Stockholders' Equity and Non-Controlling Interests

12 Months Ended

Dec. 31, 2023

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.

ATM Agreement

In May 2022, we entered into a Starwood Property Trust, Inc. Common Stock Sales Agreement (the “ATM Agreement”) with a syndicate of financial institutions 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 New York Stock Exchange or otherwise at market prices prevailing at the time of sale or at negotiated prices. The ATM Agreement replaces a similar agreement previously entered into in May 2014 with a financial institution. There were no shares issued under the ATM Agreement during the year ended December 31, 2023. During the year ended December 31, 2022, we issued 2,168,710 shares of common stock under our ATM Agreement for gross proceeds of $49.3 million at an average share price of $22.72 and paid related commission costs of $1.0 million. During the year ended December 31, 2021, there were no shares issued under our previous ATM agreement.

Dividend Reinvestment and Direct Stock Purchase Plan

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, 2023, 2022 and 2021, shares issued under the DRIP Plan were not material.

Employee Stock Purchase Plan

In April 2022, the Company’s shareholders approved the ESPP which allows eligible employees to purchase common stock of the Company at a discounted purchase price. The discounted purchase price of a share of the Company's common stock is 85% of the fair market value (closing market price) at the lower of the beginning or the end of the quarterly offering period. Participants may purchase shares not exceeding an aggregate fair market value of $25,000 in any calendar year. The maximum aggregate number of shares subject to issuance in accordance with the ESPP is 2,000,000 shares.

During the years ended December 31, 2023 and 2022, 123,327 and 67,965 shares, respectively, of common stock were purchased by participants at a weighted average discounted purchase price of $15.46 and $17.36 per share, respectively. As of December 31, 2023, there were 1.8 million shares of common stock available for future issuance through the ESPP.

Other Share Issuances

In December 2021, we issued 16.0 million shares of common stock in a public offering at a price of $24.57 per share, receiving proceeds of $393.1 million.

Dividends

Our board of directors declared the following dividends during the years ended December 31, 2023, 2022 and 2021:

Declaration Date	Record Date	Ex-Dividend Date	Payment Date	Amount		Frequency
12/15/23	12/29/23	12/28/23	1/15/24	$	0.48	Quarterly
9/15/23	9/30/23	9/29/23	10/16/23	0.48		Quarterly
6/15/23	6/30/23	6/29/23	7/17/23	0.48		Quarterly
3/16/23	3/31/23	3/30/23	4/14/23	0.48		Quarterly
12/9/22	12/30/22	12/29/22	1/13/23	0.48		Quarterly
9/16/22	9/30/22	9/29/22	10/14/22	0.48		Quarterly
6/15/22	6/30/22	6/29/22	7/15/22	0.48		Quarterly
3/14/22	3/31/22	3/30/22	4/15/22	0.48		Quarterly
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

Equity Incentive Plans

In April 2022, the Company’s shareholders approved the 2022 Manager Equity Plan and the Starwood Property Trust, Inc. 2022 Equity Plan (the “2022 Equity Plan”), which allow for the issuance of up to 18,700,000 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 2022 Manager Equity Plan succeeds and replaces the 2017 Manager Equity Plan and the 2022 Equity Plan succeeds and replaces the Starwood Property Trust, Inc. 2017 Equity Plan (the “2017 Equity Plan”). As of December 31, 2023, 16,510,282 share awards were available to be issued under either the 2022 Manager Equity Plan or the 2022 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 2017 and 2022 Manager Equity Plans during the years ended December 31, 2023, 2022 and 2021 (dollar amounts in thousands):

Grant Date	Type	Amount Granted	Grant Date Fair Value		Vesting Period
November 2022	RSU	1,500,000	$	31,605	3 years
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

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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, 2023, 2022 and 2021, we granted 914,694, 829,805, and 1,708,935 RSAs, respectively, under the 2017 and 2022 Equity Plans 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.

