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TABLE OF CONTENTS
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATIONProxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material under §240.14a-12
STARWOOD PROPERTY TRUST, INC.(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount onwhich the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
☐ Fee paid previously with preliminary materials.
☐ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which theoffsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and thedate of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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LETTERFROMOURCHAIRMANANDCEO March20,2020
DearShareholdersandStakeholdersofStarwoodPropertyTrust: ThedirectorsandofficersofStarwoodPropertyTrust,Inc.(the“Company”)joinmeinextendingtoyouacordialinvitationtoattendtheCompany’s2020AnnualMeetingofShareholders(the“AnnualMeeting”),whichwillbeconductedvialiveaudiowebcastonApril29,2020at2:00p.m.Easterntime.Inlightofpublichealthconcernsregardingthecoronavirusoutbreak,andinordertoprovideexpandedaccess,improvedcommunicationandcostsavingsforourshareholdersandourCompany,thisyear’sAnnualMeetingwillbeconductedvirtually.YouwillbeabletoattendthevirtualAnnualMeeting,voteyoursharesandsubmitquestions
duringthemeetingvialiveaudiowebcastbyvisiting:
www.virtualshareholdermeeting.com/STWD2020. Toparticipate,youwillneedthe16-digitcontrolnumberincludedinyourproxymaterialsoronyourproxycard.Weencourageyoutoallowampletimeforonlinecheck-in,whichwillbeginat1:45p.m.,Easterntime.Pleasenotethatthereisnoin-personmeetingforyoutoattend.
AttheAnnualMeeting,weareseekingtoelectsevendirectors.Theshareholderswillalsobeaskedtovote,onanadvisorybasis,toapprovetheCompany’sexecutivecompensationasdisclosedintheaccompanyingproxystatementandtovotetoratifytheappointmentofDeloitte&ToucheLLPastheCompany’sindependentregisteredpublicaccountingfirmforthecurrentcalendaryear.TheaccompanyingNoticeofthe2020AnnualMeetingofShareholdersandproxystatementdescribeseachofthesemattersinfurtherdetail.
EvenifyouplantoattendtheAnnualMeetingviathelivewebcast,pleasesubmityourproxyaspromptlyaspossible—bytelephone,viatheInternetor,ifyourequestedaprintedsetoftheCompany’sproxymaterials,bycompleting,signingandreturningaproxycard.WeencourageyoutovotebyInternet.EvenifyousubmitavotepriortotheAnnualMeeting,youwillhaveanopportunitytochangeyourearliervoteandvoteagainduringtheAnnualMeeting.
Weaskforyourvotingsupportfortheitemspresentedinthisproxystatementandthankyouforyourinvestment,andyourfaith,inus. Sincerely,
Barry S. SternlichtChairmanandChiefExecutiveOfficer
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NOTICEOF2020ANNUALMEETINGOFSHAREHOLDERSTOBEHELDONAPRIL29,2020 TotheShareholdersofStarwoodPropertyTrust,Inc.:NOTICEISHEREBYGIVENthatthe2020AnnualMeetingofShareholders(the“AnnualMeeting”)ofStarwoodPropertyTrust,Inc.,aMarylandcorporation(the“Company”),willbeheldvialiveaudiowebcastonApril29,2020at2:00p.m.,Easterntime,atwww.virtualshareholdermeeting.com/STWD2020,toconsiderandvoteonthefollowingmatters:
1. Theelectionofthesevendirectornomineesidentifiedintheaccompanyingproxystatement,eachtoserveforaone-yeartermexpiringatour2021AnnualMeetingofShareholders,andwitheachelecteddirectorholdingofficeuntilhisorhersuccessorhasbeenelectedandqualifiedoruntilhisorherearlierresignationorremoval;
2. Theapproval,onanadvisorybasis,oftheCompany’sexecutivecompensationasdisclosedintheaccompanyingproxystatement;
3. TheratificationoftheappointmentbytheAuditCommitteeofDeloitte&ToucheLLPastheCompany’sindependentregisteredpublicaccountingfirmforthecalendaryearendingDecember31,2020;and
4. ThetransactionofsuchotherbusinessasmayproperlycomebeforetheAnnualMeetingoranyadjournmentorpostponementthereof.
DetailsconcerningthosematterstocomebeforetheAnnualMeetingaresetforthintheaccompanyingProxyStatementforyourreview.
TheBoardofDirectorsoftheCompanyhasfixedMarch3,2020astherecorddateforthedeterminationofshareholdersentitledtonoticeofandtovoteattheAnnualMeetingandanymeetingshelduponadjournmentorpostponementthereof.OnlytheholdersofrecordoftheCompany’ssharesofcommonstockasofthecloseofbusinessonMarch3,2020areentitledtonoticeofandtovoteattheAnnualMeetingandanyadjournmentorpostponementthereof.
OnoraboutMarch20,2020,wefirstmailedtheNoticeofInternetAvailabilityofProxyMaterialsandpostedourproxymaterialsonthewebsitereferencedintheNoticeofInternetAvailabilityofProxyMaterials(www.proxyvote.com).Forshareholderswhoalreadyrequestedtoreceiveaprintedsetofproxymaterials,wemailedthisProxyStatement,theaccompanyingproxycardandourAnnualReportonForm10-KfortheyearendedDecember31,2019.Shareholdersofrecordmayvotetheirsharesbytelephone,viatheInternet,attheAnnualMeetingor,ifsuchshareholderreceivedaprintedsetofproxymaterials,bysigning,datingandmailingtheproxycardprovidedwiththewrittenproxymaterials.InstructionsregardingallmethodsofvotingarecontainedintheNoticeofInternetAvailabilityofProxyMaterialsor,forprintedsetsofproxymaterials,ontheproxycardthatisincludedwiththeProxyStatement.
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Shareholders are cordially invited to attend the virtual Annual Meeting in person. Your vote is important.Whether or not you plan to attend the Annual Meeting via the live webcast, please authorize proxies to castyour votes today by following the easy instructions in the Notice of Internet Availability of Proxy Materials or, ifyou requested a printed set of proxy materials, on the proxy card enclosed with the proxy materials.
ByOrderoftheBoardofDirectors,
Andrew J. SossenSecretaryDated:March20,2020Greenwich,Connecticut
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING IN PERSON OR BYPROXY; PLEASE PROMPTLY VOTE BY TELEPHONE, VIA THE INTERNET OR, IF YOU REQUESTED A PRINTEDSET OF THE PROXY MATERIALS, BY MARKING, DATING, SIGNING AND RETURNING A PROXY CARD. IFYOUHAVEANYQUESTIONSORNEEDASSISTANCEINVOTINGYOURSHARES,PLEASECALLINNISFREEM&AINCORPORATED,THECOMPANY’SPROXYSOLICITOR,TOLL-FREEAT888-750-5834(BANKSANDBROKERSMAYCALLCOLLECTAT212-750-5833).
Important Notice of Internet Availability of Proxy Materials for the 2020 Annual Meeting to Be Held on April 29,2020
Our proxy materials relating to the Annual Meeting (notice, proxy statement and annual report) are available atwww.proxyvote.com and can also be viewed on our website atwww.ir.starwoodpropertytrust.com/proxymaterials.
INTRODUCTION 1
MatterstoBeVotedonattheAnnualMeeting 1
OUR BOARD 2
Proposal 1: Election of Directors 2
Board Nominees — Who We Are 3
How Directors are Selected, Elected andEvaluated 8
DeterminationofDirectorIndependence 9
BoardEvaluationProcess 9
Corporate Governance Highlights 10
How the Board is Structured and Operates 11
BoardLeadershipStructure 11
BoardandCommitteeMeetings 11
SuccessionPlanning 15
BoardandRoleinRiskOversight 15
ExecutiveSessionsofNon-ExecutiveandIndependentDirectors 15
NumberofMeetingsoftheBoardandAttendancein2019 16
HedgingPolicy 16
HowtoCommunicatewiththeBoard 16
Non-Employee Director Compensation 18
OUR COMPANY 20
Shareholder Engagement 22
Our People 22
Our Executive Officers 23
Employment Practices 25
ExceptionalEmployeeBenefits 25
EmployeeRetentionandSatisfaction 25
DiversityandInclusion 25
EmployeeTraining,TalentManagement 25
OUR SHAREHOLDERS 26
Security Ownership of Certain BeneficialOwners, Directors and Management 26
HOW OUR EXECUTIVESARE PAID 28
Executive Compensation 28
CompensationDiscussionandAnalysis 28
CompensationCommitteeReport 32
PayRatioDisclosure 32
SummaryCompensationTable 33
GrantsofPlan-BasedAwardsDuringCalendarYearEndedDecember31,2019 34
OutstandingEquityAwardsatDecember31,2019 35
StockVestedinCalendarYearEndedDecember31,2019 36
PotentialPost-EmploymentPaymentsandPaymentsuponChangeinControl 36
EquityCompensationPlanInformation 37
Proposal 2: Advisory Vote on ExecutiveCompensation 38
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OUR AUDITORS 39
Proposal 3: Ratification of Appointment ofIndependent Registered Public AccountingFirm 39
ProposedIndependentRegisteredPublicAccountingFirm 39
Independent Registered Public AccountingFirm 40
Pre-ApprovalPoliciesforServicesofIndependentRegisteredPublicAccountingFirm 40
ReportoftheAuditCommittee 41
CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS 42
ManagementAgreement 42
GrantsofEquityCompensationtotheManager 45
SEREFandRelatedTransactions 46
SCGCore-PlusInvestment 47
OfficeCampusLoanInvestment 47
EnergyLoans 47
ResidentialMortgageLoans 48
OtherRelatedPartyArrangements 48
DisclosureRegardingFredRidley 48
CMBSSecuritizationTrustsandSpecialServicing 49
RelatedPartyTransactionPractice 49
INFORMATION CONCERNINGTHE ANNUAL MEETING ANDVOTING 50
ShareholdersEntitledtoVote 50
AttendingtheVirtualAnnualMeeting 50
Quorum 50
BrokerNon-Vote 51
RequiredVote 51
HowtoVote 51
HowSharesWillbeVoted 52
RevocationofProxies 52
ConfidentialityofVoting 53
TabulationofVotingResults 53
SolicitationofProxies 53
ListofShareholders 53
AvailabilityofAnnualReportandProxyMaterialsontheInternet 53
RecommendationsoftheBoard 54
Householding 54
OtherMatters 54
SHAREHOLDER PROPOSALSFOR THE 2021 ANNUALMEETING 55
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PROXY STATEMENT — ANNUAL MEETING OF SHAREHOLDERS
INTRODUCTION ThisProxyStatement,theaccompanyingproxycardandtheNoticeofAnnualMeetingarebeingprovidedinconnectionwiththesolicitationofproxiesbytheBoardofDirectors(the“Board”)ofStarwoodPropertyTrust,Inc.,aMarylandcorporation(the“Company,”“we,”“us”or“our”),foruseattheCompany’s2020AnnualMeetingofShareholders(the“AnnualMeeting”)tobeheldvialivewebcastaccessibleatwww.virtualshareholdermeeting.com/STWD2020onApril29,2020at2:00p.m.,Easterntime,andanyadjournmentsorpostponementsthereof.InaccordancewiththerulesadoptedbytheU.S.SecuritiesandExchangeCommission(the“SEC”),wearemakingourproxymaterialsavailabletoourshareholderselectronicallyviatheInternet.Accordingly,onoraboutMarch20,2020,theCompanywillbemailingaNoticeofInternetAvailabilityofProxyMaterialstoourshareholderscontaininginstructionsonhowtoaccesstheproxymaterialsontheInternet,howtovoteonlineorbytelephoneand,ifdesired,howtoreceiveaprintedsetoftheproxymaterials.ForadditionaldetailsregardingtheAnnualMeetingandvotinggenerally,pleasereferto“InformationConcerningtheAnnualMeetingandVoting.”
Matters to Be Voted on at the Annual Meeting
AttheAnnualMeeting,thefollowingmatterswillbevotedon:
1. TheelectionofthesevendirectornomineesidentifiedinthisProxyStatement,eachtoserveforaone-yeartermexpiringatour2021AnnualMeetingofShareholders,andwitheachelecteddirectorholdingofficeuntilhisorhersuccessorhasbeenelectedandqualifiedoruntilhisorherearlierresignationorremoval;
2. Theapproval,onanadvisorybasis,oftheCompany’sexecutivecompensationasdisclosedinthisProxyStatement;
3. TheratificationoftheappointmentbytheAuditCommitteeofDeloitte&ToucheLLPastheCompany’sindependentregisteredpublicaccountingfirmforthecalendaryearendingDecember31,2020;and
4. ThetransactionofsuchotherbusinessasmayproperlycomebeforetheAnnualMeetingoranyadjournmentorpostponementthereof.
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OURBOARD PROPOSAL 1:
ELECTION OF DIRECTORSTheBoardrecommendsavote“FOR”ournominees
TheBoard,electedannually,reflectsouragility,teamworkanddriveforexcellence.TheBoardalsobringsexpertisefromkeysectors,includingrealestate,technology/digital,finance/investment,lawandmanagement.TheBoardhasunanimouslyproposedeachofourcurrentdirectors,RichardD.Bronson,JeffreyG.Dishner,CamilleJ.Douglas,SolomonJ.Kumin,FredS.Ridley,BarryS.SternlichtandStraussZelnick,asnomineesforelectionasdirectorsoftheCompany,eachtoserveforaone-yeartermexpiringatour2021AnnualMeetingofShareholders,andwitheachelecteddirectorholdingofficeuntilhisorhersuccessorhasbeenelectedandqualifiedoruntilhisorherearlierresignationorremoval.
TheBoardrecommendsavoteFORtheelectionofeachofthenomineesfordirectornamedabove.Theexperienceandqualificationsofthenomineesaredescribedfurtherinthefollowingtableandbelow:
Experience/ Qualifications
RichardBronson
JeffreyDishner
CamilleDouglas
SolomonKumin Fred Ridley
BarrySternlicht
StraussZelnick
BusinessLeadership
CorporateGovernance
Strategy &Operations
REIT/Real Estate
Legal/Regulatory
Financial/Accounting
Risk Oversight/Management
Digital/Technology
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BOARDNOMINEES—WHOWEARE Thebiographicalinformationbelowsummarizeseachdirector’sage,term,tenureasadirectoroftheCompany,boardcommitteememberships,principaloccupation,positionswiththeCompanyandbusinessexperience,includingtheexperiences,qualifications,skillsandattributesthatledtotheNominatingandCorporateGovernanceCommittee’sconclusionthatthenomineeshouldstandforelectionasadirector.TheinformationpresentedbelowhasbeenconfirmedbyeachnomineeforpurposesofitsinclusioninthisProxyStatement.
RICHARD D.BRONSON Chairman, The BronsonCompanies LeadIndependentDirector Age:75 Directorsince2009 Committee Membership • AuditCommittee • CompensationCommittee
(Chair) • NominatingandCorporate
GovernanceCommittee
EXPERIENCE • ChairmanofTheBronsonCompanies,LLC,arealestatedevelopment,investmentandadvisory
companybasedinBeverlyHills,California(2000-present)
• FormerPresidentofNewCityDevelopment,anaffiliateofMirageResorts,Development,whereheoversawthecompany’snewbusinessinitiativesandactivitiesoutsideofNevada
• Forover30years,hehasbeeninvolvedinthedevelopmentofmyriadcommercialpropertiesthroughouttheUnitedStatesincludingthecreationofmorethan100realestateprojects
QUALIFICATIONS Mr.Bronson’sexperienceandknowledgeintherealestateindustryenablehimtoprovidevaluableinsightintopotentialinvestmentsandthecurrentstateofthecommercialrealestatemarkets OTHER CURRENTPUBLICBOARDS • StarwoodRealEstateIncomeTrust,Inc.,apublicnon-listedrealestateinvestmenttrustfocusedon
acquiringstabilized,income-orientedcommercialrealestateanddebtsecuredbycommercialrealestateinboththeU.S.andEurope,inwhichanaffiliateoftheCompanyisashareholder
• InvitationHomesInc.,apubliclytradedREITfocusedonthesingle-familyresidentialbusinessbasedinDallas,Texas,inwhichanaffiliateoftheCompanyisashareholder
FORMERPUBLICBOARDS • MirageResorts • TRIPointeGroup,Inc.,ahomebuildinganddesigncompanybasedinIrvine,California,inwhichan
affiliateoftheCompanywasashareholderandwhich,aftera2015reorganization,becamethesuccessorissuertoTRIPointeHomes,Inc.
OTHER • ServesontheAdvisoryBoardoftheNeurosurgeryDivisionatUCLAMedicalCenterinLosAngeles,
whereheandhiswife,EdieBaskinBronson,weretherecipientsofthedepartment’s2018“VisionaryAward”
• ServedasaTrusteeandVicePresidentoftheInternationalCouncilofShoppingCenters,anassociationrepresentingmorethan70,000industryprofessionalsin100countries
• FormermemberoftheBoardofTrusteesofTheFormanSchoolinLitchfield,CT • FormerChairmanoftheBoardofTrusteesofTheArcherSchoolforGirlsinLosAngeles,CA
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JEFFREY G.DISHNER Senior Managing Directorand Global Head of RealEstate Acquisitions,Starwood Capital Group Age:55 Directorsince2009 Committee Membership • InvestmentCommittee
EXPERIENCE • ExecutiveVicePresidentofSPTManagement,LLC,ourmanagerandanaffiliateoftheCompany(the
“Manager”)(August2009-present) • SeniorManagingDirectorandtheGlobalHeadofRealEstateAcquisitionsofStarwoodCapitalGroup,a
privately-heldglobalinvestmentmanagementfirmandanaffiliateoftheCompany(March2009-present);memberoftheExecutiveandInvestmentCommittees;joinedfirmin1994
• CommercialMortgageFinanceGroupofJ.P.Morgan&Co.,wherehefocusedonwhole-loan
dispositionsandsecuritizationsforvariousthriftinstitutions(1993-1994) • MemberoftheAcquisitionsGroupatJMBRealtyCorporation(1987-1991) QUALIFICATIONS Mr.Dishner’sexperienceinthecommercialrealestatemarketsenableshimtoprovideimportantperspectivesontheCompany’sinvestmentsandthecurrentstateoftheglobalcommercialrealestatemarkets EDUCATION • BS,Economics,WhartonSchooloftheUniversityofPennsylvania
• MBA,AmosTuckSchoolatDartmouthCollege
CAMILLE J.DOUGLAS Senior Managing Director,Acquisitions and CapitalMarkets, LeFrak Age:68 IndependentDirectorsince2010 Committee Membership • AuditCommittee • NominatingandCorporate
GovernanceCommittee
EXPERIENCE • SeniorManagingDirector,AcquisitionsandCapitalMarkets,atLeFrak,afamilyownedrealestate
companywhichowns,developsandmanagespropertiesintheNewYork,MiamiandLosAngelesmetropolitanareas,amongothers(present);waspreviouslyaManagingDirectorandSeniorAdvisor;joined2010
• AdjunctProfessorinFinanceandEconomicsatColumbiaBusinessSchool(2005-present) • FounderandPrincipalofMainstreetCapitalPartners,aprivatefirmfocusingonglobalrealestate
financialadvisoryservicesandtransactionsforclientsintheUnitedStates,theU.K.,BrazilandIndia(1999-2010)
• SeniorVicePresident,Finance,atOlympia&York(US)(1982-1994) • VicePresidentatMorganStanley&Co(1977-1982) QUALIFICATIONS Ms.Douglas’sover40yearsofexperienceincommercialrealestateinvestment,developmentandfinanceenableshertoprovideimportantperspectivesontheCompany’sinvestmentsaswellaspotentialfinancingsfortheCompany’sinvestments EDUCATION • BA,SmithCollege • MCRP,UrbanPlanning,HarvardUniversityGraduateSchoolofDesign
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SOLOMON J. KUMIN Co-President, LeucadiaAsset Management Age:44 IndependentDirectorsince2014 Committee Membership • CompensationCommittee • InvestmentCommittee
EXPERIENCE • Co-PresidentatLeucadiaAssetManagement,anassetmanagementfirm(2020-present),was
previouslytheChiefStrategicOfficer;joined2018 • ChiefExecutiveOfficerofFolgerHillAssetManagement,whichmergedwithSchonfeldStrategic
AdvisorsLLC,ahedgefund,in2018(2015-2018) • ChiefOperatingOfficer,S.A.C.CapitalAdvisors,ahedgefund(2015-2010),joined2005 • VicePresident,InstitutionalSalesatSanfordC.Bernstein,asubsidiaryofAllianceBernsteinLP(2001-
2005) • StartedhiscareeratLazardAssetManagementasaMarketingAssociatein1999 QUALIFICATIONS Mr.Kumin’sexperienceandknowledgeintheassetmanagementindustryenablehimtoprovidevaluableinsightontheCompany’soperations,management,capitalmarketsandportfolioallocation. EDUCATION • BA,PoliticalScience,TheJohnsHopkinsUniversity OTHER • MemberoftheBoardsofTrusteesofTheJohnsHopkinsUniversity,theFessendenSchoolinWest
Newton,MAandtheThoroughbredOwnersandBreedersAssociation • MemberoftheBoardsofDirectorsoftheBreeders’Cup,TeamImpact,andtheUSLacrosse
Foundation,forwhichheistheChairman
• MemberoftheTrustBoardofBostonChildren’sHospitalandtheJohnsHopkinsLacrosseAdvisoryBoard
FRED S. RIDLEY Partner, Foley &Lardner LLP Age:67 IndependentDirectorsince2014 Committee Membership • NominatingandCorporate
GovernanceCommittee
EXPERIENCE • PartneratFoley&LardnerLLP(“Foley”),aninternationallawfirm(2001-present);formernationalchair
ofFoley’sRealEstatePractice,amemberandformerco-chairoftheHospitality&LeisureTeam,amemberoftheSportsIndustryTeamandaformermemberofFoley’sManagementCommittee
• PartneratAnnisMitchellCockeyEdwards&Roehn,P.A.,alawfirmthatwasbasedinTampa,FL(1986-2001);Associate(1984-1986)
• PartneratBucklew,Ramsey&Ridley,P.A.,alawfirmthatwasbasedinTampa,FL(1982-1984);Associate(1980-1982)
• WorkedatIMG,asportsmanagementfirmbasedinCleveland,OH(1977-1980) QUALIFICATIONS Mr.Ridleyhasover35yearsofexperienceandknowledgeinthelegalandrealestateindustriesenablinghimtoprovidevaluableinsightintothecurrentstateofthecommercialrealestatemarketsandpotentialnewinvestments EDUCATION • BA,BusinessAdministration,UniversityofFlorida • JD,StetsonUniversityCollegeofLaw OTHER • Hasover35yearsofexperienceinrepresentingfinancialinstitutionsanddevelopersofsingle-family
andmultifamilyrealestateprojects,includingcoordinationofacquisitionandfinancingissues,environmentalandcoastalpermitting,andnegotiationsofentitlementswithlocalandstategovernmentalentities
• RecognizedbyChambersandPartnersforhisworkinrealestatelawinitsannuallypublishedChambersUSA:America’sLeadingBusinessLawyerseachyearfrom2004to2019andhasbeenselectedforinclusioninthe2006—2019Florida Super Lawyerslists
• RecognizedbyThe Legal 500 intheareaofrealestateandhasbeenselectedforinclusioninThe Best
Lawyers in America©2006—2020
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BARRY S.STERNLICHT Chairman of the Board andChief Executive Officer ofthe Company Age:59 Directorsince2009 Committee Membership • InvestmentCommittee
(Chair)
Other Public Boards Present • InvitationHomes • EstéeLauderCompanies Former • RestorationHardware • Co-ChairmanStarwood
WaypointHomes,apredecessorcompanyofInvitationHomes
• ChairmanoftheBoardofTRIPointeGroup
• ChairmanoftheBoardofBaccaratS.A.,acrystalmakerheadquarteredinBaccarat,France.
