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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, 2017

 

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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth 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)

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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 November 2, 2017 was 260,998,683.

 

 

 

 

 


 

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, 2016, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017 and this Quarterly Report on Form 10-Q, 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

4

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Operations

5

 

Condensed Consolidated Statements of Comprehensive Income

6

 

Condensed Consolidated Statements of Equity

7

 

Condensed Consolidated Statements of Cash Flows

8

 

Notes to Condensed Consolidated Financial Statements

10

 

Note 1 Business and Organization

10

 

Note 2 Summary of Significant Accounting Policies

11

 

Note 3 Acquisitions and Dispositions

17

 

Note 4 Loans

21

 

Note 5 Investment Securities

26

 

Note 6 Properties

30

 

Note 7 Investment in Unconsolidated Entities

31

 

Note 8 Goodwill and Intangibles

32

 

Note 9 Secured Financing Agreements

34

 

Note 10 Unsecured Senior Notes

37

 

Note 11 Loan Securitization/Sale Activities

39

 

Note 12 Derivatives and Hedging Activity

40

 

Note 13 Offsetting Assets and Liabilities

42

 

Note 14 Variable Interest Entities

42

 

Note 15 Related-Party Transactions

43

 

Note 16 Stockholders’ Equity

45

 

Note 17 Earnings per Share

47

 

Note 18 Accumulated Other Comprehensive Income

48

 

Note 19 Fair Value

49

 

Note 20 Income Taxes

54

 

Note 21 Commitments and Contingencies

54

 

Note 22 Segment Data

55

 

Note 23 Subsequent Events

62

Item 2. 

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

63

Item 3. 

Quantitative and Qualitative Disclosures about Market Risk

94

Item 4. 

Controls and Procedures

97

Part II 

Other Information

 

Item 1. 

Legal Proceedings

98

Item 1A. 

Risk Factors

98

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

98

Item 3. 

Defaults Upon Senior Securities

98

Item 4. 

Mine Safety Disclosures

98

Item 5. 

Other Information

98

Item 6. 

Exhibits

99

 

 

 

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, 2017

    

December 31, 2016

Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

413,845

 

$

615,522

Restricted cash

 

 

54,591

 

 

35,233

Loans held-for-investment, net

 

 

6,382,371

 

 

5,847,995

Loans held-for-sale, at fair value

 

 

608,624

 

 

63,279

Loans transferred as secured borrowings

 

 

74,339

 

 

35,000

Investment securities ($290,622 and $297,638 held at fair value)

 

 

701,818

 

 

807,618

Properties, net

 

 

2,521,342

 

 

1,944,720

Intangible assets ($33,781 and $55,082 held at fair value)

 

 

181,865

 

 

219,248

Investment in unconsolidated entities

 

 

243,450

 

 

204,605

Goodwill

 

 

140,437

 

 

140,437

Derivative assets

 

 

38,293

 

 

89,361

Accrued interest receivable

 

 

35,047

 

 

28,224

Other assets

 

 

112,265

 

 

101,763

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

 

 

51,197,981

 

 

67,123,261

Total Assets 

 

$

62,706,268

 

$

77,256,266

Liabilities and Equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

$

203,782

 

$

198,134

Related-party payable

 

 

29,989

 

 

37,818

Dividends payable

 

 

125,674

 

 

125,075

Derivative liabilities

 

 

22,890

 

 

3,904

Secured financing agreements, net

 

 

5,514,695

 

 

4,154,126

Unsecured senior notes, net

 

 

2,044,523

 

 

2,011,544

Secured borrowings on transferred loans, net

 

 

74,200

 

 

35,000

VIE liabilities, at fair value

 

 

50,150,781

 

 

66,130,592

Total Liabilities 

 

 

58,166,534

 

 

72,696,193

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, 265,406,623 issued and 260,799,738 outstanding as of September 30, 2017 and 263,893,806 issued and 259,286,921 outstanding as of December 31, 2016

 

 

2,654

 

