Notes to Consolidated Financial Statements
(Unaudited)
1. ORGANIZATION AND OPERATIONS
Ladder Capital Corp is an internally-managed real estate investment trust (“REIT”) that is a leader in commercial real estate finance. We originate and invest in a diverse portfolio of commercial real estate and real estate-related assets, focusing on senior secured assets. Our investment activities include: (i) our primary business of originating senior first mortgage fixed and floating rate loans collateralized by commercial real estate with flexible loan structures; (ii) investing in investment grade securities secured by first mortgage loans on commercial real estate; and (iii) owning and operating commercial real estate, including net leased commercial properties. Ladder Capital Corp, as the general partner of Ladder Capital Finance Holdings LLLP (“LCFH” or the “Operating Partnership”), operates the Ladder Capital business through LCFH and its subsidiaries. As of June 30, 2021, Ladder Capital Corp has a 100.0% economic interest in LCFH and controls the management of LCFH as a result of its ability to appoint its board members. Accordingly, Ladder Capital Corp consolidates the financial results of LCFH and its subsidiaries. In addition, Ladder Capital Corp, through certain subsidiaries which are treated as taxable REIT subsidiaries (each a “TRS”), is indirectly subject to U.S. federal, state and local income taxes. Other than such indirect U.S. federal, state and local income taxes, there are no material differences between Ladder Capital Corp’s consolidated financial statements and LCFH’s consolidated financial statements.
Ladder Capital Corp was formed as a Delaware corporation on May 21, 2013. The Company conducted its initial public offering (“IPO”) which closed on February 11, 2014. The Company used the net proceeds from the IPO to purchase newly issued limited partnership units (“LP Units”) from LCFH. In connection with the IPO, Ladder Capital Corp also became a holding corporation and the general partner of, and obtained a controlling interest in, LCFH. Ladder Capital Corp’s only business is to act as the general partner of LCFH, and, as such, Ladder Capital Corp indirectly operates and controls all of the business and affairs of LCFH and its subsidiaries. The IPO transactions described herein are referred to as the “IPO Transactions.”
COVID-19 Impact on the Organization
On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. We continue to actively manage the liquidity and operations of the Company in light of the market conditions and the overall financial impact of COVID-19 across most industries in the United States. In view of the ongoing uncertainty related to the duration of the pandemic, its ultimate impact on our revenues, profitability and financial position remains difficult to assess at this time. Refer to the Notes to the Consolidated Financial Statements for further disclosure on the current and potential impact of COVID-19 on our business.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Principles of Consolidation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). In the opinion of management, the unaudited financial information for the interim periods presented in this report reflects all normal and recurring adjustments necessary for a fair statement of results of operations, financial position and cash flows. The interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020, which are included in the Annual Report, as certain disclosures that would substantially duplicate those contained in the audited consolidated financial statements have not been included in this interim report. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.
The consolidated financial statements include the Company’s accounts and those of its subsidiaries which are majority-owned and/or controlled by the Company and variable interest entities for which the Company has determined itself to be the primary beneficiary, if any. All significant intercompany transactions and balances have been eliminated.
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 — Consolidation (“ASC 810”), provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIEs. Generally, the consideration of whether an entity is a VIE applies when either: (1) the equity investors (if any) lack one or more of the essential characteristics of a controlling financial interest; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is the entity that has both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE. See Note 10, Consolidated Variable Interest Entities, for further information on the Company’s consolidated variable interest entities.
Provision for Loan Losses
The Company uses a current expected credit loss model (“CECL”) for estimating the provision for loan losses on its loan portfolio. The CECL model requires the consideration of possible credit losses over the life of an instrument and includes a portfolio-based component and an asset-specific component. In compliance with the CECL reporting requirements, the Company supplemented its existing credit monitoring and management processes with additional processes to support the calculation of the CECL reserves. As part of that effort, the Company has engaged a third-party service provider to provide market data and a credit loss model. The credit loss model is a forward-looking, econometric, commercial real estate (“CRE”) loss forecasting tool. It is comprised of a probability of default (“PD”) model and a loss given default (“LGD”) model that, layered together with user’s loan-level data, selected forward-looking macroeconomic variables, and pool-level mean loss rates, produces life of loan expected losses (“EL”) at the loan and portfolio level. Where management has determined that the credit loss model does not fully capture certain external factors, including portfolio trends or loan-specific factors, a qualitative adjustment to the reserve, is recorded. The CECL model was implemented in 2020.
The asset-specific reserve component relates to reserves for losses on individually impaired loans. The Company evaluates each loan for impairment at least quarterly. Impairment occurs when it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan. If the loan is considered to be impaired, an allowance is recorded to reduce the carrying value of the loan to the present value of the expected future cash flows discounted at the loan’s effective rate or the fair value of the collateral, less the estimated costs to sell, if recovery of the Company’s investment is expected solely from the collateral. The Company may use the direct capitalization rate valuation methodology or the sales comparison approach to estimate the fair value of the collateral for such loans and in certain cases will obtain external appraisals and take into account potential sale bids. Determining fair value of the collateral may take into account a number of assumptions including, but not limited to, cash flow projections, market capitalization rates, discount rates and data regarding recent comparable sales of similar properties. Such assumptions are generally based on current market conditions and are subject to economic and market uncertainties.
The Company’s loans are typically collateralized by real estate directly or indirectly. As a result, the Company regularly evaluates the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan-by-loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash flow from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan at maturity, and/or (iii) the property’s liquidation value. The Company also evaluates the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the properties. In addition, the Company considers the overall economic environment, real estate sector, and geographic submarket in which the collateral property is located. Such impairment analyses are completed and reviewed by asset management and underwriting personnel, who utilize various data sources, including (i) periodic financial data such as property occupancy, tenant profile, rental rates, operating expenses, the borrowers’ business plan, and capitalization and discount rates, (ii) site inspections, and (iii) current credit spreads and other market data and ultimately presented to management for approval.
A loan is also considered impaired if its terms are modified in a troubled debt restructuring (“TDR”). A TDR occurs when a concession is granted and the debtor is experiencing financial difficulties. Impairments on TDR loans are generally measured based on the present value of expected future cash flows discounted at the effective interest rate of the original loans. Generally, when granting concessions, the Company will seek to protect its position by requiring incremental pay downs, additional collateral or guarantees and, in some cases, lookback features or equity interests to offset concessions granted should conditions impacting the loan improve. The Company’s determination of credit losses is impacted by TDRs whereby loans that have gone through TDRs are considered impaired and are assessed for specific reserves. Loans previously restructured under TDRs that subsequently default are reassessed to incorporate the Company’s current assumptions on expected cash flows and additional provision expense is recorded to the extent necessary.
The Company designates non-accrual loans generally when (i) the principal or coupon interest components of loan payments become 90-days past due or (ii) in the opinion of the Company, it is doubtful the Company will be able to collect all amounts due according to the contractual terms of the loan. Interest income on non-accrual loans in which the Company reasonably expects a full recovery of the loan’s outstanding principal balance is recognized when received in cash. Otherwise, income recognition will be suspended and any cash received will be applied as a reduction to the amortized cost. A non-accrual loan is returned to accrual status at such time as the loan becomes contractually current and future principal and coupon interest are reasonably assured to be received in accordance with the contractual loan terms. A loan will be written off when management has determined it is no longer realizable and deemed non-recoverable.