EXPERIENCE • StarwoodPropertyTrustChairmanoftheBoardandChiefExecutiveCompanysinceitsinception
(2009-present) • ChairmanoftheBoardandChiefExecutiveOfficerofStarwoodCapitalGroup,aprivately-heldglobal
investmentfirmwithover$60billioninassetsundermanagementandanaffiliateoftheCompany,sinceitsformation(1991-present)
• ChairmanandChiefExecutiveOfficerofStarwoodCapitalGroupManagement,LLC,aregistered
investmentadvisorandanaffiliateoftheCompany(present) • ChairmanoftheBoardofStarwoodRealEstateIncomeTrust,Inc.(2017-present) • Founder,ChairmanandChiefExecutiveOfficerofSHGroup,ahotelmanagementcompanythatowns
andmanagestheBaccaratHotels&Resorts,1HotelsandTreehousebrands(present) • Founder,ChairmanandChiefExecutiveOfficerofStarwoodHotels&ResortsWorldwide,Inc.(1995-
2005) QUALIFICATIONS Mr.Sternlicht’sextensiveexperienceinboththecommercialrealestatemarketsandasaseniorexecutiveanddirectorofotherpubliclytradedcorporationsenableshimtoprovidetheBoardwithleadershipandfinancialexpertiseaswellasinsightintothecurrentstatusoftheglobalfinancialandrealestatemarkets EDUCATION • BA,magnacumlaude,withhonors,BrownUniversity • MBA,withdistinction,HarvardBusinessSchool OTHER • Overthepast27years,Mr.Sternlichthasstructuredinvestmenttransactionswithanaggregateasset
valueinexcessof$100billion • BoardMemberofRealEstateRoundtable,A.S.Roma(theprofessionalItalianfootballclubbasedin
Rome),theDreamlandFilm&PerformingArtsCenterandtheExecutiveAdvisoryBoardofAmericansfortheArts
• MemberoftheU.S.OlympicandParalympicFoundationTrusteeCouncil,theWorld
PresidentsOrganizationandtheUrbanLandInstitute
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STRAUSS ZELNICK Chief Executive Officer andChairman of the Board ofDirectors of Take-TwoInteractive Software Age:62 IndependentDirectorsince2009 Committee Membership • AuditCommittee(Chair) • NominatingandCorporate
GovernanceCommittee(Chair)
• CompensationCommittee • InvestmentCommittee
EXPERIENCE • Take-TwoInteractiveSoftware,avideogameholdingcompany,ChiefExecutiveOfficer(2011-present)
andChairmanoftheBoardofDirectors(2007-present) • FounderofZelnickMediaCapital(“ZMC”),amediaenterprisewhichmanagesandholdsinterestsinan
arrayofbusinessesintheUnitedStatesandCanada(2001-present) • BMGEntertainment,amusicandentertainmentcompany,PresidentandChiefExecutiveOfficerof
(1998-2000),PresidentandChiefExecutiveOfficerofNorthAmerica(1995-1998) • PresidentandChiefExecutiveOfficerofCrystalDynamics,aproduceranddistributorofinteractive
entertainmentsoftware • PresidentandChiefOperatingOfficerof20thCenturyFox,wherehemanagedallaspectsofFoxInc.’s
worldwidemotionpictureproductionanddistributionbusiness • PresidentandChiefOperatingOfficerofVestronInc. • VicePresident,InternationalTelevision,atColumbiaPictures QUALIFICATIONS Mr.Zelnick’sexperienceasadirectorandseniorexecutiveofpubliclytradedcorporationsenableshimtoprovidetheCompanywithleadershipandfinancialexpertise EDUCATION • BA,WesleyanUniversity • MBA,HarvardBusinessSchool • JD,HarvardLawSchool OTHER • RepresentsZMCasadirectorofEducationNetworksofAmerica,Inc.,aprivatecompany • PreviouslyservedasChairmanandChiefExecutiveOfficerofColumbiaMusicEntertainment,Chairman
ofITNNetworksandChairmanofDirectHoldingsWorldwideandOTX • CBSCorp.,Non-ExecutiveInterimChairmanoftheBoard(2018-2019)
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HOWDIRECTORSARESELECTED,ELECTEDANDEVALUATED TheNominatingandCorporateGovernanceCommittee,aswellasthefullBoard,examineanumberofqualifications,attributesandcriteriawhenidentifyingandselectingcandidatestoserveasadirector.Theseincludeacandidate’sexperience,skills,expertise,diversity,age,personalandprofessionalintegrity,character,businessjudgment,timeavailability,dedication,independencefrommanagementandtheCompany,potentialconflictsofinterestandsuchotherfactorsthattheNominatingandCorporateGovernanceCommitteeconsidersappropriateinthecontextoftheneedsoftheBoard,asdiscussedinthesectionofthisProxyStatemententitled“OurBoard—HowtheBoardisStructuredandOperates—BoardandCommitteeMeetings—NominatingandCorporateGovernanceCommittee.”
TheCompany’sAmendedandRestatedBylaws(the“Bylaws”)providethatamajorityoftheentireBoardmayincreaseordecreasethenumberofdirectors,providedthatthenumberofdirectorsshallneverbelessthantheminimumrequiredbytheMarylandGeneralCorporationLawnormorethan15.TheBoardiscurrentlycomprisedofsevenmembers.
AttheAnnualMeeting,sevendirectorswillbeelectedtoserveontheBoard,eachtoserveforaone-yeartermexpiringatour2021AnnualMeetingofShareholders,andwitheachelecteddirectorholdingofficeuntilhisorhersuccessorhasbeenelectedandqualifiedoruntilhisorherearlierresignationorremoval.Eachnomineehasagreedtoserveasadirectorifelected,andtheBoardexpectsthateachnomineewillbeavailableforelectionasadirector.However,ifanynomineebecomesunavailableorunwillingtoserveasadirectorforanyreason,theproxiesmayexercisetheirdiscretiontovoteyoursharesforsuchotherpersonastheBoardmaynominate.
ElectionofeachnomineeforoneofthesevendirectorpositionsrequirestheaffirmativeFORvoteofapluralityofallvotescastattheAnnualMeeting.Thismeansthatthedirectornomineewiththemostvotesforaparticularseatiselectedforthatseat.However,pursuanttoourCorporateGovernanceGuidelines,anynomineeinanuncontestedelectionwhoreceivesagreaternumberofvotes“withheld”fromhisorherelectionthanvotes“for”hisorherelectionwill,withinfivedaysfollowingthecertificationoftheshareholdervote,tenderhisorherwrittenresignationtotheChairmanoftheBoardforconsiderationbytheNominatingandCorporateGovernanceCommittee.TheNominatingandCorporateGovernanceCommitteewillthenreviewthedirector’scontinuationontheBoardandrecommendtotheBoardwhethertheBoardshouldacceptsuchtenderedresignation.TheBoard,aftergivingdueconsiderationtothebestinterestsoftheCompanyanditsshareholders,willmakeadecisiononwhethertoacceptthetenderedresignationandpromptlydiscloseitsdecisionand,ifapplicable,thereasonsforrejectingthetenderedresignation.
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Determination of Director Independence
PursuanttotheCompany’sCorporateGovernanceGuidelines,theBoardmustbecomprisedofamajorityofdirectorswhoqualifyasindependentdirectorsunderthelistingstandardsoftheNewYorkStockExchange(the“NYSE”)(suchdirectors,“IndependentDirectors”).TheBoardreviewsannuallytherelationshipsthateachdirectorhaswiththeCompany(eitherdirectlyorasapartner,shareholderorofficerofanorganizationthathasarelationshipwiththeCompany).Followingsuchannualreview,onlythosedirectorswhotheBoardaffirmativelydetermineshavenomaterialrelationshipwiththeCompany(eitherdirectlyorasapartner,shareholderorofficerofanorganizationthathasarelationshipwiththeCompany)willbeconsideredIndependentDirectors,subjecttoadditionalqualificationsprescribedunderthelistingstandardsoftheNYSEorunderapplicablelaw.TheBoardmayadoptanddisclosecategoricalstandardstoassistitindeterminingdirectorindependence.IntheeventthatadirectorbecomesawareofanychangeincircumstancesthatmayresultinsuchdirectornolongerbeingconsideredindependentunderthelistingstandardsoftheNYSEorunderapplicablelaw,thedirectormustpromptlyinformtheChairoftheNominatingandCorporateGovernanceCommittee.
TheBoardconsideredallrelevantfactsandcircumstancesinassessingdirectorindependenceandhasdeterminedthatMr.Bronson,Ms.Douglas,Mr.Kumin,Mr.RidleyandMr.ZelnickareeachIndependentDirectors.Mr.SternlichtisnotanIndependentDirectorduetohispositionasChiefExecutiveOfficeroftheCompany,amongotherpositions.Mr.DishnerisnotindependentduetohispositionasExecutiveVicePresidentofSPTManagement,LLC,ourManager.
Inmakingtheseindependencedeterminations,theBoardtookintoaccountthefollowingrelationships:
• WithrespecttoMr.Bronson,theBoardtookintoaccounttherelationshipsbetweentheCompanyandeachofSREITandInvitationHomes,inwhich,withrespecttoeachentity,anaffiliateoftheCompanyisashareholderandofwhichMr.Bronsonisadirector.Inaddition,Mr.SternlichtservesastheChairmanoftheBoardofSREITandasadirectorofInvitationHomes.
• WithrespecttoMs.Douglas,theBoardtookintoaccountcertaininvestmentsbyStarwoodCapitalGroup,anaffiliateoftheCompany,andLeFrak,forwhichMs.DouglasisaSeniorManagingDirector,AcquisitionsandCapitalMarkets.Theinvestmentsinclude(i)ajointventurethatdevelopedahotelinMiami,FloridathatwassubsequentlysoldinFebruary2019,and(ii)aminorityinvestmentbyLeFrakinahotelmanagementcompanythatisaffiliatedwithStarwoodCapitalGroup.
• WithrespecttoMr.Ridley,theBoardtookintoaccounttheprovisionoflegalservicesbyFoley&LardnerLLP,alawfirmofwhichMr.Ridleyisapartner,totheCompanyandcommercialmortgagebackedsecurities(“CMBS”)trustsforwhichasubsidiaryoftheCompanyhasbeenappointedtoactasthespecialservicer.Foradditionaldetailsregardingsuchlegalservicesandlegalfees,whichwerealsoconsideredbytheBoard,seethesectionofthisProxyStatemententitled“CertainRelationshipsandRelatedTransactions—DisclosureRegardingFredRidley.”
• WithrespecttoMr.Zelnick,theBoardtookintoaccountinvestmentsofMr.Sternlicht,ourChairmanoftheBoardandChiefExecutiveOfficer,inthreeZMC-sponsoredfunds,ofwhichMr.Zelnickisthefounderandmanagingpartner,eachofwhichisequaltolessthan1%ofsuchfunds,aswellasMr.Sternlicht’sserviceonanadvisoryboardofanaffiliateofZMC.
Board Evaluation Process
TheNominatingandCorporateGovernanceCommitteecoordinatesanannualself-assessmentoftheBoard’sperformanceaswellastheperformanceofeachcommitteeoftheBoard.ThefullBoardandeachcommitteediscusstheresults.TheassessmentincludesareviewofanyareasinwhichtheBoardormanagementbelievestheBoardcanmakeabettercontributiontotheCompany.TheNominatingandCorporate
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GovernanceCommitteeutilizestheresultsofthisself-evaluationprocessinassessinganddeterminingthecharacteristicsandcriticalskillsrequiredofprospectivecandidatesforelectiontotheBoardandmakingrecommendationstotheBoardwithrespecttoassignmentsofBoardmemberstovariouscommittees.
CORPORATEGOVERNANCEHIGHLIGHTS Weareproudofourstrongcorporategovernancepractices,including:
• StrongindependentleadershipoftheBoardwithaLeadIndependentDirectorandfiveofsevendirectorsbeingindependent
• Regularexecutivesessionsofindependentdirectors
• Annualelectionofdirectors
• Resignationpolicyifanydirectorreceivesagreaternumberofvotes“withheld”fromhisorherelectionthanvotes“for”hisorherelection
• Shareholderrighttocallspecialmeetings
• Singlevotingclassstock
• ShareholderscanamendtheBylaws
• Nopoisonpill
• Annual“say-on-pay”vote
• Regularsuccessionplanning
TheCompanymaintainsacorporategovernancesectiononitswebsitetoproviderelevantinformationtoshareholdersandotherinterestedparties.CorporategovernanceinformationavailableontheCompany’swebsiteincludesthechartersoftheAuditCommittee,NominatingandCorporateGovernanceCommitteeandCompensationCommitteeoftheBoard,theCorporateGovernanceGuidelinesoftheCompany,theCompany’sCodeofBusinessConductandEthicsandtheCompany’sCodeofEthicsforthePrincipalExecutiveOfficerandSeniorFinancialOfficersoftheCompany.See:www.starwoodpropertytrust.com,undertheheading“InvestorRelations”andthesubheading“CorporateGovernance.”Theinformationisalsoavailableinprint,mailedwithoutcharge,toanyshareholderuponwrittenrequesttotheCompany’sSecretaryatStarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830.
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HOWTHEBOARDISSTRUCTUREDANDOPERATES Board Leadership Structure
Mr.SternlichtservesasChiefExecutiveOfficerandasChairmanoftheBoard.TheBoardbelievesthatthisleadershipstructureisappropriateandhasenabledtheCompanytoattractandretainastrongChiefExecutiveOfficer.ThisstructureresultsinaleaderoftheBoardwithgreatersubstantiveknowledgeoftheCompanyandtheindustryinwhichitoperatesthanwouldotherwisebethecase.TheBoardbelievestheCompany’soverallcorporategovernancepoliciesandpractices,combinedwiththestrengthoftheCompany’sIndependentDirectors,minimizeanypotentialconflictsthatmayresultfromcombiningtherolesofChiefExecutiveOfficerandChairmanoftheBoard.
OurCorporateGovernanceGuidelinescontemplatethat,iftheChairmanoftheBoardisnotanIndependentDirector,theIndependentDirectorswilldesignateoneoftheIndependentDirectorstoserveasLeadIndependentDirector.Mr.BronsoncurrentlyservesasLeadIndependentDirector.TheLeadIndependentDirectorworkswiththeChiefExecutiveOfficerandChairmanoftheBoardtoensurethattheBoarddischargesitsresponsibilities,hasstructuresandproceduresinplacetoenableittofunctionindependentlyofmanagementandclearlyunderstandstherespectiverolesandresponsibilitiesoftheBoardandmanagement.Inaddition,theLeadIndependentDirector’sdutiesincludefacilitatingcommunicationwiththeBoardandpresidingoverallmeetingsoftheBoardatwhichtheChairmanisnotpresent,includingregularlyconductedexecutivesessionsoftheIndependentDirectors.ItistheroleoftheLeadIndependentDirectortoreviewandapprovematterssuchasmeetingagendas,meetingschedulesufficiencyand,whereappropriate,otherinformationprovidedtotheotherdirectors.TheLeadIndependentDirectorservesastheliaisonbetweentheChairmanandtheIndependentDirectors;however,alldirectorsareencouragedto,andinfactdo,consultwiththeChairmanoneachoftheabovetopics.TheLeadIndependentDirectorandeachoftheotherdirectorscommunicateregularlywiththeChairmanregardingappropriateagendatopicsandothermattersrelatedtotheBoard.TheLeadIndependentDirectorhastheauthoritytocallmeetingsoftheIndependentDirectorsandisavailableforconsultationanddirectcommunicationwithinterestedparties.Inperformingtheseduties,theLeadIndependentDirectorconsultswiththeChairsoftheappropriatecommitteesoftheBoardandsolicitstheirparticipationinordertoavoiddilutingtheauthorityorresponsibilitiesofsuchcommitteeChairs.
Board and Committee Meetings
TheBoardhasfourstandingcommittees:anAuditCommittee,aNominatingandCorporateGovernanceCommittee,aCompensationCommitteeandanInvestmentCommittee.ThecurrentchartersforeachoftheAuditCommittee,NominatingandCorporateGovernanceCommitteeandCompensationCommitteeareavailableontheCompany’swebsite,www.starwoodpropertytrust.com,undertheheading“InvestorRelations”andthesubheading“CorporateGovernance.”Further,theCompanywillprovidecopiesofthesecharters,withoutcharge,toanyshareholderuponwrittenrequesttotheCompany’sSecretaryatStarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830.
ThefollowingdescriptionsofthefunctionsperformedbythecommitteesoftheBoardaregeneralinnatureandarequalifiedintheirentiretybyreferencetothecommittees’respectivecharters.
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Audit Committee
TheAuditCommittee,presentlycomprisedofMr.Zelnick(Chair),Mr.BronsonandMs.Douglas,isresponsiblefortheselection,evaluationandoversightoftheCompany’sindependentauditors,aswellasoversightofthefinancialreportingprocessandinternalcontrolsoftheCompany.EachAuditCommitteememberis“independent”asdefinedintheNYSElistingstandards.TheBoardhasdeterminedthatMr.Zelnickqualifiesasan“auditcommitteefinancialexpert”asdefinedintheapplicableSECrules,andtheBoardhasdeterminedthatMr.ZelnickhasaccountingandrelatedfinancialmanagementexpertiseandthateachmemberoftheAuditCommitteeisfinanciallyliteratewithinthemeaningofthelistingstandardsoftheNYSE.TheAuditCommitteemetfourtimesduring2019.
TheprimarypurposesoftheAuditCommitteearetoprovideassistancetotheBoardinfulfillingitslegalandfiduciaryobligationswithrespecttomattersinvolvingtheaccounting,auditing,financialreporting,internalcontrolandlegalcompliancefunctionsoftheCompanyanditssubsidiaries,including,withoutlimitation,(a)assistingtheBoard’soversightof(i)theintegrityoftheCompany’sfinancialstatements,(ii)theCompany’scompliancewithlegalandregulatoryrequirements,(iii)theCompany’sindependentauditors’qualificationsandindependenceand(iv)theperformanceoftheCompany’sindependentauditorsandtheCompany’sinternalauditfunctionand(b)preparingthereportrequiredtobepreparedbytheAuditCommitteepursuanttotherulesoftheSECforinclusionintheCompany’sannualproxystatement.
Nominating and Corporate Governance Committee
TheNominatingandCorporateGovernanceCommittee,presentlycomprisedofMr.Zelnick(Chair),Mr.Bronson,Ms.DouglasandMr.Ridley,identifiesandrecommendstotheBoardindividualsqualifiedtoserveasdirectorsoftheCompanyandoncommitteesoftheBoard,advisestheBoardwithrespecttotheBoard’scomposition,proceduresandcommittees,advisestheBoardwithrespecttothecorporategovernanceprinciplesapplicabletotheCompanyandoverseestheevaluationoftheBoardandtheCompany’smanagement.EachNominatingandCorporateGovernanceCommitteememberis“independent”asdefinedintheNYSElistingstandards.TheNominatingandCorporateGovernanceCommitteemettwotimesduring2019.