 

2,639

Additional paid-in capital

 

 

4,705,044

 

 

4,691,180

Treasury stock (4,606,885 shares)

 

 

(92,104)

 

 

(92,104)

Accumulated other comprehensive income

 

 

65,271

 

 

36,138

Accumulated deficit

 

 

(184,073)

 

 

(115,579)

Total Starwood Property Trust, Inc. Stockholders’ Equity

 

 

4,496,792

 

 

4,522,274

Non-controlling interests in consolidated subsidiaries

 

 

42,942

 

 

37,799

Total Equity 

 

 

4,539,734

 

 

4,560,073

Total Liabilities and Equity 

 

$

62,706,268

 

$

77,256,266

 

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,

 

    

2017

    

2016

    

2017

    

2016

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income from loans

 

$

138,599

 

$

121,225

 

$

371,094

 

$

361,314

Interest income from investment securities

 

 

12,451

 

 

19,175

 

 

40,045

 

 

53,879

Servicing fees

 

 

14,842

 

 

22,918

 

 

47,572

 

 

70,921

Rental income

 

 

60,153

 

 

39,742

 

 

176,161

 

 

110,262

Other revenues

 

 

722

 

 

1,645

 

 

2,184

 

 

3,814

Total revenues 

 

 

226,767

 

 

204,705

 

 

637,056

 

 

600,190

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

30,980

 

 

27,780

 

 

79,997

 

 

76,510

Interest expense

 

 

76,431

 

 

59,082

 

 

213,608

 

 

173,237

General and administrative

 

 

32,892

 

 

51,470

 

 

95,841

 

 

119,677

Acquisition and investment pursuit costs

 

 

1,024

 

 

1,509

 

 

2,232

 

 

5,682

Costs of rental operations

 

 

23,799

 

 

18,011

 

 

67,701

 

 

46,518

Depreciation and amortization

 

 

22,871

 

 

15,352

 

 

67,131

 

 

53,185

Loan loss allowance, net

 

 

(171)

 

 

2,127

 

 

(3,170)

 

 

3,395

Other expense

 

 

376

 

 

711

 

 

1,276

 

 

811

Total costs and expenses 

 

 

188,202

 

 

176,042

 

 

524,616

 

 

479,015

Income before other income (loss), income taxes and non-controlling interests

 

 

38,565

 

 

28,663

 

 

112,440

 

 

121,175

Other income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Change in net assets related to consolidated VIEs

 

 

56,177

 

 

47,848

 

 

203,108

 

 

94,388

Change in fair value of servicing rights

 

 

(4,867)

 

 

(14,283)

 

 

(21,301)

 

 

(33,213)

Change in fair value of investment securities, net

 

 

(397)

 

 

(2,786)

 

 

(4,061)

 

 

(714)

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

 

 

19,485

 

 

49,996

 

 

45,484

 

 

70,122

(Loss) earnings from unconsolidated entities

 

 

(4,689)

 

 

4,305

 

 

27,763

 

 

12,849

Gain on sale of investments and other assets, net

 

 

11,877

 

 

10

 

 

17,004

 

 

165

Loss on derivative financial instruments, net

 

 

(24,224)

 

 

(2,328)

 

 

(66,159)

 

 

(6,793)

Foreign currency gain (loss), net

 

 

10,660

 

 

(3,214)

 

 

28,434

 

 

(20,580)

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

 

 

(66)

 

 

 —

 

 

(175)

 

 

(54)

Noncredit portion of OTTI recognized in other comprehensive income

 

 

66

 

 

 —

 

 

66

 

 

54

Net impairment losses recognized in earnings

 

 

 —

 

 

 —

 

 

(109)

 

 

 —

Loss on extinguishment of debt

 

 

 —

 

 

 —

 

 

(5,916)

 

 

 —

Other income, net

 

 

28

 

 

269

 

 

484

 

 

10,998

Total other income (loss)

 

 

64,050

 

 

79,817

 

 

224,731

 

 

127,222

Income before income taxes

 

 

102,615

 

 

108,480

 

 

337,171

 

 

248,397

Income tax provision

 

 

(9,816)

 

 

(2,667)

 

 

(18,285)

 

 

(3,467)

Net income 

 

 

92,799

 

 

105,813

 

 

318,886

 

 

244,930

Net income attributable to non-controlling interests

 

 

(4,371)

 

 

(47)

 

 

(10,720)

 

 

(1,034)

Net income attributable to Starwood Property Trust, Inc.  

