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Starwood Property Trust

Investor Presentation | November 2014

STWD
Starwood
Today
Property Trust Today

(1)
(2)
(3)

Leading publicly traded non-bank real estate finance company

Largest commercial mortgage REIT in the United States with a market capitalization of $5.0 billion (1)

Total capital deployed since inception of $15.5 billion (1); current portfolio of over $7.3 billion (2)

Focused on providing a secure dividend for investors; current in-place yield of 8.5%+ (1)

Highly diversified and scalable investment platform with proven track record

Broad wholesale asset origination, acquisition and servicing model

Flexibility and expertise to invest across the real estate finance sector to generate attractive returns

Total annualized shareholder returns of 14.5% and total return of 102.9% since IPO (3)

Unparalleled access to global transaction sourcing, underwriting, and asset management

Over 450 employees dedicated to Starwood Property Trust globally

Ability to leverage Starwood Capital Groups 550+ employees and 23 years of transaction experience

Position as largest commercial special servicer provides a unique window into the CRE finance markets

Data as of October 31, 2014

Includes Starwood lending segment assets and LNR net investments as of September 30, 2014
Source: Bloomberg. Period between 8/11/2009 and 10/31/2014, includes reinvestment of dividends

Company
Evolution of
Overview
STWDs Business Lines
STWDs has diversified its business over time in order to find the best risk adjusted returns for shareholders
while continuing to leverage its expertise and infrastructure

Target Investments - IPO

Target Investments Today and beyond

First
Mortgages

First
Mortgages

Mezzanine
Loans

Value-Add
Real Estate

RMBS

First Mortgages

Mezzanine
Loans

CMBS
First Mortgages
Mezzanine Loans
RMBS
CMBS

Construction Loans

Mezzanine Loans
Preferred Equity
RMBS
CMBS
Preferred CMBS B-pieces
Equity Conduit Loans
Value-Add Real Estate Equity

CMBS

RMBS

CMBS Bpieces

Construction
Loans

Conduit
Loans

Note:

Figures as of September 30, 2014 unless otherwise noted

STWDs Manager Starwood

Starwood Capital
Capital
Group
Group
Founded in 1991 by Barry Sternlicht, Starwood Capital Group is one of the worlds leading privately held
alternative investment firms with a focus on global real estate

Note:

Outstanding Performance

Acquired over $55 billion of assets over the past 23 years;

current assets under management in excess of $37 billion

Experienced Executive Team

Seasoned executive team that has been together for over 14

years with an average of 28 years of industry experience

Distinctive Corporate
Transactions Expertise

A leader in public-private/private-public market executions

including the creation of five NYSE-listed companies

Worldwide Insight and Access

Twelve offices globally provide transaction flow and insight

into economic and local market trends

Investing Discipline

Significantly decreased acquisition activity when the market

became overheated in 2006/2007

Extensive Asset Class

Experience

Type

Multifamily/
Condos

Office

Retail

Hotels

Land

Experience

70,000 units

44 million sf

39 million sf

2,200 hotels

46,000 lots

Figures as of September 30, 2014 unless otherwise noted

Starwoods
STWDs Manager
Synergistic
Starwood
Business
Capital
Lines
Group
STWD affiliates provide information and expertise which give the Company an edge in sourcing,
underwriting, and executing transactions across various geographies and asset classes

Starwood Retail
Partners (SRP)
Manages one of the
largest regional mall
operating platforms
in the U.S., with a
portfolio of 28
properties totaling
more than 26.8
million square feet of
gross leasable area
and $5 billion of
gross asset value.

Note:

SH Group
Hotel management
team brings
operational expertise
in areas of revenue
management,
marketing, food &
beverage, systems,
and cost
management.
Currently manage
two brands: 1Hotels
and Baccarat Hotels
& Resorts.

Figures as of September 30, 2014 unless otherwise noted

Starwood Waypoint
Real Estate Group
(NYSE: SWAY)
One of the largest
publicly traded
owners and
operators of singlefamily residential
rental homes in the
U.S. The company
also invests in NPLs
to supplement its
growth.

Starwood Land
Ventures (SLV)

Starwood Energy
Group

Focused on land
acquisition,
development, and
financing. SLV has
acquired over 17,000
lots in over 60
communities in 3
states and is a
leading provider of
sites to the
homebuilding
industry.

Specialized in energy
infrastructure
investments, with a
focus on the natural
gas and renewable
power generation,
and transmission
sectors. Starwood
Energy Group
manages total equity
commitments of over
$2 billion.

STWDs Value
Value Proposition
Proposition
STWDs

Note:

Proven
Business
Model

Disciplined approach to investing across the real estate capital structure

Floating rate business model and position as leading special servicer
provide protection against higher interest rates

Balance
Sheet
Advantage

Scale enables ability to lead entire large loan transactions

Flexibility to offer loan structures outside the box
Expertise in structuring complex transactions

Diversified
Real Estate
Platform

Special servicing business in US and Europe provides unique visibility

Ability to leverage Starwood Capital Groups international presence,
experience across real estate asset classes, and terabytes of real estate
data compiled over the past 23 years

Broad Access
to Capital
Markets

Proven access to multiple sources of debt and equity capital

$4.8 billion in credit capacity across 12 facilities and two convertible
senior note issuances

Focused on
Risk
Mitigation

Culture of approaching real estate lending from an owners perspective

Committed to creating shareholder value through deliberate approach to
investing across the real estate finance sector

Figures as of September 30, 2014 unless otherwise noted

Lending
Segment
Underwriting
Compelling
Market
Backdrop Metrics
Compelling
Market
Opportunity
The changing regulatory environment, coupled with increasing real estate transaction activity, can lead to
lending opportunities for a flexible and well capitalized non-bank finance company like STWD

CRE Transaction Volumes & Expected Debt Maturities

Regulatory Items Potentially Impacting CRE

($ billions)
Reform
$361

$360

$335
$297

$234

$146
$111

Impact

$112

Basel III
Risk Based
Capital
Ratios

Phase-in 20152019

Risk weightings for

commercial real estate assets
require banks to maintain
higher capital levels

The
Volcker
Rule

Finalized
December 2013

Implementation
July 2017

Prohibits banks from

sponsoring a hedge fund or
private equity fund; limits
banks fund ownership
interests

Finalized October
2014

Implementation
Fall 2016

Requirement for sponsors of

securitization transactions to
retain a certain level of risk in
those transactions, that must
be retained for a period of 5
years

$80

$68

Key Dates

$357

$356

$16
2009

2010

2011

2012

CRE Transaction Volume

2013

2014E

CRE Debt Maturities

2015E

2016E

CMBS Maturities

2017E

Risk
Retention
Rules

Source: CRE Transaction Volumes: Real Capital Analytics, includes all property types. CRE Debt Maturities: Trepp as of 4Q13. Includes bank, life company, CMBS, and other nonresidential mortgage debt. CMBS Debt Maturities: Trepp as of 9/30/2014

Lending
Underwriting Metrics
PortfolioSegment
Overview
Compelling
Market Opportunity
STWD has built a diverse $7.3 billion portfolio across its Lending and LNR segments

LNR Segment Portfolio Overview

Lending Segment Portfolio Overview

$6.1 billion carrying value

55% First mortgages

57% CMBS

24% Mezzanine loans

20% Conduit loans

6% Subordinate mortgages

17% Special servicing intangibles

5% Preferred equity

6% Unconsolidated investments

10% CMBS, RMBS, Unconsolidated investments

Fully extended weighted average life of 4.0 years

Lending
Segment
83%

Note:

$1.2 billion carrying value

Figures as of September 30, 2014 unless otherwise noted

LNR
Segment
17%
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Lending Segment Strategy

Strategy

Originate floating rate loans with an

average duration of 3-5 years

Flexibility and creativity to structure

loans to align both borrower and
lender needs

Significant balance sheet and access

to capital allow for focus on large
loans
Ability to underwrite and close loan
transactions quickly and efficiently

Optionality to sell-off an A-note or

finance a whole loan on a secured
credit facility

Traditional lenders such as banks,

life insurance companies, and
CMBS conduits focus on stabilized
assets and typically offer long
term fixed rate loans

Long Term
(7-10 years)

STWD focuses primarily on

assets with some degree of
transition, which could include:
lease-up, redevelopment, or
construction
Loan Duration

Short Term
(3-5 years)

Lending Segment Business Model

Asset Stabilization

Stabilized

Note:

Figures as of September 30, 2014 unless otherwise noted

Transitional

Loan Origination and Structuring Process

1. Originate Whole Loan

2. Split Loan into Senior and Junior Tranches

Senior tranche has a 50% LTV while the junior tranche
remains at 75% LTV

Originate a 75% LTV first mortgage at a rate of L +

4.75%
$100mm

$75mm

Building

Optionality to sell or finance the 0% - 50% LTV

senior loan tranche

4. Retain Junior Portion of Loan

STWD benefits from the lower cost of financing on the
senior portion of the mortgage

o Sell 100% of Senior

Loan

B
Senior
Senior

STWDs
investment
represents 50%75% LTV

o Finance 100% of
Senior Loan
o Sell Participation in
Senior Loan

$25mm
$25mm
Junior
Junior

First Mtg.

Junior

3. Sell or Finance Senior Portion of Loan

$50mm
$50mm

Senior
First Mtg.

First Mtg.
$25mm
First
Mtg.
Equity

$50mm

$75mm
$75mm

$75mm

Asset Yield
(L+)

4.75%

Cost of
Financing
(L+)

(2.00%)

Net Interest
Margin (L+)

2.75%

Leverage

2.0x

Gross ROE of
Junior (L+) (1)

10.25%

$25mm
Junior
C

Assume that STWD can sell or finance 100% of the

senior loan at a cost of L + 2.00%

Note: Asset yield equates to $3.56M of interest income, cost of financing equates to $1.0M of expenses and STWD earns $2.56M on its retained investment of $25M or a 10.25% return

10

Lending Segment Portfolio

Portfolio Overview
Overview
STWD has maintained its LTV discipline as it has grown its lending portfolio to over $6.0 billion
Total Portfolio Size(1) vs. Weighted Average LTV (2)
$6,094
$5,819
$5,603
$5,375
67.8%

$4,455

66.5%
65.7%

$4,087

64.9%

64.7%

64.1%
$3,072

$3,609

$4,147

64.0%

64.0%

1Q13

2Q13

65.1%

65.5%

65.6%
64.5%

64.2%

2Q14

3Q14

63.1%

$3,201

$2,834
$2,513

$4,099

62.8%

$2,383

$2,136

1Q11

(1)
(2)

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

3Q13

4Q13

1Q14

In millions, includes all lending segment assets as of 9/30/2014.

As of 9/30/2014. Underlying property values are determined by STWDs management based on its ongoing asset assessments, and loan balances that are the face value of a loan regardless of whether STWD
has purchased the loan at a discount or premium to par. For any loans collateralized by ground-up construction projects without significant leasing or units with executed sales contracts, the fully funded loan
balance is included in the numerator and the fully budgeted construction cost including costs of acquisition of the property is included in the denominator. For ground up construction loans which have
significant leasing or units under contract for sale the fully funded loan balance is included in the numerator with an estimate of the stabilized value upon completion of construction included in the
denominator

11

Lending Segment Portfolio

Portfolio Overview
Diversification
STWDs lending portfolio is diversified by geographic location and property type

Loan Balance by Region

Loan Balance by Property Type

Industrial, 3%

South West, 5%

Residential, 5%

Midwest, 8%

Mixed Use, 7%
West, 30%
Office, 37%

Retail, 7%

Mid Atlantic, 10%

South East, 11%

Multi-family, 13%

International, 13%

North East, 23%

Hospitality, 27%

$0.0

Note:

Data as of September 30, 2014 unless otherwise noted

12

Lending Segment Portfolio

Overview
Credit Performance
STWD has funded over $10.3 billion across 155 loans since inception and has $0 of realized loan losses
to date
Realized Loan Losses to Date

Cumulative Lending Segment Loan Funding

($ millions)
$12,000
$10,000
$8,000
$6,000

$0.0

$4,000
$2,000
$0
2009

2010

2011

2012

2013

2014*

* As of 10/31/2014

$0.0

Note:

Data as of September 30, 2014 unless otherwise noted

13

Lending
Segment
Underwriting
Metrics
Value Embedded
in
LNRs Special
Servicing Portfolio
Compelling
Market Opportunity
Special servicing revenues provide a hedge against higher interest rates and credit deterioration; the
upcoming wave of CMBS maturities will potentially result in higher volumes of assets in special servicing

Expected CMBS Maturities

Key LNR Statistics

($ billions)

STWDs subsidiary LNR is one of the

largest and most experienced special
servicers in the US

LNR manages an active CMBS portfolio

with $698 million of carrying value and
is named special servicer on over $15.0
billion of loans

LNR is the named special servicer on

$102 billion or 32% of all CMBS
maturities through 2017

LNR won special servicing assignments

on 21.7% of CMBS issuances year-todate, ranked #1 in the league table

LNRs subsidiary Hatfield Phillips is a

leading primary and special servicer in
Europe

$157.9

$111.4

$112.1

$80.3

$15.5
$6.3
2014

$29.9

$28.7

2015

2016
Total

$37.5
2017

LNR Share

$28.8
2018+

Source: Trepp LLC

Note:

Data as of 9/30/2014
2014 Maturities represent maturities from 9/30/2014-12/31/2014

14

Lending
Segment
Underwriting Metrics
Conservative
Capitalization
Compelling
Market
Opportunity
As part of STWDs approach to risk, the Company has maintained a very conservative balance sheet,
consisting of both secured asset-level and corporate-level debt
Capitalization

STWD Key Credit Metrics

($ billions)

Total Debt
Outstanding
$3.8

Total capitalization of $8.8B

As of September 30, 2014, $3.8B aggregate

outstanding balance. A maximum borrowing capacity
of $4.8B under 12 financing facilities, which are with 8
leading financial institutions, and two convertible
notes

Equity Market (1)

Capitalization
$5.0

Historical Debt-to-Equity Ratio (2)

Starwood Waypoint
(NYSE:SWAY) Spin Off

1.1x

Subsequent to quarter end, maximum

borrowing capacity increased to $5.4B as a
result of a convertible note issuance of $0.4B
and an upsize of a revolving repo facility by
$0.3B

1.0x
0.9x
0.8x

0.6x

0.6x
0.5x

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

Interest coverage ratio of 4.37x

Fixed charge coverage ratio of 4.13x

Issuer rating of Ba3/BB; Outlook Stable

3Q14

Note: As of September 30, 2014, unless otherwise indicated

(1) Based on outstanding shares as of September 30 of 222.4 million and closing stock price on October 31 of $22.56
(2) Debt is comprised of secured financing agreements and convertible senior notes. Equity is STWD equity

15

Lending
Management
Underwriting Metrics
Interest Segment
Rate
RiskOpportunity
Compelling
Market
STWD should benefit from a rising interest rate environment given its high volume of LIBOR-based floating
rate loans

The Company estimates that a 100 basis point increase in LIBOR would result in an increase to income of $17.5M

The following table summarizes the impact to annual net income from a specified hypothetical change in LIBOR (amounts in millions):

Variable Rate
Investments &
Indebtedness

Income / (Expense):
Investment Income
Interest Expense
Net Investment Income

Note:

3.0%

2.5%

2.0%

1.5%

1.0%

Increase

Increase

Increase

Increase

Increase

4,283.7

132.9

109.5

86.2

62.9

39.9

(2,580.0)

(74.0)

(61.0)

(48.2)

(35.3)

(22.4)

1,703.7

58.9

48.5

38.0

27.6

17.5

The numbers in the above table do not include any benefit that would be realized by LNR, whose special servicing
revenues would likely benefit from a rising rate environment due to an expected increase in the number of loans
that would enter special servicing

Data as of September 30, 2014 unless otherwise noted

16

Lending
Management,
Underwriting Metrics
Interest Segment
Rate
RiskOpportunity
continued
Compelling
Market

Portfolio Statistics

78% of the Lending Segment loan portfolio is indexed to LIBOR

87% of the floating rate loan portfolio in the Lending Segment benefits from having a LIBOR floor at an average rate of
0.36%, which is above the current LIBOR rate

The fixed rate loan portfolio carries an attractive weighted average coupon of 8.7%

The Lending Segments fixed rate loan portfolio is financed using floating rate liabilities, the Company hedges 100% of the
floating rate exposure back to fixed

Lending Segment Assets

Lending Segment Liabilities

Secured Financings
Swapped to Fixed
Rate 3%

Fixed Rate
Loans 22%
Fixed Rate
Convertible Notes
28%
Floating Rate Secured
Financings 69%

Floating Rate
Loans 78%

Note:

Data as of September 30, 2014 unless otherwise noted

17

Lending
Segment
Underwriting
Metrics
Attractive
Dividend
Yield
Compelling
Market
Opportunity
STWD focuses on providing a secure dividend through prudent capital deployment and in-depth risk
management

Historic Dividend Yield (1)

Comparable Yields (2)

12.00%

8.5%
7.0%

10.00%

3.7%
2.4%
8.00%

STWD
6.00%
Dec-12

(1)
(2)

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Source Bloomberg. Data as of 10/31/2014; excludes Starwood Waypoint (NYSE: SWAY) from stock price historically
As of 10/31/2014; CRE mREITs includes : CLNY, BXMT, ARI, and ACRE

CRE mREITs MSCI US REIT US 10-Year

Index
Treasury

1.9%

S&P 500

18

Lending
Segment
Underwriting
Metrics
Future Avenues
STWDs Growth
Compelling
Marketfor
Opportunity
Future growth opportunities will come from a combination of leveraging STWDs existing platform as well as
pursuing new investments with meaningful synergies with STWDs core lending business

Scaling Existing
Businesses
Developing New
Businesses
Internally
Exploring New
Asset Classes

Geographic
Expansion

(1)

Building the
premiere multicylinder finance
company
primarily
focused on the
real estate
industry

Strategic
Acquisitions &
Alliances

Note:

Data as of September 30, 2014 unless otherwise noted

19

Key Takeaways
Starwood Property Trust (NYSE: STWD)

Note:

Unmatched Expertise

Combination of debt origination, underwriting, and asset management

teams is unmatched in expertise and success in completing complex
transactions

Global Organization

Global real estate platform provides unique access to investment

opportunities creating a robust pipeline for STWD

Access to Data &

Information

Servicing platform provides unprecedented access to terabytes of CRE

data, providing critical intelligence for making investment decisions

Proven Business Model

Demonstrated execution of core business of originating floating rate

loans on transitional assets while maintaining a conservative overall
capitalization

Unique Platform

LNR diversifies STWDs business model and enhances transaction

underwriting and asset management capabilities

Premiere Franchise

STWD continues to secure its position as one of the premiere global

finance companies focused on opportunities with attractive risk/reward
attributes

Data as of September 30, 2014 unless otherwise noted

20

Forward Looking Statements

This presentation 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 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, 2013, and our Quarterly Reports on Form 10-Q for the quarters ended March
31, 2014, June 30, 2014, and September 30, 2014 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;
availability of mortgage origination and acquisition opportunities acceptable to us;
our ability to integrate the segments of LNR Property LLC, a Delaware limited liability company (LNR), which were acquired on April 19, 2013, into our business and
achieve the benefits that the we anticipate from this acquisition;
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 real estate and residential 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;
the timing, terms, structure or completion of our contemplated spin-off transaction;
changes in interest rates; and
the availability of and costs associated with sources of liquidity.
Additional risk factors are identified in our filings with the U.S. Securities Exchange Commission (the SEC), including our Annual Report on Form 10-K for the year ended
December 31, 2013 and our Forms 10-Q for the quarters ended March 31, 2014, June 30, 2014, and September 30, 2014 which are available on our website at
http://www.starwoodpropertytrust.com and the SECs website at http://www.sec.gov.
If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. As a result,
our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. We undertake no obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the
events described by our forward-looking statements might not occur. We qualify any and all of our forward-looking statements by these cautionary factors. Please keep this
cautionary note in mind as you assess the information given in this presentation.

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