Calculation Methodologies


**Distributable Earnings:**
Distributable Earnings is a non-GAAP measure. We calculate Distributable Earnings as GAAP net income (loss) excluding the following: (i) non-cash
equity compensation expense; (ii) the incentive fee due under our management agreement; (iii) acquisition and investment pursuit costs associated
with successful acquisitions; (iv) depreciation and amortization of real estate and associated intangibles; (v) unrealized gains (losses), net of realized
gains (losses), as described further below; (vi) other non-cash items; and (vii) to the extent deducted from net income (loss), distributions payable with
respect to equity securities of subsidiaries issued in exchange for properties or interests therein (i.e. the Woodstar II Class A units), with each of the
above adjusted for any related non-controlling interest. Distributable Earnings may be adjusted to exclude one-time events pursuant to changes in
GAAP and certain other non-cash adjustments as determined by our Manager and approved by a majority of our independent directors.


As noted in (v) above, we exclude unrealized gains and losses from our calculation of Distributable Earnings and include realized gains and losses. The
CECL reserve and any property impairment losses have been excluded from Distributable Earnings consistent with other unrealized losses pursuant to
our existing policy for reporting Distributable Earnings. We expect to only recognize such potential credit or property impairment losses in Distributable
Earnings if and when such amounts are deemed nonrecoverable upon a realization event. This is generally at the time a loan is repaid, or in the case
of a foreclosed or other property, when the underlying asset is sold. Non-recoverability may also be determined if, in our determination, it is nearly
certain the carrying amounts will not be collected or realized upon sale. The realized loss amount reflected in Distributable Earnings will equal the
difference between the cash received, or expected to be received, and the Distributable Earnings basis of the asset, and is reflective of our economic
experience as it relates to the ultimate realization of the asset. The timing of any such loss realization in our Distributable Earnings may differ materially
from the timing of the corresponding CECL reserves, charge-offs or impairments in our consolidated financial statements prepared in accordance with
GAAP.


We believe that Distributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flow from operating
activities determined in accordance with GAAP. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of
our common stock as historically, over time, Distributable Earnings has been a strong indicator of our dividends per share. As a REIT, we generally must
distribute annually at least 90% of our REIT taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the
principal reasons stockholders may invest in our common stock. Further, Distributable Earnings helps us to evaluate our performance excluding the
effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations, and is
a performance metric we consider when declaring our dividends. We also use Distributable Earnings (previously defined as "Core Earnings") to
compute the incentive fee due under our management agreement.


Distributable Earnings does not represent net income (loss) or cash generated from operating activities and should not be considered as an alternative
to GAAP net income (loss), or an indication of our GAAP cash flows from operations, a measure of our liquidity, taxable income, or an indication of
funds available for our cash needs. In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed
by other companies to calculate the same or similar supplemental performance measures, and accordingly, our reported Distributable Earnings may
not be comparable to the Distributable Earnings reported by other companies.


STARWOOD PROPERTY TRUST


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