TheCompany’sBylawsprovidecertainproceduresthatashareholdermustfollowtonominatepersonsforelectiontotheBoard.DirectornominationsatanannualshareholdermeetingmustbesubmittedinwritingtotheCompany’sSecretaryatStarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830.TheSecretarymustreceivethenoticeofashareholder’sintentiontointroduceanominationatanannualshareholdermeeting:
• notearlierthanthe120thdaynorlaterthanthe90thdaypriortothefirstanniversaryofthedateofmailingofthenoticefortheprecedingyear’sannualmeetingofshareholders;or
• intheeventthatthedateofthemailingofthenoticefortheannualmeetingofshareholdersisadvancedordelayedbymorethan30daysfromthefirstanniversaryofthedateofmailingofthenoticefortheprecedingyear’sannualmeetingofshareholders,notearlierthanthe120thdaypriortothedateofmailingofthenoticeforsuchannualmeetingofshareholdersandnotlaterthanthecloseofbusinessonthelaterofthe90thdaypriortothedateofmailingofthenoticeforsuchannualmeetingofshareholdersorthetenthdayfollowingthedayonwhichdisclosureofthedateofmailingofthenoticeforsuchmeetingisfirstmadebytheCompany.
ThedeadlineforsuchnoticeofashareholdernominationisthesameasthedeadlinefornoticeofashareholderproposalsubmittedoutsideofRule14a-8withrespecttothe2021annualmeetingofshareholders,whichisdiscussedinthesectionofthisProxyStatemententitled“ShareholderProposalsforthe2021AnnualMeeting.”TheBylawsalsoprovidethattheshareholdernominationnoticemustcontainallinformationrelatingtosuchnomineethatisrequiredtobedisclosedinsolicitationsofproxiesforelectionsofdirectorsinanelectioncontest(evenifanelectioncontestisnotinvolved),orisotherwiserequired,ineachcasepursuanttoRegulation14AundertheSecuritiesExchangeActof1934,asamended(the“ExchangeAct”),andtherulesthereunder(includingsuchperson’swrittenconsenttobeingnamedintheproxystatementasanomineeandtoserveasdirectorifelected).
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Astotheshareholdergivingthenoticeandthebeneficialowner,ifany,onwhosebehalftheproposalisbeingmade,thenoticemustinclude:
• thenameandaddressoftheshareholder,astheyappearontheCompany’sstockledgerand,ifdifferent,thecurrentnameandaddressofsuchbeneficialowner;and
• theclassandnumberofsharesofeachclassofstockoftheCompanywhichareownedbeneficiallyandofrecordbysuchshareholderandownedbeneficiallybysuchbeneficialowner.
Inconsideringthequalifications,attributesandcriteriaforservingasadirectoroftheCompany,theNominatingandCorporateGovernanceCommitteeexaminesacandidate’sexperience,skills,expertise,diversity,age,personalandprofessionalintegrity,character,businessjudgment,timeavailability,dedication,independencefrommanagementandtheCompany,potentialconflictsofinterestandsuchotherrelevantfactorsthatthecommitteeconsidersappropriateinthecontextoftheneedsoftheBoard.TheNominatingandCorporateGovernanceCommitteedoesnotfeelitneedsaformalpolicytoconsidereachofthefactorslistedabove,includingdiversity,thatittakesintoaccountwhenevaluatingdirectorcandidates.
TheNominatingandCorporateGovernanceCommitteeidentifiespotentialnomineesbyseekinginputfromfellowdirectors,executiveofficers,professionalfirmsandshareholdersandstakeholders.TheNominatingandCorporateGovernanceCommittee’sevaluationprocessdoesnotvarybasedonwhetherornotacandidateisrecommendedbyashareholder.However,inadditiontotakingintoconsiderationtheneedsoftheBoardandthequalificationsofthecandidate,thecommitteemayalsoconsiderthenumberofsharesheldbytherecommendingshareholderandthelengthoftimethatsuchshareshavebeenheldbysuchshareholder.
OnceapersonhasbeenidentifiedbytheNominatingandCorporateGovernanceCommitteeasapotentialcandidate,theNominatingandCorporateGovernanceCommitteemaycollectandreviewpubliclyavailableinformationregardingthepersontoassesswhetherthepersonshouldbeconsideredfurther.IftheNominatingandCorporateGovernanceCommitteedeterminesthatthepotentialcandidatewarrantsfurtherconsideration,amemberoftheBoardwillcontacttheperson.Generally,ifthepersonexpressesawillingnesstobeconsideredandtoserveontheBoard,theNominatingandCorporateGovernanceCommitteerequestsinformationfromthecandidateandreviewstheperson’saccomplishmentsandqualifications.
Compensation Committee
TheCompensationCommittee,presentlycomprisedofMr.Bronson(Chair),Mr.KuminandMr.Zelnick,overseestheCompany’scompensationandemployeebenefitplansandpractices,includingitsexecutivecompensationplans,anditsincentivecompensationandequity-basedplans.TheCompensationCommitteealsooverseestheannualreviewoftheAmendedandRestatedManagementAgreement,datedasofAugust17,2009,byandbetweentheCompanyandtheManager,asthesamemaybeamendedfromtimetotime(the“ManagementAgreement”),andoverseestheannualreviewoftheCompany’sequitycompensationplans.
TheprimaryresponsibilitiesoftheCompensationCommitteeadditionallyincludereviewinganddiscussingwithmanagementtheCompany’scompensationdiscussionandanalysis(the“CD&A”)tobeincludedintheCompany’sannualproxystatementorannualreportonForm10-KfiledwiththeSECandpreparingtheCompensationCommitteeReportasrequiredbytherulesoftheSEC.TheCompensationCommitteefurtheroverseesthereviewandapprovalofgeneralcompensationpoolsandplansfortheemployeesofourRealEstateInvesting&Servicingbusinessdivision.EachCompensationCommitteememberis“independent”asdefinedintheNYSElistingstandards.TheCompensationCommitteemettwotimesduring2019.
TheCompensationCommitteehastheauthoritytodeterminethecompensationpayabletotheCompany’sdirectorsandtograntawardsundertheCompany’sequityincentiveplansandfromtimetotimemay
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solicitrecommendationsfromtheCompany’sexecutiveofficersand/oroutsidecompensationconsultantsindeterminingtheamountorformofsuchdirectorcompensationorawards.TheCompensationCommitteealsohastheauthoritytoreviewand,whereapplicable,approvebasesalaryandtargetbonuslevelstobepaidbyanaffiliateoftheManagerandequity-basedcompensationtobemadetotheCompany’snamedexecutiveofficers.Indeterminingtheamountandformofsuchcompensation,theCompensationCommitteeseeksrecommendationsfromtimetotimefromtheCompany’sChairmanoftheBoardandChiefExecutiveOfficerand/oroutsidecompensationconsultants.TheCompensationCommitteealsooverseesriskwhenitconsidersgrantingequityawardstotheManagerundertheManagementAgreement,includingwithrespecttothereviewofperformance-relatedfactors(suchasachievementofspecifiedlevelsofnetincome)whengrantingsuchawards.Forexample,inevaluatinginvestmentsandothermanagementstrategies,theopportunitytoearnincentivecompensationbasedonnetincomemayleadtheManagertoplaceundueemphasisonthemaximizationofnetincomeattheexpenseofothercriteria,suchasthepreservationofcapital,maintainingsufficientliquidityand/ormanagementofcreditriskormarketrisk,inordertoachievehigherincentivecompensation.Investmentswithhigheryieldpotentialaregenerallyriskierormorespeculative.Asaresult,theCompensationCommitteeevaluatesperformance-relatedfactors(suchasnetincome)inconjunctionwithotherkeyriskexposurefactorsinmakinggrantstotheManager.TheCompensationCommitteealsohastheauthoritytoformsubcommitteesconsistingofatleasttwodirectorsforanypurposethattheCompensationCommitteedeemsappropriateandmaydelegatetosuchsubcommitteessuchpowerandauthorityasitdeemsappropriate,exceptanypowerorauthorityrequiredbyanylaw,regulationorNYSElistingstandardtobeexercisedbytheCompensationCommitteeasawhole.
Compensation Committee Interlocks and Insider Participation
TherewerenocompensationcommitteeinterlocksrequiredtobedisclosedduringthecalendaryearendedDecember31,2019.ThedirectorswhoweremembersoftheCompensationCommitteeduringthecalendaryearendedDecember31,2019wereMr.Bronson,Mr.KuminandMr.Zelnick,noneofwhomare,orhavebeen,officersoremployeesoftheCompanyandnoneofwhomhadanyrelationshiprequiringdisclosurebytheCompanyunderItem404ofRegulationS-K.
Investment Committee
TheInvestmentCommittee,currentlycomprisedofMr.Sternlicht(Chair),Mr.Dishner,Mr.KuminandMr.Zelnick,isresponsibleforthesupervisionofourManager’scompliancewithourinvestmentguidelinesandconductingperiodicreviewsofourinvestmentportfolioatleastquarterlywhensuchportfoliosarealsoreviewedbythefullBoard.Inaddition,withrespecttoinvestmentsmadebytheCompany,(a)anyproposedinvestmentvaluedat$250millionupto$400millionofourequitycapitalwillrequiretheseparatereviewandapprovaloftheInvestmentCommitteeoftheBoardandtheInvestmentCommitteeoftheManagerand(b)anyproposedinvestmentvaluedat$400millionormorewillrequiretheapprovalofthefullBoardandtheInvestmentCommitteeoftheManager.
Disclosure Committee
Wemaintainadisclosurecommittee(the“DisclosureCommittee”)consistingofmembersofourexecutivemanagementandseniorstaff.ThepurposeoftheDisclosureCommitteeistooverseeoursystemofdisclosurecontrolsandassistandadviseourchiefexecutiveofficerandchieffinancialofficerinmakingrequiredcertificationsinSECreports.TheDisclosureCommitteewasestablishedtobringtogetheronaregularbasisrepresentativesfromourcorebusinesslinesandemployeesinvolvedinthepreparationofourfinancialstatementstodiscussanyissuesormattersofwhichthemembersareawarethatshouldbeconsideredfordisclosureinourpublicSECfilingsandreviewourdraftperiodicreportspriortofilingthemwiththeSEC.TheDisclosureCommitteereportstoourchiefexecutiveofficerand,asappropriate,toour
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AuditCommittee.TheDisclosureCommitteemeetsquarterlyandotherwiseasneeded.TheDisclosureCommitteehasadoptedawrittenchartertomemorializeitspurposeandprocedures,acopyofwhichmaybefoundonourwebsiteatwww.ir.starwoodpropertytrust.comunderthe“GovernanceDocuments”subtabofthe“CorporateGovernance”tab.
Succession Planning
TheBoard,ledbytheCompensationCommitteewithinputfromtheChiefExecutiveOfficer,regularlyengagesinsuccessionplanningforthepositionoftheChiefExecutiveOfficerandotherseniorofficers.Suchsuccessionplanninginvolvesbothshort-termandlong-termsuccessionplanningandtalentmanagement.
Board and Role in Risk Oversight
ThemembersoftheNominatingandCorporateGovernanceCommittee,theAuditCommitteeandtheCompensationCommitteeoftheBoard,includingtheirrespectiveChairs,arecomprisedentirelyofIndependentDirectorswhoserveinoversightroles.Throughthesecommittees,theBoardisactivelyinvolvedintheoversightofrisk,compliance,possibleconflictsofinterestandrelatedpartytransactions,andbusinessresults.MembersoftheBoardhaveaccesstomanagementandoutsideadvisors.
Withrespecttocybersecurityrisks,theBoardreceivesperiodicupdatesfrommanagementontheCompany’scybersecurityprogram,includingmeasurestakentoaddresscybersecurityrisksandsignificantcybersecurityincidents.Thecybersecurityprogramiscomprisedofvariouscontrolsandactivitiesperformedinordertoidentify,protect,detectandrespondtocybersecuritythreats.
TheManagerisresponsiblefortheday-to-daymanagementoftheriskstheCompanyfaces,whiletheBoard,asawholeandthroughitscommittees,hasresponsibilityfortheoversightofriskmanagement.Initsriskoversightrole,theBoardhastheresponsibilitytosatisfyitselfthattheriskmanagementprocessesdesignedandimplementedbymanagementareadequateandfunctioningasdesigned.Todothis,theChairmanoftheBoardmeetsregularlywithmanagementtodiscussstrategyandrisksfacingtheCompany.SeniormanagementattendstheBoard’smeetingsandisavailabletoaddressanyquestionsorconcernsraisedbytheBoardonriskmanagementandanyothermatters.TheChairmanoftheBoardandnon-executivemembersoftheBoardworktogethertoprovidestrong,independentoversightoftheCompany’smanagementandaffairsthroughitsstandingcommitteesand,whennecessary,specialmeetingsofIndependentDirectors.
Executive Sessions of Non-Executive and Independent Directors
Executivesessionsofthenon-executivedirectorsoccurregularlyduringthecourseoftheyear.“Non-executivedirectors”includeallIndependentDirectorsandanyothernon-managementdirectors.Mr.Bronson,ourLeadIndependentDirector,isresponsibleforpresidingoverexecutivesessionsofthenon-executivedirectors.Inaddition,intheeventthatthenon-executivedirectorsincludeanydirectorwhoisnotanIndependentDirector,anexecutivesessionofonlytheIndependentDirectorswilloccuratleastonceayear.
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Number of Meetings of the Board and Attendance in 2019
TheBoardmetsixtimesduring2019,includingbothregularlyscheduledandspecialmeetings.Eachdirectorattendedatleast75%ofthemeetingsoftheBoardandofthecommitteesoftheBoardonwhichsuchdirectorservedduringthecalendaryearendedDecember31,2019.TheCompanyexpectseachdirectorservingonitsBoardtoregularlyattendmeetingsoftheBoardandthecommitteesonwhichsuchdirectorserves,andtoreview,priortomeetings,materialdistributedinadvanceofsuchmeetings.AdirectorwhoisunabletoattendameetingisexpectedtonotifytheChairmanoftheBoardortheChairoftheappropriatecommitteeinadvanceofsuchmeeting.Additionally,theCompanyexpectseachdirectortoattendtheannualmeetingsofshareholders,andadirectorwhoisunabletoattendsuchameeting(whichitisunderstoodwilloccuronoccasion)isexpectedtonotifytheChairmanoftheBoardinadvanceofsuchmeeting.Eachdirectortheninofficeattendedour2019annualmeetingofshareholders.
Hedging Policy
PursuanttotheCompany’sCodeofBusinessConductandEthics,directors,employeesandtheirimmediatefamiliesmaynotpurchase,sell,acquireordisposeofanysecuritiesissuedbyStarwoodCapitalGroupand/oritsaffiliatedcompanies(including,withoutlimitation,theCompany),includinganyderivativeinstrumentsrelatingtothesesecurities,withoutpriorapprovalfromCompanylegalcounsel.
How to Communicate with the Board
TheBoardcastsawidenetforinformationandvaluesinputfromavarietyofstakeholders,includingshareholders.Wehavethereforecreatedavarietyofmeansforourshareholderstocommunicatewithus.Theseinclude:
• writingtousviamail(asdescribedbelow);
• writingtotheBoard’sdedicatedemailaddress(providedbelow);
• attendingourannualmeeting;
• votingyourproxies;
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• callingourInvestorRelationsDepartment(203-422-7788);
• takingpartinourshareholderengagementdiscussions;and
• attendingourperiodicinvestordays.
AnyinterestedpartymayinitiatecommunicationswiththeBoard,theChairmanoftheBoard,theLeadIndependentDirector,theIndependentDirectorsasagroup,anycommitteeoftheBoardoranyindividualdirectorordirectorsbywritingtoourSecretaryattheaddresssetforthabove.Youshouldindicateontheoutsideoftheenvelopetheintendedrecipientofyourcommunication(i.e.,thefullBoard,theIndependentDirectorsasagrouporanyindividualdirectorordirectors).Inaddition,interestedpartiesmaycontacttheBoard,theChairmanoftheBoard,theLeadIndependentDirector,theIndependentDirectorsasagroup,anycommitteeoftheBoardoranyindividualdirectorordirectorselectronicallyviaemailtotheBoard’sdesignatedemailaddress:BoardofDirectors@stwdreit.com.TheBoardhasinstructedourSecretarytoreviewsuchmailandemailcorrespondenceand,athisdiscretion,nottoforwarditemsifhedeemsthemtobeofacommercialorfrivolousnatureorotherwiseinappropriatefortherecipient’sconsideration.
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NON-EMPLOYEEDIRECTORCOMPENSATION ExecutivedirectorsdonotreceivecompensationforservingontheBoard.Forthesepurposes,an“executivedirector”isamemberoftheBoardwhoisalsoanemployeeofStarwoodCapitalGrouporanaffiliatethereof,includingtheCompany.For2019,eachnon-executivedirectorwasentitledtoreceive$100,000,payableinquarterlyinstallmentsinconjunctionwithquarterlymeetingsoftheBoard.Inaddition,directorsservinginthefollowingroleswereentitledtoreceivetheseadditionalcashretainers:ourLeadIndependentDirector:$40,000;ourAuditCommitteeChair:$20,000;eachmemberoftheAuditCommittee:$10,000;ourCompensationCommitteeChair:$15,000;eachmemberoftheCompensationCommittee:$7,500;ourNominationandCorporateGovernanceCommitteeChair:$10,000;eachmemberoftheNominatingandCorporateGovernanceCommittee:$2,500;andeachmemberoftheInvestmentCommittee:$2,500.
Inaddition,in2019eachnon-executivedirectorwasentitledtoanequityawardof$120,000,payableintheformofrestrictedsharesofcommonstockthatvestontheone-yearanniversaryofthedateofgrant,subjecttothedirector’scontinuedserviceontheBoard,calculatedbasedontheclosingpriceofashareofcommonstockonthedayprecedingthedateofgrant,undertheStarwoodPropertyTrust,Inc.2017EquityPlan(the“2017EquityPlan”);andreimbursementofreasonabletravelexpensesincurredinconnectionwithattendingBoardandcommitteemeetings.
ThetablebelowsummarizesthecompensationpaidbytheCompanytoitsnon-executivedirectorsforthecalendaryearendedDecember31,2019.
Name
FeesEarned
or Paid in Cash ($)
Stock Awards ($)(1)
(2)Option Awards
Non-Equity Incentive PlanCompensation
Change in Pension Value
and Nonqualified
Deferred Compensation
EarningsAll Other
Compensation Total ($)
RichardD.Bronson 167,500 119,435 — — — — 286,935
CamilleJ.Douglas 112,500 119,435 — — — — 231,935
SolomonJ.Kumin 110,000 119,435 — — — — 229,435
FredS.Ridley 102,500 119,435 — — — — 221,935
StraussZelnick 140,000 119,435 — — — — 259,435(1) OnSeptember24,2019,eachofthenon-executivedirectorswasgrantedanannualequityawardequalto4,861restrictedsharesofcommonstock.The
amountsreportedinthiscolumnforsuchawardsarebasedonaclosingpriceof$24.57pershareofcommonstockonthedateofgrant.(2) AsofDecember31,2019,eachofthenon-executivedirectorsheld4,861unvestedrestrictedstockawards,foratotalunvestedsharecountof24,305.
TheCompensationCommitteeandtheBoardaimtoprovideandmaintaincompetitivedirectorcompensationlevelsandminimizethecomplexityoftheCompany’sfeestructure.For2020,eachnon-executivedirectoriscontemplatedtobeentitledtoreceivethesamelevelsofcompensation,onthesameterms,forserviceasamemberoftheBoardandasamemberofthecommitteesoftheBoardasfor2019,exceptthattheannualstockretainerpaidtoeachnon-employeedirectorhasbeenincreasedto$130,000for2020.
TheBoardhasadoptedaguidelineforequityownershipequaltoatleastthreetimesthevalueoftheannualBoardmembershipcashretainer.Whenthisguidelinewasimplementedin2011,directorshad(i)five
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yearsfromthetimeoftheimplementationofthisguidelinein2011or(ii)fiveyearsfromthetimeoftheirelectiontotheBoard,whicheverislater,toobtainthislevelofequityownership.RestrictedstockawardsmadebytheCompanyinconnectionwithserviceontheBoardanditscommitteesmaybecountedtowardachievingtheequityownershipguidelines.AsofMarch3,2020,7,498,820sharesofcommonstockwereavailableforissuanceunderthe2017EquityPlan(determinedonacombinedbasiswiththe2017ManagerEquityPlan(definedbelow))and24,305sharesofcommonstockweresubjecttounvestedawardsgrantedtonon-executivedirectorsunderthe2017EquityPlanoritspredecessorplan.
