origin of the assets used by such Person to purchase the Mortgaged Property, and will maintain sufficient information to identify such Person for purposes of the Anti-Terrorism Laws.  Seller shall maintain the Custodial Agreement and Controlled Account Agreement in full force and effect.  Seller shall not directly or indirectly enter into any agreement that would be violated or breached by any Transaction or the performance by Seller of any Repurchase Document.

Section 8.03Structural Changes.Seller shall not enter into merger or consolidation, or liquidate, wind up or dissolve, or sell all or substantially all of its assets or properties, or permit any changes in the ownership of its Equity Interests which results in a Change of Control of Seller, without the consent of Buyer (unless, in any of the foregoing cases, the Repurchase Obligations are paid in full in connection with any such transaction).  Seller shall ensure that all direct Equity Interests of Seller shall continue to be directly owned by the owner or owners thereof as of the date hereof.  Seller shall ensure that neither the Equity Interests of Seller nor any property or assets of Seller shall be pledged to any Person other than Buyer.  Seller shall not enter into any transaction with an Affiliate of Seller unless such transaction is on market and arm’s‑length terms and conditions.

Section 8.04Protection of Buyer’s Interest in Purchased Assets.With respect to each Purchased Asset, Seller shall take all action necessary or required by the Repurchase Documents, Purchased Asset Documents and each and every Requirements of Law, or requested by Buyer, to perfect, protect and more fully evidence Buyer’s ownership of and first priority perfected security interest in such Purchased Asset and related Purchased Asset Documents, including executing or causing to be executed (a) such other instruments or notices as may be necessary or appropriate and filing and maintaining effective UCC financing statements, continuation statements and assignments and amendments thereto, and (b) all documents necessary to both collaterally and absolutely and unconditionally assign all rights (but none of the obligations) of Seller under each Purchase Agreement, in each case as additional collateral security for the payment and performance of each of the Repurchase Obligations, to the extent permitted under the terms of each related Purchase Agreement.  Seller shall comply with all requirements of the Custodial Agreement with respect to each Purchased Asset, including the delivery to Custodian of all required Purchased Asset Documents.  Should Seller fail to deliver any Purchased Asset Document to Custodian on a timely basis as required under the Custodial Agreement, Seller shall make best efforts to effect such delivery as soon as possible thereafter.  Seller shall (a) not assign, sell, transfer, pledge, hypothecate, grant, create, incur, assume or suffer or permit to exist any security interest in or Lien on any Purchased Asset to or in favor of any Person other than Buyer, (b) defend such Purchased Asset against, and take such action as is necessary to remove, any such Lien, and (c) defend the right, title and interest of Buyer in and to all Purchased Assets against the claims and demands of all Persons whomsoever.  Notwithstanding the foregoing, if Seller grants a Lien on any Purchased Asset in violation of this Section 8.04 or any other Repurchase Document, Seller shall be deemed to have simultaneously granted an equal and ratable Lien on such Purchased Asset in favor of Buyer to the extent such Lien has not already been granted to Buyer; provided, that such equal and ratable Lien shall not cure any resulting Default or Event of Default.  Seller shall not materially amend, modify, waive or terminate any provision of any Purchase Agreement or the Servicing and Sub‑Servicing Agreement.  Seller shall not, or permit any Servicer to make or enter into any Material Modification to any Purchased Asset, Purchased Asset Document without Buyer’s prior written consent.  Seller shall mark its computer records and tapes to evidence the interests granted to Buyer hereunder.  Seller shall not take any action to cause any Purchased Asset that is not evidenced by an instrument or chattel paper (as defined in the UCC) to be so evidenced.  If a Purchased Asset becomes evidenced by an instrument or chattel paper, the same shall be immediately delivered to Custodian on behalf of Buyer, together with endorsements required by Buyer.

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Section 8.05Actions of Seller Relating to Distributions, Indebtedness, Guarantee Obligations, Contractual Obligations, Investments and Liens.  At any time after the occurrence and during the continuance of any Default under Sections 10.01(a) or 10.01(f), any Event of Default or any breach of the Debt Yield Test, Seller shall not declare or make any payment on account of, or set apart assets for, a sinking or similar fund for the purchase, redemption, defeasance, retirement or other acquisition of any Equity Interest of Seller, Manager, any Intermediate Starwood Entity or Guarantor, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller, Manager, any Intermediate Starwood Entity or Guarantor.  Seller shall not contract, create, incur, assume or permit to exist any Indebtedness, Guarantee Obligations, Contractual Obligations or Investments, except to the extent (a) arising or existing under the Repurchase Documents, (b) existing as of the Original Closing Date, as referenced in the financial statements delivered to Buyer prior to the Original Closing Date, and any renewals, refinancings or extensions thereof in a principal amount not exceeding that outstanding as of the date of such renewal, refinancing or extension, (c) incurred after the Original Closing Date to originate or acquire Assets or to provide funding with respect to Assets, (d) required pursuant to any Interest Rate Protection Agreements entered into pursuant to Section 8.11, and (e) unsecured trade payables and personal property leases and financings incurred in the ordinary course of business, so long as the maximum outstanding amount of all liabilities described in this clause (e) shall at no time exceed an amount equal to three hundred thousand dollars ($300,000) (it being agreed that, for purposes hereof, "trade payables" shall not include unpaid legal fees and unpaid transaction costs in connection with the execution of this Agreement and the related Repurchase Documents, the acquisition or origination of any Purchased Asset or any Transaction under this Agreement).  Seller shall not (I) contract, create, incur, assume or permit to exist any Lien on or with respect to any of its property or assets (including the Purchased Assets) of any kind (whether real or personal, tangible or intangible), whether now owned or hereafter acquired, other than, except with respect to any Purchased Asset, any Permitted Liens, or (II) except as provided in the preceding clause (I), grant, allow or enter into any agreement or arrangement with any Person that prohibits or restricts or purports to prohibit or restrict the granting of any Lien on any of the foregoing.

Section 8.06Maintenance of Records.  Seller shall keep and maintain all documents, books, records and other information (including with respect to the Purchased Assets) that are reasonably necessary or advisable in the conduct of its business.

Section 8.07Financial Covenants.

(a)Neither Seller shall permit its Net Income during any fiscal year, determined on an individual basis, to be less than zero.

(b)Each Seller shall comply at all times with all applicable Sub-Limits, determined on an aggregate basis.

Section 8.08Delivery of Income.  Seller shall, and pursuant to Irrevocable Redirection Notices shall cause the Underlying Obligors under the Purchased Assets and all other applicable Persons to, remit all Income in respect of the Purchased Assets into either one of the Servicing Agreement Accounts or the Waterfall Account in accordance with Section 5.01 hereof on the day the related payments are due.  Seller, Servicer and Sub-Servicer (a) shall comply with and enforce each Irrevocable Redirection Notice, (b) shall not amend, modify, waive, terminate or revoke any Irrevocable Redirection Notice without Buyer’s consent, and (c) shall take all reasonable steps to enforce each Irrevocable Redirection Notice.  In connection with each principal payment or prepayment under a Purchased Asset, Seller shall provide or cause to be provided to Buyer and Custodian sufficient detail to enable Buyer and Custodian to identify the Purchased Asset to which such payment applies.  If Seller receives any rights, whether in addition to, in substitution of, as a conversion of, or in exchange for any Purchased Assets, or otherwise in respect thereof, Seller shall accept the same as Buyer’s agent, hold the same in trust for Buyer and immediately deliver the same to Buyer or its designee in the exact

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form received, together with duly executed instruments of transfer, stock powers or assignment in blank and such other documentation as Buyer shall reasonably request.  If any Income is received by Seller, Guarantor or any Affiliate of Seller or Guarantor, Seller shall pay or deliver such Income to Buyer or Custodian on behalf of Buyer within two (2) Business Days after receipt, and, until so paid or delivered, hold such Income in trust for Buyer, segregated from other funds of Seller.

Section 8.09Delivery of Financial Statements and Other Information.  Seller shall deliver the following to Buyer and any other Affiliated Hedge Counterparty, as soon as available and in any event within the time periods specified:

(a)within forty-five (45) days after the end of the first three (3) fiscal quarters, (i) the unaudited balance sheets of Guarantor as at the end of such period, (ii) the related unaudited statements of income, retained earnings and cash flows for such period and the portion of the fiscal year through the end of such period, setting forth in each case in comparative form the figures for the previous year, (iii) a Compliance Certificate, (iv) a schedule listing all assets and liabilities excluded from the Leverage Covenant calculations, as such covenant is set forth in Section 15(b) of the Guarantee Agreement and (v) a written certification by Seller and Guarantor of the market value of all Near Cash Securities as determined by an independent third party valuation agent reasonably acceptable to Buyer, showing all calculations and supporting materials;

(b)within seventy-five (75) days after the end of each fiscal year of Guarantor, (i) the audited balance sheets of Guarantor as at the end of such fiscal year, (ii) the related statements of income, retained earnings and cash flows for such year, setting forth in each case in comparative form the figures for the previous year, (iii) an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall not be qualified as to scope of audit or going concern and shall state that said financial statements fairly present the financial condition and results of operations of Guarantor as at the end of and for such fiscal year in accordance with GAAP, (iv) a projections of Guarantor of the operating budget and cash flow budget of Guarantor for the following fiscal year, to the extent such is prepared and (v) a Compliance Certificate;

(c)all reports submitted to Guarantor by independent certified public accountants in connection with each annual, interim or special audit of the books and records of Guarantor made by such accountants, including any management letter commenting on Guarantor’s internal controls;

(d)with respect to each Purchased Asset and related Mortgaged Property, on or before each Remittance Date, all remittance, servicing, securitization, exception and other reports, if any, and all operating and financial statements and rent rolls of all Underlying Obligors for all Mortgaged Properties during the prior month, when and as received from Sub‑Servicer, an Underlying Obligor, a third‑party servicer or from any other source;

(e)all financial statements, reports, notices and other documents that Guarantor sends to holders of its Equity Interests or makes to or files with any Governmental Authority, promptly after the delivery or filing thereof;

(f)any other material agreements, correspondence, documents or other information not included in an Underwriting Package on the related Purchase Date, which is related to Seller or the Purchased Assets, as soon as possible after the discovery thereof by Seller, any Intermediate Starwood Entity or Guarantor; and

(g)such other information regarding the financial condition, operations or business of Seller, Guarantor or any Underlying Obligor as Buyer may reasonably request including, without limitation, any such information which is otherwise necessary to allow Buyer to monitor compliance with the terms of the Repurchase Documents.

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Section 8.10Delivery of Notices.  Seller shall promptly (and in no event later than one (1) Business Day from the date that Seller has Knowledge of each such occurrence) notify Buyer and any other Affiliated Hedge Counterparty of the occurrence of any of the following of which Seller has Knowledge, together with a certificate of a Responsible Officer of Seller setting forth details of such occurrence and any action Seller has taken or proposes to take with respect thereto:

(a)a Representation Breach;

(b)any of the following: (i) with respect to any Purchased Asset or related Mortgaged Property: material change in Market Value, material loss or damage, material licensing or permit issues, violation of Requirements of Law, discharge of or damage from Materials of Environmental Concern or any other actual or expected event or change in circumstances that could reasonably be expected to result in a default or material decline in value or cash flow, and (ii) with respect to Seller: violation of Requirements of Law, material decline in the value of Seller’s assets or properties, an Internal Control Event or other event or circumstance that could reasonably be expected to have a Material Adverse Effect;

(c)the existence of any Default, Event of Default or material default under or related to a Purchased Asset, Purchased Asset Document, Indebtedness, Guarantee Obligation or Contractual Obligation of Seller;

(d)the resignation or termination of Sub-Servicer under the Servicing and Sub‑Servicing Agreement or of any other Servicer pursuant to the related Servicing Agreement;

(e)the establishment of a rating by any Rating Agency applicable to Seller, Guarantor, Manager or any Intermediate Starwood Entity, and any downgrade in or withdrawal of such rating once established;

(f)the commencement of, settlement of or material judgment in any litigation, action, suit, arbitration, investigation or other legal or arbitrable proceedings before any Governmental Authority that (i) affects Seller, Guarantor, any Purchased Asset, Pledged Collateral or any Mortgaged Property, (ii) questions or challenges the validity or enforceability of any Repurchase Document, Transaction, Purchased Asset or Purchased Asset Document, or (iii) individually or in the aggregate, if adversely determined, could reasonably be likely to have a Material Adverse Effect;

(g)loss of Guarantor’s status as a REIT; and

(h)if (i) any CMBS Purchased Asset is presented for consideration as part of any securitization, (ii) Seller withdraws any such presentation or (iii) Seller receives written notice that, for any reason, any such CMBS Purchased Asset has been rejected or not accepted for such securitization.

Section 8.11Hedging.  The terms and provisions governing hedging under Section 8.11 are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

Section 8.12Escrow Imbalance.  Seller shall, no later than ten (10) Business Days after learning of any material overdraw, deficit or imbalance in any escrow or reserve account relating to a Purchased Asset, use reasonable efforts to cause the applicable Underlying Obligor to correct and eliminate the same, including by depositing its own funds into such account.

Section 8.13Guarantee Agreement.  If at any time (a) the obligations of any Guarantor under the Guarantee Agreement shall cease to be in effect, (b) any Insolvency Event has occurred with respect to Guarantor, or (c) any violation of any provision set forth in Section 15 of the Guarantee Agreement should occur and be continuing (any of the foregoing events, a “Guarantee Default”), then, within sixty (60) days after the occurrence of any such Guarantee Default, Seller shall cause a replacement guarantor acceptable to Buyer to

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assume in writing all obligations of Guarantor under the Guarantee Agreement or become a Guarantor, as Buyer deems necessary to correct such Guarantee Default.

Section 8.14Pledge and Security Agreement. Seller shall not take any direct or indirect action that would cause Pledgor to breach any of its covenants under the Pledge and Security Agreement.  Seller shall not permit any additional Persons to acquire Equity Interests in Seller other than the Equity Interests owned by Pledgor and pledged to Buyer pursuant to the Pledge Agreement, and Seller shall not permit any sales, assignments, pledges or transfers of the Equity Interests in Seller other than to Buyer.

Section 8.15Taxes.Seller will continue to be a disregarded entity of Guarantor for U.S. federal income tax purposes.  Seller and Guarantor will each file all required federal tax returns and all other material tax returns, domestic and foreign, required to be filed by them and will pay all federal and other material taxes (including mortgage recording taxes), assessments, fees, and other governmental charges (whether imposed with respect to their income or any of their properties or assets) which become due and payable, other than any such taxes, assessments, fees, or other governmental charges that are being contested in good faith by appropriate proceedings diligently conducted and for which appropriate reserves are established in accordance with GAAP.  Seller will provide Buyer with written notice of any material suit or claim relating to any such taxes, whether pending or, to the Knowledge of Seller, threatened by any Governmental Authority.

Section 8.16Management Internalization.  Seller shall not permit Guarantor to internalize its management without Buyer’s prior written approval, which shall not be unreasonably withheld.

Section 8.17REIT Status.Guarantor shall at all times continue to be (a) qualified as a REIT as defined in Section 856 of the Code (after giving effect to any cure or corrective periods or allowances, including pursuant to Code Sections 856(c), 857 and 860), (b) entitled to a dividends paid deduction under Section 857 of the Code with respect to dividends paid by it with respect to each taxable year for which it claims a deduction on its Form 1120-REIT filed with the United States Internal Revenue Service, and (c) a publicly traded company listed, quoted or traded on and in good standing in respect of any Stock Exchange.  Each of Seller-2 and Seller-2-A shall at all times be a disregarded entity for U.S. federal income tax purposes.

Section 8.18Post-Closing Obligations. (a)For any Purchased Asset acquired by Seller on the secondary market from unaffiliated third parties, (i) Seller shall deliver fully-executed Irrevocable Redirection Notices to Buyer prior to the later to occur of (x) the next Remittance Date and (y) thirty (30) days from the related Purchase Date, and (ii) if, in Buyer’s determination, Seller does not have a perfected first-priority security interest in each bank account constituting a portion of the collateral pledged in connection with each such Purchased Asset and all amounts and assets at any time credited thereto, or any such security interest is not fully assignable and has not been properly previously fully assigned to Buyer, Seller shall, as soon as reasonably practicable following the Purchase Date, cause the Underlying Obligor and/or collection agent to enter into such contractual arrangements including, without limitation, an Account Control Agreement with Seller that Buyer reasonably deems necessary or desirable in order to validly grant and perfect Seller’s security interest in such accounts, amounts and assets, in form and substance reasonably acceptable to Buyer.

ARTICLE 9

SINGLE‑PURPOSE ENTITY

Section 9.01Covenants Applicable to Seller.  Seller shall (i) own and has owned no assets, and shall not engage in any business, other than the assets and transactions specifically contemplated by this Agreement and any other Repurchase Document (provided,  however, that it shall not be a breach of the foregoing covenant if Seller holds any Senior Interest or Junior Interest in a Whole Loan or Mezzanine Loan which Senior or Junior Interest does not become a Purchased Asset hereunder provided that such Asset is transferred to an Affiliate of Seller prior to the Purchase Date for the related Purchased Asset), (ii) not incur any Indebtedness or other obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than (I) with respect to the Purchased Asset Documents and the Retained Interests, (II) commitments to make loans which may become Eligible Assets, and (III) as otherwise permitted

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under this Agreement, (iii) not make any loans or advances to any Affiliate or third party and shall not acquire obligations or securities of its Affiliates, in each case other than in connection with the origination or acquisition of Assets for purchase under the Repurchase Documents, (iv) pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) only from its own assets, (v) comply with the provisions of its Governing Documents, (vi) do all things necessary to observe organizational formalities and to preserve its existence, and shall not amend, modify, waive provisions of or otherwise change its Governing Documents in any material respect without the prior written approval of Buyer, (vii) maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates (except that such financial statements may be consolidated to the extent consolidation is required under GAAP or as a matter of Requirements of Law; provided, that (I) appropriate notation shall be made on such financial statements to indicate the separateness of Seller from such Affiliate and to indicate that Seller’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person and (II) such assets shall also be listed on Seller’s own separate balance sheet) and file its own tax returns (except to the extent consolidation is required or permitted under Requirements of Law), (viii) be, and at all times shall hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, and shall not identify itself or any of its Affiliates as a division of the other, (ix) maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations and shall remain Solvent, (x) not engage in or suffer any Change of Control, dissolution, winding up, liquidation, consolidation or merger in whole or in part or convey or transfer all or substantially all of its properties and assets to any Person (except as contemplated herein), (xi) not commingle its funds or other assets with those of any Affiliate or any other Person (except with those of the other Seller in accordance with the terms of the Repurchase Documents) and shall maintain its properties and assets in such a manner that it would not be costly or difficult to identify, segregate or ascertain its properties and assets from those of any Affiliate or any other Person, (xii) maintain its properties, assets and accounts separate from those of any Affiliate or any other Person, (xiii) not hold itself out to be responsible for the debts or obligations of any other Person (except for the other Seller in accordance with the terms of the Repurchase Documents), (xiv) not, without the prior unanimous written consent of all of its Independent Directors or Independent Managers, take any Insolvency Action, (xv) (I) have at all times at least one (1) Independent Director or Independent Manager (whose vote is required to take any Insolvency Action),or such greater number if necessary to comply with customary industry standards then-currently applicable to bankruptcy remote entities, and (II) provide Buyer with up-to-date contact information for each such Independent Director(s) or Independent Manager(s) and a copy of the agreement pursuant to which each Independent Director(s) or Independent Manager(s) consents to and serves as an “Independent Director” or “Independent Manager” for Seller, (xvi) the Governing Documents for Seller shall provide that for so long as any Repurchase Obligations remain outstanding, that (I) Buyer be given at least two (2) Business Days prior notice of the removal and/or replacement of any Independent Director or Independent Manager, together with the name and contact information of the replacement Independent Director or Independent Manager and evidence of the replacement’s satisfaction of the definition of Independent Director or Independent Manager, (II) that, to the fullest extent permitted by law, and notwithstanding any duty otherwise existing at law or in equity, any Independent Director or Independent Manager shall consider only the interests of Seller, including its respective creditors, in acting or otherwise voting on the Insolvency Action, and (III) that, except for duties to Seller as set forth in the immediately preceding clause (including duties to the holders of the Equity Interests in Seller or Seller’s respective creditors solely to the extent of their respective economic interests in Seller, but excluding (A) all other interests of the holders of the Equity Interests in Seller, (B) the interests of other Affiliates of Seller, and (C) the interests of any group of Affiliates of which Seller is a part), the Independent Directors or Independent Managers shall not have any fiduciary duties to the holders of the Equity Interests in Seller, any officer or any other Person bound by the Governing Documents; provided,  however, the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing, (xvii) not enter into any transaction with an Affiliate of Seller except on

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commercially reasonable terms similar to those available to unaffiliated parties in an arm’s‑length transaction, (xviii) maintain a sufficient number of employees in light of contemplated business operations (xix) use separate stationary, invoices and checks bearing its own name, (xx) allocate fairly and reasonably any overhead for shared office space and for services performed by an employee of an affiliate, (xxi) not pledge its assets to secure the obligations of any other Person, and (xxii) not form, acquire or hold any Subsidiary or own any Equity Interest in any other entity.

Section 9.02Additional Covenants Applicable to Seller. (a)  Seller (i) is and shall remain a Delaware limited liability company, (ii) shall have at least one Independent Director or Independent Manager serving as manager of such company, (iii) shall not take any Insolvency Action and shall not cause or permit Pledgor to take any Insolvency Actionwith respect to Seller, in each case unless all of its Independent Director(s) or Independent Manager(s) then serving as managers of the company shall have consented in writing to such action (directly or indirectly), and (iv) shall have either (A) a member which owns no economic interest in the company, has signed the company’s limited liability company agreement and has no obligation to make capital contributions to the company, or (B) two natural persons or one entity that is not a member of the company, that has signed its limited liability company agreement and that, under the terms of such limited liability company agreement becomes a member of the company immediately prior to the resignation or dissolution of the last remaining member of the company ceasing to be a member of the company.

ARTICLE 10


EVENTS OF DEFAULT AND REMEDIES

Section 10.01Events of Default.  Each of the following events shall be an “Event of Default”:

(a)Seller fails to make a payment of (i) Margin Deficit or Repurchase Price (other than Price Differential) when due, whether by acceleration or otherwise,  (ii) Price Differential when due, or (iii) any other amount when due, in each case under the Repurchase Documents;

(b)Seller fails to observe or perform in any material respect any other Repurchase Obligation of Seller under the Repurchase Documents or the Purchased Asset Documents to which Seller is a party, and (except in the case of a failure to perform or observe the Repurchase Obligations of Seller under Section 8.04 and 18.08(a)) such failure continues unremedied for five (5) Business Days after the earlier of receipt of notice thereof from Buyer or the discovery of such failure by Seller (or such longer period as agreed to by Buyer, not to exceed fifteen (15) days from the date of the underlying breach, but only if such underlying breach is capable of being cured and so long as Seller diligently and continuously takes all actions necessary to cure such underlying breach);

(c)any Representation Breach (other than a Representation Breach arising out of any of the representations and warranties set forth on Schedule 1(a),  1(b),  1(c) and 1(d) hereto, which will not, in and of themselves, be Events of Default) exists and continues unremedied for ten (10) Business Days after the earlier of receipt of notice thereof from Buyer or the discovery of such Representation Breach by Seller;

(d)Seller or Guarantor defaults beyond any applicable grace period in paying any amount or performing any obligation under any Indebtedness, Guarantee Obligation or Contractual Obligation with an outstanding amount of at least $100,000 with respect to Seller, or $25,000,000 with respect to Guarantor, and the effect of such default is to permit the acceleration thereof (regardless of whether such default is waived or such acceleration occurs);

(e)Seller or Guarantor defaults beyond any applicable grace period in paying any amount or performing any obligation due to Buyer or any Affiliate of Buyer under any other financing, hedging, security or other agreement between Seller or Guarantor and Buyer or any Affiliate of Buyer;

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(f)an Insolvency Event occurs with respect to Seller, any Intermediate Starwood Entity or Guarantor;

(g)a Change of Control occurs with respect to Seller, Manager, any Intermediate Starwood Entity or Guarantor, without the prior written consent of Buyer, not to be unreasonably withheld;

(h)a final judgment or judgments for the payment of money in excess of $100,000 with respect to Seller, or $25,000,000 with respect to Guarantor, in each case in the aggregate and in each case that is not insured against is entered against Seller or Guarantor by one or more Governmental Authorities and the same is not satisfied, discharged (or provision has not been made for such discharge) or bonded, or a stay of execution thereof has not been procured, within thirty (30) days from the date of entry thereof;

(i)a Governmental Authority takes any action to (i) condemn, seize or appropriate, or assume custody or control of, all or any substantial part of the property of Seller, (ii) displace the management of Seller or curtail its authority in the conduct of the business of Seller, or (iii) terminate the activities of Seller as contemplated by the Repurchase Documents;

(j)Seller, any Intermediate Starwood Entity or Guarantor admits in writing that it is not Solvent or is not able to perform any of its Repurchase Obligations, Contractual Obligations, Guarantee Obligations, Capital Lease Obligations or Off‑Balance Sheet Obligations;

(k)any provision of the Repurchase Documents, any right or remedy of Buyer or obligation, covenant, agreement or duty of Seller thereunder, or any Lien, security interest or control granted under or in connection with the Repurchase Documents, Pledged Collateral or Purchased Assets terminates, is declared null and void, ceases to be valid and effective, ceases to be the legal, valid, binding and enforceable obligation of Seller or any other Person, or the validity, effectiveness, binding nature or enforceability thereof is contested, challenged, denied or repudiated by Seller or any other Person, in each case directly, indirectly, in whole or in part, except that, Seller have a period of three (3) Business Days from the date of each such violation to either repurchase the related Purchased Asset from Buyer pursuant to Section 3.04 or cure the related breach, as such cure is determined by Buyer or any Pledged Collateral;

(l)Buyer ceases for any reason to have a valid and perfected first priority security interest in any Purchased Asset except that, Seller have a period of three (3) Business Days from the date of each such violation to cure the related breach, as such cure is determined by Buyer;

(m)Seller, any Intermediate Starwood Entity or Guarantor is required to register as an “investment company” (as defined in the Investment Company Act) or the arrangements contemplated by the Repurchase Documents shall require registration of Seller, Manager, any Intermediate Starwood Entity or Guarantor as an “investment company”;

(n)Seller engages in any conduct or action where Buyer’s prior consent is required by any Repurchase Document and Seller fails to obtain such consent;

(o)Seller, Sub-Servicer, Servicer, Guarantor, Manager, any Intermediate Starwood Entity or any other Person or, due to the action or inaction of any of the foregoing, (but not merely as a result of the unprompted failure by any Underlying Obligor to make a payment under a Purchased Asset) any Underlying Obligor or any other Person fails to deposit to one of the Servicing Agreement Accounts or the Waterfall Account all Income and other amounts as required by Section 5.01 and other provisions of this Agreement within two (2) Business Days of when due, or the occurrence of a Sub‑Servicer Event of Default;

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(p)Guarantor’s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein are qualified or limited by reference to the status of Guarantor as a “going concern” or a reference of similar import, other than a qualification or limitation expressly related to Buyer’s rights in the Purchased Assets;

(q)Guarantor (i) fails (A) to qualify as a REIT (after giving effect to any cure or corrective periods or allowances or other actions, including pursuant to Code Sections 856(c), 857, and 860, permitted to be taken by Guarantor to maintain its REIT status), or (B) to continue to be entitled to a dividends paid deduction under Section 857 of the Code with respect to dividends paid by it and therefore fails the requirements of Code Section 857(a)(1) (after giving effect to any cure or corrective provisions, including pursuant to Code Section 860) or (ii) enters into a “prohibited transaction” as defined in Section 857(b)(6)(B)(iii) of the Code (taking into account Sections 857(b)(6)(C), 857(b)(6)(D) and 857(b)(6) (E) of the Code) that results in “prohibited transactions taxes” having an amount greater than $25,000,000 being imposed on Guarantor;

(r)any termination event, default or event of default (however defined) shall have occurred with respect to a Seller Party under any Interest Rate Protection Agreement and either (i) same is not cured, (ii) a replacement Interest Rate Protection Agreement acceptable to Buyer in its reasonable discretion has not been entered into and assigned to Buyer or (iii) the related Purchased Asset is not repurchased by Seller on or before the earlier to occur of (I) the date that is ten (10) Business Days after the occurrence of any such event and (II) the next Remittance Date;

(s)Guarantor breaches any of the obligations, terms or conditions set forth in the Guarantee Agreement and such breach remains uncured for at least three (3) Business Days; or

(t)any Material Modification is made to any Purchased Asset Document without the prior written consent of Buyer.

Section 10.02Remedies of Buyer as Owner of the Purchased Assets.  If an Event of Default exists, at the option of Buyer, exercised by notice to Seller (which option shall be deemed to be exercised, even if no notice is given, automatically and immediately upon the occurrence of an Event of Default under Section 10.01(f)), the Repurchase Date for all Purchased Assets shall be deemed automatically and immediately to occur (the date on which such option is exercised or deemed to be exercised, the “Accelerated Repurchase Date”).  If Buyer exercises or is deemed to have exercised the foregoing option:

(a)All Repurchase Obligations shall become immediately due and payable on and as of the Accelerated Repurchase Date.

(b)All amounts in the Waterfall Account and/or in the Servicing Agreement Account established and maintained under the Servicing and Sub-Servicing Agreement, together with all Income paid after the Accelerated Repurchase Date, shall be retained by Buyer and applied in accordance with Article 5.

(c)Buyer may complete any assignments, allonges, endorsements, powers or other documents or instruments executed in blank and otherwise obtain physical possession of all Purchased Asset Documents and all other instruments, certificates and documents then held by or on behalf of Custodian under the Custodial Agreement.  Buyer may obtain physical possession of all Servicing Files, Servicing Agreements and other files and records of Seller, Servicer or Sub-Servicer.  Seller shall deliver to Buyer such assignments and other documents with respect thereto as Buyer shall request.

(d)Buyer may immediately, at any time, and from time to time, exercise either of the following remedies with respect to any or all of the Purchased Assets:  (i) sell such Purchased Assets on a servicing-released basis and/or without providing any representations and warranties on an “as‑is where is” basis, in a recognized

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market and by means of a public or private sale at such price or prices as Buyer accepts, and apply the net proceeds thereof in accordance with Article 5, or (ii) retain such Purchased Assets and give Seller credit against the Repurchase Price for such Purchased Assets (or if the amount of such credit exceeds the Repurchase Price for such Purchased Assets, to credit against other Repurchase Obligations due and any other amounts (without duplication) then owing to Buyer by any other Person pursuant to any Repurchase Document, in such order and in such amounts as determined by Buyer), in an amount equal to the market value of such Purchased Assets.  Until such time as Buyer exercises either such remedy with respect to a Purchased Asset, Buyer may hold such Purchased Asset for its own account and retain all Income with respect thereto and apply such Income in accordance with Article 5.

(e)The Parties agree that the Purchased Assets are of such a nature that they may decline rapidly in value, and may not have a ready or liquid market.  Accordingly, Buyer shall not be required to sell more than one Purchased Asset on a particular Business Day, to the same purchaser or in the same manner.  Buyer may determine whether, when and in what manner a Purchased Asset shall be sold, it being agreed that both a good faith public and a good faith private sale shall be deemed to be commercially reasonable.  Except as expressly required herein or in the other Repurchase Documents, Buyer shall not be required to give notice to Seller or any other Person prior to exercising any remedy following the occurrence of an Event of Default.  If no prior notice is given, Buyer shall give notice to Seller of the remedies exercised by Buyer promptly thereafter.  Buyer shall act in good faith in exercising its rights and remedies under this Article 10.

(f)Seller shall be liable to Buyer for (i) any amount by which the Repurchase Obligations due to Buyer exceed the aggregate of the net proceeds and credits referred to in the preceding clause (d), (ii) the amount of all actual out-of-pocket expenses, including reasonable legal fees and expenses, actually incurred by Buyer in connection with or as a consequence of an Event of Default, (iii) any costs and losses payable under Section 12.03, and (iv) any other actual loss, damage, cost or expense resulting from the occurrence of an Event of Default.

(g)Buyer shall be entitled to an injunction, an order of specific performance or other equitable relief to compel Seller to fulfill any of its obligations as set forth in the Repurchase Documents, including this Article 10, if Seller fails or refuses to perform its obligations as set forth herein or therein.

(h)Seller hereby appoints Buyer as attorney‑in‑fact of Seller for purposes of carrying out the Repurchase Documents, including executing, endorsing and recording any instruments or documents and taking any other actions that Buyer deems necessary or advisable to accomplish such purposes, which appointment is coupled with an interest and is irrevocable.

(i)Buyer may, without prior notice to Seller, exercise any or all of its set-off rights including those set forth in Section 18.17 and pursuant to any other Repurchase Document.  This Section 10.02(i) shall be without prejudice and in addition to any right of set-off, combination of accounts, Lien or other rights to which any Party is at any time otherwise entitled.

(j)All rights and remedies of Buyer under the Repurchase Documents, including those set forth in Section 18.17, are cumulative and not exclusive of any other rights or remedies that Buyer may have and may be exercised at any time when an Event of Default exists.  Such rights and remedies may be enforced without prior judicial process or hearing.  Seller agrees that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s‑length.  Seller hereby expressly waives any defenses Seller might have to require Buyer to enforce its rights by judicial process or otherwise arising from the use of nonjudicial process, disposition of any or all of the Purchased Assets, or any other election of remedies.

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ARTICLE 11


SECURITY INTEREST

Section 11.01Grant.(a)Buyer and Seller intend that the Transactions be sales to Buyer of the Purchased Assets and not loans from Buyer to Seller secured by the Purchased Assets.  However, to preserve and protect Buyer’s rights with respect to the Purchased Assets and under the Repurchase Documents if any Governmental Authority recharacterizes any Transaction with respect to a Purchased Asset as other than a  sale, and as security for Seller’s performance of the Repurchase Obligations, Seller hereby grants to Buyer a present Lien on and security interest in all of the right, title and interest of Seller in, to and under (i) the Purchased Assets (which for this purpose shall be deemed to include the items described in the proviso in the definition thereof), and (ii) each Interest Rate Protection Agreement with each Hedge Counterparty relating to each Purchased Asset, and the transfer of the Purchased Assets to Buyer shall be deemed to constitute and confirm such grant, to secure the payment and performance of the Repurchase Obligations (including the obligation of Seller to pay the Repurchase Price, or if the related Transaction is recharacterized as  a loan, to repay such loan for the Repurchase Price)and all of the Related Repurchase Obligations.

(b)As security for the payment and performance by each of the Related Sellers to Buyer of the Related Repurchase Obligations of each of the Related Sellers, Seller hereby grants to Buyer a Lien on and security interest in all of the right, title and interest of Seller in, to and under (i) the Purchased Assets (which for this purpose shall be deemed to include the items described in the proviso in the definition thereof), and (ii) each Interest Rate Protection Agreement with each Hedge Counterparty relating to any Purchased Asset, and the transfers of the Purchased Assets to Buyer shall be deemed to constitute and confirm such grant, to secure the payment and performance of all of the Related Repurchase Obligations.

(c)Buyer hereby acknowledges and agrees that Buyer’s security interest in the collateral described in Section 11.01(b) as security for the Related Repurchase Obligations shall at all times be junior and subordinate in all respects to Buyer’s security interest in such collateral as security for the Repurchase Obligations.  The preceding subordination of Buyer’s security interest in such collateral affects only the relative priority of Buyer’s security interest in such collateral, and shall not subordinate the Related Repurchase Obligations in right of payment to the Repurchase Obligations.

Section 11.02Effect of Grant.If any circumstance described in Section 11.01 occurs, (a) this Agreement shall also be deemed to be a security agreement as defined in the UCC, (b) Buyer shall have all of the rights and remedies provided to a secured party by Requirements of Law (including the rights and remedies of a secured party under the UCC and the right to set off any mutual debt and claim) and under any other agreement between Buyer and Seller or between any Affiliated Hedge Counterparty and Seller, (c) without limiting the generality of the foregoing, Buyer shall be entitled to set off the proceeds of the liquidation of the Purchased Assets against all of the Repurchase Obligations and all of the Related Repurchase Obligations, without prejudice to Buyer’s right to recover any deficiency, (d) the possession by Buyer or any of its agents, including Custodian, of the Purchased Asset Documents, the Purchased Assets and such other items of property as constitute instruments, money, negotiable documents, securities or chattel paper shall be deemed to be possession by the secured party for purposes of perfecting such security interest under the UCC and Requirements of Law, and (e) notifications to Persons (other than Buyer) holding such property, and acknowledgments, receipts or confirmations from Persons (other than Buyer) holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from, securities intermediaries, bailees or agents (as applicable) of the secured party for the purpose of perfecting such security interest under the UCC and Requirements of Law.  The security interest of Buyer granted herein shall be, and Seller hereby represents and warrants to Buyer and to all other Affiliated Hedge Counterparties that it is, a first priority perfected security interest.  For the avoidance of doubt, (A) each Purchased Asset and each Interest Rate Protection Agreement relating to a Purchased Asset secures the Repurchase Obligations of Seller with respect to all other

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Transactions and all other Purchased Assets, including any Purchased Assets that are junior in priority to the Purchased Asset in question, and also secures all of the Related Repurchase Obligations, and (B) if an Event of Default exists, no Purchased Asset or Interest Rate Protection Agreement relating to a Purchased Asset will be released from Buyer’s Lien or transferred to Seller until the Repurchase Obligations and all of the Related Repurchase Obligations are indefeasibly paid in full; provided,  however, notwithstanding the foregoing, Buyer shall be required to release its Lien on any Purchased Asset in the event of a repayment in full by the Underlying Obligor of any Whole Loan, Senior Interest, Junior Interest, Mezzanine Loan or Mezzanine Participation Interest, and Seller’s payment of the Repurchase Price with respect to such Purchased Asset in accordance with Section 3.04.  Notwithstanding the foregoing, the Repurchase Obligations shall be full recourse to Seller.

Section 11.03Seller to Remain Liable.  Buyer and Seller agree that the grant of a security interest under this Article 11 shall not constitute or result in the creation or assumption by Buyer of any Retained Interest or other obligation of Seller or any other Person in connection with any Purchased Asset or any Interest Rate Protection Agreement, whether or not Buyer exercises any right with respect thereto.  Seller and any other related Seller Party, as applicable, shall remain liable under the Purchased Assets, each Interest Rate Protection Agreement, the Purchased Asset Documents to perform all of Seller’s or all other Seller Party’s duties and obligations thereunder to the same extent as if the Repurchase Documents had not been executed.

Section 11.04Waiver of Certain Laws.  Seller agrees, to the extent permitted by Requirements of Law, that neither it nor anyone claiming through or under it will set up, claim or seek to take advantage of any appraisement, valuation, stay, extension or redemption law now or hereafter in force in any locality where any Purchased Assets may be situated in order to prevent, hinder or delay the enforcement or foreclosure of this Agreement, or the absolute sale of any of the Purchased Assets or Interest Rate Protection Agreement relating to a Purchased Asset or any part thereof, or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereof, and Seller, for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may be lawful so to do, the benefit of all such laws and any and all right to have any of the properties or assets constituting the Purchased Assets or Interest Rate Protection Agreement relating to a Purchased Asset marshaled upon any such sale, and agrees that Buyer or any court having jurisdiction to foreclose the security interests granted in this Agreement may sell the Purchased Assets and each Interest Rate Protection Agreement relating to a Purchased Asset as an entirety or in such parcels as Buyer or such court may determine.

ARTICLE 12


INCREASED COSTS; CAPITAL ADEQUACY

Section 12.01Market Disruption.The terms and provisions regarding circumstances affecting the ability to ascertain LIBOR are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

Section 12.02Illegality.The terms and provisions regarding changes in Requirements of Law are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

Section 12.03Breakfunding.  In the event of (a) the failure by Seller to terminate any Transaction after Seller has given a notice of termination pursuant to Section 3.04, (b) any payment to Buyer on account of the outstanding Repurchase Price, including a payment made pursuant to Section 3.04 but excluding a payment made pursuant to Section 5.02, on any day other than a Remittance Date (based on the assumption that Buyer funded its commitment with respect to the Transaction in the London Interbank Eurodollar market and using any reasonable attribution or averaging methods that Buyer deems appropriate and practical)(upon request, Buyer shall provide Seller with notice of the underlying calculation methodology), (c) any failure by Seller to sell Eligible Assets to Buyer after Seller has notified Buyer of a proposed Transaction and Buyer has agreed to purchase such Eligible Assets in accordance with this Agreement, or (d) any conversion of the Pricing Rate to the Alternative Rate because LIBOR is not available for any reason on a day that is not the last day of

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the then‑current Pricing Period, Seller shall compensate Buyer for the cost and expense which Buyer may sustain or incur arising from such event.  A certificate of Buyer setting forth any amount or amounts that Buyer is entitled to receive pursuant to this Section 12.03 shall be delivered to Seller and shall be conclusive to the extent calculated in good faith and absent manifest error.  Seller shall pay Buyer the amount shown as due on any such certificate within ten (10) days after receipt thereof.

Section 12.04Increased Costs.The terms and provisions regarding increased costs are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

Section 12.05Capital Adequacy.The terms and provisions regarding capital adequacy are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

Section 12.06Taxes.

(a)Any and all payments by or on account of any obligation of Seller under any Repurchase Document shall be made without deduction or withholding for any Taxes, except as required by applicable law.  If any applicable law requires the deduction or withholding of any Tax from any such payment, then Seller shallmake (or cause to be made) such deduction or withholding and shall timely pay (or cause to be timely paid) the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable shall be increased by Seller as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 12.06) Buyer receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(b)Seller shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c)Seller shall indemnify Buyer, within ten  (10) Business Days after written demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 12.06) paid by Buyer or required to be withheld or deducted from a payment to Buyer, and any reasonable expenses arising therefrom or with respect thereto,  whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.A certificate as to the amount of such payment or liability delivered to Seller by Buyer shall be conclusive absent manifest error.

(d)As soon as practicable after any payment of Taxes by Seller to a Governmental Authority pursuant to this Section 12.06, Seller shall deliver to Buyer the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Buyer.

(e)(i)  If Buyer is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Repurchase Document, Buyer shall deliver to Seller, at the time or times reasonably requested by Seller, such properly completed and executed documentation reasonably requested by Seller as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, Buyer, if reasonably requested by Seller, shall deliver such other documentation prescribed by applicable law or reasonably requested by Seller as will enable Seller to determine whether or not Buyer is subject to backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 12.06(e)(ii)(A),  Section 12.06(e)(ii)(B) and Section 12.06(e)(ii)(D) below) shall not be required if in Buyer’s reasonable judgment such completion, execution or submission would subject Buyer to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of Buyer.

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(ii)Without limiting the generality of the foregoing,

(A)if Buyer is a U.S. Person, it shall deliver to Seller on or prior to the date on which Buyer becomes a Party under this Agreement (and from time to time thereafter upon the reasonable request of Seller), executed originals of IRS Form W-9 certifying that Buyer is exempt from U.S. federal backup withholding tax;

(B)if Buyer is a Foreign Buyer, it shall, to the extent it is legally entitled to do so, deliver to Seller (in such number of copies as shall be requested by Seller) on or prior to the date on which Buyer becomes a Party under this Agreement (and from time to time thereafter upon the reasonable request of Seller), whichever of the following is applicable:

(I)in the case of a Foreign Buyer claiming the benefits of an income tax treaty to which the United States is a party, (x) with respect to payments of interest under any Repurchase Document, executed originals of IRS Form W‑8BEN or IRS Form W‑8BEN‑E (as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Repurchase Document, IRS Form W‑8BEN or IRS Form W‑8BEN‑E (as applicable) establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(II)executed originals of IRS Form W‑8ECI;

(III)in the case of a Foreign Buyer claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate to the effect that such Foreign Buyer is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of Seller within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed originals of IRS Form W‑8BENor IRS Form W‑8BEN‑E (as applicable); or

(IV)to the extent a Foreign Buyer is not the beneficial owner, executed originals of IRS Form W‑8IMY, accompanied by IRS Form W‑8ECI, IRS Form W‑8BEN, IRS Form W‑8BEN‑E, a U.S. Tax Compliance Certificate, IRS Form W‑9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Buyer is a partnership and one or more direct or indirect partners of such Foreign Buyer are claiming the portfolio interest exemption, such Foreign Buyer may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner;

(C)if Buyer is a Foreign Buyer, it shall, to the extent it is legally entitled to do so, deliver to Seller (in such number of copies as shall be requested by Seller) on or prior to the date on which Buyer becomes a Party under this Agreement (and from time to time thereafter upon the reasonable request of Seller), executed originals of any other form prescribed by applicable 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 law to permit Seller to determine the withholding or deduction required to be made; and

(D)if a payment made to Buyer under any Repurchase Document would be subject to U.S. federal withholding Tax imposed by FATCA if Buyer were to fail to comply with the

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applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), Buyer shall deliver to Seller at the time or times prescribed by law and at such time or times reasonably requested by Seller such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Seller as may be necessary for Seller to comply with its obligations under FATCA and to determine that Buyer has complied with Buyer’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.  Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Buyer agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify Seller in writing of its legal inability to do so.

(f)If any Partydetermines, in its sole discretionexercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 12.06 (including by the payment of additional amounts pursuant to this Section 12.06), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 12.06 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund).  Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 12.06(f) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority.  Notwithstanding anything to the contrary in this Section 12.06(f), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 12.06(f) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts giving rise to such refund had never been paid.  This Section 12.06(f) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(g)For the avoidance of doubt, for purposes of this Section 12.06, the term “applicable law” includes FATCA.

Section 12.07Payment and Survival of Obligations.  Buyer may at any time send Seller a notice showing the calculation of any amounts payable pursuant to this Article 12, and Seller shall pay such amounts to Buyer within ten (10) Business Days after Seller receives such notice.  The obligations of Seller under this Article 12 shall apply to Eligible Assignees and Participants and survive any assignment of rights by, or the replacement of Buyer, the termination of the Transactions and the repayment, satisfaction or discharge of all obligations under any Repurchase Document.

ARTICLE 13


INDEMNITY AND EXPENSES

Section 13.01Indemnity.

(a)Seller shall release, defend, indemnify and hold harmless Buyer, Affiliates of Buyer and its and their respective officers, directors, shareholders, partners, members, owners, employees, agents, attorneys,

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Affiliates and advisors (each an “Indemnified Person” and collectively the “Indemnified Persons”), against, and shall hold each Indemnified Person harmless, on an after-Tax basis, from any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits,  fees, costs, expenses (including reasonable legal fees, charges, and disbursements of any counsel for any such Indemnified Person and expenses), penalties or fines of any kind that may be imposed on, incurred by or asserted against any such Indemnified Person (collectively, the “Indemnified Amounts”) in any way relating to, arising out of or resulting from or in connection with (i) the Repurchase Documents, the Purchased Asset Documents, the Purchased Assets, the Pledged Collateral, the Transactions, any Mortgaged Property or related property, or any action taken or omitted to be taken by any Indemnified Person in connection with or under any of the foregoing, or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of any Repurchase Document, any Transaction, any Purchased Asset, any Purchased Asset Document or any Pledged Collateral, (ii) any claims, actions or damages by an Underlying Obligor (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligor with respect to the related Whole Loan) or lessee with respect to a Purchased Asset, (iii) any violation or alleged violation of, non-compliance with or liability under any Requirements of Law, (iv) ownership of, Liens on, security interests in or the exercise of rights or remedies under any of the items referred to in the preceding clause (i), (v) any accident, injury to or death of any person or loss of or damage to property occurring in, on or about any Mortgaged Property or on the adjoining sidewalks, curbs, parking areas, streets or ways, (vi) any use, nonuse or condition in, on or about, or possession, alteration, repair, operation, maintenance or management of, any Mortgaged Property or on the adjoining sidewalks, curbs, parking areas, streets or ways, (vii) any failure by Seller to perform or comply with any Repurchase Document, Purchased Asset Document or Purchased Asset, (viii) performance of any labor or services or the furnishing of any materials or other property in respect of any Mortgaged Property or Purchased Asset, (ix) any claim by brokers, finders or similar Persons claiming to be entitled to a commission in connection with any lease or other transaction involving any Repurchase Document, Purchased Asset or Mortgaged Property, (x) the execution, delivery, filing or recording of any Repurchase Document, Purchased Asset Document or any memorandum of any of the foregoing, (xi) any Lien or claim arising on or against any Purchased Asset or related Mortgaged Property under any Requirements of Law or any liability asserted against Buyer or any Indemnified Person with respect thereto, (xii) (1) a past, present or future violation or alleged violation of any Environmental Laws in connection with any Mortgaged Property by any Person or other source, whether related or unrelated to Seller or any Underlying Obligor  (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligor with respect to the related Whole Loan), (2) any presence of any Materials of Environmental Concern in, on, within, above, under, near, affecting or emanating from any Mortgaged Property in violation of Environmental Law, (3) the failure to timely perform any Remedial Work required under the Purchased Asset Documents or pursuant to Environmental Law, (4) any past, present or future activity by any Person or other source, whether related or unrelated to Seller or any Underlying Obligor (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligor with respect to the related Whole Loan) in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from any Mortgaged Property of any Materials of Environmental Concern at any time located in, under, on, above or affecting any Mortgaged Property, in each case, in violation of Environmental Law, (5) any past, present or future actual Release (whether intentional or unintentional, direct or indirect, foreseeable or unforeseeable) to, from, on, within, in, under, near or affecting any Mortgaged Property by any Person or other source, whether related or unrelated to Seller or any Underlying Obligor  (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligor with respect to the related Whole Loan), in each case, in violation of Environmental Law, (6) the imposition, recording or filing or the threatened imposition, recording or filing of any Lien on any Mortgaged Property with regard to, or as a result of, any Materials of Environmental Concern or pursuant to any Environmental Law, or (7) any misrepresentation or failure to perform any obligations pursuant to any Repurchase Document, orPurchased Asset Document relating to environmental matters in any way, (xiii) any business communications or dealings between the Parties relating thereto, or (xiv) Seller’s

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conduct, activities, actions and/or inactions in connection with, relating to or arising out of any of the foregoing clauses of this Section 13.01, that, in each case, results from anything whatsoever other than any Indemnified Person’s gross negligence or intentional misconduct, as determined by a court of competent jurisdiction pursuant to a final, non‑appealable judgment.  In any suit, proceeding or action brought by an Indemnified Person in connection with any Purchased Asset for any sum owing thereunder, or to enforce any provisions of any Purchased Asset, Seller shall defend, indemnify and hold such Indemnified Person harmless from and against all expense, loss or damage suffered by reason of any defense, set‑off, counterclaim, recoupment or reduction of liability whatsoever of the account debtor or Underlying Obligor (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligor with respect to the related Whole Loan) arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or Underlying Obligor (and, in the case of a Mezzanine Loan or Mezzanine Participation Interest, the Underlying Obligor with respect to the related Whole Loan) from Seller.  In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 13.01 applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by Seller, an Indemnified Person or any other Person or any Indemnified Person is otherwise a party thereto and whether or not any Transaction is entered into.  This Section 13.01(a) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.

(b)If for any reason the indemnification provided in this Section 13.01 is unavailable to the Indemnified Person or is insufficient to hold an Indemnified Person harmless, even though such Indemnified Person is entitled to indemnification under the express terms thereof, then Seller shall contribute to the amount paid or payable by such Indemnified Person as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative benefits received by such Indemnified Person on the one hand and Seller on the other hand, the relative fault of such Indemnified Person, and any other relevant equitable considerations.

(c)An Indemnified Person may at any time send Seller a notice showing the calculation of Indemnified Amounts, and Seller shall pay such Indemnified Amounts to such Indemnified Person within ten (10) Business Days after Seller receives such notice.  The obligations of Seller under this Section 13.01 shall apply (without duplication) to Eligible Assignees and Participants and survive the termination of this Agreement.

Section 13.02Expenses.  Seller shall promptly on demand pay to or as directed by Buyer all third‑party out‑of‑pocket costs and expenses (including legal, accounting and advisory fees and expenses) incurred by Buyer in connection with (a) the development, evaluation, preparation, negotiation, execution, consummation, delivery and administration of, and any amendment, supplement or modification to, or extension, renewal or waiver of, the Repurchase Documents and the Transactions, (b) any Asset or Purchased Asset, including pre‑purchase and/or ongoing due diligence, inspection, testing, review, recording, registration, travel custody, care, insurance or preservation, (c) the enforcement of the Repurchase Documents or the payment or performance by Seller of any Repurchase Obligations, and (d) any actual or attempted sale, exchange, enforcement, collection, compromise or settlement relating to the Purchased Assets.

ARTICLE 14


INTENT

Section 14.01Safe Harbor Treatment.  The Parties intend (a) for each Transaction to qualify for the safe harbor treatment provided by the Bankruptcy Code and for Buyer to be entitled to all of the rights, benefits and protections afforded to Persons under the Bankruptcy Code with respect to a “repurchase agreement” as defined in Section 101(47) of the Bankruptcy Code (to the extent that a Transaction has a maturity date of less than one (1) year) and a “securities contract” as defined in Section 741(7) of the Bankruptcy Code and that payments and transfers under this Agreement constitute transfers made by, to or for the benefit of a financial institution, financial participant or repo participant within the meaning of

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Section 546(e) or 546(f) of the Bankruptcy Code, (b) for the Guarantee Agreement and the Pledge Agreement to each constitute a security agreement or arrangement or other credit enhancement within the meaning of Section 101 of the Code related to a “securities contract” as defined in Section 741(7)(A)(xi) of the Bankruptcy Code and, to the extent that the Guarantee Agreement and the Pledge Agreement relate to a Transaction that has a maturity date of less than one (1) year, a “repurchase agreement” as that term is defined in Section 101(47)(A)(v) of the Bankruptcy Code, and (c) that Buyer (for so long as Buyer is a “financial institution,” “financial participant,” “repo participant,” “master netting participant” or other entity listed in Section 555, 362(b)(6) or 362(b)(7) of the Bankruptcy Code) shall be entitled to the “safe harbor” benefits and protections afforded under the Bankruptcy Code with respect to a “repurchase agreement,” “securities contract” and a “master netting agreement,” including (x) the rights, set forth in Article 10 and in Sections 555, 559 and 561 of the Bankruptcy Code, to liquidate the Purchased Assets and terminate this Agreement, and (y) the right to offset or net out as set forth in Article 10 and Section 18.17 and in Sections 362(b)(6), 362(b)(7), 362(b)(27), 362(o) and 546 of the Bankruptcy Code.

Section 14.02Liquidation.  The Parties acknowledge and agree that (a) Buyer’s right to liquidate Purchased Assets delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Articles 10 and 11 and as otherwise provided in the Repurchase Documents is a contractual right to liquidate such Transactions as described in Sections 555, 559 and 561 of the Bankruptcy Code.

Section 14.03Qualified Financial Contract.  The Parties acknowledge and agree that if a Party is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

Section 14.04Netting Contract.  The Parties acknowledge and agree that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction shall constitute a “covered contractual payment entitlement” or “covered contractual payment obligation,” respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

Section 14.05Master Netting Agreement.  The Parties intend that this Agreement, the Guarantee Agreement and the Pledge and Security Agreement constitute a “master netting agreement” as defined in Section 101(38A) of the Bankruptcy Code.