Reclassifications
The Company reclassified its FHLB (as defined below) stock into other assets as of January 1, 2021, as such, the amount of $31.0 million from December 31, 2020 was reclassified into other assets on the Consolidated Balance Sheet. As of June 30, 2021, the book value of our investment in FHLB Stock was $13.0 million.
Recently Adopted Accounting Pronouncements
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective upon issuance of ASU 2020-04 for contract modifications and hedging relationships on a prospective basis. While the Company is currently assessing the impact of ASU 2020-04, the Company does not expect the adoption to have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 815), (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU 2019-12 also improves the consistent application of, and simplifies, GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The standard is effective for all entities for financial statements issued for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The adoption of ASU 2019-12 did not have a material impact on the Company’s consolidated financial statements.
In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables–Nonrefundable Fees and Other Costs, (“ASU 2020-08”). This ASU clarifies that an entity should reevaluate whether a callable debt security is within the scope of ASC paragraph 310-20-35-33 for each reporting period. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. All entities should apply ASU 2020-08 on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. The adoption of ASU 2020-08 did not have a material impact on the consolidated financial statements.
Recent Accounting Pronouncements Pending Adoption
Any new accounting standards not disclosed above that have been issued or proposed by FASB and that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
3. MORTGAGE LOAN RECEIVABLES
June 30, 2021 ($ in thousands)
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|
|
|
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|
|
Outstanding
Face Amount
|
|
Carrying
Value
|
|
Weighted
Average
Yield (1)(2)
|
|
Remaining
Maturity
(years)
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost:
|
|
|
|
|
|
|
|
|
First mortgage loans
|
$
|
2,430,910
|
|
|
$
|
2,414,167
|
|
|
5.94
|
%
|
|
1.83
|
|
Mezzanine loans
|
117,103
|
|
|
116,881
|
|
|
10.91
|
%
|
|
2.56
|
|
Total mortgage loans
|
2,548,013
|
|
|
2,531,048
|
|
|
6.17
|
%
|
|
1.86
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
N/A
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|
(35,891)
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|
|
|
|
|
|
Total mortgage loan receivables held for investment, net, at amortized cost
|
2,548,013
|
|
|
2,495,157
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|
|
|
|
|
|
Mortgage loan receivables held for sale:
|
|
|
|
|
|
|
|
|
First mortgage loans
|
59,198
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|
|
59,182
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|
|
4.25 %
|
|
9.81
|
|
Total
|
$
|
2,607,211
|
|
|
$
|
2,554,339
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|
|
6.12
|
%
|
|
2.04
|
(1)Includes the impact from interest rate floors. June 30, 2021 LIBOR rates are used to calculate weighted average yield for floating rate loans.
(2)Excludes non-accrual loans of $129.5 million. Refer to “Non-Accrual Status” below for further details.
As of June 30, 2021, $2.1 billion, or 84.3%, of the outstanding face amount of our mortgage loan receivables held for investment, net, at amortized cost, were at variable interest rates, linked to LIBOR. Of this $2.1 billion, 100% of these variable interest rate mortgage loan receivables were subject to interest rate floors. As of June 30, 2021, $59.2 million, or 100%, of the outstanding face amount of our mortgage loan receivables held for sale were at fixed interest rates.
December 31, 2020 ($ in thousands)
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|
|
|
|
|
|
|
|
|
Outstanding
Face Amount
|
|
Carrying
Value
|
|
Weighted
Average
Yield (1)(2)
|
|
Remaining
Maturity
(years)
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost:
|
|
|
|
|
|
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|
|
First mortgage loans
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$
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2,243,639
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|
|
$
|
2,232,749
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|
|
6.50 %
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|
1.00
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|
Mezzanine loans
|
121,565
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|
|
121,310
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|
|
10.83 %
|
|
2.42
|
|
Total mortgage loans
|
2,365,204
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|
|
2,354,059
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|
|
6.65 %
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|
1.07
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses
|
N/A
|
|
(41,507)
|
|
|
|
|
|
|
Total mortgage loan receivables held for investment, net, at amortized cost
|
2,365,204
|
|
|
2,312,552
|
|
|
|
|
|
|
Mortgage loan receivables held for sale:
|
|
|
|
|
|
|
|
|
First mortgage loans
|
30,478
|
|
|
30,518
|
|
|
4.05 %
|
|
9.18
|
|
Total
|
$
|
2,395,682
|
|
|
$
|
2,343,070
|
|
|
6.74 %
|
|
1.23
|
(1)Includes the impact from interest rate floors. December 31, 2020 LIBOR rates are used to calculate weighted average yield for floating rate loans.
(2)Excludes non-accrual loans of $175.0 million. Refer to “Non-Accrual Status” below for further details.
As of December 31, 2020, $1.9 billion, or 82.0%, of the outstanding face amount of our mortgage loan receivables held for investment, net, at amortized cost, were at variable interest rates, linked to LIBOR. Of this $1.9 billion, 100% of these variable rate mortgage loan receivables were subject to interest rate floors. As of December 31, 2020, $30.5 million, or 100%, of the outstanding face amount of our mortgage loan receivables held for sale were at fixed interest rates.
For the six months ended June 30, 2021 and 2020, the activity in our loan portfolio was as follows ($ in thousands):
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|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost:
|
|
|
|
|
Mortgage loans receivable
|
|
|
|
Allowance for credit losses
|
|
Mortgage loan
receivables held
for sale
|
|
Balance, December 31, 2020
|
$
|
2,354,059
|
|
|
|
|
$
|
(41,507)
|
|
|
$
|
30,518
|
|
|
Origination of mortgage loan receivables
|
795,717
|
|
|
|
|
—
|
|
|
76,404
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|
|
|
|
|
|
|
|
|
|
|
Repayment of mortgage loan receivables
|
(532,878)
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|
|
|
|
—
|
|
|
(80)
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|
|
Proceeds from sales of mortgage loan receivables
|
(46,557)
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|
|
|
|
—
|
|
|
(51,052)
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|
|
Non-cash disposition of loans via foreclosure(1)
|
(45,000)
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|
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|
|
—
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|
|
—
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|
|
Sale of loans, net
|
—
|
|
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|
|
—
|
|
|
3,392
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|
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|
Accretion/amortization of discount, premium and other fees
|
5,707
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|
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|
|
—
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|
|
—
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|
|
|
|
|
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|
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|
|
|
|
|
|
|
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|
|
Release of asset-specific loan loss provision via foreclosure(1)
|
—
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|
|
|
|
1,150
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|
|
—
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|
|
Provision for current expected credit loss, net (impact to earnings)
|
—
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|
|
|
|
4,466
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|
|
—
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|
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|
|
|
|
|
|
|
|
|
Balance, June 30, 2021
|
$
|
2,531,048
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|
|
|
|
$
|
(35,891)
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|
|
$
|
59,182
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|
(1)Refer to Note 5 Real Estate and Related Lease Intangibles, Net for further detail on foreclosure of real estate.
