Stockholders' Equity and Non-Controlling Interests

12 Months Ended

Dec. 31, 2021

Stockholders' Equity Note [Abstract]

Stockholders' Equity and Non-Controlling Interests

Stockholders’ Equity and Non-Controlling Interests

The Company’s authorized capital stock consists of 100,000,000 shares of preferred stock, $0.01 par value per share, and 500,000,000 shares of common stock, $0.01 par value per share.

We issued common stock in a public offering as follows during the year ended December 31, 2021:

	Shares issued	Price		Proceeds
Issuance date	(in thousands)	per share		(in thousands)
12/10/2021	16,000	$	24.57	$	393,120

In May 2014, we established the Starwood Property Trust, Inc. Dividend Reinvestment and Direct Stock Purchase Plan (the “DRIP Plan”), which provides stockholders with a means of purchasing additional shares of our common stock by reinvesting the cash dividends paid on our common stock and by making additional optional cash purchases. Shares of our common stock purchased under the DRIP Plan will either be issued directly by the Company or purchased in the open market by the plan administrator. The Company may issue up to 11.0 million shares of common stock under the DRIP Plan. During the years ended December 31, 2021, 2020 and 2019, shares issued under the DRIP Plan were not material.

In May 2014, we entered into an amended and restated At-The-Market Equity Offering Sales Agreement (the “ATM Agreement”) with Merrill Lynch, Pierce, Fenner & Smith Incorporated to sell shares of the Company’s common stock of up to $500.0 million from time to time, through an “at the market” equity offering program. Sales of shares under the ATM Agreement are made by means of ordinary brokers’ transactions on the NYSE or otherwise at market prices prevailing at the time of sale or at negotiated prices. During the years ended December 31, 2021, 2020 and 2019, there were no shares issued under the ATM Agreement.

During the year ended December 31, 2019, we issued 3.6 million shares in connection with the settlement of $78.0 million of our 4.00% Convertible Senior Notes due 2019. Refer to Note 12 for further discussion.

During the year ended December 31, 2020, we repurchased 2,268,551 shares of common stock for $33.8 million under a previous common stock and Convertible Note repurchase program authorized by our board of directors, which expired in February 2021.

Our board of directors declared the following dividends during the years ended December 31, 2021, 2020 and 2019:

Declaration Date	Record Date	Ex-Dividend Date	Payment Date	Amount		Frequency
12/15/21	12/31/21	12/30/21	1/14/22	$	0.48	Quarterly
9/15/21	9/30/21	9/29/21	10/15/21	0.48		Quarterly
6/14/21	6/30/21	6/29/21	7/15/21	0.48		Quarterly
3/11/21	3/31/21	3/30/21	4/15/21	0.48		Quarterly
12/9/20	12/31/20	12/30/20	1/15/21	0.48		Quarterly
9/16/20	9/30/20	9/29/20	10/15/20	0.48		Quarterly
6/16/20	6/30/20	6/29/20	7/15/20	0.48		Quarterly
2/25/20	3/31/20	3/30/20	4/15/20	0.48		Quarterly
11/18/19	12/31/19	12/30/19	1/15/20	0.48		Quarterly
8/7/19	9/30/19	9/27/19	10/15/19	0.48		Quarterly
5/8/19	6/28/19	6/27/19	7/15/19	0.48		Quarterly
2/28/19	3/29/19	3/28/19	4/15/19	0.48		Quarterly

Equity Incentive Plans

In May 2017, the Company’s shareholders approved the 2017 Manager Equity Plan and the Starwood Property Trust, Inc. 2017 Equity Plan (the “2017 Equity Plan”), which allow for the issuance of up to 11,000,000 stock options, stock appreciation rights, RSAs, RSUs or other equity-based awards or any combination thereof to the Manager, directors, employees, consultants or any other party providing services to the Company. The 2017 Manager Equity Plan succeeds and

replaces the Manager Equity Plan and the 2017 Equity Plan succeeds and replaces the Starwood Property Trust, Inc. Equity Plan (the “Equity Plan”) and the Starwood Property Trust, Inc. Non-Executive Director Stock Plan (the “Non-Executive Director Stock Plan”). As of December 31, 2021, 3,132,625 share awards were available to be issued under either the 2017 Manager Equity Plan or the 2017 Equity Plan, determined on a combined basis.

To date, we have only granted RSAs and RSUs under the equity incentive plans. The holders of awards of RSAs or RSUs are entitled to receive dividends or “distribution equivalents” beginning on either the award’s effective date or vest date, depending on the terms of the award.

The table below summarizes our share awards granted or vested under the Manager Equity Plan and the 2017 Manager Equity Plan during the years ended December 31, 2021, 2020 and 2019 (dollar amounts in thousands):

Grant Date	Type	Amount Granted	Grant Date Fair Value		Vesting Period
November 2020	RSU	1,800,000	$	30,078	3 years
September 2019	RSU	1,200,000	29,484		(1)
April 2018	RSU	775,000	16,329		3 years
March 2017	RSU	1,000,000	22,240		3 years

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(1)Of the amount granted, 218,898 vested immediately on the grant date and the remaining amount vests over a three-year period.

During the years ended December 31, 2021, 2020 and 2019, we granted 1,708,935, 1,014,753, and 520,236 RSAs, respectively, under the 2017 Equity Plan to a select group of eligible participants which includes our employees, directors 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 generally vest over a three-year period. Expenses related to the vesting of these awards are reflected in general and administrative expenses in our consolidated statements of operations. No RSUs were granted under the 2017 Equity Plan during the years ended December 31, 2021, 2020 and 2019.

The following shares of common stock were issued, without restriction, to our Manager as part of the incentive and base management compensation due under the Management Agreement during the years ended December 31, 2021, 2020 and 2019:

Timing of Issuance	Shares of Common Stock Issued	Price per share
November 2021	18,649	$	26.08
August 2021	97,151	25.79
May 2021	267,378	24.54
February 2021	332,002	22.55
May 2020	2,065,322	(1)
February 2020	355,910	25.51
November 2019	38,942	24.08
March 2019	495,363	22.16

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(1)1,422,143 shares of common stock were issued with a share price of $13.42 relating to the first quarter base management fee. 643,179 shares of common stock were issued with a share price of $12.25 relating to the first quarter incentive fee.

The following table summarizes our share-based compensation expenses during the years ended December 31, 2021, 2020 and 2019 (in thousands):

	For the Year Ended December 31,
	2021		2020		2019
Management fees:
Manager incentive fee	$	35,135	$	15,405	$	10,082
Base management fee	—		19,088		—
2017 Manager Equity Plan (1)	19,448		17,987		20,255
	54,583		52,480		30,337
General and administrative:
2017 Equity Plan (1)	19,838		13,254		15,900
	19,838		13,254		15,900
Total share-based compensation expense (2)	$	74,421	$	65,734	$	46,237

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(1)Share-based compensation expense relating to the Manager Equity Plan is reflected within the 2017 Manager Equity Plan. Share-based compensation expense relating to the Non-Executive Director Stock Plan and the Equity Plan are reflected within the 2017 Equity Plan.

(2)The income tax benefit associated with the share-based compensation expense for the years ended December 31, 2021, 2020 and 2019 was immaterial.

Schedule of Non-Vested Shares and Share Equivalents (1)

	2017 Equity Plan	2017 Manager Equity Plan	Total	Weighted Average Grant Date Fair Value (per share)
Balance as of January 1, 2021	1,594,605	2,286,896	3,881,501	$	17.26
Granted	1,708,935	—	1,708,935	22.14
Vested	(764,781)	(991,619)	(1,756,400)	18.44
Forfeited	(132,029)	—	(132,029)	18.99
Balance as of December 31, 2021	2,406,730	1,295,277	3,702,007	18.90

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(1)Equity-based award activity for awards granted under the Equity Plan and Non-Executive Director Stock Plan is reflected within the 2017 Equity Plan column, and for awards granted under the Manager Equity Plan, within the 2017 Manager Equity Plan column.

The weighted average grant date fair value per share of grants during the years ended December 31, 2021, 2020 and 2019 was $22.14, $14.64 and $24.01, respectively.

Vesting Schedule

	2017 Equity	2017 Manager
	Plan	Equity Plan	Total
2022	646,771	845,277	1,492,048
2023	451,679	450,000	901,679
2024	1,308,280	—	1,308,280
Total	2,406,730	1,295,277	3,702,007

As of December 31, 2021, there was approximately $53.5 million of total unrecognized compensation costs related to unvested share-based compensation arrangements which are expected to be recognized over a weighted average period of 1.7 years. The total fair value of shares vested during the years ended December 31, 2021, 2020 and 2019 were $32.4 million, $35.7 million and $33.2 million, respectively, as of the respective vesting dates.