 

$

88,428

 

$

105,766

 

$

308,166

 

$

243,896

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

$

0.44

 

$

1.18

 

$

1.02

Diluted

 

$

0.33

 

$

0.44

 

$

1.17

 

$

1.00

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

    

2017

 

2016

 

2017

 

2016

Net income 

 

$

92,799

 

$

105,813

 

$

318,886

 

$

244,930

Other comprehensive income (net change by component):

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges

 

 

(22)

 

 

185

 

 

56

 

 

(136)

Available-for-sale securities

 

 

3,975

 

 

6,105

 

 

10,728

 

 

8,656

Foreign currency translation

 

 

5,337

 

 

1,331

 

 

18,349

 

 

1,999

Other comprehensive income

 

 

9,290

 

 

7,621

 

 

29,133

 

 

10,519

Comprehensive income 

 

 

102,089

 

 

113,434

 

 

348,019

 

 

255,449

Less: Comprehensive income attributable to non-controlling interests

 

 

(4,371)

 

 

(47)

 

 

(10,720)

 

 

(1,034)

Comprehensive income attributable to Starwood Property Trust, Inc.  

 

$

97,718

 

$

113,387

 

$

337,299

 

$

254,415

 

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

 

Property

 

 

 

 

 

 

 

 

 

Common stock

 

Additional

 

 

 

 

 

 

 

 

Other

 

Trust, Inc.

 

Non-

 

 

 

 

 

 

 

 

Par

 

Paid-in

 

Treasury Stock

 

Accumulated

 

Comprehensive

 

Stockholders’

 

Controlling

 

Total

 

 

    

Shares

    

Value

    

Capital

    

Shares

    

Amount

    

Deficit

    

Income

    

Equity

    

Interests

    

Equity

 

Balance, January 1, 2017

 

263,893,806

 

$

2,639

 

$

4,691,180

 

4,606,885

 

$

(92,104)

 

$

(115,579)

 

$

36,138

 

$

4,522,274

 

$

37,799

 

$

4,560,073

 

Proceeds from DRIP Plan

 

24,217

 

 

 —

 

 

541

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

541

 

 

 —

 

 

541

 

Equity offering costs

 

 —

 

 

 —

 

 

(12)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(12)

 

 

 —

 

 

(12)

 

Equity component of 2023 Convertible Senior Notes issuance

 

 —

 

 

 —

 

 

3,755

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,755

 

 

 —

 

 

3,755

 

Equity component of 2018 Convertible Senior Notes repurchase

 

 —

 

 

 —

 

 

(18,105)

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(18,105)

 

 

 —

 

 

(18,105)

 

Share-based compensation

 

849,045

 

 

 9

 

 

13,281

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

13,290

 

 

 —

 

 

13,290

 

Manager incentive fee paid in stock

 

639,555

 

 

 6

 

 

14,404

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

14,410

 

 

 —

 

 

14,410

 

Net income

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

308,166

 

 

 —

 

 

308,166

 

 

10,720

 

 

318,886

 

Dividends declared, $1.44 per share

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

(376,660)

 

 

 —

 

 

(376,660)

 

 

 —

 

 

(376,660)

 

Other comprehensive income, net

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

29,133

 

 

29,133

 

 

 —

 

 

29,133

 

VIE non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,837

 

 

1,837

 

Contributions from non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

105

 

 

105

 

Distributions to non-controlling interests

 

 —

 

 

 —

 

 

