Occurrences of tropical cyclones at a location are rare, and for many locations, only short periods of observations or hindcasts are available. Hence, estimation of return values (corresponding to a period considerably longer than that for which data are available) for cyclone-induced significant wave height (SWH) from small samples is challenging. The STM-E (space-time maximum and exposure) model was developed to provide reduced bias in estimates of return values compared to competitor approaches in such situations and realistic estimates of return value uncertainty. STM-E exploits data from a spatial neighbourhood satisfying certain conditions, rather than data from a single location, for return value estimation. This article provides critical assessment of the STM-E model for tropical cyclones in the Caribbean Sea near Guadeloupe for which a large database of synthetic cyclones is available, corresponding to more than 3000 years of observation. Results indicate that STM-E yields values for the 500-year return value of SWH and its variability, estimated from 200 years of cyclone data, consistent with direct empirical estimates obtained by sampling 500 years of data from the full synthetic cyclone database; similar results were found for estimation of the 100-year return value from samples corresponding to approximately 50 years of data. In general, STM-E also provides reduced bias and more realistic uncertainty estimates for return values relative to single-location analysis.