ARTICLE 15


DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS

The Parties acknowledge that they have been advised and understand that:

(a)if one of the Parties is a broker or dealer registered with the Securities and Exchange Commission under Section 14 of the Exchange Act, the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 do not protect the other Party with respect to any Transaction;

(b)if one of the Parties is a government securities broker or a government securities dealer registered with the Securities and Exchange Commission under Section 14C of the Exchange Act, the Securities Investor Protection Act of 1970 will not provide protection to the other Party with respect to any Transaction;

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(c)if one of the Parties is a financial institution, funds held by or on behalf of the financial institution pursuant to any Transaction are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable; and

(d)if one of the Parties is an “insured depository institution” as that term is defined in Section 1813(c)(2) of Title 12 of the United States Code, funds held by or on behalf of the financial institution pursuant to any Transaction are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation, the Savings Association Insurance Fund or the Bank Insurance Fund, as applicable.

ARTICLE 16


NO RELIANCE

Each Party acknowledges, represents and warrants to the other Party that, in connection with the negotiation of, entering into, and performance under, the Repurchase Documents and each Transaction:

(a)It is not relying (for purposes of making any investment decision or otherwise) on any advice, counsel or representations (whether written or oral) of the other Party, other than the representations expressly set forth in the Repurchase Documents;

(b)It has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and it has made its own investment, hedging and trading decisions (including decisions regarding the suitability of any Transaction) based on its own judgment and on any advice from such advisors as it has deemed necessary and not on any view expressed by the other Party;

(c)It is a sophisticated and informed Person that has a full understanding of all the terms, conditions and risks (economic and otherwise) of the Repurchase Documents and each Transaction and is capable of assuming and willing to assume (financially and otherwise) those risks;

(d)It is entering into the Repurchase Documents and each Transaction for the purposes of managing its borrowings or investments or hedging its underlying assets or liabilities and not for purposes of speculation;

(e)It is not acting as a fiduciary or financial, investment or commodity trading advisor for the other Party and has not given the other Party (directly or indirectly through any other Person) any assurance, guaranty or representation whatsoever as to the merits (either legal, regulatory, tax, business, investment, financial accounting or otherwise) of the Repurchase Documents or any Transaction; and

(f)No partnership or joint venture exists or will exist as a result of the Transactions or entering into and performing the Repurchase Documents.

ARTICLE 17


SERVICING

This Article 17 shall apply to all Purchased Assets.

Section 17.01Servicing Rights.  The terms and provisions governing Servicing Rights under Section 17.01 are set forth in the Fee and Pricing Letter, and are hereby incorporated by reference.

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Section 17.02Accounts Related to Purchased Assets.  All accounts directly related to the Purchased Assets shall be maintained at institutions reasonably acceptable to Buyer, and Seller shall cause each Underlying Obligor to enter into the contractual arrangements with Seller that are necessary in order to create a perfected security interest in favor of Seller in all such accounts, including, without limitation, an Account Control Agreement in form and substance reasonably acceptable to Buyer and its outside counsel.  Seller shall execute all documents necessary to assign all of Seller’s rights in such accounts to Buyer.

Section 17.03Servicing Reports.  Seller shall deliver and cause Sub-Servicer to deliver to Buyer and Custodian a monthly remittance report on or before the 15th day of each month containing servicing information, including those fields reasonably requested by Buyer from time to time, on an asset‑by‑asset and in the aggregate, with respect to the Purchased Assets for the month (or any portion thereof) before the date of such report.

Section 17.04Servicing Agreement Accounts.Sellers shall cause each Servicing Agreement Account which is not maintained at Wells Fargo Bank, N.A. at all times to be (i) established and maintained at an Eligible Institution and (ii) subject to a Servicing Agreement, cash management agreement and/or lockbox account agreement, in each case, in form and substance acceptable to Buyer in its sole discretion.

ARTICLE 18


MISCELLANEOUS

Section 18.01Governing Law.THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AGREEMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AGREEMENT.

Section 18.02Submission to Jurisdiction; Service of Process.  Each of Buyer and Seller irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the courts of the State of New York sitting in the Borough of Manhattan 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 the Repurchase Documents, or for recognition or enforcement of any judgment, and each Party irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such State court or, to the fullest extent permitted by applicable law, in such Federal court.  Each Party 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 the other Repurchase Documents shall affect any right that Buyer may otherwise have to bring any action or proceeding arising out of or relating to the Repurchase Documents against Seller or its properties in the courts of any jurisdiction.  Each Party irrevocably and unconditionally waives, to the fullest extent permitted by Requirements of 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 the Repurchase Documents in any court referred to above, and the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.  Each Party irrevocably consents to service of process in the manner provided for notices in Section 18.12.  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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Section 18.03IMPORTANT WAIVERS.

(a)SELLER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY BUYER OR ANY INDEMNIFIED PERSON.

(b)TO THE EXTENT PERMITTED BY REQUIREMENTS OF LAW, EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE BETWEEN THEM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF, CONNECTED WITH OR RELATED TO THE REPURCHASE DOCUMENTS, THE PURCHASED ASSETS, THE TRANSACTIONS, ANY DEALINGS OR COURSE OF CONDUCT BETWEEN THEM, OR ANY STATEMENTS (WRITTEN OR ORAL) OR OTHER ACTIONS OF EITHER PARTY. NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.  INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

(c)TO THE EXTENT PERMITTED BY REQUIREMENTS OF LAW, SELLER HEREBY WAIVES ANY RIGHT TO CLAIM OR RECOVER IN ANY LITIGATION WHATSOEVER INVOLVING ANY INDEMNIFIED PERSON, ANY SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE WHATSOEVER OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES, WHETHER SUCH WAIVED DAMAGES ARE BASED ON STATUTE, CONTRACT, TORT, COMMON LAW OR ANY OTHER LEGAL THEORY, WHETHER THE LIKELIHOOD OF SUCH DAMAGES WAS KNOWN AND REGARDLESS OF THE FORM OF THE CLAIM OF ACTION, INCLUDING ANY CLAIM OR ACTION ALLEGING GROSS NEGLIGENCE, RECKLESS DISREGARD, WILLFUL OR WONTON MISCONDUCT, FAILURE TO EXERCISE REASONABLE CARE OR FAILURE TO ACT IN GOOD FAITH.  NO INDEMNIFIED PERSON SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS, ELECTRONIC OR OTHER INFORMATION TRANSMISSION SYSTEMS IN CONNECTION WITH ANY REPURCHASE DOCUMENT OR THE TRANSACTIONS.

(d)SELLER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF BUYER OR AN INDEMNIFIED PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BUYER OR AN INDEMNIFIED PERSON WOULD NOT SEEK TO ENFORCE ANY OF THE WAIVERS IN THIS SECTION 18.03 IN THE EVENT OF LITIGATION OR OTHER CIRCUMSTANCES.  THE SCOPE OF SUCH WAIVERS IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THE REPURCHASE DOCUMENTS, REGARDLESS OF THEIR LEGAL THEORY.

(e)EACH PARTY ACKNOWLEDGES THAT THE WAIVERS IN THIS SECTION 18.03 ARE A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT SUCH PARTY HAS ALREADY RELIED ON SUCH WAIVERS IN ENTERING INTO THE REPURCHASE DOCUMENTS, AND THAT SUCH PARTY WILL CONTINUE TO RELY ON SUCH WAIVERS IN THEIR RELATED FUTURE DEALINGS UNDER THE REPURCHASE DOCUMENTS.  EACH PARTY FURTHER REPRESENTS AND WARRANTS THAT IT HAS REVIEWED SUCH WAIVERS WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL AND OTHER RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

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(f)THE WAIVERS IN THIS SECTION 18.03 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO ANY OF THE REPURCHASE DOCUMENTS.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(g)THE PROVISIONS OF THIS SECTION 18.03 SHALL SURVIVE TERMINATION OF THE REPURCHASE DOCUMENTS AND THE INDEFEASIBLE PAYMENT IN FULL OF THE REPURCHASE OBLIGATIONS.

Section 18.04Integration.  The Repurchase Documents supersede and integrate all previous negotiations, contracts, agreements and understandings (whether written or oral) between the Parties relating to a sale and repurchase of Purchased Assets and the other matters addressed by the Repurchase Documents, and contain the entire final agreement of the Parties relating to the subject matter thereof.

Section 18.05Single Agreement.  Seller agrees that (a) each Transaction is in consideration of and in reliance on the fact that all Transactions constitute a single business and contractual relationship, and that each Transaction has been entered into in consideration of the other Transactions, (b) a default by it in the payment or performance of any its obligations under a Transaction shall constitute a default by it with respect to all Transactions, (c) Buyer may set off claims and apply properties and assets held by or on behalf of Buyer with respect to any Transaction against the Repurchase Obligations owing to Buyer with respect to other Transactions, and (d) payments, deliveries and other transfers made by or on behalf of Seller with respect to any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers with respect to all Transactions, and the obligations of Seller to make any such payments, deliveries and other transfers may be applied against each other and netted.

Section 18.06Use of Employee Plan Assets.  No assets of an employee benefit plan subject to any provision of ERISA shall be used by either Party in a Transaction.

Section 18.07Survival and Benefit of Seller’s Agreements.  The Repurchase Documents and all Transactions shall be binding on and shall inure to the benefit of the Parties and their successors and permitted assigns.  All of Seller’s representations, warranties, agreements and indemnities in the Repurchase Documents shall survive the termination of the Repurchase Documents and the payment in full of the Repurchase Obligations, and shall apply to and benefit all Indemnified Persons, Buyer and its successors and assigns,  Eligible Assignees and Participants.  No other Person shall be entitled to any benefit, right, power, remedy or claim under the Repurchase Documents.

Section 18.08Assignments and Participations.

(a)Sellers shall not sell, assign or transfer any of its rights or the Repurchase Obligations or delegate its duties under this Agreement or any other Repurchase Document without the prior written consent of Buyer, and any attempt by a Seller to do so without such consent shall be null and void.

(b)Buyer may at any time, without the consent of either Seller or Guarantor, sell participations to any Person (other than a natural person or Seller, Guarantor or any Affiliate of Seller or Guarantor) (a “Participant”) in up to one hundred percent (100%) (in the aggregate, in one or more transactions, including any assignments under Section 18.08(c)) of Buyer’s rights and/or obligations under the Repurchase Documents; provided, that, as conditions to the sale of such participations, (i) Buyer’s obligations and Seller’s rights and obligations under the Repurchase Documents shall remain unchanged, (ii) Buyer shall remain solely responsible to Seller for the performance of such obligations, (iii) Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under the Repurchase Documents, and (iv) each Participant agrees to be bound by the confidentiality provisions set forth in Section 18.10;provided, that, so long as no Event of Default has occurred and is continuing, Buyer shall retain full decision-making authority under the Repurchase

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Documents.  No Participant shall have any right to approve any amendment, waiver or consent with respect to any Repurchase Document, except to the extent that the Repurchase Price or Price Differential of any Purchased Asset would be reduced or the Repurchase Date of any Purchased Asset would be postponed.  Each Participant shall be entitled to the benefits of Article 12(subject to the requirements and limitations and obligations set forth therein, including the requirements under Section 12.06(e) (it being understood that the documentation required under Section 12.06(e) shall be delivered to the participating Buyer)) and Article 13to the same extent as if it had acquired its interest by assignment pursuant to Section 18.08(c),  provided that such Participant shall not be entitled to receive any greater payment under Section 12.04 or Section 12.06 than its participating Buyer would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from the adoption of or any change in any Requirements of Law or in the interpretation or application thereof by a Governmental Authority or compliance by Buyer or such Participant with a request or directive (whether or not having the force of law) from a central bank or other Governmental Authority having jurisdiction over Buyer or such Participant, in each case made or issued after the Participant acquired the applicable participation.  To the extent permitted by Requirements of Law, each Participant shall also be entitled to the benefits of Sections 10.02(j) and 18.17 to the same extent as if it had acquired its interest by assignment pursuant to Section 18.08(c).

(c)Buyer may at any time, without the consent of either Seller or Guarantor but upon notice to Seller, sell and assign to any Eligible Assignee up to one hundred percent (100%) (in the aggregate, in one or more transactions, and including any participations under Section 18.08(b)) of the rights and obligations of Buyer under the Repurchase Documents.  Each such assignment shall be made pursuant to an Assignment and Acceptance substantially in the form of Exhibit F (an “Assignment and Acceptance”),  a copy of which shall be delivered to Seller as soon as reasonably possible after the execution thereof. From and after the effective date of such Assignment and Acceptance, (i) such Eligible Assignee shall be a Party and, to the extent provided therein, have the rights and obligations of Buyer under the Repurchase Documents with respect to the percentage and amount of the Repurchase Price allocated to it; provided that Buyer shall remain solely responsible to Seller for the performance of Buyer’s obligations under the Repurchase Documents, (ii) Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under the Repurchase Documents, and (iii) Buyer will give prompt written notice thereof (including identification of the Eligible Assignee and the amount of Repurchase Price allocated to it) to each Party (but Buyer shall not have any liability for any failure to timely provide such notice).  Any sale or assignment by Buyer of rights or obligations under the Repurchase Documents that does not comply with this Section 18.08(c) shall be treated for purposes of the Repurchase Documents as a sale by such Buyer of a participation in such rights and obligations in accordance with Section 18.08(b).

(d)Seller shall cooperate with Buyer in connection with any such sale and assignment of participations or assignments and shall enter into such restatements of, and amendments, supplements and other modifications to, the Repurchase Documents to give effect to any such sale or assignment; provided, that none of the foregoing shall change any economic or other material term of the Repurchase Documents in a manner adverse to Seller without the consent of Seller.

(e)[Intentionally Omitted].

(f)Buyer, acting solely for this purpose as a non-fiduciary agent of Seller, shall maintain a copy of  each Assignment and Acceptance and a register for the recordation ofthe names and addresses of the Eligible Assignees that become Parties hereto and, with respect to each such Eligible Assignee, the aggregate assigned Purchase Price and applicable Price Differential (the “Register”).  The entries in the Register shall be conclusive absent manifest error, and the Parties shall treat each Person whose name is recorded in the Register

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pursuant to the terms hereof as a Buyer for all purposes of this Agreement.  The Register shall be available for inspection by the Parties at any reasonable time and from time to time upon reasonable prior notice.

(g)Each Party that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of Seller, maintain a register on which it enters the name and address of each Participant and, with respect to each such Participant, the aggregate participated Purchase Price and applicable Price Differential, and any other interest in any obligations under the Repurchase Documents (the “Participant Register”); provided thatBuyer shall not have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any obligations under any Repurchase Document) to any Person except to the extent that such disclosure is necessary to establish that such obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive absent manifest error, and Buyer shall treat each Person whose name is recorded in the Participant Register as the owner of the applicable participation for all purposes of this Agreement notwithstanding any notice to the contrary.

Section 18.09Ownership and Hypothecation of Purchased Assets.Title to all Purchased Assets shall pass to and vest in Buyer on the applicable Purchase Dates and, subject to the terms of the Repurchase Documents, Buyer or its designee shall have free and unrestricted use of all Purchased Assets and be entitled to exercise all rights, privileges and options relating to the Purchased Assets as the owner thereof, including rights of subscription, conversion, exchange, substitution, voting, consent and approval, and to direct any servicer or trustee.  Subject to Section 18.08,  Buyer or its designee may, at any time, without the consent of either Seller or Guarantor, engage in repurchase transactions with the Purchased Assets or otherwise sell, pledge, repledge, transfer, hypothecate, or rehypothecate the Purchased Assets to Eligible Assignees, all on terms that Buyer may determine; provided, that no such transaction shall affect the obligations of Buyer to transfer the Purchased Assets to Seller on the applicable Repurchase Dates free and clear of any pledge, Lien, security interest, encumbrance, charge or other adverse claim.In the event Buyer engages in a repurchase transaction with any of the Purchased Assets or otherwise pledges or hypothecates any of the Purchased Assets, Buyer shall have the right to assign to Buyer’s counterparty any of the applicable representations or warranties herein and the remedies for breach thereof, as they relate to the Purchased Assets that are subject to such repurchase transaction.

Section 18.10Confidentiality.  All information regarding the terms set forth in any of the Repurchase Documents or the Transactions shall be kept confidential and shall not be disclosed by either Party to any Person except (a) to the Affiliates of such Party or its or their respective directors, officers, employees, agents, advisors, attorneys, accountants and other representatives who are informed of the confidential nature of such information and instructed to keep it confidential, (b) to the extent requested by any regulatory authority, stock exchange, government department or agency, or required by Requirements of Law, (c) to the extent required to be included in the financial statements of either Party or an Affiliate thereof, (d) to the extent required to exercise any rights or remedies under the Repurchase Documents, Purchased Assets or underlying Mortgaged Properties, (e) to the extent required to consummate and administer a Transaction, (f) in the event any Party is legally compelled to make pursuant to deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process by court order of a court of competent jurisdiction, and (g) to any actual or prospective Participant, Eligible Assignee or Hedge Counterparty that agrees to comply with this Section 18.10;  provided, that, except with respect to the disclosures by Buyer under clause (g) of this Section 18.10, no such disclosure made with respect to any Repurchase Document shall include a copy of such Repurchase Document to the extent that a summary would suffice, but if it is necessary for a copy of any Repurchase Document to be disclosed, all pricing and other economic terms set forth therein shall be redacted before disclosure.

Section 18.11No Implied Waivers; Amendments.  No failure on the part of Buyer to exercise, or delay in exercising, any right or remedy under the Repurchase Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy thereunder preclude any further exercise thereof

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or the exercise of any other right.  The rights and remedies in the Repurchase Documents are cumulative and not exclusive of any rights and remedies provided by law.  Application of the Default Rate after an Event of Default shall not be deemed to constitute a waiver of any Event of Default or Buyer’s rights and remedies with respect thereto, or a consent to any extension of time for the payment or performance of any obligation with respect to which the Default Rate is applied.  Except as otherwise expressly provided in the Repurchase Documents, no amendment, waiver or other modification of any provision of the Repurchase Documents shall be effective without the signed agreement of Seller and Buyer.  Any waiver or consent under the Repurchase Documents shall be effective only if it is in writing and only in the specific instance and for the specific purpose for which given.

Section 18.12Notices and Other Communications.Unless otherwise provided in this Agreement, all notices, consents, approvals, requests and other communications required or permitted to be given to a Party hereunder shall be in writing and sent prepaid by hand delivery, by certified or registered mail, by expedited commercial or postal delivery service, or by facsimile or email if also sent by one of the foregoing, to the address for such Party specified in Annex I or such other address as such Party shall specify from time to time in a notice to the other Party.  Any of the foregoing communications shall be effective when delivered, if such delivery occurs a Business Day; otherwise, each such communication shall be effective on the first Business Day following the date of such delivery.  A Party receiving a notice that does not comply with the technical requirements of this Section 18.12 may elect to waive any deficiencies and treat the notice as having been properly given.

Section 18.13Counterparts; Electronic Transmission.Any Repurchase Document may be executed in separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which shall together constitute but one and the same instrument.The Parties agree that this Agreement, any documents to be delivered pursuant to this Agreement, any other Repurchase Document and any notices hereunder may be transmitted between them by email and/or facsimile.  The Parties intend that faxed signatures and electronically imaged signatures such as .pdf files shall constitute original signatures and are binding on all parties.

Section 18.14No Personal Liability.  No administrator, incorporator, Affiliate, owner, member, partner, stockholder, officer, director, employee, agent or attorney of Buyer, any Indemnified Person, Seller, any Intermediate Starwood Entity or Guarantor, as such, shall be subject to any recourse or personal liability under or with respect to any obligation of Buyer, Seller, any Intermediate Starwood Entity or Guarantor under the Repurchase Documents, whether by the enforcement of any assessment, by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed that the obligations of Buyer, Seller or Guarantor under the Repurchase Documents are solely their respective corporate, limited liability company or partnership obligations, as applicable, and that any such recourse or personal liability is hereby expressly waived.  This Section 18.14 shall survive the termination of the Repurchase Documents and the repayment in full of the Repurchase Obligations.

Section 18.15Protection of Buyer’s Interests in the Purchased Assets; Further Assurances.

(a)Seller shall take such action as necessary to cause the Repurchase Documents and/or all financing statements and continuation statements and any other necessary documents covering the right, title and interest of Buyer to the Purchased Assets to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law fully to preserve and protect such right, title and interest.  Seller shall deliver to Buyer file-stamped copies of, or filing receipts for, any document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing.  Seller shall execute any and all documents reasonably required to fulfill the intent of this Section 18.15.

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(b)Seller will promptly at its expense execute and deliver such instruments and documents and take such other actions as Buyer may reasonably request from time to time in order to perfect, protect, evidence, exercise and enforce Buyer’s rights and remedies under and with respect to the Repurchase Documents, the Transactions and the Purchased Assets.

(c)If Seller fails to perform any of its Repurchase Obligations promptly after written request from Buyer, Buyer may (but shall not be required to) perform or cause to be performed such Repurchase Obligation, and the costs and expenses incurred by Buyer in connection therewith shall be payable by Seller.  Without limiting the generality of the foregoing, if Seller shall fail to do so promptly after written request from Buyer, Seller authorizes Buyer, at the option of Buyer and the expense of Seller, at any time and from time to time, to take all actions and pay all amounts that Buyer deems necessary or appropriate to protect, enforce, preserve, insure, service, administer, manage, perform, maintain, safeguard, collect or realize on the Purchased Assets and Buyer’s Liens and interests therein or thereon and to give effect to the intent of the Repurchase Documents.  No Default or Event of Default shall be cured by the payment or performance of any Repurchase Obligation by Buyer on behalf of Seller.  Buyer may make any such payment in accordance with any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax Lien, title or claim except to the extent such payment is being contested in good faith by Seller in appropriate proceedings and against which adequate reserves are being maintained in accordance with GAAP.

(d)Without limiting the generality of the foregoing, Seller will no earlier than six (6) months or later than three (3) months before the fifth (5th) anniversary of the date of filing of each UCC financing statement filed in connection with to any Repurchase Document or any Transaction, (i) deliver and file or cause to be filed an appropriate continuation statement with respect to such financing statement (provided that Buyer may elect to file such continuation statement), and (ii) if requested by Buyer, deliver or cause to be delivered to Buyer an opinion of counsel, in form and substance reasonably satisfactory to Buyer, confirming and updating the security interest opinion delivered pursuant to Section 6.01(a) with respect to perfection and otherwise to the effect that the security interests hereunder continue to be enforceable and perfected security interests, senior to the rights of any other creditor of Seller, which opinion may contain usual and customary assumptions, limitations and exceptions.

(e)Except as provided in the Repurchase Documents, the sole duty of Buyer, Custodian or any other designee or agent of Buyer with respect to the Purchased Assets shall be to use reasonable care in the custody, use, operation and preservation of the Purchased Assets in its possession or control.  Buyer shall incur no liability to Seller or any other Person for any act of Governmental Authority, act of God or other destruction in whole or in part or negligence or wrongful act of custodians or agents selected by Buyer with reasonable care, or Buyer’s failure to provide adequate protection or insurance for the Purchased Assets.  Buyer shall have no obligation to take any action to preserve any rights of Seller in any Purchased Asset against prior parties, and Seller hereby agrees to take such action.  Buyer shall have no obligation to realize upon any Purchased Asset except through proper application of any distributions with respect to the Purchased Assets made directly to Buyer or its agent(s).  So long as Buyer and Custodian shall act in good faith in their handling of the Purchased Assets, Seller waives or is deemed to have waived the defense of impairment of the Purchased Assets by Buyer and Custodian.

Section 18.16Default Rate.  To the extent permitted by Requirements of Law, Seller shall pay interest at the Default Rate on the amount of all Repurchase Obligations not paid when due under the Repurchase Documents until such Repurchase Obligations are paid or satisfied in full.

Section 18.17Set-off.  In addition to any rights now or hereafter granted under the Repurchase Documents, Requirements of Law or otherwise, Seller, on behalf of itself and Guarantor, hereby grants to Buyer and each Indemnified Person, to secure repayment of the Repurchase Obligations, a right of set‑off upon any

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and all of the following: monies, securities, collateral or other property of Seller and Guarantor and any proceeds from the foregoing, now or hereafter held or received by Buyer, any Affiliate of Buyer or any Indemnified Person, for the account of Seller or Guarantor, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general, specified, special, time, demand, provisional or final) and credits, claims or Indebtedness of Seller or Guarantor at any time existing, and any obligation owed by Buyer or any Affiliate of Buyer to Seller or Guarantor and to set-off against any Repurchase Obligations or Indebtedness owed by Seller or Guarantor and any Indebtedness owed by Buyer or any Affiliate of Buyer to Seller or Guarantor, in each case whether direct or indirect, absolute or contingent, matured or unmatured, whether or not arising under the Repurchase Documents and irrespective of the currency, place of payment or booking office of the amount or obligation and in each case at any time held or owing by Buyer, any Affiliate of Buyer or any Indemnified Person to or for the credit of any Seller or Guarantor, without prejudice to Buyer’s right to recover any deficiency.  Each of Buyer, each Affiliate of Buyer and each Indemnified Person is hereby authorized upon any amount becoming due and payable by Seller or Guarantor to Buyer or any Indemnified Person under the Repurchase Documents, the Repurchase Obligations or otherwise or upon the occurrence of an Event of Default, without notice to Seller or Guarantor, any such notice being expressly waived by Seller and Guarantor to the extent permitted by any Requirements of Law, to set‑off, appropriate, apply and enforce such right of set-off against any and all items hereinabove referred to against any amounts owing to Buyer or any Indemnified Person by Seller or Guarantor under the Repurchase Documents and the Repurchase Obligations, irrespective of whether Buyer, any Affiliate of Buyer or any Indemnified Person shall have made any demand under the Repurchase Documents and regardless of any other collateral securing such amounts, and in all cases without waiver or prejudice of Buyer’s rights to recover a deficiency.  Seller and Guarantor shall be deemed directly indebted to Buyer and the other Indemnified Persons in the full amount of all amounts owing to Buyer and the other Indemnified Parties by Seller and Guarantor under the Repurchase Documents and the Repurchase Obligations, and Buyer and the other Indemnified Persons shall be entitled to exercise the rights of set‑off provided for above.  ANY AND ALL RIGHTS TO REQUIRE BUYER OR OTHER INDEMNIFIED PERSONS TO EXERCISE THEIR RIGHTS OR REMEDIES WITH RESPECT TO THE PURCHASED ASSETS OR OTHER INDEMNIFIED PERSONS UNDER THE REPURCHASE DOCUMENTS, PRIOR TO EXERCISING THE FOREGOING RIGHT OF SET-OFF, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED BY SELLER AND GUARANTOR.

Buyer or any Indemnified Person shall promptly notify the affected Seller or Guarantor after any such set-off and application made by Buyer or such Indemnified Person, provided that the failure to give such notice shall not affect the validity of such set-off and application.  If an amount or obligation is unascertained, Buyer may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant Party accounting to the other Party when the amount or obligation is ascertained.  Nothing in this Section 18.17 shall be effective to create a charge or other security interest.  This Section 18.17 shall be without prejudice and in addition to any right of set-off, combination of accounts, Lien or other rights to which any Party is at any time otherwise entitled.

Section 18.18Seller’s Waiver of Set‑off.  Seller hereby waives any right of set‑off it may have or to which it may be or become entitled under the Repurchase Documents or otherwise against Buyer, any Affiliate of Buyer, any Indemnified Person or their respective assets or properties.

Section 18.19Power of Attorney.Seller hereby authorizes Buyer to file such financing statement or statements relating to the Purchased Assets as Buyer deems appropriate.  Seller hereby appoints Buyer as Seller’s agent and attorney in fact (a) following a monetary Default, a material non‑monetary Default or any Event of Default, to file any such financing statement or statements and to perform all other acts which Buyer deems appropriate to perfect and continue its ownership interest in and/or the security interest granted hereby, if applicable, and (b) following any Event of Default, to protect, preserve and realize upon the Purchased Assets in accordance with the terms of this Agreement and the other Repurchase Documents.  This

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agency and power of attorney is coupled with an interest and is irrevocable without Buyer’s consent.  Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 18.19.

Section 18.20Periodic Due Diligence Review.  Buyer may perform continuing due diligence reviews with respect to the Purchased Assets, Seller and Affiliates of Seller, including ordering new third party reports, for purposes of, among other things, verifying compliance with the representations, warranties, covenants, agreements, duties, obligations and specifications made under the Repurchase Documents or otherwise. Upon reasonable prior notice to Seller, unless a Default or Event of Default exists, in which case no notice is required, Buyer or its representatives may during normal business hours inspect any properties and examine, inspect and make copies of the books and records of Seller and Affiliates of Seller, the Purchased Asset Documents, the Senior Interest Documents and the Servicing Files.  Seller shall make available to Buyer one or more knowledgeable financial or accounting officers and representatives of the independent certified public accountants of Seller for the purpose of answering questions of Buyer concerning any of the foregoing.  Seller shall cause Servicer and Sub-Servicer to cooperate with Buyer by permitting Buyer to conduct due diligence reviews of the Servicing Files.  Buyer may purchase Purchased Assets from Seller based solely on the information provided by Seller to Buyer in the Underwriting Package and the representations, warranties, duties, obligations and covenants contained herein, and Buyer may at any time conduct a partial or complete due diligence review on some or all of the Purchased Assets, including ordering new credit reports and new Appraisals on the underlying Mortgaged Properties and otherwise re‑generating the information used to originate and underwrite such Purchased Assets.  Buyer may underwrite such Purchased Assets itself or engage a mutually acceptable third‑party underwriter to do so.

Section 18.21Time of the Essence.  Time is of the essence with respect to all obligations, duties, covenants, agreements, notices or actions or inactions of Seller under the Repurchase Documents.

Section 18.22PATRIOT Act Notice.  Buyer hereby notifies Seller that Buyer is required by the PATRIOT Act to obtain, verify and record information that identifies Seller.

Section 18.23Successors and Assigns; No Third Party Beneficiaries.  Subject to the foregoing, the Repurchase Documents and any Transactions shall be binding upon and shall inure to the benefit of the Parties and their successors and permitted assigns.  Nothing in the Repurchase Documents, express or implied, shall give to any Person other than the Parties any benefit or any legal or equitable right, power, remedy or claim under the Repurchase Documents.

Section 18.24Joint and Several Repurchase Obligations.

(a)Each Seller hereby acknowledges and agrees that (i) each Seller shall be jointly and severally liable to Buyer to the maximum extent permitted by Requirements of Law for all Repurchase Obligations, (ii) the liability of each Seller (A) shall be absolute and unconditional and shall remain in full force and effect (or be reinstated) until all Repurchase Obligations shall have been paid in full and the expiration of any applicable preference or similar period pursuant to any Insolvency Law, or at law or in equity, without any claim having been made before the expiration of such period asserting an interest in all or any part of any payment(s) received by Buyer, and (B) until such payment has been made, shall not be discharged, affected, modified or impaired on the occurrence from time to time of any event, including any of the following, whether or not with notice to or the consent of each Seller, (1) the waiver, compromise, settlement, release, modification, supplementation, termination or amendment (including any extension or postponement of the time for payment or performance or renewal or refinancing) of any of the Repurchase Obligations or Repurchase Documents, (2) the failure to give notice to each Seller of the occurrence of an Event of Default, (3) the release, substitution or exchange by Buyer of any Purchased Asset (whether with or without consideration) or the acceptance by Buyer of any additional collateral or the availability or claimed availability of any other collateral or source of repayment or any nonperfection or other impairment of collateral, (4) the release of any Person primarily or secondarily liable for all or any part of the Repurchase Obligations, whether by Buyer or in connection with any Insolvency Proceeding affecting any Seller or any other Person who, or any of whose property, shall at the time in question

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be obligated in respect of the Repurchase Obligations or any part thereof, (5) the sale, exchange, waiver, surrender or release of any Purchased Asset, guarantee or other collateral by Buyer, (6) the failure of Buyer to protect, secure, perfect or insure any Lien at any time held by Buyer as security for amounts owed by Sellers, or (7) to the extent permitted by Requirements of Law, any other event, occurrence, action or circumstance that would, in the absence of this Section 18.24, result in the release or discharge of any or both Sellers from the performance or observance of any Repurchase Obligation, (iii) Buyer shall not be required first to initiate any suit or to exhaust its remedies against any Seller or any other Person to become liable, or against any of the Purchased Assets, in order to enforce the Repurchase Documents and each Seller expressly agrees that, notwithstanding the occurrence of any of the foregoing, each Seller shall be and remain directly and primarily liable for all sums due under any of the Repurchase Documents, (iv) when making any demand hereunder against any Seller or any of the Purchased Assets, Buyer may, but shall be under no obligation to, make a similar demand on any other Seller, or otherwise pursue such rights and remedies as it may have against any Seller or any other Person or against any collateral security or guarantee related thereto or any right of offset with respect thereto, and any failure by Buyer to make any such demand, file suit or otherwise pursue such other rights or remedies or to collect any payments from any other Seller or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right offset, or any release of any Seller or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve any Seller in a respect of which a demand or collection is not made or Sellers not so released of their obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of Buyer against Sellers (as used herein, the term “demand” shall include the commencement and continuation of legal proceedings),(v) on disposition by Buyer of any property encumbered by any Purchased Assets, each Seller shall be and shall remain jointly and severally liable for any deficiency, (vi) each Seller waives (A) any and all notice of the creation, renewal, extension or accrual of any amounts at any time owing to Buyer by any other Seller under the Repurchase Documents and notice of or proof of reliance by Buyer upon any Seller or acceptance of the obligations of any Seller under this Section 18.24, and all such amounts, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the obligations of Sellers under this Agreement, and all dealings between Sellers, on the one hand, and Buyer, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the obligations of Sellers under this Agreement, and (B) diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon any Seller with respect to any amounts at any time owing to Buyer by any Seller under the Repurchase Documents (except for any notices expressly required under this Agreement or under any other Repurchase Document), and (vii) each Seller shall continue to be liable under this Section 18.24 without regard to (A) the validity, regularity or enforceability of any other provision of this Agreement or any other Repurchase Document, any amounts at any time owing to Buyer by any Seller under the Repurchase Documents, or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by Buyer, (B) any defense, set‑off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by any Seller against Buyer, or (C) any other circumstance whatsoever (with or without notice to or knowledge of any Seller except for any notices expressly required under this Agreement or under any other Repurchase Document) which constitutes, or might be construed to constitute, an equitable or legal discharge of any Seller for any amounts owing to Buyer by any Seller under the Repurchase Documents, or of Sellers under this Agreement, in bankruptcy or in any other instance.

(b)Each Seller shall remain fully obligated under this Agreement notwithstanding that, without any reservation of rights against any Seller and without notice to or further assent by any Seller, any demand by Buyer for payment of any amounts owing to Buyer by any other Seller under the Repurchase Documents may be rescinded by Buyer and any the payment of any such amounts may be continued, and the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by Buyer (including any extension or postponement

79

of the time for payment or performance or renewal or refinancing of any Repurchase Obligation), and this Agreement and the other Repurchase Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, in accordance with its terms, as Buyer may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by Buyer for the payment of amounts owing to Buyer by Sellers under the Repurchase Documents may be sold, exchanged, waived, surrendered or released.  Buyer shall not have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for amounts owing to Buyer by Sellers under the Repurchase Documents, or any property subject thereto.

(c)To the extent that any Seller (the “Paying Seller”) pays more than its proportionate share of any payment made hereunder, the Paying Seller shall be entitled to seek and receive contribution from and against the other Seller that has not paid its proportionate share; provided, that the provisions of this Section 18.24 shall not limit the duties, covenants, agreements, obligations and liabilities of any Seller to Buyer, and, notwithstanding any payment or payments made by the Paying Seller hereunder or any setoff or application of funds of the Paying Seller by Buyer, the Paying Seller shall not be entitled to be subrogated to any of the rights of Buyer against the other Seller or any collateral security or guarantee or right of setoff held by Buyer, nor shall the Paying Seller seek or be entitled to seek any contribution or reimbursement from the other Seller in respect of payments made by the Paying Seller hereunder, until all Repurchase Obligations are paid in full.  If any amount shall be paid to the Paying Seller on account of such subrogation rights at any time when all such amounts shall not have been paid in full, such amount shall be held by the Paying Seller in trust for Buyer, segregated from other funds of the Paying Seller, and shall, forthwith upon receipt by the Paying Seller, be turned over to Buyer in the exact form received by the Paying Seller (duly indorsed by the Paying Seller to Buyer, if required), to be applied against the Repurchase Obligations, whether matured or unmatured, in such order as Buyer may determine.

(d)The Repurchase Obligations are full recourse obligations to each Seller.

(e)Anything herein or in any other Repurchase Document to the contrary notwithstanding, the maximum liability of any Seller hereunder in respect of the liabilities of the other Sellers under this Agreement and the other Repurchase Documents shall in no event exceed the amount which can be guaranteed by each Seller under applicable federal and state laws relating to the insolvency of debtors.

Section 18.25Effect of Amendment and Restatement.  From and after the date hereof, the Third Amended and Restated Master Repurchase Agreementis hereby amended, restated and superseded in its entirety by this Agreement.  The parties hereto acknowledge and agree that the liens and security interests granted under that certain Master Repurchase and Securities Contract, dated as of August 6, 2010, between Seller 2 and Buyer, as amended and restated by that certain Amended and Restated Master Repurchase and Securities Contract, dated as of February 28, 2011, between and among Seller 2, Seller 2-A and Buyer and as further amended and restated by the Second Amended and Restated Master Repurchase and Securities Contract dated as of January 27, 2014 between and among Seller 2, Seller 2-A and Buyer, and as further amended and restated by the Third Amended and Restated Master Repurchase Agreement,are continuing in full force and effect and, upon the amendment and restatement of the Third Amended and Restated Master Repurchase Agreement, such liens and security interests secure and continue to secure the payment of the Repurchase Obligations.

Section 18.26PATRIOT Act Notice.  Buyer hereby notifies each Seller that Buyer is required by the PATRIOT Act to obtain, verify and record information that identifies each Seller.

Section 18.27Successors and Assigns; No Third Party Beneficiaries.Subject to the foregoing, the Repurchase Documents and any Transactions shall be binding upon and shall inure to the benefit of the Parties and their successors and permitted assigns.

80

Section 18.28Acknowledgement of Anti Predatory Lending Policies.Seller and Buyer each have in place internal policies and procedures that expressly prohibit their purchase of any high cost mortgage loan.

[ONE OR MORE UNNUMBERED SIGNATURE PAGES FOLLOW]

81

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first above written.

SELLER:
STARWOOD PROPERTY MORTGAGE
SUB‑2, L.L.C., a Delaware limited liability company
By:	/s/ Andrew J. Sossen
	Authorized Signatory
STARWOOD PROPERTY MORTGAGE
SUB‑2-A, L.L.C., a Delaware limited liability company
By:	/s/ Andrew J. Sossen
Authorized Signatory
BUYER:
WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association
By:	/s/ H. Lee Goins III
Managing Director

EXHIBIT LIST

	EXHIBIT
Transaction Request	A
Confirmation	B
Power of Attorney	C
Closing Certificate	D
Compliance Certificate	E
Assignment and Acceptance	F
Account Control Agreement	G-1
Controlled Account Agreement	G-2
Guarantee Agreement	H
Servicing and Sub-Servicing Agreement	I
Future Funding Confirmation	J
Certificate of Responsible Officer Custodial Agreement	K L
Locations of Buyer and Seller	Annex I

EXHIBIT A

FORM OF TRANSACTION REQUEST

[    ] [  ], 20[  ]

Wells Fargo Bank, National Association
One Wells Fargo Center
301 South College Street
MAC D1053-160, 16th Floor
Charlotte, North Carolina  28202

Attention:

Re:Third Amended and Restated Master Repurchase and Securities Contract dated as of October 23, 2014 (as amended, restated, supplemented or otherwise modified and in effect from time to time the “Agreement”) among Starwood Property Mortgage Sub-2, L.L.C. (“Seller 2”), Starwood Property Mortgage Sub-2-A, L.L.C. (“Seller 2-A”) and Wells Fargo Bank, National Association (“Buyer”)

Ladies and Gentlemen:

This is a Transaction Request delivered pursuant to Section 3.01 of the Agreement.  Terms used but not defined herein are as defined in the Agreement.  [Seller 2][Seller 2-A] hereby requests that Buyer enter into a Transaction upon the proposed terms set forth below.

Assets (including Class and
underlying Mortgaged Property):	As described in Appendix 1 hereto
Is this a CMBS Purchased Asset?:	[yes]/[no]
Book Value:	As described in Appendix 1 hereto
Market Value:	$_______________________
Applicable Percentage:	_____%
Purchased Asset Documents:	As described in Appendix 1 hereto
Purchase Date:	[    ] [  ], 20[  ]
Purchase Price:	$_______________________

Except as specified in Appendix 1 hereto, on the Purchase Date for each Asset described in this Transaction Request, [Seller 2][Seller 2-A] will make all of the representations and warranties contained in the Agreement (including Schedule 1 to the Agreement as applicable to the Class of such Asset) with respect thereto.

2

Seller:
[Starwood Property Mortgage Sub-2, L.L.C.
By:
	Name:
	Title:]
[Starwood Property Mortgage Sub-2-A, L.L.C.
By:
	Name:
	Title:]

3

Appendix 1 to Transaction Request

List of Eligible Assets requested to be purchased, to include, as applicable:

(a)Transaction Name

(b)Seller Loan Number

(c)Class (Whole Loan, Junior Interest, Senior Interest, Mezzanine Loan or Mezzanine Participation Interest)

(d)Lien Type

(e)Property Type

(f)Property Street Address

(g)Property City, State, County, Zip Code

(h)Appraised Value

(i)Appraisal Firm

(j)Appraisal Date

(k)Original Balance

(l)Seller Origination Balance

(m)Current Balance

(n)Amortization

(o)Balloon Amount

(p)[Current] Interest Rate

(q)Spread

(r)Index (Ex: 1 mo LIBOR; [   ]%)

(s)Next Interest Change Date

(t)Next Payment Change Date

(u)Interest Rate cap

(v)Current Principal and Interest

(w)Note Date

(x)First Payment Due Date to Seller

(y)Initial Maturity Date

(z)Extended Maturity Date

(aa)Current delinquency status

(bb)Payment Type

(cc)Payment Frequency

(dd)Rate Change Frequency

(ee)Original Principal and Interest

(ff)Sponsor Name (including first name, if any)

(gg)Borrowing Entity Name

(hh)Underlying Borrower Name

(ii)Open to Prepayment?

(jj)Prepayment Penalty

(kk)Current Senior Liens

(ll)Current Senior Lender

(mm)DSCR on Prior/Senior Liens

(nn)Term of Senior Liens

(oo)Interest Rate of Senior Loans

(pp)Current DSCR on combined debt

(qq)Current LTV, including senior liens

[See related Confirmation for exceptions to representations and warranties made by Seller]

4

EXHIBIT B

FORM OF CONFIRMATION

[    ] [  ], 20[  ]

Wells Fargo Bank, National Association
One Wells Fargo Center
301 South College Street
MAC D1053-160, 16th Floor
Charlotte, North Carolina  28288

Attention:

Re:Third Amended and Restated Master Repurchase and Securities Contract dated as of October 23, 2014 (as amended, restated, supplemented or otherwise modified and in effect from time to time the “Agreement”) among Starwood Property Mortgage Sub-2, L.L.C. (“Seller 2”), Starwood Property Mortgage Sub-2-A, L.L.C. (“Seller 2-A”) and Wells Fargo Bank, National Association (“Buyer”)

Ladies and Gentlemen:

This is a Confirmation executed and delivered by [Seller 2][Seller 2-A] and Buyer pursuant to Section 3.01 of the Agreement.  Terms used but not defined herein are as defined in the Agreement.  [Seller 2][Seller 2-A] and Buyer hereby confirm and agree that as of the Purchase Date and upon the other terms specified below, [Seller 2][Seller 2-A] shall sell and assign to Buyer, and Buyer shall purchase from  [Seller 2][Seller 2-A], all of [Seller 2][Seller 2-A]’s right, title and interest in, to and under the Purchased Assets listed in Appendix 1 hereto. 

Purchased Assets (including Class and
underlying Mortgaged Property):	As described in Appendix 1 hereto
Is this a CMBS Purchased Asset?:	[yes]/[no]
Market Value:	$_______________________
Applicable Percentage:	_____%
Purchased Asset Documents:	As described in Appendix 1 hereto
Purchase Date:	[    ] [  ], 20[  ]
Purchase Price:	$_______________________

5

Seller hereby certifies as follows, on and as of the above Purchase Date with respect to each Purchased Asset described in this Confirmation:

1.All of the conditions precedent in Article 6 of the Agreement have been satisfied.

2.Except as specified in Appendix 1 hereto, Seller will make all of the representations and warranties contained in the Agreement (including Schedule 1 to the Agreement as applicable to the Class of such Asset).

	Seller:
	[Starwood Property Mortgage Sub-2, L.L.C.
	By:
		Name:
		Title:]
	[Starwood Property Mortgage Sub-2-A, L.L.C.
	By:
		Name:
		Title:]
Buyer:
Acknowledged and Agreed:
Wells Fargo Bank, National Association
By:______________________________
Name:
Title:

6

Appendix 1 to Confirmation

List of Purchased Assets, including, as applicable:

(a)Transaction Name

(b)Seller Loan Number

(c)Class (Whole Loan, Senior Interest, Mezzanine Loan, Junior Interest or Mezzanine Participation Interest)

(d)Lien Type

(e)Property Type

(f)Property Street Address

(g)Property City, State, County, Zip Code

(h)Appraised Value

(i)Appraisal Firm

(j)Appraisal Date

(k)Original Balance

(l)Seller Origination Balance

(m)Current Balance

(n)Amortization

(o)Balloon Amount

(p)[Current] Interest Rate

(q)Spread

(r)Index (Ex: 1 mo LIBOR; [   ]%)

(s)Next Interest Change Date

(t)Next Payment Change Date

(u)Interest Rate cap

(v)Current Principal and Interest

(w)Note Date

(x)First Payment Due Date to Seller

(y)Initial Maturity Date

(z)Extended Maturity Date

(aa)Current delinquency status

(bb)Payment Type

(cc)Payment Frequency

(dd)Rate Change Frequency

(ee)Original Principal and Interest

(ff)Sponsor Name (including first name, if any)

(gg)Borrowing Entity Name

(hh)Underlying Borrower Name

(ii)Open to Prepayment?

(jj)Prepayment Penalty

(kk)Current Senior Liens

(ll)Current Senior Lender

(mm)DSCR on Prior/Senior Liens

(nn)Term of Senior Liens

(oo)Interest Rate of Senior Loans

(pp) Current DSCR on combined debt

(qq) Current LTV, including senior liens

[See attached for a description of any exceptions to representations and warranties made by Seller]

7

EXHIBIT C

FORM OF POWER OF ATTORNEY

October 23, 2014

Know All Men by These Presents, that [STARWOOD PROPERTY MORTGAGE SUB-2, L.L.C.][STARWOOD PROPERTY MORTGAGE SUB-2-A, L.L.C.], a Delaware limited liability company (“Seller”), does hereby appoint WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (“Buyer”), its attorney‑in‑fact to act in Seller’s name, place and stead in any way that Seller could do with respect to the enforcement of Seller’s rights under the Purchased Assets purchased by Buyer pursuant to the Third Amended and Restated Master Repurchase and Securities Contract, dated as of October 23, 2014, among Buyer, Seller and [Starwood Property Mortgage Sub-2, L.L.C.][Starwood Property Mortgage Sub-2-A, L.L.C.] (as amended, restated, supplemented or otherwise modified and in effect from time to time, the  “Repurchase Agreement”), and to take such other steps as may be necessary or desirable to enforce Buyer’s rights against such Purchased Assets to the extent that Seller is permitted by law to act through an agent.

TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.

THIS POWER OF ATTORNEY IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE UNTIL SUCH TIME AS ALL OBLIGATIONS OF SELLER AND [STARWOOD PROPERTY MORTGAGE SUB-2, L.L.C.] [STARWOOD PROPERTY MORTGAGE SUB-2-A, L.L.C.] TO BUYER ARE FULLY AND IRREVOCABLY PERFORMED AND SATISFIED.  THIS POWER OF ATTORNEY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS PRINCIPLES OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

[SIGNATURE PAGE FOLLOWS]

8

IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed as a deed on the date first written above.

Seller:
[Starwood Property Mortgage Sub-2, L.L.C.
Delaware limited liability company
By:
	Name:
	Title:]
[Starwood Property Mortgage Sub-2-A, L.L.C.
Delaware limited liability company
By:
	Name:
	Title:]

9

EXHIBIT D

Form of CLOSING Certificate

STARWOOD PROPERTY TRUST, INC.

SECRETARY'S CERTIFICATE

The undersigned, being the Secretary of Starwood Property Trust, Inc., a Maryland corporation (the “Guarantor”), which is the parent of Starwood Property Mortgage Sub-2, L.L.C. (“Seller 2”), a Delaware limited liability company, and Starwood Property Mortgage Sub-2-A, L.L.C. (“Seller 2-A”, and collectively with Seller 2, the “Seller”), a Delaware limited liability company, certifies that he is authorized to execute and deliver this Certificate in the name and on behalf of the Guarantor and the Seller, and further certifies as follows:

1.The Articles of Incorporation of Guarantor have not been amended or modified since August 14, 2009 and are in full force and effect;

2.The By-Laws of the Guarantor have not been amended or modified as of the date hereof and are in full force and effect;

3.Annexed hereto as Exhibit A is a true, correct and complete copy of the Certificate of Good Standing of the Guarantor issued by the Secretary of State of the State of Maryland;

4.The Certificate of Formation of Seller 2 has not been amended or modified as of the date hereof and is in full force and effect;

5.The Amended and Restated Limited Liability Company Operating Agreement of Seller 2 has not been amended or modified as of the date hereof, except as modified pursuant to that certain Amendment to Amended and Restated Limited Liability Company Agreement of Seller 2, dated as of February 28, 2011, annexed hereto as Exhibit B, and is in full force and effect;

6.Annexed hereto as Exhibit C is a true, correct and completely copy of the Certificate of Good Standing of Seller 2 issued by the Secretary of State of the State of Delaware;

7.Annexed hereto as Exhibit D is a true, correct and complete copy of the Certificate of Formation of Seller 2-A, which Certificate of Formation has not been amended or modified as of the date hereof and is in full force and effect;

8.Annexed hereto as Exhibit E is a true, correct and complete copy of the Limited Liability Company Operating Agreement of Seller 2-A, which Operating Agreement has not been amended or modified as of the date hereof and is in full force and effect;

9.Annexed hereto as Exhibit F is a true, correct and completely copy of the Certificate of Good Standing of Seller 2-A issued by the Secretary of State of the State of Delaware;

10.Annexed hereto as Exhibit G are true, correct and complete copies of the Consents of Starwood Property Mortgage, L.L.C. (“Seller 2 Sole Member”), a Delaware limited liability company, the sole member of Seller 2 and Starwood Property Mortgage BC, L.L.C., (“Seller 2-A Sole Member”) a Delaware limited liability company, authorizing the transactions contemplated by the Repurchase Agreement.  Such consents have

10

been in effect since the date set forth therein and have not been modified or rescinded subsequent to the date thereof;

11.The Certificate of Formation of the Seller 2 Sole Member has not been amended or modified since September 14, 2009 and is in full force and effect;

12.The Limited Liability Company Operating Agreement of the Seller 2 Sole Member has not been amended or modified as of the date hereof and is in full force and effect;

13.Annexed hereto as Exhibit H is a true, correct and completely copy of the Certificate of Good Standing of Seller 2 Sole Member issued by the Secretary of State of the State of Delaware;

14.Annexed hereto as Exhibit I is a true, correct and complete copy of the Consent of Seller 2-A Sole Member, the sole member of Seller 2-A, authorizing the transactions contemplated by the Repurchase Agreement.  Such consent has been in effect since the date set forth therein and has not been modified or rescinded subsequent to the date hereof;

15.Annexed hereto as Exhibit J is a true, correct and complete copy of the Certificate of Formation of the Seller 2-A Sole Member, which Certificate of Formation has not been amended or modified as of the date hereof and is in full force and effect;

16.Annexed hereto as Exhibit K is a true, correct and complete copy of the Limited Liability Company Operating Agreement of the Seller 2-A Sole Member, which Operating Agreement has not been amended or modified as of the date hereof and is in full force and effect;

17.Annexed hereto as Exhibit L is a true, correct and completely copy of the Certificate of Good Standing of the Seller 2-A Sole Member issued by the Secretary of State of the State of Delaware;

18.Annexed hereto as Exhibit M is a true, correct and complete copy of the Consent of SPT Real Estate Sub I, LLC, the sole member of the Seller 2 Sole Member, authorizing the transactions contemplated by the Repurchase Agreement.  Such consent has been in effect since the date set forth therein and has not been modified or rescinded subsequent to the date hereof.

11

IN WITNESS HEREOF, the undersigned has signed this Secretary’s Certificate as of the ___ day of October, 2014.

, Secretary

12

EXHIBIT E

Form of Compliance Certificate

[    ] [  ], 20[  ]

Wells Fargo Bank, National Association
One Wells Fargo Center
301 South College Street
MAC D1053-160, 16th Floor
Charlotte, NC  28288

Attention:  ___________

Re:Third Amended and Restated Master Repurchase and Securities Contract dated as of October 23, 2014 (as amended, restated, supplemented or otherwise modified and in effect from time to time the “Agreement”) among Starwood Property Mortgage Sub-2, L.L.C, Starwood Property Mortgage Sub-2-A, L.L.C. (individually and collectively, “Seller”) and Wells Fargo Bank, National Association (“Buyer”)

This Compliance Certificate is furnished pursuant to the above Agreement.  Unless otherwise defined herein, capitalized terms used in this Compliance Certificate have the respective meanings ascribed thereto in the Agreement.

THE UNDERSIGNED HEREBY CERTIFIES THAT:

1. (a)I am a duly elected Responsible Officer of _________.

2. All of the financial statements, calculations and other information set forth in this Compliance Certificate, including in any exhibit or other attachment hereto, are true, complete and correct as of the date hereof.

3. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and financial condition of [___________][Seller] during the accounting period covered by the financial statements attached hereto (or most recently delivered to Buyer if none are attached).

4. The examinations described in the preceding paragraph did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Event of Default or Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Compliance Certificate (including after giving effect to any pending Transactions requested to be entered into), except as set forth below.

13

5. Attached as Exhibit 1 hereto are the financial statements required to be delivered pursuant to Section 8.09 of the Agreement (or, if none are required to be delivered as of the date of this Compliance Certificate, the financial statements most recently delivered pursuant to Section 8.09 of the Agreement), which financial statements, to the best of my knowledge after due inquiry, fairly and accurately present in all material respects, the consolidated financial condition and operations of [____________][Seller] and the consolidated results of their operations as of the date or with respect to the period therein specified, determined in accordance with GAAP.