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|
|
Mortgage loan receivables held for investment, net, at amortized cost:
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|
|
|
Mortgage loans receivable
|
|
|
|
Allowance for credit losses
|
|
Mortgage loan
receivables held
for sale
|
|
Balance, December 31, 2019
|
$
|
3,257,036
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|
|
|
|
$
|
(20,500)
|
|
|
$
|
122,325
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|
|
Origination of mortgage loan receivables
|
334,347
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|
|
|
|
—
|
|
|
212,845
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|
|
|
|
|
|
|
|
|
|
|
Repayment of mortgage loan receivables
|
(446,080)
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|
|
|
|
—
|
|
|
(292)
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|
|
Proceeds from sales of mortgage loan receivables
|
(165,364)
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|
|
|
|
—
|
|
|
(255,827)
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|
|
Non-cash disposition of loan via foreclosure(1)
|
(27,107)
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|
|
|
|
—
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|
|
—
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|
|
Sale of loans, net
|
(6,665)
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|
|
|
|
—
|
|
|
6,926
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|
|
|
|
|
|
|
|
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|
|
Accretion/amortization of discount, premium and other fees
|
8,917
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|
|
|
|
—
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|
|
—
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|
|
|
|
|
|
|
|
|
|
|
Release of asset-specific loan loss provision via foreclosure(1)
|
—
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|
|
|
|
2,000
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|
|
—
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|
|
Provision expense for current expected credit loss(implementation impact)(2)
|
—
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|
|
|
|
(4,964)
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|
|
—
|
|
|
Provision expense for current expected credit loss (impact to earnings)(2)
|
—
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|
|
|
|
(17,638)
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|
|
—
|
|
|
Additional asset-specific reserve
|
—
|
|
|
|
|
(8,000)
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|
|
—
|
|
|
Balance, June 30, 2020
|
$
|
2,955,084
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|
|
|
|
$
|
(49,102)
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|
|
$
|
85,977
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|
(1)Refer to Note 5, Real Estate and Related Lease Intangibles, Net for further detail on real estate acquired via foreclosure.
(2)During the three months ended March 31, 2020, the initial impact of the implementation of the CECL accounting standard as of January 1, 2020 is recorded against retained earnings. Subsequent remeasurement thereafter, including the period to date change for the six months ended June 30, 2020, is accounted for as provision expense for current expected credit loss in the consolidated statements of income.
As of June 30, 2021 and December 31, 2020, there were $0.5 million of unamortized discounts included in our mortgage loan receivables held for investment, net, at amortized cost, on our consolidated balance sheets.
Allowance for Credit Losses and Non-Accrual Status ($ in thousands)
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|
|
|
|
|
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|
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|
|
|
|
|
|
|
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|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
Allowance for Credit Losses
|
|
|
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|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses at beginning of period
|
|
|
|
|
|
$
|
36,241
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|
|
$
|
49,457
|
|
|
$
|
41,507
|
|
|
$
|
20,500
|
|
|
|
|
|
Provision for current expected credit loss (implementation impact)
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,964
|
|
(1)
|
|
|
|
Provision for current expected credit loss, net (impact to earnings)(2)
|
|
|
|
|
|
(350)
|
|
|
(355)
|
|
|
(4,466)
|
|
|
25,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreclosure of loans subject to asset-specific reserve
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(1,150)
|
|
|
(2,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for credit losses at end of period
|
|
|
|
|
|
$
|
35,891
|
|
|
$
|
49,102
|
|
|
$
|
35,891
|
|
|
$
|
49,102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Additional provisions for current expected credit losses related to implementation of $0.8 million and $22.0 thousand related to unfunded commitments and held-to-maturity securities, respectively, were recorded on January 1, 2020 at implementation of CECL.
(2)For the three months ended June 30, 2021 and 2020 the total provision release consisted of $0.4 million in general reserves and no asset-specific reserves.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Accrual Status
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
Carrying value of loans on non-accrual status, net of asset-specific reserve
|
|
|
|
|
|
|
|
|
|
$
|
129,468
|
|
(1)(2)
|
$
|
175,022
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents two of the Company’s loans, which were originated simultaneously as part of a single transaction and had a combined carrying value of $24.2 million, two loans with a combined carrying value of $26.3 million, one loan with a carrying value of $36.4 million, one loan with a carrying value of $12.1 million, and one loan with a carrying value of $30.5 million.
(2) Subsequent to June 30, 2021, the Company resolved one of its non-accrual loans with a carrying value of $12.1 million. The Company received a full pay-off which included all accrued interest and fees.
(3) Represents two of the Company’s loans, which were originated simultaneously as part of a single transaction and had a combined carrying value of $24.2 million, two loans with a combined carrying value of $27.1 million, one loan with a carrying value of $36.4 million, one loan with a carrying value of $13.0 million, one loan with a carrying value of $30.6 million and one loan with a carrying value of $43.8 million which was foreclosed on and sold in 2021.
Current Expected Credit Loss (“CECL”)
On January 1, 2020, the Company recorded a CECL Reserve of $11.6 million, which equated to 0.36% of $3.2 billion carrying value of its held for investment loan portfolio. This reserve excluded three loans that previously had an aggregate of $14.7 million of asset-specific reserves and a carrying value of $39.8 million as of January 1, 2020. Upon adoption, the aggregated CECL Reserve reduced total shareholder’s equity by $5.8 million.
As of June 30, 2021, the Company has a $36.3 million allowance for current expected credit losses, of which $35.9 million pertains to mortgage loan receivables. This allowance includes three loans that have an aggregate of $20.2 million of asset-specific reserves against a carrying value of $70.7 million as of June 30, 2021.
The total change in reserve for provision for the six months ended June 30, 2021 was a release of $4.6 million. The release represents a decline in the general reserve of loans held for investment of $4.5 million and the release on unfunded loan commitments of $0.1 million. The release during the year is primarily due to an improvement in macro economic assumptions. For additional information, refer to “Allowance for Credit Losses and Non-Accrual Status” in Note 3, Mortgage Loan Receivables, to the consolidated financial statements.
The Company has concluded that none of its loans, other than the three loans discussed below, are individually impaired as of June 30, 2021.
Loan Portfolio by Geographic Region, Property Type and Vintage (amortized cost $ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
Geographic Region
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northeast
|
|
$
|
688,885
|
|
|
$
|
707,485
|
|
|
|
|
|
|
|
|
|
|
Southwest
|
|
435,247
|
|
|
437,153
|
|
|
|
|
|
|
|
|
|
|
South
|
|
584,708
|
|
|
313,759
|
|
|
|
|
|
|
|
|
|
|
Midwest
|
|
336,273
|
|
|
462,602
|
|
|
|
|
|
|
|
|
|
|
West
|
|
415,284
|
|
|
316,620
|
|
|
|
|
|
|
|
|
|
|
Subtotal loans
|
|
2,460,397
|
|
|
2,237,619
|
|
|
|
|
|
|
|
|
|
|
Individually impaired loans(1)
|
|
70,651
|
|
|
116,440
|
|
|
|
|
|
|
|
|
|
|
Total loans
|
|
$
|
2,531,048
|
|
|
$
|
2,354,059
|
|
|
|
|
|
|
|
|
|
(1)Refer to “Individually Impaired Loans” below for further detail.
