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Starwood Property Trust Provides Tax Basis Of Starwood Waypoint Residential Trust Distribution

GREENWICH, Conn., March 10, 2014 /PRNewswire/ -- Starwood Property Trust, Inc. (NYSE: STWD) today provided the tax basis for its previously completed spin-off of Starwood Waypoint Residential Trust (NYSE: SWAY).  Starwood Property Trust, Inc. completed the spin-off of SWAY on January 31, 2014 (the "Spin-off") by distributing one share of SWAY common stock for every five shares of STWD common stock held by the holders of STWD common stock as of 5:00 p.m., Eastern Time, on January 24, 2014, the spin-off record date. If you were not a holder of STWD common stock as of the record date for the Spin-off, the following information will not be applicable to you. If you purchased STWD shares after the record date or purchased SWAY shares in the open market, the following information will not be applicable to you.

Tax Basis of Distributed SWAY Stock

For U.S. federal income tax purposes, STWD intends to report the fair market value of the distribution at $28.84 per share of SWAY common stock distributed. Accordingly, every STWD stockholder who received a share of SWAY in the distribution will have a tax cost basis of $28.84 per share of SWAY.

Estimated Tax Impact of Distribution on STWD Stockholders

For U.S. federal income tax purposes, STWD's distributions of cash and property, including the distributed SWAY shares, are treated as taxable dividends to the extent of STWD's earnings and profits ("E&P"). Because the distribution of the SWAY shares was a taxable event to STWD in which STWD recognized gain, the distribution created E&P for STWD in 2014 equal to what is preliminarily estimated to be approximately $0.48 per share of STWD common stock.  This amount is equal to the fair market value of the SWAY shares distributed less STWD's estimated tax basis in the assets of SWAY. No assurance can be given that this estimate of the amount of E&P created by the distribution will prove accurate, and an investor should not place undue reliance on this estimate.

While STWD can currently report that the tax basis of the SWAY shares distributed in the Spin-off to holders of STWD shares is $28.84 per share, the taxability of the distribution of SWAY common stock and the effect of this distribution on the tax basis of your STWD common stock will not be known until early 2015.  STWD's E&P for 2014 depends upon all of STWD's activities for the year.  As a result, the actual amounts of STWD's E&P, the taxable portion of its cash and property distributions including the distribution of SWAY shares, and the non-taxable return of capital will not be available until January 2015 when STWD announces the tax treatment of its 2014 distributions. 

If STWD's E&P in 2014 is less than STWD's distributions to shareholders during 2014, such E&P will be allocated to each distribution during the year, pro rata based on the amount of each distribution.  Each distribution will be treated as a dividend to the extent of the E&P allocated to it. To the extent that a distribution exceeds the amount of E&P allocated to it, the excess will first be applied to reduce your tax basis in your STWD stock and, to the extent it exceeds your tax basis in your STWD stock, will be treated as if it were gain on the sale of that stock.

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