The following shares of common stock were issued, without restriction, to our Manager as part of the incentive compensation due under the Management Agreement during the years ended December 31, 2023, 2022 and 2021:

Timing of Issuance	Shares of Common Stock Issued	Price per share
August 2023	92,640	20.59
May 2023	377,207	16.39
March 2023	373,204	19.38
November 2022	21,390	20.92
August 2022	108,374	23.94
May 2022	647,128	22.69
February 2022	1,068,828	23.78
November 2021	18,649	26.08
August 2021	97,151	25.79
May 2021	267,378	24.54
February 2021	332,002	22.55

The following table summarizes our share-based compensation expenses during the years ended December 31, 2023, 2022 and 2021 (in thousands):

	For the Year Ended December 31,
	2023		2022		2021
Management fees:
Manager incentive fee	$	13,703	$	24,903	$	35,135
Manager Equity Plans (1)	18,027		18,693		19,448
	31,730		43,596		54,583
General and administrative:
Equity Plans (1)	20,761		21,219		19,838
ESPP	459		273		—
	21,219		21,492		19,838
Total share-based compensation expense (2)	$	52,949	$	65,089	$	74,421

__________________________________________

(1)Share-based compensation expense relating to the 2017 and 2022 Manager Equity Plans is reflected within the Manager Equity Plans line. Share-based compensation expense relating to the 2017 and 2022 Equity Plans is reflected within the Equity Plans line.

(2)The income tax benefit associated with the share-based compensation expense for the years ended December 31, 2023, 2022 and 2021 was not material.

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

	Equity Plan	Manager Equity Plan	Total	Weighted Average Grant Date Fair Value (per share)
Balance as of January 1, 2023	2,513,847	1,825,000	4,338,847	$	20.65
Granted	914,694	—	914,694	18.93
Vested	(687,743)	(950,000)	(1,637,743)	18.56
Forfeited	(169,070)	—	(169,070)	22.76
Balance as of December 31, 2023	2,571,728	875,000	3,446,728	21.08

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(1)Equity-based award activity for awards granted under the 2017 and 2022 Equity Plans is reflected within the Equity Plan column, and for awards granted under the 2017 and 2022 Manager Equity Plans, within the Manager Equity Plan column.

The weighted average grant date fair value per share of grants during the years ended December 31, 2023, 2022 and 2021 was $18.93, $21.95 and $22.14, respectively.

Vesting Schedule

	Equity	Manager
	Plan	Equity Plan	Total
2024	1,674,540	500,000	2,174,540
2025	583,200	375,000	958,200
2026	313,988	—	313,988
Total	2,571,728	875,000	3,446,728

As of December 31, 2023, there was approximately $37.4 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, 2023, 2022 and 2021 were $30.3 million, $30.0 million and $32.4 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 sheets and represent the fair value of the Woodstar Fund’s net assets allocable to those interests. During the years ended December 31, 2023 and 2022, net income attributable to these non-controlling interests was $58.4 million and $153.8 million, respectively. 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. As of December 31, 2023, 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. During the year ended December 31, 2022, no redemptions of Class A Units were received. During the year ended December 31, 2023, redemptions of 0.1 million of the Class A Units were received and settled for $1.3 million in cash, leaving 9.7 million Class A Units outstanding as of December 31, 2023. The outstanding Class A Units are reflected as non-controlling interests in consolidated subsidiaries on our consolidated balance sheets, the balance of which was $207.1 million and $208.5 million as of December 31, 2023 and 2022.

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, 2023, 2022 and 2021, we recognized net income attributable to non-controlling interests of $18.7 million, $18.8 million and $19.4 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. 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 statements of operations. The non-controlling interests in the CMBS JV were $129.2 million and $144.3 million as of December 31, 2023 and 2022, respectively. During the years ended December 31, 2023, 2022 and 2021, net (loss) income attributable to non-controlling interests was $(1.5) million, $6.2 million and $22.7 million, respectively.