Management’s method for monitoring credit is the performance of a loan. A loan is impaired or not impaired based on the expectation that all amounts contractually due under a loan will be collected when due. The primary credit quality indicator management utilizes to assess its current expected credit loss reserve is by viewing Ladder’s loan portfolio by collateral type. The following tables as of June 30, 2021 and December 31, 2020, summarize the amortized cost of the loan portfolio by property type ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost Basis by Origination Year as of June 30, 2021
|
|
|
|
|
|
|
|
Property Type
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017 and Earlier
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
|
|
$
|
261,182
|
|
|
$
|
29,548
|
|
|
$
|
187,005
|
|
|
$
|
206,888
|
|
|
$
|
118,911
|
|
|
$
|
803,534
|
|
|
|
|
|
|
|
|
|
|
Multifamily
|
|
175,376
|
|
|
15,083
|
|
|
196,426
|
|
|
13,451
|
|
|
21,085
|
|
|
421,421
|
|
|
|
|
|
|
|
|
|
|
Mixed Use
|
|
193,744
|
|
|
79,254
|
|
|
147,437
|
|
|
—
|
|
|
—
|
|
|
420,435
|
|
|
|
|
|
|
|
|
|
|
Hospitality
|
|
—
|
|
|
—
|
|
|
43,621
|
|
|
139,777
|
|
|
111,089
|
|
|
294,487
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
29,395
|
|
|
—
|
|
|
85,268
|
|
|
—
|
|
|
36,514
|
|
|
151,177
|
|
|
|
|
|
|
|
|
|
|
Manufactured Housing
|
|
59,641
|
|
|
—
|
|
|
43,383
|
|
|
11,741
|
|
|
3,951
|
|
|
118,716
|
|
|
|
|
|
|
|
|
|
|
Industrial
|
|
—
|
|
|
—
|
|
|
105,283
|
|
|
—
|
|
|
6,453
|
|
|
111,736
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
20,802
|
|
|
—
|
|
|
44,842
|
|
|
30,033
|
|
|
—
|
|
|
95,677
|
|
|
|
|
|
|
|
|
|
|
Self-Storage
|
|
43,214
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
43,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal loans
|
|
783,354
|
|
|
123,885
|
|
|
853,265
|
|
|
401,890
|
|
|
298,003
|
|
|
2,460,397
|
|
|
|
|
|
|
|
|
|
|
Individually Impaired loans (1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70,651
|
|
|
70,651
|
|
|
|
|
|
|
|
|
|
|
Total loans (2)
|
|
$
|
783,354
|
|
|
$
|
123,885
|
|
|
$
|
853,265
|
|
|
$
|
401,890
|
|
|
$
|
368,654
|
|
|
$
|
2,531,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized Cost Basis by Origination Year as of December 31, 2020
|
|
|
|
|
|
|
|
Property Type
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
2016 and Earlier
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
|
|
$
|
—
|
|
|
$
|
196,610
|
|
|
$
|
249,330
|
|
|
$
|
83,673
|
|
|
$
|
50,935
|
|
|
$
|
580,548
|
|
|
|
|
|
|
|
|
|
|
Multifamily
|
|
65,537
|
|
|
260,254
|
|
|
44,665
|
|
|
24,406
|
|
|
—
|
|
|
394,862
|
|
|
|
|
|
|
|
|
|
|
Hospitality
|
|
—
|
|
|
43,000
|
|
|
139,394
|
|
|
67,307
|
|
|
78,694
|
|
|
328,395
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
31,217
|
|
|
131,434
|
|
|
77,484
|
|
|
—
|
|
|
—
|
|
|
240,135
|
|
|
|
|
|
|
|
|
|
|
Mixed Use
|
|
106,537
|
|
|
101,704
|
|
|
—
|
|
|
13,268
|
|
|
—
|
|
|
221,509
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
—
|
|
|
110,492
|
|
|
—
|
|
|
—
|
|
|
65,734
|
|
|
176,226
|
|
|
|
|
|
|
|
|
|
|
Industrial
|
|
46,130
|
|
|
114,630
|
|
|
—
|
|
|
—
|
|
|
6,461
|
|
|
167,221
|
|
|
|
|
|
|
|
|
|
|
Manufactured Housing
|
|
4,553
|
|
|
57,305
|
|
|
11,718
|
|
|
—
|
|
|
3,961
|
|
|
77,537
|
|
|
|
|
|
|
|
|
|
|
Self-Storage
|
|
—
|
|
|
35,986
|
|
|
15,200
|
|
|
—
|
|
|
—
|
|
|
51,186
|
|
|
|
|
|
|
|
|
|
|
Subtotal loans
|
|
253,974
|
|
|
1,051,415
|
|
|
537,791
|
|
|
188,654
|
|
|
205,785
|
|
|
2,237,619
|
|
|
|
|
|
|
|
|
|
|
Individually Impaired loans (1)
|
|
—
|
|
|
—
|
|
|
44,952
|
|
|
—
|
|
|
71,488
|
|
|
116,440
|
|
|
|
|
|
|
|
|
|
|
Total loans (3)
|
|
$
|
253,974
|
|
|
$
|
1,051,415
|
|
|
$
|
582,743
|
|
|
$
|
188,654
|
|
|
$
|
277,273
|
|
|
$
|
2,354,059
|
|
|
|
|
|
|
|
|
|
(1)Refer to “Individually Impaired Loans” below for further detail.
(2)Not included above is $11.9 million of accrued interest receivable on all loans at June 30, 2021.
(3)Not included above is $14.5 million of accrued interest receivable on all loans at December 31, 2020.
Individually Impaired Loans
As of June 30, 2021, two loans with an amortized cost basis of $26.9 million and a combined carrying value of $24.2 million were impaired and on non-accrual status. The loans are collateralized by a mixed use property in the Northeast region, which were originated simultaneously as part of a single transaction and are directly and indirectly secured by the same property. In assessing these collateral-dependent loans for impairment, the most significant consideration is the fair value of the underlying real estate collateral, which includes an in-place long-dated retail lease. The value of such property is most significantly affected by the contractual lease terms and the appropriate market capitalization rates, which are driven by the property’s market strength, the general interest rate environment and the retail tenant’s creditworthiness. In view of these considerations, the Company uses a direct capitalization rate valuation methodology to calculate the fair value of the underlying real estate collateral. The Company previously recorded an asset-specific provision for loss in 2018 on one of these loans, with a carrying value of $5.9 million, of $2.7 million to reduce the carrying value of the two loans collectively to the fair value of the property less the cost to foreclose and sell the property utilizing direct capitalization rates of 4.70% to 5.00%. As of June 30, 2021, the Company determined the loan was adequately provisioned based on the application of direct capitalization rates of 4.75% to 5.20%.
