Related-Party Transactions	3 Months Ended
Mar. 31, 2020
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, 2020 and 2019, approximately $19.1 million and $19.6 million, respectively, was incurred for base management fees. As of March 31, 2020 and December 31, 2019, there were $19.1 million and $19.3 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, 2020 and 2019, approximately $15.8 million and $0.2 million, respectively, was incurred for incentive fees. As of March 31, 2020 and December 31, 2019, there were $15.8 million and $18.1 million, respectively, of unpaid incentive fees included in related-party payable in our condensed consolidated balance sheets. Expense Reimbursement. For both the three months ended March 31, 2020 and 2019, approximately $2.2 million 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, 2020 and December 31, 2019, approximately $4.4 million and $3.5 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, 2020 and 2019, we granted 341,635 and 114,216 RSAs, respectively, at grant date fair values of $3.9 million and $2.6 million, respectively. Expenses related to the vesting of awards to employees of affiliates of our Manager were $1.1 million and $0.8 million during the three months ended March 31, 2020 and 2019, 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 May 2017, the Company’s shareholders approved the Starwood Property Trust, Inc. 2017 Manager Equity Plan (the “2017 Manager Equity Plan”), which replaced the Starwood Property Trust, Inc. Manager Equity Plan (“Manager Equity Plan”). In September 2019, we granted 1,200,000 RSUs to our Manager under the 2017 Manager Equity Plan. In April 2018, we granted 775,000 RSUs to our Manager under the 2017 Manager Equity Plan. In March 2017, we granted 1,000,000 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 $5.2 million and $3.2 million within management fees in our condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019, respectively. Refer to Note 16 for further discussion of these grants. Investments in Loans In January 2020, the Company originated a $3.5 million bridge loan to a third party borrower for the development and recapitalization of luxury cabin rentals. In February 2020, the bridge loan was repaid, and the Company originated a $99.0 million first mortgage loan to the same borrower. The loan bears interest at a fixed rate of 10.5% plus fees and contains a term of 36 months with two one-year extension options. Certain members of our executive team and board of directors own equity interests in the borrower. The investment was approved by our independent directors. In January 2020, the Company co-originated a €70.3 million mezzanine loan with SEREF, an affiliate of our Manager, to the third party that acquired our property portfolio in Ireland in December 2019. The Company and SEREF each originated €35.2 million. The loan matures in October 2025. During the three months ended March 31, 2020, the Company acquired $100.8 million of loans from a residential mortgage originator in which it holds an equity interest. Additionally, as of March 31, 2020, the Company had an outstanding residential mortgage loan purchase commitment of $18.0 million to this residential mortgage originator. Refer to Note 7 for further discussion. Lease Arrangements In March 2020, we entered into an office lease agreement with an entity which is controlled by our Chairman and CEO through majority equity ownership of the entity. The leased premises are currently under construction and will serve as our new Miami Beach office when our existing lease in Miami Beach expires on December 31, 2021. The lease will commence after delivery of the office space to us, but no earlier than July 30, 2021. The lease is for approximately 74,000 square feet of office space, has an initial term of 15 years and requires monthly lease payments starting in the tenth month after lease commencement. The lease payments are based on an annual base rate of $52.00 per square foot that increases by 3% each anniversary following commencement, plus our pro rata share of building operating expenses. On April 30, 2020, we provided a $1.9 million cash security deposit to the landlord. Prior to the execution of this lease, we engaged an independent third party leasing firm and external counsel to advise the independent directors of our board of directors on market terms for the lease. The terms of the lease were approved by our independent directors. Other Related-Party Arrangements Highmark Residential (“Highmark”), an affiliate of our Manager, provides property management services for 21 properties within our Woodstar I Portfolio. Fees paid to Highmark are calculated as a percentage of gross receipts and are at market terms. During the three months ended March 31, 2020 and 2019, property management fees to Highmark of $0.5 million and $0.3 million, respectively, were recognized in our condensed consolidated statements of operations. Refer to Note 16 to the consolidated financial statements included in our Form 10-K for further discussion of related-party agreements.

Related-Party Transactions

3 Months Ended

Mar. 31, 2020

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, 2020 and 2019, approximately $19.1 million and $19.6 million, respectively, was incurred for base management fees. As of March 31, 2020 and December 31, 2019, there were $19.1 million and $19.3 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, 2020 and 2019, approximately $15.8 million and $0.2 million, respectively, was incurred for incentive fees. As of March 31, 2020 and December 31, 2019, there were $15.8 million and $18.1 million, respectively, of unpaid incentive fees included in related-party payable in our condensed consolidated balance sheets.

Expense Reimbursement. For both the three months ended March 31, 2020 and 2019, approximately $2.2 million 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, 2020 and December 31, 2019, approximately $4.4 million and $3.5 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, 2020 and 2019, we granted 341,635 and 114,216 RSAs, respectively, at grant date fair values of $3.9 million and $2.6 million, respectively. Expenses related to the vesting of awards to employees of affiliates of our Manager were $1.1 million and $0.8 million during the three months ended March 31, 2020 and 2019, 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 May 2017, the Company’s shareholders approved the Starwood Property Trust, Inc. 2017 Manager Equity Plan (the “2017 Manager Equity Plan”), which replaced the Starwood Property Trust, Inc. Manager Equity Plan (“Manager Equity Plan”). In September 2019, we granted 1,200,000 RSUs to our Manager under the 2017 Manager Equity Plan. In April 2018, we granted 775,000 RSUs to our Manager under the 2017 Manager Equity Plan. In March 2017, we granted 1,000,000 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 $5.2 million and $3.2 million within management fees in our condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019, respectively. Refer to Note 16 for further discussion of these grants.

Investments in Loans

In January 2020, the Company originated a $3.5 million bridge loan to a third party borrower for the development and recapitalization of luxury cabin rentals. In February 2020, the bridge loan was repaid, and the Company originated a $99.0 million first mortgage loan to the same borrower. The loan bears interest at a fixed rate of 10.5% plus fees and contains a term of 36 months with two one-year extension options. Certain members of our executive team and board of directors own equity interests in the borrower. The investment was approved by our independent directors.

In January 2020, the Company co-originated a €70.3 million mezzanine loan with SEREF, an affiliate of our Manager, to the third party that acquired our property portfolio in Ireland in December 2019. The Company and SEREF each originated €35.2 million. The loan matures in October 2025.

During the three months ended March 31, 2020, the Company acquired $100.8 million of loans from a residential mortgage originator in which it holds an equity interest. Additionally, as of March 31, 2020, the Company had an outstanding residential mortgage loan purchase commitment of $18.0 million to this residential mortgage originator. Refer to Note 7 for further discussion.

Lease Arrangements

In March 2020, we entered into an office lease agreement with an entity which is controlled by our Chairman and CEO through majority equity ownership of the entity. The leased premises are currently under construction and will serve as our new Miami Beach office when our existing lease in Miami Beach expires on December 31, 2021. The lease will commence after delivery of the office space to us, but no earlier than July 30, 2021. The lease is for approximately 74,000 square feet of office space, has an initial term of 15 years and requires monthly lease payments starting in the tenth month after lease commencement. The lease payments are based on an annual base rate of $52.00 per square foot that increases by 3% each anniversary following commencement, plus our pro rata share of building operating expenses. On April 30, 2020, we provided a $1.9 million cash security deposit to the landlord. Prior to the execution of this lease, we engaged an independent third party leasing firm and external counsel to advise the independent directors of our board of directors on market terms for the lease. The terms of the lease were approved by our independent directors.

Other Related-Party Arrangements

Highmark Residential (“Highmark”), an affiliate of our Manager, provides property management services for 21 properties within our Woodstar I Portfolio. Fees paid to Highmark are calculated as a percentage of gross receipts and are at market terms. During the three months ended March 31, 2020 and 2019, property management fees to Highmark of $0.5 million and $0.3 million, respectively, were recognized in our condensed consolidated statements of operations.

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