Wehavealsoenteredintoanindemnificationagreementwitheachofourdirectorsthatprovidesforindemnification,tothefullestextentpermittedbyapplicablelawandsubjecttocertainconditions,withrespecttocertainexpensesandclaimsthatsuchdirectorincursorbecomespartytobyreasonofthefactthatsuchdirectorisorwasanofficer,director,trustee,employeeoragentoftheCompanyoranyofoursubsidiariesoraffiliates.Pursuanttosuchindemnificationagreements,ourdirectorsmayalsoobtainadvancementofcertainofsuchexpenses.Suchindemnificationwillbereducedtotheextentthatsuchdirectorsareindemnifiedunderthedirectors’andofficers’liabilityinsurancemaintainedbytheCompany.AcopyoftheformofsuchindemnificationagreementsisanexhibittotheCompany’sAnnualReportonForm10-KforthecalendaryearendedDecember31,2015,asfiledwiththeSEC.
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OURCOMPANY Wearealeading,diversifiedrealestatefinancecompany—andthelargestcommercialmortgagerealestateinvestmenttrustintheUnitedStatesbasedonmarketcapitalization.Wearepassionateaboutourbusinessandwanttoshareasummaryofaccomplishmentsofwhichweareproud.Wealsobelieveitisimportanttoprovideinsightintohowwethinkofourselvesandourlargerpurposeasacorporatecitizen,whichsupportsourabilitytocreatevalueforourshareholders.Weutilizeamulti-cylinderinvestmentplatformthatenablesustocollaboratewithStarwoodCapitalGroup’sover4,000employeesacrossits13globalofficestofindinvestmentopportunitiesinourcorefocusareasofrealestateandinfrastructure.AfewhighlightsregardingourCompanyareprovidedbelow:
STWD 29 Years
WehavesharespubliclytradedontheNYSE
WehavetheabilitytoleveragetheplatformofStarwoodCapitalGroup,aleadingprivateinvestmentfirmwithover29yearsofexperienceandbroadoperatingexpertiseacrossvirtuallyeveryrealestateassetclass
61B 17B
CapitaldeployedsinceourinceptioninAugust2009
PortfolioacrossourCommercialandResidentialLending,InfrastructureLending,Investing&ServicingandPropertyBusinessSegments
300 Employeesand~50additionalpeopleemployedbytheManagerorotherproviderthatarefullydedicatedtotheCompany’sbusinessandoperations
Wehavethesizeandexpertisetosuccessfullyexecutelarge,complexrealestatetransactions
WeareoneofthelargestcommercialmortgagespecialservicingbusinessesintheUnitedStates
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+$ +$
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We also provide solutions to important environmental and social challenges, both through ourproperty and infrastructure investments and via our residential lending portfolio. Here are some of theenvironmental and societal benefits that are inextricably linked to our core operations:
~1/2 Roughlyhalfofourapproximately$2.3billionownedrealestateportfolioisinvestedinrent-restrictedmulti-familyproperties.ThismakesusoneofthelargestprovidersandownersofaffordablehousingintheU.S.
AsofDecember2019,weownedapproximately15,057apartmentunitsthatprovidehousingtoapproximately35,000people,90%ofwhomrepresenthouseholdsearningaround60%orlessofthemedianhouseholdincomeforeachproperty’sregion.
Ineveryoneofourcommunities,wehavepreservedallin-placeaffordabilityrestrictionsonourproperties.WeprovidesupportservicestoresidentssuchasSoldierstoScholarsprogram,whichoffersfreerent,utilities,andmaintenancetomilitaryveteranswhoareobtainingacollegedegreeandfreetransporationtomedicalandretaildestinationsatseniors-onlycommunities.
Sincethepurchaseofourinfrastructurelendingplatformin2018wehavefinanced$700millionofrenewableenergyassets,includingwind,hydro,solarandgeothermalprojects.
In2019,ourrenewableportfoliogeneratedover5,700gigawatthoursofenergy,avoidingapproximately4.1MtonsofCO2emissions.94%ofourrenewableportfolioislocatedintheU.S.withtheremainderinEurope.
Ourresidentiallendingbusinesshasdeployedapproximately$3.6billionsince2016,advancingfinancialinclusionbyprovidingmortgagestomanyhigh-qualityborrowerswhomightotherwisestruggletosecureaccesstohousingcredit.
Inourownedrealestateportfolio,werunseveralinitiativesfocusedonenergyefficiencyandcostsavings,suchas:
• autilitytrackingprogramthatenablesefficientmonitoringofwaterandelectricuseacrossportfolios;and
• waterconservationprogramsthatinvestinmoreefficientkitchenandbathroomfixtures,reducingwaterusagebyapproximately41%onaverageandrealizingaveragewaterbillsavingsofapproximately42%.Todate,thevalueofthesesavingsisapproximately$16million.
Through our commercialreal estate lendingbusiness, we evaluateenvironmental risksassociated with ourinvestments.
• WeutilizeaPhaseIenvironmentalsiteassessmenttoidentifyenvironmentalconditionsthatmayhaveamaterialimpactonthepropertybeingassessed..
• Weassessaproperty’ssustainabilityandmarketabilitybyreviewingcharacteristicsincludingLEEDcertification,tenantamenitiessuchasbikestorageandrepairfacilitiesneighborhoodwalkabilityratingsandelectriccarchargingstations.
• Weconductperiodicpropertysitevisitswhichincludephysicalinspectionof
theassetsthatincludeenvironmentalconsiderations.
We are, in other words, a company that is:
Investinginrenewableenergyprojectsandintegratingenvironmentalduediligenceintoourlendingpractices.
Makingaffordablehousingavailableforthousandsoffamilies.
Advancingfinancialinclusionbyhelpingtomakehomeownershippossibleforpeoplewhocan’tgettraditionalbankloans.
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SHAREHOLDERENGAGEMENT Onaregularbasisthroughouttheyear,ourmanagementteam—includingourChairmanoftheBoard—attendsinvestorconferencesandholdsone-on-onemeetingsandcallswithinvestorstogainabetterunderstandingoftheissuesthatareimportanttoexistingandpotentialshareholders.Wealsointeractwithourshareholders’stewardshipandproxyvotingteamsandourdirectorsremainopentoengagementswherevaluableandappropriate.
Weusetheinformationgatheredinthesemeetingstohelpinformourgovernanceanddecision-makingandensureourinterestsremainalignedwiththoseofourshareholders.Forexample,asdisclosedintheCompany’sCurrentReportonForm8-KfiledonMarch20,2020,werecentlyamendedourBylawstoprovideshareholderswiththepowertoamendourBylaws,subjecttoeligibilityrequirementsthataretiedtoRule14a-8undertheExchangeAct.Previously,onlytheBoardcouldamendtheBylaws.
During2019,ourmanagementteamheld187individualandgroupmeetings(eitherin-personortelephonically)withshareholdersrepresentingapproximately34%ofouroutstandingsharestodiscuss,amongothertopics,ourbusiness,financialandoperatingperformance;ourcapitalallocationprioritiesandourcorporategovernanceandexecutivecompensation.
OURPEOPLE Wehaveapproximately300employeesacrosseightofficeslocatedinGreenwich,NewYork,MiamiBeach,Atlanta,LosAngeles,SanFrancisco,CharlotteandStamford.Westrivetobeanemployerofchoice,andarethereforehighlyfocusedoncreatingandmaintainingbestinclassrecruitment,retentionandcompensationprogramsandaculturedesignedtoencourageperformance,integrityandwell-being.
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OUREXECUTIVEOFFICERS Thefollowingchartliststhenames,agesandpositionsoftheexecutiveofficersoftheCompany.ForadditionalinformationonMr.SternlichtseethesectionofthisProxyStatemententitled“OurBoard—Proposal1:ElectionofDirectors.”
Name Age Position(s)
BarryS.Sternlicht 59 ChairmanoftheBoardandChiefExecutiveOfficer
JeffreyF.DiModica,CFA 52 President
AndrewJ.Sossen 43 ChiefOperatingOfficer,GeneralCounsel,ChiefComplianceOfficer,SecretaryandExecutiveVicePresident
RinaPaniry 46 ChiefFinancialOfficer,Treasurer,PrincipalFinancialOfficerandChiefAccountingOfficer
JEFFREY F.DIMODICA, CFA President of the Company
EXPERIENCE • PresidentoftheCompanysinceSeptember2014 • ManagingDirectorofanaffiliateoftheManagersinceJuly2014 • DirectoroftheCompanyfromitsinceptionin2009untilJuly2014 • ManagingDirectorandtheHeadofMBS/ABS/CMBSSalesandStrategy,whereMr.DiModicawas
responsibleforthedistributionofmortgage-backedsecurities(“MBS”),asset-backedsecurities(“ABS”)andCMBStoinstitutionalclients,includingbanks,hedgefunds,insurancecompaniesandmoneymanagers,RoyalBankofScotland(2007-2014);joined2001
• SoldderivativeandMBSproductstoinstitutionalclientsforMerrillLynchinBoston(1993-2001) • ChemicalBank,MerchantandInvestmentBankingGroupoftheCommercialRealEstateDepartment
(1989-1991) EDUCATION • BS/BA,withaconcentrationinFinance,BostonUniversity • MBA,AmosTuckSchoolatDartmouthCollege • CharteredFinancialAnalyst OTHER • MemberoftheYoungPresidentsOrganization • ServesontheBoardofVirtualEnterprisesInternational,anon-profitfocusedonteachingcareerand
entrepreneurialskillstoinnercityhighschoolstudents
• FoundingPresidentofMitoAction,anon-profitorganizationthatprovideseducation,supportandadvocacyforpatientsandfamiliesaffectedbymitochondrialdisease
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ANDREW J. SOSSEN Chief Operating Officer,General Counsel, ChiefCompliance Officer,Secretary and ExecutiveVice President of theCompany
EXPERIENCE • ChiefOperatingOfficeroftheCompanysinceJuly2011;GeneralCounsel,ChiefComplianceOfficer,
SecretaryandExecutiveVicePresidentsinceJanuary2010 • GeneralCounselofKKR&Co.’sassetmanagementbusinessandofKKRFinancialHoldingsLLC,a
publiclytradedspecialtyfinancecompany,whereMr.Sossenwasamemberofseniormanagementandwasintegrallyinvolvedinthepolicyandstrategicdecision-making,aswellastheday-to-dayoperations,ofthebusinesses(2006-2009)
• BegancareeratSimpsonThacher&BartlettLLP,whereMr.Sossenwasamemberofthefirm’s
corporatedepartment,specializingincapitalmarketsandmergersandacquisitions EDUCATION • BA,UniversityofPennsylvania • JD,UniversityofPennsylvania OTHER • FormerTrusteeofStarwoodWaypointResidentialTrust,apubliclytradedREITthatisapredecessor
companyofInvitationHomes
RINA PANIRY Chief Financial Officer,Treasurer, PrincipalFinancial Officer and ChiefAccounting Officer of theCompany
EXPERIENCE • ChiefFinancialOfficer,Treasurer,PrincipalFinancialOfficerandChiefAccountingOfficerofthe
CompanysinceMay2014 • EmployeeofStarwoodCapitalOperations,LLCsinceMay2014 • ChiefFinancialOfficer(2013-2014)ofLNRPropertyLLC,awholly-ownedsubsidiaryoftheCompany
thatwasacquiredbytheCompanyin2013;previouslyChiefAccountingOfficer(2006-2013) • Spent11yearsatDeloitte&Toucheinvariousroles,principallyintherealestateindustryandinthe
functionalareasofauditandmergersandacquisitions EDUCATION • BAcc/BAinManagementInformationSystems,FloridaInternationalUniversity • MAcc,FloridaInternationalUniversity • CertifiedPublicAccountantinFlorida
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• Medical,prescription,dentalandvisioninsuranceforallemployeesandtheirfamilies;
• 401(k)planwithcompanymatchincentive;
• Subsidizedlifeanddisabilityinsurance;
• Paidtimeoffforholidays,personaldaysandvacation;
• Gymsubsidies,annualhealthscreeningsandflushots;
• Matchingcharitablecontributions;
• Educationassistanceprograms;and
• Commutersubsidyprograms.
• Managementandleadershiptrainingopportunities,includingwomeninleadershiptraining;
• 1-on-1coaching;
• Professionaldesignations;
• Onaverage,10-20%ofemployeesparticipateinsomeformofmanagementandleadershiptrainingprogramseachyear;and
• Approximately25%ofjobopeningsarefilledinternally.
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EMPLOYMENTPRACTICES Webelievethatourcompetitivecompensation,outstandingbenefits,trainingopportunitiesandstimulatingworkenvironmenthelpusattractandretainpeoplewithexceptionalfinancialandrealestateskills.Thesebenefitsandopportunitiesinclude:
Exceptional Employee Benefits
Employee Retention and Satisfaction Diversity and Inclusion
• Regularreviewandmonitoringofemployeeturnoverandreasonsbehindit;
• Regularreviewandmonitoringof
employeedemographicdata; • ConductregularPulseSurveysto
“takethepulse”ofalargesegmentofemployeestoseehowtheyfeelabouttheCompany,theirwork,ourimprovementprogressandmore;and
• Approximately20%ofemployees
haveatenureof15+years.
• OurEmployeeHandbookincludesadiscrimination,harassmentandretaliationpreventionpolicy.
• Programstosupportdiversetalent
include: • Mentoringinitiatives; • Affinitygroups;and • Targetedcollegerecruitment
programs;and
46ofemployeesidentifyasfemale
37ofemployeesidentifyasHispanicand15%ofemployeesidentifyasotherminorities.
Employee Training, Talent Management
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OURSHAREHOLDERSSECURITYOWNERSHIPOFCERTAINBENEFICIALOWNERS,DIRECTORSANDMANAGEMENT ThefollowingtablesetsforththebeneficialownershipofourcommonstockasofMarch3,2020withrespectto:
• eachoftheCompany’sdirectorsanddirectornominees;
• eachoftheCompany’snamedexecutiveofficers;and
• alloftheCompany’sdirectors,directornomineesandexecutiveofficersasagroup.
Exceptasindicatedinthetablebelow,thebusinessaddressofeachpersonlistedinthetablebelowistheaddressofourprincipalexecutiveoffices,StarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830.
Directors and Named Executive Officers
Amount and Natureof
Beneficial OwnershipPercent of Class (%)
RichardD.Bronson(1)(2) 64,409 *
JeffreyF.DiModica 305,765 *
JeffreyG.Dishner 336,097 *
CamilleJ.Douglas(1) 35,909 *
SolomonJ.Kumin(1) 30,117 *
RinaPaniry 199,927 *
FredS.Ridley(1) 9,889 *
AndrewJ.Sossen 171,648 *
BarryS.Sternlicht(3) 8,781,663 3.1
StraussZelnick(1)(4) 57,409 *
DirectorsandExecutiveOfficersasaGroup(10persons) 9,992,833 3.5* Lessthan1%(1) Includes4,861sharesofunvestedrestrictedcommonstockgrantedtoeachofthenon-executivedirectorspursuanttothe2017EquityPlan.(2) Includes15,000sharesownedbyMr.Bronson’sspouse.(3) Includes253,421sharesownedinatrustofwhichMr.Sternlichtisthetrusteeand229,675sharesissuableuponthevestingonMarch31,2020of
restrictedstockunitsgrantedtotheManager.(4) Includes11,800sharesownedintrustsofwhichMr.Zelnickisthetrusteeand2,600sharesownedbyMr.Zelnick’sspouse.
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Thefollowingtablesetsforthcertaininformationrelatingtothebeneficialownershipofourcommonstockbyeachperson,entityorgroupknowntotheCompanytobethebeneficialownerofmorethanfivepercentofourcommonstockbasedonareviewofpubliclyavailablestatementsofbeneficialownershipfiledwiththeSEConSchedules13Dand13GthroughMarch3,2020.
Name and Address of Beneficial Owner
Amount and Natureof
Beneficial OwnershipPercent of Class (%)
BlackRock,Inc.(1)55East52ndStreetNewYork,NewYork10055
17,606,586 6.2
TheVanguardGroup(2)100VanguardBoulevardMalvern,Pennsylvania19355
26,820,117 9.51
(1) BasedoninformationasofDecember31,2019setforthinSchedule13G/AfiledwiththeSEConFebruary6,2020byBlackRock,Inc.,whichhassolevotingpowerwithrespectto16,485,232sharesofcommonstockandsoledispositivepowerwithrespectto17,606,586sharesofcommonstock.BlackRock,Inc.didnotreportanysharedvotingordispositivepowerwithrespecttosharesofcommonstock.
(2) BasedoninformationasofDecember31,2019setforthinSchedule13G/AfiledwiththeSEConFebruary12,2020byTheVanguardGroup,whichhassolevotingpowerwithrespectto155,834sharesofcommonstock,sharedvotingpowerwithrespectto41,317sharesofcommonstock,soledispositivepowerwithrespectto26,672,273sharesofcommonstockandshareddispositivepowerwithrespectto147,844sharesofcommonstock.
Unlessotherwiseindicated,allsharessetforthinthetablesaboveareowneddirectlyandtheindicatedpersonhassolevotingandinvestmentpowerwithrespectthereto.Unlessotherwiseindicated,thepercentageofbeneficialownershipiscalculatedbasedon282,970,469sharesofcommonstockoutstandingasofMarch3,2020.InaccordancewithSECrules,eachlistedperson’sbeneficialownershipincludes:
• allsharesofourcommonstocktheinvestoractuallyownsbeneficiallyorofrecord;
• allsharesofourcommonstockoverwhichtheinvestorhasorsharesvotingordispositivecontrol(suchasinthecapacityasageneralpartnerofaninvestmentfund);and
• allsharesofourcommonstocktheinvestorhastherighttoacquirewithin60days.
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HOWOUREXECUTIVESAREPAIDEXECUTIVECOMPENSATION Compensation Discussion and Analysis
NoneofthenamedexecutiveofficersoftheCompanyiscurrentlyanemployeeoftheCompany.WearemanagedbytheManager,pursuanttothetermsoftheManagementAgreement.AllofournamedexecutiveofficersareemployeesofanaffiliateoftheManager.BecausetheManagementAgreementwiththeManagerprovidesthattheManagerisresponsibleformanagingtheCompany’saffairs,eachoftheCompany’sChiefExecutiveOfficeranditsothercurrentexecutiveofficers(otherthanMs.Paniry),eachofwhomisanexecutiveofStarwoodCapitalGrouporanaffiliatethereof,doesnotreceivecashcompensationfromtheCompanyforservingasoneoftheCompany’sexecutiveofficers.Instead,theCompanypaystheManagermanagementfeesandreimbursementamounts,asdescribedinthesectionofthisProxyStatemententitled“CertainRelationshipsandRelatedTransactions—ManagementAgreement,”and,atthediscretionoftheCompensationCommitteeoftheBoard,theCompanymayalsogranttheManagerequity-basedawards,asdescribedinthesectionofthisProxyStatemententitled“CertainRelationshipsandRelatedTransactions—GrantsofEquityCompensationtotheManager.”Mr.Sternlicht,ourChairmanoftheBoardandChiefExecutiveOfficer,doesnotreceiveanydirectcompensationfromtheManagerortheCompanyforhisservicesasChairmanoftheBoardorChiefExecutiveOfficeroftheCompany,andtheCompanydoesnotreimburseStarwoodCapitalGrouporanyofitsaffiliatesforcompensationpaidtoMr.Sternlicht.Mr.Sternlichtis,however,thecontrollingequityholderoftheparentoftheManagerand,accordingly,hasaninterestinthefeespaidandequityawardsgrantedtotheManager.
Shareholder Engagement
TheBoardbelievesinregularinteractionwithshareholdersonabroadvarietyoftopics.Weusetheinformationgatheredinthesemeetingstohelpinformourdecision-makingandensureourinterestsremainalignedwiththoseofourshareholders.Foradescriptionofourengagementeffortsin2019,pleasesee“OurCompany—ShareholderEngagement.”
Cash Compensation
Wehavenotpaiddirectly,anddonotintendtopaydirectly,anycashcompensationtoournamedexecutiveofficers(otherthanMs.Paniry).Mr.Sossen,theCompany’sChiefOperatingOfficer,GeneralCounsel,ChiefComplianceOfficer,SecretaryandExecutiveVicePresidenthasbeensecondedtotheCompanybyanaffiliateoftheManagerunderthetermsoftheSecondmentAgreement,effectiveasofJanuary1,2014(the“SossenSecondmentAgreement”),betweensuchaffiliateoftheManagerandtheCompany,pursuanttowhichtheCompanyreimbursessuchaffiliateoftheManagerforcertainofitsexpensesincurredinconnectionwithhisserviceintheseroles,includingannualbasesalaryandannualcashbonus(aswellasemployeebenefitcostsandanyrelatedemployeewithholdingtaxes).Ms.Paniry,theCompany’sChiefFinancialOfficer,Treasurer,PrincipalFinancialOfficerandChiefAccountingOfficer,hassimilarlybeensecondedtotheCompanybyanaffiliateoftheManagerunderthetermsoftheSecondmentAgreement,effectiveasofJanuary1,2014(the“PanirySecondmentAgreement”),amongsuchaffiliateoftheManager,theCompanyandLNRProperty,buttheCompanyandcertainofitssubsidiariesdirectlypaytheexpensesincurredinconnectionwithherserviceintheseroles,includingannualbasesalaryandannualcashbonus(aswellasemployeebenefitcostsandanyrelatedemployeewithholdingtaxes).Foradditional
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details,seethesectionofthisProxyStatemententitled“CertainRelationshipsandRelatedTransactions—ManagementAgreement—ReimbursementofExpenses.”
Theannualbasesalaryfor2019ofMr.DiModica,theCompany’sPresident,was$450,000andhiscashbonusfor2019was$2,550,000.Mr.Sossen’sannualbasesalaryfor2019was$400,000andhiscashbonusfor2019was$1,500,000.Ms.Paniry’sannualbasesalaryfor2019was$600,000andhercashbonusfor2019was$1,300,000.
Messrs.DiModica’sandSossen’sandMs.Paniry’sannualbasesalarieswererecommendedbytheChairmanoftheBoardandChiefExecutiveOfficerinconsultationwiththeManager,withtheassistanceofMeridian,theCompensationCommittee’sindependentoutsidecompensationconsultant,basedonageneralunderstandingofcompensationpracticesinourindustryandacomparisonagainstourpeers,aswellasanticipatedsalaryrequirementsofothercandidateswhocouldpotentiallyfillthepositions.TheCompensationCommitteereviewedandapprovedMessrs.DiModica’sandSossen’sandMs.Paniry’sannualbasesalariesfor2019.Messrs.DiModica’sandSossen’sandMs.Paniry’scashbonusesfor2019wererecommendedbytheChairmanoftheBoardandChiefExecutiveOfficerinconsultationwiththeManager,withtheassistanceofMeridian,baseduponareviewofcompensationpaidbytheCompensationPeerGroup(asdefinedbelow)forcomparablepositionsaswellasbroaderindustrycompensationlevels(includinganevaluationofindustrysurveydataprovidedbyMeridian),asdescribedbelowunder“—IndependentCompensationConsultant.”TheCompensationCommitteereviewedandapprovedMessrs.DiModica’sandSossen’sandMs.Paniry’scashbonusesfor2019.InapprovingMessrs.DiModica’sandSossen’sandMs.Paniry’scashbonuses,theCompensationCommitteetargetedamountsbetweenthefiftiethandseventy-fifthpercentileofthemarketdatareviewedbythecommittee,includingCompensationPeerGroupandsurveydata.
Approximately21%ofthecashcompensationpaidtoournamedexecutiveofficerswasforfixedpay(i.e.,basesalary)andapproximately79%wasforincentivepay(i.e.,cashbonus).TheCompensationCommitteedidnotapplyanyfixedmetricsindeterminingtheamountoftheapplicablecashbonusestobepaidfor2019.Rather,ittookintoconsiderationarangeoffactors,includingtheperformanceofthepricepershareofthecommonstock,profitabilityoftheCompany,operationsoftheCompany,riskmanagementpoliciesandpracticesoftheCompany,investmentactivityoftheCompany,managementoftheCompany’scapitalstructureandcompletedacquisitionsanddispositions.
Equity-Based Compensation
TheCompensationCommitteemaygrantournamedexecutiveofficerscertainequity-basedawards.Whereappropriate,theseawardsaredesignedtoaligntheinterestsofournamedexecutiveofficerswiththoseofourshareholdersbyallowingournamedexecutiveofficerstoshareinthecreationofvalueforourshareholdersthroughcapitalappreciationanddividends.Theseequityawardsaregenerallysubjecttovestingrequirementsoveranumberofyears,andaredesignedtopromotetheretentionofmanagementandtoachievestrongperformancefortheCompany.TheseawardsprovideafurtherbenefittousbyenablingourManagertoattract,motivateandretaintalentedindividualstoserveasourexecutiveofficers.
In2019,theCompanygranted68,645,25,686and34,322restrictedsharesofcommonstocktoMessrs.DiModicaandSossenandMs.Paniry,respectively,which,ineachcase,vestannuallyinequalamountsoverathree-yearperiod,withthefirstvestinghavingoccurreduponthefirstanniversaryofthegrant(March15,2020),subjecttosuchgrantee’scontinuedservicetotheCompany,pursuanttothe2017EquityPlan.Indeterminingeachoftheseequity-basedawardsfor2019,theCompensationCommitteedidnotapplyanyfixedmetrics.Rather,theCompensationCommitteetookintoconsiderationarangeoffactors,includingtheperformanceofthecommonstock,profitabilityoftheCompany,operationsoftheCompany,riskmanagementpoliciesandpracticesoftheCompany,investmentactivityoftheCompany,managementoftheCompany’scapitalstructureandcompletedacquisitionsanddispositions.Messrs.DiModica’sand
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Sossen’sandMs.Paniry’sequity-basedawardsfor2019wererecommendedbyourChairmanoftheBoardandChiefExecutiveOfficer.TheCompensationCommitteealsoconsideredinputfromMeridian,itsindependentoutsidecompensationconsultant,asdescribedbelowunder“—IndependentCompensationConsultant.”
Indemnification
Wehavealsoenteredintoanindemnificationagreementwitheachofournamedexecutiveofficersthatprovidesforindemnification,tothefullestextentpermittedbyapplicablelawandsubjecttocertainconditions,withrespecttocertainexpensesandclaimsthatsuchnamedexecutiveofficerincursorbecomespartytobyreasonofthefactthatsuchnamedexecutiveofficerisorwasanofficer,director,trustee,employeeoragentoftheCompanyoranyofoursubsidiariesoraffiliates.Pursuanttosuchindemnificationagreements,ournamedexecutiveofficersmayalsoobtainadvancementofcertainofsuchexpenses.Suchindemnificationwillbereducedtotheextentthatsuchdirectorsareindemnifiedunderthedirectors’andofficers’liabilityinsurancemaintainedbytheCompany.AcopyoftheformofsuchindemnificationagreementsisanexhibittotheCompany’sAnnualReportonForm10-KforthecalendaryearendedDecember31,2015,asfiledwiththeSEC.
Role of Compensation Committee
TheCompensationCommitteereviewsand,whereapplicable,approvesbasesalaryandtargetbonuslevelsaswellasanyequity-basedawardstobemadetoournamedexecutiveofficersbasedonrecommendationsfromtheCompany’sChairmanoftheBoardandChiefExecutiveOfficerandoutsidecompensationconsultants.InformationontheCompensationCommittee’sprocessesandproceduresforconsiderationofexecutivecompensationissetforthinthesectionofthisProxyStatemententitled“OurBoard—HowtheBoardisStructuredandOperates—BoardandCommitteeMeetings—CompensationCommittee.”
Independent Compensation Consultant
MeridianprovidesexecutivecompensationconsultingservicestotheCompensationCommittee.Amongotherthings,Meridian:
• participatesinthedesignoftheCompany’sexecutivecompensationprograms;
• providesandreviewsmarketdataandadvisestheCompensationCommitteeonsettingexecutivecompensationlevelsandthecompetitivenessandreasonablenessoftheCompany’sexecutivecompensationprogram;
• reviewsandadvisestheCompensationCommitteeregardingtheelementsoftheCompany’sexecutivecompensationprogram,includingasrelativetotheCompany’speers;and
• reviewsandadvisestheCompensationCommitteeregardingdirectorcompensation.
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In2019,aspartofthereviewofMessrs.DiModica’sandSossen’sandMs.Paniry’scompensation,MeridianassistedtheCompensationCommitteewithcomparingpreviousexecutivecompensationlevelsto(a)theexecutivecompensationlevelsatsixteenotherpubliclytradedREITsandspecializedfinancecompaniesthathavecharacteristicsthataresimilartothoseoftheCompany(collectively,the“CompensationPeerGroup”)and(b)executivecompensationlevelsinthebroaderindustry(basedongeneralindustrysurveydataprovidedbyMeridian).ThecompaniesthatcomprisedtheCompensationPeerGroupare:
Meridiandoesnot,anddidnotinthecalendaryearendedDecember31,2019,provideanyotherservicestotheCompanyortheManager.
Role of Chief Executive Officer
Asnotedabove,theCompensationCommitteeisresponsibleforreviewingand,whereapplicable,approvingcompensationforournamedexecutiveofficers.OurChairmanoftheBoardandChiefExecutiveOfficer,Mr.Sternlicht,annuallyreviewstheperformanceofeachmemberofseniormanagement(otherthanhisownperformance).Recommendationsbasedonthesereviews,includingsalaryadjustments,annualbonusesandequity-basedawards,ifany,arepresentedbyMr.SternlichttotheCompensationCommittee.Allcompensationdecisionsfor2019madebytheCompensationCommitteewithrespecttothenamedexecutiveofficers(otherthanMr.Sternlicht)weremadeafterdeliberationwithMr.Sternlicht.AsnotedelsewhereinthisProxyStatement,Mr.SternlichtdoesnotreceiveanydirectcompensationforhisservicesasChairmanoftheBoardandChiefExecutiveOfficeroftheCompany,andtheCompanydoesnotreimburseStarwoodCapitalGrouporanyofitsaffiliatesforcompensationpaidtoMr.Sternlicht.Mr.Sternlichtis,however,thecontrollingequityholderoftheparentoftheManagerandaccordinglyhasaninterestinthefeespaidandequityawardsgrantedtotheManager.
Inaddition,atvarioustimesduringtheyearattherequestoftheCompensationCommittee,Mr.SternlichtattendsCompensationCommitteemeetings,orportionsofCompensationCommitteemeetings,toprovidetheCompensationCommitteewithinformationregardingtheCompany’soperationalperformance,financialperformanceorothertopicsrequestedbytheCompensationCommitteetoassisttheCompensationCommitteeinmakingitscompensationdecisions.
Role of Manager
AsnotedelsewhereinthisProxyStatement,theCompanydoesnotpayanycashcompensationtoournamedexecutiveofficers(otherthanMs.Paniry).Rather,cashcompensationispaidtosuchnamedexecutiveofficers,otherthanMr.Sternlicht,bytheManageroritsaffiliates.Mr.SternlichtreceivesnocashcompensationforhisserviceasourChairmanoftheBoardandChiefExecutiveOfficer,although,asthecontrollingequityholderoftheparentoftheManager,hehasaninterestinthefeespaidandequityawardsgrantedtotheManager.TheCompanyreimbursesanaffiliateoftheManagerforMr.Sossen’scashcompensation.Noreimbursementismade
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forMr.DiModica’scashcompensation.Inaddition,fromtimetotime(butnotin2019),equityawardshavebeengrantedtoMr.DiModicabytheManageroritsaffiliates.NoportionofthemanagementfeeisallocatedtocompensationpaidbytheManageroritsaffiliatestoournamedexecutiveofficers.
TheManagerprovidestheday-to-daymanagementoftheCompany’soperations.ThisarrangementenablestheCompanytohaveaccesstotheManager’sover4,000employeesaroundtheglobetoprovidetransactionflowandinsightintoeconomicandlocalmarkettrends.Inaddition,thisarrangementgivestheCompanyaccesstotheManager’sseasonedexecutiveteam,whichhasanaverageof29yearsofindustryexperience.Webelievethatthisarrangementhascontributedsignificantlytooursuccess.ThemanagementfeecompensatestheManagerfortheseservicesthatitprovidestotheCompany.
Compensation Committee Report
TheCompensationCommitteehasreviewedanddiscussedtheCD&A(asdefinedbelow)includedinthisProxyStatementwithmanagement.Basedonthatreviewanddiscussion,theCompensationCommitteerecommendedtotheBoardthattheCD&AbeincludedinthisProxyStatement.
RespectfullysubmittedbytheCompensationCommitteeoftheBoard.
RichardD.Bronson(Chair)SolomonJ.KuminStraussZelnick
Pay Ratio Disclosure
AsnotedelsewhereinthisProxyStatement,Mr.SternlichtdoesnotreceiveanydirectcompensationfromtheCompanyortheManagerforhisservicesasChairmanoftheBoardandChiefExecutiveOfficeroftheCompany,andtheCompanydoesnotreimburseStarwoodCapitalGrouporanyofitsaffiliatesforcompensationpaidtoMr.Sternlicht.BecausetheCompanydoesnotpay,orprovidereimbursementfor,anydirectcompensationtoMr.Sternlicht,theCompanyisnotabletocalculateandprovidearatioofthemedianemployee’sannualtotalcompensationtothetotalannualcompensationofMr.Sternlicht.
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Summary Compensation Table
ThefollowingtableprovidesinformationregardingcompensationearnedbyeachoftheCompany’snamedexecutiveofficersforthecalendaryearendedDecember31,2019,aswellasforthecalendaryearsendedDecember31,2018and2017.AsdescribedintheCD&AincludedinthisProxyStatement,noneofthenamedexecutiveofficersoftheCompanyareemployeesoftheCompanyandtheCompanydidnotdirectlypayanycashcompensationtothenamedexecutiveofficers(otherthanMs.Paniry)fororinsuchcalendaryears.ThecashamountsshownforMr.SossenincludetheamountsofhiscompensationpaidbyanaffiliateoftheManagerforwhichtheCompanyreimbursedsuchaffiliateoftheManagerforhisservicesfortheyearinquestion.TheCompanydoesnotpayormakeanyreimbursementwithrespecttoMr.DiModica’scompensation.
Name and Principal PositionCalendar
Year Salary ($) Bonus ($)
Stock Awards
($)(1)
Non-Equity Incentive Plan Compensation
($)
All Other Compensation
($) Total ($)
BarryS.SternlichtChairmanandChiefExecutiveOfficer(2)
2019 — — — — — —
2018 — — — — — —
2017 — — — — — —
JeffreyF.DiModicaPresident
2019 450,000 2,550,000 1,554,809 4,554,809
2018 450,000 2,500,000 1,449,405 — — 4,399,405
2017 425,000 2,350,000 1,257,868 — — 4,032,868
AndrewJ.SossenChiefOperatingOfficer,GeneralCounsel,ChiefComplianceOfficer,SecretaryandExecutiveVicePresident
2019 400,000 1,500,000 579,990 2,479,990
2018 400,000 1,425,000 573,209 — — 2,398,209
2017 370,000 1,400,000 616,987 — — 2,386,987
RinaPaniryChiefFinancialOfficer,Treasurer,PrincipalFinancialOfficerandChiefAccountingOfficer
2019 600,000 1,300,000 774,991 2,674,991
2018 600,000 1,225,000 1,734,822 — — 3,559,822
2017 600,000 1,100,000 654,100 — — 2,354,100(1) RepresentstheaggregategrantdatefairvalueofawardsofrestrictedsharesofcommonstockcalculatedundertheFinancialAccountingStandardBoard’s
AccountingCodificationTopic718.EachgrantdatefairvalueiscalculatedusingtheclosingpriceofourcommonstockonthedateofgrantasreportedbytheNYSE.Withrespectto2019,onMay28,2019,Mr.DiModicareceivedanawardof68,645restrictedsharesofcommonstock.Theamountreportedinthiscolumnisbasedonaclosingpriceof$22.65pershareofcommonstockonthedateofgrantasreportedbytheNYSE.OnMarch15,2019,Mr.Sossenreceivedanawardof25,686restrictedsharesofcommonstock.Theamountreportedinthiscolumnisbasedonaclosingpriceof$22.58pershareofcommonstockonthedateofgrantasreportedbytheNYSE.OnMarch15,2019,Ms.Paniryreceivedanawardof34,322restrictedsharesofcommonstock,andtheamountreportedinthiscolumnwithrespecttosuchawardisbasedonaclosingpriceof$22.58pershareofcommonstockonthedateofgrantasreportedbytheNYSE.
(2) Mr.SternlichtdoesnotreceiveanydirectcompensationfromtheManagerortheCompanyforhisservicesastheChairmanoftheBoardandChiefExecutiveOfficeroftheCompany,andtheCompanydoesnotreimburseStarwoodCapitalGrouporanyofitsaffiliatesforcompensationpaidtoMr.Sternlicht.Mr.Sternlichtis,however,thecontrollingequityholderoftheparentoftheManagerandaccordinglyhasaninterestinthefeespaidandequityawardsgrantedtotheManager.
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Grants of Plan-Based Awards During Calendar Year Ended December 31, 2019
Thefollowingtableprovidesinformationregardingplan-basedawardsgrantedtotheCompany’snamedexecutiveofficersduringthecalendaryearendedDecember31,2019.
Name Grant Date
All Other Stock Awards: Number of
Shares of Stock or Units (#)
Grant Date Fair Value of Stock or Unit
Awards ($)
BarryS.Sternlicht N/A — —
JeffreyF.DiModicaRestrictedStockAward May28,2019 68,645(1) 1,554,809
AndrewJ.SossenRestrictedStockAward March15,2019 25,686(1) 579,990
RinaPaniryRestrictedStockAward March15,2019 34,322(1) 774,991
(1) Therestrictedsharesreceivedpursuanttothisawardvestinannualinstallmentsoverathree-yearperiodwiththefirstvestinghavingoccurredonMarch15,2020.
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Outstanding Equity Awards At December 31, 2019
ThefollowingtableprovidesinformationregardingoutstandingequityawardsoftheCompany’snamedexecutiveofficersasofDecember31,2019.
Stock Awards
Name
Number of Shares or Units ofStock
That Have Not Vested (#)
Market Value of Shares or Units ofStock
That Have Not Vested ($)(11)
Barry S. Sternlicht — —
Jeffrey F. DiModica
RestrictedStockAward 18,737(1) 465,802
RestrictedStockAward 46,123(2) 1,146,618
RestrictedStockAward 68,645(3) 1,706,515
Andrew J. Sossen
RestrictedStockAward 8,994(4) 223,591
RestrictedStockAward 18,137(5) 450,886
RestrictedStockAward 25,686(6) 638,554
Rina Paniry
RestrictedStockAward 9,743(7) 242,211
RestrictedStockAward 21,889(8) 544,161
RestrictedStockAward 45,746(9) 1,137,246
RestrictedStockAward 34,322(10) 853,245(1) ReflectsarestrictedstockawardgrantedtoMr.DiModica,whichvestsinannualinstallmentsoverathree-yearperiodthatbeganonMarch15,2017.The
remaining18,737unvestedrestrictedsharesasofDecember31,2019vestedonMarch15,2020.(2) ReflectsarestrictedstockawardgrantedtoMr.DiModica,whichvestsinannualinstallmentsoverathree-yearperiodthatbeganonMarch29,2018.The
numberofrestrictedsharesthathadnotvestedasofDecember31,2019andthevestingdatesforsuchrestrictedsharesareasfollows:23,061onMarch15,2020and23,062onMarch15,2021.
(3) ReflectsarestrictedstockawardgrantedtoMr.DiModica,whichvestsinannualinstallmentsoverathree-yearperiodthatbeganonMay28,2019.ThenumberofrestrictedsharesthathadnotvestedasofDecember31,2019andthevestingdatesforsuchrestrictedsharesareasfollows:22,881onMarch15,2020,22,881onMarch15,2021and22,883onMarch15,2022.
(4) ReflectsarestrictedstockawardgrantedtoMr.Sossen,whichvestsinannualinstallmentsoverathree-yearperiodthatbeganonMarch27,2017.Theremaining8,994unvestedrestrictedsharesasofDecember31,2019vestedonMarch15,2020.
(5) ReflectsarestrictedstockawardgrantedtoMr.Sossenwhichvestsinannualinstallmentsoverathree-yearperiodthatbeganonApril4,2018.ThenumberofrestrictedsharesthathadnotvestedasofDecember31,2019andthevestingdatesforsuchrestrictedsharesareasfollows:9,068onMarch15,2020and9,069onMarch15,2021.
(6) ReflectsarestrictedstockawardgrantedtoMr.Sossenwhichvestsinannualinstallmentsoverathree-yearperiodthatbeganonMarch15,2019.ThenumberofrestrictedsharesthathadnotvestedasofDecember31,2019andthevestingdatesforsuchrestrictedsharesareasfollows:8,562onMarch15,2020,8,562onMarch15,2021and8,562onMarch15,2022.
(7) ReflectsarestrictedstockawardgrantedtoMs.Panirywhichvestsinannualinstallmentsoverathree-yearperiodthatbeganonMarch15,2017.Theremaining9,743unvestedrestrictedsharesasofDecember31,2019vestedonMarch15,2020.
(8) ReflectsarestrictedstockawardgrantedtoMs.Panirywhichvestsinannualinstallmentsoverathree-yearperiodthatbeganonMarch27,2018.ThenumberofrestrictedsharesthathadnotvestedasofDecember31,2019andthevestingdatesforsuchrestrictedsharesareasfollows:10,944onMarch15,2020and10,945onMarch15,2021.
(9) ReflectsarestrictedstockawardgrantedtoMs.Panirywhichissubjecttoacliffvestingschedule.The45,746unvestedrestrictedsharesasofDecember31,2019willvestonSeptember18,2020.
(10) ReflectsarestrictedstockawardgrantedtoMs.Panirywhichvestsinannualinstallmentsoverathree-yearperiodthatbeganonMarch15,2019.ThenumberofrestrictedsharesthathadnotvestedasofDecember31,2019andthevestingdatesforsuchrestrictedsharesareasfollows:11,440onMarch15,2020,11,440onMarch15,2021and11,442onMarch15,2022.
(11) Theamountreportedinthiscolumnisbasedonaclosingpriceof$24.86pershareofcommonstockonDecember31,2019.
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Stock Vested in Calendar Year Ended December 31, 2019
ThefollowingtableprovidesinformationforeachnamedexecutiveofficerwithrespecttothevestingofstockawardsduringthecalendaryearendedDecember31,2019andthevaluerealizeduponsuchvesting.
Stock Awards
Name
Number of Shares Acquired on Vesting
(#)(1)Value Realized on Vesting ($)(2)
BarryS.Sternlicht — —
JeffreyF.DiModica 41,795 943,731
AndrewJ.Sossen 18,060 407,795
RinaPaniry 31,696 715,696(1) Representsthevestingofrestrictedstockawardsunderthe2017EquityPlanoritspredecessorplan.(2) Valuerealizedonvestingofrestrictedstockawardsistheaggregatefairmarketvalueonthedate(s)ofvesting.Fairmarketvalueisbasedontheclosing
priceoftheCompany’scommonstockasreportedbytheNYSE.
Potential Post-Employment Payments and Payments upon Change in Control
TheCompanydoesnothaveemploymentorseveranceagreementswithanyofitsnamedexecutiveofficersandisnotobligatedtomakeanypaymentstoanyofitsnamedexecutiveofficersuponterminationofemploymentorchangeincontroloftheCompany.Intheeventthatanynamedexecutiveofficer’sservicetotheCompanyisterminatedeitherbytheCompanyforCauseorbysuchnamedexecutiveofficerforanyreason,anyandallunvestedawardsofrestrictedsharesofcommonstockandrestrictedstockunitsthattheCompanyhasgrantedtosuchnamedexecutiveofficerunderthe2017EquityPlanoritspredecessorplanwillbeimmediatelyforfeitedbythenamedexecutiveofficer.
However,anyandallunvestedawardsofrestrictedsharesofcommonstockandrestrictedstockunitsthattheCompanyhasgrantedtoanamedexecutiveofficerunderthe2017EquityPlanoritspredecessorplanwillvestimmediatelyupon(a)theterminationofsuchnamedexecutiveofficer’sservicetotheCompanybytheCompanywithoutCauseor(b)aChangeinControlpriortotheterminationofsuchnamedexecutiveofficer’sservicetotheCompany.Assuming,forthesakeofanalysis,thataterminationofservicewithoutCauseoraChangeinControltookplaceonthelastbusinessdayofthecalendaryearendedDecember31,2019,thevalueofthevestedawardsofrestrictedsharesofcommonstockandrestrictedstockunitsofeachnamedexecutiveofficerwouldbethesameastherespectivevaluesetforthinthethirdcolumn,“MarketValueofSharesorUnitsofStockThatHaveNotVested,”ofthetablepresentedinthesectionofthisProxyStatemententitled“—OutstandingEquityAwardsatDecember31,2019.”Underboththe2017EquityPlananditspredecessorplan:(i)“Cause”generallymeans(A)anyactionsoromissionsbythenamedexecutiveofficerrepresentingafraudorwillfulmisconductagainsttheCompanyoranaffiliateoftheCompany,(B)anycommissionbythenamedexecutiveofficerofanyfelony,(C)anyviolationbythenamedexecutiveofficerofanymaterialwrittenpolicyoftheCompany,(D)anyfailurebythenamedexecutiveofficertoperformorsatisfyanyofhisorherdutiesorobligationstotheCompanyoranyaffiliateoftheCompanyoranygrosslynegligentorrecklessdisregardofanysuchdutiesorobligationsor(E)anyfailurebythenamedexecutiveofficertodevotehisorherfullworking-timeandattention(otherthanduetophysicalormentalincapacityorcustomaryandreasonabletimeoffforvacationsandholidays)totheperformanceofhisorherdutiestotheCompanyandanyaffiliatesoftheCompany,provided,however,thatuponwrittennoticefromtheCompanyofanymatterintheforegoingclauses(D)or(E),thenamedexecutiveofficerwillbegiven15daysfromthedeliveryofsuchnoticetocuresuchmattertothesatisfactionoftheCompany;and(ii)“ChangeinControl”generallymeansachangeintheownershiporeffectivecontroloftheCompanyorachangeintheownershipofasubstantialportionoftheassetsofthe
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Company,provided,however,thatatransactionorseriesoftransactionseffectedwiththeManagerand/oranyaffiliatesoftheManagerthroughtheacquisitionofcommonstockorothersecuritiesoftheCompany(regardlessoftheformofsuchtransactionorseriesoftransactions)orchangestothemembershipoftheBoardwillnotconstituteaChangeinControl.
Wehavenotincludedtablesforpensionbenefitsornonqualifieddeferredcompensationbecause,duetothelimitednatureofourcompensationprogram,wehavenothingtoreportwithrespecttotheseitems.
Equity Compensation Plan Information
ThefollowingtableprovidesinformationregardingthenumberofsharesofourcommonstockthatmaybeissuedundertheCompany’sequitycompensationplansasofDecember31,2019.
(a) (b) (c)
Plan Category
Number of Securitiesto
be Issued UponExercise
of OutstandingOptions,
Warrants and Rights
Weighted-Average Exercise Price of
OutstandingOptions,
Warrants and Rights
Number of Securities Remaining Available for Future Issuance Under Equity Compensation
Plans (Excluding Securities
Reflected in Column (a))
Equitycompensationplansapprovedbysecurityholders 1,305,597 N/A 7,498,820
Equitycompensationplansnotapprovedbysecurityholders — — —
Total 1,305,597 N/A 7,498,820
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PROPOSAL 2:ADVISORY VOTE ON EXECUTIVE COMPENSATION
PursuanttoSection14AoftheExchangeAct,weareprovidingshareholderswithanopportunitytovotetoapprove,onanadvisorybasis,thecompensationofournamedexecutiveofficersasdisclosedinthisProxyStatement.Theadvisoryvoteonexecutivecompensationdescribedinthisproposaliscommonlyreferredtoasa“say-on-payvote.”Inaccordancewiththepreferenceexpressedbyourshareholders,weholdthisadvisoryvotetoapprovethecompensationofournamedexecutiveofficersonanannualbasis.
AsdescribedintheCD&AincludedinthisProxyStatement,noneofthenamedexecutiveofficersoftheCompanyareemployeesoftheCompanyandtheCompanyhasnotdirectlypaid,anddoesnotintendtodirectlypay,anycashcompensationtothenamedexecutiveofficers(otherthanMs.Paniry).However,wearechargedbyanaffiliateoftheManagerforcertainofitsexpensesincurredinemployingcertainofournamedexecutiveofficers.Additionally,fromtimetotimewemaygranttoournamedexecutiveofficersequity-basedawardspursuanttothe2017EquityPlan,whichwebelieveservetoaligntheinterestsofournamedexecutiveofficerswiththeinterestsofourshareholdersinreceivingattractiverisk-adjusteddividendsandgrowth.
Thisproposalgivesourshareholderstheopportunitytoexpresstheirviewsontheoverallcompensationofournamedexecutiveofficersandthephilosophy,policiesandpracticesdescribedinthisProxyStatement.Forthereasonsdiscussedabove,weareaskingourshareholderstoindicatetheirsupportforournamedexecutiveofficercompensationbyvotingFORthefollowingresolutionattheAnnualMeeting:
“RESOLVED,thatStarwoodPropertyTrust,Inc.’sshareholdersapprove,onanadvisorybasis,thecompensationofthenamedexecutiveofficers,asdisclosedintheProxyStatementpursuanttothecompensationdisclosurerulesoftheU.S.SecuritiesandExchangeCommission,whichdisclosureincludestheCompensationDiscussionandAnalysis,theSummaryCompensationTableandtheotherrelatedtablesanddisclosures.”
Thesay-on-payvoteisanadvisoryvoteand,therefore,itwillnotbindtheCompanyortheBoard.However,theBoardandtheCompensationCommitteewillconsiderthevotingresultsasappropriatewhenmakingdecisionsregardingexecutivecompensation.
Recommendation of the Board
TheBoardrecommendsavoteFORtheapproval,onanadvisorybasis,ofthecompensationofournamedexecutiveofficersasdisclosedinthisProxyStatement.
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OURAUDITORS PROPOSAL 3:RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM
Proposed Independent Registered Public Accounting Firm
Deloitte&ToucheLLP,independentcertifiedpublicaccountants,servedastheindependentregisteredpublicaccountingfirmoftheCompanyanditssubsidiariesforthecalendaryearendedDecember31,2019.TheAuditCommitteehasappointedDeloitte&ToucheLLPtobetheCompany’sindependentregisteredpublicaccountingfirmforthecalendaryearendingDecember31,2020andhasfurtherdirectedthattheappointmentoftheindependentregisteredpublicaccountingfirmbesubmittedforratificationbytheshareholdersattheAnnualMeeting.
AlthoughthereisnorequirementthatDeloitte&ToucheLLP’sappointmentbeterminatediftheratificationfails,theAuditCommitteewillconsider,asappropriate,theappointmentofotherindependentregisteredpublicaccountingfirmsiftheshareholderschoosenottoratifytheappointmentofDeloitte&ToucheLLP.TheAuditCommitteemayterminatetheappointmentofDeloitte&ToucheLLPasourindependentregisteredpublicaccountingfirmwithouttheapprovaloftheshareholderswhenevertheAuditCommitteedeemssuchterminationappropriate.
RepresentativesofDeloitte&ToucheLLPareexpectedtobepresentattheAnnualMeeting.TherepresentativesofDeloitte&ToucheLLPwillbegiventheopportunitytomakeastatement,iftheysodesire,andwillbeavailabletorespondtoappropriatequestionsfromshareholders.
Recommendation of the Board and its Audit Committee
TheBoardanditsAuditCommitteerecommendavoteFORtheratificationoftheappointmentofDeloitte&ToucheLLPastheindependentregisteredpublicaccountingfirmfortheCompanyforthecalendaryearendingDecember31,2020.
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INDEPENDENTREGISTEREDPUBLICACCOUNTINGFIRM TheAuditCommitteehasappointedDeloitte&ToucheLLPtoserveastheCompany’sindependentregisteredpublicaccountingfirmforthecalendaryearendingDecember31,2020.TheAuditCommitteeconsideredthenon-auditservicesprovidedbyDeloitte&ToucheLLPanddeterminedthattheprovisionofsuchserviceswascompatiblewithmaintainingDeloitte&ToucheLLP’sindependence.
ThefollowingtablepresentsfeesforprofessionalauditservicesrenderedbyDeloitte&ToucheLLPwithrespecttotheCompany’sannualfinancialstatementsforthecalendaryearsendedDecember31,2019and2018andfeesbilledforotherservicesrenderedbyDeloitte&ToucheLLPduringthoseperiods.
2019 ($) 2018 ($)
AuditFees(1) 2,505,500 2,648,560
AuditRelatedFees(2) 3,790 5,390
TaxFees(3) 47,750 88,452
AllOtherFees(4) — 11,600
TotalFees 2,557,040 2,754,002(1) AuditFeesprimarilyrepresent,forthecalendaryearsendedDecember31,2019and2018,feesfortheauditsandquarterlyreviewsoftheconsolidated
financialstatementsfiledwiththeSECinannualreportsonForm10-KandquarterlyreportsonForm10-Q,aswellasworkgenerallyonlytheindependentregisteredpublicaccountingfirmcanbereasonablyexpectedtoprovide,suchasstatutoryauditsandissuancesofconsentandcomfortlettersincludedindocumentsfiledwiththeSEC.
(2) AuditRelatedFeesprimarilyrepresent,forthecalendaryearsendedDecember31,2019and2018,feesfortheCompany’ssubscriptiontoDeloitte&ToucheLLP’sonlineaccountingandreportingtechnicallibrary.
(3) TaxFeesprimarilyrepresent,forthecalendaryearsendedDecember31,2019and2018,feesforprofessionalservicesfortaxcompliance,taxadviceandtaxplanning.
(4) AllOtherFeesprimarilyrepresent,forthecalendaryearsendedDecember31,2019and2018,feesinconnectionwithduediligence,agreeduponproceduresandtransactionscompletedorcontemplatedduringthoseyears.
Pre-Approval Policies for Services of Independent Registered PublicAccounting Firm
InaccordancewithAuditCommitteepolicyandrequirementsoflaw,theAuditCommitteepre-approvesallservicestobeprovidedbytheindependentregisteredpublicaccountingfirm,includingallauditservices,audit-relatedservices,taxservicesandotherservices.Insomecases,thefullAuditCommitteeprovidespre-approvalofcertainservicesforuptoayear,suchasthoserelatedtoaparticulardefinedtaskorscopeofwork,subjecttoaspecificbudget.TheAuditCommitteehasauthorizeditsChairtopre-approveadditionalservicesand,iftheChairoftheAuditCommitteepre-approvesaservicepursuanttothisauthority,heorshereviewsthematterwiththefullAuditCommitteeatitsnextregularlyscheduledmeeting.Toavoidpotentialconflictsofinterest,thelawprohibitsapubliclytradedcompanyfromobtainingcertainnon-auditservicesfromitsindependentregisteredpublicaccountingfirm.TheCompanyobtainstheseservicesfromotherfirmsasneeded.
ForthecalendaryearsendedDecember31,2019and2018,allservicesprovidedbyDeloitte&ToucheLLPwerepre-approvedbytheAuditCommitteepursuanttosuchpolicies.
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Report of the Audit Committee
TheBoardhasappointedanAuditCommitteeconsistingofthreedirectors.AllofthemembersoftheAuditCommitteeare“independent”asdefinedintheNYSElistingstandards.
TheAuditCommittee’sjobisoneofoversight,assetforthinitscharter.ItisnotthedutyoftheAuditCommitteetopreparetheCompany’sfinancialstatements,toplanorconductauditsortodeterminethattheCompany’sfinancialstatementsarecompleteandaccurateandareinaccordancewithgenerallyacceptedaccountingprinciples(“GAAP”).TheindependentregisteredpublicaccountingfirmengagedbytheCompanyisresponsibleforauditingthefinancialstatementsandexpressinganopinionastowhetherthoseauditedfinancialstatementsfairlypresentthefinancialposition,resultsofoperationsandcashflowsoftheCompanyinconformitywithGAAP.
TheAuditCommitteehasreviewedanddiscussedtheCompany’sauditedfinancialstatementswithmanagementandwithDeloitte&ToucheLLP,theCompany’sindependentregisteredpublicaccountingfirmforthecalendaryearendedDecember31,2019.TheAuditCommitteehasalsodiscussedwithDeloitte&ToucheLLPtheothermattersrequiredtobediscussedundertheapplicablerequirementsofthePublicCompanyAccountingOversightBoardandtheSEC.
TheAuditCommitteehasreceivedfromDeloitte&ToucheLLPthewrittendisclosuresandtheletterrequiredbyapplicablerequirementsofthePublicCompanyAccountingOversightBoardregardingDeloitte&ToucheLLP’scommunicationswiththeAuditCommitteeconcerningindependence,hasdiscussedDeloitte&ToucheLLP’sindependencewithDeloitte&ToucheLLPandhasconsideredthecompatibilityofnon-auditserviceswiththeindependenceoftheindependentregisteredpublicaccountingfirm.
Basedonthereviewanddiscussionsreferredtoabove,theAuditCommitteerecommendedtotheBoardthattheauditedfinancialstatementsbeincludedintheCompany’sAnnualReportonForm10-KforthecalendaryearendedDecember31,2019forfilingwiththeSEC.
RespectfullysubmittedbytheAuditCommitteeoftheBoard.
StraussZelnick(Chair)RichardD.BronsonCamilleJ.Douglas
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CERTAINRELATIONSHIPSANDRELATEDTRANSACTIONS Management Agreement
TheCompanyispartytotheManagementAgreementwiththeManager,pursuanttowhichtheManagerprovidestheday-to-daymanagementoftheCompany’soperations.TheManagementAgreementrequirestheManagertomanagetheCompany’sbusinessaffairsinconformitywiththepoliciesandtheinvestmentguidelinesthatareapprovedandmonitoredbytheBoard.TheManagementAgreementhadaninitialthree-yeartermandisnowrenewedforone-yeartermsunlessterminatedbyeithertheCompany(uponpaymentofaterminationfeeifterminatedwithoutcauseperthetermsoftheManagementAgreement)ortheManager.ThetermsoftheManagementAgreement,asamended,arereflectedinthebelowdescriptionsofthebasemanagementfeeandincentivefeecalculations.
Base Management Fee
TheCompanypaystheManagerabasemanagementfeeinanamountequalto1.5%oftheCompany’sshareholders’equity,perannum,calculatedandpayablequarterlyinarrearsincash.Forpurposesofcalculatingthebasemanagementfee,theCompany’sshareholders’equitymeans:(a)thesumof(i)thenetproceedsfromallissuancesoftheCompany’sequitysecuritiessinceinceptionandequitysecuritiesofsubsidiariesissuedinexchangeforproperties(allocatedonaproratabasisforsuchissuancesduringthefiscalquarterofanysuchissuance),plus(ii)theCompany’sretainedearningsandincometonon-controllinginterestswithrespecttoequitysecuritiesofsubsidiariesoftheCompanyissuedinexchangeforpropertiesattheendofthemostrecentlycompletedcalendarquarter(withouttakingintoaccountanynon-cashequitycompensationexpenseincurredincurrentorpriorperiods),less(b)anyamountthattheCompanyhaspaidtorepurchaseitscommonstocksinceinception.Italsoexcludes(1)anyunrealizedgainsandlossesandothernon-cashitemsthathaveimpactedshareholders’equityasreportedintheCompany’sfinancialstatementspreparedinaccordancewithGAAP,and(2)one-timeeventspursuanttochangesinGAAP,andcertainnon-cashitemsnototherwisedescribedabove,ineachcaseafterdiscussionsbetweentheManagerandtheIndependentDirectorsandapprovalbyamajorityoftheIndependentDirectors.Asaresult,theCompany’sshareholders’equity,forpurposesofcalculatingthemanagementfee,couldbegreaterorlessthantheamountofshareholders’equityshownontheCompany’sfinancialstatements.TheManagerusestheproceedsfromitsmanagementfee,inpart,topaycompensationtoitsofficersandpersonnelwho,notwithstandingthatcertainofthemalsoaretheCompany’sofficers,receivenocashcompensationdirectlyfromtheCompany.ThemanagementfeeispayableindependentoftheperformanceoftheCompany’sportfolio.
ThemanagementfeeoftheManageriscalculatedwithin30daysaftertheendofeachquarterandsuchcalculationispromptlydeliveredtotheCompany.TheCompanyisobligatedtopaythemanagementfeeincashwithinfivebusinessdaysafterdeliverytotheCompanyofthewrittenstatementoftheManagersettingforththecomputationofthemanagementfeeforsuchquarter.
Incentive Fee
TheCompanypaystheManageranincentivefeewithrespecttoeachcalendarquarter(oranypartthereofthattheManagementAgreementisineffect)inarrears.TheManagerisentitledtobepaidtheincentivefeewithrespecttoeachcalendarquarterif(a)theCompany’sCoreEarnings(asdefinedbelow)forthe
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previoustwelve-monthperiodexceedsan8%thresholdand(b)theCompany’sCoreEarningsforthetwelvemostrecentlycompletedcalendarquartersisgreaterthanzero.Theincentivefeeisanamount,notlessthanzero,equaltothedifferencebetween(a)theproductof(i)20%and(ii)thedifferencebetween(1)theCompany’sCoreEarnings(asdefinedbelow)fortheprevioustwelve-monthperiod,and(2)theproductof(A)theweightedaverageoftheissuepricepershareofcommonstockofalloftheCompany’spublicofferingsofcommonstockandincludingissuepriceperequitysecurityofsubsidiariesoftheCompanyissuedinexchangeforpropertiesmultipliedbytheweighted-averagenumberofallsharesofcommonstockoutstanding(includinganyrestrictedstockunits,anyrestrictedsharesofcommonstockandanyothersharesofcommonstockunderlyingawardsgrantedundertheCompany’sequityincentiveplans)andequitysecuritiesofsubsidiariesissuedinexchangeforpropertiesorintereststhereinintheprevioustwelve-monthperiod,and(B)8%and(b)thesumofanyincentivefeepaidtotheManagerwithrespecttothefirstthreecalendarquartersofsuchprevioustwelve-monthperiod;provided,however,that,toaccountfortheCompany’sspin-offofSWAY(apredecessorcompanyofInvitationHomes),whichcontainedtheCompany’ssinglefamilyresidentialbusiness,(the“SWAYSpin-Off”),forpurposesofclause(a)(i)(2)(A)above,onandafterJanuary31,2014,thecomputationoftheweighted-averageissuepricepershareofcommonstockisdecreasedtogiveeffecttothebookvaluepershareonJanuary31,2014oftheassetsofSWAY,andthecomputationoftheaveragenumberofsharesofcommonstockoutstandingisdecreasedbytheweighted-averagenumberofsharesofSWAYdistributedintheSWAYSpin-OffonJanuary31,2014.OnehalfofeachquarterlyinstallmentoftheincentivefeeispayableinsharesoftheCompany’scommonstocksolongastheownershipofsuchadditionalnumberofsharesbytheManagerwouldnotviolatethe9.8%stockownershiplimitsetforthintheCompany’scharter,aftergivingeffecttoanywaiverfromsuchlimitthattheBoardmaygrantinthefuture.Theremainderoftheincentivefeeispayableincash.ThenumberofsharestobeissuedtotheManagerisequaltothedollaramountoftheportionofthequarterlyinstallmentoftheincentivefeepayableinsharesdividedbytheaverageoftheclosingpricesoftheCompany’scommonstockontheNYSEforthefivetradingdayspriortothedateonwhichsuchquarterlyinstallmentispaid.
“CoreEarnings”isanon-GAAPmeasureandisdefinedasGAAPnetincome(loss)excluding(a)non-cashequitycompensationexpense,(b)theincentivefee,(c)depreciationandamortizationofrealestateandassociatedintangibles,(d)acquisitioncostsassociatedwithsuccessfulacquisitions,(e)anyunrealizedgains,lossesorothernon-cashitemsrecordedinnetincomefortheperiod,regardlessofwhethersuchitemsareincludedinothercomprehensiveincomeorloss,orinnetincomeand(f)totheextentdeductedfromnetincome(loss),distributionspayablewithrespecttoequitysecuritiesofsubsidiariesissuedinexchangeforproperties.Theamountisadjustedtoexcludeone-timeeventspursuanttochangesinGAAPandcertainothernon-cashadjustments,ineachcaseasdeterminedbytheManagerandafterapprovalbyamajorityoftheIndependentDirectors.
Reimbursement of Expenses
TheCompanyisrequiredtoreimbursetheManagerfortheexpensesdescribedbelow.ExpensereimbursementstotheManageraremadeincashonamonthlybasisfollowingtheendofeachmonth.TheCompany’sreimbursementobligationisnotsubjecttoanydollarlimitation,butissubjecttoreviewbytheIndependentDirectors.BecausetheManager’spersonnelperformcertainlegal,accounting,duediligencetasksandotherservicesthatoutsideprofessionalsoroutsideconsultantsotherwisewouldperform,theManagerispaidorreimbursedforthedocumentedcostofperformingsuchtasks,providedthatsuchcostsandreimbursementsareinamountswhicharenogreaterthanthosewhichwouldbepayabletooutsideprofessionalsorconsultantsengagedtoperformsuchservicespursuanttoagreementsnegotiatedonanarm’s-lengthbasis.
TheCompanyalsopaysalloperatingexpenses,exceptthosespecificallyrequiredtobebornebytheManagerundertheManagementAgreement.TheexpensesrequiredtobepaidbytheCompanyinclude,butarenotlimitedto:
• expensesinconnectionwiththeissuanceandtransactioncostsincidenttotheacquisition,dispositionandfinancingoftheCompany’sinvestments;
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• costsoflegal,tax,accounting,consulting,auditingandothersimilarservicesrenderedfortheCompanybyprovidersretainedby
theManageror,ifprovidedbytheManager’spersonnel,inamountswhicharenogreaterthanthosewhichwouldbepayabletooutsideprofessionalsorconsultantsengagedtoperformsuchservicespursuanttoagreementsnegotiatedonanarm’s-lengthbasis;
• thecompensationandexpensesoftheCompany’sdirectorsandthecostofliabilityinsurancetoindemnifytheCompany’sdirectorsandofficers;
• costsassociatedwiththeestablishmentandmaintenanceofanyoftheCompany’screditfacilities,otherfinancingarrangements,orotherindebtednessoftheCompany(includingcommitmentfees,accountingfees,legalfees,closingandothersimilarcosts)oranyoftheCompany’ssecuritiesofferings;
• expensesconnectedwithcommunicationstoholdersoftheCompany’ssecuritiesoroftheCompany’ssubsidiariesandotherbookkeepingandclericalworknecessaryinmaintainingrelationswithholdersofsuchsecuritiesandincomplyingwiththecontinuousreportingandotherrequirementsofgovernmentalbodiesoragencies,including,withoutlimitation,allcostsofpreparingandfilingrequiredreportswiththeSEC,thecostspayablebytheCompanytoanytransferagentandregistrarinconnectionwiththelistingand/ortradingoftheCompany’sstockonanyexchange,thefeespayablebytheCompanytoanysuchexchangeinconnectionwithitslisting,costsofpreparing,printingandmailingtheCompany’sannualreporttoitsshareholdersandproxymaterialswithrespecttoanymeetingoftheCompany’sshareholders;
• costsassociatedwithanycomputersoftwareorhardware,electronicequipmentorpurchasedinformationtechnologyservicesfromthirdpartyvendorsthatisusedfortheCompany;
• expensesincurredbymanagers,officers,personnelandagentsoftheManagerfortravelontheCompany’sbehalfandotherout-of-pocketexpensesincurredbymanagers,officers,personnelandagentsoftheManagerinconnectionwiththepurchase,financing,refinancing,saleorotherdispositionofaninvestmentorestablishmentandmaintenanceofanyoftheCompany’ssecuritizationsoranyoftheCompany’ssecuritiesofferings;
• costsandexpensesincurredwithrespecttomarketinformationsystemsandpublications,researchpublicationsandmaterialsandsettlement,clearingandcustodialfeesandexpenses;
• compensationandexpensesoftheCompany’scustodianandtransferagent,ifany;
• thecostsofmaintainingcompliancewithallfederal,stateandlocalrulesandregulationsoranyotherregulatoryagency;
• alltaxesandlicensefees;
• allinsurancecostsincurredinconnectionwiththeoperationoftheCompany’sbusinessexceptforthecostsattributabletotheinsurancethattheManagerelectstocarryforitselfanditspersonnel;
• costsandexpensesincurredincontractingwiththirdparties;
• allothercostsandexpensesrelatingtotheCompany’sbusinessandinvestmentoperations,including,withoutlimitation,thecostsandexpensesofacquiring,owning,protecting,maintaining,developinganddisposingofinvestments,includingappraisal,reporting,auditandlegalfees;
• expensesrelatingtoanyoffice(s)orofficefacilities,including,butnotlimitedto,disasterbackuprecoverysitesandfacilities,maintainedfortheCompanyoritsinvestmentsseparatefromtheofficeorofficesoftheManager;
• expensesconnectedwiththepaymentsofinterest,dividendsordistributionsincashoranyotherformauthorizedorcausedtobemadebytheBoardtooronaccountofholdersoftheCompany’ssecuritiesoroftheCompany’ssubsidiaries,including,withoutlimitation,inconnectionwithanydividendreinvestmentplan;
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• anyjudgmentorsettlementofpendingorthreatenedproceedings(whethercivil,criminalorotherwise)againsttheCompanyor
anysubsidiary,oragainstanytrustee,director,partner,memberorofficeroftheCompanyorofanysubsidiaryinhiscapacityassuchforwhichweoranysubsidiaryisrequiredtoindemnifysuchtrustee,director,partner,memberorofficerbyanycourtorgovernmentalagency;and
• allotherexpensesactuallyincurredbytheManager(exceptasdescribedbelow)whicharereasonablynecessaryfortheperformancebytheManagerofitsdutiesandfunctionsundertheManagementAgreement.
PursuanttotheSossenSecondmentAgreement,theCompanyisresponsibleforreimbursingtoanaffiliateoftheManageraportionoftheexpensesincurredinconnectionwithMr.Sossen’sserviceastheCompany’sChiefOperatingOfficer,GeneralCounsel,ChiefComplianceOfficer,SecretaryandExecutiveVicePresident,includingannualbasesalary,annualcashbonus,employeebenefitsandanyrelatedemployeewithholdingtaxes.ExceptasrequiredundertheSossenSecondmentAgreementandreimbursementsforcertainotherpersonnelaspermittedundertheManagementAgreement,theCompanyanditssubsidiariesdonotreimbursetheManageroritsaffiliatesforthesalariesandothercompensationofitspersonnel(includingpursuanttothePanirySecondmentAgreement).
Inaddition,theCompanymayberequiredtopayitsprorataportionofrent,telephone,utilities,officefurniture,equipment,machineryandotheroffice,internalandoverheadexpensesoftheManageranditsaffiliatesrequiredfortheCompany’soperations.
Fees Incurred and Paid for 2019
ForthecalendaryearendedDecember31,2019,theCompanyincurred$77.0millioninbasemanagementfees,ofwhich$57.7millionwaspaidduringthecalendaryearendedDecember31,2019.ForthecalendaryearendedDecember31,2019,theCompanyincurred$20.2millioninincentivecompensationpayabletotheManager,ofwhich$2.1millionwaspaidduringthecalendaryearendedDecember31,2019.OnehalfoftheincentivefeepaidduringthecalendaryearendedDecember31,2019waspaidincommonstock,asrequiredbytheManagementAgreement.InFebruary2019,anadditional$18.1millionofthetotalincentivefeewaspaid,onehalfofwhichwassimilarlypaidincommonstock.TheCompanyalsowasobligatedtoreimbursetheManagerfor$7.7millionofcertainexpensesincurredontheCompany’sbehalfduringthecalendaryearendedDecember31,2019,ofwhich$4.2millionwaspaidduringthecalendaryearendedDecember31,2019.
Board Approval
TheCompany’sChiefExecutiveOfficerisalsoanexecutiveofStarwoodCapitalGroup.Asaresult,theManagementAgreementbetweentheCompanyandtheManagerwasnegotiatedbetweenrelatedparties,andtheterms,includingfeesandotheramountspayable,maynotbeasfavorabletotheCompanyasifithadbeennegotiatedwithanunaffiliatedthirdparty.TheManagementAgreementisintendedtoprovidetheCompanywithaccesstotheManager’spipelineofinvestmentopportunities,personnelandexperienceincapitalmarkets,creditanalysis,debtstructuringandriskandassetmanagement,aswellasassistancewithcorporateoperations,legalandcompliancefunctionsandgovernance.TheindependentdirectorsoftheBoardhaveapprovedtheManagementAgreement.Mr.SternlichtandMr.Dishnerrecusedthemselvesfromsuchapproval.
Grants of Equity Compensation to the Manager
UndertheCompany’sequityincentiveplans,ourCompensationCommitteeisauthorizedtoapprovegrantsofequity-basedawardstotheCompany’sofficersanddirectorsandtotheManageranditspersonnelandaffiliates.OnMarch15,2017,theCompanygrantedtotheManager1,000,000restrictedstockunits.Thisawardofrestrictedstockunitsvestsratablyonaquarterlybasisoverathree-yearperiodthatbeganonJune30,2017.OnApril4,2018theCompanygrantedtotheManager775,000restrictedstockunits.This
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awardofrestrictedstockunitsvestsratablyonaquarterlybasisoverathree-yearperiodthatbeganonJune30,2018.OnSeptember24,2019,theCompanygrantedtotheManager1,200,000restrictedstockunits.Oftheamountgranted,218,898restrictedstockunitsvestedimmediatelyonthegrantdateandtheremainingamountvestsratablyonaquarterlybasisoverathree-yearperiodthatbeganonDecember31,2019.Theseawardsofrestrictedstockunits,oncevested,aresettledinsharesofcommonstock.TheManagerisentitledtoreceive“distributionequivalents”withrespecttotheserestrictedstockunits,whetherornotvested,atthesametimeandinthesameamountsasdistributionsarepaidtotheCompany’sholdersofcommonstock.
OnMay4,2017,attheCompany’s2017annualmeetingofshareholders,shareholdersapprovedtheStarwoodPropertyTrust,Inc.2017ManagerEquityPlan(the“2017ManagerEquityPlan”),whichallowsfortheissuanceofupto11,000,000stockoptions,stockappreciationrights,restrictedstockunitsorotherequity-basedawardsoranycombinationthereof(determinedonacombinedbasiswiththe2017EquityPlan)totheManager.ThemaximumnumberofsuchequityawardsthatmaybeissuedtotheManagershallbereducedbythenumberofsharesofcommonstockissuedandawardsgrantedunderthe2017EquityPlan.The2017ManagerEquityPlansucceededandreplacedthepreviousmanagerequityplan.
SEREF and Related Transactions
InDecember2012,theCompanyacquired9,140,000ordinarysharesforapproximately$14.7millioninStarwoodEuropeanRealEstateFinanceLimited,adebtfundthatismanagedbyanaffiliateoftheManagerandislistedontheLondonStockExchange(“SEREF”),inconnectionwithSEREF’sinitialpublicoffering(the“SEREFInvestment”),whichequatedtoanapproximate4%ownershipinterestinSEREF.AsofDecember31,2019,theCompany’ssharesrepresentedanapproximate2%ownershipinterestinSEREF.
InJune2016,theCompanyco-originatedaGBP-denominated$108.9millionfirstmortgageloanwithSEREFforthedevelopmentofathree-propertymixeduseportfoliolocatedinGreaterLondon,England(the“GreaterLondonLoan”).TheCompanyoriginated$87.1millionoftheGreaterLondonLoancommitmentandSEREForiginated$21.8millionofsuchcommitment.InJune2017,theCompanyandSEREFamendedtheGreaterLondonLoanbyreducingfirstmortgage’stotalcommitmentto$88.8millionofwhichtheCompany’sshareis$71.0million.InOctober2018,theCompanyandSEREFamendedtheGreaterLondonLoanbyincreasingthetotalcommitmentto$98.3million,ofwhichtheCompany’sshareis$78.6million.TheGreaterLondonLoanbearsinterestatone-monthLIBORplus5.75%andhasanextendedmaturityofJune2020.
InMarch2018,theCompanyacquiredfromSEREFaEuro-denominated$68.0million50%participationinanewly-originatedloan,whichissecuredbyaluxuryresortinEstepona,Spain(the“EsteponaLoan”).TheEsteponaLoanbearsinterestatthree-monthEuribor(floorof0.0%)plus4.90%untilSeptember13,2022andat6.50%thereafter.TheEsteponaLoanmaturesinMarch2023.
InDecember2018,theCompanyco-originatedaGBP-denominated$79.0millionmezzanineloanforthedevelopmentofaresidentialandhotelpropertylocatedinCentralLondonwithSEREF(the“CentralLondonLoan”).TheCompanyoriginated$26.9millionoftheCentralLondonLoanandSEREForiginated$52.1million.TheCentralLondonLoanbearsinterestatafixedinterestrateof8.50%andisscheduledtomatureinDecember2021.
InSeptember2019,theCompanyco-originatedaEuro-denominated$80.2millionfirstmortgageloanwithSEREF.TheloanwastoathirdpartyborrowerforthedevelopmentofaGradeAofficebuildingandconventioncenterinDublin,Ireland.TheCompanyoriginated$64.2millionoftheloanandSEREForiginated$16.0million.Theloanbearsinterestatone-monthEuribor(floorof0.0%)plus7.8%andmaturesinMay2022.
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InNovember2019,theCompanyandSEREF,anaffiliateofourManager,eachoriginated$42.9millionofaEuro-denominated$211.2millionfirstmortgageandsubordinatedloan.TheloanwastoathirdpartyborrowerfortheacquisitionofanofficeportfoliolocatedinSpain.InDecember2019,theCompanysoldthefirstmortgageof$16.5million.TheCompany’sremainingsubordinatedloanof$26.4millionbearsinterestatthree-monthEuribor(floorof0.0%)plus8.95%andmaturesinNovember2023.
SCG Core-Plus Investment
InOctober2014,theCompanycommitted$150.0millionfora33%limitedpartnerequityinterestinSCGCore-PlusRetailFund,L.P.,anaffiliateoftheManager(“SCGCore-Plus”),ofwhich$132.0millionwasfundedinOctober2014.AnunaffiliatedthirdpartyhasmadeanadditionalinvestmentasalimitedpartnerinSCGCore-Plusonsubstantiallysimilarterms.InAugust2017,theCompanyfundedtheremaining$15.5millioncapitalcommitmentinSCGCore-Plus.DuringtheyearendedDecember31,2019,theCompanyrecognizedalossof$114.4millionanddidnotreceiveanydistributions,whichreducedtheCompany’sinvestmentcarryingvaluetozeroasofDecember31,2019.DuringtheperiodincludedintheCompany’syearendedDecember31,2019,SCGCore-Plusreportedunrealizeddecreasesinthefairvalueofitsrealestateproperties,whichresultedina$47.2milliondecreasetotheCompany’sinvestment.Inaddition,theCompanyprovidedanimpairmentchargeof$71.9millionagainsttheremainderoftheinvestmentbasedonitsestimateofthefairvalueoftheunderlyingretailassetsasofDecember31,2019.SCGCore-PluswasestablishedforthepurposeofacquiringandoperatingfourregionalshoppingmallslocatedinFlorida,Michigan,NorthCarolinaandVirginia.AllleasingservicesandassetmanagementfunctionsfortheacquiredpropertiesareconductedbyanaffiliateoftheManagerthatspecializesinredeveloping,managingandrepositioningretailrealestateassets.Inaddition,anotheraffiliateoftheManagerservesasthegeneralpartnerofSCGCore-Plus.
Office Campus Loan Investment
InAugust2017,theCompanyoriginateda$339.2millionfirstmortgageandmezzanineloanfortheacquisitionofanofficecampuslocatedinIrvine,California.AnaffiliateoftheManagerhasanon-controllingequityinterestintheborrower.Thefirstmortgageandmezzanineloanareeachinterest-onlyandcarryinterestratesofone-monthLIBORplus2.25%andone-monthLIBORplus4.50%,respectively.TheloanshaveaninitialmaturityofSeptember2020withtwoone-yearextensionoptions.
Energy Loans
InJanuary2018,theCompanyacquireda$130.0millionfirstmortgageparticipationfromathirdparty,whichbearsinterestatthree-monthLIBORplus4.00%andmaturesinDecember2024.Theloanissecuredbyfourcoal-firedpowerplantslocatedintheUnitedStates.StarwoodEnergyGroup,anaffiliateoftheManager,istheborrowerundertheloan.
InFebruary2019,theCompanyacquireda$60.0millionparticipationina$925.0millionfirstpriorityinfrastructuretermloan.InApril2019andJuly2019,theCompanyacquiredparticipationsof$5.0millionand$16.0million,respectively,ina$350.0millionupsizetothetermloan.Theloanissecuredbyfivedomesticnaturalgaspowerplants.Ourparticipationstotaling$81.0millionbearinterestatone-monthLIBORplus3.75%andmatureinDecember2025.StarwoodEnergyGroup,anaffiliateoftheManager,istheborrowerunderthetermloan.
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Residential Mortgage Loans
DuringtheyearendedDecember31,2019theCompanyacquired$353.0millionofloansfromaresidentialmortgageoriginatorinwhichtheCompanyholdsanequityinterest.Also,inSeptember2019andOctober2019,theCompanyamendeda$2.0millionsubordinatedloantothisresidentialmortgageoriginator,whichwasenteredintoinJune2018,toextendthematurityfromSeptember2019toSeptember2020andincreasethetotalcommitmentto$4.5million.Thesubordinatedloanbearsinterestatafixedrateof8.0%.
Other Related Party Arrangements
During2016,theCompanyestablishedaco-investmentfundwhichprovideskeypersonnelwiththeopportunitytoinvestincertainpropertiesincludedintheCompany’sRealEstateInvestingandServicingbusinesssegment.ThesepersonnelincludecertainemployeesoftheCompany,includingMessrs.DiModicaandSossen,aswellasemployeesofaffiliatesoftheManager(the“FundParticipants”).Thefundcarriesanaggregatecommitmentof$15.0millionandownsa10%equityinterestinthesubsidiaryoftheCompanywhichownssuchproperties.AsofDecember31,2019,theFundParticipantsfunded$4.9millionofsuchcommitment.Inanefforttoretainkeypersonnel,theFundParticipantsareentitledtoapromoteontheirinvestment,wherebyoperatingprofitsaredistributedassumingimpliedleverageof60%ontheFundParticipants’capitalaccounts.ThispromoteispaidaftertheCompany,asgeneralpartnerofthefund,earnsa5%preferredreturn.During2019,thenon-controllinginterestsrelatedtothisfundreceivedcashdistributionsof$1.3million.
InNovember2018,theCompanyengagedHighmarkResidential(“Highmark”)(formerlyknownasMilestoneManagement),anaffiliateoftheManager,toprovidepropertymanagementservicesfortheCompany’sWoodstarIPortfolio.FeespaidbytheCompanytoMilestonearecalculatedas3%ofgrossreceipts.DuringtheyearendedDecember31,2019,propertymanagementfeespaidtoHighmarkwere$1.6million.
Disclosure Regarding Fred Ridley
Oneofourdirectors,Mr.Ridley,isapartnerwithFoley&LarderLLP(“Foley”).Infiscalyear2019,Foleycollectedlegalfeesof$37,847fromtheCompanyand$1,318,488fromoronbehalfoftheCMBSsecuritizationtrustsforwhichasubsidiaryoftheCompanyhasbeenappointedtoactasthespecialservicer.FormoreinformationregardingCMBSsecuritizationtrustsandtheroleofaspecialservicer,seebelowundertheheading“CMBSSecuritizationTrustsandSpecialServicing.”NotwithstandingthelegalfeespaidtoFoley,theBoarddeterminedthatMr.Ridleyisanindependentdirector(underNYSElistingstandardsorotherwise)duetothebelowfactors:
• Mr.RidleydidnotpersonallyperformorsuperviseanylegalservicestotheCompanyoritssubsidiariesin2019anddoesnotpersonallyreceivefeesorothercompensationfortheseservices.Accordingly,thereisnodirectfinancialtietothelegalfeeswhichcouldcompromiseMr.Ridley’sindependence.
• FoleywasfirstretainedbyasubsidiaryoftheCompanymorethan20yearsago,wellbeforeMr.RidleywasappointedtotheBoard.Mr.Ridley’sappointmentwasnotrelatedtoFoley’sprovisionoflegalservices,andFoleydoesnotreceiveanyadditionalbenefitasaresultofMr.RidleybeingappointedtotheBoard.
• ThefeespaidtoFoleyamountedtoapproximately0.15%ofthelawfirm’sconsolidatedgrossannualrevenuefor2019.
