Unsecured Senior Notes

9 Months Ended

Sep. 30, 2021

Debt Instruments [Abstract]

Unsecured Senior Notes

Secured Borrowings

Secured Financing Agreements

The following table is a summary of our secured financing agreements in place as of September 30, 2021 and December 31, 2020 (dollars in thousands):

												Outstanding Balance at
	Current Maturity		Extended Maturity (a)		Weighted Average Pricing	Pledged Asset Carrying Value			Maximum Facility Size			September 30, 2021			December 31, 2020
Repurchase Agreements:
Commercial Loans	Mar 2022 to Jul 2026	(b)	Jun 2025 to Mar 2029	(b)	(c)	$	7,750,853		$	9,980,380	(d)	$	5,294,281		$	4,878,939
Residential Loans	Jun 2022 to Oct 2023		N/A		LIBOR + 2.01%	1,755,161			2,550,000			1,440,018			22,590
Infrastructure Loans	Sep 2024		Sep 2026		LIBOR + 2.00%	467,921			650,000			368,442			232,961
Conduit Loans	Feb 2022 to Jun 2024		Feb 2023 to Jun 2025		LIBOR + 1.99%	259,155			350,000			192,829			53,554
CMBS/RMBS	Dec 2021 to May 2031	(e)	Sep 2022 to Nov 2031	(e)	(f)	1,193,808			835,850			709,340		(g)	620,763
Total Repurchase Agreements						11,426,898			14,366,230			8,004,910			5,808,807
Other Secured Financing:
Borrowing Base Facility	Apr 2022		Apr 2024		LIBOR + 2.25%	73,502			650,000		(h)	2,000			43,014
Commercial Financing Facility	Mar 2022		Mar 2029		GBP LIBOR + 1.75%	177,424			142,872			142,872			81,218
Residential Financing Facility	Sep 2022		Sep 2025		3.50%	149,604			250,000			2,018			215,024
Infrastructure Acquisition Facility	N/A		N/A		N/A	—			—			—			467,450
Infrastructure Financing Facilities	Jul 2022 to Oct 2022		Oct 2024 to Jul 2027		LIBOR + 2.03%	688,488			1,250,000			544,582			538,645
Property Mortgages - Fixed rate	Nov 2024 to Aug 2052	(i)	N/A		4.03%	1,254,141			1,154,763			1,154,763			1,077,528
Property Mortgages - Variable rate	Nov 2021 to Jul 2030		N/A		(j)	898,634			969,790			945,311			960,903
Term Loan and Revolver	(k)		N/A		(k)	N/A		(k)	940,750			790,750			645,000
Federal Home Loan Bank	N/A		N/A		N/A	—			—			—			396,000
Total Other Secured Financing						3,241,793			5,358,175			3,582,296			4,424,782
						$	14,668,691		$	19,724,405		11,587,206			10,233,589
Unamortized net discount												(14,603)			(13,569)
Unamortized deferred financing costs												(70,551)			(73,830)
												$	11,502,052		$	10,146,190

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

(b)For certain facilities, borrowings collateralized by loans existing at maturity may remain outstanding until such loan collateral matures, subject to certain specified conditions.

(c)Certain facilities with an outstanding balance of $1.9 billion as of September 30, 2021 are indexed to GBP LIBOR, EURIBOR, BBSY and SONIA. The remainder have a weighted average rate of LIBOR + 1.94%.

(d)Certain facilities with an aggregate initial maximum facility size of $9.1 billion may be increased to $10.0 billion, subject to certain conditions. The $10.0 billion amount includes such upsizes.

(e)Certain facilities with an outstanding balance of $292.8 million as of September 30, 2021 carry a rolling 11-month or 12-month term which may reset monthly or quarterly with the lender's consent. These facilities carry no maximum facility size.

(f)A facility with an outstanding balance of $243.0 million as of September 30, 2021 has a weighted average fixed annual interest rate of 3.21%. All other facilities are variable rate with a weighted average rate of LIBOR + 1.76%.

(g)Includes: (i) $243.0 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $35.8 million outstanding on one of our repurchase facilities that represents the 49% pro rata share owed by a non-controlling partner in a consolidated joint venture (see Note 14).

(h)The initial maximum facility size of $300.0 million may be increased to $650.0 million, subject to certain conditions.

(i)The weighted average maturity is 6.0 years as of September 30, 2021.

(j)Includes a $600.0 million first mortgage and mezzanine loan secured by our Medical Office Portfolio. This debt has a weighted average interest rate of LIBOR + 2.07% that we swapped to a fixed rate of 3.34%. The remainder have a weighted average rate of LIBOR + 2.61%.

