Related-Party Transactions

3 Months Ended

Mar. 31, 2017

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 16 to the consolidated financial statements included in our Form 10-K for further discussion of this agreement.

Base Management Fee.  For the three months ended March 31, 2017 and 2016, approximately $16.9 million and $15.1 million, respectively, was incurred for base management fees. As of March 31, 2017 and December 31, 2016, there were $16.9 million and $15.7 million, respectively, of unpaid base management fees included in related-party payable in our condensed consolidated balance sheets.

Incentive Fee.  For the three months ended March 31, 2017 and 2016, approximately $5.5 million and $4.6 million, respectively, was incurred for incentive fees. As of March 31, 2017 and December 31, 2016, approximately $5.4 million and $19.0 million, respectively, of unpaid incentive fees were included in related-party payable in our condensed consolidated balance sheets.

Expense Reimbursement.  For the three months ended March 31, 2017 and 2016, approximately $1.6 million and $1.1 million, respectively, was incurred for executive compensation and other reimbursable expenses and recognized within general and administrative expenses in our condensed consolidated statements of operations. As of March 31, 2017 and December 31, 2016, approximately $3.7 million and $3.0 million, respectively, of unpaid reimbursable executive compensation and other expenses were included in related-party payable in our condensed consolidated balance sheets.

Equity Awards. In certain instances, we issue RSAs to certain employees of affiliates of our Manager who perform services for us.  During the three months ended March 31, 2017 and 2016, we granted 138,264 and 162,546 RSAs, respectively, at grant date fair values of $3.1 million for both periods. Expenses related to the vesting of awards to employees of affiliates of our Manager were $0.6 million and $0.4 million during the three months ended March 31, 2017 and 2016, respectively, and are reflected in general and administrative expenses in our condensed consolidated statements of operations. These shares generally vest over a three-year period.

Manager Equity Plan

In March 2017, we granted 1,000,000 RSUs to our Manager under the Starwood Property Trust, Inc. Manager Equity Plan (“Manager Equity Plan”). In May 2015, we granted 675,000 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 $1.5 million and $4.8 million within management fees in our condensed consolidated statements of operations for the three months ended March 31, 2017 and 2016, respectively. Refer to Note 16 for further discussion of these grants.

Investments in Loans and Securities

In March 2017, we were fully repaid $59.0 million upon the maturity of a subordinate single-borrower CMBS that we acquired in March 2015.  The bond was secured by 85 U.S. hotel properties, and the borrower was an affiliate of Starwood Distressed Opportunity Fund IX, an affiliate of our Manager. 

Refer to Note 16 to the consolidated financial statements included in our Form 10-K for further discussion of related-party agreements.