Secured Borrowings

9 Months Ended

Sep. 30, 2023

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 September 30, 2023 and December 31, 2022 (dollars in thousands):

													Outstanding Balance at
	Current Maturity		Extended Maturity (a)		Weighted Average Pricing		Pledged Asset Carrying Value			Maximum Facility Size			September 30, 2023			December 31, 2022
Repurchase Agreements:
Commercial Loans	Oct 2023 to Jun 2028	(b)	Oct 2025 to Dec 2030	(b)	Index + 2.02%	(c)	$	10,197,141		$	12,039,568	(d)	$	6,768,758		$	7,746,867
Residential Loans	Dec 2023 to Sep 2025		Mar 2024 to Sep 2025		SOFR + 1.97%		2,509,325			3,200,000			2,321,057			1,912,774
Infrastructure Loans	Sep 2024		Sep 2026		SOFR + 2.07%		397,130			650,000			333,119			290,431
Conduit Loans	Dec 2023 to Jun 2026		Dec 2024 to Jun 2027		SOFR + 2.07%		68,058			388,937			53,059			8,423
CMBS/RMBS	Jun 2024 to Apr 2032	(e)	Sep 2024 to Oct 2032	(e)	(f)		1,481,324			1,061,603			757,089		(g)	840,625
Total Repurchase Agreements							14,652,978			17,340,108			10,233,082			10,799,120
Other Secured Financing:
Borrowing Base Facility	Nov 2024		Oct 2026		SOFR + 2.11%		47,724			750,000		(h)	3,920			—
Commercial Financing Facilities	Dec 2023 to Aug 2028		Jul 2025 to Dec 2030		Index + 2.16%		502,694			553,319		(i)	355,962			311,825
Residential Financing Facility	N/A		N/A		N/A		—			—			—			244,418
Infrastructure Financing Facilities	Jun 2025 to Oct 2025		Jun 2027 to Jul 2032		Index + 2.14%		857,350			1,550,000			608,847			765,265
Property Mortgages - Fixed rate	Oct 2025 to Oct 2027	(j)	N/A		4.40%		326,161			224,898			224,898			261,100
Property Mortgages - Variable rate	Nov 2024 to Dec 2027		N/A		(k)		965,870			849,328			846,946			847,633
Term Loans and Revolver	(l)		N/A		(l)		N/A		(l)	1,520,275			1,370,275			1,380,766
Total Other Secured Financing							2,699,799			5,447,820			3,410,848			3,811,007
							$	17,352,777		$	22,787,928		13,643,930			14,610,127
Unamortized net discount													(26,039)			(30,320)
Unamortized deferred financing costs													(60,010)			(78,275)
													$	13,557,881		$	14,501,532

______________________________________________________________________________________________________________________

(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 $2.7 billion as of September 30, 2023 are indexed to EURIBOR, BBSY, SARON and SONIA. The remainder are indexed to SOFR.

(d)Certain facilities with an aggregate initial maximum facility size of $11.9 billion may be increased to $12.0 billion, subject to certain conditions. The $12.0 billion amount includes such upsizes.

(e)Certain facilities with an outstanding balance of $348.0 million as of September 30, 2023 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 $259.5 million as of September 30, 2023 has a weighted average fixed annual interest rate of 3.27%. All other facilities are variable rate with a weighted average rate of SOFR + 2.21%.

(g)Includes: (i) $259.5 million outstanding on a repurchase facility that is not subject to margin calls; and (ii) $40.6 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 September 30, 2023 of $450.0 million may be increased to $750.0 million, subject to certain conditions.

(i)Certain facilities with an aggregate initial maximum facility size of $453.3 million may be increased to $553.3 million, subject to certain conditions. The $553.3 million amount includes such upsizes.

(j)The weighted average maturity is 3.8 years as of September 30, 2023.

(k)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 SOFR + 2.07% that we swapped to a fixed rate of 3.34%. The remainder have a weighted average rate of SOFR + 3.36%.

(l)Consists of: (i) a $774.8 million term loan facility that matures in July 2026, of which $384.0 million has an annual interest rate of SOFR + 2.60% and $390.8 million has an annual interest rate of SOFR + 3.35%, subject to a 0.75% SOFR floor, (ii) a $150.0 million revolving credit facility that matures in April 2026 with an annual interest rate of SOFR + 2.60% and (iii) a $595.5 million term loan facility that matures in November 2027, with an annual interest rate of SOFR + 3.25%, subject to a 0.50% SOFR floor. These facilities are secured by the equity interests in certain of our subsidiaries which totaled $5.7 billion as of September 30, 2023.

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.