 —

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(7,519)

 

 

(7,519)

 

Balance, September 30, 2017

 

265,406,623

 

$

2,654

 

$

4,705,044

 

4,606,885

 

$

(92,104)

 

$

(184,073)

 

$

65,271

 

$

4,496,792

 

$

42,942

 

$

4,539,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

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,

 

    

2017

    

2016

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net income

 

$

318,886

 

$

244,930

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

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

 

 

14,131

 

 

12,061

Amortization of discounts and deferred financing costs on senior notes

 

 

17,514

 

 

16,058

Accretion of net discount on investment securities

 

 

(11,669)

 

 

(11,967)

Accretion of net deferred loan fees and discounts

 

 

(27,014)

 

 

(38,809)

Share-based compensation

 

 

13,290

 

 

22,797

Share-based component of incentive fees

 

 

14,410

 

 

14,657

Change in fair value of fair value option investment securities

 

 

4,061

 

 

714

Change in fair value of consolidated VIEs

 

 

(59,160)

 

 

42,371

Change in fair value of servicing rights

 

 

21,301

 

 

33,213

Change in fair value of loans held-for-sale

 

 

(45,484)

 

 

(70,122)

Change in fair value of derivatives

 

 

62,463

 

 

3,360

Foreign currency (gain) loss, net

 

 

(28,211)

 

 

20,367

Gain on sale of investments and other assets

 

 

(17,004)

 

 

(165)

Impairment charges

 

 

1,099

 

 

711

Loan loss allowance, net

 

 

(3,170)

 

 

3,395

Depreciation and amortization

 

 

64,937

 

 

49,081

Earnings from unconsolidated entities

 

 

(27,763)

 

 

(12,849)

Distributions of earnings from unconsolidated entities

 

 

4,716

 

 

15,151

Bargain purchase gain

 

 

 —

 

 

(8,406)

Loss on extinguishment of debt

 

 

5,916

 

 

 —

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

 

 

(1,487,813)

 

 

(1,186,080)

Proceeds from sale of loans held-for-sale

 

 

987,828

 

 

1,123,512

Changes in operating assets and liabilities:

 

 

 

 

 

 

Related-party payable, net

 

 

(7,829)

 

 

(17,166)

Accrued and capitalized interest receivable, less purchased interest

 

 

(63,032)

 

 

(58,275)

Other assets

 

 

(12,198)

 

 

6,168

Accounts payable, accrued expenses and other liabilities

 

 

37,367

 

 

(3,537)

Net cash (used in) provided by operating activities

 

 

(222,428)

 

 

201,170

Cash Flows from Investing Activities:

 

 

 

 

 

 

Origination and purchase of loans held-for-investment

 

 

(2,195,258)

 

 

(1,583,628)

Proceeds from principal collections on loans

 

 

1,670,159

 

 

2,187,844

Proceeds from loans sold

 

 

37,079

 

 

236,433

Purchase of investment securities

 

 

(69,231)

 

 

(359,510)

Proceeds from sales of investment securities

 

 

11,134

 

 

3,799

Proceeds from principal collections on investment securities

 

 

209,903

 

 

70,316

Real estate business combinations, net of cash and restricted cash acquired

 

 

(18,194)

 

 

(91,186)

Proceeds from sale of properties

 

 

44,219

 

 

 —

Purchases and additions to properties and other assets

 

 

(564,755)

 

 

(10,209)

Investment in unconsolidated entities

 

 

(20,544)

 

 

(3,870)

Distribution of capital from unconsolidated entities

 

 

3,858

 

 

15,026

Payments for purchase or termination of derivatives

 

 

(41,208)

 

 

(24,954)

Proceeds from termination of derivatives

 

 

23,686

 

 

37,652

Return of investment basis in purchased derivative asset

 

 

151

 

 

206

Net cash (used in) provided by investing activities

 

 

(909,001)

 

 

477,919

 

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,

 

    

2017

    

2016

Cash Flows from Financing Activities: