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Section 1: 10-Q (10-Q)

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Table of Contents 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2016

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number 001-34436

 


 

Starwood Property Trust, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Maryland

 

27-0247747

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

591 West Putnam Avenue

 

 

Greenwich, Connecticut

 

06830

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code:

(203) 422-7700

 


 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

Large accelerated filer ☒

 

Accelerated filer ☐

 

 

 

Non-accelerated filer ☐

 

Smaller reporting company ☐

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

The number of shares of the issuer’s common stock, $0.01 par value, outstanding as of October 27, 2016 was 238,411,267.

 

 

 

 

 

 


 

Table of Contents 

Special Note Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains certain forward-looking statements, including without limitation, statements concerning our operations, economic performance and financial condition. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are developed by combining currently available information with our beliefs and assumptions and are generally identified by the words “believe,” “expect,” “anticipate” and other similar expressions. Forward-looking statements do not guarantee future performance, which may be materially different from that expressed in, or implied by, any such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates.

 

These forward-looking statements are based largely on our current beliefs, assumptions and expectations of our future performance taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us or within our control, and which could materially affect actual results, performance or achievements. Factors that may cause actual results to vary from our forward-looking statements include, but are not limited to:

 

·

factors described in our Annual Report on Form 10-K for the year ended December 31, 2015, this Quarterly Report on Form 10-Q and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2016 and June 30, 2016, including those set forth under the captions “Risk Factors” and “Business”;

 

·

defaults by borrowers in paying debt service on outstanding indebtedness;

 

·

impairment in the value of real estate property securing our loans or in which we invest;

 

·

availability of mortgage origination and acquisition opportunities acceptable to us;

 

·

potential mismatches in the timing of asset repayments and the maturity of the associated financing agreements;

 

·

national and local economic and business conditions;

 

·

general and local commercial and residential real estate property conditions;

 

·

changes in federal government policies;

 

·

changes in federal, state and local governmental laws and regulations;

 

·

increased competition from entities engaged in mortgage lending and securities investing activities;

 

·

changes in interest rates; and

 

·

the availability of, and costs associated with, sources of liquidity.

 

In light of these risks and uncertainties, there can be no assurances that the results referred to in the forward-looking statements contained in this Quarterly Report on Form 10-Q will in fact occur. Except to the extent required by applicable law or regulation, we undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, changes to future results over time or otherwise.

2


 

Table of Contents 

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

Part I 

Financial Information

 

Item 1. 

Financial Statements

 

Condensed Consolidated Balance Sheets

 

Condensed Consolidated Statements of Operations

 

Condensed Consolidated Statements of Comprehensive Income

 

Condensed Consolidated Statements of Equity

 

Condensed Consolidated Statements of Cash Flows

 

Notes to Condensed Consolidated Financial Statements

10 

 

Note 1 Business and Organization

10 

 

Note 2 Summary of Significant Accounting Policies

11 

 

Note 3 Acquisitions

18 

 

Note 4 Loans

20 

 

Note 5 Investment Securities

25 

 

Note 6 Properties

30 

 

Note 7 Investment in Unconsolidated Entities

30 

 

Note 8 Goodwill and Intangible Assets

31 

 

Note 9 Secured Financing Agreements

33 

 

Note 10 Convertible Senior Notes

36 

 

Note 11 Loan Securitization/Sale Activities

37 

 

Note 12 Derivatives and Hedging Activity

38 

 

Note 13 Offsetting Assets and Liabilities

41 

 

Note 14 Variable Interest Entities

41 

 

Note 15 Related-Party Transactions

43 

 

Note 16 Stockholders’ Equity

45 

 

Note 17 Earnings per Share

46 

 

Note 18 Accumulated Other Comprehensive Income

47 

 

Note 19 Fair Value

48 

 

Note 20 Income Taxes

52 

 

Note 21 Commitments and Contingencies

52 

 

Note 22 Segment Data

53 

 

Note 23 Subsequent Events

59 

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

60 

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

87 

Item 4. 

Controls and Procedures

90 

Part II 

Other Information

 

Item 1. 

Legal Proceedings

91 

Item 1A. 

Risk Factors

91 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

91 

Item 3. 

Defaults Upon Senior Securities

91 

Item 4. 

Mine Safety Disclosures

91 

Item 5. 

Other Information

91 

Item 6. 

Exhibits

93 

 

 

 

3


 

Table of Contents 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

    

September 30, 2016

    

December 31, 2015

Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

501,557

 

$

368,815

Restricted cash

 

 

51,735

 

 

23,069

Loans held-for-investment, net

 

 

5,232,231

 

 

5,973,079

Loans held-for-sale, at fair value

 

 

347,490

 

 

203,865

Loans transferred as secured borrowings

 

 

100,978

 

 

86,573

Investment securities ($332,047 and $403,703 held at fair value)

 

 

854,667

 

 

724,947

Properties, net

 

 

1,237,879

 

 

919,225

Intangible assets ($69,018 and $119,698 held at fair value)

 

 

155,392

 

 

201,570

Investment in unconsolidated entities

 

 

185,748

 

 

199,201

Goodwill

 

 

140,437

 

 

140,437

Derivative assets

 

 

34,309

 

 

45,091

Accrued interest receivable

 

 

26,744

 

 

34,314

Other assets

 

 

128,292

 

 

102,479

Variable interest entity (“VIE”) assets, at fair value

 

 

73,923,699

 

 

76,675,689

Total Assets 

 

$

82,921,158

 

$

85,698,354

Liabilities and Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

174,124

 

$

156,805

Related-party payable

 

 

23,901

 

 

40,955

Dividends payable

 

 

115,190

 

 

114,947

Derivative liabilities

 

 

12,753

 

 

5,196

Secured financing agreements, net

 

 

4,122,839

 

 

3,980,699

Convertible senior notes, net

 

 

1,339,853

 

 

1,323,795

Secured borrowings on transferred loans

 

 

102,365

 

 

88,000

VIE liabilities, at fair value

 

 

72,924,751

 

 

75,817,014

Total Liabilities 

 

 

78,815,776

 

 

81,527,411

Commitments and contingencies (Note 21)

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Starwood Property Trust, Inc. Stockholders’ Equity:

 

 

 

 

 

 

Preferred stock, $0.01 per share, 100,000,000 shares authorized, no shares issued and outstanding

 

 

 —

 

 

 —

Common stock, $0.01 per share, 500,000,000 shares authorized, 242,995,917 issued and 238,389,032 outstanding as of September 30, 2016 and 241,044,775 issued and 237,490,779 outstanding as of December 31, 2015

 

 

2,430

 

 

2,410

Additional paid-in capital

 

 

4,230,577

 

 

4,192,844

Treasury stock (4,606,885 shares and 3,553,996 shares)

 

 

(92,104)

 

 

(72,381)

Accumulated other comprehensive income

 

 

40,248

 

 

29,729

Accumulated deficit

 

 

(112,303)

 

 

(12,286)

Total Starwood Property Trust, Inc. Stockholders’ Equity

 

 

4,068,848

 

 

4,140,316

Non-controlling interests in consolidated subsidiaries

 

 

36,534

 

 

30,627

Total Equity 

 

 

4,105,382

 

 

4,170,943

Total Liabilities and Equity 

 

$

82,921,158

 

$

85,698,354

 

See notes to condensed consolidated financial statements.

4


 

Table of Contents 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Operations

(Unaudited, amounts in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

September 30,

 

September 30,

 

    

2016

    

2015

    

2016

    

2015

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from loans

 

$

121,225

 

$

120,598

 

$

361,314

 

$

357,319

Interest income from investment securities

 

 

19,175

 

 

24,674

 

 

53,879

 

 

76,228

Servicing fees

 

 

22,918

 

 

32,528

 

 

70,921

 

 

90,939

Rental income

 

 

39,742

 

 

10,045

 

 

110,262

 

 

17,731

Other revenues

 

 

1,645

 

 

4,300

 

 

3,814

 

 

7,437

Total revenues 

 

 

204,705

 

 

192,145

 

 

600,190

 

 

549,654

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

27,780

 

 

28,082

 

 

76,510

 

 

82,871

Interest expense

 

 

59,082

 

 

50,688

 

 

173,237

 

 

151,021

General and administrative

 

 

51,470

 

 

38,693

 

 

119,677

 

 

115,361

Acquisition and investment pursuit costs

 

 

1,509

 

 

3,682

 

 

5,682

 

 

9,735

Costs of rental operations

 

 

18,011

 

 

2,352

 

 

46,518

 

 

5,261

Depreciation and amortization

 

 

15,352

 

 

7,234

 

 

53,185

 

 

17,147

Loan loss allowance, net

 

 

2,127

 

 

(2,667)

 

 

3,395

 

 

311

Other expense

 

 

 —

 

 

3

 

 

100

 

 

378

Total costs and expenses 

 

 

175,331

 

 

128,067

 

 

478,304

 

 

382,085

Income before other income, income taxes and non-controlling interests

 

 

29,374

 

 

64,078

 

 

121,886

 

 

167,569

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Change in net assets related to consolidated VIEs

 

 

47,848

 

 

49,665

 

 

94,388

 

 

153,399

Change in fair value of servicing rights

 

 

(14,283)

 

 

(4,217)

 

 

(33,213)

 

 

(8,411)

Change in fair value of investment securities, net

 

 

(2,786)

 

 

2,617

 

 

(714)

 

 

3,564

Change in fair value of mortgage loans held-for-sale, net

 

 

49,996

 

 

19,082

 

 

70,122

 

 

51,044

Earnings from unconsolidated entities

 

 

4,305

 

 

5,706

 

 

12,849

 

 

20,747

Gain on sale of investments and other assets, net

 

 

10

 

 

3,348

 

 

165

 

 

20,755

(Loss) gain on derivative financial instruments, net

 

 

(2,328)

 

 

2,230

 

 

(6,793)

 

 

7,323

Foreign currency loss, net

 

 

(3,214)

 

 

(17,782)

 

 

(20,580)

 

 

(27,235)

Total other-than-temporary impairment (“OTTI”)

 

 

(711)

 

 

 —

 

 

(765)

 

 

 —

Noncredit portion of OTTI recognized in other comprehensive income

 

 

 —

 

 

 —

 

 

54

 

 

 —

Net impairment losses recognized in earnings

 

 

(711)

 

 

 —

 

 

(711)

 

 

 —

Loss on extinguishment of debt

 

 

 —

 

 

 —

 

 

 —

 

 

(5,921)

Other income, net

 

 

269

 

 

64

 

 

10,998

 

 

119

Total other income

 

 

79,106

 

 

60,713

 

 

126,511

 

 

215,384

Income before income taxes 

 

 

108,480

 

 

124,791

 

 

248,397

 

 

382,953

Income tax provision

 

 

(2,667)

 

 

(7,675)

 

 

(3,467)

 

 

(27,418)

Net income 

 

 

105,813

 

 

117,116

 

 

244,930

 

 

355,535

Net income attributable to non-controlling interests

 

 

(47)

 

 

(381)

 

 

(1,034)

 

 

(1,289)

Net income attributable to Starwood Property Trust, Inc.  

 

$

105,766

 

$

116,735

 

$

243,896

 

$

354,246

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share data attributable to Starwood Property Trust, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.44

 

$

0.49

 

$

1.02

 

$

1.51

Diluted

 

$

0.44

 

$

0.49

 

$

1.00

 

$

1.51

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per common share

 

$

0.48

 

$

0.48

 

$

1.44

 

$

1.44

 

See notes to condensed consolidated financial statements.

 

 

5


 

Table of Contents 

 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

    

For the Nine Months Ended

 

 

September 30,

 

September 30,

 

    

2016

    

2015

    

2016

    

2015

Net income 

 

$

105,813

 

$

117,116

 

$

244,930

 

$

355,535

Other comprehensive income (loss) (net change by component):

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges

 

 

185

 

 

(208)

 

 

(136)

 

 

(348)

Available-for-sale securities

 

 

6,105

 

 

(9,095)

 

 

8,656

 

 

(18,915)

Foreign currency remeasurement

 

 

1,331

 

 

2,912

 

 

1,999

 

 

2,877

Other comprehensive gain (loss)

 

 

7,621

 

 

(6,391)

 

 

10,519

 

 

(16,386)

Comprehensive income 

 

 

113,434

 

 

110,725

 

 

255,449

 

 

339,149

Less: Comprehensive income attributable to non-controlling interests

 

 

(47)

 

 

(381)

 

 

(1,034)

 

 

(1,289)

Comprehensive income attributable to Starwood Property Trust, Inc.  

 

$

113,387

 

$

110,344

 

$

254,415

 

$

337,860

 

See notes to condensed consolidated financial statements.

 

 

6


 

Table of Contents 

Starwood Property Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity

(Unaudited, amounts in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Starwood

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Accumulated

 

Accumulated

 

Property

 

 

 

 

 

 

 

 

 

Common stock

 

Additional

 

 

 

 

 

 

Deficit)

 

Other

 

Trust, Inc.

 

Non-

 

 

 

 

 

 

 

 

Par

 

Paid-in

 

Treasury Stock

 

Retained

 

Comprehensive

 

Stockholders’

 

Controlling

 

Total

 

 

    

Shares

    

Value

    

Capital

    

Shares

    

Amount

    

Earnings

    

Income

    

Equity

    

Interests

    

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2016

 

241,044,775

 

$

2,410

 

$

4,192,844

 

3,553,996

 

$

(72,381)

 

$

(12,286)

 

$

29,729

 

$

4,140,316

 

$

30,627

 

$

4,170,943

 

Proceeds from DRIP Plan

 

14,707

 

 

 —

 

 

299

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

299

 

 

 —

 

 

299

 

Common stock repurchased

 

 —

 

 

 —

 

 

 —

 

1,052,889

 

 

(19,723)

 

 

 —

 

 

 —

 

 

(19,723)

 

 

 —

 

 

(19,723)

 

Share-based compensation

 

1,147,975

 

 

12

 

 

22,785

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

22,797

 

 

 —

 

 

22,797

 

Manager incentive fee paid in stock

 

788,460

 

 

8

 

 

14,649

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14,657

 

 

 —

 

 

14,657

 

Net income

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

243,896

 

 

 —

 

 

243,896

 

 

1,034

 

 

244,930

 

Dividends declared, $1.44 per share

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(343,913)

 

 

 —

 

 

(343,913)

 

 

 —

 

 

(343,913)

 

Other comprehensive income, net

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

10,519

 

 

10,519

 

 

 —

 

 

10,519

 

VIE non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(144)

 

 

(144)

 

Contributions from non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

10,417

 

 

10,417

 

Distributions to non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(5,400)

 

 

(5,400)

 

Balance, September 30, 2016

 

242,995,917

 

$

2,430

 

$

4,230,577

 

4,606,885

 

$

(92,104)

 

$

(112,303)

 

$

40,248

 

$

4,068,848

 

$

36,534

 

$

4,105,382

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2015

 

224,752,053

 

$

2,248

 

$

3,835,725

 

1,213,750

 

$

(23,635)

 

$

(9,378)

 

$

55,896

 

$

3,860,856

 

$

22,056

 

$

3,882,912

 

Proceeds from public offering of common stock

 

13,800,000

 

 

138

 

 

326,004

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

326,142

 

 

 —

 

 

326,142

 

Proceeds from DRIP Plan

 

9,400

 

 

 —

 

 

219

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

219

 

 

 —

 

 

219

 

Equity offering costs

 

 —

 

 

 —

 

 

(945)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(945)

 

 

 —

 

 

(945)

 

Common stock repurchased

 

 —

 

 

 —

 

 

 —

 

1,793,223

 

 

(37,890)

 

 

 —

 

 

 —

 

 

(37,890)

 

 

 —

 

 

(37,890)

 

Equity component of 4.0% Convertible Senior Notes repurchase

 

 —

 

 

 —

 

 

(17,727)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(17,727)

 

 

 —

 

 

(17,727)

 

Share-based compensation

 

1,484,879

 

 

15

 

 

26,440

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

26,455

 

 

 —

 

 

26,455

 

Manager incentive fee paid in stock

 

619,256

 

 

6

 

 

14,822

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14,828

 

 

 —

 

 

14,828

 

Net income

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

354,246

 

 

 —

 

 

354,246

 

 

1,289

 

 

355,535

 

Dividends declared, $1.44 per share

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(339,025)

 

 

 —

 

 

(339,025)

 

 

 —

 

 

(339,025)

 

Other comprehensive loss, net

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

(16,386)

 

 

(16,386)

 

 

 —

 

 

(16,386)

 

VIE non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4,188

 

 

4,188

 

Contributions from non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

4,133

 

 

4,133

 

Distributions to non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(1,259)

 

 

(1,259)

 

Balance, September 30, 2015

 

240,665,588

 

$

2,407

 

$

4,184,538

 

3,006,973

 

$

(61,525)

 

$

5,843

 

$

39,510

 

$

4,170,773

 

$

30,407

 

$

4,201,180

 

 

See notes to condensed consolidated financial statements.

 

7


 

Table of Contents 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

September 30,

 

    

2016

    

2015

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

244,930

 

$

355,535

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Amortization of deferred financing costs, premiums and discounts on secured financing agreements

 

 

12,061

 

 

11,055

Amortization of convertible debt discount and deferred costs

 

 

16,058

 

 

15,631

Accretion of net discount on investment securities

 

 

(11,967)

 

 

(20,312)

Accretion of net deferred loan fees and discounts

 

 

(38,809)

 

 

(26,615)

Amortization of net discount from secured borrowings on transferred loans

 

 

 —

 

 

4

Share-based compensation

 

 

22,797

 

 

26,455

Share-based component of incentive fees

 

 

14,657

 

 

14,828

Change in fair value of fair value option investment securities

 

 

714

 

 

(3,564)

Change in fair value of consolidated VIEs

 

 

42,371

 

 

17,438

Change in fair value of servicing rights

 

 

33,213

 

 

8,411

Change in fair value of loans held-for-sale

 

 

(70,122)

 

 

(51,044)

Change in fair value of derivatives

 

 

3,360

 

 

(12,765)

Foreign currency loss, net

 

 

20,367

 

 

27,372

Gain on sale of investments and other assets

 

 

(165)

 

 

(20,755)

Other-than-temporary impairment

 

 

711

 

 

 —

Loan loss allowance, net

 

 

3,395

 

 

311

Depreciation and amortization

 

 

49,081

 

 

15,873

Earnings from unconsolidated entities

 

 

(12,849)

 

 

(20,747)

Distributions of earnings from unconsolidated entities

 

 

15,151

 

 

18,665

Bargain purchase gain

 

 

(8,406)

 

 

 —

Loss on extinguishment of debt

 

 

 —

 

 

5,921

Origination and purchase of loans held-for-sale, net of principal collections

 

 

(1,186,080)

 

 

(1,424,837)

Proceeds from sale of loans held-for-sale

 

 

1,123,512

 

 

1,443,871

Changes in operating assets and liabilities:

 

 

 

 

 

 

Related-party payable, net

 

 

(17,166)

 

 

(17,947)

Accrued and capitalized interest receivable, less purchased interest

 

 

(58,275)

 

 

(48,310)

Other assets

 

 

6,168

 

 

(29,576)

Accounts payable, accrued expenses and other liabilities

 

 

(3,537)

 

 

(25,211)

Net cash provided by operating activities

 

 

201,170

 

 

259,687

Cash Flows from Investing Activities:

 

 

 

 

 

 

Origination and purchase of loans held-for-investment

 

 

(1,583,628)

 

 

(1,670,124)

Proceeds from principal collections on loans

 

 

2,187,844

 

 

1,057,700

Proceeds from loans sold

 

 

236,433

 

 

599,504

Purchase of investment securities

 

 

(359,510)

 

 

(163,018)

Proceeds from sales of investment securities

 

 

3,799

 

 

6,301

Proceeds from principal collections on investment securities

 

 

70,316

 

 

348,090

Real estate business combinations, net of cash acquired

 

 

(91,186)

 

 

(239,933)

Proceeds from sale of properties

 

 

 —

 

 

33,056

Additions to properties and other assets

 

 

(10,209)

 

 

(309)

Investment in unconsolidated entities

 

 

(3,870)

 

 

(32,063)

Distribution of capital from unconsolidated entities

 

 

15,026

 

 

29,003

Payments for purchase or termination of derivatives

 

 

(24,954)

 

 

(18,271)

Proceeds from termination of derivatives

 

 

37,652

 

 

30,194

Return of investment basis in purchased derivative asset

 

 

206

 

 

260

(Increase) decrease in restricted cash, net

 

 

(28,311)

 

 

9,404

Net cash provided by (used in) investing activities

 

 

449,608

 

 

(10,206)

 

See notes to condensed consolidated financial statements.

8


 

Table of Contents 

Starwood Property Trust, Inc. and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited, amounts in thousands)

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

 

September 30,

 

    

2016

    

2015

Cash Flows from Financing Activities:

 

 

 

 

 

 

Borrowings under financing agreements

 

$

3,158,920

 

$

3,423,328

Principal repayments on and repurchases of borrowings

 

 

(3,138,534)

 

 

(3,289,937)

Payment of deferred financing costs