During the nine months ended September 30, 2023, we entered into Residential Loans facilities of $1.8 billion and amended or terminated several Residential Loans facilities, resulting in an aggregate net downsize of $337.9 million. The weighted average spread on the new facilities was 39 bps lower than the facilities that were repaid.

During the nine months ended September 30, 2023, we entered into a commercial credit facility of $63.4 million. In addition, we amended several Commercial Loans facilities resulting in an aggregate upsize of $200.0 million.

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.

Our secured financing agreements contain certain financial tests and covenants. As of September 30, 2023, 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 69% 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 31% 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 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, 2023, approximately $10.3 million and $31.1 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, 2022, approximately $9.5 million and $28.3 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, 2023, Morgan Stanley Bank, N.A., Wells Fargo Bank, N.A., and Goldman Sachs Bank USA held collateral sold under certain of our repurchase agreements with carrying values that exceeded the respective repurchase obligations by $775.9 million, $733.0 million, and $702.9 million, respectively. The weighted average extended maturity of those repurchase agreements is 3.1 years, 7.0 years, and 3.5 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. During the nine months ended September 30, 2023, we utilized the reinvestment feature, contributing $50.2 million of additional interests into the CLO.

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 were 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, 2023, we utilized the reinvestment feature, contributing $93.7 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 were 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, allowed us to contribute new loans or participation interests in loans to the CLO in exchange for cash. The reinvestment period expired during 2022 and during the nine months ended September 30, 2023, we repaid CLO debt in the amount of $161.2 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 nine months ended September 30, 2023, we utilized the reinvestment feature, contributing $154.4 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 for a period of three years. During the nine months ended September 30, 2023, we utilized the reinvestment feature, contributing $159.1 million of additional interests into the CLO.

The following table is a summary of our CLOs and our SASB as of September 30, 2023 and December 31, 2022 (amounts in thousands):

September 30, 2023	Count	Face Amount		Carrying Value		Weighted Average Spread		Maturity
STWD 2022-FL3
Collateral assets	50	$	999,998	$	1,009,424	SOFR + 3.53%	(a)	April 2026	(b)
Financing	1	842,500		840,414		SOFR + 1.93%	(c)	November 2038	(d)
STWD 2021-HTS
Collateral assets	1	230,000		231,293		SOFR + 3.87%	(a)	April 2026	(b)
Financing	1	210,091		209,639		SOFR + 2.75%	(c)	April 2034	(d)
STWD 2021-FL2
Collateral assets	36	1,275,042		1,288,073		Index + 3.94%	(a)	November 2025	(b)
Financing	1	1,077,375		1,074,437		SOFR + 1.85%	(c)	April 2038	(d)
STWD 2019-FL1
Collateral assets	14	737,444		747,484		Index + 3.49%	(a)	April 2025	(b)
Financing	1	578,016		578,016		SOFR + 1.64%	(c)	July 2038	(d)
STWD 2021-SIF2
Collateral assets	30	498,888		513,296		SOFR + 3.87%	(a)	January 2028	(b)
Financing	1	410,000		407,940		SOFR + 2.11%	(c)	January 2033	(d)
STWD 2021-SIF1
Collateral assets	31	499,203		513,618		SOFR + 3.98%	(a)	August 2027	(b)
Financing	1	410,000		407,828		SOFR + 2.22%	(c)	April 2032	(d)
Total
Collateral assets		$	4,240,575	$	4,303,188
Financing		$	3,527,982	$	3,518,274

December 31, 2022	Count	Face Amount		Carrying Value		Weighted Average Spread		Maturity
STWD 2022-FL3
Collateral assets	51	$	1,000,000	$	1,010,051	Index + 3.52%	(a)	February 2026	(b)
Financing	1	842,500		842,374		SOFR + 1.93%	(c)	November 2038	(d)
STWD 2021-HTS
Collateral assets	1	230,000		231,186		LIBOR + 3.85%	(a)	April 2026	(b)
Financing	1	210,091		208,961		LIBOR + 2.71%	(c)	April 2034	(d)
STWD 2021-FL2
Collateral assets	36	1,277,474		1,284,240		Index + 4.04%	(a)	June 2025	(b)
Financing	1	1,077,375		1,072,403		LIBOR + 1.80%	(c)	April 2038	(d)
STWD 2019-FL1
Collateral assets	16	902,799		906,409		Index + 3.67%	(a)	December 2024	(b)
Financing	1	739,174		738,473		SOFR + 1.64%	(c)	July 2038	(d)
STWD 2021-SIF2
Collateral assets	31	495,587		510,730		Index + 3.73%	(a)	February 2027	(b)
Financing	1	410,000		407,260		SOFR + 2.11%	(c)	January 2033	(d)
STWD 2021-SIF1
Collateral assets	31	495,781		511,471		Index + 3.76%	(a)	November 2026	(b)
Financing	1	410,000		406,753		LIBOR + 2.15%	(c)	April 2032	(d)
Total
Collateral assets		$	4,401,641	$	4,454,087
Financing		$	3,689,140	$	3,676,224

______________________________________________________________________________________________________________________________

(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, 2023, 6% earned fixed-rate weighted average interest of 7.40%. Of the investments financed by the STWD 2021-SIF1 CLO as of September 30, 2023, 2% earned fixed-rate weighted average interest of 5.70%.