(k)Consists of: (i) a $790.8 million term loan facility that matures in July 2026, of which $392.0 million (the "Initial Borrowings") has an annual interest rate of LIBOR + 2.50% and $398.8 million (the "Incremental Borrowings") has an annual interest rate of LIBOR + 3.25%, subject to a 0.75% LIBOR floor, and (ii) a $150.0 million revolving credit

facility that matures in April 2026 with an annual interest rate of SOFR + 2.50%. These facilities are secured by the equity interests in certain of our subsidiaries which totaled $4.7 billion as of September 30, 2021.

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

In January 2021, we entered into a Residential Loans repurchase facility to finance residential loans. The facility carries a one-year term, which we intend to extend every three months, and an annual interest rate of one-month LIBOR + 2.00% to 2.50%, subject to a 0.25% LIBOR floor. The maximum facility size was initially $375.0 million and was increased to $1.0 billion in March 2021.

In March 2021, we entered into mortgage loans with total borrowings of $82.9 million to refinance our Woodstar II Portfolio. The loans carry seven-year terms and a weighted average fixed annual interest rate of 4.36%. A portion of the net proceeds from the mortgage loans was used to repay $4.9 million of outstanding government sponsored mortgage loans.

In May 2021, we entered into a Residential Loans repurchase facility to finance residential loans. The facility carries a 15-month term, which renews to a new 15-month term every three months, and an annual interest rate of one-month LIBOR + 2.25%, subject to a 0.15% LIBOR floor. The maximum facility size was initially $150.0 million and was increased to $300.0 million during the three months ended September 30, 2021.

In August 2021, we amended a Residential Loans repurchase facility to increase the available borrowings from $1.0 billion to $1.5 billion. The margin call provisions under this facility do not permit valuation adjustments based on capital market events and are limited to collateral-specific credit marks.

In August 2021, we entered into a Commercial Loans repurchase facility to provide short-term bridge financing for loans denominated in foreign currency. The facility carries a three-year term, with a one-year extension option, and has a maximum facility size of £250.0 million and an interest rate of the applicable index + 1.50%. The margin call provisions under this facility do not permit valuation adjustments based on capital market events and are limited to collateral-specific credit marks.

In September 2021, we amended an Infrastructure Loans repurchase facility. The amendment provides for a temporary increase to available borrowings from $500.0 million to $650.0 million, with available capacity decreasing to $600.0 million in September 2022, $550.0 million in December 2022 and back to $500.0 million in March 2023. The amendment also extends the current maturity from February 2022 to September 2024, with two one-year extension options. In connection with this amendment, we terminated the Infrastructure Acquisition Facility and transferred the related financing to the amended repurchase facility. The facility carries an annual interest rate of LIBOR + 2.00%.

In September 2021, we amended the Term Loan facility to increase the Incremental Borrowings by $150.0 million and reduce the annual interest rate by 0.25% to LIBOR + 3.25% on all the Incremental Borrowings, subject to a 0.75% LIBOR floor. Additionally, we increased the maximum facility size of the revolver by $30.0 million to $150.0 million, reduced the annual rate by 0.50% to SOFR + 2.50% and extended the maturity from July 2024 to April 2026.

Our secured financing agreements contain certain financial tests and covenants. As of September 30, 2021, we were in compliance with all such covenants.

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 64% of these agreements, do not permit valuation adjustments based on capital market events and are limited to collateral-specific credit marks generally determined on a commercially reasonable basis. 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 the 36% of repurchase agreements which do permit valuation adjustments based on capital market events, approximately 7% of 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 agreement.

For the three and nine months ended September 30, 2021, approximately $8.6 million and $26.9 million, respectively, of amortization of deferred financing costs from secured financing agreements was included in interest expense on our condensed consolidated statements of operations. For the three and nine months ended September 30, 2020, approximately

$9.5 million and $27.3 million, respectively, of amortization of deferred financing costs from secured financing agreements was included in interest expense on our condensed consolidated statements of operations.

As of September 30, 2021, JPMorgan Chase Bank, N.A. and Morgan Stanley Bank, N.A. held collateral sold under certain of our repurchase agreements with carrying values that exceeded the respective repurchase obligations by $785.7 million and $579.5 million, respectively. The weighted average extended maturities of those repurchase agreements were 4.0 and 4.1 years, respectively.

Collateralized Loan Obligations and Single Asset Securitization

Commercial and Residential Lending Segment

In July 2021, we contributed into a single asset securitization, STWD 2021-HTS, a previously originated $230.0 million first mortgage and mezzanine loan on a portfolio of 41 extended stay hotels with $210.1 million of third party financing at an average coupon of LIBOR + 2.22%.

In May 2021, we refinanced a pool of our commercial loans held-for-investment through a CLO, STWD 2021-FL2. On the closing date, the CLO issued $1.3 billion of notes and preferred shares, of which $1.1 billion of notes was purchased by third party investors. We retained $70.1 million of notes, along with preferred shares with a liquidation preference of $127.5 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash. During the nine months ended September 30, 2021, we utilized the reinvestment feature, contributing $1.0 million of additional interests into the CLO.