6. Attached as Exhibit 2 hereto are the calculations demonstrating compliance with the financial covenants set forth in Section 8.07 of the Agreement and in Section 15 of the Guarantee Agreement, each for the immediately preceding fiscal quarter.

7. To the best of my knowledge, Seller has, during the period since the delivery of the immediately preceding Compliance Certificate, observed or performed all of its covenants and other agreements in all material respects, and satisfied in all material respects every condition, contained in the Agreement and the other Repurchase Documents to be observed, performed or satisfied by it, and I have no knowledge of the occurrence during such period, or present existence, of any condition or event which constitutes an Event of Default or Default (including after giving effect to any pending Transactions requested to be entered into), except as set forth below.

Described below are the exceptions, if any, to the above paragraph, setting forth in detail the nature of the condition or event, the period during which it has existed and the action which the Parent or any Seller has taken, is taking, or proposes to take with respect to such condition or event:

The foregoing certifications, together with the financial statements, updates, reports, materials, calculations and other information set forth in any exhibit or other attachment hereto,  or otherwise covered by this Compliance Certificate, are made and delivered as of ___________________, 200__.

Name:

Title:

Exhibit 1: Financial Statements

Exhibit 2: Financial Covenant Compliance Calculations

14

EXHIBIT F

FORM OF ASSIGNMENT AND ACCEPTANCE

1.Reference is made to the Third Amended and Restated Master Repurchase and Securities Contract dated as of October 23, 2014 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Agreement”) among Starwood Property Mortgage Sub-2, L.L.C., Starwood Property Mortgage Sub-2-A, L.L.C. (individually and collectively, “Seller”) and Wells Fargo Bank, National Association (“Buyer”).

2.Wells Fargo Bank, National Association (“Assignor”) and _______________________ (“Assignee”) hereby agree as follows:

3.Assignor hereby sells and assigns and delegates, without recourse except as to the representations and warranties made by it herein, to Assignee, and Assignee hereby purchases and assumes from Assignor, an interest in and to Assignor’s rights and obligations under the Agreement as of the Effective Date (as hereinafter defined) equal to the percentage interest specified on Schedule I hereto of all outstanding rights and obligations under the Repurchase Agreement (collectively, the “Assigned Interest”). 

4.Assignor:

(a)hereby represents and warrants that its name set forth on Schedule I hereto is its legal name, that it is the legal and beneficial owner of the Assigned Interest and that such Assigned Interest is free and clear of any adverse claim;

(b)other than as provided herein, makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or any of the other Repurchase Documents, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or security interest created or purported to be created under or in connection with, the Repurchase Agreement or any of the other Repurchase Documents, or any other instrument or document furnished pursuant thereto; and

(c)makes no representation or warranty and assumes no responsibility with respect to the financial condition of Seller or the performance or observance by the Seller of any of its Obligations.

5.Assignee:

(a)confirms that it has received a copy of the Agreement, the other Repurchase Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance;

(b)agrees that it will, independently and without reliance upon the Agent or any Buyer, 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 Repurchase Agreement;

(c)represents and warrants that its name set forth on Schedule I hereto is its legal name;

(d)agrees that, from and after the Effective Date, it will be bound by the provisions of the Agreement and the other Repurchase Documents and, to the extent of the Assigned Interest, it will perform

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in accordance with their terms all of the obligations that by the terms of the Repurchase Agreement are required to be performed by it as a Buyer; and

(e)The effective date for this Assignment and Acceptance (the “Effective Date”) shall be the date specified on Schedule I hereto.

6.As of the Effective Date, (a)  Assignee shall be a party to the Agreement and, to the extent of the Assigned Interest, shall have the rights and obligations of Buyer thereunder and (b)  Assignor shall, to the extent that any rights and obligations under the Agreement have been assigned and delegated by it pursuant to this Assignment and Acceptance, relinquish its rights (other than provisions of the Agreement and the other Repurchase Documents that are specified under the terms thereof to survive the payment in full of the Obligations) and be released from its obligations under the Agreement (and, if this Assignment and Acceptance covers all or the remaining rights and obligations of such Assignor under the Agreement, such Assignor shall cease to be a party thereto).

7.Assignor and Assignee shall make all appropriate adjustments in payments under the Agreement for periods prior to the Effective Date directly between themselves.

8.This Assignment and Acceptance and any claim, controversy or dispute arising under or related to or in connection with this Assignment and Acceptance, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Section 5-1401 of the New York General Obligations Law.

9.This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns.  This Assignment and Acceptance may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of Schedule I hereto in Portable Document Format (PDF) or by telecopier or facsimile transmission shall be effective as delivery of an originally executed counterpart of this Assignment and Acceptance.

IN WITNESS WHEREOF, each of Assignor and Assignee have caused Schedule I hereto to be executed by their respective officers thereunto duly authorized, as of the date specified thereon.

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Schedule I
to
ASSIGNMENT AND ACCEPTANCE

Assignor:  Wells Fargo Bank, National Association

Assignee:

Effective Date:   ______________ ___, 201__

Assigned Purchase Price	$
Aggregate Purchase Price	$
Assigned Buyer Percentage	%
Outstanding Aggregate Purchase Amount	$
Outstanding Buyer Purchase Amount	$

Assignor:
Wells Fargo Bank, National Association, as Assignor
[Type or print legal name of Assignor]
By
	Name:
	Title:
Dated:	___________ __, 201__

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Assignee:
_______________________________, as Assignee
[Type or print legal name of Assignor]
By
	Name:
	Title:
Dated:	___________ __, 201__
Address for Notices:

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EXHIBIT G-1

FORM OF ACCOUNT CONTROL AGREEMENT
(Deposit Account and Securities Account)

Account Control Agreement dated as of _____________, 201_ (the “Agreement”), among [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent] (“Secured Party”), [identify underlying borrower] (“Pledgor”), and [identify custodian] (the “Custodian”).

WHEREAS, the Custodian maintains the [escrow and reserve account and securities account] for the benefit of by the Pledgor; and

WHEREAS, pursuant to the terms the [identify security agreement] between Secured Party and Pledgor (as amended from time to time, the “Security Agreement”), Pledgor has granted to Secured Party a security interest in the Collateral Accounts and the Collateral (each as defined below) to secure the obligations of Pledgor described in the Security Agreement; and

WHEREAS, Secured Party, Pledgor and the Custodian are entering into this Agreement to provide for the control of the Collateral;

NOW, THEREFORE, in consideration of the mutual promises set forth herein, it is agreed as follows:

1.Collateral Accounts.  All Collateral (other than cash Collateral) shall be identified and segregated on the Custodian’s books and records under the name “[Name of Pledgor] for the benefit of [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]” (the “Securities Account”).  The Custodian shall treat all non‑cash Collateral as financial assets under Article 8 of the Uniform Commercial Code as in effect from time to time in The State of New York (the “UCC”), and shall credit such Collateral to the Securities Account.  The Custodian  represents that the Securities Account is a “securities account” (as defined in Section 8‑501(a) of the UCC).  The Custodian shall identify and segregate in a separate deposit account any cash Collateral and hold it under the name “[Name of Pledgor] for the benefit of [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]” (the “Deposit Account” and, together with the Securities Account, the “Collateral Accounts”).  The Custodian  represents that the Deposit Account is a “deposit account” (as defined in Section 9‑102(a)(29) of the UCC). All Collateral consisting of cash or funds, whether posted as initial Collateral or Collateral in the form of Proceeds (as defined in Section 3 below) shall be held in the Deposit Account.

2.Account Control.

2.1Security Interest.  This Agreement is intended by Secured Party and Pledgor to grant “control” of the Collateral Accounts to Secured Party for purposes of perfection of Secured Party’s security interest in such Collateral pursuant to Article 8 and Article 9 of the UCC, and the Custodian hereby acknowledges that it has been advised of Pledgor’s grant to Secured Party of a security interest in the Collateral Accounts and all financial assets, funds and other property credited thereto or held therein from time to time (collectively, the “Collateral”).  Notwithstanding anything to the contrary in this Agreement, the Custodian will at all times comply with entitlement orders or instructions (within the meaning of Sections 8‑102, 9‑104 and 9‑106 of the UCC) received from Secured Party with respect to the Collateral Accounts, including without limitation instructions directing the disposition of funds held in the Deposit Account, without further consent of the Pledgor or any other person.

2.2Control by Pledgor.  Unless and until the Custodian receives written notice from Secured Party pursuant to Section 2.3 below instructing the Custodian that Secured Party is exercising its right to exclusive

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control over the Collateral Accounts, which notice is substantially in the form attached hereto as Exhibit A (a “Notice of Exclusive Control”) the Custodian shall take all actions with respect to the Collateral in the Collateral Accounts upon the joint instructions of Secured Party and Pledgor.

2.3Control by Secured Party.

(i)Secured Party agrees to provide the Custodian, in the form of Exhibit B attached (as may be amended from time to time), the names and signatures of authorized parties who may give notices, instructions, or entitlement orders concerning the Collateral Accounts.  Other means of notice or instruction may be used provided that Secured Party and the Custodian agree to appropriate security procedures.  Upon receipt by the Custodian of a Notice of Exclusive Control, the Custodian shall thereafter follow only the instructions or entitlement orders of Secured Party with respect to the Collateral Accounts and shall comply with any entitlement order or instructions (within the meaning of Sections 8‑102, 9‑104 and 9‑106 of the UCC) received from Secured Party with respect thereto, including without limitation instructions directing the disposition of funds held in the Deposit Account, without further consent of Pledgor or any other person, and Custodian will not comply with entitlement orders or instructions concerning the Collateral originated by Pledgor without the prior written consent of Secured Party.

(ii)The Custodian shall have no responsibility or liability to Pledgor for complying with a Notice of Exclusive Control or complying with entitlement orders or instructions originated by Secured Party concerning the Collateral Accounts.  The Custodian shall have no duty to investigate or make any determination to verify the existence of an event of default or compliance by either Secured Party or Pledgor with applicable law or the Security Agreement, and the Custodian shall be fully protected in complying with a Notice of Exclusive Control whether or not Pledgor may allege that no such event of default or other like event exists.

3.Distributions.  The Custodian shall, without further action by Pledgor or Secured Party, credit to Deposit Account all interest, dividends and other income received by the Custodian on the Collateral (collectively, “Proceeds”) as additional Collateral.

4.Release of Collateral; Release of Security Interest.

4.1Release of Collateral.  Subject to Section 2.3 hereof, Custodian will release all, or any designated portion, of the Collateral held in the Collateral Accounts as soon as reasonably practicable after receiving written instructions or entitlement orders from Secured Party and Pledgor authorizing such release.

4.2Release of Security Interest.  Secured Party agrees to notify the Custodian promptly in writing when all obligations of Pledgor to Secured Party secured by the Security Agreement have been fully paid and satisfied (and any commitment of Secured Party to advance further amounts or credit thereunder has been terminated) or Secured Party otherwise no longer claims any interest in the Collateral in the Collateral Accounts, whichever is sooner; at which time the Custodian shall have no further liabilities or responsibilities hereunder and the Custodian’s obligations under this Agreement shall terminate.

5.Duties and Services of Custodian.

(i)Custodian agrees that it is acting as a “securities intermediary,” as defined in Section 8‑102(a)(14) of the UCC, with respect to the Securities Account and the Collateral credited thereto.  The Custodian agrees, with respect to the Deposit Account, that it is acting as a “bank,” as defined in Section 9‑102(a)(8) of the UCC.

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(ii)The Custodian shall have no duties, obligations, responsibilities or liabilities with respect to the Collateral Accounts except as and to the extent expressly set forth in this Agreement.  The Custodian shall not be liable or responsible for anything done or omitted to be done by it in good faith and in the absence of bad faith, negligence or willful misconduct.

(iii)Pledgor shall indemnify and hold the Custodian harmless with regard to any losses or liabilities of the Custodian (including reasonable attorneys’ fees) imposed on or incurred by the Custodian arising out of any action or omission of the Custodian under this Agreement, except for any such losses or liabilities caused by the bad faith, negligence or willful misconduct of the Custodian.

6.Force Majeure.  The Custodian shall not be liable for delays, errors or losses occurring by reason of circumstances beyond its control, including, without limitation, acts of God, market disorder, terrorism, insurrection, war, riots, failure of transportation or equipment, or failure of vendors, communication or power supply.  In no event shall the Custodian be liable to any person for indirect, consequential or special damages, even if the Custodian has been advised of the possibility or likelihood of such damages (each, a “Force Majeure Event”); provided,  however, that the Custodian shall (i) make reasonably diligent efforts to mitigate the effects of any Force Majeure Event and (ii) resume performance under this Agreement as soon as reasonably possible after the cessation of such Force Majeure Event.

7.Custodian Representations.  The Custodian agrees and confirms, as of the date hereof, and at all times until the termination of this Agreement, that it has not entered into, and until the termination of this Agreement will not enter into, any agreement with any other person or entity relating to the Collateral or the Collateral Accounts under which it has agreed to comply with entitlement orders (as defined in Section 8‑102(a)(8) of the UCC) or other instructions of such other person or entity.

8.Fees and Expenses of Custodian; Subordination of Security Interest.  Pledgor hereby agrees to pay and reimburse the Custodian for any advances, fees, costs, expenses (including, without limitation, reasonable attorneys’ fees and costs) and disbursements that may be paid or incurred by the Custodian in connection with this Agreement or the arrangement contemplated hereby.  The Custodian agrees that any security interest, lien, encumbrance or other right that the Custodian may have with respect to the Collateral or the Collateral Accounts shall be subordinate to the security interest of Secured Party therein.

9.Notices.  Any notice, instruction, entitlement order or other instrument required to be given hereunder, or requests and demands to or upon the respective parties hereto, shall be in writing and may be sent by hand, or by facsimile transmission, email, telex, or overnight delivery by any recognized delivery service, prepaid or, for termination of this Agreement only, by certified or registered mail, and addressed as follows, or to such other address as any party may hereafter notify the other respective parties hereto in writing:

If to Secured Party, then:

[Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]
[ADDRESS]
Attention: 
Facsimile: 
Telephone: 

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If to Pledgor, then:

[NAME OF PLEDGOR]
[ADDRESS]
Attention: 
Facsimile: 
Telephone: 

If to Custodian, then:

[NAME OF CUSTODIAN]
[ADDRESS]
Attention:
Facsimile:
Telephone:

10.Amendment.  No amendment or modification of this Agreement will be effective unless it is in writing and signed by each of the parties hereto.

11.Termination.  This Agreement shall continue in effect until Secured Party has notified the Custodian in writing that this Agreement is to be terminated.

12.Severability.  In the event any provision of this Agreement is held illegal, void or unenforceable, the remainder of this Agreement shall remain in effect.

13.Governing Law.This Agreement and any claim, controversy or dispute arising under or related to or in connection with this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Section 5-1401 of the New York General Obligations Law.

14.Headings.  Any headings appearing on this Agreement are for convenience only and shall not affect the interpretation of any of the terms of this Agreement.

15.Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.

16.Successors; Assignment.  The Agreement will be binding upon the parties and their respective successors and assigns.  This Agreement may not be assigned without the written consent of all parties, and any attempted assignment in violation this Section 16 shall be null and void.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers or duly authorized representatives as of the date first above written.

[NAME OF PLEDGOR]

By:  ___________________________
Name:
Title: 

By:  ___________________________
Name:
Title: 

[STARWOOD PROPERTY MORTGAGE SUB‑2, L.L.C., STARWOOD PROPERTY MORTGAGE SUB‑2-A, L.L.C. AND/OR APPLICABLE PLEDGE AGENT]

By:  ___________________________
Name:
Title: 

[NAME OF CUSTODIAN]

By:  ___________________________
Name:
Title: 

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Exhibit A

[Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]

Date:  _________________

[Name of Custodian]
[Address]
Attn: 

Re:[Name of Pledgor]

NOTICE OF EXCLUSIVE CONTROL

We hereby instruct you pursuant to the terms of that certain Account Control Agreement dated as of _____________, 201_ (the “Control Agreement”) among the undersigned, [name of underlying borrower] (“Pledgor”), and you, as Custodian, that you (i) shall not follow any instructions or entitlement orders of Pledgor with respect to the Collateral or the Collateral Accounts (as defined in the Control Agreement) held by you for Pledgor, and (ii) unless and until otherwise expressly instructed by the undersigned, shall exclusively follow the entitlement orders and instructions of the undersigned with respect to such Collateral and such Collateral Accounts.

Very truly yours,

[Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]

By:  _____________________________________________________________________
Authorized Signatory

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Exhibit B

TO

CONTROL AGREEMENT

DATED ___________ __, 2010

AUTHORIZED PERSONS FOR [SECURED PARTY].

[Custodian] is directed to accept and act upon notices, instructions or entitlement orders received from any one of the following persons at [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]:

Name	Telephone/Fax Number	Signature
1.	1.  Telephone: Facsimile:	1.  _____________________
2.	2.  Telephone: Facsimile:	2.  _____________________
3.	3.  Telephone: Facsimile:	3.  _____________________
4.	4.  Telephone: Facsimile:	4.  _____________________
5.	5.  Telephone: Facsimile:	5.  ______________________

Authorized by:
	as authorized agent of [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]
	Name:
	Title:
	Date:

25

FORM OF ACCOUNT CONTROL AGREEMENT
(Securities Account Only)

Account Control Agreement dated as of _____________, 201_ (the “Agreement”), among [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent] (“Secured Party”), [identify underlying borrower] (“Pledgor”), and [identify custodian] (the “Custodian”).

WHEREAS, the Custodian maintains the [escrow and reserve account and securities account] for the benefit of by the Pledgor; and

WHEREAS, pursuant to the terms the [identify security agreement] between Secured Party and Pledgor (as amended from time to time, the “Security Agreement”), Pledgor has granted to Secured Party a security interest in the Collateral Account and the Collateral (each as defined below) to secure the obligations of Pledgor described in the Security Agreement; and

WHEREAS, Secured Party, Pledgor and the Custodian are entering into this Agreement to provide for the control of the Collateral;

NOW, THEREFORE, in consideration of the mutual promises set forth herein, it is agreed as follows:

1.Collateral Account.   All Collateral shall be identified and segregated on the Custodian’s books and records under the name “[Name of Pledgor] for the benefit of [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]” (the “Collateral Account”).  The Custodian shall treat all Collateral, including without limitation cash, as financial assets under Article 8 of the Uniform Commercial Code as in effect from time to time in The State of New York (the “UCC”), and shall credit the Collateral to the Collateral Account.  The Custodian represents that the Collateral Account is a “securities account” (as defined in Section 8‑501(a) of the UCC).

2.Account Control.

2.1Security Interest.  This Agreement is intended by Secured Party and Pledgor to grant “control” of the Collateral Account to Secured Party for purposes of perfection of Secured Party’s security interest in such Collateral pursuant to Article 8 and Article 9 of the UCC, and the Custodian hereby acknowledges that it has been advised of Pledgor’s grant to Secured Party of a security interest in the Collateral Account and all financial assets credited thereto from time to time (collectively, the “Collateral”).  Notwithstanding anything to the contrary in this Agreement, the Custodian will at all times comply with entitlement orders (within the meaning of Sections 8‑102(a)(8) and 9‑106 of the UCC) received from Secured Party with respect to the Collateral Accounts, without further consent of the Pledgor or any other person.

2.2Control by Pledgor.  Unless and until the Custodian receives written notice from Secured Party pursuant to Section 2.3 below instructing the Custodian that Secured Party is exercising its right to exclusive control over the Collateral Account, which notice is substantially in the form attached hereto as Exhibit A (a “Notice of Exclusive Control”) the Custodian shall take all actions with respect to the Collateral in the Collateral Account upon the joint instructions of Secured Party and Pledgor.

2.3Control by Secured Party.

(i)Secured Party agrees to provide the Custodian, in the form of Exhibit B attached (as may be amended from time to time), the names and signatures of authorized parties who may give notices, instructions, or entitlement orders concerning the Collateral Account.  Other means of notice or

26

instruction may be used provided that Secured Party and the Custodian agree to appropriate security procedures.  Upon receipt by the Custodian of a Notice of Exclusive Control, the Custodian shall thereafter follow only the entitlement orders of Secured Party with respect to the Collateral Account and shall comply with any entitlement order (within the meaning of Sections 8‑102(a)(8) and 9‑106 of the UCC) received from Secured Party with respect thereto, without further consent of Pledgor or any other person, and Custodian will not comply with entitlement orders or instructions concerning the Collateral originated by Pledgor without the prior written consent of Secured Party.

(ii)The Custodian shall have no responsibility or liability to Pledgor for complying with a Notice of Exclusive Control or complying with entitlement orders originated by Secured Party concerning the Collateral Account.  The Custodian shall have no duty to investigate or make any determination to verify the existence of an event of default or compliance by either Secured Party or Pledgor with applicable law or the Security Agreement, and the Custodian shall be fully protected in complying with a Notice of Exclusive Control whether or not Pledgor may allege that no such event of default or other like event exists.

3.Distributions.  The Custodian shall, without further action by Pledgor or Secured Party, credit to Collateral Account all interest, dividends and other income received by the Custodian on the Collateral as additional Collateral.

4.Release of Collateral; Release of Security Interest.

4.1Release of Collateral.  Subject to Section 2.3 hereof, Custodian will release all, or any designated portion, of the Collateral held in the Collateral Account as soon as reasonably practicable after receiving written instructions or entitlement orders from Secured Party and Pledgor authorizing such release.

4.2Release of Security Interest.  Secured Party agrees to notify the Custodian promptly in writing when all obligations of Pledgor to Secured Party secured by the Security Agreement have been fully paid and satisfied (and any commitment of Secured Party to advance further amounts or credit thereunder has been terminated) or Secured Party otherwise no longer claims any interest in the Collateral in the Collateral Account, whichever is sooner; at which time the Custodian shall have no further liabilities or responsibilities hereunder and the Custodian’s obligations under this Agreement shall terminate.

5.Duties and Services of Custodian.

(i)Custodian agrees that it is acting as a “securities intermediary,” as defined in Section 8‑102(a)(14) of the UCC, with respect to the Collateral Account and the Collateral credited thereto.

(ii)The Custodian shall have no duties, obligations, responsibilities or liabilities with respect to the Collateral Account except as and to the extent expressly set forth in this Agreement.  The Custodian shall not be liable or responsible for anything done or omitted to be done by it in good faith and in the absence of bad faith, negligence or willful misconduct.

(iii)Pledgor shall indemnify and hold the Custodian harmless with regard to any losses or liabilities of the Custodian (including reasonable attorneys’ fees) imposed on or incurred by the Custodian arising out of any action or omission of the Custodian under this Agreement, except for any such losses or liabilities caused by the bad faith, negligence or willful misconduct of the Custodian.

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6.Force Majeure.  The Custodian shall not be liable for delays, errors or losses occurring by reason of circumstances beyond its control, including, without limitation, acts of God, market disorder, terrorism, insurrection, war, riots, failure of transportation or equipment, or failure of vendors, communication or power supply.  In no event shall the Custodian be liable to any person for indirect, consequential or special damages, even if the Custodian has been advised of the possibility or likelihood of such damages (each, a “Force Majeure Event”); provided,  however, that the Custodian shall (i) make reasonably diligent efforts to mitigate the effects of any Force Majeure Event and (ii) resume performance under this Agreement as soon as reasonably possible after the cessation of such Force Majeure Event.

7.Custodian Representations.  The Custodian agrees and confirms, as of the date hereof, and at all times until the termination of this Agreement, that it has not entered into, and until the termination of this Agreement will not enter into, any agreement with any other person or entity relating to the Collateral or the Collateral Account under which it has agreed to comply with entitlement orders (as defined in Section 8‑102(a)(8) of the UCC) or other instructions of such other person or entity.

8.Fees and Expenses of Custodian; Subordination of Security Interest.  Pledgor hereby agrees to pay and reimburse the Custodian for any advances, fees, costs, expenses (including, without limitation, reasonable attorneys’ fees and costs) and disbursements that may be paid or incurred by the Custodian in connection with this Agreement or the arrangement contemplated hereby.  The Custodian agrees that any security interest, lien, encumbrance or other right that the Custodian may have with respect to the Collateral or the Collateral Account shall be subordinate to the security interest of Secured Party therein. 

9.Notices.  Any notice, instruction, entitlement order or other instrument required to be given hereunder, or requests and demands to or upon the respective parties hereto, shall be in writing and may be sent by hand, or by facsimile transmission, email, telex, or overnight delivery by any recognized delivery service, prepaid or, for termination of this Agreement only, by certified or registered mail, and addressed as follows, or to such other address as any party may hereafter notify the other respective parties hereto in writing:

If to Secured Party, then:

[Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]
[ADDRESS]
Attention: 
Facsimile: 
Telephone: 

If to Pledgor, then:

[NAME OF PLEDGOR]
[ADDRESS] 
Attention: 
Facsimile: 
Telephone: 

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If to Custodian, then:

[NAME OF CUSTODIAN]
[ADDRESS]
Attention:
Facsimile:
Telephone:

10.Amendment.  No amendment or modification of this Agreement will be effective unless it is in writing and signed by each of the parties hereto.

11.Termination.  This Agreement shall continue in effect until Secured Party has notified the Custodian in writing that this Agreement is to be terminated. 

12.Severability.  In the event any provision of this Agreement is held illegal, void or unenforceable, the remainder of this Agreement shall remain in effect.

13.Governing Law.This Agreement and any claim, controversy or dispute arising under or related to or in connection with this Agreement, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Section 5-1401 of the New York General Obligations Law.

14.Headings.  Any headings appearing on this Agreement are for convenience only and shall not affect the interpretation of any of the terms of this Agreement.

15.Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all such counterparts taken together shall constitute one and the same Agreement.

16.Successors; Assignment.  The Agreement will be binding upon the parties and their respective successors and assigns.  This Agreement may not be assigned without the written consent of all parties, and any attempted assignment in violation this Section 16 shall be null and void.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

29

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers or duly authorized representatives as of the date first above written.

[NAME OF PLEDGOR]

By:  ___________________________
Name:
Title: 

By:  ___________________________
Name:
Title: 

[STARWOOD PROPERTY MORTGAGE SUB‑2, L.L.C., STARWOOD PROPERTY MORTGAGE SUB‑2-A, L.L.C. AND/OR APPLICABLE PLEDGE AGENT]

By:  ___________________________
Name:
Title: 

[NAME OF CUSTODIAN]

By:  ___________________________
Name:
Title: 

30

Exhibit A

[Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]

Date:  _________________

[Name of Custodian]
[Address]
Attn: 

Re:[Name of Pledgor]

NOTICE OF EXCLUSIVE CONTROL

We hereby instruct you pursuant to the terms of that certain Account Control Agreement dated as of _____________, 201_ (the “Control Agreement”) among the undersigned, [name of underlying borrower] (“Pledgor”), and you, as Custodian, that you (i) shall not follow any instructions or entitlement orders of Pledgor with respect to the Collateral or the Collateral Account (as defined in the Control Agreement) held by you for Pledgor, and (ii) unless and until otherwise expressly instructed by the undersigned, shall exclusively follow the entitlement orders and instructions of the undersigned with respect to such Collateral and such Collateral Account.

Very truly yours,

[Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]

By:  _____________________________________________________________________
Authorized Signatory

31

Exhibit B

TO

CONTROL AGREEMENT

DATED ___________ __, ____

AUTHORIZED PERSONS FOR [SECURED PARTY].

[Custodian] is directed to accept and act upon notices, instructions or entitlement orders received from any one of the following persons at [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]:

Name	Telephone/Fax Number	Signature
1.	1.  Telephone: Facsimile:	1.  _____________________
2.	2.  Telephone: Facsimile:	2.  _____________________
3.	3.  Telephone: Facsimile:	3.  _____________________
4.	4.  Telephone: Facsimile:	4.  _____________________
5.	5.  Telephone: Facsimile:	5.  ______________________

Authorized by:
	as authorized agent of [Starwood Property Mortgage Sub‑2, L.L.C., Starwood Property Mortgage Sub‑2-A, L.L.C. and/or applicable pledge agent]
	Name:
	Title:
	Date:

32

EXHIBIT G-2

Form of controlled account agreement

See attached.

33

EXHIBIT H

Form of guarantee agreement

See attached.

34

EXHIBIT I

FORM OF SERVICING AND SUB-servicing agreement

See attached.

35

EXHIBIT J

FORM OF FUTURE FUNDING CONFIRMATION

[    ] [  ], 20[  ]

Wells Fargo Bank, N.A.
One Wells Fargo Center
301 South College Street
MAC D1053-125, 12th Floor
Charlotte, North Carolina  28202

Attention:  Karen Whittlesey

Re:Third Amended and Restated Master Repurchase and Securities Contract dated as of October 23,  2014 (as amended, restated, supplemented or otherwise modified and in effect from time to time the “Agreement”), between Starwood Property Mortgage Sub-2, L.L.C. (“Seller 2”), Starwood Property Mortgage Sub-2-A, L.L.C. (“Seller 2-A” and, together with Seller 2, the “Seller”),  and Wells Fargo Bank, N.A. (“Buyer”)

Ladies and Gentlemen:

This is a Future Funding Confirmation (as this and other terms used but not defined herein are defined in the Agreement) executed and delivered by [Seller 2] [Seller 2-A]and Buyer pursuant to Section 3.10 of the Agreement.  [Seller 2] [Seller 2-A]and Buyer hereby confirm and agree that as of the Future Funding Date and upon the other terms specified below, Buyer shall advance funds to Seller, or at the request of Seller, to the borrower identified below related to the Purchased Assets identified below. 

Seller (please select):	[Seller 2] [Seller 2-A]
Related Purchased Asset:	________________________
Market Value:	$_______________________
Applicable Percentage:	_____%
Maximum Applicable Percentage:	_____%
Purchased Asset Documents:	As described in Appendix 1 hereto
Future Funding Date:	[    ] [  ], 20[  ]
Outstanding principal balance
prior to future advance:	$_______________________

36

Future advance amount to
Underlying Obligor:	$_______________________
Outstanding principal balance
after future advance:	$_______________________
Purchase Price prior to
Future Funding Amount:	$_______________________
Purchase Price after
Future Funding Amount:	$_______________________
Future Funding Amount:	$_______________________
Borrower:	________________________

Seller hereby certifies as follows, on and as of the above Future Funding Date with respect to the Purchased Asset described in this Confirmation:

1.All of the conditions precedent in Section 3.10 of the Agreement have been satisfied.

2.Except as specified in Appendix 1 hereto, Seller will make all of the representations and warranties contained in the Agreement (including Schedule 1 to the Agreement as applicable to the Class of such Asset) that it can make with respect to such Asset.

Seller:

[STARWOOD PROPERTY MORTGAGE SUB‑2, L.L.C.]

[STARWOOD PROPERTY MORTGAGE SUB-2-A, L.L.C.]

By:_______________________________________
Name:
Title:

37

Buyer:

Acknowledged and Agreed:

Wells Fargo Bank, N.A.

By:_______________________________________
Name:_______________________________________
Title: _______________________________________

38

Appendix 1

Exceptions to Representations and Warranties

39

EXHIBIT K

Form of CERTIFICATE OF RESPONSIBLE OFFICER OF
[STARWOOD PROPERTY MORTGAGE SUB-2, L.L.C.] [STARWOOD PROPERTY MORTGAGE SUB-2, L.L.C.]

October 23, 2014

Wells Fargo Bank, National Association
One Wells Fargo Center
301 South College Street
MAC D1053-160, 16th Floor
Charlotte, North Carolina  28202

Re:Third Amended and Restated Master Repurchase and Securities Contract dated as of October 23, 2014 (as amended, restated, supplemented or otherwise modified and in effect from time to time the “Agreement”) among Starwood Property Mortgage Sub-2, L.L.C. [(“Seller”)], Starwood Property Mortgage Sub-2-A, L.L.C.[(“Seller”)] and Wells Fargo Bank, National Association (“Buyer”)

Ladies and Gentlemen:

The undersigned, in his capacity as Responsible Officer (as such term is defined in the Agreement) of Seller, certifies the following to Buyer on behalf of Seller in accordance with Section 6.01(a) of the Agreement:

8. (b)the representations and warranties contained in Article 7 of the Agreement are true and correct on and as of the date of this certificate;

9. (c)no Default or Event of Default exists or would result from the execution or performance of the Agreement; and

10. (d)there has occurred since October 23, 2014, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect.

All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Agreement.

[Signature Page Follows]

40

RESPONSIBLE OFFICER:

Name:
Title: 

41

EXHIBIT L

Form of custodial agreement

See attached.

42

ANNEX 1

BUYER’S LOCATION

Wells Fargo Bank, National Association

One Wells Fargo Center

301 South College Street

MAC D1053-053, 5th Floor

Charlotte, North Carolina  28202

Attention: H. Lee Goins III

SELLER’S LOCATION

Starwood Property Mortgage Sub-2, L.L.C.

Starwood Capital Group

591 West Putnam Avenue

Greenwich, Connecticut 06830

Attention: Andrew Sossen

Starwood Property Mortgage Sub-2-A, L.L.C.

Starwood Capital Group

591 West Putnam Avenue

Greenwich, Connecticut 06830

Attention: Andrew Sossen

43

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 September 30, 2015;

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: November 5, 2015	/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 endedSeptember 30, 2015;

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: November 5, 2015	/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 September 30, 2015 (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: November 5, 2015	/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 September 30, 2015 (the “Report”), I, Rina Paniry, do hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 5, 2015	/s/ RINA PANIRY
	Rina Paniry
	Chief Financial Officer

XML

Secured Financing Agreements (Tables)

9 Months Ended

Sep. 30, 2015

Secured Financing Agreements.

Summary of secured financing agreements

The following table is a summary of our secured financing agreements in place as of September 30, 2015 and December 31, 2014 (dollars in thousands):

					Pledged
					Asset		Maximum			Carrying Value at
	Current	Extended			Carrying		Facility			September 30,			December 31,
	Maturity	Maturity(a)	Pricing		Value		Size			2015			2014
Lender 1 Repo 1	(b)	(b)	LIBOR + 1.85% to 5.25%		$	1,471,791	$	1,600,000		$	916,310		$	875,111
Lender 1 Repo 2	(c)	N/A	LIBOR + 1.90%			184,785		125,000			6,948			101,886
Lender 2 Repo 1	Oct 2015	Oct 2018	LIBOR + 1.75% to 2.75%			373,917		325,000			272,824			240,188
Lender 3 Repo 1	May 2017	May 2019	LIBOR + 2.85%			229,983		162,917			162,917			124,250
Conduit Repo 1	Sep 2016	N/A	LIBOR + 1.95% to 3.35%			116,084		150,000			85,849			94,727
Conduit Repo 2	Nov 2015	Nov 2016	LIBOR + 2.10%			164,310		150,000			121,556			113,636
Conduit Repo 3	Feb 2018	Feb 2019	LIBOR + 2.10%			107,389		150,000			79,847			—
Lender 4 Repo 1	Oct 2016	Oct 2017	LIBOR + 2.00%			405,195		317,688			317,688			327,117
Lender 5 Repo 1	(d)	N/A	N/A			—		—			—			58,079
Lender 6 Repo 1	Aug 2018	N/A	LIBOR + 2.50% to 3.00%			733,579		500,000			367,010			296,967
Lender 6 Mortgage	May 2020	N/A	EURIBOR + 1.69%			502,497		328,602			328,602			—
Lender 7 Repo 1	Dec 2016	N/A	LIBOR + 2.35% to 2.70%			140,274		107,416			107,416			39,024
Investing and Servicing Segment Property Mortgages	June 2018 to Nov 2024	N/A	Various			43,688		38,975			31,835			14,000
Lender 9 Repo 1	(e)	(e)	LIBOR + 1.40% to 1.85%			319,853		225,313			225,313			—
Borrowing Base	Jul 2018	Jul 2019	LIBOR + 2.75%	(f)		222,770		450,000	(g)		—			189,871
Term Loan	Apr 2020	N/A	LIBOR + 2.75%	(f)		3,296,673		659,962			658,159	(h)		662,933	(h)
FHLB Advances	N/A	N/A	Various			—		1,000,000			—			—
					$	8,312,788	$	6,290,873		$	3,682,274		$	3,137,789

(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.  Borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions and not to exceed January 2023.

(c) The date that is 180 days after the buyer delivers notice to seller, subject to a maximum date of March 2017.

(d) Facility was terminated at our option in March 2015.

(e) Facility carries a rolling twelve month term which may reset monthly with the lender’s consent. Current maturity is September 2016.  Facility carries no maximum facility size.  Amount herein reflects the outstanding balance as of September 30, 2015.

(f) 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.

(g) Subject to certain conditions defined in the facility agreement, the maximum facility size may be increased to $650.0 million.

(h) Term loan outstanding balance is net of $1.8 million and $2.1 million of unamortized discount as of September 30, 2015 and December 31, 2014, respectively.

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):

	Repurchase		Other Secured
	Agreements		Financing			Total
2015 (remainder of)	$	302,104	$	1,692		$	303,796
2016		249,929		6,769			256,698
2017		928,144		6,769			934,913
2018		626,982		19,054			646,036
2019		556,519		6,769			563,288
Thereafter		—		979,347	(1)		979,347
Total	$	2,663,678	$	1,020,400		$	3,684,078

(1) Principal paydown of the Term Loan through 2020 excludes $1.8 million of discount amortization.

Schedule of outstanding balance of repurchase agreements related to the following asset collateral classes

As of September 30, 2015 and December 31, 2014, the outstanding balance of our repurchase agreements related to the following asset collateral classes (amounts in thousands):

Class of Collateral	September 30, 2015		December 31, 2014
Loans held-for-investment	$	2,036,748	$	1,863,633
Loans held-for-sale		287,252		208,363
Investment securities		339,678		198,989
	$	2,663,678	$	2,270,985

XML

Acquisitions and Divestitures (Details 2) $ in Thousands, shares in Millions			9 Months Ended
	Jan. 31, 2014 USD ($) item shares	Jan. 24, 2014	Sep. 30, 2014 USD ($)
Summarized consolidated results of discontinued operations for the SFR segment prior to the spin-off
Net loss			$ (1,551)
Single Family Residential
Summarized consolidated results of discontinued operations for the SFR segment prior to the spin-off
Total revenues			3,876
Total costs and expenses			6,369
Loss before other income and income taxes			(2,493)
Total other income			942
Loss before income taxes			(1,551)
Net loss			$ (1,551)
SWAY
Spin-off transaction
Net assets	$ 1,100,000
Number of units of single-family homes | item	7,200
Shares issued | shares	40.1
Spin off | Single Family Residential
Spin-off transaction
Share exchange ratio		0.20
Cash contribution	$ 100,000

XML

Income Taxes (Tables)

9 Months Ended

Sep. 30, 2015

Income Taxes

Schedule of income tax provision

Our income tax provision consisted of the following for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Current
Federal	$	6,074	$	10,044	$	21,825	$	20,668
Foreign		1,718		905		3,996		4,136
State		1,009		2,041		3,634		3,840
Total current		8,801		12,990		29,455		28,644
Deferred
Federal		(689)		(7,390)		(74)		(10,438)
Foreign		(322)		(539)		(1,945)		(2,737)
State		(115)		(1,225)		(18)		(1,736)
Total deferred		(1,126)		(9,154)		(2,037)		(14,911)
Total income tax provision	$	7,675	$	3,836	$	27,418	$	13,733

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 (amounts in thousands):

	September 30, 2015		December 31, 2014
U.S.
Deferred tax asset, net
Reserves and accruals	$	12,790	$	13,818
Domestic intangible assets		12,292		9,617
Investment securities and loans		(2,482)		(2,327)
Investment in unconsolidated entities		(412)		883
Deferred income		432		427
Net operating and capital loss carryforwards		5,173		2,498
Valuation allowance		(5,173)		(2,498)
Other U.S. temporary differences		405		515
		23,025		22,933
Europe
Deferred tax liability, net
European servicing rights		(845)		(2,681)
Net operating and capital loss carryforwards		8,149		8,702
Valuation allowance		(8,149)		(8,702)
Other European temporary differences		(131)		(337)
		(976)		(3,018)
Net deferred tax assets	$	22,049	$	19,915

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 nine months ended September 30, 2015 and 2014 (dollar amounts in thousands):

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2015				2014				2015				2014
Federal statutory tax rate	$	43,677	35.0	%	$	59,929	35.0	%	$	134,034	35.0	%	$	147,836	35.0	%
REIT and other non-taxable income		(36,250)	(29.0)	%		(52,979)	(30.9)	%		(111,732)	(29.1)	%		(133,483)	(31.6)	%
State income taxes		937	0.8	%		930	0.5	%		3,117	0.8	%		1,953	0.5	%
Federal benefit of state tax deduction		(328)	(0.3)	%		(326)	(0.2)	%		(1,091)	(0.3)	%		(683)	(0.2)	%
Valuation allowance		(221)	(0.2)	%		712	0.4	%		2,652	0.7	%		1,160	0.3	%
Other		(140)	(0.1)	%		(4,430)	(2.6)	%		438	0.1	%		(3,050)	(0.7)	%
Effective tax rate	$	7,675	6.2	%	$	3,836	2.2	%	$	27,418	7.2	%	$	13,733	3.3	%

XML

Derivatives and Hedging Activity (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	$ 36,307	$ 26,628
Fair Value of Derivatives in a Liability Position	14,901	5,476
Derivatives designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	6	138
Fair Value of Derivatives in a Liability Position	451	235
Derivatives not designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	36,301	26,490
Fair Value of Derivatives in a Liability Position	14,450	5,241
Interest rate swaps | Derivatives designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	6	138
Fair Value of Derivatives in a Liability Position	451	235
Interest rate swaps | Derivatives not designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	2,981	1,128
Fair Value of Derivatives in a Liability Position	13,508	5,216
Foreign exchange contracts | Derivatives not designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	31,657	24,388
Fair Value of Derivatives in a Liability Position	942	15
Credit index instruments | Derivatives not designated as hedging instruments
Fair value of derivative instruments
Fair Value of Derivatives in an Asset Position	$ 1,663	974
Fair Value of Derivatives in a Liability Position		$ 10

XML

Loans (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Dec. 31, 2013
Investments in loans
Total gross loans	$ 6,414,512	$ 6,306,316
Loan loss allowance (loans held-for-investment)	(6,342)	(6,031)	$ (5,917)	$ (3,984)
Carrying Value	6,408,170	6,300,285
Face Amount	6,478,156	6,394,245
Carrying value under fair value option	423,630
Loans with variable rates of interest	$ 4,770,057	4,468,210
Loans with variable rates of interest (as a percent)	81.90%
Variable rate basis of loans	LIBOR
Weighted average spread of loans (as a percent)	6.10%
Amount of loan impairment charges on individual loans held-for-investment	$ 0	0
1-month LIBOR
Investments in loans
Loans with variable rates of interest	$ 463,214	$ 138,576
Effective variable rate basis (as a percent)	0.193%	0.1713%
3 Month LIBOR
Investments in loans
Loans with variable rates of interest	$ 411,122	$ 440,222
Effective variable rate basis (as a percent)	0.5831%	0.564%
LIBOR floor
Investments in loans
Loans with variable rates of interest	$ 3,895,721	$ 3,889,412
LIBOR floor | Minimum
Investments in loans
Effective variable rate basis (as a percent)	0.15%	0.15%
LIBOR floor | Maximum
Investments in loans
Effective variable rate basis (as a percent)	3.00%	3.00%
LIBOR floor | Weighted-average
Investments in loans
Effective variable rate basis (as a percent)	0.31%	0.35%
Total loans held-for-investment
Investments in loans
Total gross loans	$ 5,821,228	$ 5,785,269
Face Amount	5,887,026	5,874,333
Loans held-for-sale
Investments in loans
Total gross loans	450,828	391,620
Face Amount	$ 447,204	$ 390,342
Weighted Average Coupon (as a percent)	4.80%	4.50%
Weighted Average Life	8 years 10 months 24 days	8 years 3 months 18 days
Loans transferred as secured borrowings
Investments in loans
Total gross loans	$ 142,456	$ 129,427
Face Amount	$ 143,926	$ 129,570
Weighted Average Coupon (as a percent)	6.00%	5.40%
Weighted Average Life	2 years 2 months 12 days	2 years 6 months
First Mortgages: | Total loans held-for-investment
Investments in loans
Total gross loans	$ 4,533,689	$ 4,538,961
Face Amount	$ 4,588,988	$ 4,609,526
Weighted Average Coupon (as a percent)	6.10%	6.20%
Weighted Average Life	3 years	3 years 6 months
Subordinated mortgages | Total loans held-for-investment
Investments in loans
Total gross loans	$ 399,381	$ 345,091
Face Amount	$ 424,957	$ 374,859
Weighted Average Coupon (as a percent)	8.60%	8.10%
Weighted Average Life	3 years 7 months 6 days	3 years 10 months 24 days
Mezzanine Loans
Investments in loans
Carrying Value	$ 892,300	$ 704,200
Mezzanine Loans | Total loans held-for-investment
Investments in loans
Total gross loans	888,158	901,217
Face Amount	$ 873,081	$ 889,948
Weighted Average Coupon (as a percent)	10.00%	10.40%
Weighted Average Life	2 years 2 months 12 days	2 years 7 months 6 days

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Stockholders' Equity (Details 3) - $ / shares	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015
Non-Vested Shares and Share Equivalents activity
Beginning Balance (in shares)		1,981,398
Granted (in shares)		1,208,267
Vested (in shares)		(1,015,337)
Forfeited (in shares)		(19,722)
Balance at the end of period (in shares)	2,154,606	2,154,606
Weighted Average Grant Date Fair Value (per share)
Balance at the beginning of period (in dollars per share)		$ 27.30
Granted (in dollars per share)		24.36
Vested (in dollars per share)		26.47
Forfeited (in dollars per share)		23.96
Balance at the end of period (in dollars per share)	$ 26.07	$ 26.07
Starwood Property Trust, Inc. Equity Plan
Non-Vested Shares and Share Equivalents activity
Beginning Balance (in shares)		109,708
Granted (in shares)	30,608	533,267
Vested (in shares)		(40,151)
Forfeited (in shares)		(19,722)
Balance at the end of period (in shares)	583,102	583,102
Starwood Property Trust, Inc. Manager Equity Plan
Non-Vested Shares and Share Equivalents activity
Beginning Balance (in shares)		1,854,585
Granted (in shares)		675,000
Vested (in shares)		(971,334)
Balance at the end of period (in shares)	1,558,251	1,558,251
Starwood Property Trust, Inc. Non-Executive Director Stock Plan
Non-Vested Shares and Share Equivalents activity
Beginning Balance (in shares)		17,105
Vested (in shares)		(3,852)
Balance at the end of period (in shares)	13,253	13,253

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Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2015

Accumulated Other Comprehensive Income

Schedule of changes in AOCI by component

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

			Cumulative
			Unrealized Gain
	Effective Portion of		(Loss) on		Foreign
	Cumulative Loss on		Available-for-		Currency
	Cash Flow Hedges		Sale Securities		Translation		Total
Three Months Ended September 30, 2015
Balance at July 1, 2015	$	(237)	$	50,370	$	(4,232)	$	45,901
OCI before reclassifications		(395)		(9,095)		(3,057)		(12,547)
Amounts reclassified from AOCI		187		—		5,969		6,156
Net period OCI		(208)		(9,095)		2,912		(6,391)
Balance at September 30, 2015	$	(445)	$	41,275	$	(1,320)	$	39,510
Three Months Ended September 30, 2014
Balance at July 1, 2014	$	(575)	$	60,446	$	15,091	$	74,962
OCI before reclassifications		186		4,190		(9,765)		(5,389)
Amounts reclassified from AOCI		344		(236)		—		108
Net period OCI		530		3,954		(9,765)		(5,281)
Balance at September 30, 2014	$	(45)	$	64,400	$	5,326	$	69,681
Nine Months Ended September 30, 2015
Balance at January 1, 2015	$	(97)	$	60,190	$	(4,197)	$	55,896
OCI before reclassifications		(933)		(13,519)		(3,092)		(17,544)
Amounts reclassified from AOCI		585		(5,396)		5,969		1,158
Net period OCI		(348)		(18,915)		2,877		(16,386)
Balance at September 30, 2015	$	(445)	$	41,275	$	(1,320)	$	39,510
Nine Months Ended September 30, 2014
Balance at January 1, 2014	$	(604)	$	66,566	$	9,487	$	75,449
OCI before reclassifications		(522)		9,563		(4,161)		4,880
Amounts reclassified from AOCI		1,081		(11,729)		—		(10,648)
Net period OCI		559		(2,166)		(4,161)		(5,768)
Balance at September 30, 2014	$	(45)	$	64,400	$	5,326	$	69,681

Schedule of reclassifications out of AOCI that impacted the consolidated statements of operations

	Amounts Reclassified from				Amounts Reclassified from
	AOCI during the Three Months				AOCI during the Nine Months				Affected Line Item
	Ended September 30,				Ended September 30,				in the Statements
Details about AOCI Components	2015		2014		2015		2014		of Operations
Losses on cash flow hedges:
Interest rate contracts	$	(187)	$	(344)	$	(585)	$	(1,081)	Interest expense
Unrealized gains (losses) on available-for-sale securities:
Interest realized upon collection		—		—		5,396		—	Interest income from investment securities
Net realized gain on sale of investments		—		236		—		11,942	Gain on sale of investments and other assets, net
OTTI		—		—		—		(213)	OTTI
Total		—		236		5,396		11,729
Foreign currency translation:
Foreign currency loss from CMBS redemption		(5,969)		—		(5,969)		—	Foreign currency loss, net
Total reclassifications for the period	$	(6,156)	$	(108)	$	(1,158)	$	10,648

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Acquisitions and Divestitures (Tables)

9 Months Ended

Sep. 30, 2015

Acquisitions and Divestitures

Summary of assets acquired and liabilities assumed from Ireland Portfolio acquisition

The following table summarizes the provisional estimates of identified assets acquired and liabilities assumed at the respective acquisition dates (amounts in thousands):

Assets acquired:
Restricted cash	$	10,829
Properties		445,369
Intangible assets		59,529
Other assets		11,128
Total assets acquired		526,855
Liabilities assumed:
Accounts payable, accrued expenses and other liabilities		17,273
Secured financing agreements		283,010
Total liabilities assumed		300,283
Net assets acquired/purchase price	$	226,572

Schedule of unaudited pro forma revenue and net income assuming the business combination was consummated on January 1, 2014

The pro-forma revenues and net income attributable to STWD of the combined entity for the three and nine months ended September 30, 2015 and 2014, assuming the Ireland Portfolio acquisition occurred on January 1, 2014, are as follows (amounts in thousands, except per share amounts):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Revenues	$	192,722	$	190,198	$	564,574	$	550,586
Net income attributable to STWD		116,803		164,838		357,314		399,053
Net income per share - Basic		0.49		0.73		1.52		1.85
Net income per share - Diluted		0.49		0.73		1.52		1.85

Schedule of adjustments related to pro forma revenue and net income

Pro-forma net income was adjusted to include the following estimated management fees the combined entity would have incurred (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Management fee expense addition	$	46	$	1,047	$	1,605	$	3,141

Summary of consolidated results of discontinued operations for the SFR segment prior to the spin-off

The following table presents the summarized consolidated results of discontinued operations for the SFR segment prior to the spin-off (amounts in thousands):

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2014		September 30, 2014
Total revenues	$	—	$	3,876
Total costs and expenses		—		6,369
Loss before other income and income taxes		—		(2,493)
Total other income		—		942
Loss before income taxes		—		(1,551)
Income tax provision		—		—
Net loss	$	—	$	(1,551)

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Variable Interest Entities (Details) - Not primary beneficiary $ in Millions	3 Months Ended
	Mar. 31, 2014 item	Sep. 30, 2015 USD ($) 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 | $		$ 222.4
Securitization SPEs
Variable interest entities
Debt obligations to beneficial interest holders, unpaid principal balances | $		$ 40,500.0

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Income Taxes (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Reconciliation of statutory tax to effective tax
Federal statutory tax rate	$ 43,677	$ 59,929	$ 134,034	$ 147,836
REIT and other non-taxable income	(36,250)	(52,979)	(111,732)	(133,483)
State income taxes	937	930	3,117	1,953
Federal benefit of state tax deduction	(328)	(326)	(1,091)	(683)
Valuation allowance	(221)	712	2,652	1,160
Other	(140)	(4,430)	438	(3,050)
Total income tax provision	$ 7,675	$ 3,836	$ 27,418	$ 13,733
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)	(29.00%)	(30.90%)	(29.10%)	(31.60%)
State income taxes (as a percent)	0.80%	0.50%	0.80%	0.50%
Federal benefit of state tax deduction (as a percent)	(0.30%)	(0.20%)	(0.30%)	(0.20%)
Valuation allowance (as a percent)	(0.20%)	0.40%	0.70%	0.30%
Other (as a percent)	(0.10%)	(2.60%)	0.10%	(0.70%)
Effective tax rate (as a percent)	6.20%	2.20%	7.20%	3.30%

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Loans (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Activity in allowance for loan losses
Allowance for loan losses at the beginning of the period			$ 6,031	$ 3,984
Provision for loan losses			311	1,933
Allowance for loan losses at the end of the period	$ 6,342	$ 5,917	6,342	5,917
Recorded investment in loans related to the allowance for loan loss	422,801	287,231	422,801	287,231
Activity in loan portfolio
Balance at the beginning of the period			6,300,285	4,750,804
Acquisitions/origination/additional funding			3,114,293	3,283,546
Capitalized Interest			51,416	31,994
Basis of loans sold			(2,040,380)	(1,505,764)
Loan maturities/principal repayments			(1,055,419)	(1,009,222)
Discount accretion			26,615	16,756
Changes in fair value	19,082	15,517	51,044	48,018
Unrealized foreign currency remeasurement loss			(30,529)	(21,088)
Change in loan loss allowance, net			(311)	(1,933)
Transfer to/from other asset classifications			(8,844)	(3,503)
Balance at the end of the period	$ 6,408,170	$ 5,589,608	$ 6,408,170	$ 5,589,608

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Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands							1 Months Ended		3 Months Ended		9 Months Ended
	Nov. 05, 2015	Aug. 04, 2015	May. 05, 2015	Apr. 20, 2015	Feb. 25, 2015	Jan. 31, 2014	Jun. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Stockholders' Equity
Dividend declared (in dollars per share)		$ 0.48	$ 0.48		$ 0.48				$ 0.48	$ 0.48	$ 1.44	$ 1.44
Gross proceeds from issuance of common stock											$ 326,361	$ 583,099
Number of days for which the option is given into the underwriters				30 days
Authorized amount of share repurchases							$ 450,000	$ 250,000		$ 250,000		250,000
Period for repurchase of common stock							1 year	1 year
Common stock repurchased (in shares)									1,393,223		1,793,223
Cost of common stock repurchased									$ 29,100		$ 37,890	12,993
Remaining capacity under repurchase program									262,600		$ 262,600
Shares issued under ATM Agreement											0
Proceeds from ATM Agreement												18,346
Underwriting and offering costs											$ 945	$ 1,623
Subsequent event
Stockholders' Equity
Dividend declared (in dollars per share)	$ 0.48
Public offering
Stockholders' Equity
Shares issued				12,000,000
Gross proceeds from issuance of common stock				$ 283,600
Underwriters option
Stockholders' Equity
Shares issued				1,800,000
Gross proceeds from issuance of common stock				$ 42,500
SWAY
Stockholders' Equity
Shares issued						40,100,000
2019 Notes
Stockholders' Equity
Face amount of debt repurchased									118,600		118,600
Debt repurchased amount									$ 136,300		$ 136,300