In 2018, a loan secured by a mixed-use property in the Northeast region, with a carrying value of $45.0 million, was determined to be impaired and a reserve of $10.0 million was recorded to reduce the carrying value of the loan to the estimated fair value of the collateral, less the estimated costs to sell. In 2018, the loan experienced a maturity default and its terms were modified in a troubled debt restructuring (“TDR”), which provided for, among other things, the restructuring of the Company’s existing $45.0 million first mortgage loan into a $35.0 million A-Note and a $10.0 million B-Note. The reserve of $10.0 million was applied to the B-Note and the B-Note was placed on non-accrual status. For the three months ended March 31, 2020, management determined that the A-Note was impaired, reflecting a decline in collateral value due to: (i) new information available during the three months ended March 31, 2020 regarding two recent comparable sales and (ii) a change in market conditions driven by COVID-19 as capital flow to the tertiary markets shifted. As a result, on March 31, 2020, the Company recorded an asset-specific provision for loss on the A-Note of $7.5 million to reduce the carrying value of this loan to the fair value of the property less the cost to foreclose and sell the property utilizing direct capitalization rates of 7.50% to 8.60%. The Company placed the A-Note on non-accrual status as of March 31, 2020. As of June 30, 2021, the amortized cost basis was $43.8 million, and after impairment of the A-Note and the B-Note of $17.5 million, the carrying value was $26.3 million. As of June 30, 2021, the Company determined the loan was adequately provisioned based on the application of direct capitalization rates of 8.25% to 8.75%.
As of June 30, 2021, there were no unfunded commitments associated with modified loans considered TDRs.
These non-recurring fair values are considered Level 3 measurements in the fair value hierarchy.
Other Loans on Non-Accrual Status
As of June 30, 2021, three other loans were on non-accrual status, with a combined carrying value of $79.0 million. The Company put such loans on non-accrual status in the fourth quarter of 2020 and performed a review of the collateral for the loans. The review consisted of conversations with market participants familiar with the property locations as well as reviewing market data and comparable properties.
There are no other loans on non-accrual status other than those discussed in Individually Impaired Loans and Other Loans on Non-Accrual Status above as of June 30, 2021.
Subsequent to June 30, 2021, the Company resolved one of its non-accrual loans with a carrying value of $12.1 million. The Company received a full pay-off which included all accrued interest and fees.
4. REAL ESTATE SECURITIES
The Company invests in primarily AAA-rated real estate securities, typically front pay securities, with relatively short duration and significant subordination. Market conditions due to the COVID-19 pandemic and the resulting economic disruption have broadly impacted the commercial real estate sector, including real estate securities. We continue to actively monitor the impacts of COVID-19 on our securities portfolio.
Commercial mortgage-backed securities (“CMBS”), CMBS interest-only securities, Agency securities, Government National Mortgage Association (“GNMA”) construction securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income. GNMA and Federal Home Loan Mortgage Corp (“FHLMC”) securities (collectively, “Agency interest-only securities”) are recorded at fair value with changes in fair value recorded in current period earnings. Equity securities are reported at fair value with changes in fair value recorded in current period earnings. The following is a summary of the Company’s securities at June 30, 2021 and December 31, 2020 ($ in thousands):
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
|
Weighted Average
|
|
Asset Type
|
|
Outstanding
Face Amount
|
|
Amortized Cost Basis
|
|
Gains
|
|
Losses
|
|
Carrying
Value
|
|
# of
Securities
|
|
Rating (1)
|
|
Coupon %
|
|
Yield %
|
|
Remaining
Duration
(years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS(2)
|
|
$
|
677,025
|
|
|
$
|
677,901
|
|
|
$
|
1,726
|
|
|
$
|
(5,069)
|
|
|
$
|
674,558
|
|
|
72
|
|
|
AAA
|
|
1.68
|
%
|
|
1.65 %
|
|
2.07
|
|
CMBS interest-only(2)(4)
|
|
1,399,645
|
|
|
18,072
|
|
|
748
|
|
|
—
|
|
|
18,820
|
|
|
14
|
|
|
AAA
|
|
0.43
|
%
|
|
2.00 %
|
|
2.01
|
|
GNMA interest-only(4)(6)
|
|
63,305
|
|
|
635
|
|
|
145
|
|
|
(81)
|
|
|
699
|
|
|
14
|
|
|
AA+
|
|
0.40
|
%
|
|
4.79 %
|
|
3.39
|
|
Agency securities(2)
|
|
568
|
|
|
572
|
|
|
7
|
|
|
—
|
|
|
579
|
|
|
2
|
|
|
AA+
|
|
2.50
|
%
|
|
1.60 %
|
|
0.97
|
|
GNMA permanent securities(2)
|
|
24,040
|
|
|
24,171
|
|
|
376
|
|
|
—
|
|
|
24,547
|
|
|
3
|
|
|
AA+
|
|
4.12
|
%
|
|
3.54 %
|
|
1.18
|
|
Total debt securities
|
|
$
|
2,164,583
|
|
|
$
|
721,351
|
|
|
$
|
3,002
|
|
|
$
|
(5,150)
|
|
|
$
|
719,203
|
|
|
105
|
|
|
|
|
0.86
|
%
|
|
1.72
|
%
|
|
2.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for current expected credit losses
|
|
N/A
|
|
—
|
|
|
—
|
|
|
(20)
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate securities
|
|
$
|
2,164,583
|
|
|
$
|
721,351
|
|
|
$
|
3,002
|
|
|
$
|
(5,170)
|
|
|
$
|
719,183
|
|
|
105
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Unrealized
|
|
|
|
|
|
Weighted Average
|
|
Asset Type
|
|
Outstanding
Face Amount
|
|
Amortized
Cost Basis
|
|
Gains
|
|
Losses
|
|
Carrying
Value
|
|
# of
Securities
|
|
Rating (1)
|
|
Coupon %
|
|
Yield %
|
|
Remaining
Duration
(years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS(2)
|
|
$
|
1,015,520
|
|
|
$
|
1,015,282
|
|
|
$
|
1,382
|
|
|
$
|
(13,363)
|
|
|
$
|
1,003,301
|
|
(3)
|
90
|
|
|
AAA
|
|
1.56
|
%
|
|
1.56 %
|
|
2.01
|
|
CMBS interest-only(2)(4)
|
|
1,498,181
|
|
|
21,567
|
|
|
672
|
|
|
(26)
|
|
|
22,213
|
|
(5)
|
15
|
|
|
AAA
|
|
0.44
|
%
|
|
3.53 %
|
|
2.19
|
|
GNMA interest-only(4)(6)
|
|
75,350
|
|
|
868
|
|
|
232
|
|
|
(100)
|
|
|
1,000
|
|
|
11
|
|
|
AA+
|
|
0.43
|
%
|
|
5.06 %
|
|
3.59
|
|
Agency securities(2)
|
|
586
|
|
|
593
|
|
|
12
|
|
|
—
|
|
|
605
|
|
|
2
|
|
|
AA+
|
|
2.55
|
%
|
|
1.64 %
|
|
1.26
|
|
GNMA permanent securities(2)
|
|
30,254
|
|
|
30,340
|
|
|
859
|
|
|
—
|
|
|
31,199
|
|
|
5
|
|
|
AA+
|
|
3.87
|
%
|
|
3.49 %
|
|
1.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt securities
|
|
$
|
2,619,891
|
|
|
$
|
1,068,650
|
|
|
$
|
3,157
|
|
|
$
|
(13,489)
|
|
|
$
|
1,058,318
|
|
|
123
|
|
|
|
|
0.91
|
%
|
|
1.66
|
%
|
|
2.01
|
|
Provision for current expected credit losses
|
|
N/A
|
|
—
|
|
|
—
|
|
|
(20)
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate securities
|
|
$
|
2,619,891
|
|
|
$
|
1,068,650
|
|
|
$
|
3,157
|
|
|
$
|
(13,509)
|
|
|
$
|
1,058,298
|
|
|
123
|
|
|
|
|
|
|
|
|
|
(1)Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. For each security rated by multiple rating agencies, the highest rating is used. Ratings provided were determined by third-party rating agencies as of a particular date, may not be current and are subject to change (including the assignment of a “negative outlook” or “credit watch”) at any time.
(2)CMBS, CMBS interest-only securities, Agency securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.
(3)As of June 30, 2021 and December 31, 2020, respectively, includes $11.0 million and $11.1 million of restricted securities which are designated as risk retention securities under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and are therefore subject to transfer restrictions over the term of the securitization trust and are classified as held-to-maturity and reported at amortized cost.
(4)The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.
(5)As of June 30, 2021 and December 31, 2020, respectively, includes $0.6 million and $0.7 million of restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust and are classified as held-to-maturity and reported at amortized cost.
(6)Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings. The Company’s Agency interest-only securities are considered to be hybrid financial instruments that contain embedded derivatives. As a result, the Company has elected to account for them as hybrid instruments in their entirety at fair value with changes in fair value recognized in unrealized gain (loss) on Agency interest-only securities in the consolidated statements of income in accordance with ASC 815.
The following is a breakdown of the carrying value of the Company’s debt securities by remaining maturity based upon expected cash flows at June 30, 2021 and December 31, 2020 ($ in thousands):
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Type
|
|
Within 1 year
|
|
1-5 years
|
|
5-10 years
|
|
After 10 years
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS
|
|
$
|
296,214
|
|
|
$
|
315,343
|
|
|
$
|
54,231
|
|
|
$
|
8,770
|
|
|
$
|
674,558
|
|
|
CMBS interest-only
|
|
947
|
|
|
17,873
|
|
|
—
|
|
|
—
|
|
|
18,820
|
|
|
GNMA interest-only
|
|
67
|
|
|
433
|
|
|
199
|
|
|
—
|
|
|
699
|
|
|
Agency securities
|
|
508
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
579
|
|
|
GNMA permanent securities
|
|
—
|
|
|
24,547
|
|
|
—
|
|
|
—
|
|
|
24,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for current expected credit losses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20)
|
|
|
Total debt securities
|
|
$
|
297,736
|
|
|
$
|
358,267
|
|
|
$
|
54,430
|
|
|
$
|
8,770
|
|
|
$
|
719,183
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Type
|
|
Within 1 year
|
|
1-5 years
|
|
5-10 years
|
|
After 10 years
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS
|
|
$
|
230,977
|
|
|
$
|
748,953
|
|
|
$
|
23,371
|
|
|
$
|
—
|
|
|
$
|
1,003,301
|
|
|
CMBS interest-only
|
|
1,572
|
|
|
20,641
|
|
|
—
|
|
|
—
|
|
|
22,213
|
|
|
GNMA interest-only
|
|
65
|
|
|
647
|
|
|
288
|
|
|
—
|
|
|
1,000
|
|
|
Agency securities
|
|
—
|
|
|
605
|
|
|
—
|
|
|
—
|
|
|
605
|
|
|
GNMA permanent securities
|
|
67
|
|
|
31,132
|
|
|
—
|
|
|
—
|
|
|
31,199
|
|
|
Provision for current expected credit losses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20)
|
|
|
Total debt securities
|
|
$
|
232,681
|
|
|
$
|
801,978
|
|
|
$
|
23,659
|
|
|
$
|
—
|
|
|
$
|
1,058,298
|
|
During the three and six months ended June 30, 2021, the Company realized losses on securities recorded as other than temporary impairments of zero and $0.1 million respectively, which are included in realized gain (loss) on securities on the Company’s consolidated statements of income. During the three and six months ended June 30, 2020, the Company realized losses on securities recorded as other than temporary impairments of $0.1 million and $0.3 million, respectively.
5. REAL ESTATE AND RELATED LEASE INTANGIBLES, NET
The market conditions due to the COVID-19 pandemic and the resulting economic disruption have broadly impacted the commercial real estate sector. As expected, the net leased commercial real estate properties, which comprise the majority of our portfolio, have remained minimally impacted as the majority of the net leased properties in our real estate portfolio are necessity-based businesses and have remained open and stable during the COVID-19 pandemic. We continue to actively monitor the diversified commercial real estate properties for both the immediate and long term impact of the pandemic on the buildings, the tenants, the business plans and the ability to execute those business plans.
The following tables present additional detail related to our real estate portfolio, net, including foreclosed properties ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
Land
|
$
|
213,477
|
|
|
$
|
220,511
|
|
|
Building
|
820,417
|
|
|
838,542
|
|
|
In-place leases and other intangibles
|
153,989
|
|
|
157,176
|
|
|
Undepreciated real estate and related lease intangibles
|
1,187,883
|
|
|
1,216,229
|
|
|
Less: Accumulated depreciation and amortization
|
(239,435)
|
|
|
(230,925)
|
|
|
|
|
|
|
|
Real estate and related lease intangibles, net
|
$
|
948,448
|
|
|
$
|
985,304
|
|
|
|
|
|
|
|
Below market lease intangibles, net (other liabilities)
|
$
|
(35,807)
|
|
|
$
|
(36,952)
|
|
At June 30, 2021 and December 31, 2020, the Company held foreclosed properties included in real estate and related lease intangibles, net with a carrying value of $104.8 million and $106.8 million, respectively.
The following table presents depreciation and amortization expense on real estate recorded by the Company ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense(1)
|
|
|
|
|
$
|
7,825
|
|
|
$
|
8,110
|
|
|
$
|
15,815
|
|
|
$
|
16,383
|
|
|
|
|
Amortization expense
|
|
|
|
|
1,639
|
|
|
1,681
|
|
|
3,185
|
|
|
3,392
|
|
|
|
|
Total real estate depreciation and amortization expense
|
|
|
|
|
$
|
9,464
|
|
|
$
|
9,791
|
|
|
$
|
19,000
|
|
|
$
|
19,775
|
|
|
|
(1)Depreciation expense on the consolidated statements of income also includes $25 thousand and $50 thousand of depreciation on corporate fixed assets for the three and six months ended June 30, 2021 and 2020.
The Company’s intangible assets are comprised of in-place leases, above market leases and other intangibles. The following tables present additional detail related to our intangible assets ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
Gross intangible assets(1)
|
$
|
153,989
|
|
|
$
|
157,176
|
|
|
Accumulated amortization
|
67,996
|
|
|
66,014
|
|
|
Net intangible assets
|
$
|
85,993
|
|
|
$
|
91,162
|
|
(1)Includes $4.0 million and $4.2 million of unamortized above market lease intangibles which are included in real estate and related lease intangibles, net on the consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively.