In August 2019, we refinanced a pool of our commercial loans held-for-investment through a CLO, STWD 2019-FL1. On the closing date, the CLO issued $1.1 billion of notes and preferred shares, of which $936.4 million of notes was purchased by third party investors. We retained $86.6 million of notes, along with preferred shares with a liquidation preference of $77.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash. During the nine months ended September 30, 2021, we utilized the reinvestment feature, contributing $163.7 million of additional interests into the CLO.

Infrastructure Lending Segment

In April 2021, we refinanced a pool of our infrastructure loans held-for-investment through a CLO, STWD 2021-SIF1. On the closing date, the CLO issued $500.0 million of notes and preferred shares, of which $410.0 million of notes was purchased by third party investors. We retained preferred shares with a liquidation preference of $90.0 million. The CLO contains a reinvestment feature that, subject to certain eligibility criteria, allows us to contribute new loans or participation interests in loans to the CLO in exchange for cash. During the nine months ended September 30, 2021, we utilized the reinvestment feature, contributing $37.0 million of additional interests into the CLO.

The following table is a summary of our CLOs and our SASB as of September 30, 2021 and December 31, 2020 (amounts in thousands):

September 30, 2021	Count	Face Amount		Carrying Value		Weighted Average Spread		Maturity
STWD 2019-FL1
Collateral assets	25	$	1,034,361	$	1,103,259	LIBOR + 4.23%	(a)	September 2024	(b)
Financing	1	936,375		932,425		SOFR + 1.63%	(c)	July 2038	(d)
STWD 2021-FL2
Collateral assets	25	1,269,744		1,279,245		LIBOR + 4.23%	(a)	January 2025	(b)
Financing	1	1,077,375		1,069,014		LIBOR + 1.78%	(c)	April 2038	(d)
STWD 2021-SIF1
Collateral assets	31	494,065		510,592		LIBOR + 3.94%	(a)	March 2026	(b)
Financing	1	410,000		404,960		LIBOR + 2.15%	(c)	April 2032	(d)
STWD 2021-HTS
Collateral assets	1	230,000		230,562		LIBOR + 4.34%	(a)	April 2026	(b)
Financing	1	210,091		207,831		LIBOR + 2.47%	(c)	April 2034	(d)
Total
Collateral assets		$	3,028,170	$	3,123,658
Financing		$	2,633,841	$	2,614,230
December 31, 2020
STWD 2019-FL1
Collateral assets	23	$	1,002,445	$	1,099,439	LIBOR + 3.93%	(a)	April 2024	(b)
Financing	1	936,375		930,554		LIBOR + 1.64%	(c)	July 2038	(d)

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(a)Represents the weighted-average coupon earned on variable rate loans during the respective year-to-date period. Of the loans financed by the STWD 2021-FL2 CLO as of September 30, 2021, 7% earned fixed-rate weighted average interest of 7.55%. Of the loans financed by the STWD 2021-SIF1 CLO as of September 30, 2021, 2% earned fixed-rate weighted average interest of 5.62%.

(b)Represents the weighted-average maturity, assuming the extended contractual maturity of the collateral assets.

(c)Represents the weighted-average cost of financing incurred during the respective year-to-date period, inclusive of deferred issuance costs.

(d)Repayments of the CLO and SASB are tied to timing of the related collateral asset repayments. The term of the CLO and SASB financing obligation represents the legal final maturity date.

We incurred $26.9 million of issuance costs in connection with the CLOs and SASB, which are amortized on an effective yield basis over the estimated life of the CLOs and SASB. For the three and nine months ended September 30, 2021, approximately $1.8 million and $3.9 million, respectively, of amortization of deferred financing costs was included in interest expense on our condensed consolidated statements of operations. For the three and nine months ended September 30, 2020, approximately $0.7 million and $1.9 million, respectively, of amortization of deferred financing costs was included in interest expense. As of September 30, 2021 and December 31, 2020, our unamortized issuance costs were $19.6 million and $5.8 million, respectively.

The CLOs and SASB are considered VIEs, for which we are deemed the primary beneficiary. We therefore consolidate the CLOs and SASB. Refer to Note 14 for further discussion.

Maturities

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 following table sets forth our principal repayments schedule for secured financings based on the earlier of (i) the extended contractual maturity of each credit facility or (ii) the extended contractual maturity of each of the investments that have been pledged as collateral under the respective credit facility (amounts in thousands):

	Repurchase Agreements		Other Secured Financing		CLOs and SASB (a)		Total
2021 (remainder of)	$	273,583	$	15,751	$	4,103	$	293,437
2022	1,998,566		35,189		125,338		2,159,093
2023	860,568		821,810		638,036		2,320,414
2024	824,181		214,086		485,408		1,523,675
2025	2,585,446		264,934		513,671		3,364,051
Thereafter	1,462,566		2,230,526		867,285		4,560,377
Total	$	8,004,910	$	3,582,296	$	2,633,841	$	14,221,047

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(a)For the CLOs, the above does not assume utilization of their reinvestment features. The SASB does not have a reinvestment feature.