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Fair Value (Details 4) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Carrying Value	$ 91,819,407	$ 116,099,297
Fair value measurements on recurring basis | Level III | Loans held-for-sale | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements for assets and liabilities measured at fair value on recurring basis
Carrying Value	$ 423,630
Fair value measurements on recurring basis | Level III | Loans held-for-sale | 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)	4.30%	4.20%
Duration	5 years	5 years
Fair value measurements on recurring basis | Level III | Loans held-for-sale | 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)	4.90%	4.90%
Duration	10 years	10 years
Fair value measurements on 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	$ 184,785
Portfolio percentage	75.00%	85.00%
Fair value measurements on 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)	2.60%	1.20%
Constant default rate (as a percent)	0.90%	1.10%
Loss severity (as a percent)	9.00%	15.00%
Delinquency rate (as a percent)	2.00%	2.00%
Servicer advances (as a percent)	28.00%	14.00%
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%
Fair value measurements on 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)	14.70%	15.90%
Constant default rate (as a percent)	9.10%	8.90%
Loss severity (as a percent)	79.00%	80.00%
Delinquency rate (as a percent)	29.00%	43.00%
Servicer advances (as a percent)	92.00%	75.00%
Annual coupon deterioration (as a percent)	0.50%	0.60%
Putback amount per projected total collateral loss (as a percent)	11.00%	11.00%
Loss severity for specified percentage of portfolio (as a percent)	80.00%	80.00%
Fair value measurements on 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	$ 222,360
Fair value measurements on 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
Fair value measurements on 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)	779.70%	421.40%
Duration	13 years 2 months 12 days	11 years 9 months 18 days
Fair value measurements on 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	$ 123,892
Yield (as a percent)	8.25%	8.25%
Discount rate (as a percent)	15.00%	15.00%
Fair value measurements on 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%
Fair value measurements on 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%
Fair value measurements on 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	$ 82,937,617
Fair value measurements on 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
Fair value measurements on 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)	907.40%	925.00%
Duration	18 years 7 months 6 days	21 years
Fair value measurements on recurring basis | Level III | VIE liabilities | 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
Fair value measurements on recurring basis | Level III | VIE liabilities | 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)	907.40%	925.00%
Duration	18 years 7 months 6 days	21 years

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Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Changes in AOCI by component
Beginning balance	$ 45,901	$ 74,962	$ 55,896	$ 75,449
OCI before reclassifications	(12,547)	(5,389)	(17,544)	4,880
Amounts reclassified from AOCI	6,156	108	1,158	(10,648)
Net period OCI	(6,391)	(5,281)	(16,386)	(5,768)
Ending balance	39,510	69,681	39,510	69,681
Effective Portion of Cumulative Loss on Cash Flow Hedges
Changes in AOCI by component
Beginning balance	(237)	(575)	(97)	(604)
OCI before reclassifications	(395)	186	(933)	(522)
Amounts reclassified from AOCI	187	344	585	1,081
Net period OCI	(208)	530	(348)	559
Ending balance	(445)	(45)	(445)	(45)
Cumulative Unrealized Gain on Available-for-Sale Securities
Changes in AOCI by component
Beginning balance	50,370	60,446	60,190	66,566
OCI before reclassifications	(9,095)	4,190	(13,519)	9,563
Amounts reclassified from AOCI		(236)	(5,396)	(11,729)
Net period OCI	(9,095)	3,954	(18,915)	(2,166)
Ending balance	41,275	64,400	41,275	64,400
Foreign Currency Translation
Changes in AOCI by component
Beginning balance	(4,232)	15,091	(4,197)	9,487
OCI before reclassifications	(3,057)	(9,765)	(3,092)	(4,161)
Amounts reclassified from AOCI	5,969		5,969
Net period OCI	2,912	(9,765)	2,877	(4,161)
Ending balance	$ (1,320)	$ 5,326	$ (1,320)	$ 5,326

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Fair Value (Details 5) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Quantitative information for Level 3 Fair Value Measurements Liabilities
Carrying Value	$ 87,618,227	$ 112,216,385
Fair value measurements on recurring basis | Level III | VIE liabilities | Discounted cash flow
Quantitative information for Level 3 Fair Value Measurements Liabilities
Carrying Value	$ 3,003,577

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Stockholders' Equity (Details 2)		1 Months Ended			3 Months Ended	9 Months Ended
	Aug. 12, 2014 shares	May. 31, 2015 USD ($) shares	Jan. 31, 2014 USD ($) shares	Oct. 31, 2012 USD ($) shares	Sep. 30, 2015 shares	Sep. 30, 2015 shares
Equity Incentive Plans
Awards granted (in shares)						1,208,267
Award vesting period		3 years
Spin off | Single Family Residential
Equity Incentive Plans
Share exchange ratio			0.20
Starwood Property Trust, Inc. Equity Plan and Manager Equity Plan
Equity Incentive Plans
Number of additional shares authorized	489,281
Number of shares available for future grants					2,700,000	2,700,000
Starwood Property Trust, Inc. Equity Plan
Equity Incentive Plans
Awards granted (in shares)					30,608	533,267
Starwood Property Trust, Inc. Manager Equity Plan
Equity Incentive Plans
Awards granted (in shares)						675,000
Starwood Property Trust, Inc. Manager Equity Plan | Restricted stock units
Equity Incentive Plans
Awards granted (in shares)		675,000	2,000,000	875,000
Awards granted, fair value | $		$ 16,511,000	$ 55,420,000	$ 19,854,000
Award vesting period			3 years	3 years
Starwood Property Trust, Inc. Manager Equity Plan | Restricted stock units | Spin off
Equity Incentive Plans
Awards granted (in shares)			489,281
Awards granted, fair value | $			$ 14,776,000
Award vesting period			3 years

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Derivatives and Hedging Activity (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Derivatives
Gain (loss) on derivative financial instruments, net	$ 2,230	$ 29,275	$ 7,323	$ 11,619
Derivatives not designated as hedging instruments
Derivatives
Gain (loss) on derivative financial instruments, net	2,230	29,275	7,323	11,619
Interest rate swaps | Derivatives not designated as hedging instruments
Derivatives
Gain (loss) on derivative financial instruments, net	(17,242)	1,054	(22,206)	(5,639)
Foreign exchange contracts | Derivatives not designated as hedging instruments
Derivatives
Gain (loss) on derivative financial instruments, net	18,957	28,123	29,129	18,293
Credit index instruments | Derivatives not designated as hedging instruments
Derivatives
Gain (loss) on derivative financial instruments, net	515	98	400	(1,035)
Cash flow hedges | Interest rate swaps | Derivatives designated as hedging instruments
Derivatives
(Loss) Gain Recognized in OCI (effective portion)	(395)	186	(933)	(522)
(Loss) Reclassified from AOCI into Income (effective portion)	$ (187)	$ (344)	$ (585)	$ (1,081)

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Earnings per Share

9 Months Ended

Sep. 30, 2015

Earnings per Share

Earnings per Share

17. Earnings 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 (amounts in thousands, except per share amounts):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Basic Earnings
Continuing Operations:
Income from continuing operations attributable to STWD common shareholders	$	116,735	$	165,044	$	354,246	$	405,064
Less: Income attributable to unvested shares		(1,052)		(1,742)		(3,239)		(4,898)
Basic — Income from continuing operations	$	115,683	$	163,302	$	351,007	$	400,166
Discontinued Operations:
Loss from discontinued operations	$	—	$	—	$	—	$	(1,551)
Basic — Net income attributable to STWD common shareholders after allocation to participating securities	$	115,683	$	163,302	$	351,007	$	398,615
Diluted Earnings
Continuing Operations:
Basic — Income from continuing operations attributable to STWD common shareholders	$	116,735	$	165,044	$	354,246	$	405,064
Less: Income attributable to unvested shares		(1,052)		(1,742)		(3,239)		(4,898)
Add: Undistributed earnings to unvested shares		18		653		147		1,187
Less: Undistributed earnings reallocated to unvested shares		(18)		(650)		(147)		(1,182)
Diluted — Income from continuing operations	$	115,683	$	163,305	$	351,007	$	400,171
Discontinued Operations:
Basic — Loss from discontinued operations	$	—	$	—	$	—	$	(1,551)
Diluted — Net income attributable to STWD common shareholders after allocation to participating securities	$	115,683	$	163,305	$	351,007	$	398,620
Number of Shares:
Basic — Average shares outstanding		237,796		222,481		232,194		212,351
Effect of dilutive securities — Convertible Notes		—		966		—		932
Effect of dilutive securities — Contingently issuable shares		129		96		129		96
Diluted — Average shares outstanding		237,925		223,543		232,323		213,379
Earnings Per Share Attributable to STWD Common Stockholders:
Basic:
Income from continuing operations	$	0.49	$	0.73	$	1.51	$	1.89
Loss from discontinued operations		—		—		—		(0.01)
Net income	$	0.49	$	0.73	$	1.51	$	1.88
Diluted:
Income from continuing operations	$	0.49	$	0.73	$	1.51	$	1.88
Loss from discontinued operations		—		—		—		(0.01)
Net income	$	0.49	$	0.73	$	1.51	$	1.87

Earnings per share for the nine months ended September 30, 2015 and 2014 may not equal the sum of each quarter’s earnings per share due to rounding and other computational factors.

As of September 30, 2015 and 2014, unvested restricted shares of 2.2 million and 2.3 million, respectively, were excluded from the computation of diluted shares as their effect was already considered under the more dilutive two-class method used above.

Also as of September 30, 2015, there were 62.2 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 62.2 million shares at September 30, 2015, was not included in the computation of diluted EPS.  As  discussed in Note 10, the conversion options associated with the 2017 Notes, 2018 Notes and 2019 Notes are “out-of-the-money” because the if-converted values of those notes were less than their principal amounts by $61.9 million,  $35.0 million and $0.3 million, respectively, at September 30, 2015. Therefore, there was no dilutive effect to EPS for the 2017 Notes, 2018 Notes and 2019 Notes during the three and nine months ended September 30, 2015.

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Business and Organization (Details)	9 Months Ended
	Sep. 30, 2015 segment
Business and Organization
Number of reportable business segments	3
Minimum annual REIT taxable income distributable to stockholders (as a percent)	90.00%

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Derivatives and Hedging Activity (Tables)

9 Months Ended

Sep. 30, 2015

Derivatives and Hedging Activity

Summary of foreign exchange ("Fx") forwards, interest rate swaps, interest rate caps and credit index instruments

The following table summarizes our foreign exchange (“Fx”) forwards, interest rate swaps, interest rate caps and credit index instruments as of September 30, 2015 (notional amounts in thousands):

		Aggregate
	Number	Notional	Notional
Type of Derivative	of Contracts	Amount	Currency	Maturity
Fx contracts – Sell Euros ("EUR") (1)	87	352,420	EUR	October 2015 – June 2020
Fx contracts – Sell Pounds Sterling ("GBP")	63	257,203	GBP	October 2015 – March 2018
Fx contracts – Sell Swedish Krona ("SEK")	2	19,197	SEK	December 2015
Fx contracts – Buy SEK	1	4,083	SEK	December 2015
Fx contracts – Sell Norwegian Krone ("NOK")	1	1,218	NOK	December 2015
Fx contracts – Sell Danish Krone ("DKK")	1	3,200	DKK	December 2015
Interest rate swaps – Paying fixed rates	73	513,218	USD	July 2016 – October 2025
Interest rate swaps – Receiving fixed rates	4	14,300	USD	October 2015 – September 2025
Interest rate caps	2	294,000	EUR	May 2020
Interest rate caps	2	17,835	USD	June 2018
Credit index instruments	11	40,000	USD	January 2047
Total	247

(1) Includes 59 Fx contracts executed to hedge our Euro currency exposure created by our acquisition of the Ireland Portfolio.  As of September 30, 2015, these contracts have an aggregate notional of €259.7million and varying maturities through June 2020.

Schedule of fair values of derivative financial 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 September 30, 2015 and December 31, 2014 (amounts in thousands):

	Fair Value of Derivatives in an				Fair Value of Derivatives in a
	Asset Position(1) As of				Liability Position(2) As of
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
Derivatives designated as hedging instruments:
Interest rate swaps	$	6	$	138	$	451	$	235
Total derivatives designated as hedging instruments		6		138		451		235
Derivatives not designated as hedging instruments:
Interest rate swaps and caps		2,981		1,128		13,508		5,216
Foreign exchange contracts		31,657		24,388		942		15
Credit index instruments		1,663		974		—		10
Total derivatives not designated as hedging instruments		36,301		26,490		14,450		5,241
Total derivatives	$	36,307	$	26,628	$	14,901	$	5,476

(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 consolidated statements of operations and of comprehensive income

			Gain (Loss)
	Gain (Loss)		Reclassified		Gain (Loss)
Derivatives Designated as	Recognized		from AOCI		Recognized
Hedging Instruments	in OCI		into Income		in Income		Location of Gain (Loss)
For the Three Months Ended September 30,	(effective portion)		(effective portion)		(ineffective portion)		Recognized in Income
2015	$	(395)	$	(187)	$	—	Interest expense
2014	$	186	$	(344)	$	—	Interest expense
For the Nine Months Ended September 30,
2015	$	(933)	$	(585)	$	—	Interest expense
2014	$	(522)	$	(1,081)	$	—	Interest expense

Schedule of Gain / (Loss) recognized in Income for Derivatives Not Designated as Hedging Instruments

		Amount of Gain (Loss)				Amount of Gain (Loss)
		Recognized in Income for the				Recognized in Income for the
Derivatives Not Designated	Location of Gain (Loss)	Three Months Ended September 30,				Nine Months Ended September 30,
as Hedging Instruments	Recognized in Income	2015		2014		2015		2014
Interest rate swaps and caps	Gain on derivative financial instruments	$	(17,242)	$	1,054	$	(22,206)	$	(5,639)
Foreign exchange contracts	Gain on derivative financial instruments		18,957		28,123		29,129		18,293
Credit index instruments	Gain on derivative financial instruments		515		98		400		(1,035)
		$	2,230	$	29,275	$	7,323	$	11,619

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Related-Party Transactions (Details 2) $ in Thousands, £ in Millions	1 Months Ended	3 Months Ended		9 Months Ended		12 Months Ended
	Mar. 31, 2015 USD ($) property	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Dec. 31, 2012 shares	Jan. 31, 2015 GBP (£)	Dec. 31, 2014 GBP (£)	Dec. 31, 2014 USD ($)
Related-Party Transactions
Variable rate basis of loans				LIBOR
Spread on interest rate basis (as a percent)		6.10%		6.10%
Originations of mortgage financing				$ 3,114,293	$ 3,283,546
Purchase price of notes				1,670,124	2,123,947
Equity method, Carrying value		$ 180,384		180,384					$ 176,359
Earnings from unconsolidated entities		5,706	$ 3,805	20,747	$ 13,432
Purchase price				65,900
Co-origination of loan with SEREF | Junior Mezzanine Loan
Related-Party Transactions
Participation interest in security | £							£ 18.0	£ 30.0
Spread on interest rate basis (as a percent)							8.81%	11.65%	11.65%
SEREF
Related-Party Transactions
Number of shares acquired | shares						9,140,000
Ownership percentage						4.00%
Retail fund
Related-Party Transactions
Equity method, Carrying value		$ 121,733		$ 121,733					$ 129,475
Equity interest acquired (as a percent)		33.00%		33.00%
Investment and Servicing Segment
Related-Party Transactions
Purchase price		$ 32,500		$ 65,900
Amount of intercompany loans originated		10,400
Fund IX | CMBS
Related-Party Transactions
Payments to acquire security	$ 58,600
Number of properties by which investment is secured | property	85
Fund IX | LNR
Related-Party Transactions
Obligation funded by an affiliate		6,200		6,200
Related party payable									$ 4,400
Mammoth Mezz Holdings, LLC | Mammoth Loan Investment
Related-Party Transactions
Sale of participation interest in subordinated loan	$ 35,000
Starwood Global Opportunity Fund X [Member]
Related-Party Transactions
Fee income recognized		$ 100		$ 400

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Investment in Unconsolidated Entities (Tables)

9 Months Ended

Sep. 30, 2015

Investment in Unconsolidated Entities

Summary of investments in unconsolidated entities

The below table summarizes our investments in unconsolidated entities as of September 30, 2015 and December 31, 2014 (dollar amounts in thousands):

	Participation /	Carrying value as of
	Ownership %(1)	September 30, 2015		December 31, 2014
Equity method:
Retail Fund	33%	$	121,733	$	129,475
Investor entity which owns equity in two real estate services providers	50%		23,366		21,534
Equity interests in commercial real estate (2)	16% - 43%		28,224		—
Bridge loan venture (3)	various		—		8,417
Various	25% - 50%		7,061		16,933
			180,384		176,359
Cost method:
Investment funds which own equity in a loan servicer and other real estate assets	4% - 6%		9,225		9,225
Various	0% - 3%		9,562		8,399
			18,787		17,624
		$	199,171	$	193,983

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

(2) During the nine months ended September 30, 2015, we acquired $28.0 million of equity interests in limited liability companies that own ten office and student housing properties throughout the U.S.

(3) During the three months ended September 30, 2015, we sold our interest in the Bridge Loan Venture at par.

There were no differences between the carrying value of our investment in unconsolidated entities and the underlying equity in the net assets of the investeesas of September 30, 2015.

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Summary of Significant Accounting Policies (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Reclassifications to financial statements
Other assets	$ 137,296		$ 137,296		$ 95,652
Other revenues	4,300	$ 4,033	7,437	$ 9,296
Other expense	$ 3	918	$ 378	6,527
Reclassification Adjustment
Reclassifications to financial statements
Other assets					$ 39,900
Other revenues		3,400		6,500
Other expense		$ 1,800		$ 3,900

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Convertible Senior Notes (Details) $ / shares in Units, shares in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2014 shares	Sep. 30, 2015 USD ($) item $ / shares shares	Sep. 30, 2014 shares	Dec. 31, 2014 USD ($)	Oct. 08, 2014 USD ($)	Jul. 03, 2013 USD ($)	Feb. 15, 2013 USD ($)
Convertible Senior Notes
Portion of repurchase price attributable to equity component recognized as a reduction of additional paid-in-capital		$ 17,727,000
Loss on extinguishment of debt		$ (5,921,000)
Conversion spread included in computation of diluted EPS (in shares) | shares	966		932
Conversion upon satisfaction of closing market price condition
Convertible Senior Notes
Minimum number of conditions to be satisfied for conversion of debt | item		1
Minimum trading period as a basis for debt conversion | item		20
Consecutive trading period as a basis for debt conversion		30 days
Conversion upon satisfaction of closing market price condition | Minimum
Convertible Senior Notes
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%
Conversion upon satisfaction of closing market price condition | Maximum
Convertible Senior Notes
Period of average closing market price of common stock as a basis for debt conversion		10 days
Conversion upon satisfaction of trading price condition
Convertible Senior Notes
Consecutive trading period as a basis for debt conversion		5 days
Conversion upon satisfaction of trading price condition | Maximum
Convertible Senior Notes
Percentage of conversion price and last reported sales price as a basis for debt conversion		98.00%
2017 Notes
Convertible Senior Notes
Amount issued					$ 431,300,000
Principal Amount		$ 431,250,000
Coupon Rate (as a percent)		3.75%
Effective Rate (as a percent)		5.87%
Conversion Rate		41.7397
Remaining Period of Amortization		2 years
Amount by which if-converted value of the Notes are less than principal amount		$ 61,900,000
Conversion price (in dollars per share) | $ / shares		$ 23.96
2017 Notes | Conversion upon satisfaction of closing market price condition | Minimum
Convertible Senior Notes
Percentage of conversion price as a basis for debt conversion		110.00%
2018 Notes
Convertible Senior Notes
Amount issued							$ 600,000,000
Principal Amount		$ 599,981,000
Coupon Rate (as a percent)		4.55%
Effective Rate (as a percent)		6.10%
Conversion Rate		45.8850
Remaining Period of Amortization		2 years 4 months 24 days
Amount by which if-converted value of the Notes are less than principal amount		$ 35,000,000
Conversion price (in dollars per share) | $ / shares		$ 21.79
Conversion spread included in computation of diluted EPS (in shares) | shares		0
2019 Notes
Convertible Senior Notes
Amount issued						$ 460,000,000
Principal Amount		$ 341,363,000
Coupon Rate (as a percent)		4.00%
Effective Rate (as a percent)		5.37%
Conversion Rate		48.6931
Remaining Period of Amortization		3 years 3 months 18 days
Amount by which if-converted value of the Notes are less than principal amount		$ 300,000
Conversion price (in dollars per share) | $ / shares		$ 20.54
Amount of debt repurchased		$ 118,600,000
Debt repurchased amount		136,300,000
Repurchase expenses		100,000
Portion of repurchase price attributable to equity component recognized as a reduction of additional paid-in-capital		17,700,000
Loss on extinguishment of debt		$ 5,900,000
Conversion spread included in computation of diluted EPS (in shares) | shares		0
2018 Notes and 2019 Notes | Conversion upon satisfaction of closing market price condition | Minimum
Convertible Senior Notes
Percentage of conversion price as a basis for debt conversion		130.00%
Convertible Senior Notes
Convertible Senior Notes
Principal Amount		$ 1,372,594,000		$ 1,491,228,000
Net unamortized discount		(52,387,000)		(73,206,000)
Carrying amount of debt components		1,320,207,000		1,418,022,000
Carrying amount of conversion option equity components recorded in additional paid-in capital		$ 46,343,000		64,070,000
Principal amount of notes, basis for conversion				1,000
Closing share price (in dollars per share) | $ / shares		$ 20.52
Conversion of principal not included in computation of diluted EPS (in shares | shares		62,200
Deferred financing costs, net of amortization		$ 1,600,000		$ 2,300,000
Convertible Senior Notes | 2017 Notes
Convertible Senior Notes
Conversion spread included in computation of diluted EPS (in shares) | shares		0
Convertible Senior Notes | 2019 Notes
Convertible Senior Notes
Amount by which if-converted value of the Notes are less than principal amount		$ 300,000

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Investment Securities (Details 4) - SEREF - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2012	Sep. 30, 2015	Dec. 31, 2014
Residential Real Estate
Number of shares acquired	9,140,000
Ownership percentage	4.00%
Fair value of investment		$ 14.3	$ 15.1

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Fair Value (Tables)

9 Months Ended

Sep. 30, 2015

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 September 30, 2015 and December 31, 2014 (amounts in thousands):

	September 30, 2015
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	423,630	$	—	$	—	$	423,630
RMBS		184,785		—		—		184,785
CMBS		222,360		—		—		222,360
Equity security		14,311		14,311		—		—
Domestic servicing rights		123,892				—		123,892
Derivative assets		36,307		—		36,307		—
VIE assets		82,937,617		—		—		82,937,617
Total	$	83,942,902	$	14,311	$	36,307	$	83,892,284
Financial Liabilities:
Derivative liabilities	$	14,901	$	—	$	14,901	$	—
VIE liabilities		82,181,138		—		79,177,561		3,003,577
Total	$	82,196,039	$	—	$	79,192,462	$	3,003,577

	December 31, 2014
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	391,620	$	—	$	—	$	391,620
RMBS		207,053		—		—		207,053
CMBS		334,080		—		—		334,080
Equity security		15,120		15,120		—		—
Domestic servicing rights		132,303		—		—		132,303
Derivative assets		26,628		—		26,628		—
VIE assets		107,816,065		—		—		107,816,065
Total	$	108,922,869	$	15,120	$	26,628	$	108,881,121
Financial Liabilities:
Derivative liabilities	$	5,476	$	—	$	5,476	$	—
VIE liabilities		107,232,201		—		102,339,081		4,893,120
Total	$	107,237,677	$	—	$	102,344,557	$	4,893,120

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 nine months ended September 30, 2015 and 2014 (amounts in thousands):

							Domestic
	Loans						Servicing				VIE
Three Months Ended September 30, 2015	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
July 1, 2015 balance	$	279,352	$	193,150	$	314,152	$	128,109	$	92,719,092	$	(2,111,011)	$	91,522,844
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		19,082		—		(2,835)		(4,217)		(10,394,490)		615,263		(9,767,197)
OTTI		—		—		—		—		—		—		—
Net accretion		—		3,600		—		—		—		—		3,600
Included in OCI		—		(3,465)		(2,164)		—		—		—		(5,629)
Purchases / Originations		535,580		—		5,665		—		—		—		541,245
Sales		(410,227)		—		(1,203)		—		—		—		(411,430)
Issuances		—		—		—		—		—		(1,619)		(1,619)
Cash repayments / receipts		(157)		(8,500)		(91,795)		—		—		96,896		(3,556)
Transfers into Level III		—		—		—		—		—		(1,773,898)		(1,773,898)
Transfers out of Level III		—		—		—		—		—		232,484		232,484
Consolidations of VIEs		—		—		—		—		2,410,232		(80,149)		2,330,083
Deconsolidations of VIEs		—		—		540		—		(1,797,217)		18,457		(1,778,220)
September 30, 2015 balance	$	423,630	$	184,785	$	222,360	$	123,892	$	82,937,617	$	(3,003,577)	$	80,888,707
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2015	$	5,482	$	3,600	$	3,212	$	(4,217)	$	(10,394,490)	$	615,263	$	(9,771,150)

							Domestic
	Loans						Servicing				VIE
Three Months Ended September 30, 2014	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
July 1, 2014 balance	$	154,412	$	231,605	$	282,361	$	138,318	$	114,091,158	$	(5,186,125)	$	109,711,729
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		15,517		535		2,471		(7,898)		(5,261,507)		237,693		(5,013,189)
Net accretion		—		4,035		—		—		—		—		4,035
Included in OCI		—		7,602		(9,662)		—		—		—		(2,060)
Purchases / Originations		577,216		—		13,777		—		—		—		590,993
Sales		(498,789)		(5,588)		—		—		—		—		(504,377)
Issuances		—		—		—		—		—		(16,655)		(16,655)
Cash repayments / receipts		(191)		(21,870)		23		—		—		20,189		(1,849)
Transfers into Level III		—		—		1,440		—		—		(770,785)		(769,345)
Transfers out of Level III		—		—		—		—		—		1,940,522		1,940,522
Consolidations of VIEs		—		—		—		—		3,103,150		(48,745)		3,054,405
Deconsolidations of VIEs		—		—		635		—		(2,464,508)		12,167		(2,451,706)
September 30, 2014 balance	$	248,165	$	216,319	$	291,045	$	130,420	$	109,468,293	$	(3,811,739)	$	106,542,503
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2014	$	(455)	$	3,963	$	2,471	$	(7,898)	$	(5,261,507)	$	237,693	$	(5,025,733)

							Domestic
	Loans						Servicing				VIE
Nine Months Ended September 30, 2015	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
January 1, 2015 balance	$	391,620	$	207,053	$	334,080	$	132,303	$	107,816,065	$	(4,893,120)	$	103,988,001
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		51,044		—		(2,059)		(8,411)		(27,667,727)		3,566,846		(24,060,307)
OTTI		—		—		—		—		—		—		—
Net accretion		—		17,087		—		—		—		—		17,087
Included in OCI		—		(12,241)		(2,362)		—		—		—		(14,603)
Purchases / Originations		1,425,499		—		14,653		—		—		—		1,440,152
Sales		(1,443,871)		—		(6,301)		—		—		—		(1,450,172)
Issuances		—		—		—		—		—		(9,132)		(9,132)
Cash repayments / receipts		(662)		(27,114)		(92,018)		—		—		171,884		52,090
Transfers into Level III		—		—		—		—		—		(2,589,916)		(2,589,916)
Transfers out of Level III		—		—		—		—		—		956,230		956,230
Consolidations of VIEs		—		—		(24,310)		—		8,067,859		(225,354)		7,818,195
Deconsolidations of VIEs		—		—		677		—		(5,278,580)		18,985		(5,258,918)
September 30, 2015 balance	$	423,630	$	184,785	$	222,360	$	123,892	$	82,937,617	$	(3,003,577)	$	80,888,707
Amount of total gains (losses) included in earnings attributable to assets still held at September 30, 2015	$	5,126	$	11,594	$	4,171	$	(8,411)	$	(27,667,727)	$	3,566,846	$	(24,088,401)

							Domestic
	Loans						Servicing				VIE
Nine Months Ended September 30, 2014	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		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 gains (losses):
Included in earnings:
Change in fair value / gain on sale		47,955		11,676		12,070		(18,671)		(12,275,130)		337,529		(11,884,571)
OTTI		—		(214)		—		—		—		—		(214)
Net accretion		—		13,922		—		—		—		—		13,922
Included in OCI		—		2,988		(7,455)		—		—		—		(4,467)
Purchases / Originations		1,159,607		—		60,348		—		—		—		1,219,955
Sales		(1,052,862)		(68,134)		(29,301)		—		—		—		(1,150,297)
Issuances		—		—		—		—		—		(88,412)		(88,412)
Cash repayments / receipts		(487)		(40,155)		(806)		—		—		106,538		65,090
Transfers into Level III		—		—		54,221		—		—		(3,325,922)		(3,271,701)
Transfers out of Level III		(112,720)		—		(180)		(1,058)		—		2,653,379		2,539,421
Consolidations of VIEs		—		—		(6,715)		—		27,094,681		(1,941,689)		25,146,277
Deconsolidations of VIEs		—		—		857		—		(8,502,882)		44,822		(8,457,203)
September 30, 2014 balance	$	248,165	$	216,319	$	291,045	$	130,420	$	109,468,293	$	(3,811,739)	$	106,542,503
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2014	$	(455)	$	11,742	$	14,907	$	(18,671)	$	(12,275,130)	$	337,529	$	(11,930,078)

Schedule of fair value of financial instruments not carried at fair value

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

	September 30, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets not carried at fair value:
Loans held-for-investment, loans held-for-sale and loans transferred as secured borrowings	$	5,984,540	$	6,083,182	$	5,908,665	$	6,034,838
Securities, held-to-maturity		365,005		362,026		441,995		440,629
European servicing rights		3,772		7,684		11,849		12,741
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	$	3,826,200	$	3,815,875	$	3,267,230		3,251,035
Convertible senior notes		1,320,207		1,339,173		1,418,022		1,444,975

Schedule of quantitative information for Level 3 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	Unobservable	Range as of (1)
	September 30, 2015		Technique	Input	September 30, 2015	December 31, 2014
Loans held-for-sale, fair value option	$	423,630	Discounted cash flow	Yield (b)	4.3% - 4.9%	4.2% - 4.9%
				Duration (c)	5.0 - 10.0 years	5.0 - 10.0 years
RMBS		184,785	Discounted cash flow	Constant prepayment rate (a)	2.6% - 14.7%	1.2% - 15.9%
				Constant default rate (b)	0.9% - 9.1%	1.1% - 8.9%
				Loss severity (b)	9% - 79% (e)	15% - 80% (e)
				Delinquency rate (c)	2% - 29%	2% - 43%
				Servicer advances (a)	28% - 92%	14% - 75%
				Annual coupon deterioration (b)	0% - 0.5%	0% - 0.6%
				Putback amount per projected total collateral loss (d)	0% - 11%	0% - 11%
CMBS		222,360	Discounted cash flow	Yield (b)	0% - 779.7%	0% - 421.4%
				Duration (c)	0 - 13.2 years	0 - 11.8 years
Domestic servicing rights		123,892	Discounted cash flow	Debt yield (a)	8.25%	8.25%
				Discount rate (b)	15%	15%
				Control migration (b)	0% - 80%	0% - 80%
VIE assets		82,937,617	Discounted cash flow	Yield (b)	0% - 907.4%	0% - 925.0%
				Duration (c)	0 - 18.6 years	0 - 21.0 years
VIE liabilities		3,003,577	Discounted cash flow	Yield (b)	0% - 907.4%	0% - 925.0%
				Duration (c)	0 - 18.6 years	0 - 21.0 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.

75% and 85% of the portfolio falls within a range of 45%-80% as of September 30, 2015 and December 31, 2014, respectively.

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Business and Organization

9 Months Ended

Sep. 30, 2015

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 investments in both the U.S. and Europe. We refer to the following as our target assets:commercial real estate mortgage loans, preferred equity interests, CMBS andother commercial real estate-related debt investments.Our target assets may also include residential mortgage-backed securities (“RMBS”), certain residential mortgage loans, distressed or non-performing commercial loans, commercial properties subject to net leases and equity interests in commercial real estate. 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 three reportable business segments as of September 30, 2015:

· Real estate lending (the “Lending Segment”)—engages primarily in originating, acquiring, financing and managing commercial first mortgages, subordinated mortgages, mezzanine loans, preferred equity, CMBS, RMBS and other real estate and real estate-related debt investments in both the U.S. and Europe that are held-for-investment.

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

· Real estate property (the “Property Segment”)—engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, including multi-family properties, that are held for investment. 

On January 31, 2014, we completed the spin-off of our former single family residential (“SFR”) segment to our stockholders as discussed further in Note 3.

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

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

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Properties (Details) $ in Thousands		1 Months Ended	3 Months Ended			9 Months Ended
	Jul. 24, 2015 USD ($)	Mar. 31, 2015 USD ($)	Sep. 30, 2015 USD ($) property	Jul. 25, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	May. 31, 2015 property	Dec. 31, 2014 USD ($)
Properties
Purchase price						$ 65,900
Gain on sale of investments and other assets, net			$ 3,348		$ 1,332	20,755	$ 12,965
Summary of properties
Land improvements			70			70
Building improvements			240			240
Total properties, at cost			534,768			534,768			$ 40,497
Less: accumulated depreciation			(4,330)			(4,330)			(643)
Properties, net			530,438			$ 530,438			39,854
Minimum
Summary of properties
Land improvements, useful life						5 years
Building improvements, useful life						5 years
Maximum
Summary of properties
Land improvements, useful life						15 years
Building improvements, useful life						10 years
Property Segment
Summary of properties
Land			162,274			$ 162,274
Building			286,913			$ 286,913
Building, useful life						30 years
Investment and Servicing Segment
Properties
Purchase price			32,500			$ 65,900
Gain on sale of investments and other assets, net		$ 17,100
Summary of properties
Land			20,972			20,972			8,225
Building			63,619			63,619			30,637
Furniture & fixtures			$ 680			$ 680			$ 1,635
Furniture & fixtures, useful life						3 years
Investment and Servicing Segment | Minimum
Summary of properties
Building, useful life						20 years
Investment and Servicing Segment | Maximum
Summary of properties
Building, useful life						40 years
Ireland Portfolio
Properties
Purchase price				$ 226,600
Ireland Portfolio | Lender 6 Mortgage Facility
Properties
Debt incurred to partially fund acquisition				$ 328,600
Residential Properties | Investment and Servicing Segment
Properties
Number of properties acquired | property			3
Net Leased Office Property | Ireland Portfolio
Properties
Number of properties in portfolio investment | property								11
Purchase price	$ 121,900
Net Leased Office Property | Ireland Portfolio | Lender 6 Mortgage Facility
Properties
Debt incurred to partially fund acquisition	$ 80,700
Multifamily Property | Ireland Portfolio
Properties
Number of properties in portfolio investment | property								1

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Offsetting Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2015

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):

							(iv)
							Gross Amounts Not
							Offset in the Statement
			(ii)		(iii) = (i) - (ii)		of Financial Position
			Gross Amounts		Net Amounts				Cash
	(i)		Offset in the		Presented in				Collateral
	Gross Amounts		Statement of		the Statement of		Financial		Received /		(v) = (iii) - (iv)
	Recognized		Financial Position		Financial Position		Instruments		Pledged		Net Amount
As of September 30, 2015
Derivative assets	$	36,307	$	—	$	36,307	$	1,475	$	—	$	34,832
Derivative liabilities	$	14,901	$	—	$	14,901	$	1,475	$	13,426	$	—
Repurchase agreements		2,663,678		—		2,663,678		2,663,678		—		—
	$	2,678,579	$	—	$	2,678,579	$	2,665,153	$	13,426	$	—
As of December 31, 2014
Derivative assets	$	26,628	$	—	$	26,628	$	2,016	$	—	$	24,612
Derivative liabilities	$	5,476	$	—	$	5,476	$	2,016	$	3,460	$	—
Repurchase agreements		2,270,985		—		2,270,985		2,270,985		—		—
	$	2,276,461	$	—	$	2,276,461	$	2,273,001	$	3,460	$	—

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2015

Commitments and Contingencies.

Commitments and Contingencies

21. Commitments and Contingencies

As of September 30, 2015, we had future funding commitments on 55 loanstotaling $1.7 billion, of which we expect to fund $1.5 billion. These future funding commitments primarily relate 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.

In the ordinary course of business, we may provide various forms of guarantees.  In limited instances, specifically involving construction loans, the Company has guaranteed the future funding obligations of certain third party lenders in the event that such third parties fail to fund their proportionate share of the obligation in a timely manner.  We are currently unaware of any circumstances which would require us to make payments under any of these guarantees. 

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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Income Taxes

9 Months Ended

Sep. 30, 2015

Income Taxes

Income Taxes

20.  Income Taxes

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

Our TRSs engage in various real estate related operations, including special servicing of commercial real estate, originating and securitizing commercial mortgage loans, and investing in entities which engage in real estate related operations. The majority of our TRSs are held within the Investing and Servicing Segment.  As of September 30, 2015 and December 31, 2014, approximately $1.1billion and $1.0 billion, respectively, of the Investing and Servicing Segment’s assets were owned by TRS entities, including $129.6 million and $88.6 million in cash, respectively. 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.

Our income tax provision consisted of the following for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Current
Federal	$	6,074	$	10,044	$	21,825	$	20,668
Foreign		1,718		905		3,996		4,136
State		1,009		2,041		3,634		3,840
Total current		8,801		12,990		29,455		28,644
Deferred
Federal		(689)		(7,390)		(74)		(10,438)
Foreign		(322)		(539)		(1,945)		(2,737)
State		(115)		(1,225)		(18)		(1,736)
Total deferred		(1,126)		(9,154)		(2,037)		(14,911)
Total income tax provision	$	7,675	$	3,836	$	27,418	$	13,733

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 September 30, 2015 and December 31, 2014, 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 (amounts in thousands):

	September 30, 2015		December 31, 2014
U.S.
Deferred tax asset, net
Reserves and accruals	$	12,790	$	13,818
Domestic intangible assets		12,292		9,617
Investment securities and loans		(2,482)		(2,327)
Investment in unconsolidated entities		(412)		883
Deferred income		432		427
Net operating and capital loss carryforwards		5,173		2,498
Valuation allowance		(5,173)		(2,498)
Other U.S. temporary differences		405		515
		23,025		22,933
Europe
Deferred tax liability, net
European servicing rights		(845)		(2,681)
Net operating and capital loss carryforwards		8,149		8,702
Valuation allowance		(8,149)		(8,702)
Other European temporary differences		(131)		(337)
		(976)		(3,018)
Net deferred tax assets	$	22,049	$	19,915

Unrecognized tax benefits were not material as of and during the three and nine months ended September 30, 2015.

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 nine months ended September 30, 2015 and 2014 (dollar amounts in thousands):

	For the Three Months Ended September 30,								For the Nine Months Ended September 30,
	2015				2014				2015				2014
Federal statutory tax rate	$	43,677	35.0	%	$	59,929	35.0	%	$	134,034	35.0	%	$	147,836	35.0	%
REIT and other non-taxable income		(36,250)	(29.0)	%		(52,979)	(30.9)	%		(111,732)	(29.1)	%		(133,483)	(31.6)	%
State income taxes		937	0.8	%		930	0.5	%		3,117	0.8	%		1,953	0.5	%
Federal benefit of state tax deduction		(328)	(0.3)	%		(326)	(0.2)	%		(1,091)	(0.3)	%		(683)	(0.2)	%
Valuation allowance		(221)	(0.2)	%		712	0.4	%		2,652	0.7	%		1,160	0.3	%
Other		(140)	(0.1)	%		(4,430)	(2.6)	%		438	0.1	%		(3,050)	(0.7)	%
Effective tax rate	$	7,675	6.2	%	$	3,836	2.2	%	$	27,418	7.2	%	$	13,733	3.3	%

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Loans (Details 2) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2015 USD ($) loan	Dec. 31, 2014 USD ($)
Investments in loans
Total gross loans	$ 6,414,512	$ 6,306,316
Total gross loans (as a percent)	100.00%	100.00%
Amount of loan impairment charges on individual loans held-for-investment	$ 0	$ 0
Investment and Servicing Segment
Investments in loans
Number of held-for-sale loans 90 days past due or greater that were repaid | loan	2
Rating 1
Investments in loans
Total gross loans	$ 702	822
Rating 1 | Maximum
Investments in loans
LTV (as a percent)	65.00%
Rating 2
Investments in loans
Total gross loans	$ 604,864	$ 523,572
Total gross loans (as a percent)	9.40%	8.30%
Rating 2 | Maximum
Investments in loans
LTV (as a percent)	70.00%
Rating 3
Investments in loans
Total gross loans	$ 4,935,317	$ 5,092,243
Total gross loans (as a percent)	76.90%	80.70%
Rating 3 | Maximum
Investments in loans
LTV (as a percent)	80.00%
Rating 4
Investments in loans
Total gross loans	$ 422,801	$ 248,793
Total gross loans (as a percent)	6.60%	4.00%
Allowance for loan losses as a percent of carrying amount	1.50%
Rating 4 | Minimum
Investments in loans
LTV (as a percent)	80.00%
Rating 4 | Maximum
Investments in loans
LTV (as a percent)	90.00%
Rating 5
Investments in loans
Total gross loans		$ 45,974
Total gross loans (as a percent)		0.70%
Allowance for loan losses as a percent of carrying amount	5.00%
Rating 5 | Minimum
Investments in loans
LTV (as a percent)	90.00%
N/A
Investments in loans
Total gross loans	$ 450,828	$ 394,912
Total gross loans (as a percent)	7.10%	6.30%
Mezzanine Loans | Lending Segment
Investments in loans
Total gross loans	$ 61,000
Carrying amount of loans 90 days or more past due	18,600
Total loans held-for-investment
Investments in loans
Total gross loans	5,821,228	$ 5,785,269
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans
Investments in loans
Total gross loans	4,533,689	4,535,669
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | Rating 1
Investments in loans
Total gross loans	702	822
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | Rating 2
Investments in loans
Total gross loans	396,967	258,822
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | Rating 3
Investments in loans
Total gross loans	3,863,862	4,120,562
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | Rating 4
Investments in loans
Total gross loans	272,158	109,489
Total loans held-for-investment | First Mortgages, excluding Cost Recovery Loans | Rating 5
Investments in loans
Total gross loans		45,974
Total loans held-for-investment | Subordinated mortgages
Investments in loans
Total gross loans	399,381	345,091
Total loans held-for-investment | Subordinated mortgages | Rating 2
Investments in loans
Total gross loans	88,195	116,168
Total loans held-for-investment | Subordinated mortgages | Rating 3
Investments in loans
Total gross loans	278,140	196,476
Total loans held-for-investment | Subordinated mortgages | Rating 4
Investments in loans
Total gross loans	33,046	32,447
Total loans held-for-investment | Mezzanine Loans
Investments in loans
Total gross loans	888,158	901,217
Total loans held-for-investment | Mezzanine Loans | Rating 2
Investments in loans
Total gross loans	119,702	148,582
Total loans held-for-investment | Mezzanine Loans | Rating 3
Investments in loans
Total gross loans	650,859	645,778
Total loans held-for-investment | Mezzanine Loans | Rating 4
Investments in loans
Total gross loans	117,597	106,857
Total loans held-for-investment | Cost Recovery Loans
Investments in loans
Total gross loans		3,292
Total loans held-for-investment | Cost Recovery Loans | N/A
Investments in loans
Total gross loans		3,292
Loans held-for-sale
Investments in loans
Total gross loans	$ 450,828	391,620
Number of held-for-sale loans with the fair value option elected that were 90 days past due or greater or on nonaccrual status | loan	0
Loans held-for-sale | N/A
Investments in loans
Total gross loans	$ 450,828	391,620
Loans transferred as secured borrowings
Investments in loans
Total gross loans	142,456	129,427
Loans transferred as secured borrowings | Rating 3
Investments in loans
Total gross loans	$ 142,456	$ 129,427

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2015

Stockholders' Equity

Schedule of dividends declared by board of directors

Declare Date	Record Date	Ex-Dividend Date	Payment Date	Amount		Frequency
8/4/15	9/30/15	9/28/15	10/15/15	$	0.48	Quarterly
5/5/15	6/30/15	6/26/15	7/15/15	$	0.48	Quarterly
2/25/15	3/31/15	3/27/15	4/15/15	$	0.48	Quarterly

Summary of share awards granted under the Manager Equity Plan

The table below summarizes our share awards granted under the Manager Equity Plan that were not fully vested as of September 30, 2015 (dollar amounts in thousands):

Grant Date	Type	Amount Granted	Grant Date Fair Value		Vesting Period
May 2015	RSU	675,000	$	16,511	3 years
January 2014 (1)	RSU	489,281		14,776	3 years
January 2014	RSU	2,000,000		55,420	3 years
October 2012	RSU	875,000		19,854	3 years

(1) As part of the spin-off of our SFR segment, all holders of the Company’s common stock and vested restricted common stock received one SWAY common share for every five shares of the Company’s common stock.  At the time of the spin-off, the Manager held certain unvested RSUs that were not entitled to SWAY shares.  Under the legal documentation governing the outstanding RSUs, the Manager was entitled to receive additional RSUs in an amount equal to the number of such outstanding RSUs times the amount received in the spin-off by a holder of a share of the Company’s common stock (i.e., the price per share of a SWAY common share divided by five) divided by the fair market value of a share of the Company’s common stock on the date of the spin-off.  In order to prevent dilution of the rights of our equity plan participants resulting from this make-whole issuance, the Equity Plan and Manager Equity Plan provide for, and, on August 12, 2014, our board of directors authorized, an increase of 489,281 shares to the maximum number of shares available for issuance under the Equity Plan and Manager Equity Plan.

Schedule of Non-Vested Shares and Share Equivalents

					Weighted
					Average
	Non-Executive				Grant Date
	Director		Manager		Fair Value
	Stock Plan	Equity Plan	Equity Plan	Total	(per share)
Balance as of January 1, 2015	17,105	109,708	1,854,585	1,981,398	$	27.30
Granted	—	533,267	675,000	1,208,267		24.36
Vested	(3,852)	(40,151)	(971,334)	(1,015,337)		26.47
Forfeited	—	(19,722)	—	(19,722)		23.96
Balance as of September 30, 2015	13,253	583,102	1,558,251	2,154,606		26.07

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Segment Data

9 Months Ended

Sep. 30, 2015

Segment Data

Segment Data

22.  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.  Effective January 1, 2015, we established a separate presentation for corporate overhead, which includes our corporate debt facilities and the associated expenses, management fee expenses and general and administrative expenses not directly allocable to our segments.  Also effective January 1, 2015, we transferred a performing loan with a balance of $25.0 million as of December 31, 2014 from our Investing and Servicing Segment to our Lending Segment.  Effective upon our Ireland Portfolio acquisition discussed in Note 3, we established a third business segment, the Property Segment, and transferred our existing equity method investment in four regional shopping malls (the “Retail Fund”) from our Lending Segment to our Property Segment.  As of December 31, 2014, the carrying value of the Retail Fund was $129.5 million.  We have retrospectively reclassified prior periods to conform to these changes in presentation.