• Otherthanthe$37,847offeespaidtoFoleyin2019fornon-materialmatters,theremaining$1,318,488inpaymentsin2019toFoleywerepaidbyoronbehalfoftrustsforwhichasubsidiaryoftheCompany,LNR
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PartnersLLC(“LNR”),hasbeenappointedtoactasthespecialservicer.ThiswasparticularlyimportanttotheBoardindeterminingMr.Ridley’sindependence.Foraccountingpurposes,theassetsofthetrustsareconsolidatedintheCompany’sfinancialsdespitethefactthattheCompanyhaseithernoorlimitedequityandvotinginterestsinthetrusts.Foley was retainedon behalf of each trust that LNR serviced, and was not retained to represent LNR in its individual capacity or to represent theCompany in these matters.
• Bywayofbackground,LNR’sprimarybusinessisadministeringthedefaultsideofloanservicingforCMBSsecuritizationtrusts.LNRretainsthirdpartycontractors,includinglawfirmssuchasFoley,toperformlegalservicesrelatedtothecollectionandrestructuringofdefaultedloans.Pursuanttoitscontractualagreements,LNRisprohibitedfromreceivingkickbacksorotherbenefitsfromcontractorsprovidingservicestothetrustandLNRhasadutytoobtainthemostcosteffectiveservices.Inaddition,theCMBSsecuritizationsdesignateacertificateholderrepresentative(“CCR”)thatoverseesthespecialservicerthroughouttheentireworkoutoftheloan,servingastheultimatedecisionmakeronbehalfofthetrust,includingtheretentionofthirdpartyvendorsinconnectionwithmajordecisionsinaccordancewiththeservicingstandard.Ingeneral,undertheservicingagreements,aCCRhastheauthoritytoremovethespecialservicerwithoutcauseatanytime.Foleyisoneofover103lawfirmsretainedtoprovidethetrustswithlegalservices.In2019,thetrustsservicedbyLNRpaidapproximately$19.6milliontovariouslawfirmsforlegalservicesrelatedtodefaultedloans.Foleyreceivedapproximately6.7%ofthattotalamount.TheCompanyconsiderstheseservicestobetransactionalsupportfortheloanbeingspecialserviced.Inconnectionwiththeprovisionoftheseservices,FoleywasnotgivenaccesstosensitiveCompanyinformationandwasnotinvolvedintheCompany’sorLNR’sstrategicdecisions.
Foralloftheabovereasons,theBoardisconfidentthattherelationshipsdescribedabovedonotaffectMr.Ridley’sabilitytoexercisehisindependentjudgmentwithrespecttoanymatterbeforetheBoard.
CMBS Securitization Trusts and Special Servicing
CMBSarebondswithpaymentsderivedfromaloanorapoolofloansoncommercialrealestate.CMBSsecuritizationistheprocessbywhichaloan,ormorecommonlyagrouporpoolofloans,arepackagedtogethertocreateCMBS,whichareissuedandthenheldbyaRealEstateInvestmentMortgageConduit,referredtogenerallyasaCMBSsecuritizationtrust.Thetrusthasthreeagentsthathavespecificrolesandauthoritytoactonbehalfofthetrust:thetrusteeservesastheholderoftitletotheloansinthetrust;themasterservicerprovidesloanservicingonperformingloans;andthespecialservicerattemptstoworkoutdistressedordefaultedloansandprovidescertainconsentsonbehalfofthetrustthatarerequiredundertheloandocuments.Asnotedabove,LNRisaspecialservicerforcertainCMBSsecuritizationtrusts.Whenaloanownedbyatrustgoesintodefaultorisgoingintodefault,theloanistransferredtoLNRforservicing.
Related Party Transaction Practice
TheBoarddoesnothaveawrittenpolicyregardingtheapprovalofrelatedpartytransactions.However,itisthepracticeoftheBoardtoseekapprovalofthenon-executivedirectorsforanyrelatedpartytransaction(whichmeansanytransactionorseriesoftransactionsinwhichtheCompanyoranyofitssubsidiariesisoraretobeaparticipant,theamountinvolvedexceeds$120,000,anda“relatedperson”(asdefinedunderSECrules)hasadirectorindirectmaterialinterest)involvingapotentialconflictofinterest.Further,whentheBoardhaspreviouslyapprovedanequityinvestmentinapartythatcontemplatestherighttoparticipateinsubsequentdebtinvestmentswithsuchpartyintheordinarycourseoftheCompany’sbusiness(e.g.,thedisclosuresunder“-SEREFandRelatedTransactions”),itisthepracticeoftheBoardtoseekseparateapprovalofthenon-executivedirectorsforanysuchindividualdebtinvestmentiftheCompanyisnotinvestingonapari passubasiswithsuchparty.
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INFORMATIONCONCERNINGTHEANNUALMEETINGANDVOTING Shareholders Entitled to Vote
TheBoardhasfixedMarch3,2020astherecorddateforthedeterminationofshareholdersentitledtonoticeofandtovotetheirsharesoftheCompany’scommonstock,parvalue$0.01pershare(“commonstock”),attheAnnualMeeting.AsofMarch3,2020,theCompanyhadoutstanding282,970,469sharesofcommonstock.Eachshareofcommonstockentitlesitsholdertoonevote.
Attending the Virtual Annual Meeting
Inlightofpublichealthconcernsregardingthecoronavirusoutbreak,andinordertoprovideexpandedaccess,improvedcommunicationandcostsavingsforourshareholdersandourCompany,thisyear’sAnnualMeetingwillbeacompletely“virtual”meetingofshareholders,whichwillbeconductedvialivewebcast.YouwillbeabletoattendtheAnnualMeetingonlineandsubmityourquestionsduringthemeetingbyvisitingwww.virtualshareholdermeeting.com/STWD2020.SuchquestionsmustbeconfinedtomattersproperlybeforetheAnnualMeetingandofgeneralCompanyconcern.YouwillalsobeabletovoteyourshareselectronicallyattheAnnualMeeting.Toparticipate,youwillneedyour16-digitcontrolnumberincludedinyourproxymaterials,onyourproxycard,orontheinstructionsthataccompaniedyourproxymaterials.
Themeetingwillbeginpromptlyat2:00p.m.,Easterntime.Weencourageyoutoaccessthemeetingpriortothestarttime.Onlineaccesswillopenat1:45p.m.,Easterntime,andyoushouldallowampletimetologintothemeetingwebcastandtestyourcomputeraudiosystem.Werecommendthatyoucarefullyreviewtheproceduresneededtogainadmissioninadvance.
Wewillhavetechniciansreadytoassistyouwithanytechnicaldifficultiesyoumayhaveaccessingthevirtualmeeting.Ifyouencounteranydifficultiesaccessingthevirtualmeetingduringcheck-inorduringthemeeting,pleasecallthetechnicalsupportnumberthatwillbepostedonthevirtualshareholdermeetingloginpagewww.virtualshareholdermeeting.com/STWD2020.
Quorum
ThepresenceinpersonorbyproxyofshareholdersentitledtocastamajorityofallthevotesentitledtobecastattheAnnualMeetingconstitutesaquorumforpurposesoftransactingbusinessattheAnnualMeeting.Abstentionsandbrokernon-votesarecountedaspresentandentitledtovoteforpurposesofdeterminingaquorum.
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Broker Non-Vote
A“brokernon-vote”occurswhenabank,brokerorothernomineethatholdssharesforabeneficialownerin“streetname”(referencedhereinasa“broker”)doesnotvoteonaparticularproposalbecausethatbrokerdoesnothavediscretionaryvotingpowerforthatparticularitemandhasnotreceivedinstructionsfromthebeneficialowner.Ifyouholdyoursharesinstreetname,therulesoftheNYSEprovidetherecordholder(i.e.,yourbroker)withtheauthoritytovoteyoursharesonlyoncertain“routine”matterswhenitdoesnotreceivevotinginstructionsfromyou.AttheAnnualMeeting,abrokerwillhavediscretionaryauthoritytovotesharesontheratificationoftheappointmentofDeloitte&ToucheLLPastheCompany’sindependentregisteredpublicaccountingfirmforthecalendaryearendingDecember31,2020(Proposal3),butwillnothavediscretionaryauthorityastotheotherproposalspresented:theelectionofdirectornominees(Proposal1)orontheadvisoryproposalregardingexecutivecompensation(Proposal2).
Ifyouholdyoursharesinstreetname,pleaseensurethatyoursharesarevotedattheAnnualMeetingbytimelysubmittingvotinginstructionstoyourbrokeraccordingtotheinstructionsprovidedbyyourbroker.
Required Vote
Electionofeachnomineeforthesevendirectorpositions(Proposal1)requirestheaffirmativeFORvoteofapluralityofallvotescastattheAnnualMeeting.Thismeansthatthedirectornomineewiththemostvotesforaparticularseatiselectedforthatseat.Votes“withheld”fromoneormoredirectornomineesthereforewillhavenoeffectontheoutcomeofthevotewithrespecttotheelectionofdirectors.However,inanuncontestedelectionofdirectors,anynomineefordirectorwhoreceivesagreaternumberofvotes“withheld”fromhisorherelectionthanvotes“for”hisorherelectionisexpectedtotenderhisorherwrittenresignationtotheChairmanoftheBoardforconsiderationbytheNominatingandCorporateGovernanceCommittee.Foradditionaldetailsregardingourdirectorresignationpolicyandtheelectionofdirectors,seethesectionofthisproxystatemententitled“OurBoard—Proposal1:ElectionofDirectors.”Intabulatingthevotingresults,abstentionsand,ifapplicable,brokernon-votes,willhavenoeffectontheelectionofdirectors.
TheaffirmativeFORvoteofamajorityofvotescastattheAnnualMeetingisrequiredtoapproveallotherproposals,includingtheapproval,onanadvisorybasis,oftheCompany’sexecutivecompensationasdisclosedinthisProxyStatement(Proposal2)andtheratificationoftheappointmentofDeloitte&ToucheLLPastheCompany’sindependentregisteredpublicaccountingfirmforthecalendaryearendingDecember31,2020(Proposal3).Intabulatingthevotingresultsforeachsuchproposal,abstentionsand,ifapplicable,brokernon-votes,arenottreatedas“votescast”andwillhavenoeffectontheresultofsuchvote.
AlthoughtheadvisoryvoteontheCompany’sexecutivecompensationasdisclosedinthisProxyStatement(Proposal2)isnon-binding,theBoardwillreviewtheresultsofthevoteandwilltakethemintoaccountasappropriatewhenmakingdecisionsregardingexecutivecompensation.
How to Vote
YoumayvoteattheAnnualMeetinginanyofthefollowingways:
Submitting a Proxy by Telephone or via the Internet: Ifyouareashareholderofrecord,youmayappointyourproxybytelephoneorviatheInternetuntil11:59p.m.,Easterntime,onApril28,2020,byfollowingtheinstructionsontheNoticeofInternetAvailabilityofProxyMaterialsor,ifyourequestedaprintedsetoftheproxymaterials,onyourproxycard.Easy-to-followpromptsallowyoutosubmitaproxyforyoursharesandconfirmthatyourinstructionshavebeenproperlyrecorded.TheCompany’stelephoneandInternet
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proxysubmissionproceduresaredesignedtoauthenticateshareholdersbyusingindividualcontrolnumbers.Ifyouholdyoursharesinstreetname,pleasecheckyourvotinginstructioncardprovidedwiththeproxymaterialsorcontactyourbrokertodeterminewhetheryouwillbeabletoprovideyourinstructionsbytelephoneorviatheInternet.
Submitting a Proxy by Mail: Ifyouareashareholderofrecordandrequestedtoreceiveaprintedsetoftheproxymaterials,youcanappointyourproxybymarking,datingandsigningyourproxycardandreturningitbymailinthepostage-prepaidenvelopeprovided.Ifsubmittedbymail,yourproxymustbereceivedbythecloseofbusinessonApril28,2020,tobecounted.Ifyouholdyoursharesinstreetname,youcaninstructyourbrokertovotebyfollowingthedirectionsonyourvotinginstructioncardprovidedwiththeproxymaterials.
Bycastingyourvoteinanyofthewayslistedabove,youareauthorizingtheindividualslistedontheproxytovoteyoursharesinaccordancewithyourinstructions.
In Person at the Annual Meeting: ShareholdersofrecordmayvoteinpersonduringthevirtualAnnualMeetingbyvisitingwww.virtualshareholdermeeting.com/STWD2020.Tovote,youwillneedyour16-digitcontrolnumberincludedinyourproxymaterials,onyourproxycard,orontheinstructionsthataccompaniedyourproxymaterials.
PleasenotethatevenifyouplantoattendtheAnnualMeeting,weencourageyoutosubmitaproxyinadvancetoensureyoursharesarerepresented.YourvotinginpersonattheAnnualMeetingwillautomaticallyresultintherevocationofanypreviouslysubmittedproxy.
How Shares Will be Voted
Ifyouareashareholderofrecordandyouproperlycomplete,signandreturnaproxycardorusethetelephoneorInternetvotingprocedures,asapplicable,toauthorizethenamedproxiestovoteyourshares,andyourproxycardorotherproxyauthorizationisreceivedbytheCompanyintimetobevotedattheAnnualMeeting,yourshareswillbevotedasspecified,unlessyourproxyisproperlyrevokedpriorthereto.Asnotedabove,youmayalsovoteyoursharesatthevirtualAnnualMeeting.Ifyousubmitasignedproxycardbutnospecificationismadeontheproxycardastoanyoneormoreoftheproposals,thesharesofcommonstockrepresentedbytheproxywillbevotedasfollows:
FORtheelectionofeachofthedirectornominees;
FORtheapproval,onanadvisorybasis,oftheCompany’sexecutivecompensationasdisclosedinthisProxyStatement;and
FORtheratificationoftheappointmentbytheAuditCommitteeofDeloitte&ToucheLLPastheindependentregisteredpublicaccountingfirmoftheCompanyforthecalendaryearendingDecember31,2020.
Revocation of Proxies
Apersonsubmittingaproxyhasthepowertorevokeitatanytimebeforeitisexercisedby(a)attendingtheAnnualMeetingandvotinginperson,(b)dulyexecutinganddeliveringaproxybearingalaterdatepriortotheAnnualMeetingor(c)sendingwrittennoticeofrevocationtotheCompany’sSecretaryatStarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830,whichmustbereceivedbytheCompany’sSecretaryby5:00p.m.,Easterntime,onApril28,2020tohaveanyeffect.AttendingtheAnnualMeetingbyitselfdoesnotautomaticallyrevokeanyearliersubmittedproxy.
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Confidentiality of Voting
TheCompanykeepsallproxies,ballotsandvotingtabulationsconfidentialasamatterofpractice.TheCompanyonlyletsitsproxysolicitor,InnisfreeM&AIncorporated(“Innisfree”),anditsInspectorofElection,ComputershareTrustCompanyN.A.(“Computershare”),examinethesedocuments.Occasionally,shareholdersprovidewrittencommentsontheirproxycard,whichthenmaybeforwardedtotheCompany’smanagementbyComputershare.
Tabulation of Voting Results
Computershare,theCompany’sindependenttabulatingagent,willcountthevotesandactastheInspectorofElectionattheAnnualMeeting.
Solicitation of Proxies
TheCompanywillpaytheexpensesofsolicitingproxiesinconnectionwiththisProxyStatement.Proxiesmaybesolicitedinpersonorbymail,telephone,electronictransmissionand/orfacsimiletransmissionontheCompany’sbehalfbydirectors,officersoremployeesoftheCompanyoritssubsidiaries,withoutadditionalcompensation.TheCompanyasksbrokeragehousesandothercustodians,nomineesandfiduciariestoforwardsolicitingmaterialstothebeneficialownersofthestockheldofrecordbysuchpersonsandtoobtainauthoritytoexecuteproxies,forwhichtheCompanywillreimbursesuchpersons.InnisfreehasbeenengagedtoassistinthesolicitationofproxiesfortheCompanyforafeeof$20,000plusreasonableout-of-pocketexpenses.WhenrecordingvotesbytelephoneorviatheInternet,theCompanywilluseproceduresdesignedtoauthenticateshareholders’identities,whichwillallowshareholderstoauthorizethevotingoftheirsharesinaccordancewiththeirinstructionsandconfirmthattheirinstructionshavebeenrecordedproperly.
List of Shareholders
AlistofshareholdersentitledtovoteattheAnnualMeetingwillbeavailableatthevirtualAnnualMeetingatwww.virtualshareholdermeeting.com/STWD2020andfortendayspriortotheAnnualMeeting,betweenthehoursof9:00a.m.and5:00p.m.,Easterntime,attheCompany’sprincipalexecutiveofficesatStarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830,andopentoexaminationbyanyshareholderforanypurposegermanetotheAnnualMeeting,bycontactingtheSecretaryoftheCompany.
Availability of Annual Report and Proxy Materials on the Internet
ThisProxyStatementandourannualreportforthecalendaryearendedDecember31,2019areavailableatwww.proxyvote.combyusingthecontrolnumberthatisprovidedtoyouintheNoticeRegardingInternetAvailabilityofProxyMaterials.Youmayalsoviewsuchmaterialsonourwebsiteatwww.ir.starwoodpropertytrust.com/proxymaterialsorrequestprintedcopiesofsuchmaterialsbymail.PleasesubmitanysuchrequesttotheattentionoftheCompany’sSecretary,StarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830.
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Recommendations of the Board
TheBoardrecommendsavoteFORtheelectionofeachofthenomineesfordirectornamedinthisProxyStatement,FORtheapproval,onanadvisorybasis,oftheCompany’sexecutivecompensationasdisclosedinthisProxyStatementandFORtheratificationoftheappointmentbytheAuditCommitteeofDeloitte&ToucheLLPastheindependentregisteredpublicaccountingfirmoftheCompanyforthecalendaryearendingDecember31,2020.
Householding
TheSEChasadoptedrulesthatpermitcompaniesandintermediariessuchasbrokerstosatisfydeliveryrequirementsforproxystatementsandannualreportswithrespecttotwoormoreshareholderssharingthesameaddressbydeliveringasingleproxystatementandannualreportaddressedtothoseshareholders.Thisprocess,whichiscommonlyreferredtoas“householding,”potentiallyprovidesextraconvenienceforshareholdersandcostsavingsforcompanies.TheCompanyandsomebrokershouseholdproxymaterials,deliveringasingleproxystatementandannualreporttomultipleshareholderssharinganaddressunlesscontraryinstructionshavebeenreceivedfromtheaffectedshareholders.OnceyouhavereceivednoticefromyourbrokerortheCompanythattheyortheCompanywillbehouseholdingmaterialstoyouraddress,householdingwillcontinueuntilyouarenotifiedotherwiseoruntilyourevokeyourconsent.If,atanytime,younolongerwishtoparticipateinhouseholdingorwouldprefertoreceiveaseparateproxystatementandannualreport,pleasenotifyyourbrokerifyoursharesareheldinabrokerageaccountortheCompanyifyouholdregisteredshares.YoucannotifytheCompanybyphoneat(203)422-7700orsendawrittenrequesttotheCompany’sSecretaryatStarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830.Ifyousorequest,wewillhavedeliveredtherequestedseparateproxystatementandannualreportpromptlyfollowingourreceiptofyourrequest.
Ifyourhouseholdhasreceivedmultiplecopiesofproxystatementsandannualreports,youcanrequestthedeliveryofsinglecopiesinthefuturebynotifyingtheCompanyassetforthabove.
Other Matters
TheBoardknowsofnootherbusinesstobebroughtbeforetheAnnualMeeting.IfanyothermattersproperlycomebeforetheAnnualMeeting,includingaproposalomittedfromthisProxyStatementinaccordancewithRule14a-8undertheExchangeAct,theproxieswillbevotedonsuchmattersinaccordancewiththejudgmentofthepersonsnamedasproxiestherein,ortheirsubstitutes,presentandactingatthemeeting.
NopersonisauthorizedtogiveanyinformationortomakeanyrepresentationnotcontainedinthisProxyStatement,and,ifgivenormade,suchinformationorrepresentationshouldnotberelieduponashavingbeenauthorized.ThedeliveryofthisProxyStatementshallnot,underanycircumstances,implythattherehasnotbeenanychangeintheinformationsetforthhereinsincethedateoftheProxyStatement.
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SHAREHOLDERPROPOSALSFORTHE2021ANNUALMEETING ProposalsreceivedfromshareholdersaregivencarefulconsiderationbytheCompany.Shareholderproposalsareeligibleforconsiderationforinclusionintheproxystatementforthe2021annualmeetingofshareholdersinaccordancewithRule14a-8undertheExchangeActiftheyarereceivedbytheCompanyonorbeforeNovember20,2020.AnyproposalshouldbedirectedtotheattentionoftheCompany’sSecretaryatStarwoodPropertyTrust,Inc.,591WestPutnamAvenue,Greenwich,Connecticut06830.InorderforashareholderproposalornominationsubmittedoutsideofRule14a-8tobeconsideredtimelyundertheCompany’sBylaws,itmustbereceivednotlessthan90daysnormorethan120dayspriortothefirstanniversaryofthedateofthemailingofthenoticeforthepriorannualmeeting,withcertainexceptions.Forthe2021annualmeetingofshareholders,anysuchproposalornominationshouldbereceivednoearlierthanNovember20,2020andnolaterthanDecember20,2020.
ByOrderoftheBoard,
Andrew J. SossenSecretary
Dated:March20,2020Greenwich,Connecticut
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