Secured Borrowings

3 Months Ended

Mar. 31, 2022

Secured Debt [Abstract]

Secured Borrowings

Secured Borrowings

Secured Financing Agreements

The following table is a summary of our secured financing agreements in place as of March 31, 2022 and December 31, 2021 (dollars in thousands):

													Outstanding Balance at
	Current Maturity		Extended Maturity (a)		Weighted Average Pricing		Pledged Asset Carrying Value			Maximum Facility Size			March 31, 2022			December 31, 2021
Repurchase Agreements:
Commercial Loans	Aug 2022 to Jul 2026	(b)	Jun 2025 to Dec 2030	(b)	Index + 1.98%	(c)	$	9,013,669		$	11,572,553	(d)	$	6,121,160		$	6,556,438
Residential Loans	Feb 2023 to Dec 2023		N/A		Index + 1.93%		1,965,289			2,850,000			1,594,785			1,744,225
Infrastructure Loans	Sep 2024		Sep 2026		LIBOR + 2.00%		310,044			650,000			256,044			379,095
Conduit Loans	Feb 2023 to Jun 2024		Feb 2024 to Jun 2025		Index + 2.04%		333,827			650,000			260,177			174,130
CMBS/RMBS	Dec 2022 to May 2031	(e)	Mar 2023 to Nov 2031	(e)	(f)		1,213,883			827,204			688,316		(g)	688,146
Total Repurchase Agreements							12,836,712			16,549,757			8,920,482			9,542,034
Other Secured Financing:
Borrowing Base Facility	Nov 2024		Oct 2026		SOFR + 2.11%		193,173			750,000		(h)	100,742			213,478
Commercial Financing Facilities	Dec 2023 to Jan 2025		Jan 2027 to Dec 2030		Index + 1.66%		255,131			241,981			207,051			167,476
Residential Financing Facility	Mar 2024		Mar 2027		2.45%		386,635			500,000			22,948			102,018
Infrastructure Financing Facilities	Jul 2022 to Oct 2022		Oct 2024 to Jul 2027		Index + 2.03%		820,121			1,250,000			653,312			855,646
Property Mortgages - Fixed rate	Nov 2024 to Sep 2029	(i)	N/A		4.35%		387,022			272,321			272,321			272,522
Property Mortgages - Variable rate	Nov 2022 to Dec 2025		N/A		(j)		655,967			654,900			640,541			712,493
Term Loan and Revolver	(k)		N/A		(k)		N/A		(k)	936,756			786,756			788,753
Total Other Secured Financing							2,698,049			4,605,958			2,683,671			3,112,386
							$	15,534,761		$	21,155,715		11,604,153			12,654,420
Unamortized net discount													(12,862)			(13,350)
Unamortized deferred financing costs													(59,720)			(64,220)
													$	11,531,571		$	12,576,850

______________________________________________________________________________________________________________________

(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 $2.1 billion as of March 31, 2022 are indexed to GBP LIBOR, EURIBOR, BBSY and SONIA. The remainder are indexed to USD LIBOR or SOFR.

(d)Certain facilities with an aggregate initial maximum facility size of $10.7 billion may be increased to $11.6 billion, subject to certain conditions. The $11.6 billion amount includes such upsizes.

(e)Certain facilities with an outstanding balance of $284.1 million as of March 31, 2022 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 $240.5 million as of March 31, 2022 has a weighted average fixed annual interest rate of 3.20%. All other facilities are variable rate with a weighted average rate of Index + 1.89%.

(g)Includes: (i) $240.5 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $38.8 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 15).

(h)The maximum facility size as of March 31, 2022 of $650.0 million is scheduled to decline to $450.0 million as of December 31, 2022 and may be increased to $750.0 million, subject to certain conditions.

(i)The weighted average maturity is 5.3 years as of March 31, 2022.

(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 Index + 2.35%.

(k)Consists of: (i) a $786.8 million term loan facility that matures in July 2026, of which $390.0 million has an annual interest rate of LIBOR + 2.50% and $396.8 million 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 $4.8 billion as of March 31, 2022.

The above table no longer reflects property mortgages of the Woodstar Portfolios which, as discussed in Notes 2 and 7, are now reflected within “Investments of consolidated affordable housing fund” on our condensed consolidated balance sheets.

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 March 2022, we amended a Residential Loans credit facility to increase the available borrowings to $500.0 million from $250.0 million and extend the initial maturity for 18 months to March 2024 with a three-year extension option. 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.