The table below presents our results of operations for the three months ended September 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	116,049	$	4,549	$	—	$	—	$	120,598	$	—	$	120,598
Interest income from investment securities		18,137		40,615		—		—		58,752		(34,078)		24,674
Servicing fees		114		61,394		—		—		61,508		(28,980)		32,528
Rental income		—		2,758		7,287		—		10,045		—		10,045
Other revenues		154		4,372		—		—		4,526		(226)		4,300
Total revenues		134,454		113,688		7,287		—		255,429		(63,284)		192,145
Costs and expenses:
Management fees		364		18		—		27,614		27,996		86		28,082
Interest expense		20,148		2,793		1,713		26,034		50,688		—		50,688
General and administrative		5,901		30,187		226		2,201		38,515		178		38,693
Acquisition and investment pursuit costs		935		552		2,233		(38)		3,682		—		3,682
Costs of rental operations		—		1,562		790		—		2,352		—		2,352
Depreciation and amortization		—		2,492		4,742		—		7,234		—		7,234
Loan loss allowance, net		(2,667)		—		—		—		(2,667)		—		(2,667)
Other expense		—		3		—		—		3		—		3
Total costs and expenses		24,681		37,607		9,704		55,811		127,803		264		128,067
Income (loss) before other income, income taxes and non-controlling interests		109,773		76,081		(2,417)		(55,811)		127,626		(63,548)		64,078
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		49,665		49,665
Change in fair value of servicing rights		—		(13,331)		—		—		(13,331)		9,114		(4,217)
Change in fair value of investment securities, net		(518)		(1,941)		—		—		(2,459)		5,076		2,617
Change in fair value of mortgage loans held-for-sale, net		—		19,082		—		—		19,082		—		19,082
Earnings from unconsolidated entities		818		2,652		2,436		—		5,906		(200)		5,706
Gain on sale of investments and other assets, net		2,688		660		—		—		3,348		—		3,348
Gain (loss) on derivative financial instruments, net		10,693		(9,582)		1,119		—		2,230		—		2,230
Foreign currency (loss) gain, net		(18,705)		896		27		—		(17,782)		—		(17,782)
Other income, net		—		64		—		—		64		—		64
Total other (loss) income		(5,024)		(1,500)		3,582		—		(2,942)		63,655		60,713
Income (loss) before income taxes		104,749		74,581		1,165		(55,811)		124,684		107		124,791
Income tax provision		(166)		(7,509)		—		—		(7,675)		—		(7,675)
Net income (loss)		104,583		67,072		1,165		(55,811)		117,009		107		117,116
Net income attributable to non-controlling interests		(350)		76		—		—		(274)		(107)		(381)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	104,233	$	67,148	$	1,165	$	(55,811)	$	116,735	$	—	$	116,735

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

			Investing						Investing
	Lending		and Servicing						and Servicing
	Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	106,369	$	4,300	$	—	$	110,669	$	—	$	110,669
Interest income from investment securities		15,729		30,136		—		45,865		(17,225)		28,640
Servicing fees		63		58,826		—		58,889		(24,248)		34,641
Rental income		—		3,385		—		3,385		—		3,385
Other revenues		130		4,219		—		4,349		(316)		4,033
Total revenues		122,291		100,866		—		223,157		(41,789)		181,368
Costs and expenses:
Management fees		470		18		24,413		24,901		42		24,943
Interest expense		16,865		1,602		21,272		39,739		—		39,739
General and administrative		8,362		37,723		1,378		47,463		177		47,640
Acquisition and investment pursuit costs		583		176		—		759		—		759
Costs of rental operations		—		1,783		—		1,783		—		1,783
Depreciation and amortization		—		3,017		—		3,017		—		3,017
Loan loss allowance, net		1,575		—		—		1,575		—		1,575
Other expense		—		918		—		918		—		918
Total costs and expenses		27,855		45,237		47,063		120,155		219		120,374
Income (loss) before other income, income taxes and non-controlling interests		94,436		55,629		(47,063)		103,002		(42,008)		60,994
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		87,778		87,778
Change in fair value of servicing rights		—		(18,312)		—		(18,312)		10,415		(7,897)
Change in fair value of investment securities, net		(140)		52,067		—		51,927		(50,067)		1,860
Change in fair value of mortgage loans held-for-sale, net		—		15,517		—		15,517		—		15,517
Earnings from unconsolidated entities		1,875		5,905		—		7,780		(3,975)		3,805
Gain on sale of investments, net		1,332		—		—		1,332		—		1,332
Gain on derivative financial instruments, net		26,540		2,735		—		29,275		—		29,275
Foreign currency loss, net		(21,019)		(447)		—		(21,466)		—		(21,466)
Other income, net		—		28		—		28		—		28
Total other income		8,588		57,493		—		66,081		44,151		110,232
Income (loss) before income taxes		103,024		113,122		(47,063)		169,083		2,143		171,226
Income tax benefit (provision)		233		(4,069)		—		(3,836)		—		(3,836)
Net income (loss)		103,257		109,053		(47,063)		165,247		2,143		167,390
Net income attributable to non-controlling interests		(203)		—		—		(203)		(2,143)		(2,346)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	103,054	$	109,053	$	(47,063)	$	165,044	$	—	$	165,044

The table below presents our results of operations for the nine months ended September 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	343,449	$	13,870	$	—	$	—	$	357,319	$	—	$	357,319
Interest income from investment securities		57,483		112,583		—		—		170,066		(93,838)		76,228
Servicing fees		296		166,691		—		—		166,987		(76,048)		90,939
Rental income		—		6,908		10,823		—		17,731		—		17,731
Other revenues		567		7,603		—		—		8,170		(733)		7,437
Total revenues		401,795		307,655		10,823		—		720,273		(170,619)		549,654
Costs and expenses:
Management fees		1,119		54		—		81,511		82,684		187		82,871
Interest expense		61,868		7,663		2,590		78,900		151,021		—		151,021
General and administrative		16,842		92,002		402		5,573		114,819		542		115,361
Acquisition and investment pursuit costs		1,932		1,270		6,495		38		9,735		—		9,735
Costs of rental operations		—		4,138		1,123		—		5,261		—		5,261
Depreciation and amortization		—		10,790		6,357		—		17,147		—		17,147
Loan loss allowance, net		311		—		—		—		311		—		311
Other expense		—		378		—		—		378		—		378
Total costs and expenses		82,072		116,295		16,967		166,022		381,356		729		382,085
Income (loss) before other income, income taxes and non-controlling interests		319,723		191,360		(6,144)		(166,022)		338,917		(171,348)		167,569
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		153,399		153,399
Change in fair value of servicing rights		—		(26,587)		—		—		(26,587)		18,176		(8,411)
Change in fair value of investment securities, net		(347)		3,181		—		—		2,834		730		3,564
Change in fair value of mortgage loans held-for-sale, net		—		51,044		—		—		51,044		—		51,044
Earnings from unconsolidated entities		3,034		10,704		7,631		—		21,369		(622)		20,747
Gain on sale of investments and other assets, net		2,995		17,760		—		—		20,755		—		20,755
Gain (loss) on derivative financial instruments, net		19,602		(13,315)		1,036		—		7,323		—		7,323
Foreign currency (loss) gain, net		(26,860)		(395)		20		—		(27,235)		—		(27,235)
Loss on extinguishment of debt		—		—		—		(5,921)		(5,921)		—		(5,921)
Other income, net		—		105		—		14		119		—		119
Total other (loss) income		(1,576)		42,497		8,687		(5,907)		43,701		171,683		215,384
Income (loss) before income taxes		318,147		233,857		2,543		(171,929)		382,618		335		382,953
Income tax provision		(136)		(27,282)		—		—		(27,418)		—		(27,418)
Net income (loss)		318,011		206,575		2,543		(171,929)		355,200		335		355,535
Net income attributable to non-controlling interests		(1,030)		76		—		—		(954)		(335)		(1,289)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	316,981	$	206,651	$	2,543	$	(171,929)	$	354,246	$	—	$	354,246

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

			Investing				Single				Investing
	Lending		and Servicing				Family				and Servicing
	Segment		Segment		Corporate		Residential		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	311,348	$	9,686	$	—	$	—	$	321,034	$	—	$	321,034
Interest income from investment securities		49,196		83,225		—		—		132,421		(46,707)		85,714
Servicing fees		253		172,845		—		—		173,098		(71,565)		101,533
Rental income		—		6,520		—		—		6,520		—		6,520
Other revenues		318		9,917		—		—		10,235		(939)		9,296
Total revenues		361,115		282,193		—		—		643,308		(119,211)		524,097
Costs and expenses:
Management fees		1,653		54		76,022		—		77,729		120		77,849
Interest expense		48,310		3,529		63,426		—		115,265		—		115,265
General and administrative		18,974		112,049		5,268		—		136,291		544		136,835
Acquisition and investment pursuit costs		1,303		606		15		—		1,924		—		1,924
Costs of rental operations		—		3,889		—		—		3,889		—		3,889
Depreciation and amortization		—		12,807		—		—		12,807		—		12,807
Loan loss allowance, net		1,933		—		—		—		1,933		—		1,933
Other expense		52		6,475		—		—		6,527		—		6,527
Total costs and expenses		72,225		139,409		144,731		—		356,365		664		357,029
Income (loss) before other income, income taxes and non-controlling interests		288,890		142,784		(144,731)		—		286,943		(119,875)		167,068
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		190,810		190,810
Change in fair value of servicing rights		—		(43,291)		—		—		(43,291)		24,620		(18,671)
Change in fair value of investment securities, net		565		105,313		—		—		105,878		(90,698)		15,180
Change in fair value of mortgage loans held-for-sale, net		—		48,018		—		—		48,018		—		48,018
Earnings from unconsolidated entities		6,847		9,741		—		—		16,588		(3,156)		13,432
Gain on sale of investments, net		12,965		—		—		—		12,965		—		12,965
Gain (loss) on derivative financial instruments, net		16,142		(4,523)		—		—		11,619		—		11,619
Foreign currency loss, net		(15,376)		(836)		—		—		(16,212)		—		(16,212)
OTTI		(214)		(796)		—		—		(1,010)		—		(1,010)
Other income, net		54		684		—		—		738		—		738
Total other income		20,983		114,310		—		—		135,293		121,576		256,869
Income (loss) from continuing operations before income taxes		309,873		257,094		(144,731)		—		422,236		1,701		423,937
Income tax provision		(293)		(13,440)		—		—		(13,733)		—		(13,733)
Income (loss) from continuing operations		309,580		243,654		(144,731)		—		408,503		1,701		410,204
Loss from discontinued operations, net of tax		—		—		—		(1,551)		(1,551)		—		(1,551)
Net income (loss)		309,580		243,654		(144,731)		(1,551)		406,952		1,701		408,653
Net income attributable to non-controlling interests		(3,439)		—		—		—		(3,439)		(1,701)		(5,140)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	306,141	$	243,654	$	(144,731)	$	(1,551)	$	403,513	$	—	$	403,513

The table below presents our condensed consolidated balance sheet as ofSeptember 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Assets:
Cash and cash equivalents	$	112,635	$	56,454	$	—	$	202,766	$	371,855	$	913	$	372,768
Restricted cash		15,352		23,978		4,290		—		43,620		—		43,620
Loans held-for-investment, net		5,814,886		—		—		—		5,814,886		—		5,814,886
Loans held-for-sale		27,198		423,630		—		—		450,828		—		450,828
Loans transferred as secured borrowings		142,456		—		—		—		142,456		—		142,456
Investment securities		564,101		927,315		—		—		1,491,416		(704,955)		786,461
Properties, net		—		84,558		445,880		—		530,438		—		530,438
Intangible assets		—		162,343		56,616		—		218,959		(27,879)		191,080
Investment in unconsolidated entities		30,155		54,627		121,733		—		206,515		(7,344)		199,171
Goodwill		—		140,437		—		—		140,437		—		140,437
Derivative assets		26,102		4,389		5,816		—		36,307		—		36,307
Accrued interest receivable		35,214		828		—		—		36,042		—		36,042
Other assets		21,722		64,086		40,604		12,784		139,196		(1,900)		137,296
VIE assets, at fair value		—		—		—		—		—		82,937,617		82,937,617
Total Assets	$	6,789,821	$	1,942,645	$	674,939	$	215,550	$	9,622,955	$	82,196,452	$	91,819,407
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	17,143	$	85,208	$	10,344	$	24,431	$	137,126	$	660	$	137,786
Related-party payable		—		120		—		22,684		22,804		—		22,804
Dividends payable		—		—		—		115,191		115,191		—		115,191
Derivative liabilities		8,387		6,359		155		—		14,901		—		14,901
Secured financing agreements, net		2,209,851		485,662		328,602		658,159		3,682,274		—		3,682,274
Convertible senior notes, net		—		—		—		1,320,207		1,320,207		—		1,320,207
Secured borrowings on transferred loans		143,926		—		—		—		143,926		—		143,926
VIE liabilities, at fair value		—		—		—		—		—		82,181,138		82,181,138
Total Liabilities		2,379,307		577,349		339,101		2,140,672		5,436,429		82,181,798		87,618,227
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock		—		—		—		2,407		2,407		—		2,407
Additional paid-in capital		2,689,426		1,183,262		329,960		(18,110)		4,184,538		—		4,184,538
Treasury stock		—		—		—		(61,525)		(61,525)		—		(61,525)
Accumulated other comprehensive income (loss)		40,830		(2,478)		1,158		—		39,510		—		39,510
Retained earnings (accumulated deficit)		1,668,561		180,456		4,720		(1,847,894)		5,843		—		5,843
Total Starwood Property Trust, Inc. Stockholders’ Equity		4,398,817		1,361,240		335,838		(1,925,122)		4,170,773		—		4,170,773
Non-controlling interests in consolidated subsidiaries		11,697		4,056		—		—		15,753		14,654		30,407
Total Equity		4,410,514		1,365,296		335,838		(1,925,122)		4,186,526		14,654		4,201,180
Total Liabilities and Equity	$	6,789,821	$	1,942,645	$	674,939	$	215,550	$	9,622,955	$	82,196,452	$	91,819,407

The table below presents our condensed consolidated balance sheet as of December 31, 2014 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Assets:
Cash and cash equivalents	$	125,132	$	85,252	$	—	$	44,017	$	254,401	$	786	$	255,187
Restricted cash		34,941		13,763		—		—		48,704		—		48,704
Loans held-for-investment, net		5,771,307		7,931		—		—		5,779,238		—		5,779,238
Loans held-for-sale		—		391,620		—		—		391,620		—		391,620
Loans transferred as secured borrowings		129,427		—		—		—		129,427		—		129,427
Investment securities		764,517		753,553		—		—		1,518,070		(519,822)		998,248
Properties, net		—		39,854		—		—		39,854		—		39,854
Intangible assets		—		190,207		—		—		190,207		(46,055)		144,152
Investment in unconsolidated entities		22,537		48,693		129,475		—		200,705		(6,722)		193,983
Goodwill		—		140,437		—		—		140,437		—		140,437
Derivative assets		23,579		3,049		—		—		26,628		—		26,628
Accrued interest receivable		39,188		914		—		—		40,102		—		40,102
Other assets		21,329		61,048		—		14,739		97,116		(1,464)		95,652
VIE assets, at fair value		—		—		—		—		—		107,816,065		107,816,065
Total Assets	$	6,931,957	$	1,736,321	$	129,475	$	58,756	$	8,856,509	$	107,242,788	$	116,099,297
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	23,015	$	97,424	$	—	$	23,620	$	144,059	$	457	$	144,516
Related-party payable		—		4,405		—		36,346		40,751		—		40,751
Dividends payable		—		—		—		108,189		108,189		—		108,189
Derivative liabilities		3,662		1,814		—		—		5,476		—		5,476
Secured financing agreements, net		2,252,493		222,363		—		662,933		3,137,789		—		3,137,789
Convertible senior notes, net		—		—		—		1,418,022		1,418,022		—		1,418,022
Secured borrowings on transferred loans		129,441		—		—		—		129,441		—		129,441
VIE liabilities, at fair value		—		—		—		—		—		107,232,201		107,232,201
Total Liabilities		2,408,611		326,006		—		2,249,110		4,983,727		107,232,658		112,216,385
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock		—		—		—		2,248		2,248		—		2,248
Additional paid-in capital		3,126,845		1,413,608		127,299		(832,027)		3,835,725		—		3,835,725
Treasury stock		—		—		—		(23,635)		(23,635)		—		(23,635)
Accumulated other comprehensive income		55,781		115		—		—		55,896		—		55,896
Retained earnings (accumulated deficit)		1,328,794		(3,408)		2,176		(1,336,940)		(9,378)		—		(9,378)
Total Starwood Property Trust, Inc. Stockholders’ Equity		4,511,420		1,410,315		129,475		(2,190,354)		3,860,856		—		3,860,856
Non-controlling interests in consolidated subsidiaries		11,926		—		—		—		11,926		10,130		22,056
Total Equity		4,523,346		1,410,315		129,475		(2,190,354)		3,872,782		10,130		3,882,912
Total Liabilities and Equity	$	6,931,957	$	1,736,321	$	129,475	$	58,756	$	8,856,509	$	107,242,788	$	116,099,297

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Subsequent Events

9 Months Ended

Sep. 30, 2015

Subsequent Events

Subsequent Events

23. Subsequent Events

Our significant events subsequent to September 30, 2015 were as follows:

Affordable Housing Property Acquisitions

On October 20, 2015, we acquired seven of the properties comprising the Affordable Housing Portfolio for $143.2 million.  These acquisitions were financed in part by newly established property specific debt facilities with an aggregate outstanding balance of $101.0 million, a 10-year term and a fixed interest rate of 3.7%.  The remaining 22 properties remain subject to customary closing conditions. 

On October 26, 2015, we entered into an agreement to acquire a 450-unit affordable housing community in Tampa, Florida for $29.1 million.

Secured Financing Agreements

In October 2015, we amended the Lender 2 Repo 1 facility to upsize available borrowings from $325.0 million to $500.0 million and extend the maturity from October 2018 to October 2020, assuming exercise of available extension options.

In October 2015, we exercised a one-year extension option on the Conduit Repo 2 facility extending the maturity from November 2015 to November 2016.

Dividend Declaration

On November 5, 2015, our board of directors declared a dividend of $0.48 per share for the fourth quarter of 2015, which is payable on January 15, 2016 to common stockholders of record as of December 31, 2015.

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash Flows from Operating Activities:
Net income	$ 355,535	$ 408,653
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred financing costs	11,055	8,501
Amortization of convertible debt discount and deferred fees	15,631	9,376
Accretion of net discount on investment securities	(20,312)	(17,174)
Accretion of net deferred loan fees and discounts	(26,615)	(16,756)
Amortization of net premium (discount) from secured borrowings on transferred loans	4	(862)
Share-based compensation	26,455	21,501
Share-based component of incentive fees	14,828	8,990
Change in fair value of fair value option investment securities	(3,564)	(15,180)
Change in fair value of consolidated VIEs	17,438	(71,105)
Change in fair value of servicing rights	8,411	18,671
Change in fair value of loans held-for-sale	(51,044)	(48,018)
Change in fair value of derivatives	(12,765)	(14,595)
Foreign currency loss, net	27,372	15,767
Gain on sale of investments and other assets	(20,755)	(13,907)
Other-than-temporary impairment		1,010
Loan allowance, net	311	1,933
Depreciation and amortization	15,873	13,178
Earnings from unconsolidated entities	(20,747)	(13,432)
Distributions of earnings from unconsolidated entities	18,665	9,354
Loss on extinguishment of debt	5,921
Originations of loans held-for-sale, net of principal collections	(1,424,837)	(1,159,058)
Proceeds from sale of loans held-for-sale	1,443,871	1,165,583
Changes in operating assets and liabilities:
Related-party payable, net	(17,947)	7,073
Accrued and capitalized interest receivable, less purchased interest	(48,310)	(29,770)
Other assets	(29,576)	(6,192)
Accounts payable, accrued expenses and other liabilities	(25,211)	(46,997)
Net cash provided by operating activities	259,687	236,544
Cash Flows from Investing Activities:
Origination and purchase of loans held-for-investment	(1,670,124)	(2,123,947)
Proceeds from principal collections on loans	1,057,700	966,350
Proceeds from loans sold	599,504	341,472
Purchase of investment securities	(163,018)	(67,230)
Proceeds from sales of investment securities	6,301	100,166
Proceeds from principal collections on investment securities	348,090	40,999
Real estate business combinations, net of cash acquired	(239,933)
Proceeds from sale of properties	33,056	1,784
Purchase of other assets	(309)	(18,731)
Investment in unconsolidated entities	(32,063)	(21,973)
Distribution of capital from unconsolidated entities	29,003	38,946
Payments for purchase or termination of derivatives	(18,271)	(16,081)
Proceeds from termination of derivatives	30,194	5,611
Return of investment basis in purchased derivative asset	260	1,222
Decrease in restricted cash, net	9,404	8,890
Spin-off of Starwood Waypoint Residential Trust		(111,960)
Acquisition and improvement of single family homes		(61,901)
Proceeds from sale of non-performing loans		1,153
Net cash used in investing activities	(10,206)	(915,230)
Cash Flows from Financing Activities:
Borrowings under financing agreements	3,423,328	2,917,281
Principal repayments on and repurchases of borrowings	(3,289,937)	(2,459,837)
Payment of deferred financing costs	(13,876)	(11,536)
Proceeds from common stock issuances	326,361	583,099
Payment of equity offering costs	(945)	(1,623)
Payment of dividends	(332,023)	(293,607)
Distributions to non-controlling interests	(1,259)	(33,582)
Purchase of treasury stock	(29,792)
Issuance of debt of consolidated VIEs	9,132	88,412
Repayment of debt of consolidated VIEs	(246,230)	(129,724)
Distributions of cash from consolidated VIEs	26,690	32,601
Net cash (used in) provided by financing activities	(128,551)	691,484
Net increase in cash and cash equivalents	120,930	12,798
Cash and cash equivalents, beginning of period	255,187	317,627
Effect of exchange rate changes on cash	(3,349)	(3,103)
Cash and cash equivalents, end of period	372,768	327,322
Supplemental disclosure of cash flow information:
Cash paid for interest	126,668	110,208
Income taxes paid	27,256	19,040
Supplemental disclosure of non-cash investing and financing activities:
Fair value of assets acquired	540,764
Fair value of liabilities assumed	300,831
Assets acquired from consolidated VIEs	(39,506)
Unsettled common stock repurchased	8,098	12,993
Dividends declared, but not yet paid	115,191	108,056
Consolidation of VIEs (VIE asset/liability additions)	8,067,859	27,094,681
Deconsolidation of VIEs (VIE asset/liability reductions)	$ (5,278,580)	8,502,882
Net assets distributed in spin-off of Starwood Waypoint Residential Trust		$ 1,008,377

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2015

Summary of Significant Accounting Policies

Balance Sheet Presentation of the Investing and Servicing Segment"s Variable Interest Entities

Balance Sheet Presentation of the Investing and Servicing Segment’s Variable Interest Entities

As noted above, the Investing and Servicing Segment operates an investment 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 accounting principles generally accepted in the United States of America (“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 the Investing and Servicing Segment 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 VIEs. The assets and other instruments held by these VIEs are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the VIEs do not have any recourse to the general credit of any other consolidated entities, nor to us as the consolidator of these VIEs.

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

Refer to the segment data in Note 22 for a presentation of the Investing and Servicing Segment without consolidation of these VIEs.

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, 2014 (the “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three and nine months ended September 30, 2015 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, 2014 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. Accounting Standards Codification (“ASC”) 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. We 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 elect the fair value option for initial and subsequent recognition of the assets and liabilities of our consolidated VIEs.  Interest income and interest expense associated with these VIEs are no longer relevant on a standalone basis because these amounts are already reflected in the fair value changes.  We have elected to present these items in a single line on our condensed consolidated statements of operations.  The residual difference shown on our condensed consolidated statements of operations in the line item “Change in net assets related to consolidated VIEs” represents our beneficial interest in the VIEs.

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

Loans comprise the vast majority of our VIE assets and are carried at fair value due to the election of the fair value option.  When an asset becomes REO, it is due to nonperformance of the loan.  Because the loan is already at fair value, the carrying value of an REO asset is also initially at fair value.  Furthermore, when we consolidate a CMBS trust, any existing REO would be consolidated at fair value.  Once an asset becomes REO, its disposition time is relatively short. As a result, the carrying value of an REO generally approximates fair value under GAAP.

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

REO assets generally represent a very small percentage of the overall asset pool of a CMBS trust.  In a new issue CMBS trust there are no REO assets.  We estimate that REO assets constitute approximately 4% of our consolidated VIE assets, with the remaining 96% representing loans.  However, it is important to note that the fair value of our VIE assets is determined by reference to our VIE liabilities as permitted under Accounting Standards Update (“ASU”) 2014-13,  Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.  In other words, our VIE liabilities are more reliably measurable than the VIE assets, resulting in our current measurement methodology which utilizes this value to determine the fair value of our VIE assets as a whole. As a result, these percentages are not necessarily indicative of the relative fair values of each of these asset categories if the assets were to be valued individually. 

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

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

Convertible Senior Notes

Convertible Senior Notes

ASC 470, Debt, requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. ASC 470-20 requires that the initial proceeds from the sale of these notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by the Company at such time. The equity components of the convertible notes have been reflected within additional paid-in capital in our condensed consolidated balance sheets. The resulting debt discount is being amortized over the period during which the convertible notes are expected to be outstanding (the maturity date) as additional non-cash interest expense.

Upon repurchase of convertible debt instruments, ASC 470-20 requires the issuer to allocate total settlement consideration, inclusive of transaction costs, amongst the liability and equity components of the instrument based on the fair value of the liability component immediately prior to repurchase.  The difference between the settlement consideration allocated to the liability component and the net carrying value of the liability component, including unamortized debt issuance costs, is recognized as gain (loss) on extinguishment of debt in our condensed consolidated statements of operations.  The remaining settlement consideration allocated to the equity component is recognized as a reduction of additional paid-in capital in our condensed consolidated balance sheets. 

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 3.  In accordance with ASC 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 nine months ended September 30, 2014.

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 the Investing and Servicing Segment’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 the Investing and Servicing Segment’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.

Fair Value Measurements

Fair Value Measurements

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

As discussed above, we measure the assets and liabilities of consolidated VIEs at fair value pursuant to our election of the fair value option. The VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the VIE, we maximize the use of observable inputs over unobservable inputs. We also acknowledge that our principal market for selling CMBS assets is the securitization market where the market participant is considered to be a CMBS trust or a collateralized debt obligation (“CDO”). This methodology results in the fair value of the assets of a static CMBS trust being equal to the fair value of its liabilities. Refer to Note 19 for further information regarding our fair value measurements.

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-collateral 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.

Intangible Lease Assets

Intangible Lease Assets

In accordance with ASC 805, Business Combinations, the acquirer in a business combination must recognize, with certain exceptions, the fair values of assets acquired, liabilities assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity.  In connection with the Ireland portfolio acquisition (refer to Note 3 for further discussion) and certain properties acquired from CMBS trusts, we recognized intangible lease assets and liabilities associated with certain noncancelable operating leases of the acquired properties. These intangible lease assets and liabilities include in-place lease intangible assets, favorable lease intangible assets and unfavorable lease liabilities.  In-place lease intangible assets reflect the acquired benefit of purchasing properties with in-place leases and are measured based on estimates of direct costs associated with leasing the property and lost rental income during projected lease-up and free rent periods, both of which are avoided due to the presence of in-place leases at the acquisition date. Favorable and unfavorable lease intangible assets and liabilities reflect the terms of in-place tenant leases being either favorable or unfavorable relative to market terms at the acquisition date.  The estimated fair values of our favorable and unfavorable lease assets and liabilities at the respective acquisition dates represent the discounted cash flow differential between the contractual cash flows of such leases and the estimated cash flows that comparable leases at market terms would generate. Our intangible lease assets and liabilities are recognized within intangible assets and other liabilities, respectively, in our condensed consolidated balance sheet.  Our in-place lease intangible assets are amortized to amortization expense while our favorable and unfavorable lease intangible assets and liabilities are amortized to rental income, both over the remaining noncancelable term of the respective leases on a straight-line basis.

Properties

Properties

Our properties consist of commercial real estate properties held-for-investment and are recorded at cost, less accumulated depreciation and impairments, if any.  Properties consist primarily of land, buildings and improvements.  Land is not depreciated, and buildings and improvements are depreciated on a straight-line basis over their estimated useful lives.  Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated on a straight-line basis over their estimated useful lives.  We review properties for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability is determined by comparing the carrying amount of the property to the undiscounted future net cash flows it is expected to generate. If such carrying amounts exceed the expected undiscounted future net cash flows, we adjust the carrying amount of the property to its estimated fair value.

Revenue Recognition

Revenue Recognition

Rental Income

Rental income is recognized when earned from tenants. For leases that provide rent concessions or fixed escalations over the lease term, rental income is recognized on a straight-line basis over the noncancelable term of the lease.  In net lease arrangements, costs reimbursable from tenants are recognized in rental income in the period in which the related expenses are incurred as we are generally the primary obligor with respect to purchasing goods and services for property operations.

Acquisition and Investment Pursuit Costs

Acquisition and Investment Pursuit Costs

Costs incurred in connection with acquiring properties, investments, loans and businesses, as well as in pursuing unsuccessful acquisitions and investments, are recorded within acquisition and investment pursuit costs in our condensed consolidated statements of operations when incurred.  These costs reflect services performed by third parties and principally include due diligence and legal services.

Earnings Per Share

Earnings Per Share

We present both basic and diluted earnings per share (“EPS”) amounts in our financial statements.  Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from (i) our share-based compensation, consisting of unvested restricted stock (“RSAs”) and restricted stock units (“RSUs”), (ii) shares contingently issuable to our Manager, and (iii) the “in-the-money” conversion options associated with our outstanding convertible notes (see further discussion in Note 17). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.

The Company’s unvested RSUs and RSAs 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 shares of common stock and participating securities.  For the three and nine months ended September 30, 2015 and 2014, the two-class method resulted in the most dilutive EPS calculation.

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

Reclassifications

Certain prior period amounts have been reclassified to conform to our current period presentation.  In that regard, we have reclassified $39.9 million of commercial real estate properties from other assets to properties, net on our condensed consolidated balance sheet as of December 31, 2014.  Additionally, revenues of $3.4 million and $6.5 million previously reported in other revenue have been reclassified to rental income in our condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.  Expenses of $1.8 million and $3.9 million previously reported in other expense have been reclassified to costs of rental operations in our condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.

Recent Accounting Developments

Recent Accounting Developments

On February 18, 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis, which amends the criteria for determining which entities are considered VIEs, amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2015. Early application is permitted. We are in the process of assessing what impact this ASU will have on the Company. 

On April 7, 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30), which requires entities to present debt issuance costs as a direct deduction from the carrying value of the related debt liability, consistent with debt discounts, rather than as a separate deferred asset as the previous guidance required.  The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2015.  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.  At issuance, the ASU was effective for the first interim or annual period beginning after December 15, 2016. On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, which delayed the effective date of ASU 2014-09 by one year, resulting in the ASU becoming effective for the first interim or annual period beginning after December 15, 2017.  Early application, which was not permissible under the initial effectiveness timeline, is now permissible though no earlier than as of the first interim or annual period beginning after December 15, 2016.  We do not expect the application of this ASU to materially impact the Company.

On September 25, 2015, the FASB issued ASU 2015-16,  Business Combinations (Topic 805) – Simplifying the Accounting for Measurement-Period Adjustments, which requires that the acquirer in a business combination recognize any measurement period adjustments in the period in which the adjustments are identified rather than retrospectively as of the acquisition date, as current GAAP dictates.  The ASU shall be applied prospectively and is effective for annual periods, and interim periods therein, beginning after December 15, 2015.  Early application is permitted.We intend to early adopt this ASU by recognizing any future measurement period adjustments in the period identified. 

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Fair Value (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Assets and liabilities measured at fair value
Marketable securities	$ 786,461	$ 998,248
Intangible assets - servicing rights held at fair value	123,892	132,303
Derivative assets	36,307	26,628
VIE Assets	82,937,617	107,816,065
Derivative liabilities	14,901	5,476
VIE Liabilities	82,181,138	107,232,201
Fair value measurements on recurring basis
Assets and liabilities measured at fair value
Loans held-for-sale, fair value option	423,630	391,620
Derivative assets	36,307	26,628
VIE Assets	82,937,617	107,816,065
Total	83,942,902	108,922,869
Derivative liabilities	14,901	5,476
VIE Liabilities	82,181,138	107,232,201
Total	82,196,039	107,237,677
Fair value measurements on recurring basis | Domestic Servicing Rights
Assets and liabilities measured at fair value
Intangible assets - servicing rights held at fair value	123,892	132,303
Fair value measurements on recurring basis | RMBS
Assets and liabilities measured at fair value
Available-for-sale securities	184,785	207,053
Fair value measurements on recurring basis | CMBS
Assets and liabilities measured at fair value
Available-for-sale securities	222,360	334,080
Fair value measurements on recurring basis | Equity security
Assets and liabilities measured at fair value
Marketable securities	14,311	15,120
Fair value measurements on recurring basis | Level I
Assets and liabilities measured at fair value
Total	14,311	15,120
Fair value measurements on recurring basis | Level I | Equity security
Assets and liabilities measured at fair value
Marketable securities	14,311	15,120
Fair value measurements on recurring basis | Level II
Assets and liabilities measured at fair value
Derivative assets	36,307	26,628
Total	36,307	26,628
Derivative liabilities	14,901	5,476
VIE Liabilities	79,177,561	102,339,081
Total	79,192,462	102,344,557
Fair value measurements on recurring basis | Level III
Assets and liabilities measured at fair value
Loans held-for-sale, fair value option	423,630	391,620
VIE Assets	82,937,617	107,816,065
Total	83,892,284	108,881,121
VIE Liabilities	3,003,577	4,893,120
Total	3,003,577	4,893,120
Fair value measurements on recurring basis | Level III | Domestic Servicing Rights
Assets and liabilities measured at fair value
Intangible assets - servicing rights held at fair value	123,892	132,303
Fair value measurements on recurring basis | Level III | RMBS
Assets and liabilities measured at fair value
Available-for-sale securities	184,785	207,053
Fair value measurements on recurring basis | Level III | CMBS
Assets and liabilities measured at fair value
Available-for-sale securities	$ 222,360	$ 334,080

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Convertible Senior Notes (Tables)

9 Months Ended

Sep. 30, 2015

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 September 30, 2015 (amounts in thousands, except rates):

									Remaining
	Principal		Coupon		Effective		Conversion	Maturity	Period of
	Amount		Rate		Rate(1)		Rate(2)	Date	Amortization
2017 Notes	$	431,250	3.75	%	5.87	%	41.7397	10/15/2017	2.0	years
2018 Notes	$	599,981	4.55	%	6.10	%	45.8850	3/1/2018	2.4	years
2019 Notes	$	341,363	4.00	%	5.37	%	48.6931	1/15/2019	3.3	years

	As of		As of
	September 30, 2015		December 31, 2014
Total principal	$	1,372,594	$	1,491,228
Net unamortized discount		(52,387)		(73,206)
Carrying amount of debt components	$	1,320,207	$	1,418,022
Carrying amount of conversion option equity components recorded in additional paid-in capital	$	46,343	$	64,070

(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 values of the 2017 Notes, 2018 Notes and 2019 Notes were less than their principal amounts by $61.9million,  $35.0million, and $0.3million at September 30, 2015, respectively, since the closing market price of the Company’s common stock of $20.52 per share was less than the implicit conversion prices of $23.96,$21.79,  and $20.54,  respectively. 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 62.2 million shares, was not included in the computation of diluted earnings per share (“EPS”).  No dilution related to the 2017 Notes, 2018 Notes or 2019 Notes was included in the computation of diluted EPS for the three and nine months ended September 30, 2015 as these notes were not “in-the-money”. See further discussion at Note 17.

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Acquisitions and Divestitures (Details) $ / shares in Units, $ in Thousands			1 Months Ended		3 Months Ended			5 Months Ended	9 Months Ended
	Oct. 20, 2015 USD ($) property	Jul. 24, 2015 USD ($)	Jun. 30, 2015 USD ($)	May. 31, 2015 USD ($) property	Sep. 30, 2015 USD ($) $ / shares	Jul. 25, 2015 USD ($) ft²	Sep. 30, 2014 USD ($) $ / shares	Sep. 30, 2015 USD ($)	Sep. 30, 2015 USD ($) $ / shares	Sep. 30, 2014 USD ($) $ / shares	Oct. 26, 2015 USD ($) item	Aug. 31, 2015 USD ($) property item	Dec. 31, 2014 USD ($)
Acquisition
Purchase price									$ 65,900
Liabilities assumed:
Revenues					$ 192,145		$ 181,368		549,654	$ 524,097
Net loss					117,116		167,390		355,535	408,653
Goodwill					140,437			$ 140,437	140,437				$ 140,437
Affordable Housing Portfolio
Acquisition
Number of properties in portfolio investment | property												29
Number of units | item												7,870
Initial aggregate purchase price to be transferred												$ 524,100
Debt incurred to partially fund acquisition												$ 362,800
Affordable Housing Portfolio | Subsequent event
Acquisition
Number of acquired properties closed | property	7
Number of acquired properties not closed | property	22
Purchase price	$ 143,200
Ireland Portfolio
Acquisition
Area of property | ft²						600,000
Purchase price						$ 226,600
Amount of assumed debt extinguished in connection with the acquisition						283,000
Assets acquired:
Restricted cash					10,829			10,829	10,829
Properties					445,369			445,369	445,369
Intangible assets					59,529			59,529	59,529
Other assets					11,128			11,128	11,128
Total assets acquired					526,855			526,855	526,855
Liabilities assumed:
Accounts payable, accrued expenses and other liabilities					17,273			17,273	17,273
Secured financing agreements					283,010			283,010	283,010
Total liabilities assumed					300,283			300,283	300,283
Net assets acquired/purchase price					226,572			226,572	226,572
Revenues								10,800
Net loss								4,100
Acquisition related costs			$ 3,300	$ 3,300	3,300
Goodwill					0			$ 0	0
Pro forma revenue and net income
Revenues					192,722		190,198		564,574	550,586
Net income attributable to STWD					$ 116,803		$ 164,838		$ 357,314	$ 399,053
Net income per share - Basic | $ / shares					$ 0.49		$ 0.73		$ 1.52	$ 1.85
Net income per share - Diluted | $ / shares					$ 0.49		$ 0.73		$ 1.52	$ 1.85
Management fee expense addition					$ 46		$ 1,047		$ 1,605	$ 3,141
Ireland Portfolio | Lender 6 Mortgage Facility
Acquisition
Debt incurred to partially fund acquisition						$ 328,600
Affordable Housing Community In Tampa Florida | Subsequent event
Acquisition
Number of units | item											450
Initial aggregate purchase price to be transferred											$ 29,100
Net Leased Office Property | Ireland Portfolio
Acquisition
Number of properties in portfolio investment | property				11
Purchase price		$ 121,900
Net Leased Office Property | Ireland Portfolio | Lender 6 Mortgage Facility
Acquisition
Debt incurred to partially fund acquisition		$ 80,700
Multifamily Property | Ireland Portfolio
Acquisition
Number of properties in portfolio investment | property				1

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Offsetting Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Assets
Net Amounts of Assets Presented in the Statement of Financial Position	$ 36,307	$ 26,628
Liabilities
Gross Amounts of Recognized Liabilities	2,678,579	2,276,461
Net Amounts of Liabilities Presented in the Statement of Financial	2,678,579	2,276,461
Gross Amounts Not Offset in the Statement of Financial Position
Financial Instruments	2,665,153	2,273,001
Cash Collateral Pledged	13,426	3,460
Derivatives
Assets
Gross Amounts of Recognized Assets	36,307	26,628
Net Amounts of Assets Presented in the Statement of Financial Position	36,307	26,628
Gross Amounts Not Offset in the Statement of Financial Position
Financial Instruments	1,475	2,016
Net Amount	34,832	24,612
Liabilities
Gross Amounts of Recognized Liabilities	14,901	5,476
Net Amounts of Liabilities Presented in the Statement of Financial	14,901	5,476
Gross Amounts Not Offset in the Statement of Financial Position
Financial Instruments	1,475	2,016
Cash Collateral Pledged	13,426	3,460
Repurchase agreements
Liabilities
Gross Amounts of Recognized Liabilities	2,663,678	2,270,985
Net Amounts of Liabilities Presented in the Statement of Financial	2,663,678	2,270,985
Gross Amounts Not Offset in the Statement of Financial Position
Financial Instruments	$ 2,663,678	$ 2,270,985

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Assets:
Cash and cash equivalents	$ 372,768	$ 255,187
Restricted cash	43,620	48,704
Loans held-for-investment, net	5,814,886	5,779,238
Loans held-for-sale ($423,630 and $391,620 held at fair value)	450,828	391,620
Loans transferred as secured borrowings	142,456	129,427
Investment securities ($421,456 and $556,253 held at fair value)	786,461	998,248
Properties, net	530,438	39,854
Intangible assets ($123,892 and $132,303 held at fair value)	191,080	144,152
Investment in unconsolidated entities	199,171	193,983
Goodwill	140,437	140,437
Derivative assets	36,307	26,628
Accrued interest receivable	36,042	40,102
Other assets	137,296	95,652
Variable interest entity ("VIE") assets, at fair value	82,937,617	107,816,065
Total Assets	91,819,407	116,099,297
Liabilities:
Accounts payable, accrued expenses and other liabilities	137,786	144,516
Related-party payable	22,804	40,751
Dividends payable	115,191	108,189
Derivative liabilities	14,901	5,476
Secured financing agreements, net	3,682,274	3,137,789
Convertible senior notes, net	1,320,207	1,418,022
Secured borrowings on transferred loans	143,926	129,441
VIE liabilities, at fair value	82,181,138	107,232,201
Total Liabilities	$ 87,618,227	$ 112,216,385
Commitments and contingencies (Note 21)
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, 240,665,588 issued and 237,658,615 outstanding as of September 30, 2015 and 224,752,053 issued and 223,538,303 outstanding as of December 31, 2014	$ 2,407	$ 2,248
Additional paid-in capital	4,184,538	3,835,725
Treasury stock (3,006,973 shares and 1,213,750 shares)	(61,525)	(23,635)
Accumulated other comprehensive income	39,510	55,896
Retained earnings (accumulated deficit)	5,843	(9,378)
Total Starwood Property Trust, Inc. Stockholders' Equity	4,170,773	3,860,856
Non-controlling interests in consolidated subsidiaries	30,407	22,056
Total Equity	4,201,180	3,882,912
Total Liabilities and Equity	$ 91,819,407	$ 116,099,297

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Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2015

Earnings per Share

Reconciliation of net income from continuing operations and the number of shares of common stock used in the computation of basic EPS and diluted EPS

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 (amounts in thousands, except per share amounts):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Basic Earnings
Continuing Operations:
Income from continuing operations attributable to STWD common shareholders	$	116,735	$	165,044	$	354,246	$	405,064
Less: Income attributable to unvested shares		(1,052)		(1,742)		(3,239)		(4,898)
Basic — Income from continuing operations	$	115,683	$	163,302	$	351,007	$	400,166
Discontinued Operations:
Loss from discontinued operations	$	—	$	—	$	—	$	(1,551)
Basic — Net income attributable to STWD common shareholders after allocation to participating securities	$	115,683	$	163,302	$	351,007	$	398,615
Diluted Earnings
Continuing Operations:
Basic — Income from continuing operations attributable to STWD common shareholders	$	116,735	$	165,044	$	354,246	$	405,064
Less: Income attributable to unvested shares		(1,052)		(1,742)		(3,239)		(4,898)
Add: Undistributed earnings to unvested shares		18		653		147		1,187
Less: Undistributed earnings reallocated to unvested shares		(18)		(650)		(147)		(1,182)
Diluted — Income from continuing operations	$	115,683	$	163,305	$	351,007	$	400,171
Discontinued Operations:
Basic — Loss from discontinued operations	$	—	$	—	$	—	$	(1,551)
Diluted — Net income attributable to STWD common shareholders after allocation to participating securities	$	115,683	$	163,305	$	351,007	$	398,620
Number of Shares:
Basic — Average shares outstanding		237,796		222,481		232,194		212,351
Effect of dilutive securities — Convertible Notes		—		966		—		932
Effect of dilutive securities — Contingently issuable shares		129		96		129		96
Diluted — Average shares outstanding		237,925		223,543		232,323		213,379
Earnings Per Share Attributable to STWD Common Stockholders:
Basic:
Income from continuing operations	$	0.49	$	0.73	$	1.51	$	1.89
Loss from discontinued operations		—		—		—		(0.01)
Net income	$	0.49	$	0.73	$	1.51	$	1.88
Diluted:
Income from continuing operations	$	0.49	$	0.73	$	1.51	$	1.88
Loss from discontinued operations		—		—		—		(0.01)
Net income	$	0.49	$	0.73	$	1.51	$	1.87

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Condensed Consolidated Statements of Equity - USD ($) $ in Thousands	Total Starwood Property Trust, Inc. Stockholders' Equity	Common stock	Additional Paid-In Capital	Treasury Stock	(Accumulated Deficit) Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Non-Controlling Interests	Total
Balance at Dec. 31, 2013	$ 4,282,528	$ 1,961	$ 4,300,479	$ (10,642)	$ (84,719)	$ 75,449	$ 44,605	$ 4,327,133
Balance (in shares) at Dec. 31, 2013		196,139,045		625,850
Increase (Decrease) in Stockholders' Equity
Proceeds from public offering of common stock	564,695	$ 253	564,442					564,695
Proceeds from public offering of common stock (in shares)		25,300,000
Proceeds from ATM Agreement	18,346	$ 8	18,338					18,346
Proceeds from ATM Agreement (in shares)		759,000
Proceeds from DRIP Plan	58		58					58
Proceeds from DRIP Plan (in shares)		2,430
Equity offering costs	(1,623)		(1,623)					(1,623)
Common stock repurchased	(12,993)			$ (12,993)				(12,993)
Common stock repurchased (in shares)				587,900
Share-based compensation	21,501	$ 10	21,491					21,501
Share-based compensation (in shares)		1,025,144
Manager incentive fee paid in stock	8,990	$ 4	8,986					8,990
Manager incentive fee paid in stock (in shares)		376,932
Net income	403,513				403,513		5,140	408,653
Dividends declared, $1.44 per share	(311,492)				(311,492)			(311,492)
Spin-off of Starwood Waypoint Residential Trust	(1,118,743)		(1,118,743)				(1,594)	(1,120,337)
Other comprehensive loss, net	(5,768)					(5,768)		(5,768)
VIE non-controlling interests							382	382
Distribution to non-controlling interests							(33,582)	(33,582)
Balance at Sep. 30, 2014	3,849,012	$ 2,236	3,793,428	$ (23,635)	7,302	69,681	14,951	3,863,963
Balance (in shares) at Sep. 30, 2014		223,602,551		1,213,750
Balance at Dec. 31, 2014	3,860,856	$ 2,248	3,835,725	$ (23,635)	(9,378)	55,896	22,056	$ 3,882,912
Balance (in shares) at Dec. 31, 2014		224,752,053		1,213,750				224,752,053
Increase (Decrease) in Stockholders' Equity
Proceeds from public offering of common stock	326,142	$ 138	326,004					$ 326,142
Proceeds from public offering of common stock (in shares)		13,800,000
Proceeds from ATM Agreement (in shares)								0
Proceeds from DRIP Plan	219		219					$ 219
Proceeds from DRIP Plan (in shares)		9,400
Equity offering costs	(945)		(945)					(945)
Common stock repurchased	(37,890)			$ (37,890)				$ (37,890)
Common stock repurchased (in shares)				1,793,223				1,793,223
Equity component of 4.0% Convertible Senior Notes repurchase	(17,727)		(17,727)					$ (17,727)
Share-based compensation	26,455	$ 15	26,440					26,455
Share-based compensation (in shares)		1,484,879
Manager incentive fee paid in stock	14,828	$ 6	14,822					14,828
Manager incentive fee paid in stock (in shares)		619,256
Net income	354,246				354,246		1,289	355,535
Dividends declared, $1.44 per share	(339,025)				(339,025)			(339,025)
Other comprehensive loss, net	(16,386)					(16,386)		(16,386)
VIE non-controlling interests							4,188	4,188
Contributions from non-controlling interests							4,133	4,133
Distribution to non-controlling interests							(1,259)	(1,259)
Balance at Sep. 30, 2015	$ 4,170,773	$ 2,407	$ 4,184,538	$ (61,525)	$ 5,843	$ 39,510	$ 30,407	$ 4,201,180
Balance (in shares) at Sep. 30, 2015		240,665,588		3,006,973				240,665,588

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Investment Securities (Details 2) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2015 USD ($) security	Sep. 30, 2015 USD ($) security	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($) security
Available-for-sale
Estimated Fair Value
Securities with a loss less than 12 months	$ 12,320	$ 12,320
Securities with a loss greater than 12 months	678	678		$ 682
Unrealized Losses
Securities with a loss less than 12 months	(25)	(25)
Securities with a loss greater than 12 months	(150)	(150)		(197)
RMBS
Unrealized Losses
Portion of securities with variable rate	128,400	$ 128,400
RMBS | Available-for-sale
Investment Securities
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	400	$ 1,100	$ 1,500
Estimated Fair Value
Securities with a loss less than 12 months	12,320	12,320
Securities with a loss greater than 12 months	678	678		682
Unrealized Losses
Securities with a loss less than 12 months	(25)	(25)
Securities with a loss greater than 12 months	$ (150)	$ (150)		$ (197)
Number of securities with unrealized loss position | security	2	2		2
Portion of securities with variable rate				$ 140,100
CMBS | Available-for-sale
Unrealized Losses
Portion of securities with variable rate				$ 200
CMBS | Fair value option
Unrealized Losses
Unpaid principal balance of investment securities before consolidation of VIEs	$ 4,500,000	$ 4,500,000
Purchases in which fair value option was elected	115,000	213,200
Purchase amount reflected as repayment of debt of consolidated VIEs	109,400	198,600
CMBS, fair value option
Unrealized Losses
Portion of securities with variable rate	$ 0	$ 0

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2015

Schedule of investment securities

Investment securities were comprised of the following as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	Carrying Value as of
	September 30, 2015		December 31, 2014
RMBS, available-for-sale	$	184,785	$	207,053
Single-borrower CMBS, available-for-sale		—		100,349
CMBS, fair value option (1)		927,315		753,553
Held-to-maturity (“HTM”) securities		365,005		441,995
Equity security, fair value option		14,311		15,120
Subtotal—Investment securities		1,491,416		1,518,070
VIE eliminations (1)		(704,955)		(519,822)
Total investment securities	$	786,461	$	998,248

(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):

	Available-for-sale				CMBS, fair		HTM		Equity
	RMBS		CMBS		value option		Securities		Security		Total
Three Months Ended September 30, 2015
Purchases	$	—	$	—	$	5,665	$	9,930	$	—	$	15,595
Sales		—		—		1,203		—		—		1,203
Principal collections		8,500		91,794		1		21		—		100,316
Three Months Ended September 30, 2014
Purchases	$	—	$	—	$	13,777	$	—	$	—	$	13,777
Sales		5,588		—		—		—		—		5,588
Principal collections		21,870		—		1		14		—		21,885

	Available-for-sale				CMBS, fair		HTM		Equity
	RMBS		CMBS		value option		Securities		Security		Total
Nine Months Ended September 30, 2015
Purchases	$	—	$	—	$	14,653	$	148,365	$	—	$	163,018
Sales		—		—		6,301		—		—		6,301
Principal collections		27,114		92,018		2		228,956		—		348,090
Nine Months Ended September 30, 2014
Purchases	$	—	$	—	$	67,230	$	—	$	—	$	67,230
Sales		68,134		—		32,032		—		—		100,166
Principal collections		40,155		805		1		38		—		40,999

Summary 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 September 30, 2015 and December 31, 2014 (amounts in thousands):

							Unrealized Gains or (Losses)
							Recognized in AOCI
	Purchase				Recorded				Gross		Gross		Net
	Amortized		Credit		Amortized		Non-Credit		Unrealized		Unrealized		Fair Value
	Cost		OTTI		Cost		OTTI		Gains		Losses		Adjustment		Fair Value
September 30, 2015
RMBS	$	153,694	$	(10,184)	$	143,510	$	(175)	$	41,450	$	—	$	41,275	$	184,785
Single-borrower CMBS		—		—		—		—		—		—		—		—
Total	$	153,694	$	(10,184)	$	143,510	$	(175)	$	41,450	$	—	$	41,275	$	184,785
December 31, 2014
RMBS	$	163,733	$	(10,197)	$	153,536	$	(197)	$	53,714	$	—	$	53,517	$	207,053
Single-borrower CMBS		93,685		—		93,685		—		6,664		—		6,664		100,349
Total	$	257,418	$	(10,197)	$	247,221	$	(197)	$	60,378	$	—	$	60,181	$	307,402

	Weighted Average		Weighted Average
	Coupon(1)		Rating (Standard & Poor’s)	WAL (Years)(2)
September 30, 2015
RMBS	1.1	%	B−	6.3
Single-borrower CMBS	—	%	—	—
December 31, 2014
RMBS	1.1	%	B−	5.8
Single-borrower CMBS	11.6	%	BB+	3.2

(1) Calculated using the September 30, 2015 and December 31, 2014 one-month LIBOR rate of 0.193% and 0.171%, respectively, for floating rate securities.

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

Reconciliation of aggregate principal balance to amortized cost for RMBS and single-borrower CMBS, excluding CMBS where the fair value option is elected

The following table contains a reconciliation of aggregate principal balance to amortized cost for our RMBS and single-borrower CMBS as of September 30, 2015 and December 31, 2014, excluding CMBS where we have elected the fair value option (amounts in thousands):

	September 30, 2015				December 31, 2014
	RMBS		CMBS		RMBS		CMBS
Principal balance	$	242,219	$	—	$	270,783	$	93,685
Accretable yield		(73,361)		—		(85,495)		—
Non-accretable difference		(25,348)		—		(31,752)		—
Total discount		(98,709)		—		(117,247)		—
Amortized cost	$	143,510	$	—	$	153,536	$	93,685

Schedule of changes to accretable yield and non-accretable difference for RMBS and single-borrower CMBS, excluding CMBS where the fair value option is elected

The following table discloses the changes to accretable yield and non-accretable difference for our RMBS during the three and nine months ended September 30, 2015 (amounts in thousands):

			Non-Accretable
Three Months Ended September 30, 2015	Accretable Yield		Difference
Balance as of July 1, 2015	$	74,184	$	28,609
Accretion of discount		(3,600)		—
Principal write-downs		—		(484)
Purchases		—		—
Sales		—		—
OTTI		—		—
Transfer to/from non-accretable difference		2,777		(2,777)
Balance as of September 30, 2015	$	73,361	$	25,348
Nine Months Ended September 30, 2015
Balance as of January 1, 2015	$	85,495	$	31,752
Accretion of discount		(17,087)		—
Principal write-downs		—		(1,451)
Purchases		—		—
Sales		—		—
OTTI		—		—
Transfer to/from non-accretable difference		4,953		(4,953)
Balance as of September 30, 2015	$	73,361	$	25,348

Schedule of gross unrealized losses and estimated fair value of securities in an unrealized loss position, excluding CMBS where the fair value option is elected

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 September 30, 2015 and December 31, 2014, 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		Securities with a		Securities with a		Securities with a
	loss less than		loss greater than		loss less than		loss greater than
	12 months		12 months		12 months		12 months
As of September 30, 2015
RMBS	$	12,320	$	678	$	(25)	$	(150)
Single-borrower CMBS		—		—		—		—
Total	$	12,320	$	678	$	(25)	$	(150)
As of December 31, 2014
RMBS	$	—	$	682	$	—	$	(197)
Single-borrower CMBS		—		—		—		—
Total	$	—	$	682	$	—	$	(197)

Schedule of investment in fair value option CMBS

The table below summarizes various attributes of our investment in fair value option CMBS as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	Weighted		Weighted
	Average		Average Rating	WAL
	Coupon		(Standard & Poor’s) (1)	(Years)(2)
September 30, 2015
CMBS, fair value option	3.5	%	CCC+	7.4
December 31, 2014
CMBS, fair value option	3.9	%	CCC−	7.7

(1) As of September 30, 2015 and December 31, 2014, excludes $35.8million and $41.7 million, respectively, in fair value option CMBS that are not rated.

(2) 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.

Held-to-maturity

Schedule of gross unrealized losses and estimated fair value of securities in an unrealized loss position, excluding CMBS where the fair value option is elected

The table below summarizes unrealized gains and losses of our investments in HTM securities as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	Net Carrying Amount		Gross Unrealized		Gross Unrealized
	(Amortized Cost)		Holding Gains		Holding Losses		Fair Value
September 30, 2015
Preferred interests	$	81,968	$	—	$	(827)	$	81,141
CMBS		283,037		43		(2,195)		280,885
Total	$	365,005	$	43	$	(3,022)	$	362,026
December 31, 2014
Preferred interests	$	307,465	$	—	$	(1,366)	$	306,099
CMBS		134,530		—		—		134,530
Total	$	441,995	$	—	$	(1,366)	$	440,629

Summary of investments in HTM securities

The table below summarizes the maturities of our HTM preferred equity interests in limited liability companies that own commercial real estate and our HTM CMBS as of September 30, 2015 (amounts in thousands):

	Preferred
	Interests		CMBS		Total
Less than one year	$	—	$	—	$	—
One to three years		—		283,037		283,037
Three to five years		62,704		—		62,704
Thereafter		19,264		—		19,264
Total	$	81,968	$	283,037	$	365,005

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Goodwill and Intangible Assets (Details 2) $ in Thousands	9 Months Ended
	Sep. 30, 2015 USD ($)
Summary of activity within intangible assets
Balance as of beginning of period	$ 144,152
Amortization	(11,702)
Foreign exchange (loss) gain	258
Changes in fair value due to changes in inputs and assumptions	(8,411)
Balance as of end of period	191,080
Future amortization expense for the European servicing rights, in-place lease intangible assets and favorable lease intangible assets
2015 (reminder of)	3,839
2016	12,039
2017	8,560
2018	7,855
2019	6,700
Thereafter	28,195
Total	67,188
Ireland Portfolio
Summary of activity within intangible assets
Acquisition of finite-lived intangibles	59,529
CMBS Trusts
Summary of activity within intangible assets
Acquisition of finite-lived intangibles	7,254
European servicing rights
Summary of activity within intangible assets
Balance as of beginning of period	11,849
Amortization	(7,814)
Foreign exchange (loss) gain	(263)
Balance as of end of period	3,772
In-place lease
Summary of activity within intangible assets
Amortization	(3,384)
Foreign exchange (loss) gain	391
Balance as of end of period	50,848
In-place lease | Ireland Portfolio
Summary of activity within intangible assets
Acquisition of finite-lived intangibles	47,999
In-place lease | CMBS Trusts
Summary of activity within intangible assets
Acquisition of finite-lived intangibles	5,842
Favorable lease
Summary of activity within intangible assets
Amortization	(504)
Foreign exchange (loss) gain	130
Balance as of end of period	12,568
Favorable lease | Ireland Portfolio
Summary of activity within intangible assets
Acquisition of finite-lived intangibles	11,530
Favorable lease | CMBS Trusts
Summary of activity within intangible assets
Acquisition of finite-lived intangibles	1,412
Domestic Servicing Rights
Summary of activity within intangible assets
Balance as of beginning of period	132,303
Changes in fair value due to changes in inputs and assumptions	(8,411)
Balance as of end of period	$ 123,892

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Variable Interest Entities

9 Months Ended

Sep. 30, 2015

Variable Interest Entities

Variable Interest Entities

14. Variable Interest Entities

Investment Securities

As discussed in Note 2, we evaluate all of our investments and other interests in entities for consolidation, including 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 VIE liabilities initially represent investment securities on our balance sheet (pre-consolidation). Upon consolidation of these VIEs, our associated investment securities are eliminated, as is the interest income related to those securities. Similarly, the fees we earn in our roles as special servicer of the bonds issued by the consolidated VIEs or as collateral administrator of the consolidated VIEs are also eliminated. Finally, 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 September 30, 2015, one of our 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 September 30, 2015, 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 the 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 VIEs, whether or not we are deemed to be the primary beneficiary. As such, the risk associated with our involvement in these VIEs is limited to the carrying value of our investment in the entity. As of September 30, 2015, our maximum risk of loss related to VIEs in which we were not the primary beneficiary was $222.4 million on a fair value basis.

As of September 30, 2015, the securitization VIEs which we do not consolidate had debt obligations to beneficial interest holders with unpaid principal balances of $40.5 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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Properties (Tables)

9 Months Ended

Sep. 30, 2015

Properties

Summary of properties

	Depreciable Life	September 30, 2015		December 31, 2014
Property Segment
Land	—	$	162,274	$	—
Buildings	30 years		286,913		—
Investing and Servicing Segment
Land	—		20,972		8,225
Land improvements	5 – 15 years		70		—
Buildings	20 – 40 years		63,619		30,637
Building improvements	5 – 10 years		240		—
Furniture & fixtures	3 years		680		1,635
Properties, cost			534,768		40,497
Less: accumulated depreciation			(4,330)		(643)
Properties, net		$	530,438	$	39,854

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Stockholders' Equity

9 Months Ended

Sep. 30, 2015

Stockholders' Equity

Stockholders' Equity

16. Stockholders’ Equity

During the nine months ended September 30, 2015, our board of directors declared the following dividends:

Declare Date	Record Date	Ex-Dividend Date	Payment Date	Amount		Frequency
8/4/15	9/30/15	9/28/15	10/15/15	$	0.48	Quarterly
5/5/15	6/30/15	6/26/15	7/15/15	$	0.48	Quarterly
2/25/15	3/31/15	3/27/15	4/15/15	$	0.48	Quarterly

On April 20, 2015, we issued 12.0 million shares of common stock for gross proceeds of $283.6 million.  In connection with the offering, the underwriters had a30-day option to purchase an additional 1.8 million shares of common stock, which they exercised in full, resulting in additional gross proceeds of $42.5 million.

During the nine months ended September 30, 2015, there were no shares issued under our At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”).  During the nine months ended September 30, 2015, shares issued under the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”) were not material.

In September 2014, our board of directors authorized and announced the repurchase of up to $250 million of our outstanding common stock over a period of one year. In December 2014, our board of directors amended the repurchase program to include the repurchase of our outstanding Convertible Notes. In June 2015, our board of directors amended the repurchase program to increase the authorized purchase amount to $450 million and provide for a one-year extension through June 2016. There were no repurchases of our outstanding Convertible Notes during the three months ended September 30, 2015. During the nine months ended September 30, 2015, we repurchased $118.6million aggregate principal amount of our 2019 Notes for $136.3million (refer to Note 10).  Also during the three and nine months ended September 30, 2015 we repurchased 1,393,223 shares and 1,793,223 shares of common stock for $29.1million and $37.9million, respectively, under the repurchase program.As of September 30, 2015, we have $262.6million of remaining capacity to repurchase common stock or Convertible Notes under the repurchase program.