Non-Controlling Interests in Consolidated Subsidiaries

As discussed in Note 2, on November 5, 2021 we sold a 20.6% non-controlling interest in the Woodstar Fund to third party investors for net cash proceeds of $214.2 million. Under the Woodstar Fund operating agreement, such interests are contingently redeemable by us, at the option of the interest holder, for cash at liquidation fair value if any assets remain upon termination of the Woodstar Fund. The Woodstar Fund operating agreement specifies an eight-year term with two one-year

extension options, the first at our option and the second subject to consent of an advisory committee representing the non-controlling interest holders. Accordingly, these contingently redeemable non-controlling interests have been classified as “Temporary Equity” in our consolidated balance sheet as of December 31, 2021 and represent the fair value of the Woodstar Fund’s net assets allocable to those interests. During the period from November 5, 2021 through December 31, 2021, net income attributable to these non-controlling interests was $0.7 million.

In connection with our Woodstar II Portfolio acquisitions, we issued 10.2 million Class A Units in our subsidiary, SPT Dolphin, and rights to receive an additional 1.9 million Class A Units if certain contingent events occur. During the years ended December 31, 2020 and 2019, we issued 0.1 million and 0.1 million, respectively, of the total 1.9 million contingent Class A Units to the contributors. As of December 31, 2021, all of the 1.9 million contingent Class A Units were issued. The Class A Units are redeemable for consideration equal to the current share price of the Company’s common stock on a one-for-one basis, with the consideration paid in either cash or the Company’s common stock, at the determination of the Company. During the year ended December 31, 2021, redemptions of 0.9 million of the Class A Units were received and settled in common stock, leaving 9.8 million Class A Units outstanding as of December 31, 2021. During the year ended December 31, 2020, redemptions of 0.5 million of the Class A Units were received, of which 0.4 million were settled in common stock and 0.1 million were settled for $1.3 million in cash. During the year ended December 31, 2019, redemptions of 1.0 million of the Class A Units were received and settled in common stock. The outstanding Class A Units are reflected as non-controlling interests in consolidated subsidiaries on our consolidated balance sheets, the balance of which was $208.5 million and $226.7 million as of December 31, 2021 and 2020, respectively.

To the extent SPT Dolphin has sufficient cash available, the Class A Units earn a preferred return indexed to the dividend rate of the Company’s common stock. Any distributions made pursuant to this waterfall are recognized within net income attributable to non-controlling interests in our consolidated statements of operations. During the years ended December 31, 2021, 2020 and 2019, we recognized net income attributable to non-controlling interests of $19.4 million, $20.4 million and $21.6 million, respectively, associated with these Class A Units.

As discussed in Note 16, we hold a 51% controlling interest in the CMBS JV within our Investing and Servicing Segment. In connection with the formation of this venture in December 2019, we sold assets totaling $333.0 million to the CMBS JV, including $318.3 million of CMBS, $13.3 million of interests in various existing CMBS joint ventures, and $1.4 million of related interest receivables. We obtained a 51% interest in the venture for cash consideration of $169.8 million, and our joint venture partner obtained a 49% interest for $163.2 million. The $13.3 million of joint venture interests that we contributed into the CMBS JV relate to joint ventures which we consolidate. The CMBS within these ventures carried a fair value of $24.5 million at the time of sale and related non-controlling interests of $11.2 million.

Because the CMBS JV is deemed a VIE for which we are the primary beneficiary, the 49% interest of our joint venture partner is reflected as a non-controlling interest in consolidated subsidiaries on our consolidated balance sheets, and any net income attributable to this 49% joint venture interest is reflected within net income attributable to non-controlling interests in our consolidated statement of operations. The non-controlling interests in the CMBS JV were $131.9 million and $126.7 million as of December 31, 2021 and 2020, respectively. During the years ended December 31, 2021 and 2020, net income attributable to non-controlling interests was $22.7 million and $11.1 million, respectively. During the year ended December 31, 2019, net income attributable to non-controlling interests was immaterial.