(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 $37.9 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, 2023, approximately $2.0 million and $6.7 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, 2022, approximately $2.7 million and $7.8 million, respectively, of amortization of deferred financing costs was included in interest expense on our condensed consolidated statements of operations. As of September 30, 2023 and December 31, 2022, our unamortized issuance costs were $11.5 million and $18.2 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
2023 (remainder of)	$	284,742	$	6,137	$	212,438	$	503,317
2024	2,025,069		628,757		301,307		2,955,133
2025	2,073,125		291,132		1,015,613		3,379,870
2026	2,146,190		871,513		1,679,387		4,697,090
2027	3,283,708		1,426,009		123,920		4,833,637
Thereafter	420,248		187,300		195,317		802,865
Total	$	10,233,082	$	3,410,848	$	3,527,982	$	17,171,912

______________________________________________________________________________________________________________________

(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, 2023 and December 31, 2022 (dollars in thousands):

	Coupon Rate			Effective Rate (1)		Maturity Date	Remaining Period of Amortization	Carrying Value at
								September 30, 2023		December 31, 2022
2023 Convertible Notes	4.38	%		4.57	%	4/1/2023	0.0 years	—		250,000
2027 Convertible Notes	6.75	%		7.48	%	7/15/2027	3.8 years	380,750		—
2023 Senior Notes	5.50	%		5.71	%	11/1/2023	0.1 years	300,000		300,000
2024 Senior Notes	3.75	%		3.94	%	12/31/2024	1.3 years	400,000		400,000
2025 Senior Notes	4.75	%	(2)	5.04	%	3/15/2025	1.5 years	500,000		500,000
2026 Senior Notes	3.63	%		3.77	%	7/15/2026	2.8 years	400,000		400,000
2027 Senior Notes	4.38	%	(3)	4.49	%	1/15/2027	3.3 years	500,000		500,000
Total principal amount								2,480,750		2,350,000
Unamortized discount—Convertible Notes								(9,085)		(118)
Unamortized discount—Senior Notes								(6,276)		(9,051)
Unamortized deferred financing costs								(8,806)		(11,620)
Total carrying amount								$	2,456,583	$	2,329,211

______________________________________________________________________________________________________________________

(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%, which was converted to SOFR + 2.53% effective July 2023.

(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 September 30, 2023, we were in compliance with all such covenants.

Convertible Notes

In July 2023, we issued $380.8 million of 6.750% Convertible Senior Notes due 2027 (the "2027 Convertible Notes") for net proceeds of $371.2 million. The notes mature on July 15, 2027.

In March 2017, we issued $250.0 million of 4.375% Convertible Senior Notes due 2023 (the “2023 Convertible Notes”). The entire $250.0 million principal balance of the 2023 Convertible Notes matured and was repaid in cash on April 1, 2023.

We recognized interest expense of $6.7 million and $9.7 million during the three and nine months ended September 30, 2023 from our Convertible Notes. We recognized interest expense of $2.9 million and $8.7 million during the three and nine months ended September 30, 2022 from our Convertible Notes.

The following table details the conversion attributes of our Convertible Notes outstanding as of September 30, 2023 (amounts in thousands, except rates):

	September 30, 2023
	Conversion	Conversion
	Rate (1)	Price (2)
2027 Convertible Notes	48.1783	$	20.76

(1)    The conversion rate represents the number of shares of common stock issuable per $1,000 principal amount of 2027

Convertible Notes converted, as adjusted in accordance with the indenture governing the 2027 Convertible Notes

(including the applicable supplemental indenture).

(2)    As of September 30, 2023, the market price of the Company's common stock was $19.35.

The if-converted value of the 2027 Convertible Notes was less than their principal amount by $25.8 million at September 30, 2023 as the closing market price of the Company’s common stock of $19.35 was less than the implicit conversion price of $20.76 per share. The if-converted value of the principal amount of the 2027 Convertible Notes was $355.0 million as of September 30, 2023. As of September 30, 2023, the net carrying amount and fair value of the 2027 Convertible Notes was $371.0 million and $359.7 million, respectively.

Upon conversion of the 2027 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 January 15, 2027, the 2027 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 2027 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 2027 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 January 15, 2027, holders of the 2027 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.