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 16 to the consolidated financial statements included in our Form 10-K for further information regarding these plans.

The table below summarizes our share awards granted under the Manager Equity Plan that were not fully vested as of September 30, 2015 (dollar amounts in thousands):

Grant Date	Type	Amount Granted	Grant Date Fair Value		Vesting Period
May 2015	RSU	675,000	$	16,511	3 years
January 2014 (1)	RSU	489,281		14,776	3 years
January 2014	RSU	2,000,000		55,420	3 years
October 2012	RSU	875,000		19,854	3 years

(1) As part of the spin-off of our SFR segment, all holders of the Company’s common stock and vested restricted common stock received one SWAY common share for every five shares of the Company’s common stock.  At the time of the spin-off, the Manager held certain unvested RSUs that were not entitled to SWAY shares.  Under the legal documentation governing the outstanding RSUs, the Manager was entitled to receive additional RSUs in an amount equal to the number of such outstanding RSUs times the amount received in the spin-off by a holder of a share of the Company’s common stock (i.e., the price per share of a SWAY common share divided by five) divided by the fair market value of a share of the Company’s common stock on the date of the spin-off.  In order to prevent dilution of the rights of our equity plan participants resulting from this make-whole issuance, the Equity Plan and Manager Equity Plan provide for, and, on August 12, 2014, our board of directors authorized, an increase of 489,281 shares to the maximum number of shares available for issuance under the Equity Plan and Manager Equity Plan.

During the three and nine months ended September 30, 2015, we granted 30,608and 533,267 RSAs, respectively, under the Equity Plan to a select group of eligible participants which includes our employees and employees of our Manager who perform services for us.  The awards were granted based on the market price of the Company’s common stock on the respective grant date and vest ratably over a three-year period. Expenses related to the vesting of these awards is reflected in general and administrative expenses in our condensed consolidated statements of operations.  

As of September 30, 2015, there were 2.7 million shares available for future grants under the Manager Equity Plan, the Equity Plan and the Non-Executive Director Stock Plan.

Schedule of Non-Vested Shares and Share Equivalents

					Weighted
					Average
	Non-Executive				Grant Date
	Director		Manager		Fair Value
	Stock Plan	Equity Plan	Equity Plan	Total	(per share)
Balance as of January 1, 2015	17,105	109,708	1,854,585	1,981,398	$	27.30
Granted	—	533,267	675,000	1,208,267		24.36
Vested	(3,852)	(40,151)	(971,334)	(1,015,337)		26.47
Forfeited	—	(19,722)	—	(19,722)		23.96
Balance as of September 30, 2015	13,253	583,102	1,558,251	2,154,606		26.07

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Loan Securitization/Sale Activities (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Loan Transfers Accounted for as Secured Borrowings
Face Amount			$ 38,925
Proceeds			38,925
Investment and Servicing Segment
Loan Transfer Activities
Fair value of loans sold	$ 410,227	$ 498,789	1,443,871	$ 1,165,583
Par value of loans sold	398,654	482,129	1,396,674	1,119,537
Repayment of purchase agreements	299,301	361,569	1,043,757	839,626
Lending Segment
Loan Transfers Accounted for as Secured Borrowings
Net gain on the sale of loan qualifying for sales treatment	2,700	800	3,000	1,300
Repurchase agreements | Lending Segment
Loan Transfers Accounted for as Sales
Face Amount	225,264	142,896	606,725	347,755
Proceeds	$ 220,928	$ 138,958	$ 599,504	$ 341,472

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Condensed Consolidated Statements of Equity (Parenthetical) - $ / shares				3 Months Ended		9 Months Ended
	Aug. 04, 2015	May. 05, 2015	Feb. 25, 2015	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Consolidated Statements of Equity
Dividends declared per common share (in dollars per share)	$ 0.48	$ 0.48	$ 0.48	$ 0.48	$ 0.48	$ 1.44	$ 1.44

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Consolidated Balance Sheets
Loans-held-for-sale held at fair value	$ 423,630	$ 391,620
Investment securities held at fair value	421,456	556,253
Intangible assets - servicing rights held at fair value	$ 123,892	$ 132,303
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	240,665,588	224,752,053
Common stock, shares outstanding	237,658,615	223,538,303
Treasury stock, shares	3,006,973	1,213,750

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Secured Financing Agreements

9 Months Ended

Sep. 30, 2015

Secured financing agreements

Secured Financing Agreements

Secured Financing Agreements

9. Secured Financing Agreements

The following table is a summary of our secured financing agreements in place as of September 30, 2015 and December 31, 2014 (dollars in thousands):

					Pledged
					Asset		Maximum			Carrying Value at
	Current	Extended			Carrying		Facility			September 30,			December 31,
	Maturity	Maturity(a)	Pricing		Value		Size			2015			2014
Lender 1 Repo 1	(b)	(b)	LIBOR + 1.85% to 5.25%		$	1,471,791	$	1,600,000		$	916,310		$	875,111
Lender 1 Repo 2	(c)	N/A	LIBOR + 1.90%			184,785		125,000			6,948			101,886
Lender 2 Repo 1	Oct 2015	Oct 2018	LIBOR + 1.75% to 2.75%			373,917		325,000			272,824			240,188
Lender 3 Repo 1	May 2017	May 2019	LIBOR + 2.85%			229,983		162,917			162,917			124,250
Conduit Repo 1	Sep 2016	N/A	LIBOR + 1.95% to 3.35%			116,084		150,000			85,849			94,727
Conduit Repo 2	Nov 2015	Nov 2016	LIBOR + 2.10%			164,310		150,000			121,556			113,636
Conduit Repo 3	Feb 2018	Feb 2019	LIBOR + 2.10%			107,389		150,000			79,847			—
Lender 4 Repo 1	Oct 2016	Oct 2017	LIBOR + 2.00%			405,195		317,688			317,688			327,117
Lender 5 Repo 1	(d)	N/A	N/A			—		—			—			58,079
Lender 6 Repo 1	Aug 2018	N/A	LIBOR + 2.50% to 3.00%			733,579		500,000			367,010			296,967
Lender 6 Mortgage	May 2020	N/A	EURIBOR + 1.69%			502,497		328,602			328,602			—
Lender 7 Repo 1	Dec 2016	N/A	LIBOR + 2.35% to 2.70%			140,274		107,416			107,416			39,024
Investing and Servicing Segment Property Mortgages	June 2018 to Nov 2024	N/A	Various			43,688		38,975			31,835			14,000
Lender 9 Repo 1	(e)	(e)	LIBOR + 1.40% to 1.85%			319,853		225,313			225,313			—
Borrowing Base	Jul 2018	Jul 2019	LIBOR + 2.75%	(f)		222,770		450,000	(g)		—			189,871
Term Loan	Apr 2020	N/A	LIBOR + 2.75%	(f)		3,296,673		659,962			658,159	(h)		662,933	(h)
FHLB Advances	N/A	N/A	Various			—		1,000,000			—			—
					$	8,312,788	$	6,290,873		$	3,682,274		$	3,137,789

(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.  Borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions and not to exceed January 2023.

(c) The date that is 180 days after the buyer delivers notice to seller, subject to a maximum date of March 2017.

(d) Facility was terminated at our option in March 2015.

(e) Facility carries a rolling twelve month term which may reset monthly with the lender’s consent. Current maturity is September 2016.  Facility carries no maximum facility size.  Amount herein reflects the outstanding balance as of September 30, 2015.

(f) 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.

(g) Subject to certain conditions defined in the facility agreement, the maximum facility size may be increased to $650.0 million.

(h) Term loan outstanding balance is net of $1.8 million and $2.1 million of unamortized discount as of September 30, 2015 and December 31, 2014, respectively.

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

In February 2015, we executed a $150.0 million repurchase facility (“Conduit Repo 3”) with an existing lender for our Investing and Servicing Segment’s conduit platform.  The facility carries a three year initial term with a one year extension option and an annual interest rate of LIBOR +2.10%.

In March 2015, we executed a repurchase facility (“Lender 9 Repo 1”) with a new lender to finance certain CMBS holdings, including CMBS holdings previously financed under the Lender 5 Repo 1 facility which was terminated at our option in March 2015.  There is no maximum facility size specified under the facility as the lender will evaluate all eligible collateral on an individual basis.  The facility carries a rolling twelve month term which may reset monthly with the lender’s consent and an annual interest rate of LIBOR +1.40% to LIBOR +1.85% depending on the CMBS collateral.

In April 2015, we amended the Lender 4 Repo 1 facility to reduce pricing.

In May 2015, we executed a €294.0 million mortgage facility (“Lender 6 Mortgage”) to finance the acquisition of the Ireland Portfolio, of which €73.5 million was drawn during the three months ended September 30, 2015. The facility carries a five year term, an annual interest rate of EURIBOR + 1.69%and was fully funded as of September 30, 2015.  Refer to Note 3 for further discussion of this acquisition. During the nine months ended September 30, 2015, we incurred deferred financing costs of $5.7 million associated with this facility.

In July 2015, we exercised a one-year extension option on the Lender 6 Repo 1 facility, extending the maturity from August 2017 to August 2018.

In July 2015, we amended the Borrowing Base facility to (i) permanently upsize available borrowings from $250.0 million to $450.0 million; (ii) extend the maturity date to July 2019 assuming exercise of a one-year extension option; and (iii) reduce pricing.

In July 2015, we exercised a one-year extension option on the Lender 4 Repo 1 facility, extending the maturity from October 2015 to October 2016.

In August 2015, we amended the Lender 1 Repo 1 facility to upsize available borrowings from $1.25 billion to $1.6 billion.

During the nine months ended September 30, 2015, we executed two mortgage facilities with aggregate borrowings of $17.8 million to finance commercial real estate acquired by our Investing and Servicing Segment. At inception, these facilities carry a weighted average term of 4.2 years and weighted average interest rate of LIBOR + 2.41%.

In September 2015, we were admitted as a member of the Federal Home Loan Bank (“FHLB”) of Des Moines, which provides us an additional financing source for various multifamily and commercial real estate loans and investment securities.  As of September 30, 2015, we had no outstanding borrowings with the FHLB.

Our secured financing agreements contain certain financial tests and covenants. Should we breach certain of these covenants, it may restrict our ability to pay dividends in the future. As of September 30, 2015, we were in compliance with all such covenants.

The following table sets forth our five-year principal repayments schedule for secured financings, assuming no defaults and excluding 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):

	Repurchase		Other Secured
	Agreements		Financing			Total
2015 (remainder of)	$	302,104	$	1,692		$	303,796
2016		249,929		6,769			256,698
2017		928,144		6,769			934,913
2018		626,982		19,054			646,036
2019		556,519		6,769			563,288
Thereafter		—		979,347	(1)		979,347
Total	$	2,663,678	$	1,020,400		$	3,684,078

(1) Principal paydown of the Term Loan through 2020 excludes $1.8 million of discount amortization.

Secured financing maturities for 2015 primarily relate to $287.3 million on the Conduit Repo facilities.

As of September 30, 2015 and December 31, 2014, we had approximately $29.6 million and $26.5 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 nine months ended September 30, 2015, approximately $3.8 million and $10.8 million, respectively, of amortization was included in interest expense on our condensed consolidated statements of operations. For the three and nine months ended September 30, 2014, approximately $2.9 million and $8.2 million, respectively, of amortization was included in interest expense on our condensed consolidated statements of operations.

As of September 30, 2015 and December 31, 2014, the outstanding balance of our repurchase agreements related to the following asset collateral classes (amounts in thousands):

Class of Collateral	September 30, 2015		December 31, 2014
Loans held-for-investment	$	2,036,748	$	1,863,633
Loans held-for-sale		287,252		208,363
Investment securities		339,678		198,989
	$	2,663,678	$	2,270,985

We seek to mitigate risks associated with our repurchase agreements by managing risk related to the credit quality of our assets, interest rates, liquidity, prepayment speeds and market value.  The margin call provisions under the majority of our repurchase facilities, consisting of 76% of these agreements, do not permit valuation adjustments based on capital markets activity.  Instead, margin calls on these facilities are limited to collateral-specific credit marks.  To monitor credit risk associated with the performance and value of our loans and investments, our asset management team regularly reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.  For repurchase agreements containing margin call provisions for general capital markets activity, approximately halfof these pertain to our loans held-for-sale, for which we manage credit risk through the purchase of credit index instruments.  We further seek to manage risks associated with our repurchase agreements by matching the maturities and interest rate characteristics of our loans with the related repurchase agreements.

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Subsequent Events (Details) $ / shares in Units, $ in Thousands						1 Months Ended		3 Months Ended		9 Months Ended
	Nov. 05, 2015 $ / shares	Oct. 20, 2015 USD ($) property	Aug. 04, 2015 $ / shares	May. 05, 2015 $ / shares	Feb. 25, 2015 $ / shares	Oct. 31, 2015 USD ($)	Jul. 31, 2015	Sep. 30, 2015 USD ($) $ / shares	Sep. 30, 2014 $ / shares	Sep. 30, 2015 USD ($) $ / shares	Sep. 30, 2014 $ / shares	Oct. 26, 2015 USD ($) item	Aug. 31, 2015 USD ($) property item	Dec. 31, 2014 USD ($)
Subsequent Events
Purchase price										$ 65,900
Maximum Facility Size								$ 6,290,873		$ 6,290,873
Extension option exercised period							1 year
Dividend declared (in dollars per share) | $ / shares			$ 0.48	$ 0.48	$ 0.48			$ 0.48	$ 0.48	$ 1.44	$ 1.44
Carrying Value								$ 3,682,274		$ 3,682,274				$ 3,137,789
Lender 2 Repo 1 Facility
Subsequent Events
Maximum Facility Size								325,000		325,000
Carrying Value								272,824		272,824				240,188
Conduit Repo 2 Facility
Subsequent Events
Maximum Facility Size								150,000		150,000
Carrying Value								$ 121,556		$ 121,556				$ 113,636
Subsequent event
Subsequent Events
Dividend declared (in dollars per share) | $ / shares	$ 0.48
Subsequent event | Lender 2 Repo 1 Facility
Subsequent Events
Maximum Facility Size						$ 500,000
Subsequent event | Conduit Repo 2 Facility
Subsequent Events
Extension option exercised period						1 year
Affordable Housing Portfolio
Subsequent Events
Number of units | item													7,870
Number of properties in portfolio investment | property													29
Initial aggregate purchase price to be transferred													$ 524,100
Affordable Housing Portfolio | Subsequent event
Subsequent Events
Number of acquired properties closed | property		7
Purchase price		$ 143,200
Number of acquired properties not closed | property		22
Affordable Housing Portfolio | Subsequent event | Property Specific Debt Facilities
Subsequent Events
Carrying Value		$ 101,000
Maturity period		10 years
Interest rate (as a percent)		3.70%
Affordable Housing Community In Tampa Florida | Subsequent event
Subsequent Events
Number of units | item												450
Initial aggregate purchase price to be transferred												$ 29,100

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Segment Data (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Segment data
Balance of the performing loan that was transferred from the Investing and Servicing Segment to the Lending Segment						$ 25,000
Revenues:
Interest income from loans		$ 120,598	$ 110,669	$ 357,319	$ 321,034
Interest income from investment securities		24,674	28,640	76,228	85,714
Servicing fees		32,528	34,641	90,939	101,533
Rental income		10,045	3,385	17,731	6,520
Other revenues		4,300	4,033	7,437	9,296
Total revenues		192,145	181,368	549,654	524,097
Costs and expenses:
Management fees		28,082	24,943	82,871	77,849
Interest expense		50,688	39,739	151,021	115,265
General and administrative		38,693	47,640	115,361	136,835
Acquisition and investment pursuit costs		3,682	759	9,735	1,924
Costs of rental operations		2,352	1,783	5,261	3,889
Depreciation and amortization		7,234	3,017	17,147	12,807
Loan allowance, net		(2,667)	1,575	311	1,933
Other expense		3	918	378	6,527
Total costs and expenses		128,067	120,374	382,085	357,029
Income before other income, income taxes and non-controlling interests		64,078	60,994	167,569	167,068
Other income:
Change in net assets related to consolidated VIEs		49,665	87,778	153,399	190,810
Change in fair value of servicing rights		(4,217)	(7,897)	(8,411)	(18,671)
Change in fair value of investment securities, net		2,617	1,860	3,564	15,180
Change in fair value of mortgage loans held-for-sale, net		19,082	15,517	51,044	48,018
Earnings from unconsolidated entities		5,706	3,805	20,747	13,432
Gain on sale of investments and other assets, net		3,348	1,332	20,755	12,965
Gain (loss) on derivative financial instruments, net		2,230	29,275	7,323	11,619
Foreign currency loss, net		(17,782)	(21,466)	(27,235)	(16,212)
Included in earnings: OTTI					(1,010)
Loss on extinguishment of debt				(5,921)
Other income, net		64	28	119	738
Total other income		60,713	110,232	215,384	256,869
Income from continuing operations before income taxes		124,791	171,226	382,953	423,937
Income tax benefit (provision)		(7,675)	(3,836)	(27,418)	(13,733)
Income from continuing operations		117,116	167,390	355,535	410,204
Loss from discontinued operations, net of tax					(1,551)
Net income		117,116	167,390	355,535	408,653
Net income attributable to non-controlling interests		(381)	(2,346)	(1,289)	(5,140)
Net income (loss) attributable to Starwood Property Trust, Inc.		116,735	165,044	354,246	403,513
Investment and Servicing Segment
Other income:
Gain on sale of investments and other assets, net	$ 17,100
Operating Segments and Corporate
Revenues:
Interest income from loans		120,598	110,669	357,319	321,034
Interest income from investment securities		58,752	45,865	170,066	132,421
Servicing fees		61,508	58,889	166,987	173,098
Rental income		10,045	3,385	17,731	6,520
Other revenues		4,526	4,349	8,170	10,235
Total revenues		255,429	223,157	720,273	643,308
Costs and expenses:
Management fees		27,996	24,901	82,684	77,729
Interest expense		50,688	39,739	151,021	115,265
General and administrative		38,515	47,463	114,819	136,291
Acquisition and investment pursuit costs		3,682	759	9,735	1,924
Costs of rental operations		2,352	1,783	5,261	3,889
Depreciation and amortization		7,234	3,017	17,147	12,807
Loan allowance, net		(2,667)	1,575	311	1,933
Other expense		3	918	378	6,527
Total costs and expenses		127,803	120,155	381,356	356,365
Income before other income, income taxes and non-controlling interests		127,626	103,002	338,917	286,943
Other income:
Change in fair value of servicing rights		(13,331)	(18,312)	(26,587)	(43,291)
Change in fair value of investment securities, net		(2,459)	51,927	2,834	105,878
Change in fair value of mortgage loans held-for-sale, net		19,082	15,517	51,044	48,018
Earnings from unconsolidated entities		5,906	7,780	21,369	16,588
Gain on sale of investments and other assets, net		3,348	1,332	20,755	12,965
Gain (loss) on derivative financial instruments, net		2,230	29,275	7,323	11,619
Foreign currency loss, net		(17,782)	(21,466)	(27,235)	(16,212)
Included in earnings: OTTI					(1,010)
Loss on extinguishment of debt				(5,921)
Other income, net		64	28	119	738
Total other income		(2,942)	66,081	43,701	135,293
Income from continuing operations before income taxes		124,684	169,083	382,618	422,236
Income tax benefit (provision)		(7,675)	(3,836)	(27,418)	(13,733)
Income from continuing operations					408,503
Loss from discontinued operations, net of tax					(1,551)
Net income		117,009	165,247	355,200	406,952
Net income attributable to non-controlling interests		(274)	(203)	(954)	(3,439)
Net income (loss) attributable to Starwood Property Trust, Inc.		116,735	165,044	354,246	403,513
Operating segment | Lending Segment
Revenues:
Interest income from loans		116,049	106,369	343,449	311,348
Interest income from investment securities		18,137	15,729	57,483	49,196
Servicing fees		114	63	296	253
Other revenues		154	130	567	318
Total revenues		134,454	122,291	401,795	361,115
Costs and expenses:
Management fees		364	470	1,119	1,653
Interest expense		20,148	16,865	61,868	48,310
General and administrative		5,901	8,362	16,842	18,974
Acquisition and investment pursuit costs		935	583	1,932	1,303
Loan allowance, net		(2,667)	1,575	311	1,933
Other expense					52
Total costs and expenses		24,681	27,855	82,072	72,225
Income before other income, income taxes and non-controlling interests		109,773	94,436	319,723	288,890
Other income:
Change in fair value of investment securities, net		(518)	(140)	(347)	565
Earnings from unconsolidated entities		818	1,875	3,034	6,847
Gain on sale of investments and other assets, net		2,688	1,332	2,995	12,965
Gain (loss) on derivative financial instruments, net		10,693	26,540	19,602	16,142
Foreign currency loss, net		(18,705)	(21,019)	(26,860)	(15,376)
Included in earnings: OTTI					(214)
Other income, net					54
Total other income		(5,024)	8,588	(1,576)	20,983
Income from continuing operations before income taxes		104,749	103,024	318,147	309,873
Income tax benefit (provision)		(166)	233	(136)	(293)
Income from continuing operations					309,580
Net income		104,583	103,257	318,011	309,580
Net income attributable to non-controlling interests		(350)	(203)	(1,030)	(3,439)
Net income (loss) attributable to Starwood Property Trust, Inc.		104,233	103,054	316,981	306,141
Operating segment | Investment and Servicing Segment
Revenues:
Interest income from loans		4,549	4,300	13,870	9,686
Interest income from investment securities		40,615	30,136	112,583	83,225
Servicing fees		61,394	58,826	166,691	172,845
Rental income		2,758	3,385	6,908	6,520
Other revenues		4,372	4,219	7,603	9,917
Total revenues		113,688	100,866	307,655	282,193
Costs and expenses:
Management fees		18	18	54	54
Interest expense		2,793	1,602	7,663	3,529
General and administrative		30,187	37,723	92,002	112,049
Acquisition and investment pursuit costs		552	176	1,270	606
Costs of rental operations		1,562	1,783	4,138	3,889
Depreciation and amortization		2,492	3,017	10,790	12,807
Other expense		3	918	378	6,475
Total costs and expenses		37,607	45,237	116,295	139,409
Income before other income, income taxes and non-controlling interests		76,081	55,629	191,360	142,784
Other income:
Change in fair value of servicing rights		(13,331)	(18,312)	(26,587)	(43,291)
Change in fair value of investment securities, net		(1,941)	52,067	3,181	105,313
Change in fair value of mortgage loans held-for-sale, net		19,082	15,517	51,044	48,018
Earnings from unconsolidated entities		2,652	5,905	10,704	9,741
Gain on sale of investments and other assets, net		660		17,760
Gain (loss) on derivative financial instruments, net		(9,582)	2,735	(13,315)	(4,523)
Foreign currency loss, net		896	(447)	(395)	(836)
Included in earnings: OTTI					(796)
Other income, net		64	28	105	684
Total other income		(1,500)	57,493	42,497	114,310
Income from continuing operations before income taxes		74,581	113,122	233,857	257,094
Income tax benefit (provision)		(7,509)	(4,069)	(27,282)	(13,440)
Income from continuing operations					243,654
Net income		67,072	109,053	206,575	243,654
Net income attributable to non-controlling interests		76		76
Net income (loss) attributable to Starwood Property Trust, Inc.		67,148	109,053	206,651	243,654
Operating segment | Property Segment
Revenues:
Rental income		7,287		10,823
Total revenues		7,287		10,823
Costs and expenses:
Interest expense		1,713		2,590
General and administrative		226		402
Acquisition and investment pursuit costs		2,233		6,495
Costs of rental operations		790		1,123
Depreciation and amortization		4,742		6,357
Total costs and expenses		9,704		16,967
Income before other income, income taxes and non-controlling interests		(2,417)		(6,144)
Other income:
Earnings from unconsolidated entities		2,436		7,631
Gain (loss) on derivative financial instruments, net		1,119		1,036
Foreign currency loss, net		27		20
Total other income		3,582		8,687
Income from continuing operations before income taxes		1,165		2,543
Net income		1,165		2,543
Net income (loss) attributable to Starwood Property Trust, Inc.		1,165		2,543
Operating segment | Single Family Residential
Other income:
Loss from discontinued operations, net of tax					(1,551)
Net income					(1,551)
Net income (loss) attributable to Starwood Property Trust, Inc.					(1,551)
Corporate
Costs and expenses:
Management fees		27,614	24,413	81,511	76,022
Interest expense		26,034	21,272	78,900	63,426
General and administrative		2,201	1,378	5,573	5,268
Acquisition and investment pursuit costs		(38)		38	15
Total costs and expenses		55,811	47,063	166,022	144,731
Income before other income, income taxes and non-controlling interests		(55,811)	(47,063)	(166,022)	(144,731)
Other income:
Loss on extinguishment of debt				(5,921)
Other income, net				14
Total other income				(5,907)
Income from continuing operations before income taxes		(55,811)	(47,063)	(171,929)	(144,731)
Income from continuing operations					(144,731)
Net income		(55,811)	(47,063)	(171,929)	(144,731)
Net income (loss) attributable to Starwood Property Trust, Inc.		(55,811)	(47,063)	(171,929)	(144,731)
Investment and Servicing VIEs
Revenues:
Interest income from investment securities		(34,078)	(17,225)	(93,838)	(46,707)
Servicing fees		(28,980)	(24,248)	(76,048)	(71,565)
Other revenues		(226)	(316)	(733)	(939)
Total revenues		(63,284)	(41,789)	(170,619)	(119,211)
Costs and expenses:
Management fees		86	42	187	120
General and administrative		178	177	542	544
Total costs and expenses		264	219	729	664
Income before other income, income taxes and non-controlling interests		(63,548)	(42,008)	(171,348)	(119,875)
Other income:
Change in net assets related to consolidated VIEs		49,665	87,778	153,399	190,810
Change in fair value of servicing rights		9,114	10,415	18,176	24,620
Change in fair value of investment securities, net		5,076	(50,067)	730	(90,698)
Earnings from unconsolidated entities		(200)	(3,975)	(622)	(3,156)
Total other income		63,655	44,151	171,683	121,576
Income from continuing operations before income taxes		107	2,143	335	1,701
Income from continuing operations					1,701
Net income		107	2,143	335	1,701
Net income attributable to non-controlling interests		$ (107)	$ (2,143)	$ (335)	$ (1,701)
Retail fund
Segment data
Balance of the equity method investment that was transferred from the Lending Segment to the Property Segment						$ 129,500

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Oct. 30, 2015
Document and Entity Information
Entity Registrant Name	STARWOOD PROPERTY TRUST, INC.
Entity Central Index Key	0001465128
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
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		237,672,948
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3

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Convertible Senior Notes

9 Months Ended

Sep. 30, 2015

Convertible Senior Notes

Convertible Senior Notes

Convertible Senior Notes

10. Convertible Senior Notes

On October 8, 2014, we issued $431.3 million of 3.75% Convertible Senior Notes due 2017 (the “2017 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 September 30, 2015 (amounts in thousands, except rates):

									Remaining
	Principal		Coupon		Effective		Conversion	Maturity	Period of
	Amount		Rate		Rate(1)		Rate(2)	Date	Amortization
2017 Notes	$	431,250	3.75	%	5.87	%	41.7397	10/15/2017	2.0	years
2018 Notes	$	599,981	4.55	%	6.10	%	45.8850	3/1/2018	2.4	years
2019 Notes	$	341,363	4.00	%	5.37	%	48.6931	1/15/2019	3.3	years

	As of		As of
	September 30, 2015		December 31, 2014
Total principal	$	1,372,594	$	1,491,228
Net unamortized discount		(52,387)		(73,206)
Carrying amount of debt components	$	1,320,207	$	1,418,022
Carrying amount of conversion option equity components recorded in additional paid-in capital	$	46,343	$	64,070

(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 values of the 2017 Notes, 2018 Notes and 2019 Notes were less than their principal amounts by $61.9million,  $35.0million, and $0.3million at September 30, 2015, respectively, since the closing market price of the Company’s common stock of $20.52 per share was less than the implicit conversion prices of $23.96,$21.79,  and $20.54,  respectively. 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 62.2 million shares, was not included in the computation of diluted earnings per share (“EPS”).  No dilution related to the 2017 Notes, 2018 Notes or 2019 Notes was included in the computation of diluted EPS for the three and nine months ended September 30, 2015 as these notes were not “in-the-money”. See further discussion at Note 17.

Under the repurchase program approved by our board of directors (refer to Note 16), we repurchased $118.6million aggregate principal amount of our 2019 Notes during the nine months ended September 30, 2015 for $136.3million plus transaction expenses of $0.1million. The repurchase price was allocated between the fair value of the liability component and the fair value of the equity component of the convertible security. The portion of the repurchase price attributable to the equity component totaled $17.7million and was recognized as a reduction of additional paid-in capital during the nine months ended September 30, 2015. The remaining repurchase price was attributable to the liability component. The difference between this amount and the net carrying amount of the liability and debt issuance costs was reflected as a loss on extinguishment of debt in our condensed consolidated statement of operations. For the nine months ended September 30, 2015, the loss on extinguishment of debt totaled $5.9million, consisting principally of the write-off of unamortized debt discount. There were no repurchases of our outstanding Convertible Notes during the three months ended September 30, 2015.

As of September 30, 2015 and December 31, 2014, we had approximately $1.6million and $2.3 million, respectively, of deferred financing costs from our Convertible Senior Notes, net of amortization, which is included in other assets on our condensed consolidated balance sheets.

Conditions for Conversion

Prior to April 15, 2017 for the 2017 Notes, 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 110% for the 2017 Notes or 130% for the 2018 Notes and 2019 Notes 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 April 15, 2017 for the 2017 Notes, 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.

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Earnings per Share (Details 2) shares in Thousands, instrument in Millions, $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2014 shares	Sep. 30, 2015 USD ($) instrument shares	Sep. 30, 2014 shares
Antidilutive securities and effect of dilutive securities
Effect of dilutive securities - Convertible Notes (in shares)	966		932
2017 Notes
Antidilutive securities and effect of dilutive securities
Amount by which if-converted value of the Notes are less than principal amount | $		$ 61.9
2018 Notes
Antidilutive securities and effect of dilutive securities
Amount by which if-converted value of the Notes are less than principal amount | $		$ 35.0
Effect of dilutive securities - Convertible Notes (in shares)		0
2019 Notes
Antidilutive securities and effect of dilutive securities
Amount by which if-converted value of the Notes are less than principal amount | $		$ 0.3
Effect of dilutive securities - Convertible Notes (in shares)		0
Convertible Senior Notes
Antidilutive securities and effect of dilutive securities
Potential shares of common stock contingently issuable upon conversion of the Convertible Notes | instrument		62.2
Shares excluded from diluted EPS calculations		62,200
Convertible Senior Notes | 2017 Notes
Antidilutive securities and effect of dilutive securities
Effect of dilutive securities - Convertible Notes (in shares)		0
Convertible Senior Notes | 2019 Notes
Antidilutive securities and effect of dilutive securities
Amount by which if-converted value of the Notes are less than principal amount | $		$ 0.3
Restricted stock
Antidilutive securities and effect of dilutive securities
Number of anti-dilutive common shares excluded from the calculation of diluted income per share		2,200	2,300

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Commitments and Contingencies (Details) - Commitments $ in Billions	Sep. 30, 2015 USD ($) loan
Operating leases
Number of loans with future funding commitments | loan	55
Value of loans with future funding commitments	$ 1.7
Value of loans with future funding commitments expected to fund	$ 1.5

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Revenues:
Interest income from loans	$ 120,598	$ 110,669	$ 357,319	$ 321,034
Interest income from investment securities	24,674	28,640	76,228	85,714
Servicing fees	32,528	34,641	90,939	101,533
Rental income	10,045	3,385	17,731	6,520
Other revenues	4,300	4,033	7,437	9,296
Total revenues	192,145	181,368	549,654	524,097
Costs and expenses:
Management fees	28,082	24,943	82,871	77,849
Interest expense	50,688	39,739	151,021	115,265
General and administrative	38,693	47,640	115,361	136,835
Acquisition and investment pursuit costs	3,682	759	9,735	1,924
Costs of rental operations	2,352	1,783	5,261	3,889
Depreciation and amortization	7,234	3,017	17,147	12,807
Loan allowance, net	(2,667)	1,575	311	1,933
Other expense	3	918	378	6,527
Total costs and expenses	128,067	120,374	382,085	357,029
Income before other income, income taxes and non-controlling interests	64,078	60,994	167,569	167,068
Other income:
Change in net assets related to consolidated VIEs	49,665	87,778	153,399	190,810
Change in fair value of servicing rights	(4,217)	(7,897)	(8,411)	(18,671)
Change in fair value of investment securities, net	2,617	1,860	3,564	15,180
Change in fair value of mortgage loans held-for-sale, net	19,082	15,517	51,044	48,018
Earnings from unconsolidated entities	5,706	3,805	20,747	13,432
Gain on sale of investments and other assets, net	3,348	1,332	20,755	12,965
Gain on derivative financial instruments, net	2,230	29,275	7,323	11,619
Foreign currency loss, net	$ (17,782)	(21,466)	$ (27,235)	(16,212)
Total other-than-temporary impairment ("OTTI")		(264)		(2,256)
Noncredit portion of OTTI recognized in other comprehensive income		264		1,246
Net impairment losses recognized in earnings				(1,010)
Loss on extinguishment of debt			$ (5,921)
Other income, net	$ 64	28	119	738
Total other income	60,713	110,232	215,384	256,869
Income from continuing operations before income taxes	124,791	171,226	382,953	423,937
Income tax provision	(7,675)	(3,836)	(27,418)	(13,733)
Income from continuing operations	117,116	167,390	355,535	410,204
Loss from discontinued operations, net of tax (Note 3)				(1,551)
Net income	117,116	167,390	355,535	408,653
Net income attributable to non-controlling interests	(381)	(2,346)	(1,289)	(5,140)
Net income (loss) attributable to Starwood Property Trust, Inc.	$ 116,735	$ 165,044	$ 354,246	$ 403,513
Basic:
Income from continuing operations (in dollars per share)	$ 0.49	$ 0.73	$ 1.51	$ 1.89
Loss from discontinued operations (in dollars per share)				(0.01)
Net income (in dollars per share)	0.49	0.73	1.51	1.88
Diluted:
Income from continuing operations (in dollars per share)	0.49	0.73	1.51	1.88
Loss from discontinued operations (in dollars per share)				(0.01)
Net income (in dollars per share)	0.49	0.73	1.51	1.87
Dividends declared per common share (in dollars per share)	$ 0.48	$ 0.48	$ 1.44	$ 1.44

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Loans

9 Months Ended

Sep. 30, 2015

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 September 30, 2015 and December 31, 2014 (amounts in thousands):

							Weighted
					Weighted		Average Life
	Carrying		Face		Average		(“WAL”)
September 30, 2015	Value		Amount		Coupon		(years)(3)
First mortgages (1)	$	4,533,689	$	4,588,988	6.1	%	3.0
Subordinated mortgages (2)		399,381		424,957	8.6	%	3.6
Mezzanine loans (1)		888,158		873,081	10.0	%	2.2
Total loans held-for-investment		5,821,228		5,887,026
Loans held-for-sale (carrying value of $423,630 under fair value option)		450,828		447,204	4.8	%	8.9
Loans transferred as secured borrowings		142,456		143,926	6.0	%	2.2
Total gross loans		6,414,512		6,478,156
Loan loss allowance (loans held-for-investment)		(6,342)		—
Total net loans	$	6,408,170	$	6,478,156
December 31, 2014
First mortgages (1)	$	4,538,961	$	4,609,526	6.2	%	3.5
Subordinated mortgages (2)		345,091		374,859	8.1	%	3.9
Mezzanine loans (1)		901,217		889,948	10.4	%	2.6
Total loans held-for-investment		5,785,269		5,874,333
Loans held-for-sale, fair value option elected		391,620		390,342	4.5	%	8.3
Loans transferred as secured borrowings		129,427		129,570	5.4	%	2.5
Total gross loans		6,306,316		6,394,245
Loan loss allowance (loans held-for-investment)		(6,031)		—
Total net loans	$	6,300,285	$	6,394,245

(1) First mortgages include first mortgage loansand any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan.  The application of this methodology resulted in mezzanine loans with carrying values of $892.3 million and $704.2 million being classified as first mortgages as of September 30, 2015 and December 31, 2014, respectively.  

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

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

As of September 30, 2015, approximately $4.8 billion, or 81.9%, of our loans held-for-investment were variable rate and paid interest principally at LIBOR plus a weighted-average spread of 6.1%.  The following table summarizes our investments in floating rate loans (amounts in thousands):

	September 30, 2015				December 31, 2014
			Carrying				Carrying
Index	Base Rate		Value		Base Rate		Value
One-month LIBOR USD	0.1930	%	$	463,214	0.1713	%	$	138,576
Three-month LIBOR GBP	0.5831	%		411,122	0.5640	%		440,222
LIBOR floor	0.15 - 3.00	% (1)		3,895,721	0.15 - 3.00	% (1)		3,889,412
Total			$	4,770,057			$	4,468,210

(1) The weighted-average LIBOR Floor was 0.31% and 0.35% as of September 30, 2015 and December 31, 2014, respectively.

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

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

The rating categories generally include the characteristics described below, but these are utilized as guidelines and therefore not every loan will have all of the characteristics described in each category:

Rating	Characteristics
1		Sponsor capability and financial condition—Sponsor is highly rated or investment grade or, if private, the equivalent thereof with significant management experience.
		Loan collateral and performance relative to underwriting—The collateral has surpassed underwritten expectations.
		Quality and stability of collateral cash flows—Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.
		Loan structure—LTV does not exceed 65%. The loan has structural features that enhance the credit profile.
2		Sponsor capability and financial condition—Strong sponsorship with experienced management team and a responsibly leveraged portfolio.
		Loan collateral and performance relative to underwriting—Collateral performance equals or exceeds underwritten expectations and covenants and performance criteria are being met or exceeded.
		Quality and stability of collateral cash flows—Occupancy is stabilized with a diverse tenant mix.
		Loan structure—LTV does not exceed 70% and unique property risks are mitigated by structural features.
3		Sponsor capability and financial condition—Sponsor has historically met its credit obligations, routinely pays off loans at maturity, and has a capable management team.
		Loan collateral and performance relative to underwriting—Property performance is consistent with underwritten expectations.
		Quality and stability of collateral cash flows—Occupancy is stabilized, near stabilized, or is on track with underwriting.
		Loan structure—LTV does not exceed 80%.
4		Sponsor capability and financial condition—Sponsor credit history includes missed payments, past due payment, and maturity extensions. Management team is capable but thin.
		Loan collateral and performance relative to underwriting—Property performance lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers. A sale of the property may be necessary in order for the borrower to pay off the loan at maturity.
		Quality and stability of collateral cash flows—Occupancy is not stabilized and the property has a large amount of rollover.
		Loan structure—LTV is 80% to 90%.
5		Sponsor capability and financial condition—Credit history includes defaults, deeds‑in‑lieu, foreclosures, and/or bankruptcies.
		Loan collateral and performance relative to underwriting—Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Sale proceeds would not be sufficient to pay off the loan at maturity.
		Quality and stability of collateral cash flows—The property has material vacancy and significant rollover of remaining tenants.
		Loan structure—LTV exceeds 90%.

As of September 30, 2015, the risk ratings for loans subject to our rating system, which 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
							Cost				Transferred				% of
Risk Rating	First		Subordinated		Mezzanine		Recovery		Loans Held-		As Secured				Total
Category	Mortgages		Mortgages		Loans		Loans		For-Sale		Borrowings		Total		Loans
1	$	702	$	—	$	—	$	—	$	—	$	—	$	702	—	%
2		396,967		88,195		119,702		—		—		—		604,864	9.4	%
3		3,863,862		278,140		650,859		—		—		142,456		4,935,317	76.9	%
4		272,158		33,046		117,597		—		—		—		422,801	6.6	%
5		—		—		—		—		—		—		—	—	%
N/A		—		—		—		—		450,828		—		450,828	7.1	%
	$	4,533,689	$	399,381	$	888,158	$	—	$	450,828	$	142,456	$	6,414,512	100.0	%

As of December 31, 2014, 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
							Cost				Transferred				% of
Risk Rating	First		Subordinated		Mezzanine		Recovery		Loans Held-		As Secured				Total
Category	Mortgages		Mortgages		Loans		Loans		For-Sale		Borrowings		Total		Loans
1	$	822	$	—	$	—	$	—	$	—	$	—	$	822	—	%
2		258,822		116,168		148,582		—		—		—		523,572	8.3	%
3		4,120,562		196,476		645,778		—		—		129,427		5,092,243	80.7	%
4		109,489		32,447		106,857		—		—		—		248,793	4.0	%
5		45,974		—		—		—		—		—		45,974	0.7	%
N/A		—		—		—		3,292		391,620		—		394,912	6.3	%
	$	4,535,669	$	345,091	$	901,217	$	3,292	$	391,620	$	129,427	$	6,306,316	100.0	%

As of September 30, 2015, the Lending Segment held a $61.0 million mezzanine loan on a luxury condominium project located in New York, of which $18.6million is greater than 90 days past due.  After completing our impairment evaluation process, we concluded that no impairment charges were required on this loan or any other individual loans held-for-investment as of September 30, 2015 or December 31, 2014, as we expect to collect all outstanding principal and interest.  During the three months ended September 30, 2015, the Investing and Servicing Segment received full repayments of its basis in the two remaining loans held-for-investment which were greater than 90 days past due and were acquired as part of the acquisition of LNR Property LLC (“LNR”) in April 2013.  None of our held-for-sale loans where we have elected the fair value option were 90 days or greaterpast due.

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.” The following table presents the activity in our allowance for loan losses (amounts in thousands):

	For the Nine Months Ended
	September 30,
	2015		2014
Allowance for loan losses at January 1	$	6,031	$	3,984
Provision for loan losses		311		1,933
Charge-offs		—		—
Recoveries		—		—
Allowance for loan losses at September 30	$	6,342	$	5,917
Recorded investment in loans related to the allowance for loan loss	$	422,801	$	287,231

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

	For the Nine Months Ended
	September 30,
	2015		2014
Balance at January 1	$	6,300,285	$	4,750,804
Acquisitions/originations/additional funding		3,114,293		3,283,546
Capitalized interest (1)		51,416		31,994
Basis of loans sold (2)		(2,040,380)		(1,505,764)
Loan maturities/principal repayments		(1,055,419)		(1,009,222)
Discount accretion/premium amortization		26,615		16,756
Changes in fair value		51,044		48,018
Unrealized foreign currency remeasurement loss		(30,529)		(21,088)
Change in loan loss allowance, net		(311)		(1,933)
Transfer to/from other asset classifications		(8,844)		(3,503)
Balance at September 30	$	6,408,170	$	5,589,608

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

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

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Acquisitions and Divestitures

9 Months Ended

Sep. 30, 2015

Acquisitions and Divestitures

Acquisitions and Divestitures

3.  Acquisitions and Divestitures

Affordable Housing Portfolio Acquisition

In August 2015, we entered into an agreement to acquire 29 affordable housing communities located throughout Florida (the “Affordable Housing Portfolio”) for an aggregate acquisition price of $524.1 million.  The acquisition will be fully funded with existing cash on hand and debt totaling $362.8 million, including third party debt and the assumption of pre-existing federal, state and county sponsored financing.  The Affordable Housing Portfolio is comprised of 7,870 units concentrated primarily in the Tampa, Orlando and West Palm Beach metropolitan areas. 

On October 26, 2015, we entered into an agreement to acquire a 450-unit affordable housing community in Tampa, Florida for $29.1 million.

On October 20, 2015, we acquired seven of the properties for $143.2 million.  As of November 5, 2015, the initial accounting for these acquisitions was not sufficiently complete to allow for the inclusion of the ASC 805, Business Combinations, disclosures herein. 

Theproperties not yet acquired remain subject to customary closing conditions.  Refer to Note 23 for further discussion.

Ireland Portfolio Acquisition

On July 24, 2015, we acquired a fully occupied net leased office property located in Dublin, Ireland for $121.9 million.  This acquisition was partially financed with $80.7 million from the Lender 6 Mortgage facility.  This property, along with the 11 net leased fully occupied office properties and onemulti-family property acquired in May 2015, comprise the “Ireland Portfolio”.  The aggregate cash purchase price for the Ireland Portfolio, which collectively comprisesapproximately 600,000 square feet, was $226.6 million.  In connection with the acquisition, we extinguished $283.0 million of debt assumed, and obtained new financings totaling $328.6 million from the Lender 6 Mortgage facility.  Refer to Note 9 for further discussion of this facility.All properties within the Ireland Portfolio were acquired from entities controlled by the same third party investment fund.

We applied the provisions of ASC 805, Business Combinations, in accounting for our acquisition of the Ireland Portfolio.  In doing so, we have provisionally recorded all identifiable assets acquired and liabilities assumed at fair value as of the acquisition date.  These provisional amounts may be adjusted during the measurement period, which expires no later than one year from the acquisition date, if new information is obtained that, if known, would have affected the amounts recognized as of the acquisition date.

The following table summarizes the provisional estimates of identified assets acquired and liabilities assumed at the respective acquisition dates (amounts in thousands):

Assets acquired:
Restricted cash	$	10,829
Properties		445,369
Intangible assets		59,529
Other assets		11,128
Total assets acquired		526,855
Liabilities assumed:
Accounts payable, accrued expenses and other liabilities		17,273
Secured financing agreements		283,010
Total liabilities assumed		300,283
Net assets acquired/purchase price	$	226,572

For the period from their respective acquisition dates through September 30, 2015, we have recognized revenues of $10.8 million and net loss of $4.1 million related to the Ireland Portfolio.  Such net loss includes one-time acquisition-related costs, such as legal and due diligence costs, of approximately $3.3 millionwhich are included in acquisition and investment pursuit costs within our condensed consolidated statements of operations.  No goodwill was recognized in connection with the Ireland Portfolio acquisition as the purchase price equaled the fair value of the net assets acquired.

The pro-forma revenues and net income attributable to STWD of the combined entity for the three and nine months ended September 30, 2015 and 2014, assuming the Ireland Portfolio acquisition occurred on January 1, 2014, are as follows (amounts in thousands, except per share amounts):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Revenues	$	192,722	$	190,198	$	564,574	$	550,586
Net income attributable to STWD		116,803		164,838		357,314		399,053
Net income per share - Basic		0.49		0.73		1.52		1.85
Net income per share - Diluted		0.49		0.73		1.52		1.85

Pro-forma net income was adjusted to include the following estimated management fees the combined entity would have incurred (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Management fee expense addition	$	46	$	1,047	$	1,605	$	3,141

SFR Spin-off

On January 31, 2014, we completed the spin-off of our former SFR segment to our stockholders. The 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. The results of operations for the SFR segment are presented within discontinued operations in our condensed consolidated statement of operations for the nine months ended September 30, 2014. 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 discontinued operations for the SFR segment prior to the spin-off (amounts in thousands):

	For the Three Months Ended		For the Nine Months Ended
	September 30, 2014		September 30, 2014
Total revenues	$	—	$	3,876
Total costs and expenses		—		6,369
Loss before other income and income taxes		—		(2,493)
Total other income		—		942
Loss before income taxes		—		(1,551)
Income tax provision		—		—
Net loss	$	—	$	(1,551)

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Related-Party Transactions

9 Months Ended

Sep. 30, 2015

Related-Party Transactions

Related-Party Transactions

15. 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 15 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 September 30, 2015 and 2014, we recognized base management fees of $15.2million and $13.8 million, respectively, within management fees in our condensed consolidated statements of operations. For the nine months ended September 30, 2015 and 2014, we recognized base management fees of $44.0million and $40.7 million, respectively. As of September 30, 2015 and December 31, 2014, there were $15.2million and $13.9 million, respectively, of unpaid base management fees within related-party payable in our condensed consolidated balance sheets.

Incentive Fee.  For the three months ended September 30, 2015 and 2014, we recognized incentive fees of $5.3million and $4.3 million, respectively,within management fees in our condensed consolidated statements of operations. For the nine months ended September 30, 2015 and 2014, we recognized incentive fees of $16.1million and $15.5 million, respectively. As of September 30, 2015 and December 31, 2014, $5.4 million and $18.9 million, respectively, of unpaid incentive fees were included within related-party payable in our condensed consolidated balance sheets.

Expense Reimbursement.  For both the three months ended September 30, 2015 and 2014, we recognized expense reimbursements for executive compensation and other reimbursable expenses of $1.7million within general and administrative expenses in our condensed consolidated statements of operations. For the nine months ended September 30, 2015 and 2014, we recognized expense reimbursements for executive compensation and other reimbursable expenses of $4.6million and $5.7 million, respectively. As of September 30, 2015 and December 31, 2014, approximately $2.1 million and $3.4 million, respectively, of unpaid reimbursable executive compensation and other expenses were included within related-party payable in our condensed consolidated balance sheets.

Manager Equity Plan

In May 2015, we granted 675,000 RSUs to our Manager under the Starwood Property Trust, Inc. Manager Equity Plan (“Manager Equity Plan”).  In January 2014, we granted 2,489,281 RSUs to our Manager under the Manager Equity Plan.  In connection with these grants and prior similar grants, we recognized share-based compensation expense of $7.1million and $6.3 million within management fees in our condensed consolidated statements of operations for the three months ended September 30, 2015 and 2014, respectively. For the nine months ended September 30, 2015 and 2014, we recognized $21.4million and $19.8 million, respectively, related to these awards. Refer to Note 16 herein for further discussion of these grants.

Investments in Loans and Securities

In March 2015, we purchased a subordinate single-borrower CMBS from a third party for $58.6 million which is secured by 85 U.S. hotel properties.  The borrower is an affiliate of Starwood Distressed Opportunity Fund IX (“Fund IX”), an affiliate of our Manager.  

In March 2015, we sold our entire interest, consisting of a $35 million participation, in a subordinate loan (the “Mammoth Loan”) at par to Mammoth Mezz Holdings, LLC, an affiliate of our Manager. We purchased the Mammoth Loan in April 2011 from an independent third party and a syndicate of financial institutions and other entities acting as subordinate lenders to Mammoth Mountain Ski Area, LLC (“Mammoth”). Mammoth is a single purpose, bankruptcy remote entity that is owned and controlled by Starwood Global Opportunity Fund VII‑A, L.P., Starwood Global Opportunity Fund VII‑B, L.P., Starwood U.S. Opportunity Fund VII‑D, L.P. and Starwood U.S. Opportunity Fund VII‑D‑2, L.P. (collectively, the “Sponsors”). Each of the Sponsors is indirectly wholly‑owned by Starwood Capital Group Global I, LLC and an affiliate of our Chief Executive Officer.

In January 2015, a junior mezzanine loan, which we co-originated with SEREF and an unaffiliated third party in 2012, was restructured to reduce both our and SEREF’s participation interests and margin. We now hold a participation interest in the junior mezzanine loan of £18 million, which bears interest at three-month LIBOR plus 8.81%.  Prior to the restructure, our participation interest was £30.0 million and carried an interest rate of three-month LIBOR plus 11.65%. The junior mezzanine loan is secured primarily by the ownership interest in entities that own a portfolio of three luxury hotels located in London, England.

Other Related-Party Arrangements

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 was within our name and was thus reflected within our restricted cash balance. As of December 31, 2014, we recognized a corresponding payable to Fund IX of $4.4 million within related-party payable in our condensed consolidated balance sheet. Our obligation was released in September 2015.

Our Investing and Servicing Segment acquires properties from CMBS trusts, some of which are consolidated as VIEs on our balance sheet.  Acquisitions from consolidated VIEs are reflected as repayment of debt of consolidated VIEs in our condensed consolidated statement of cash flows.  During the three and nine months ended September 30, 2015, we acquired in aggregate $32.5 million and $65.9 million, respectively, of properties from both consolidated and unconsolidated CMBS trusts. Refer to Note 6 for further discussion of these acquisitions.

During the three and nine months ended September 30, 2015, we provided due diligence services to an affiliate of Starwood Global Opportunity Fund X, an affiliate of our Manager, in which we received fees of $0.1 million and $0.4 million, respectively.

In the normal course of business, the Investing and Servicing Segment’s conduit lending platform provides loans to consolidated subsidiaries of the Company which are subsequently securitized and sold to third parties.  The loan, debt and applicable interest income and expense are eliminated in consolidation until such time as the loan is sold.  During the three months ended September 30, 2015, our conduit lending platform originated a $10.4 million intercompany loan which was eliminated in consolidation as of September 30, 2015. 

Refer to Note 15 to the consolidated financial statements included in our Form 10-K for further discussion of related-party agreements.

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Loan Securitization/Sale Activities

9 Months Ended

Sep. 30, 2015

Loan Securitization/Sale Activities

Loan Securitization/Sale Activities

11. 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 the Investing and Servicing Segment, we originate commercial mortgage loans with the intent to sell these mortgage loans to VIEs for the purposes of securitization. These VIEs then issue CMBS that are collateralized in part by these assets, as well as other assets transferred to the VIE. In certain instances, we retain a subordinated interest in the VIE and serve as special servicer for the VIE. The following summarizes the fair value and par value of loans sold from our conduit platform, as well as the amount of sale proceeds used in part to repay the outstanding balance of the repurchase agreements associated with these loans for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Fair value of loans sold	$	410,227	$	498,789	$	1,443,871	$	1,165,583
Par value of loans sold		398,654		482,129		1,396,674		1,119,537
Repayment of repurchase agreements		299,301		361,569		1,043,757		839,626

Within the Lending Segment, we originate or acquire loans and then subsequently sell a portion, which can be in various forms including first mortgages, A-Notes, senior participations and mezzanine loans. 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. In certain instances, we continue to service the loan following its sale. The following table summarizes our loans sold and loans transferred as secured borrowings by the Lending Segment net of expenses (amounts in thousands):

					Loan Transfers
	Loan Transfers Accounted				Accounted for as Secured
	for as Sales				Borrowings
	Face Amount		Proceeds		Face Amount		Proceeds
For the Three Months Ended September 30,
2015	$	225,264	$	220,928	$	—	$	—
2014		142,896		138,958		—		—
For the Nine Months Ended September 30,
2015	$	606,725	$	599,504	$	38,925	$	38,925
2014		347,755		341,472		—		—

During the three months ended September 30, 2015 and 2014, the Lending Segment recognized gains on sales of loans of $2.7 million and $0.8 million, respectively, within gain on sale of investments in our condensed consolidated statements of operations.  During the nine months ended September 30, 2015 and 2014, the Lending Segment recognized gains on sales of loans of $3.0 million and $1.3 million, respectively.