Our secured financing agreements contain certain financial tests and covenants. As of March 31, 2022, 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 66% 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 34% of repurchase agreements which do permit valuation adjustments based on capital market events, approximately 12% of these pertain to our loans held-for-sale, for which we manage credit risk through the purchase of credit 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 months ended March 31, 2022 and 2021, approximately $9.6 million and $9.5 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 March 31, 2022, 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 $666.8 million and $659.8 million, respectively. The weighted average extended maturities of those repurchase agreements were 3.5 and 3.6 years, respectively.

Collateralized Loan Obligations and Single Asset Securitization

Commercial and Residential Lending Segment

In February 2022, we refinanced a pool of our commercial loans held-for-investment through a CLO, STWD 2022-FL3. On the closing date, the CLO issued $1.0 billion of notes and preferred shares, of which $842.5 million of notes were purchased by third party investors. We retained $82.5 million of notes along with preferred shares with a liquidation preference of $75.0 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 for a period of two years. The reinvestment feature was not utilized during the three months ended March 31, 2022.

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.

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 three months ended March 31, 2022, we utilized the reinvestment feature, contributing $87.0 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 quarter, the reinvestment period expired, and we repaid CLO debt in the amount of $71.1 million.

Infrastructure Lending Segment

In January 2022, we refinanced a pool of our infrastructure loans held-for-investment through a CLO, STWD 2021-SIF2. On the closing date, the CLO issued $500.0 million of notes and preferred shares, of which $410.0 million of notes were 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 for a period of three years. During the three months ended March 31, 2022, we utilized the reinvestment feature, contributing $63.1 million of additional interests into the CLO.

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 were 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 three months ended March 31, 2022, we utilized the reinvestment feature, contributing $25.2 million of additional interests into the CLO.

The following table is a summary of our CLOs and our SASB as of March 31, 2022 and December 31, 2021 (amounts in thousands):

March 31, 2022	Count	Face Amount		Carrying Value		Weighted Average Spread		Maturity
STWD 2022-FL3
Collateral assets	24	$	1,000,000	$	1,011,426	LIBOR + 3.61%	(a)	January 2026	(b)
Financing	1	842,500		844,461		SOFR + 1.91%	(c)	November 2038	(d)
STWD 2021-HTS
Collateral assets	1	230,000		230,609		LIBOR + 3.89%	(a)	April 2026	(b)
Financing	1	210,091		208,283		LIBOR + 2.69%	(c)	April 2034	(d)
STWD 2021-FL2
Collateral assets	25	1,276,181		1,280,262		LIBOR + 4.19%	(a)	April 2025	(b)
Financing	1	1,077,375		1,070,369		LIBOR + 1.78%	(c)	April 2038	(d)
STWD 2019-FL1
Collateral assets	19	999,432		1,031,438		LIBOR + 4.08%	(a)	January 2025	(b)
Financing	1	865,225		862,524		SOFR + 1.64%	(c)	July 2038	(d)
STWD 2021-SIF2
Collateral assets	34	482,796		504,479		LIBOR + 3.72%	(a)	December 2026	(b)
Financing	1	410,000		406,581		SOFR + 2.11%	(c)	January 2033	(d)
STWD 2021-SIF1
Collateral assets	32	483,243		506,443		Index + 3.91%	(a)	June 2026	(b)
Financing	1	410,000		405,677		LIBOR  + 2.16%	(c)	April 2032	(d)
Total
Collateral assets		$	4,471,652	$	4,564,657
Financing		$	3,815,191	$	3,797,895

December 31, 2021	Count	Face Amount		Carrying Value		Weighted Average Spread		Maturity
STWD 2021-HTS
Collateral assets	1	$	230,000	$	230,587	LIBOR + 4.12%	(a)	April 2026	(b)
Financing	1	210,091		208,057		LIBOR + 2.48%	(c)	April 2034	(d)
STWD 2021-FL2
Collateral assets	25	1,272,133		1,279,678		LIBOR + 4.22%	(a)	February 2025	(b)
Financing	1	1,077,375		1,069,691		LIBOR + 1.78%	(c)	April 2038	(d)
STWD 2019-FL1
Collateral assets	24	1,092,887		1,103,513		LIBOR + 4.19%	(a)	November 2024	(b)
Financing	1	936,375		933,049		SOFR + 1.63%	(c)	July 2038	(d)
STWD 2021-SIF1
Collateral assets	31	491,299		506,666		LIBOR + 3.91%	(a)	March 2026	(b)
Financing	1	410,000		405,319		LIBOR + 2.15%	(c)	April 2032	(d)
Total
Collateral assets		$	3,086,319	$	3,120,444
Financing		$	2,633,841	$	2,616,116