Unsecured Senior Notes

The following table is a summary of our unsecured senior notes outstanding as of September 30, 2021 and December 31, 2020 (dollars in thousands):

	Coupon Rate			Effective Rate (1)		Maturity Date	Remaining Period of Amortization	Carrying Value at
								September 30, 2021		December 31, 2020
2021 Senior Notes (2)	5.00	%		5.32	%	12/15/2021	0.2 years	$	300,000	$	700,000
2023 Senior Notes	5.50	%		5.71	%	11/1/2023	2.1 years	300,000		300,000
2023 Convertible Notes	4.38	%		4.57	%	4/1/2023	1.5 years	250,000		250,000
2025 Senior Notes	4.75	%	(3)	5.04	%	3/15/2025	3.5 years	500,000		500,000
2026 Senior Notes	3.63	%		3.77	%	7/15/2026	4.8 years	400,000		—
Total principal amount								1,750,000		1,750,000
Unamortized discount—Convertible Notes								(690)		(2,559)
Unamortized discount—Senior Notes								(8,666)		(9,332)
Unamortized deferred financing costs								(6,960)		(5,589)
Carrying amount of debt components								$	1,733,684	$	1,732,520
Carrying amount of conversion option equity components recorded in additional paid-in capital for outstanding convertible notes								N/A		$	3,755

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(1)Effective rate includes the effects of underwriter purchase discount.

(2)On September 15, 2021, we redeemed $400.0 million of our 2021 Senior Notes and the remaining $300.0 million matures on December 15, 2021.

(3)The coupon on the 2025 Senior Notes is 4.75%.  At closing, we swapped $470.0 million of the notes to a floating rate of LIBOR + 2.53%.

Our unsecured senior notes contain certain financial tests and covenants. As of September 30, 2021, we were in compliance with all such covenants.

Senior Notes

On July 14, 2021, we issued $400.0 million of 3.625% Senior Notes due 2026 (the “2026 Senior Notes”). The 2026 Senior Notes mature on July 15, 2026. Prior to January 15, 2026, we may redeem some or all of the 2026 Senior Notes at a price equal to 100% of the principal amount thereof, plus the applicable “make-whole” premium as of the applicable date of redemption. On and after January 15, 2026, we may redeem some or all of the 2026 Senior Notes at a price equal to 100% of the principal amount thereof. In addition, prior to July 15, 2023, we may redeem up to 40% of the 2026 Senior Notes at the applicable redemption price using the proceeds of certain equity offerings.

Convertible Senior Notes

On March 29, 2017, we issued $250.0 million of 4.375% Convertible Senior Notes due 2023 (the “2023 Convertible Notes”) which remain outstanding at September 30, 2021 and mature on April 1, 2023.

We recognized interest expense of $2.9 million and $8.7 million during the three and nine months ended September 30, 2021, respectively, from our Convertible Notes. We recognized interest expense of $3.1 million and $9.2 million during the three and nine months ended September 30, 2020, respectively, from our Convertible Notes.

The following table details the conversion attributes of our Convertible Notes outstanding as of September 30, 2021 (amounts in thousands, except rates):

	September 30, 2021
	Conversion	Conversion
	Rate (1)	Price (2)
2023 Convertible Notes	38.5959	$	25.91

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(1)The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of 2023 Convertible Notes converted, as adjusted in accordance with the indenture governing the 2023 Convertible Notes (including the applicable supplemental indenture).

(2)As of September 30, 2021, the market price of the Company’s common stock was $24.41.

The if-converted value of the 2023 Convertible Notes was less than their principal amount by $14.5 million at September 30, 2021 as the closing market price of the Company’s common stock of $24.41 was less than the implicit conversion price of $25.91 per share. The if-converted value of the principal amount of the 2023 Convertible Notes was $235.5 million as of September 30, 2021. As of September 30, 2021, the net carrying amount and fair value of the 2023 Convertible Notes was $249.0 million and $255.6 million, respectively.

Upon conversion of the 2023 Convertible Notes, settlement may be made in common stock, cash or a combination of both, at the option of the Company.

Conditions for Conversion

Prior to October 1, 2022, the 2023 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% of the conversion price of the 2023 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 2023 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) certain other specified corporate events (significant consolidation, sale, merger, share exchange, fundamental change, etc.) occur.

On or after October 1, 2022, holders of the 2023 Convertible Notes 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.