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Fair Value (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Total realized and unrealized gains (losses):
Included in earnings: OTTI				$ (1,010)
Included in earnings: Net accretion			$ 20,312	17,174
Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	$ 91,522,844	$ 109,711,729	103,988,001	102,414,703
Total realized and unrealized gains (losses):
Included in earnings: Change in fair value / gain on sale	(9,767,197)	(5,013,189)	(24,060,307)	(11,884,571)
Included in earnings: OTTI				(214)
Included in earnings: Net accretion	3,600	4,035	17,087	13,922
Included in OCI	(5,629)	(2,060)	(14,603)	(4,467)
Purchases / Originations	541,245	590,993	1,440,152	1,219,955
Sales	(411,430)	(504,377)	(1,450,172)	(1,150,297)
Cash repayments / receipts	(3,556)	(1,849)
Consolidations of VIEs	2,330,083	3,054,405	7,818,195	25,146,277
Deconsolidations of VIEs	(1,778,220)	(2,451,706)	(5,258,918)	(8,457,203)
Balance at the end of the period	80,888,707	106,542,503	80,888,707	106,542,503
Amount of total (losses) gains included in earnings attributable to assets still held at period end	(9,771,150)	(5,025,733)	(24,088,401)	(11,930,078)
Total realized and unrealized (losses) gains:
Issuances	(1,619)	(16,655)	(9,132)	(88,412)
Cash repayments / receipts			52,090	65,090
Transfers into Level III	(1,773,898)	(769,345)	(2,589,916)	(3,271,701)
Transfers out of Level III	232,484	1,940,522	956,230	2,539,421
VIE liabilities | Level III
Changes in financial liabilities classified as Level III
Balance at the beginning of the period	(2,111,011)	(5,186,125)	(4,893,120)	(1,597,984)
Total realized and unrealized (losses) gains:
Included in earnings: Change in fair value/ gain on sale	615,263	237,693	3,566,846	337,529
Issuances	(1,619)	(16,655)	(9,132)	(88,412)
Cash repayments / receipts	96,896	20,189	171,884	106,538
Transfers into Level III	(1,773,898)	(770,785)	(2,589,916)	(3,325,922)
Transfers out of Level III	232,484	1,940,522	956,230	2,653,379
Consolidations of VIEs	(80,149)	(48,745)	(225,354)	(1,941,689)
Deconsolidations of VIEs	18,457	12,167	18,985	44,822
Balance at the end of the period	(3,003,577)	(3,811,739)	(3,003,577)	(3,811,739)
Amount of total gains (losses) included in earnings attributable to assets still held at period end	615,263	237,693	3,566,846	337,529
Loans held-for-sale | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	279,352	154,412	391,620	206,672
Total realized and unrealized gains (losses):
Included in earnings: Change in fair value / gain on sale	19,082	15,517	51,044	47,955
Purchases / Originations	535,580	577,216	1,425,499	1,159,607
Sales	(410,227)	(498,789)	(1,443,871)	(1,052,862)
Cash repayments / receipts	(157)	(191)	(662)	(487)
Transfers out of Level III				(112,720)
Balance at the end of the period	423,630	248,165	423,630	248,165
Amount of total (losses) gains included in earnings attributable to assets still held at period end	5,482	(455)	5,126	(455)
RMBS | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	193,150	231,605	207,053	296,236
Total realized and unrealized gains (losses):
Included in earnings: Change in fair value / gain on sale		535		11,676
Included in earnings: OTTI				(214)
Included in earnings: Net accretion	3,600	4,035	17,087	13,922
Included in OCI	(3,465)	7,602	(12,241)	2,988
Sales		(5,588)		(68,134)
Cash repayments / receipts	(8,500)	(21,870)	(27,114)	(40,155)
Balance at the end of the period	184,785	216,319	184,785	216,319
Amount of total (losses) gains included in earnings attributable to assets still held at period end	3,600	3,963	11,594	11,742
CMBS | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	314,152	282,361	334,080	208,006
Total realized and unrealized gains (losses):
Included in earnings: Change in fair value / gain on sale	(2,835)	2,471	(2,059)	12,070
Included in OCI	(2,164)	(9,662)	(2,362)	(7,455)
Purchases / Originations	5,665	13,777	14,653	60,348
Sales	(1,203)		(6,301)	(29,301)
Cash repayments / receipts	(91,795)	23	(92,018)	(806)
Transfers into Level III		1,440		54,221
Transfers out of Level III				(180)
Consolidations of VIEs			(24,310)	(6,715)
Deconsolidations of VIEs	540	635	677	857
Balance at the end of the period	222,360	291,045	222,360	291,045
Amount of total (losses) gains included in earnings attributable to assets still held at period end	3,212	2,471	4,171	14,907
Domestic Servicing Rights | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	128,109	138,318	132,303	150,149
Total realized and unrealized gains (losses):
Included in earnings: Change in fair value / gain on sale	(4,217)	(7,898)	(8,411)	(18,671)
Transfers out of Level III				(1,058)
Balance at the end of the period	123,892	130,420	123,892	130,420
Amount of total (losses) gains included in earnings attributable to assets still held at period end	(4,217)	(7,898)	(8,411)	(18,671)
VIE Assets | Level III
Changes in financial assets classified as Level III
Balance at the beginning of the period	92,719,092	114,091,158	107,816,065	103,151,624
Total realized and unrealized gains (losses):
Included in earnings: Change in fair value / gain on sale	(10,394,490)	(5,261,507)	(27,667,727)	(12,275,130)
Consolidations of VIEs	2,410,232	3,103,150	8,067,859	27,094,681
Deconsolidations of VIEs	(1,797,217)	(2,464,508)	(5,278,580)	(8,502,882)
Balance at the end of the period	82,937,617	109,468,293	82,937,617	109,468,293
Amount of total (losses) gains included in earnings attributable to assets still held at period end	$ (10,394,490)	$ (5,261,507)	$ (27,667,727)	$ (12,275,130)

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Investment in Unconsolidated Entities

9 Months Ended

Sep. 30, 2015

Investment in Unconsolidated Entities

Investment in Unconsolidated Entities

7. Investment in Unconsolidated Entities

The below table summarizes our investments in unconsolidated entities as of September 30, 2015 and December 31, 2014 (dollar amounts in thousands):

	Participation /	Carrying value as of
	Ownership %(1)	September 30, 2015		December 31, 2014
Equity method:
Retail Fund	33%	$	121,733	$	129,475
Investor entity which owns equity in two real estate services providers	50%		23,366		21,534
Equity interests in commercial real estate (2)	16% - 43%		28,224		—
Bridge loan venture (3)	various		—		8,417
Various	25% - 50%		7,061		16,933
			180,384		176,359
Cost method:
Investment funds which own equity in a loan servicer and other real estate assets	4% - 6%		9,225		9,225
Various	0% - 3%		9,562		8,399
			18,787		17,624
		$	199,171	$	193,983

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

(2) During the nine months ended September 30, 2015, we acquired $28.0 million of equity interests in limited liability companies that own ten office and student housing properties throughout the U.S.

(3) During the three months ended September 30, 2015, we sold our interest in the Bridge Loan Venture at par.

There were no differences between the carrying value of our investment in unconsolidated entities and the underlying equity in the net assets of the investeesas of September 30, 2015.

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Investment Securities (Details 3) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
HTM Securities
Net Carrying Amount (Amortized Cost)	$ 365,005	$ 441,995
Gross Unrealized Holdings Gains	43
Gross Unrealized Holdings Losses	(3,022)	(1,366)
Fair Value	362,026	440,629
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
One to three years	283,037
Three to five years	62,704
Thereafter	19,264
Total	365,005	441,995
Preferred Equity Investment
HTM Securities
Net Carrying Amount (Amortized Cost)	81,968	307,465
Gross Unrealized Holdings Losses	(827)	(1,366)
Fair Value	81,141	306,099
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
Three to five years	62,704
Thereafter	19,264
Total	81,968	307,465
CMBS
HTM Securities
Net Carrying Amount (Amortized Cost)	283,037	134,530
Gross Unrealized Holdings Gains	43
Gross Unrealized Holdings Losses	(2,195)
Fair Value	280,885	134,530
Held-to-maturity Securities, Debt Maturities, Net Carrying Amount [Abstract]
One to three years	283,037
Total	$ 283,037	$ 134,530

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Investment Securities

9 Months Ended

Sep. 30, 2015

Investment Securities

Investment Securities

5. Investment Securities

Investment securities were comprised of the following as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	Carrying Value as of
	September 30, 2015		December 31, 2014
RMBS, available-for-sale	$	184,785	$	207,053
Single-borrower CMBS, available-for-sale		—		100,349
CMBS, fair value option (1)		927,315		753,553
Held-to-maturity (“HTM”) securities		365,005		441,995
Equity security, fair value option		14,311		15,120
Subtotal—Investment securities		1,491,416		1,518,070
VIE eliminations (1)		(704,955)		(519,822)
Total investment securities	$	786,461	$	998,248

(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):

	Available-for-sale				CMBS, fair		HTM		Equity
	RMBS		CMBS		value option		Securities		Security		Total
Three Months Ended September 30, 2015
Purchases	$	—	$	—	$	5,665	$	9,930	$	—	$	15,595
Sales		—		—		1,203		—		—		1,203
Principal collections		8,500		91,794		1		21		—		100,316
Three Months Ended September 30, 2014
Purchases	$	—	$	—	$	13,777	$	—	$	—	$	13,777
Sales		5,588		—		—		—		—		5,588
Principal collections		21,870		—		1		14		—		21,885

	Available-for-sale				CMBS, fair		HTM		Equity
	RMBS		CMBS		value option		Securities		Security		Total
Nine Months Ended September 30, 2015
Purchases	$	—	$	—	$	14,653	$	148,365	$	—	$	163,018
Sales		—		—		6,301		—		—		6,301
Principal collections		27,114		92,018		2		228,956		—		348,090
Nine Months Ended September 30, 2014
Purchases	$	—	$	—	$	67,230	$	—	$	—	$	67,230
Sales		68,134		—		32,032		—		—		100,166
Principal collections		40,155		805		1		38		—		40,999

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

With the exception of six CMBS classified as HTM, the Company classified all of its RMBS and any CMBS investments where the fair value option has not been elected as available-for-sale as of September 30, 2015 and December 31, 2014. 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 September 30, 2015 and December 31, 2014 (amounts in thousands):

							Unrealized Gains or (Losses)
							Recognized in AOCI
	Purchase				Recorded				Gross		Gross		Net
	Amortized		Credit		Amortized		Non-Credit		Unrealized		Unrealized		Fair Value
	Cost		OTTI		Cost		OTTI		Gains		Losses		Adjustment		Fair Value
September 30, 2015
RMBS	$	153,694	$	(10,184)	$	143,510	$	(175)	$	41,450	$	—	$	41,275	$	184,785
Single-borrower CMBS		—		—		—		—		—		—		—		—
Total	$	153,694	$	(10,184)	$	143,510	$	(175)	$	41,450	$	—	$	41,275	$	184,785
December 31, 2014
RMBS	$	163,733	$	(10,197)	$	153,536	$	(197)	$	53,714	$	—	$	53,517	$	207,053
Single-borrower CMBS		93,685		—		93,685		—		6,664		—		6,664		100,349
Total	$	257,418	$	(10,197)	$	247,221	$	(197)	$	60,378	$	—	$	60,181	$	307,402

	Weighted Average		Weighted Average
	Coupon(1)		Rating (Standard & Poor’s)	WAL (Years)(2)
September 30, 2015
RMBS	1.1	%	B−	6.3
Single-borrower CMBS	—	%	—	—
December 31, 2014
RMBS	1.1	%	B−	5.8
Single-borrower CMBS	11.6	%	BB+	3.2

(1) Calculated using the September 30, 2015 and December 31, 2014 one-month LIBOR rate of 0.193% and 0.171%, respectively, for floating rate securities.

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

As of September 30, 2015, there were no variable rate single-borrower CMBS. As of December 31, 2014, $0.2 million, or 0.2%, of the single-borrower CMBS were variable rate. As of September 30, 2015, approximately $128.4 million, or 69.5%, of the RMBS were variable rate and paid interest at LIBOR plus a weighted average spread of 0.43%. As of December 31, 2014, approximately $140.1 million, or 67.7%, of the RMBS were variable rate and paid interest at LIBOR plus a weighted average spread of 0.44%. 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 September 30, 2015 and December 31, 2014, excluding CMBS where we have elected the fair value option (amounts in thousands):

	September 30, 2015				December 31, 2014
	RMBS		CMBS		RMBS		CMBS
Principal balance	$	242,219	$	—	$	270,783	$	93,685
Accretable yield		(73,361)		—		(85,495)		—
Non-accretable difference		(25,348)		—		(31,752)		—
Total discount		(98,709)		—		(117,247)		—
Amortized cost	$	143,510	$	—	$	153,536	$	93,685

The principal balance of credit deteriorated RMBS was $205.2 million and $222.9 million as of September 30, 2015 and December 31, 2014, respectively. Accretable yield related to these securities totaled $61.9 million and $66.6 million as of September 30, 2015 and December 31, 2014, respectively.

The following table discloses the changes to accretable yield and non-accretable difference for our RMBS during the three and nine months ended September 30, 2015 (amounts in thousands):

			Non-Accretable
Three Months Ended September 30, 2015	Accretable Yield		Difference
Balance as of July 1, 2015	$	74,184	$	28,609
Accretion of discount		(3,600)		—
Principal write-downs		—		(484)
Purchases		—		—
Sales		—		—
OTTI		—		—
Transfer to/from non-accretable difference		2,777		(2,777)
Balance as of September 30, 2015	$	73,361	$	25,348
Nine Months Ended September 30, 2015
Balance as of January 1, 2015	$	85,495	$	31,752
Accretion of discount		(17,087)		—
Principal write-downs		—		(1,451)
Purchases		—		—
Sales		—		—
OTTI		—		—
Transfer to/from non-accretable difference		4,953		(4,953)
Balance as of September 30, 2015	$	73,361	$	25,348

Subject to certain limitations on durations, we have allocated an amount to invest in RMBS that cannot exceed 10% of our total assets excluding Investing and Servicing Segment VIEs. We have engaged a third party manager who specializes in RMBS to execute the trading of RMBS, the cost of which was $0.4million for both the three months ended September 30, 2015 and 2014, and $1.1million and $1.5 million for the nine months ended September 30, 2015 and 2014, 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 September 30, 2015 and December 31, 2014, 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		Securities with a		Securities with a		Securities with a
	loss less than		loss greater than		loss less than		loss greater than
	12 months		12 months		12 months		12 months
As of September 30, 2015
RMBS	$	12,320	$	678	$	(25)	$	(150)
Single-borrower CMBS		—		—		—		—
Total	$	12,320	$	678	$	(25)	$	(150)
As of December 31, 2014
RMBS	$	—	$	682	$	—	$	(197)
Single-borrower CMBS		—		—		—		—
Total	$	—	$	682	$	—	$	(197)

As of September 30, 2015 and December 31, 2014, there weretwo securities with unrealized losses reflected in the table above. After evaluating these securities and recording adjustments for credit-related other-than-temporary impairment, we concluded that the remaining unrealized losses reflected above were noncredit-related and would be recovered from the securities’ estimated future cash flows. We considered a number of factors in reaching this conclusion, including that we did not intend to sell the securities, it was not considered more likely than not that we would be forced to sell the securities prior to recovering our amortized cost, and there were no material credit events that would have caused us to otherwise conclude that we would not recover our cost. Credit losses, which represent most of the other-than-temporary impairments we record on securities, 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 the Investing and Servicing Segment’s CMBS in an effort to eliminate accounting mismatches resulting from the current or potential consolidation of securitization VIEs. As of September 30, 2015, the fair value and unpaid principal balance of CMBS where we have elected the fair value option, before consolidation of securitization VIEs, were $927.3 million and $4.5billion, 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 ($705.0 million at September 30, 2015) is eliminated against VIE liabilities before arriving at our GAAP balance for fair value option CMBS. During the three and nine months ended September 30, 2015, we purchased $115.0 million and $213.2million of CMBS, respectively, for which we elected the fair value option. Due to our consolidation of securitization VIEs, $109.4million and $198.6million, respectively, of these amounts are eliminated and reflected primarily as repayment of debt of consolidated VIEs in our condensed consolidated statement of cash flows.

As of September 30, 2015, 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 September 30, 2015 and December 31, 2014 (amounts in thousands):

	Weighted		Weighted
	Average		Average Rating	WAL
	Coupon		(Standard & Poor’s) (1)	(Years)(2)
September 30, 2015
CMBS, fair value option	3.5	%	CCC+	7.4
December 31, 2014
CMBS, fair value option	3.9	%	CCC−	7.7

(1) As of September 30, 2015 and December 31, 2014, excludes $35.8million and $41.7 million, respectively, in fair value option CMBS that are not rated.

(2) 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.

HTM Securities

The table below summarizes unrealized gains and losses of our investments in HTM securities as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	Net Carrying Amount		Gross Unrealized		Gross Unrealized
	(Amortized Cost)		Holding Gains		Holding Losses		Fair Value
September 30, 2015
Preferred interests	$	81,968	$	—	$	(827)	$	81,141
CMBS		283,037		43		(2,195)		280,885
Total	$	365,005	$	43	$	(3,022)	$	362,026
December 31, 2014
Preferred interests	$	307,465	$	—	$	(1,366)	$	306,099
CMBS		134,530		—		—		134,530
Total	$	441,995	$	—	$	(1,366)	$	440,629

The table below summarizes the maturities of our HTM preferred equity interests in limited liability companies that own commercial real estate and our HTM CMBS as of September 30, 2015 (amounts in thousands):

	Preferred
	Interests		CMBS		Total
Less than one year	$	—	$	—	$	—
One to three years		—		283,037		283,037
Three to five years		62,704		—		62,704
Thereafter		19,264		—		19,264
Total	$	81,968	$	283,037	$	365,005

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 USD was $14.3million and $15.1 million as of September 30, 2015 and December 31, 2014, respectively.

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Properties

9 Months Ended

Sep. 30, 2015

Properties

Properties

6. Properties

On July 24, 2015, we acquired a fully occupied net leased office property located in Dublin, Ireland for $121.9 million.  This acquisition was partially financed with $80.7 million from the Lender 6 Mortgage facility (see Note 9 for facility terms).  This property, with the 11 net leased fully occupied office properties and one multi-family property acquired in May 2015, comprise the Ireland Portfolio discussed in Note 3. 

Also during the three and nine months ended September 30, 2015, our Investing and Servicing Segment acquired three and six commercial real estate properties, respectively, from CMBS trusts for $32.5 million and $65.9 million, respectively.  These properties are generally acquired from CMBS trusts that are consolidated as VIEs on our balance sheet.  As a result, the acquisitions are generally reflected as repayment of debt of consolidated VIEs in our condensed consolidated statement of cash flows. 

The below table summarizes our properties held as of September 30, 2015 and December 31, 2014 (dollar amounts in thousands):

	Depreciable Life	September 30, 2015		December 31, 2014
Property Segment
Land	—	$	162,274	$	—
Buildings	30 years		286,913		—
Investing and Servicing Segment
Land	—		20,972		8,225
Land improvements	5 – 15 years		70		—
Buildings	20 – 40 years		63,619		30,637
Building improvements	5 – 10 years		240		—
Furniture & fixtures	3 years		680		1,635
Properties, cost			534,768		40,497
Less: accumulated depreciation			(4,330)		(643)
Properties, net		$	530,438	$	39,854

In March 2015, the Investing and Servicing Segment sold an operating property that we had previously acquired from a CMBS trust.  The sale resulted in a $17.1 million gain, which is included in gain on sale of investments and other assets in our condensed consolidated statement of operationsfor the nine months ended September 30, 2015.

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Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets

Goodwill and Intangible Assets

8. Goodwill and Intangible Assets

Goodwill

Goodwill at September 30, 2015 and December 31, 2014 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.

Intangible 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 September 30, 2015 and December 31, 2014, the balance of the domestic servicing intangible was net of $27.9million and $46.1 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 September 30, 2015 and December 31, 2014 the domestic servicing intangible had a balance of $151.8million and $178.4 million, respectively, which represents our economic interest in this asset.

Lease Intangibles

In connection with our acquisitions of commercial real estate, we recognized in-place lease intangible assets and favorable lease intangible assets associated with certain noncancelable operating leases of the acquired properties. The weighted-average amortization periods for the in-place lease intangible assets and the favorable lease intangible assets for the Ireland Portfolio at acquisition were 10.0 years and 11.2 years, respectively, as of September 30, 2015.

The following table summarizes our intangible assets, which are comprised of servicing rights intangibles and lease intangibles, as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	As of September 30, 2015						As of December 31, 2014
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Value		Amortization		Value		Value		Amortization		Value
Domestic servicing rights, at fair value	$	123,892	$	—	$	123,892	$	132,303	$	—	$	132,303
European servicing rights (1)		32,429		(28,657)		3,772		33,392		(21,543)		11,849
In-place lease intangible assets		54,245		(3,397)		50,848		—		—		—
Favorable lease intangible assets		13,074		(506)		12,568		—		—		—
Total net intangible assets	$	223,640	$	(32,560)	$	191,080	$	165,695	$	(21,543)	$	144,152

(1) The fair value as of September 30, 2015 and December 31, 2014 was $7.7million and $12.7 million, respectively.

The following table summarizes the activity within intangible assets for the nine months ended September 30, 2015 (amounts in thousands):

	Domestic		European		In-place Lease		Favorable Lease
	Servicing		Servicing		Intangible		Intangible
	Rights		Rights		Assets		Assets		Total
Balance as of January 1, 2015	$	132,303	$	11,849	$	—	$	—	$	144,152
Acquisition of Ireland Portfolio		—		—		47,999		11,530		59,529
Properties acquired from CMBS trusts		—		—		5,842		1,412		7,254
Amortization		—		(7,814)		(3,384)		(504)		(11,702)
Foreign exchange (loss) gain		—		(263)		391		130		258
Changes in fair value due to changes in inputs and assumptions		(8,411)		—		—		—		(8,411)
Balance as of September 30, 2015	$	123,892	$	3,772	$	50,848	$	12,568	$	191,080

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

2015 (remainder of)	$	3,839
2016		12,039
2017		8,560
2018		7,855
2019		6,700
Thereafter		28,195
Total	$	67,188

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Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Summary of Intangible Assets
Gross carrying value	$ 223,640	$ 165,695
Accumulated amortization	(32,560)	(21,543)
Net carrying value	191,080	144,152
European servicing rights
Summary of Intangible Assets
Gross carrying value	32,429	33,392
Accumulated amortization	(28,657)	(21,543)
Net carrying value	3,772	11,849
Fair value intangible assets	7,700	12,700
In-place lease
Summary of Intangible Assets
Gross carrying value	54,245
Accumulated amortization	(3,397)
Net carrying value	$ 50,848
In-place lease | Weighted-average
Intangible Assets
Amortization period (in years)	10 years
Favorable lease
Summary of Intangible Assets
Gross carrying value	$ 13,074
Accumulated amortization	(506)
Net carrying value	$ 12,568
Favorable lease | Weighted-average
Intangible Assets
Amortization period (in years)	11 years 2 months 12 days
Domestic Servicing Rights
Summary of Intangible Assets
Gross carrying value	$ 123,892	132,303
Net carrying value	123,892	132,303
Domestic Servicing Rights | Before consolidation of securitization VIEs
Intangible Assets
Servicing rights intangibles	151,800	178,400
Domestic Servicing Rights | VIE eliminations
Intangible Assets
Servicing rights intangibles	$ 27,900	$ 46,100

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Fair Value (Details 3) - USD ($) $ in Thousands	Sep. 30, 2015	Dec. 31, 2014
Financial assets not carried at fair value:
Securities, held-to-maturity	$ 365,005	$ 441,995
Financial liabilities not carried at fair value:
Convertible senior notes	1,320,207	1,418,022
Carrying Value
Financial assets not carried at fair value:
Loans held-for-investment, loans held-for-sale and loans transferred as secured borrowings	5,984,540	5,908,665
Securities, held-to-maturity	365,005	441,995
European servicing rights	3,772	11,849
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	3,826,200	3,267,230
Convertible senior notes	1,320,207	1,418,022
Fair Value.
Financial assets not carried at fair value:
Loans held-for-investment, loans held-for-sale and loans transferred as secured borrowings	6,083,182	6,034,838
Securities, held-to-maturity	362,026	440,629
European servicing rights	7,684	12,741
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	3,815,875	3,251,035
Convertible senior notes	$ 1,339,173	$ 1,444,975

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Secured Financing Agreements (Details) $ in Thousands, € in Millions	1 Months Ended				3 Months Ended			9 Months Ended
	Jul. 31, 2015 USD ($)	May. 31, 2015 EUR (€)	Mar. 31, 2015	Feb. 28, 2015 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($) item	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Aug. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Secured Financing Agreements
Pledged Asset Carrying Value					$ 8,312,788			$ 8,312,788
Maximum Facility Size					6,290,873			6,290,873
Carrying Value					3,682,274			3,682,274			$ 3,137,789
Repayment of secured financings
Extension option exercised period	1 year
Outstanding borrowings with the FHLB					$ 0			$ 0
Percentage of repurchase agreements for which margin calls are limited to collateral specific credit marks					76.00%			76.00%
Percentage of repurchase agreements containing margin call provisions that pertain to loans held-for-sale					50.00%			50.00%
Lender 1 Repo 1 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					$ 1,471,791			$ 1,471,791
Maximum Facility Size	$ 1,250,000				1,600,000			1,600,000		$ 1,600,000
Carrying Value					916,310			$ 916,310			875,111
Lender 1 Repo 1 Facility | Minimum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								1.85%
Lender 1 Repo 1 Facility | Maximum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								5.25%
Lender 1 Repo 2 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					184,785			$ 184,785
Maximum Facility Size					125,000			125,000
Carrying Value					6,948			$ 6,948			101,886
Current maturity period, relative to when the buyer delivers notice to the seller								180 days
Lender 1 Repo 2 Facility | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								1.90%
Lender 2 Repo 1 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					373,917			$ 373,917
Maximum Facility Size					325,000			325,000
Carrying Value					272,824			$ 272,824			240,188
Lender 2 Repo 1 Facility | Minimum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								1.75%
Lender 2 Repo 1 Facility | Maximum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.75%
Lender 3 Repo I Facility
Secured Financing Agreements
Pledged Asset Carrying Value					229,983			$ 229,983
Maximum Facility Size					162,917			162,917
Carrying Value					162,917			$ 162,917			124,250
Lender 3 Repo I Facility | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.85%
Conduit Repo 1 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					116,084			$ 116,084
Maximum Facility Size					150,000			150,000
Carrying Value					85,849			85,849			94,727
Repayment of secured financings
2015 (remainder of)					287,300			$ 287,300
Conduit Repo 1 Facility | Minimum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								1.95%
Conduit Repo 1 Facility | Maximum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								3.35%
Conduit Repo 2 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					164,310			$ 164,310
Maximum Facility Size					150,000			150,000
Carrying Value					121,556			$ 121,556			113,636
Conduit Repo 2 Facility | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.10%
Conduit Repo 3 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					107,389			$ 107,389
Maximum Facility Size				$ 150,000	150,000			150,000
Carrying Value					79,847			$ 79,847
Maturity period				3 years
Extended term				1 year
Conduit Repo 3 Facility | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)				2.10%				2.10%
Lender 4 Repo 1 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					405,195			$ 405,195
Maximum Facility Size					317,688			317,688
Carrying Value					317,688			$ 317,688			327,117
Repayment of secured financings
Extension option exercised period	1 year
Lender 4 Repo 1 Facility | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.00%
Lender 5 Repo 1 Facility
Secured Financing Agreements
Carrying Value											58,079
Lender 6 Repo 1 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					733,579			$ 733,579
Maximum Facility Size					500,000			500,000
Carrying Value					367,010			$ 367,010			296,967
Lender 6 Repo 1 Facility | Minimum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.50%
Lender 6 Repo 1 Facility | Maximum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								3.00%
Lender 6 Mortgage Facility
Secured Financing Agreements
Pledged Asset Carrying Value					502,497			$ 502,497
Maximum Facility Size		€ 294.0			328,602			328,602
Carrying Value					328,602			328,602
Amount drawn | €		€ 73.5
Maturity period		5 years
Repayment of secured financings
Deferred financing costs incurred								$ 5,700
Lender 6 Mortgage Facility | Eurodollar
Secured Financing Agreements
Pricing margin (as a percent)		1.69%						1.69%
Lender 7 Repo 1 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					140,274			$ 140,274
Maximum Facility Size					107,416			107,416
Carrying Value					107,416			$ 107,416			39,024
Lender 7 Repo 1 Facility | Minimum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.35%
Lender 7 Repo 1 Facility | Maximum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.70%
Investing and Servicing Segment Property Mortgages
Secured Financing Agreements
Pledged Asset Carrying Value					43,688			$ 43,688
Maximum Facility Size					38,975			38,975
Carrying Value					31,835			31,835			14,000
Lender 9 Repo 1 Facility
Secured Financing Agreements
Pledged Asset Carrying Value					319,853			319,853
Maximum Facility Size					225,313			225,313
Carrying Value					225,313			$ 225,313
Maturity period			12 months
Lender 9 Repo 1 Facility | Minimum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)			1.40%					1.40%
Lender 9 Repo 1 Facility | Maximum | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)			1.85%					1.85%
Borrowing Base
Secured Financing Agreements
Pledged Asset Carrying Value					222,770			$ 222,770
Maximum Facility Size	$ 450,000				450,000	$ 250,000		450,000
Carrying Value											189,871
Maximum facility size subject to certain conditions					650,000			$ 650,000
Repayment of secured financings
Extension option exercised period	1 year
Borrowing Base | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.75%
Term Loan
Secured Financing Agreements
Pledged Asset Carrying Value					3,296,673			$ 3,296,673
Maximum Facility Size					659,962			659,962
Carrying Value					658,159			$ 658,159			662,933
Floor interest rate (as a percent)								0.75%
Unamortized discount					1,800			$ 1,800			2,100
Term Loan | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)								2.75%
FHLB Advances
Secured Financing Agreements
Maximum Facility Size					1,000,000			$ 1,000,000
Secured financing agreements
Secured Financing Agreements
Maximum Facility Size						$ 17,800
Unamortized discount					1,800			1,800
Number of investment securities financed | item						2
Repayment of secured financings
2015 (remainder of)					303,796			303,796
2016					256,698			256,698
2017					934,913			934,913
2018					646,036			646,036
2019					563,288			563,288
Thereafter					979,347			979,347
Total					3,684,078			3,684,078
Deferred financing costs, net of amortization					29,600			29,600			26,500
Additional non-cash interest expense					3,800		$ 2,900	10,800	$ 8,200
Secured financing agreements | LIBOR
Secured Financing Agreements
Pricing margin (as a percent)						2.41%
Secured financing agreements | Weighted-average
Secured Financing Agreements
Maturity period						4 years 2 months 12 days
Repurchase Agreements
Secured Financing Agreements
Pledged Asset Carrying Value					2,663,678			2,663,678			2,270,985
Repayment of secured financings
2015 (remainder of)					302,104			302,104
2016					249,929			249,929
2017					928,144			928,144
2018					626,982			626,982
2019					556,519			556,519
Total					2,663,678			2,663,678
Repurchase Agreements | Loan held for investment
Secured Financing Agreements
Pledged Asset Carrying Value					2,036,748			2,036,748			1,863,633
Repurchase Agreements | Loans held-for-sale
Secured Financing Agreements
Pledged Asset Carrying Value					287,252			287,252			208,363
Repurchase Agreements | Investment securities.
Secured Financing Agreements
Pledged Asset Carrying Value					339,678			339,678			$ 198,989
Other Secured Financing
Repayment of secured financings
2015 (remainder of)					1,692			1,692
2016					6,769			6,769
2017					6,769			6,769
2018					19,054			19,054
2019					6,769			6,769
Thereafter					979,347			979,347
Total					$ 1,020,400			$ 1,020,400

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Investment in Unconsolidated Entities (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015 USD ($) property	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) property	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Investment in Unconsolidated Entities
Equity method, Carrying value	$ 180,384		$ 180,384		$ 176,359
Cost method, Carrying value	18,787		18,787		17,624
Investment in unconsolidated entities	199,171		199,171		193,983
Purchase price			65,900
Income recognized	$ 5,706	$ 3,805	$ 20,747	$ 13,432
Retail fund
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	33.00%		33.00%
Equity method, Carrying value	$ 121,733		$ 121,733		$ 129,475
Investor entity which owns equity in two real estate services providers
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	50.00%		50.00%		50.00%
Equity method, Carrying value	$ 23,366		$ 23,366		$ 21,534
Equity interests in commercial real estate
Investment in Unconsolidated Entities
Equity method, Carrying value	$ 28,224		$ 28,224
Equity interests in commercial real estate | Properties of unconsolidated entities
Investment in Unconsolidated Entities
Number of properties | property	10		10
Equity interests in commercial real estate | Minimum
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	16.00%		16.00%		16.00%
Equity interests in commercial real estate | Maximum
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	43.00%		43.00%		43.00%
Bridge loan venture
Investment in Unconsolidated Entities
Equity method, Carrying value					$ 8,417
Various - Equity method
Investment in Unconsolidated Entities
Equity method, Carrying value	$ 7,061		$ 7,061		$ 16,933
Various - Equity method | Minimum
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	25.00%		25.00%		25.00%
Various - Equity method | Maximum
Investment in Unconsolidated Entities
Equity method, Participation / Ownership %	50.00%		50.00%		50.00%
Investment funds which own equity in a loan servicer and other real estate assets
Investment in Unconsolidated Entities
Cost method, Carrying value	$ 9,225		$ 9,225		$ 9,225
Investment funds which own equity in a loan servicer and other real estate assets | Minimum
Investment in Unconsolidated Entities
Cost method, Ownership %	4.00%		4.00%		4.00%
Investment funds which own equity in a loan servicer and other real estate assets | Maximum
Investment in Unconsolidated Entities
Cost method, Ownership %	6.00%		6.00%		6.00%
Various - Cost method
Investment in Unconsolidated Entities
Cost method, Carrying value	$ 9,562		$ 9,562		$ 8,399
Various - Cost method | Minimum
Investment in Unconsolidated Entities
Cost method, Ownership %	0.00%		0.00%		0.00%
Various - Cost method | Maximum
Investment in Unconsolidated Entities
Cost method, Ownership %	3.00%		3.00%		3.00%

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Segment Data (Details 2) - USD ($) $ in Thousands	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Dec. 31, 2013
Assets:
Cash and cash equivalents	$ 372,768		$ 255,187	$ 327,322		$ 317,627
Restricted cash	43,620		48,704
Loans held-for-investment, net	5,814,886		5,779,238
Loans held-for-sale	450,828		391,620
Loans transferred as secured borrowings	142,456		129,427
Investment securities	786,461		998,248
Properties, net	530,438		39,854
Intangible assets	191,080		144,152
Investment in unconsolidated entities	199,171		193,983
Goodwill	140,437		140,437
Derivative assets	36,307		26,628
Accrued interest receivable	36,042		40,102
Other assets	137,296		95,652
VIE assets, at fair value	82,937,617		107,816,065
Total Assets	91,819,407		116,099,297
Liabilities:
Accounts payable, accrued expenses and other liabilities	137,786		144,516
Related-party payable	22,804		40,751
Dividends payable	115,191		108,189	108,056
Derivative liabilities	14,901		5,476
Secured financing agreements, net	3,682,274		3,137,789
Convertible senior notes, net	1,320,207		1,418,022
Secured borrowings on transferred loans	143,926		129,441
VIE liabilities, at fair value	82,181,138		107,232,201
Total Liabilities	87,618,227		112,216,385
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock	2,407		2,248
Additional paid-in capital	4,184,538		3,835,725
Treasury stock	(61,525)		(23,635)
Accumulated other comprehensive income (loss)	39,510	$ 45,901	55,896	69,681	$ 74,962	75,449
Retained earnings (accumulated deficit)	5,843		(9,378)
Total Starwood Property Trust, Inc. Stockholders' Equity	4,170,773		3,860,856
Non-controlling interests in consolidated subsidiaries	30,407		22,056
Total Equity	4,201,180		3,882,912	$ 3,863,963		$ 4,327,133
Total Liabilities and Equity	91,819,407		116,099,297
Operating Segments and Corporate
Assets:
Cash and cash equivalents	371,855		254,401
Restricted cash	43,620		48,704
Loans held-for-investment, net	5,814,886		5,779,238
Loans held-for-sale	450,828		391,620
Loans transferred as secured borrowings	142,456		129,427
Investment securities	1,491,416		1,518,070
Properties, net	530,438		39,854
Intangible assets	218,959		190,207
Investment in unconsolidated entities	206,515		200,705
Goodwill	140,437		140,437
Derivative assets	36,307		26,628
Accrued interest receivable	36,042		40,102
Other assets	139,196		97,116
Total Assets	9,622,955		8,856,509
Liabilities:
Accounts payable, accrued expenses and other liabilities	137,126		144,059
Related-party payable	22,804		40,751
Dividends payable	115,191		108,189
Derivative liabilities	14,901		5,476
Secured financing agreements, net	3,682,274		3,137,789
Convertible senior notes, net	1,320,207		1,418,022
Secured borrowings on transferred loans	143,926		129,441
Total Liabilities	5,436,429		4,983,727
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock	2,407		2,248
Additional paid-in capital	4,184,538		3,835,725
Treasury stock	(61,525)		(23,635)
Accumulated other comprehensive income (loss)	39,510		55,896
Retained earnings (accumulated deficit)	5,843		(9,378)
Total Starwood Property Trust, Inc. Stockholders' Equity	4,170,773		3,860,856
Non-controlling interests in consolidated subsidiaries	15,753		11,926
Total Equity	4,186,526		3,872,782
Total Liabilities and Equity	9,622,955		8,856,509
Operating segment | Lending Segment
Assets:
Cash and cash equivalents	112,635		125,132
Restricted cash	15,352		34,941
Loans held-for-investment, net	5,814,886		5,771,307
Loans held-for-sale	27,198
Loans transferred as secured borrowings	142,456		129,427
Investment securities	564,101		764,517
Investment in unconsolidated entities	30,155		22,537
Derivative assets	26,102		23,579
Accrued interest receivable	35,214		39,188
Other assets	21,722		21,329
Total Assets	6,789,821		6,931,957
Liabilities:
Accounts payable, accrued expenses and other liabilities	17,143		23,015
Derivative liabilities	8,387		3,662
Secured financing agreements, net	2,209,851		2,252,493
Secured borrowings on transferred loans	143,926		129,441
Total Liabilities	2,379,307		2,408,611
Starwood Property Trust, Inc. Stockholders' Equity:
Additional paid-in capital	2,689,426		3,126,845
Accumulated other comprehensive income (loss)	40,830		55,781
Retained earnings (accumulated deficit)	1,668,561		1,328,794
Total Starwood Property Trust, Inc. Stockholders' Equity	4,398,817		4,511,420
Non-controlling interests in consolidated subsidiaries	11,697		11,926
Total Equity	4,410,514		4,523,346
Total Liabilities and Equity	6,789,821		6,931,957
Operating segment | Investment and Servicing Segment
Assets:
Cash and cash equivalents	56,454		85,252
Restricted cash	23,978		13,763
Loans held-for-investment, net			7,931
Loans held-for-sale	423,630		391,620
Investment securities	927,315		753,553
Properties, net	84,558		39,854
Intangible assets	162,343		190,207
Investment in unconsolidated entities	54,627		48,693
Goodwill	140,437		140,437
Derivative assets	4,389		3,049
Accrued interest receivable	828		914
Other assets	64,086		61,048
Total Assets	1,942,645		1,736,321
Liabilities:
Accounts payable, accrued expenses and other liabilities	85,208		97,424
Related-party payable	120		4,405
Derivative liabilities	6,359		1,814
Secured financing agreements, net	485,662		222,363
Total Liabilities	577,349		326,006
Starwood Property Trust, Inc. Stockholders' Equity:
Additional paid-in capital	1,183,262		1,413,608
Accumulated other comprehensive income (loss)	(2,478)		115
Retained earnings (accumulated deficit)	180,456		(3,408)
Total Starwood Property Trust, Inc. Stockholders' Equity	1,361,240		1,410,315
Non-controlling interests in consolidated subsidiaries	4,056
Total Equity	1,365,296		1,410,315
Total Liabilities and Equity	1,942,645		1,736,321
Operating segment | Property Segment
Assets:
Restricted cash	4,290
Properties, net	445,880
Intangible assets	56,616
Investment in unconsolidated entities	121,733		129,475
Derivative assets	5,816
Other assets	40,604
Total Assets	674,939		129,475
Liabilities:
Accounts payable, accrued expenses and other liabilities	10,344
Derivative liabilities	155
Secured financing agreements, net	328,602
Total Liabilities	339,101
Starwood Property Trust, Inc. Stockholders' Equity:
Additional paid-in capital	329,960		127,299
Accumulated other comprehensive income (loss)	1,158
Retained earnings (accumulated deficit)	4,720		2,176
Total Starwood Property Trust, Inc. Stockholders' Equity	335,838		129,475
Total Equity	335,838		129,475
Total Liabilities and Equity	674,939		129,475
Corporate
Assets:
Cash and cash equivalents	202,766		44,017
Other assets	12,784		14,739
Total Assets	215,550		58,756
Liabilities:
Accounts payable, accrued expenses and other liabilities	24,431		23,620
Related-party payable	22,684		36,346
Dividends payable	115,191		108,189
Secured financing agreements, net	658,159		662,933
Convertible senior notes, net	1,320,207		1,418,022
Total Liabilities	2,140,672		2,249,110
Starwood Property Trust, Inc. Stockholders' Equity:
Common stock	2,407		2,248
Additional paid-in capital	(18,110)		(832,027)
Treasury stock	(61,525)		(23,635)
Retained earnings (accumulated deficit)	(1,847,894)		(1,336,940)
Total Starwood Property Trust, Inc. Stockholders' Equity	(1,925,122)		(2,190,354)
Total Equity	(1,925,122)		(2,190,354)
Total Liabilities and Equity	215,550		58,756
Investment and Servicing VIEs
Assets:
Cash and cash equivalents	913		786
Investment securities	(704,955)		(519,822)
Intangible assets	(27,879)		(46,055)
Investment in unconsolidated entities	(7,344)		(6,722)
Other assets	(1,900)		(1,464)
VIE assets, at fair value	82,937,617		107,816,065
Total Assets	82,196,452		107,242,788
Liabilities:
Accounts payable, accrued expenses and other liabilities	660		457
VIE liabilities, at fair value	82,181,138		107,232,201
Total Liabilities	82,181,798		107,232,658
Starwood Property Trust, Inc. Stockholders' Equity:
Non-controlling interests in consolidated subsidiaries	14,654		10,130
Total Equity	14,654		10,130
Total Liabilities and Equity	$ 82,196,452		$ 107,242,788

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Loans (Tables)

9 Months Ended

Sep. 30, 2015

Loans

Summary of investments in mortgages and loans by subordination class

The following tables summarize our investments in mortgages and loans by subordination class as of September 30, 2015 and December 31, 2014 (amounts in thousands):

							Weighted
					Weighted		Average Life
	Carrying		Face		Average		(“WAL”)
September 30, 2015	Value		Amount		Coupon		(years)(3)
First mortgages (1)	$	4,533,689	$	4,588,988	6.1	%	3.0
Subordinated mortgages (2)		399,381		424,957	8.6	%	3.6
Mezzanine loans (1)		888,158		873,081	10.0	%	2.2
Total loans held-for-investment		5,821,228		5,887,026
Loans held-for-sale (carrying value of $423,630 under fair value option)		450,828		447,204	4.8	%	8.9
Loans transferred as secured borrowings		142,456		143,926	6.0	%	2.2
Total gross loans		6,414,512		6,478,156
Loan loss allowance (loans held-for-investment)		(6,342)		—
Total net loans	$	6,408,170	$	6,478,156
December 31, 2014
First mortgages (1)	$	4,538,961	$	4,609,526	6.2	%	3.5
Subordinated mortgages (2)		345,091		374,859	8.1	%	3.9
Mezzanine loans (1)		901,217		889,948	10.4	%	2.6
Total loans held-for-investment		5,785,269		5,874,333
Loans held-for-sale, fair value option elected		391,620		390,342	4.5	%	8.3
Loans transferred as secured borrowings		129,427		129,570	5.4	%	2.5
Total gross loans		6,306,316		6,394,245
Loan loss allowance (loans held-for-investment)		(6,031)		—
Total net loans	$	6,300,285	$	6,394,245

(1) First mortgages include first mortgage loansand any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan.  The application of this methodology resulted in mezzanine loans with carrying values of $892.3 million and $704.2 million being classified as first mortgages as of September 30, 2015 and December 31, 2014, respectively.  

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

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

Summary of investments in floating rate loans

The following table summarizes our investments in floating rate loans (amounts in thousands):

	September 30, 2015				December 31, 2014
			Carrying				Carrying
Index	Base Rate		Value		Base Rate		Value
One-month LIBOR USD	0.1930	%	$	463,214	0.1713	%	$	138,576
Three-month LIBOR GBP	0.5831	%		411,122	0.5640	%		440,222
LIBOR floor	0.15 - 3.00	% (1)		3,895,721	0.15 - 3.00	% (1)		3,889,412
Total			$	4,770,057			$	4,468,210

The weighted-average LIBOR Floor was 0.31% and 0.35% as of September 30, 2015 and December 31, 2014, respectively.

Schedule of internal rating categories

As of September 30, 2015, the risk ratings for loans subject to our rating system, which 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
							Cost				Transferred				% of
Risk Rating	First		Subordinated		Mezzanine		Recovery		Loans Held-		As Secured				Total
Category	Mortgages		Mortgages		Loans		Loans		For-Sale		Borrowings		Total		Loans
1	$	702	$	—	$	—	$	—	$	—	$	—	$	702	—	%
2		396,967		88,195		119,702		—		—		—		604,864	9.4	%
3		3,863,862		278,140		650,859		—		—		142,456		4,935,317	76.9	%
4		272,158		33,046		117,597		—		—		—		422,801	6.6	%
5		—		—		—		—		—		—		—	—	%
N/A		—		—		—		—		450,828		—		450,828	7.1	%
	$	4,533,689	$	399,381	$	888,158	$	—	$	450,828	$	142,456	$	6,414,512	100.0	%

As of December 31, 2014, 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
							Cost				Transferred				% of
Risk Rating	First		Subordinated		Mezzanine		Recovery		Loans Held-		As Secured				Total
Category	Mortgages		Mortgages		Loans		Loans		For-Sale		Borrowings		Total		Loans
1	$	822	$	—	$	—	$	—	$	—	$	—	$	822	—	%
2		258,822		116,168		148,582		—		—		—		523,572	8.3	%
3		4,120,562		196,476		645,778		—		—		129,427		5,092,243	80.7	%
4		109,489		32,447		106,857		—		—		—		248,793	4.0	%
5		45,974		—		—		—		—		—		45,974	0.7	%
N/A		—		—		—		3,292		391,620		—		394,912	6.3	%
	$	4,535,669	$	345,091	$	901,217	$	3,292	$	391,620	$	129,427	$	6,306,316	100.0	%

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 Nine Months Ended
	September 30,
	2015		2014
Allowance for loan losses at January 1	$	6,031	$	3,984
Provision for loan losses		311		1,933
Charge-offs		—		—
Recoveries		—		—
Allowance for loan losses at September 30	$	6,342	$	5,917
Recorded investment in loans related to the allowance for loan loss	$	422,801	$	287,231

Schedule of activity in loan portfolio

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

	For the Nine Months Ended
	September 30,
	2015		2014
Balance at January 1	$	6,300,285	$	4,750,804
Acquisitions/originations/additional funding		3,114,293		3,283,546
Capitalized interest (1)		51,416		31,994
Basis of loans sold (2)		(2,040,380)		(1,505,764)
Loan maturities/principal repayments		(1,055,419)		(1,009,222)
Discount accretion/premium amortization		26,615		16,756
Changes in fair value		51,044		48,018
Unrealized foreign currency remeasurement loss		(30,529)		(21,088)
Change in loan loss allowance, net		(311)		(1,933)
Transfer to/from other asset classifications		(8,844)		(3,503)
Balance at September 30	$	6,408,170	$	5,589,608

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

See Note 11 for additional disclosure on these transactions.