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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 March 31, 2022, 7% earned fixed-rate weighted average interest of 7.55%. Of the loans financed by the STWD 2021-SIF2 CLO as of March 31, 2022, 3% earned fixed-rate weighted average interest of 7.75%. Of the loans financed by the STWD 2021-SIF1 CLO as of March 31, 2022, 3% earned fixed-rate weighted average interest of 5.88%.

(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 CLOs and SASB are tied to timing of the related collateral asset repayments. The term of the CLOs and SASB financing obligations represents the legal final maturity date.

We incurred $37.8 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 months ended March 31, 2022 and 2021, approximately $2.4 million and $0.6 million, respectively, of amortization of deferred financing costs was included in interest expense on our condensed consolidated statements of operations. As of March 31, 2022 and December 31, 2021, our unamortized issuance costs were $26.2 million and $17.7 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 15 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
2022 (remainder of)	$	610,746	$	55,197	$	151,048	$	816,991
2023	1,847,990		732,451		652,409		3,232,850
2024	1,279,084		238,653		444,452		1,962,189
2025	2,878,826		138,669		705,374		3,722,869
2026	1,591,498		1,035,301		1,731,283		4,358,082
Thereafter	712,338		483,400		130,625		1,326,363
Total	$	8,920,482	$	2,683,671	$	3,815,191	$	15,419,344

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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 March 31, 2022 and December 31, 2021 (dollars in thousands):

	Coupon Rate			Effective Rate (1)		Maturity Date	Remaining Period of Amortization	Carrying Value at
								March 31, 2022		December 31, 2021
2023 Senior Notes	5.50	%		5.71	%	11/1/2023	1.6 years	300,000		300,000
2023 Convertible Notes	4.38	%		4.57	%	4/1/2023	1.0 years	250,000		250,000
2024 Senior Notes	3.75	%		3.94	%	12/31/2024	2.8 years	400,000		400,000
2025 Senior Notes	4.75	%	(2)	5.04	%	3/15/2025	3.0 years	500,000		500,000
2026 Senior Notes	3.63	%		3.77	%	7/15/2026	4.3 years	400,000		400,000
2027 Senior Notes	4.38	%	(3)	4.49	%	1/15/2027	4.8 years	500,000		—
Total principal amount								2,350,000		1,850,000
Unamortized discount—Convertible Notes								(465)		(578)
Unamortized discount—Senior Notes								(11,727)		(10,067)
Unamortized deferred financing costs								(15,178)		(10,765)
Total carrying amount								$	2,322,630	$	1,828,590

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

(2)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%.

(3)The coupon on the 2027 Senior Notes is 4.375%.  At closing, we swapped the notes to a floating rate of SOFR + 2.95%.

Our unsecured senior notes contain certain financial tests and covenants. As of March 31, 2022, we were in compliance with all such covenants.

Senior Notes

On January 25, 2022, we issued $500.0 million of 4.375% Senior Notes due 2027 (the “2027 Senior Notes”). The 2027 Senior Notes mature on January 15, 2027. Prior to July 15, 2026, we may redeem some or all of the 2027 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 July 15, 2026, we may redeem some or all of the 2027 Senior Notes at a price equal to 100% of the principal amount thereof. In addition, prior to July 15, 2025, we may redeem up to 40% of the 2027 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 March 31, 2022 and mature on April 1, 2023.

For both the three months ended March 31, 2022 and 2021, we recognized interest expense of $2.9 million from our Convertible Notes.

The following table details the conversion attributes of our Convertible Notes outstanding as of March 31, 2022 (amounts in thousands, except rates):

	March 31, 2022
	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 March 31, 2022, the market price of the Company’s common stock was $24.17.

The if-converted value of the 2023 Convertible Notes was less than their principal amount by $16.8 million at March 31, 2022 as the closing market price of the Company’s common stock of $24.17 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 $233.2 million as of March 31, 2022. As of March 31, 2022, the net carrying amount and fair value of the 2023 Convertible Notes was $249.3 million and $252.4 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.