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Summary of Significant Accounting Policies (Details)	Sep. 30, 2015
Variable Interest Entities
REO assets as a percent of consolidated VIE assets	4.00%
Loans as a percent of consolidated VIE assets	96.00%

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Offsetting Assets and Liabilities

9 Months Ended

Sep. 30, 2015

Offsetting Assets and Liabilities

Offsetting Assets and Liabilities

13. 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):

							(iv)
							Gross Amounts Not
							Offset in the Statement
			(ii)		(iii) = (i) - (ii)		of Financial Position
			Gross Amounts		Net Amounts				Cash
	(i)		Offset in the		Presented in				Collateral
	Gross Amounts		Statement of		the Statement of		Financial		Received /		(v) = (iii) - (iv)
	Recognized		Financial Position		Financial Position		Instruments		Pledged		Net Amount
As of September 30, 2015
Derivative assets	$	36,307	$	—	$	36,307	$	1,475	$	—	$	34,832
Derivative liabilities	$	14,901	$	—	$	14,901	$	1,475	$	13,426	$	—
Repurchase agreements		2,663,678		—		2,663,678		2,663,678		—		—
	$	2,678,579	$	—	$	2,678,579	$	2,665,153	$	13,426	$	—
As of December 31, 2014
Derivative assets	$	26,628	$	—	$	26,628	$	2,016	$	—	$	24,612
Derivative liabilities	$	5,476	$	—	$	5,476	$	2,016	$	3,460	$	—
Repurchase agreements		2,270,985		—		2,270,985		2,270,985		—		—
	$	2,276,461	$	—	$	2,276,461	$	2,273,001	$	3,460	$	—

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Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2015

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

18. Accumulated Other Comprehensive Income

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

			Cumulative
			Unrealized Gain
	Effective Portion of		(Loss) on		Foreign
	Cumulative Loss on		Available-for-		Currency
	Cash Flow Hedges		Sale Securities		Translation		Total
Three Months Ended September 30, 2015
Balance at July 1, 2015	$	(237)	$	50,370	$	(4,232)	$	45,901
OCI before reclassifications		(395)		(9,095)		(3,057)		(12,547)
Amounts reclassified from AOCI		187		—		5,969		6,156
Net period OCI		(208)		(9,095)		2,912		(6,391)
Balance at September 30, 2015	$	(445)	$	41,275	$	(1,320)	$	39,510
Three Months Ended September 30, 2014
Balance at July 1, 2014	$	(575)	$	60,446	$	15,091	$	74,962
OCI before reclassifications		186		4,190		(9,765)		(5,389)
Amounts reclassified from AOCI		344		(236)		—		108
Net period OCI		530		3,954		(9,765)		(5,281)
Balance at September 30, 2014	$	(45)	$	64,400	$	5,326	$	69,681
Nine Months Ended September 30, 2015
Balance at January 1, 2015	$	(97)	$	60,190	$	(4,197)	$	55,896
OCI before reclassifications		(933)		(13,519)		(3,092)		(17,544)
Amounts reclassified from AOCI		585		(5,396)		5,969		1,158
Net period OCI		(348)		(18,915)		2,877		(16,386)
Balance at September 30, 2015	$	(445)	$	41,275	$	(1,320)	$	39,510
Nine Months Ended September 30, 2014
Balance at January 1, 2014	$	(604)	$	66,566	$	9,487	$	75,449
OCI before reclassifications		(522)		9,563		(4,161)		4,880
Amounts reclassified from AOCI		1,081		(11,729)		—		(10,648)
Net period OCI		559		(2,166)		(4,161)		(5,768)
Balance at September 30, 2014	$	(45)	$	64,400	$	5,326	$	69,681

The reclassifications out of AOCI impacted the condensed consolidated statements of operations for the three and nine months ended September 30, 2015 and 2014 as follows (amounts in thousands):

	Amounts Reclassified from				Amounts Reclassified from
	AOCI during the Three Months				AOCI during the Nine Months				Affected Line Item
	Ended September 30,				Ended September 30,				in the Statements
Details about AOCI Components	2015		2014		2015		2014		of Operations
Losses on cash flow hedges:
Interest rate contracts	$	(187)	$	(344)	$	(585)	$	(1,081)	Interest expense
Unrealized gains (losses) on available-for-sale securities:
Interest realized upon collection		—		—		5,396		—	Interest income from investment securities
Net realized gain on sale of investments		—		236		—		11,942	Gain on sale of investments and other assets, net
OTTI		—		—		—		(213)	OTTI
Total		—		236		5,396		11,729
Foreign currency translation:
Foreign currency loss from CMBS redemption		(5,969)		—		(5,969)		—	Foreign currency loss, net
Total reclassifications for the period	$	(6,156)	$	(108)	$	(1,158)	$	10,648

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Segment Data (Tables)

9 Months Ended

Sep. 30, 2015

Segment Data

Schedule of results of operations by business segment

The table below presents our results of operations for the three months ended September 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	116,049	$	4,549	$	—	$	—	$	120,598	$	—	$	120,598
Interest income from investment securities		18,137		40,615		—		—		58,752		(34,078)		24,674
Servicing fees		114		61,394		—		—		61,508		(28,980)		32,528
Rental income		—		2,758		7,287		—		10,045		—		10,045
Other revenues		154		4,372		—		—		4,526		(226)		4,300
Total revenues		134,454		113,688		7,287		—		255,429		(63,284)		192,145
Costs and expenses:
Management fees		364		18		—		27,614		27,996		86		28,082
Interest expense		20,148		2,793		1,713		26,034		50,688		—		50,688
General and administrative		5,901		30,187		226		2,201		38,515		178		38,693
Acquisition and investment pursuit costs		935		552		2,233		(38)		3,682		—		3,682
Costs of rental operations		—		1,562		790		—		2,352		—		2,352
Depreciation and amortization		—		2,492		4,742		—		7,234		—		7,234
Loan loss allowance, net		(2,667)		—		—		—		(2,667)		—		(2,667)
Other expense		—		3		—		—		3		—		3
Total costs and expenses		24,681		37,607		9,704		55,811		127,803		264		128,067
Income (loss) before other income, income taxes and non-controlling interests		109,773		76,081		(2,417)		(55,811)		127,626		(63,548)		64,078
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		49,665		49,665
Change in fair value of servicing rights		—		(13,331)		—		—		(13,331)		9,114		(4,217)
Change in fair value of investment securities, net		(518)		(1,941)		—		—		(2,459)		5,076		2,617
Change in fair value of mortgage loans held-for-sale, net		—		19,082		—		—		19,082		—		19,082
Earnings from unconsolidated entities		818		2,652		2,436		—		5,906		(200)		5,706
Gain on sale of investments and other assets, net		2,688		660		—		—		3,348		—		3,348
Gain (loss) on derivative financial instruments, net		10,693		(9,582)		1,119		—		2,230		—		2,230
Foreign currency (loss) gain, net		(18,705)		896		27		—		(17,782)		—		(17,782)
Other income, net		—		64		—		—		64		—		64
Total other (loss) income		(5,024)		(1,500)		3,582		—		(2,942)		63,655		60,713
Income (loss) before income taxes		104,749		74,581		1,165		(55,811)		124,684		107		124,791
Income tax provision		(166)		(7,509)		—		—		(7,675)		—		(7,675)
Net income (loss)		104,583		67,072		1,165		(55,811)		117,009		107		117,116
Net income attributable to non-controlling interests		(350)		76		—		—		(274)		(107)		(381)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	104,233	$	67,148	$	1,165	$	(55,811)	$	116,735	$	—	$	116,735

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

			Investing						Investing
	Lending		and Servicing						and Servicing
	Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	106,369	$	4,300	$	—	$	110,669	$	—	$	110,669
Interest income from investment securities		15,729		30,136		—		45,865		(17,225)		28,640
Servicing fees		63		58,826		—		58,889		(24,248)		34,641
Rental income		—		3,385		—		3,385		—		3,385
Other revenues		130		4,219		—		4,349		(316)		4,033
Total revenues		122,291		100,866		—		223,157		(41,789)		181,368
Costs and expenses:
Management fees		470		18		24,413		24,901		42		24,943
Interest expense		16,865		1,602		21,272		39,739		—		39,739
General and administrative		8,362		37,723		1,378		47,463		177		47,640
Acquisition and investment pursuit costs		583		176		—		759		—		759
Costs of rental operations		—		1,783		—		1,783		—		1,783
Depreciation and amortization		—		3,017		—		3,017		—		3,017
Loan loss allowance, net		1,575		—		—		1,575		—		1,575
Other expense		—		918		—		918		—		918
Total costs and expenses		27,855		45,237		47,063		120,155		219		120,374
Income (loss) before other income, income taxes and non-controlling interests		94,436		55,629		(47,063)		103,002		(42,008)		60,994
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		87,778		87,778
Change in fair value of servicing rights		—		(18,312)		—		(18,312)		10,415		(7,897)
Change in fair value of investment securities, net		(140)		52,067		—		51,927		(50,067)		1,860
Change in fair value of mortgage loans held-for-sale, net		—		15,517		—		15,517		—		15,517
Earnings from unconsolidated entities		1,875		5,905		—		7,780		(3,975)		3,805
Gain on sale of investments, net		1,332		—		—		1,332		—		1,332
Gain on derivative financial instruments, net		26,540		2,735		—		29,275		—		29,275
Foreign currency loss, net		(21,019)		(447)		—		(21,466)		—		(21,466)
Other income, net		—		28		—		28		—		28
Total other income		8,588		57,493		—		66,081		44,151		110,232
Income (loss) before income taxes		103,024		113,122		(47,063)		169,083		2,143		171,226
Income tax benefit (provision)		233		(4,069)		—		(3,836)		—		(3,836)
Net income (loss)		103,257		109,053		(47,063)		165,247		2,143		167,390
Net income attributable to non-controlling interests		(203)		—		—		(203)		(2,143)		(2,346)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	103,054	$	109,053	$	(47,063)	$	165,044	$	—	$	165,044

The table below presents our results of operations for the nine months ended September 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	343,449	$	13,870	$	—	$	—	$	357,319	$	—	$	357,319
Interest income from investment securities		57,483		112,583		—		—		170,066		(93,838)		76,228
Servicing fees		296		166,691		—		—		166,987		(76,048)		90,939
Rental income		—		6,908		10,823		—		17,731		—		17,731
Other revenues		567		7,603		—		—		8,170		(733)		7,437
Total revenues		401,795		307,655		10,823		—		720,273		(170,619)		549,654
Costs and expenses:
Management fees		1,119		54		—		81,511		82,684		187		82,871
Interest expense		61,868		7,663		2,590		78,900		151,021		—		151,021
General and administrative		16,842		92,002		402		5,573		114,819		542		115,361
Acquisition and investment pursuit costs		1,932		1,270		6,495		38		9,735		—		9,735
Costs of rental operations		—		4,138		1,123		—		5,261		—		5,261
Depreciation and amortization		—		10,790		6,357		—		17,147		—		17,147
Loan loss allowance, net		311		—		—		—		311		—		311
Other expense		—		378		—		—		378		—		378
Total costs and expenses		82,072		116,295		16,967		166,022		381,356		729		382,085
Income (loss) before other income, income taxes and non-controlling interests		319,723		191,360		(6,144)		(166,022)		338,917		(171,348)		167,569
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		153,399		153,399
Change in fair value of servicing rights		—		(26,587)		—		—		(26,587)		18,176		(8,411)
Change in fair value of investment securities, net		(347)		3,181		—		—		2,834		730		3,564
Change in fair value of mortgage loans held-for-sale, net		—		51,044		—		—		51,044		—		51,044
Earnings from unconsolidated entities		3,034		10,704		7,631		—		21,369		(622)		20,747
Gain on sale of investments and other assets, net		2,995		17,760		—		—		20,755		—		20,755
Gain (loss) on derivative financial instruments, net		19,602		(13,315)		1,036		—		7,323		—		7,323
Foreign currency (loss) gain, net		(26,860)		(395)		20		—		(27,235)		—		(27,235)
Loss on extinguishment of debt		—		—		—		(5,921)		(5,921)		—		(5,921)
Other income, net		—		105		—		14		119		—		119
Total other (loss) income		(1,576)		42,497		8,687		(5,907)		43,701		171,683		215,384
Income (loss) before income taxes		318,147		233,857		2,543		(171,929)		382,618		335		382,953
Income tax provision		(136)		(27,282)		—		—		(27,418)		—		(27,418)
Net income (loss)		318,011		206,575		2,543		(171,929)		355,200		335		355,535
Net income attributable to non-controlling interests		(1,030)		76		—		—		(954)		(335)		(1,289)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	316,981	$	206,651	$	2,543	$	(171,929)	$	354,246	$	—	$	354,246

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

			Investing				Single				Investing
	Lending		and Servicing				Family				and Servicing
	Segment		Segment		Corporate		Residential		Subtotal		VIEs		Total
Revenues:
Interest income from loans	$	311,348	$	9,686	$	—	$	—	$	321,034	$	—	$	321,034
Interest income from investment securities		49,196		83,225		—		—		132,421		(46,707)		85,714
Servicing fees		253		172,845		—		—		173,098		(71,565)		101,533
Rental income		—		6,520		—		—		6,520		—		6,520
Other revenues		318		9,917		—		—		10,235		(939)		9,296
Total revenues		361,115		282,193		—		—		643,308		(119,211)		524,097
Costs and expenses:
Management fees		1,653		54		76,022		—		77,729		120		77,849
Interest expense		48,310		3,529		63,426		—		115,265		—		115,265
General and administrative		18,974		112,049		5,268		—		136,291		544		136,835
Acquisition and investment pursuit costs		1,303		606		15		—		1,924		—		1,924
Costs of rental operations		—		3,889		—		—		3,889		—		3,889
Depreciation and amortization		—		12,807		—		—		12,807		—		12,807
Loan loss allowance, net		1,933		—		—		—		1,933		—		1,933
Other expense		52		6,475		—		—		6,527		—		6,527
Total costs and expenses		72,225		139,409		144,731		—		356,365		664		357,029
Income (loss) before other income, income taxes and non-controlling interests		288,890		142,784		(144,731)		—		286,943		(119,875)		167,068
Other income:
Change in net assets related to consolidated VIEs		—		—		—		—		—		190,810		190,810
Change in fair value of servicing rights		—		(43,291)		—		—		(43,291)		24,620		(18,671)
Change in fair value of investment securities, net		565		105,313		—		—		105,878		(90,698)		15,180
Change in fair value of mortgage loans held-for-sale, net		—		48,018		—		—		48,018		—		48,018
Earnings from unconsolidated entities		6,847		9,741		—		—		16,588		(3,156)		13,432
Gain on sale of investments, net		12,965		—		—		—		12,965		—		12,965
Gain (loss) on derivative financial instruments, net		16,142		(4,523)		—		—		11,619		—		11,619
Foreign currency loss, net		(15,376)		(836)		—		—		(16,212)		—		(16,212)
OTTI		(214)		(796)		—		—		(1,010)		—		(1,010)
Other income, net		54		684		—		—		738		—		738
Total other income		20,983		114,310		—		—		135,293		121,576		256,869
Income (loss) from continuing operations before income taxes		309,873		257,094		(144,731)		—		422,236		1,701		423,937
Income tax provision		(293)		(13,440)		—		—		(13,733)		—		(13,733)
Income (loss) from continuing operations		309,580		243,654		(144,731)		—		408,503		1,701		410,204
Loss from discontinued operations, net of tax		—		—		—		(1,551)		(1,551)		—		(1,551)
Net income (loss)		309,580		243,654		(144,731)		(1,551)		406,952		1,701		408,653
Net income attributable to non-controlling interests		(3,439)		—		—		—		(3,439)		(1,701)		(5,140)
Net income (loss) attributable to Starwood Property Trust, Inc.	$	306,141	$	243,654	$	(144,731)	$	(1,551)	$	403,513	$	—	$	403,513

Schedule of condensed consolidated balance sheet by business segment

The table below presents our condensed consolidated balance sheet as ofSeptember 30, 2015 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Assets:
Cash and cash equivalents	$	112,635	$	56,454	$	—	$	202,766	$	371,855	$	913	$	372,768
Restricted cash		15,352		23,978		4,290		—		43,620		—		43,620
Loans held-for-investment, net		5,814,886		—		—		—		5,814,886		—		5,814,886
Loans held-for-sale		27,198		423,630		—		—		450,828		—		450,828
Loans transferred as secured borrowings		142,456		—		—		—		142,456		—		142,456
Investment securities		564,101		927,315		—		—		1,491,416		(704,955)		786,461
Properties, net		—		84,558		445,880		—		530,438		—		530,438
Intangible assets		—		162,343		56,616		—		218,959		(27,879)		191,080
Investment in unconsolidated entities		30,155		54,627		121,733		—		206,515		(7,344)		199,171
Goodwill		—		140,437		—		—		140,437		—		140,437
Derivative assets		26,102		4,389		5,816		—		36,307		—		36,307
Accrued interest receivable		35,214		828		—		—		36,042		—		36,042
Other assets		21,722		64,086		40,604		12,784		139,196		(1,900)		137,296
VIE assets, at fair value		—		—		—		—		—		82,937,617		82,937,617
Total Assets	$	6,789,821	$	1,942,645	$	674,939	$	215,550	$	9,622,955	$	82,196,452	$	91,819,407
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	17,143	$	85,208	$	10,344	$	24,431	$	137,126	$	660	$	137,786
Related-party payable		—		120		—		22,684		22,804		—		22,804
Dividends payable		—		—		—		115,191		115,191		—		115,191
Derivative liabilities		8,387		6,359		155		—		14,901		—		14,901
Secured financing agreements, net		2,209,851		485,662		328,602		658,159		3,682,274		—		3,682,274
Convertible senior notes, net		—		—		—		1,320,207		1,320,207		—		1,320,207
Secured borrowings on transferred loans		143,926		—		—		—		143,926		—		143,926
VIE liabilities, at fair value		—		—		—		—		—		82,181,138		82,181,138
Total Liabilities		2,379,307		577,349		339,101		2,140,672		5,436,429		82,181,798		87,618,227
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock		—		—		—		2,407		2,407		—		2,407
Additional paid-in capital		2,689,426		1,183,262		329,960		(18,110)		4,184,538		—		4,184,538
Treasury stock		—		—		—		(61,525)		(61,525)		—		(61,525)
Accumulated other comprehensive income (loss)		40,830		(2,478)		1,158		—		39,510		—		39,510
Retained earnings (accumulated deficit)		1,668,561		180,456		4,720		(1,847,894)		5,843		—		5,843
Total Starwood Property Trust, Inc. Stockholders’ Equity		4,398,817		1,361,240		335,838		(1,925,122)		4,170,773		—		4,170,773
Non-controlling interests in consolidated subsidiaries		11,697		4,056		—		—		15,753		14,654		30,407
Total Equity		4,410,514		1,365,296		335,838		(1,925,122)		4,186,526		14,654		4,201,180
Total Liabilities and Equity	$	6,789,821	$	1,942,645	$	674,939	$	215,550	$	9,622,955	$	82,196,452	$	91,819,407

The table below presents our condensed consolidated balance sheet as of December 31, 2014 by business segment (amounts in thousands):

			Investing								Investing
	Lending		and Servicing		Property						and Servicing
	Segment		Segment		Segment		Corporate		Subtotal		VIEs		Total
Assets:
Cash and cash equivalents	$	125,132	$	85,252	$	—	$	44,017	$	254,401	$	786	$	255,187
Restricted cash		34,941		13,763		—		—		48,704		—		48,704
Loans held-for-investment, net		5,771,307		7,931		—		—		5,779,238		—		5,779,238
Loans held-for-sale		—		391,620		—		—		391,620		—		391,620
Loans transferred as secured borrowings		129,427		—		—		—		129,427		—		129,427
Investment securities		764,517		753,553		—		—		1,518,070		(519,822)		998,248
Properties, net		—		39,854		—		—		39,854		—		39,854
Intangible assets		—		190,207		—		—		190,207		(46,055)		144,152
Investment in unconsolidated entities		22,537		48,693		129,475		—		200,705		(6,722)		193,983
Goodwill		—		140,437		—		—		140,437		—		140,437
Derivative assets		23,579		3,049		—		—		26,628		—		26,628
Accrued interest receivable		39,188		914		—		—		40,102		—		40,102
Other assets		21,329		61,048		—		14,739		97,116		(1,464)		95,652
VIE assets, at fair value		—		—		—		—		—		107,816,065		107,816,065
Total Assets	$	6,931,957	$	1,736,321	$	129,475	$	58,756	$	8,856,509	$	107,242,788	$	116,099,297
Liabilities and Equity
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	23,015	$	97,424	$	—	$	23,620	$	144,059	$	457	$	144,516
Related-party payable		—		4,405		—		36,346		40,751		—		40,751
Dividends payable		—		—		—		108,189		108,189		—		108,189
Derivative liabilities		3,662		1,814		—		—		5,476		—		5,476
Secured financing agreements, net		2,252,493		222,363		—		662,933		3,137,789		—		3,137,789
Convertible senior notes, net		—		—		—		1,418,022		1,418,022		—		1,418,022
Secured borrowings on transferred loans		129,441		—		—		—		129,441		—		129,441
VIE liabilities, at fair value		—		—		—		—		—		107,232,201		107,232,201
Total Liabilities		2,408,611		326,006		—		2,249,110		4,983,727		107,232,658		112,216,385
Equity:
Starwood Property Trust, Inc. Stockholders’ Equity:
Common stock		—		—		—		2,248		2,248		—		2,248
Additional paid-in capital		3,126,845		1,413,608		127,299		(832,027)		3,835,725		—		3,835,725
Treasury stock		—		—		—		(23,635)		(23,635)		—		(23,635)
Accumulated other comprehensive income		55,781		115		—		—		55,896		—		55,896
Retained earnings (accumulated deficit)		1,328,794		(3,408)		2,176		(1,336,940)		(9,378)		—		(9,378)
Total Starwood Property Trust, Inc. Stockholders’ Equity		4,511,420		1,410,315		129,475		(2,190,354)		3,860,856		—		3,860,856
Non-controlling interests in consolidated subsidiaries		11,926		—		—		—		11,926		10,130		22,056
Total Equity		4,523,346		1,410,315		129,475		(2,190,354)		3,872,782		10,130		3,882,912
Total Liabilities and Equity	$	6,931,957	$	1,736,321	$	129,475	$	58,756	$	8,856,509	$	107,242,788	$	116,099,297

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Loan Securitization/Sale Activities (Tables)

9 Months Ended

Sep. 30, 2015

Investment and Servicing Segment

Summary of fair value and par value of loans sold and amount of sale proceeds used in part to repay the outstanding balance of the repurchase agreements associated with the loans

The following summarizes the fair value and par value of loans sold from our conduit platform, as well as the amount of sale proceeds used in part to repay the outstanding balance of the repurchase agreements associated with these loans for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2015		2014		2015		2014
Fair value of loans sold	$	410,227	$	498,789	$	1,443,871	$	1,165,583
Par value of loans sold		398,654		482,129		1,396,674		1,119,537
Repayment of repurchase agreements		299,301		361,569		1,043,757		839,626

Lending Segment

Summary of loans sold and loans transferred as secured borrowings by the 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 (amounts in thousands):

					Loan Transfers
	Loan Transfers Accounted				Accounted for as Secured
	for as Sales				Borrowings
	Face Amount		Proceeds		Face Amount		Proceeds
For the Three Months Ended September 30,
2015	$	225,264	$	220,928	$	—	$	—
2014		142,896		138,958		—		—
For the Nine Months Ended September 30,
2015	$	606,725	$	599,504	$	38,925	$	38,925
2014		347,755		341,472		—		—

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Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Consolidated Statements of Comprehensive Income
Net income	$ 117,116	$ 167,390	$ 355,535	$ 408,653
Other comprehensive (loss) income (net change by component):
Cash flow hedges	(208)	530	(348)	559
Available-for-sale securities	(9,095)	3,954	(18,915)	(2,166)
Foreign currency remeasurement	2,912	(9,765)	2,877	(4,161)
Other comprehensive loss	(6,391)	(5,281)	(16,386)	(5,768)
Comprehensive income	110,725	162,109	339,149	402,885
Less: Comprehensive income attributable to non-controlling interests	(381)	(2,346)	(1,289)	(5,140)
Comprehensive income attributable to Starwood Property Trust, Inc.	$ 110,344	$ 159,763	$ 337,860	$ 397,745

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014	Dec. 31, 2013
Current
Federal	$ 6,074	$ 10,044	$ 21,825	$ 20,668
Foreign	1,718	905	3,996	4,136
State	1,009	2,041	3,634	3,840
Total current	8,801	12,990	29,455	28,644
Deferred
Federal	(689)	(7,390)	(74)	(10,438)
Foreign	(322)	(539)	(1,945)	(2,737)
State	(115)	(1,225)	(18)	(1,736)
Total deferred	(1,126)	(9,154)	(2,037)	(14,911)
Total income tax provision	7,675	3,836	27,418	13,733
Income Taxes
Assets owned	91,819,407		91,819,407		$ 116,099,297
Cash	372,768	$ 327,322	372,768	$ 327,322	255,187	$ 317,627
Deferred tax assets and liabilities
Net deferred tax assets (liabilities)	22,049		22,049		19,915
U.S.
Deferred tax assets and liabilities
Reserves and accruals	12,790		12,790		13,818
Domestic intangible assets	12,292		12,292		9,617
Investment securities and loans	(2,482)		(2,482)		(2,327)
Investment in unconsolidated entities	(412)		(412)		883
Deferred income	432		432		427
Net operating and capital loss carryforwards	5,173		5,173		2,498
Valuation allowance	(5,173)		(5,173)		(2,498)
Other temporary differences (asset)	405		405		515
Net deferred tax assets	23,025		23,025		22,933
Europe
Deferred tax assets and liabilities
European servicing rights	(845)		(845)		(2,681)
Net operating and capital loss carryforwards	8,149		8,149		8,702
Valuation allowance	(8,149)		(8,149)		(8,702)
Other temporary differences (liability)	(131)		(131)		(337)
Net deferred tax liabilities	(976)		(976)		(3,018)
Investment and Servicing Segment | TRS entities
Income Taxes
Assets owned	1,100,000		1,100,000		1,000,000
Cash	$ 129,600		$ 129,600		$ 88,600

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2015

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Balance Sheet Presentation of the Investing and Servicing Segment’s Variable Interest Entities

As noted above, the Investing and Servicing Segment operates an investment 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 accounting principles generally accepted in the United States of America (“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 the Investing and Servicing Segment 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 VIEs. The assets and other instruments held by these VIEs are restricted and can only be used to fulfill the obligations of the entity. Additionally, the obligations of the VIEs do not have any recourse to the general credit of any other consolidated entities, nor to us as the consolidator of these VIEs.

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

Refer to the segment data in Note 22 for a presentation of the Investing and Servicing Segment 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, 2014 (the “Form 10-K”), as filed with the Securities and Exchange Commission (“SEC”). The results of operations for the three and nine months ended September 30, 2015 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, 2014 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. Accounting Standards Codification (“ASC”) 810, Consolidation, defines the primary beneficiary as the party that has both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant. We 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 elect the fair value option for initial and subsequent recognition of the assets and liabilities of our consolidated VIEs.  Interest income and interest expense associated with these VIEs are no longer relevant on a standalone basis because these amounts are already reflected in the fair value changes.  We have elected to present these items in a single line on our condensed consolidated statements of operations.  The residual difference shown on our condensed consolidated statements of operations in the line item “Change in net assets related to consolidated VIEs” represents our beneficial interest in the VIEs.

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

Loans comprise the vast majority of our VIE assets and are carried at fair value due to the election of the fair value option.  When an asset becomes REO, it is due to nonperformance of the loan.  Because the loan is already at fair value, the carrying value of an REO asset is also initially at fair value.  Furthermore, when we consolidate a CMBS trust, any existing REO would be consolidated at fair value.  Once an asset becomes REO, its disposition time is relatively short. As a result, the carrying value of an REO generally approximates fair value under GAAP.

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

REO assets generally represent a very small percentage of the overall asset pool of a CMBS trust.  In a new issue CMBS trust there are no REO assets.  We estimate that REO assets constitute approximately 4% of our consolidated VIE assets, with the remaining 96% representing loans.  However, it is important to note that the fair value of our VIE assets is determined by reference to our VIE liabilities as permitted under Accounting Standards Update (“ASU”) 2014-13,  Consolidation (Topic 810): Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.  In other words, our VIE liabilities are more reliably measurable than the VIE assets, resulting in our current measurement methodology which utilizes this value to determine the fair value of our VIE assets as a whole. As a result, these percentages are not necessarily indicative of the relative fair values of each of these asset categories if the assets were to be valued individually. 

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

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

Convertible Senior Notes

ASC 470, Debt, requires the liability and equity components of convertible debt instruments that may be settled in cash upon conversion to be separately accounted for in a manner that reflects the issuer’s nonconvertible debt borrowing rate. ASC 470-20 requires that the initial proceeds from the sale of these notes be allocated between a liability component and an equity component in a manner that reflects interest expense at the interest rate of similar nonconvertible debt that could have been issued by the Company at such time. The equity components of the convertible notes have been reflected within additional paid-in capital in our condensed consolidated balance sheets. The resulting debt discount is being amortized over the period during which the convertible notes are expected to be outstanding (the maturity date) as additional non-cash interest expense.

Upon repurchase of convertible debt instruments, ASC 470-20 requires the issuer to allocate total settlement consideration, inclusive of transaction costs, amongst the liability and equity components of the instrument based on the fair value of the liability component immediately prior to repurchase.  The difference between the settlement consideration allocated to the liability component and the net carrying value of the liability component, including unamortized debt issuance costs, is recognized as gain (loss) on extinguishment of debt in our condensed consolidated statements of operations.  The remaining settlement consideration allocated to the equity component is recognized as a reduction of additional paid-in capital in our condensed consolidated balance sheets. 

Discontinued Operations

On January 31, 2014, we completed the spin-off of our former SFR segment to our stockholders as discussed in Note 3.  In accordance with ASC 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 nine months ended September 30, 2014.

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 the Investing and Servicing Segment’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 the Investing and Servicing Segment’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.

Fair Value Measurements

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

As discussed above, we measure the assets and liabilities of consolidated VIEs at fair value pursuant to our election of the fair value option. The VIEs in which we invest are “static”; that is, no reinvestment is permitted, and there is no active management of the underlying assets. In determining the fair value of the assets and liabilities of the VIE, we maximize the use of observable inputs over unobservable inputs. We also acknowledge that our principal market for selling CMBS assets is the securitization market where the market participant is considered to be a CMBS trust or a collateralized debt obligation (“CDO”). This methodology results in the fair value of the assets of a static CMBS trust being equal to the fair value of its liabilities. Refer to Note 19 for further information regarding our fair value measurements.

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-collateral 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.

Intangible Lease Assets

In accordance with ASC 805, Business Combinations, the acquirer in a business combination must recognize, with certain exceptions, the fair values of assets acquired, liabilities assumed, and non-controlling interests when the acquisition constitutes a change in control of the acquired entity.  In connection with the Ireland portfolio acquisition (refer to Note 3 for further discussion) and certain properties acquired from CMBS trusts, we recognized intangible lease assets and liabilities associated with certain noncancelable operating leases of the acquired properties. These intangible lease assets and liabilities include in-place lease intangible assets, favorable lease intangible assets and unfavorable lease liabilities.  In-place lease intangible assets reflect the acquired benefit of purchasing properties with in-place leases and are measured based on estimates of direct costs associated with leasing the property and lost rental income during projected lease-up and free rent periods, both of which are avoided due to the presence of in-place leases at the acquisition date. Favorable and unfavorable lease intangible assets and liabilities reflect the terms of in-place tenant leases being either favorable or unfavorable relative to market terms at the acquisition date.  The estimated fair values of our favorable and unfavorable lease assets and liabilities at the respective acquisition dates represent the discounted cash flow differential between the contractual cash flows of such leases and the estimated cash flows that comparable leases at market terms would generate. Our intangible lease assets and liabilities are recognized within intangible assets and other liabilities, respectively, in our condensed consolidated balance sheet.  Our in-place lease intangible assets are amortized to amortization expense while our favorable and unfavorable lease intangible assets and liabilities are amortized to rental income, both over the remaining noncancelable term of the respective leases on a straight-line basis.

Properties

Our properties consist of commercial real estate properties held-for-investment and are recorded at cost, less accumulated depreciation and impairments, if any.  Properties consist primarily of land, buildings and improvements.  Land is not depreciated, and buildings and improvements are depreciated on a straight-line basis over their estimated useful lives.  Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated on a straight-line basis over their estimated useful lives.  We review properties for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability is determined by comparing the carrying amount of the property to the undiscounted future net cash flows it is expected to generate. If such carrying amounts exceed the expected undiscounted future net cash flows, we adjust the carrying amount of the property to its estimated fair value.

Revenue Recognition

Rental Income

Rental income is recognized when earned from tenants. For leases that provide rent concessions or fixed escalations over the lease term, rental income is recognized on a straight-line basis over the noncancelable term of the lease.  In net lease arrangements, costs reimbursable from tenants are recognized in rental income in the period in which the related expenses are incurred as we are generally the primary obligor with respect to purchasing goods and services for property operations.

Acquisition and Investment Pursuit Costs

Costs incurred in connection with acquiring properties, investments, loans and businesses, as well as in pursuing unsuccessful acquisitions and investments, are recorded within acquisition and investment pursuit costs in our condensed consolidated statements of operations when incurred.  These costs reflect services performed by third parties and principally include due diligence and legal services.

Earnings Per Share

We present both basic and diluted earnings per share (“EPS”) amounts in our financial statements.  Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the maximum potential dilution that could occur from (i) our share-based compensation, consisting of unvested restricted stock (“RSAs”) and restricted stock units (“RSUs”), (ii) shares contingently issuable to our Manager, and (iii) the “in-the-money” conversion options associated with our outstanding convertible notes (see further discussion in Note 17). Potential dilutive shares are excluded from the calculation if they have an anti-dilutive effect in the period.

The Company’s unvested RSUs and RSAs 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 shares of common stock and participating securities.  For the three and nine months ended September 30, 2015 and 2014, the two-class method resulted in the most dilutive EPS calculation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. 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

Certain prior period amounts have been reclassified to conform to our current period presentation.  In that regard, we have reclassified $39.9 million of commercial real estate properties from other assets to properties, net on our condensed consolidated balance sheet as of December 31, 2014.  Additionally, revenues of $3.4 million and $6.5 million previously reported in other revenue have been reclassified to rental income in our condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.  Expenses of $1.8 million and $3.9 million previously reported in other expense have been reclassified to costs of rental operations in our condensed consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.

Recent Accounting Developments

On February 18, 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis, which amends the criteria for determining which entities are considered VIEs, amends the criteria for determining if a service provider possesses a variable interest in a VIE and ends the deferral granted to investment companies for application of the VIE consolidation model. The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2015. Early application is permitted. We are in the process of assessing what impact this ASU will have on the Company. 

On April 7, 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30), which requires entities to present debt issuance costs as a direct deduction from the carrying value of the related debt liability, consistent with debt discounts, rather than as a separate deferred asset as the previous guidance required.  The ASU is effective for annual periods, and interim periods therein, beginning after December 15, 2015.  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.  At issuance, the ASU was effective for the first interim or annual period beginning after December 15, 2016. On August 12, 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers – Deferral of the Effective Date, which delayed the effective date of ASU 2014-09 by one year, resulting in the ASU becoming effective for the first interim or annual period beginning after December 15, 2017.  Early application, which was not permissible under the initial effectiveness timeline, is now permissible though no earlier than as of the first interim or annual period beginning after December 15, 2016.  We do not expect the application of this ASU to materially impact the Company.

On September 25, 2015, the FASB issued ASU 2015-16,  Business Combinations (Topic 805) – Simplifying the Accounting for Measurement-Period Adjustments, which requires that the acquirer in a business combination recognize any measurement period adjustments in the period in which the adjustments are identified rather than retrospectively as of the acquisition date, as current GAAP dictates.  The ASU shall be applied prospectively and is effective for annual periods, and interim periods therein, beginning after December 15, 2015.  Early application is permitted.We intend to early adopt this ASU by recognizing any future measurement period adjustments in the period identified. 

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Investment Securities (Details) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2015 USD ($)	Sep. 30, 2014 USD ($)	Sep. 30, 2015 USD ($) item	Sep. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Investment Securities
Investment securities	$ 786,461		$ 786,461		$ 998,248
Purchases	15,595	$ 13,777	163,018	$ 67,230
Sales	1,203	5,588	6,301	100,166
Principal collections	100,316	21,885	$ 348,090	40,999
Number of CMBS classified as HTM | item			6
Before consolidation of securitization VIEs
Investment Securities
Investment securities	1,491,416		$ 1,491,416		1,518,070
Available-for-sale
Investment Securities
Purchase Amortized Cost	153,694		153,694		257,418
Credit OTTI	(10,184)		(10,184)		(10,197)
Recorded Amortized Cost	143,510		143,510		247,221
Non-Credit OTTI	(175)		(175)		(197)
Gross Unrealized Gains	41,450		41,450		60,378
Net Fair Value Adjustment	41,275		41,275		60,181
Fair Value	$ 184,785		$ 184,785		$ 307,402
Available-for-sale | One-month LIBOR
Investment Securities
Effective variable rate basis (as a percent)	0.193%		0.193%		0.171%
Fair value option | VIE eliminations
Investment Securities
Investment securities	$ (704,955)		$ (704,955)		$ (519,822)
Held-to-maturity
Investment Securities
Purchases	9,930		148,365
Principal collections	21	14	228,956	38
Held-to-maturity | Before consolidation of securitization VIEs
Investment Securities
Investment securities	365,005		365,005		441,995
RMBS
Investment Securities
Portion of securities with variable rate	128,400		128,400
RMBS | Available-for-sale
Investment Securities
Sales		5,588		68,134
Principal collections	8,500	21,870	27,114	40,155
Purchase Amortized Cost	153,694		153,694		163,733
Credit OTTI	(10,184)		(10,184)		(10,197)
Recorded Amortized Cost	143,510		143,510		153,536
Non-Credit OTTI	(175)		(175)		(197)
Gross Unrealized Gains	41,450		41,450		53,714
Net Fair Value Adjustment	41,275		41,275		53,517
Fair Value	$ 184,785		$ 184,785		207,053
Portion of securities with variable rate					$ 140,100
Portion of securities with variable rate (as a percent)	69.50%		69.50%		67.70%
Principal balance	$ 242,219		$ 242,219		$ 270,783
Accretable yield	(73,361)		(73,361)		(85,495)
Non-accretable difference	(25,348)		(25,348)		(31,752)
Total discount	(98,709)		(98,709)		(117,247)
Amortized cost	143,510		143,510		153,536
Credit deteriorated RMBS	205,200		205,200		222,900
Accretable yield related to credit deteriorated RMBS	61,900		61,900		66,600
Changes to accretable yield
Balance at the beginning of the period	74,184		85,495
Accretion of discount	(3,600)		(17,087)
Principal write-downs	(484)		(1,451)
Transfer to/from non-accretable difference	2,777		4,953
Balance at the end of the period	73,361		73,361		85,495
Changes to non accretable difference
Balance at the beginning of the period	28,609		31,752
Accretion of discount	(3,600)		(17,087)
Principal write-downs	(484)		(1,451)
Transfer to/from non-accretable difference	(2,777)		(4,953)
Balance at the end of the period	$ 25,348		$ 25,348		$ 31,752
RMBS | Available-for-sale | LIBOR
Investment Securities
Variable rate, weighted average spread (as a percent)			0.43%		0.44%
RMBS | Available-for-sale | B-
Investment Securities
Weighted Average Coupon (as a percent)	1.10%		1.10%		1.10%
WAL			6 years 3 months 18 days		5 years 9 months 18 days
RMBS | Available-for-sale | Before consolidation of securitization VIEs
Investment Securities
Investment securities	$ 184,785		$ 184,785		$ 207,053
CMBS | Available-for-sale
Investment Securities
Principal collections	91,794		92,018	805
Purchase Amortized Cost					93,685
Recorded Amortized Cost					93,685
Gross Unrealized Gains					6,664
Net Fair Value Adjustment					6,664
Fair Value					100,349
Portion of securities with variable rate					$ 200
Portion of securities with variable rate (as a percent)					0.20%
Principal balance					$ 93,685
Amortized cost					$ 93,685
CMBS | Available-for-sale | BB+
Investment Securities
Weighted Average Coupon (as a percent)					11.60%
WAL					3 years 2 months 12 days
CMBS | Available-for-sale | Before consolidation of securitization VIEs
Investment Securities
Investment securities					$ 100,349
CMBS | Fair value option
Investment Securities
Purchases	5,665	13,777	14,653	67,230
Sales	1,203		6,301	32,032
Principal collections	$ 1	$ 1	$ 2	$ 1
Weighted Average Coupon (as a percent)	3.50%		3.50%		3.90%
WAL			7 years 4 months 24 days		7 years 8 months 12 days
CMBS | Fair value option | Before consolidation of securitization VIEs
Investment Securities
Investment securities	$ 927,315		$ 927,315		$ 753,553
Equity security | Fair value option | Before consolidation of securitization VIEs
Investment Securities
Investment securities	14,311		14,311		15,120
CMBS, fair value option
Investment Securities
Amount not rated	35,800		35,800		$ 41,700
Portion of securities with variable rate	$ 0		$ 0

XML

Accumulated Other Comprehensive Income (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Accumulated Other Comprehensive Income
Interest expense	$ (50,688)	$ (39,739)	$ (151,021)	$ (115,265)
Interest income from investment securities	24,674	28,640	76,228	85,714
Included in earnings: OTTI				(1,010)
Net income	117,116	167,390	355,535	408,653
Amounts Reclassified from AOCI
Accumulated Other Comprehensive Income
Net income	(6,156)	(108)	(1,158)	10,648
Effective Portion of Cumulative Loss on Cash Flow Hedges | Interest rate contracts | Amounts Reclassified from AOCI
Accumulated Other Comprehensive Income
Interest expense	(187)	(344)	(585)	(1,081)
Cumulative Unrealized Gain on Available-for-Sale Securities | Amounts Reclassified from AOCI
Accumulated Other Comprehensive Income
Interest income from investment securities			5,396
Foreign currency loss, net	$ (5,969)		(5,969)
Gain on sale of investments, net		236		11,942
Included in earnings: OTTI				(213)
Net income		$ 236	$ 5,396	$ 11,729

XML

Derivatives and Hedging Activity (Details) - 9 months ended Sep. 30, 2015 € in Thousands, £ in Thousands, SEK in Thousands, NOK in Thousands, DKK in Thousands, $ in Thousands	SEK instrument item	NOK instrument item	GBP (£) instrument item	DKK instrument item	EUR (€) instrument item	USD ($) instrument item
Derivatives
Number of contracts	247	247	247	247	247	247
Foreign exchange contracts | GBP | Sell
Derivatives
Number of contracts	63	63	63	63	63	63
Aggregate notional amount | £			£ 257,203
Foreign exchange contracts | EUR | Sell
Derivatives
Number of contracts	87	87	87	87	87	87
Aggregate notional amount | €					€ 352,420
Foreign exchange contracts | EUR | Sell | Ireland Portfolio
Derivatives
Number of contracts	59	59	59	59	59	59
Aggregate notional amount | €					€ 259,700
Foreign exchange contracts | SEK | Buy
Derivatives
Number of contracts	1	1	1	1	1	1
Aggregate notional amount | SEK	SEK 4,083
Foreign exchange contracts | SEK | Sell
Derivatives
Number of contracts	2	2	2	2	2	2
Aggregate notional amount | SEK	SEK 19,197
Foreign exchange contracts | NOK | Sell
Derivatives
Number of contracts	1	1	1	1	1	1
Aggregate notional amount | NOK		NOK 1,218
Foreign exchange contracts | DKK | Sell
Derivatives
Number of contracts	1	1	1	1	1	1
Aggregate notional amount | DKK				DKK 3,200
Interest rate swaps | Paying fixed rates
Derivatives
Number of contracts	73	73	73	73	73	73
Aggregate notional amount | $						$ 513,218
Interest rate swaps | Receiving fixed rates
Derivatives
Number of contracts	4	4	4	4	4	4
Aggregate notional amount | $						$ 14,300
Interest rate swaps | Derivatives designated as hedging instruments
Derivatives
Number of contracts | instrument	8	8	8	8	8	8
Aggregate notional amount | $						$ 87,500
Fixed monthly coupons at fixed rate, low end of range (as a percent)	0.56%	0.56%	0.56%	0.56%	0.56%	0.56%
Fixed monthly coupons at fixed rate, high end of range (as a percent)	2.23%	2.23%	2.23%	2.23%	2.23%	2.23%
Amount expected to be reclassified from other comprehensive income to interest expense over the next twelve months | $						$ 400
Hedging period for covering exposure to the variability in future cash flows	68 months
Interest rate caps | EUR
Derivatives
Number of contracts	2	2	2	2	2	2
Aggregate notional amount | €					€ 294,000
Interest rate caps | USD
Derivatives
Number of contracts	2	2	2	2	2	2
Aggregate notional amount | $						$ 17,835
Credit index instruments
Derivatives
Number of contracts	11	11	11	11	11	11
Aggregate notional amount | $						$ 40,000

XML

Fair Value

9 Months Ended

Sep. 30, 2015

Fair Value

Fair Value

19. 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 20 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 September 30, 2015 and December 31, 2014 (amounts in thousands):

	September 30, 2015
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	423,630	$	—	$	—	$	423,630
RMBS		184,785		—		—		184,785
CMBS		222,360		—		—		222,360
Equity security		14,311		14,311		—		—
Domestic servicing rights		123,892				—		123,892
Derivative assets		36,307		—		36,307		—
VIE assets		82,937,617		—		—		82,937,617
Total	$	83,942,902	$	14,311	$	36,307	$	83,892,284
Financial Liabilities:
Derivative liabilities	$	14,901	$	—	$	14,901	$	—
VIE liabilities		82,181,138		—		79,177,561		3,003,577
Total	$	82,196,039	$	—	$	79,192,462	$	3,003,577

	December 31, 2014
	Total		Level I		Level II		Level III
Financial Assets:
Loans held-for-sale, fair value option	$	391,620	$	—	$	—	$	391,620
RMBS		207,053		—		—		207,053
CMBS		334,080		—		—		334,080
Equity security		15,120		15,120		—		—
Domestic servicing rights		132,303		—		—		132,303
Derivative assets		26,628		—		26,628		—
VIE assets		107,816,065		—		—		107,816,065
Total	$	108,922,869	$	15,120	$	26,628	$	108,881,121
Financial Liabilities:
Derivative liabilities	$	5,476	$	—	$	5,476	$	—
VIE liabilities		107,232,201		—		102,339,081		4,893,120
Total	$	107,237,677	$	—	$	102,344,557	$	4,893,120

The changes in financial assets and liabilities classified as Level III were as follows for the three and nine months ended September 30, 2015 and 2014 (amounts in thousands):

							Domestic
	Loans						Servicing				VIE
Three Months Ended September 30, 2015	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
July 1, 2015 balance	$	279,352	$	193,150	$	314,152	$	128,109	$	92,719,092	$	(2,111,011)	$	91,522,844
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		19,082		—		(2,835)		(4,217)		(10,394,490)		615,263		(9,767,197)
OTTI		—		—		—		—		—		—		—
Net accretion		—		3,600		—		—		—		—		3,600
Included in OCI		—		(3,465)		(2,164)		—		—		—		(5,629)
Purchases / Originations		535,580		—		5,665		—		—		—		541,245
Sales		(410,227)		—		(1,203)		—		—		—		(411,430)
Issuances		—		—		—		—		—		(1,619)		(1,619)
Cash repayments / receipts		(157)		(8,500)		(91,795)		—		—		96,896		(3,556)
Transfers into Level III		—		—		—		—		—		(1,773,898)		(1,773,898)
Transfers out of Level III		—		—		—		—		—		232,484		232,484
Consolidations of VIEs		—		—		—		—		2,410,232		(80,149)		2,330,083
Deconsolidations of VIEs		—		—		540		—		(1,797,217)		18,457		(1,778,220)
September 30, 2015 balance	$	423,630	$	184,785	$	222,360	$	123,892	$	82,937,617	$	(3,003,577)	$	80,888,707
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2015	$	5,482	$	3,600	$	3,212	$	(4,217)	$	(10,394,490)	$	615,263	$	(9,771,150)

							Domestic
	Loans						Servicing				VIE
Three Months Ended September 30, 2014	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
July 1, 2014 balance	$	154,412	$	231,605	$	282,361	$	138,318	$	114,091,158	$	(5,186,125)	$	109,711,729
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		15,517		535		2,471		(7,898)		(5,261,507)		237,693		(5,013,189)
Net accretion		—		4,035		—		—		—		—		4,035
Included in OCI		—		7,602		(9,662)		—		—		—		(2,060)
Purchases / Originations		577,216		—		13,777		—		—		—		590,993
Sales		(498,789)		(5,588)		—		—		—		—		(504,377)
Issuances		—		—		—		—		—		(16,655)		(16,655)
Cash repayments / receipts		(191)		(21,870)		23		—		—		20,189		(1,849)
Transfers into Level III		—		—		1,440		—		—		(770,785)		(769,345)
Transfers out of Level III		—		—		—		—		—		1,940,522		1,940,522
Consolidations of VIEs		—		—		—		—		3,103,150		(48,745)		3,054,405
Deconsolidations of VIEs		—		—		635		—		(2,464,508)		12,167		(2,451,706)
September 30, 2014 balance	$	248,165	$	216,319	$	291,045	$	130,420	$	109,468,293	$	(3,811,739)	$	106,542,503
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2014	$	(455)	$	3,963	$	2,471	$	(7,898)	$	(5,261,507)	$	237,693	$	(5,025,733)

							Domestic
	Loans						Servicing				VIE
Nine Months Ended September 30, 2015	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		Liabilities		Total
January 1, 2015 balance	$	391,620	$	207,053	$	334,080	$	132,303	$	107,816,065	$	(4,893,120)	$	103,988,001
Total realized and unrealized gains (losses):
Included in earnings:
Change in fair value / gain on sale		51,044		—		(2,059)		(8,411)		(27,667,727)		3,566,846		(24,060,307)
OTTI		—		—		—		—		—		—		—
Net accretion		—		17,087		—		—		—		—		17,087
Included in OCI		—		(12,241)		(2,362)		—		—		—		(14,603)
Purchases / Originations		1,425,499		—		14,653		—		—		—		1,440,152
Sales		(1,443,871)		—		(6,301)		—		—		—		(1,450,172)
Issuances		—		—		—		—		—		(9,132)		(9,132)
Cash repayments / receipts		(662)		(27,114)		(92,018)		—		—		171,884		52,090
Transfers into Level III		—		—		—		—		—		(2,589,916)		(2,589,916)
Transfers out of Level III		—		—		—		—		—		956,230		956,230
Consolidations of VIEs		—		—		(24,310)		—		8,067,859		(225,354)		7,818,195
Deconsolidations of VIEs		—		—		677		—		(5,278,580)		18,985		(5,258,918)
September 30, 2015 balance	$	423,630	$	184,785	$	222,360	$	123,892	$	82,937,617	$	(3,003,577)	$	80,888,707
Amount of total gains (losses) included in earnings attributable to assets still held at September 30, 2015	$	5,126	$	11,594	$	4,171	$	(8,411)	$	(27,667,727)	$	3,566,846	$	(24,088,401)

							Domestic
	Loans						Servicing				VIE
Nine Months Ended September 30, 2014	Held‑for‑sale		RMBS		CMBS		Rights		VIE Assets		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 gains (losses):
Included in earnings:
Change in fair value / gain on sale		47,955		11,676		12,070		(18,671)		(12,275,130)		337,529		(11,884,571)
OTTI		—		(214)		—		—		—		—		(214)
Net accretion		—		13,922		—		—		—		—		13,922
Included in OCI		—		2,988		(7,455)		—		—		—		(4,467)
Purchases / Originations		1,159,607		—		60,348		—		—		—		1,219,955
Sales		(1,052,862)		(68,134)		(29,301)		—		—		—		(1,150,297)
Issuances		—		—		—		—		—		(88,412)		(88,412)
Cash repayments / receipts		(487)		(40,155)		(806)		—		—		106,538		65,090
Transfers into Level III		—		—		54,221		—		—		(3,325,922)		(3,271,701)
Transfers out of Level III		(112,720)		—		(180)		(1,058)		—		2,653,379		2,539,421
Consolidations of VIEs		—		—		(6,715)		—		27,094,681		(1,941,689)		25,146,277
Deconsolidations of VIEs		—		—		857		—		(8,502,882)		44,822		(8,457,203)
September 30, 2014 balance	$	248,165	$	216,319	$	291,045	$	130,420	$	109,468,293	$	(3,811,739)	$	106,542,503
Amount of total (losses) gains included in earnings attributable to assets still held at September 30, 2014	$	(455)	$	11,742	$	14,907	$	(18,671)	$	(12,275,130)	$	337,529	$	(11,930,078)

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

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

	September 30, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
Financial assets not carried at fair value:
Loans held-for-investment, loans held-for-sale and loans transferred as secured borrowings	$	5,984,540	$	6,083,182	$	5,908,665	$	6,034,838
Securities, held-to-maturity		365,005		362,026		441,995		440,629
European servicing rights		3,772		7,684		11,849		12,741
Financial liabilities not carried at fair value:
Secured financing agreements and secured borrowings on transferred loans	$	3,826,200	$	3,815,875	$	3,267,230		3,251,035
Convertible senior notes		1,320,207		1,339,173		1,418,022		1,444,975

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	Unobservable	Range as of (1)
	September 30, 2015		Technique	Input	September 30, 2015	December 31, 2014
Loans held-for-sale, fair value option	$	423,630	Discounted cash flow	Yield (b)	4.3% - 4.9%	4.2% - 4.9%
				Duration (c)	5.0 - 10.0 years	5.0 - 10.0 years
RMBS		184,785	Discounted cash flow	Constant prepayment rate (a)	2.6% - 14.7%	1.2% - 15.9%
				Constant default rate (b)	0.9% - 9.1%	1.1% - 8.9%
				Loss severity (b)	9% - 79% (e)	15% - 80% (e)
				Delinquency rate (c)	2% - 29%	2% - 43%
				Servicer advances (a)	28% - 92%	14% - 75%
				Annual coupon deterioration (b)	0% - 0.5%	0% - 0.6%
				Putback amount per projected total collateral loss (d)	0% - 11%	0% - 11%
CMBS		222,360	Discounted cash flow	Yield (b)	0% - 779.7%	0% - 421.4%
				Duration (c)	0 - 13.2 years	0 - 11.8 years
Domestic servicing rights		123,892	Discounted cash flow	Debt yield (a)	8.25%	8.25%
				Discount rate (b)	15%	15%
				Control migration (b)	0% - 80%	0% - 80%
VIE assets		82,937,617	Discounted cash flow	Yield (b)	0% - 907.4%	0% - 925.0%
				Duration (c)	0 - 18.6 years	0 - 21.0 years
VIE liabilities		3,003,577	Discounted cash flow	Yield (b)	0% - 907.4%	0% - 925.0%
				Duration (c)	0 - 18.6 years	0 - 21.0 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) 75% and 85% of the portfolio falls within a range of 45%-80% as of September 30, 2015 and December 31, 2014, respectively.

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Related-Party Transactions (Details) - USD ($) $ in Millions	1 Months Ended			3 Months Ended		9 Months Ended
	May. 31, 2015	Jan. 31, 2014	Oct. 31, 2012	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Related-Party Transactions
Granted (in shares)						1,208,267
Starwood Property Trust, Inc. Manager Equity Plan
Related-Party Transactions
Granted (in shares)						675,000
Starwood Property Trust, Inc. Manager Equity Plan | Restricted stock units
Related-Party Transactions
Granted (in shares)	675,000	2,000,000	875,000
Manager
Related-Party Transactions
Base management fee incurred				$ 15.2	$ 13.8	$ 44.0	$ 40.7
Base management fee payable				15.2		15.2		$ 13.9
Incentive fee incurred				5.3	4.3	16.1	15.5
Incentive fees payable				5.4		5.4		18.9
Executive compensation and other reimbursable expenses				1.7		4.6	5.7
Executive compensation and other reimbursable expense payable				2.1		2.1		$ 3.4
Manager | Starwood Property Trust, Inc. Manager Equity Plan | Restricted stock units
Related-Party Transactions
Granted (in shares)	675,000	2,489,281
Share-based compensation expense				$ 7.1	$ 6.3	$ 21.4	$ 19.8

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Goodwill and Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets

Summary of intangibles assets

The following table summarizes our intangible assets, which are comprised of servicing rights intangibles and lease intangibles, as of September 30, 2015 and December 31, 2014 (amounts in thousands):

	As of September 30, 2015						As of December 31, 2014
	Gross Carrying		Accumulated		Net Carrying		Gross Carrying		Accumulated		Net Carrying
	Value		Amortization		Value		Value		Amortization		Value
Domestic servicing rights, at fair value	$	123,892	$	—	$	123,892	$	132,303	$	—	$	132,303
European servicing rights (1)		32,429		(28,657)		3,772		33,392		(21,543)		11,849
In-place lease intangible assets		54,245		(3,397)		50,848		—		—		—
Favorable lease intangible assets		13,074		(506)		12,568		—		—		—
Total net intangible assets	$	223,640	$	(32,560)	$	191,080	$	165,695	$	(21,543)	$	144,152

The fair value as of September 30, 2015 and December 31, 2014 was $7.7million and $12.7 million, respectively.

Summary of activity within intangible assets

The following table summarizes the activity within intangible assets for the nine months ended September 30, 2015 (amounts in thousands):

	Domestic		European		In-place Lease		Favorable Lease
	Servicing		Servicing		Intangible		Intangible
	Rights		Rights		Assets		Assets		Total
Balance as of January 1, 2015	$	132,303	$	11,849	$	—	$	—	$	144,152
Acquisition of Ireland Portfolio		—		—		47,999		11,530		59,529
Properties acquired from CMBS trusts		—		—		5,842		1,412		7,254
Amortization		—		(7,814)		(3,384)		(504)		(11,702)
Foreign exchange (loss) gain		—		(263)		391		130		258
Changes in fair value due to changes in inputs and assumptions		(8,411)		—		—		—		(8,411)
Balance as of September 30, 2015	$	123,892	$	3,772	$	50,848	$	12,568	$	191,080

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Derivatives and Hedging Activity

9 Months Ended

Sep. 30, 2015

Derivatives and Hedging Activity

Derivatives and Hedging Activity

12. Derivatives and Hedging Activity

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from both our business operations and economic conditions. Refer to Note 12 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 eight outstanding interest rate swaps that have been designated as cash flow hedges of the interest rate risk associated with forecasted interest payments. As of September 30, 2015, the aggregate notional amount of our interest rate swaps designated as cash flow hedges of interest rate risk totaled $87.5million. 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 nine months ended September 30, 2015 and 2014 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 $0.4million 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 68 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.

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 June 2020. 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 investments.

The following table summarizes our foreign exchange (“Fx”) forwards, interest rate swaps, interest rate caps and credit index instruments as of September 30, 2015 (notional amounts in thousands):

		Aggregate
	Number	Notional	Notional
Type of Derivative	of Contracts	Amount	Currency	Maturity
Fx contracts – Sell Euros ("EUR") (1)	87	352,420	EUR	October 2015 – June 2020
Fx contracts – Sell Pounds Sterling ("GBP")	63	257,203	GBP	October 2015 – March 2018
Fx contracts – Sell Swedish Krona ("SEK")	2	19,197	SEK	December 2015
Fx contracts – Buy SEK	1	4,083	SEK	December 2015
Fx contracts – Sell Norwegian Krone ("NOK")	1	1,218	NOK	December 2015
Fx contracts – Sell Danish Krone ("DKK")	1	3,200	DKK	December 2015
Interest rate swaps – Paying fixed rates	73	513,218	USD	July 2016 – October 2025
Interest rate swaps – Receiving fixed rates	4	14,300	USD	October 2015 – September 2025
Interest rate caps	2	294,000	EUR	May 2020
Interest rate caps	2	17,835	USD	June 2018
Credit index instruments	11	40,000	USD	January 2047
Total	247

(1) Includes 59 Fx contracts executed to hedge our Euro currency exposure created by our acquisition of the Ireland Portfolio.  As of September 30, 2015, these contracts have an aggregate notional of €259.7million and varying maturities through June 2020.

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 September 30, 2015 and December 31, 2014 (amounts in thousands):

	Fair Value of Derivatives in an				Fair Value of Derivatives in a
	Asset Position(1) As of				Liability Position(2) As of
	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
Derivatives designated as hedging instruments:
Interest rate swaps	$	6	$	138	$	451	$	235
Total derivatives designated as hedging instruments		6		138		451		235
Derivatives not designated as hedging instruments:
Interest rate swaps and caps		2,981		1,128		13,508		5,216
Foreign exchange contracts		31,657		24,388		942		15
Credit index instruments		1,663		974		—		10
Total derivatives not designated as hedging instruments		36,301		26,490		14,450		5,241
Total derivatives	$	36,307	$	26,628	$	14,901	$	5,476

(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 nine months ended September 30, 2015 and 2014 (amounts in thousands):

			Gain (Loss)
	Gain (Loss)		Reclassified		Gain (Loss)
Derivatives Designated as	Recognized		from AOCI		Recognized
Hedging Instruments	in OCI		into Income		in Income		Location of Gain (Loss)
For the Three Months Ended September 30,	(effective portion)		(effective portion)		(ineffective portion)		Recognized in Income
2015	$	(395)	$	(187)	$	—	Interest expense
2014	$	186	$	(344)	$	—	Interest expense
For the Nine Months Ended September 30,
2015	$	(933)	$	(585)	$	—	Interest expense
2014	$	(522)	$	(1,081)	$	—	Interest expense

		Amount of Gain (Loss)				Amount of Gain (Loss)
		Recognized in Income for the				Recognized in Income for the
Derivatives Not Designated	Location of Gain (Loss)	Three Months Ended September 30,				Nine Months Ended September 30,
as Hedging Instruments	Recognized in Income	2015		2014		2015		2014
Interest rate swaps and caps	Gain on derivative financial instruments	$	(17,242)	$	1,054	$	(22,206)	$	(5,639)
Foreign exchange contracts	Gain on derivative financial instruments		18,957		28,123		29,129		18,293
Credit index instruments	Gain on derivative financial instruments		515		98		400		(1,035)
		$	2,230	$	29,275	$	7,323	$	11,619