The following table presents increases/reductions in operating lease income related to the amortization of above or below market leases recorded by the Company ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reduction in operating lease income for amortization of above market lease intangibles acquired
|
|
|
|
|
$
|
(92)
|
|
|
$
|
(92)
|
|
|
$
|
(183)
|
|
|
$
|
(183)
|
|
|
|
|
Increase in operating lease income for amortization of below market lease intangibles acquired
|
|
|
|
|
576
|
|
|
619
|
|
|
1,146
|
|
|
1,371
|
|
|
|
The following table presents expected adjustment to operating lease income and expected amortization expense during the next five years and thereafter related to the above and below market leases and acquired in-place lease and other intangibles for property owned as of June 30, 2021 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ending December 31,
|
|
Adjustment to Operating Lease Income
|
|
Amortization Expense
|
|
|
|
|
|
|
|
2021 (last 6 months)
|
|
$
|
536
|
|
|
$
|
2,620
|
|
|
2022
|
|
1,071
|
|
|
5,241
|
|
|
2023
|
|
1,071
|
|
|
5,241
|
|
|
2024
|
|
1,071
|
|
|
5,241
|
|
|
2025
|
|
1,071
|
|
|
5,241
|
|
|
Thereafter
|
|
27,000
|
|
|
58,423
|
|
|
Total
|
|
$
|
31,820
|
|
|
$
|
82,007
|
|
Rent Receivables, Unencumbered Real Estate, and Operating Lease Income
There were $0.1 million and $0.5 million of rent receivables included in other assets on the consolidated balance sheets as of June 30, 2021 and December 31, 2020, respectively.
There was unencumbered real estate of $74.8 million and $75.9 million as of June 30, 2021 and December 31, 2020, respectively.
During the three months ended June 30, 2021 and 2020, the Company recorded $2.8 million and $0.6 million, respectively, of real estate operating income, which is included in operating lease income in the consolidated statements of income. During the six months ended June 30, 2021 and 2020, the Company recorded $3.8 million and $2.5 million, respectively.
The following is a schedule of non-cancellable, contractual, future minimum rent under leases (excluding property operating expenses paid directly by tenant under net leases) at June 30, 2021 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
Period Ending December 31,
|
|
Amount
|
|
|
|
|
|
2021 (last 6 months)
|
|
$
|
46,824
|
|
|
2022
|
|
70,156
|
|
|
2023
|
|
62,414
|
|
|
2024
|
|
61,450
|
|
|
2025
|
|
60,173
|
|
|
Thereafter
|
|
448,700
|
|
|
Total
|
|
$
|
749,717
|
|
Acquisitions
During the six months ended June 30, 2021, the Company acquired the following properties ($ in thousands):
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|
|
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|
|
|
|
|
|
|
Acquisition Date
|
|
Type
|
|
Primary Location(s)
|
|
Purchase Price/Fair Value on the Date of Foreclosure
|
|
|
|
|
Ownership Interest (1)
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|
|
|
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|
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|
|
Real estate acquired via foreclosure
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|
|
|
|
|
|
|
|
February 2021
|
|
Hotel
|
|
Miami, FL
|
|
$
|
43,750
|
|
|
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate acquired via foreclosure
|
|
43,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate acquisitions
|
|
|
|
$
|
43,750
|
|
|
|
|
|
|
(1)Properties were consolidated as of acquisition date.
In February 2021, the Company acquired a hotel in Miami, FL via foreclosure recognizing a $25.8 thousand loss which is included in its consolidated statements of income. The property previously served as collateral for a mortgage loan receivable held for investment with a basis of $45.1 million, net of an asset-specific loan loss provision of $1.2 million recorded in the three months ended December 31, 2020. In February 2021, the foreclosed property was sold without any gain or loss. The Company recorded no revenues from its 2021 acquisitions for the six months ended June 30, 2021.
During the six months ended June 30, 2020, the Company acquired the following properties ($ in thousands):
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|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition Date
|
|
Type
|
|
Primary Location(s)
|
|
Purchase Price/Fair Value on the Date of Foreclosure
|
|
|
|
|
Ownership Interest (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate purchases of net leased real estate
|
|
$
|
6,239
|
|
|
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate acquired via foreclosure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 2020
|
|
Diversified
|
|
Los Angeles, CA
|
|
21,535
|
|
|
|
|
|
100.0%
|
|
June 2020
|
|
Diversified
|
|
Winston Salem, NC
|
|
3,900
|
|
|
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate acquired via foreclosure
|
|
25,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate acquisitions
|
|
|
|
$
|
31,674
|
|
|
|
|
|
|
(1)Properties were consolidated as of acquisition date.
The Company allocates purchase consideration based on relative fair values, and real estate acquisition costs are capitalized as a component of the cost of the assets acquired for asset acquisitions. During the six months ended June 30, 2020, all acquisitions were determined to be asset acquisitions.
Sales
The Company sold the following properties during the six months ended June 30, 2021 ($ in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Date
|
|
Type
|
|
|
|
Primary Location(s)
|
|
Net Sales Proceeds
|
|
Net Book Value
|
|
Realized Gain/(Loss)
|
|
Properties
|
|
Units Sold
|
|
Units Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2021
|
|
Hotel
|
|
|
|
Miami, FL
|
|
$
|
43,750
|
|
|
$
|
43,750
|
|
|
$
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
|
|
June 2021
|
|
Retail
|
|
|
|
North Dartmouth, MA
|
|
38,732
|
|
|
19,343
|
|
|
19,389
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
$
|
82,482
|
|
|
$
|
63,093
|
|
|
$
|
19,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company sold the following properties during the six months ended June 30, 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Date
|
|
Type
|
|
|
|
Primary Location(s)
|
|
Net Sales Proceeds
|
|
Net Book Value
|
|
Realized Gain/(Loss)
|
|
Properties
|
|
Units Sold
|
|
Units Remaining
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Various
|
|
Condominium
|
|
|
|
Miami, FL
|
|
$
|
931
|
|
|
$
|
924
|
|
|
$
|
7
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|
March 2020
|
|
Diversified
|
|
|
|
Richmond, VA
|
|
22,526
|
|
|
14,829
|
|
|
7,697
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
March 2020
|
|
Diversified
|
|
|
|
Richmond, VA
|
|
6,933
|
|
|
4,109
|
|
|
2,824
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
|
|
|
|
|
$
|
30,390
|
|
|
$
|
19,862
|
|
|
$
|
10,528
|
|
|
|
|
|
|
|
(1)Realized gain (loss) on the sale of real estate, net on the consolidated statements of income also includes $0.1 million of realized loss on the disposal of fixed assets for the six months ended June 30, 2020.
6. INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
The following is a summary of the Company’s investments in and advances to unconsolidated joint ventures, which we account for using the equity method, as of June 30, 2021 and December 31, 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entity
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grace Lake JV, LLC
|
|
$
|
4,645
|
|
|
$
|
4,023
|
|
|
24 Second Avenue Holdings LLC
|
|
33,174
|
|
|
42,230
|
|
|
Investment in unconsolidated joint ventures
|
|
$
|
37,819
|
|
|
$
|
46,253
|
|
The following is a summary of the Company’s allocated earnings (losses) based on its ownership interests from investment in unconsolidated joint ventures for the three and six months ended June 30, 2021 and 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Entity
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grace Lake JV, LLC
|
|
|
|
|
|
$
|
325
|
|
|
$
|
263
|
|
|
$
|
622
|
|
|
$
|
449
|
|
|
|
|
24 Second Avenue Holdings LLC
|
|
|
|
|
|
(88)
|
|
|
208
|
|
|
51
|
|
|
463
|
|
|
|
|
Earnings (loss) from investment in unconsolidated joint ventures
|
|
|
|
|
|
$
|
237
|
|
|
$
|
471
|
|
|
$
|
673
|
|
|
$
|
912
|
|
|
|
Grace Lake JV, LLC
In connection with the origination of a loan in April 2012, the Company received a 25% equity interest with the right to convert upon a capital event. On March 22, 2013, the loan was refinanced, and the Company converted its interest into a 19% limited liability company membership interest in Grace Lake JV, LLC (“Grace Lake LLC”), which holds an investment in an office building complex. After taking into account the preferred return of 8.25% and the return of all equity remaining in the property to the Company’s operating partner, the Company is entitled to 25% of the distribution of all excess cash flows and all disposition proceeds upon any sale. The Company is not legally required to provide any future funding to Grace Lake LLC. The Company accounts for its interest in Grace Lake LLC using the equity method of accounting, as it has a 19% investment, compared to the 81% investment of its operating partner and does not control the entity.
The Company’s investment in Grace Lake LLC is an unconsolidated joint venture, which is a variable interest entity (“VIE”) for which the Company is not the primary beneficiary. This joint venture was deemed to be a VIE primarily based on the fact there are disproportionate voting and economic rights within the joint venture. The Company determined that it was not the primary beneficiary of this VIE based on the fact that the Company has a passive investment and no control of this entity and therefore does not have controlling financial interests in this VIE. The Company’s maximum exposure to loss is limited to its investment in the VIE. The Company has not provided financial support to this VIE that it was not previously contractually required to provide.
During the six months ended June 30, 2021, and June 30, 2020, the Company received no distributions from its investment in Grace Lake LLC.
The Company holds its investment in Grace Lake LLC in a TRS.
24 Second Avenue Holdings LLC
On August 7, 2015, the Company entered into a joint venture, 24 Second Avenue Holdings LLC (“24 Second Avenue”), with an operating partner (the “Operating Partner”) to invest in a ground-up residential/retail condominium development and construction project located at 24 Second Avenue, New York, NY. The Company accounted for its interest in 24 Second Avenue using the equity method of accounting as its joint venture partner was the managing member of 24 Second Avenue and had substantive management rights.
During the three months ended March 31, 2019, the Company converted its existing $35.0 million common equity interest into a $35.0 million priority preferred equity position. The Company also provided $50.4 million in first mortgage financing in order to refinance the existing $48.1 million first mortgage construction loan which was made by another lending institution. In addition to the new $50.4 million first mortgage loan, the Company also funded a $6.5 million mezzanine loan for use in completing the project. The Operating Partner must fully fund any and all additional capital for necessary expenses.
Due to the Company’s non-controlling equity interest in 24 Second Avenue, the Company accounts for the new loans as additional investments in the joint venture.
During the three and six months ended June 30, 2021 the Company recorded $(0.1) million and $0.1 million, respectively, in income (expenses), each of which is recorded in earnings (loss) from investment in unconsolidated joint ventures in the consolidated statements of income. During the three and six months ended June 30, 2020 the Company recorded $0.2 million and $0.5 million, respectively, in income (expenses). The Company received $6.9 million and $9.1 million of distributions during the three and six months ended June 30, 2021, respectively.
The 24 Second Avenue investment consists of residential condominium units and one commercial condominium unit. 24 Second Avenue started closing on the existing sales contracts during the quarter ended March 31, 2019, upon receipt of New York City Building Department approvals and a temporary certificate of occupancy for a portion of the project. As of June 30, 2021, 24 Second Avenue sold 24 residential condominium units for $62.7 million in total gross sale proceeds, and two residential condominium units were under contract for sale for $10.2 million in gross sales proceeds with a 10% deposit down on the sales contracts. As of June 30, 2021, the Company had no additional remaining capital commitment to 24 Second Avenue.
The Company’s non-controlling investment in 24 Second Avenue is an unconsolidated joint venture, which is a VIE for which the Company is not the primary beneficiary. This joint venture was deemed to be a VIE primarily based on (i) the fact that the total equity investment at risk (inclusive of the additional financing the Company provided through the first mortgage and mezzanine loans) is sufficient to permit the entities to finance activities without additional subordinated financial support provided by any parties, including equity holders; and (ii) the voting and economic rights are not disproportionate within the joint venture. The Company determined that it was not the primary beneficiary of this VIE because it does not have a controlling financial interest.
The Company holds its investment in 24 Second Avenue in a TRS.
Combined Summary Financial Information for Unconsolidated Joint Ventures
The following is a summary of the combined financial position of the unconsolidated joint ventures in which the Company had investment interests as of June 30, 2021 and December 31, 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
117,970
|
|
|
$
|
114,916
|
|
|
Total liabilities
|
|
69,848
|
|
|
75,775
|
|
|
Partners’/members’ capital
|
|
$
|
48,122
|
|
|
$
|
39,141
|
|
The following is a summary of the combined results from operations of the unconsolidated joint ventures for the period in which the Company had investment interests during the three and six months ended June 30, 2021 and 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
$
|
4,543
|
|
|
$
|
4,294
|
|
|
$
|
9,057
|
|
|
$
|
8,770
|
|
|
|
|
Total expenses
|
|
|
|
|
|
3,242
|
|
|
3,450
|
|
|
6,565
|
|
|
7,424
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
$
|
1,301
|
|
|
$
|
844
|
|
|
$
|
2,492
|
|
|
$
|
1,346
|
|
|
|
7. DEBT OBLIGATIONS, NET
The details of the Company’s debt obligations at June 30, 2021 and December 31, 2020 are as follows ($ in thousands):
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Obligations
|
|
Committed Financing
|
|
Debt Obligations Outstanding
|
|
Committed but Unfunded
|
|
Interest Rate at June 30, 2021(1)
|
|
Current Term Maturity
|
|
Remaining Extension Options
|
|
Eligible Collateral
|
|
Carrying Amount of Collateral
|
|
Fair Value of Collateral
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed Loan Repurchase Facility(2)
|
|
$
|
500,000
|
|
|
$
|
109,300
|
|
|
$
|
390,700
|
|
|
1.82%
|
—
|
2.07%
|
|
12/19/2022
|
|
(3)
|
|
(4)
|
|
$
|
178,903
|
|
|
$
|
178,903
|
|
|
|
Committed Loan Repurchase Facility
|
|
100,000
|
|
|
—
|
|
|
100,000
|
|
|
—%
|
—
|
—%
|
|
2/26/2022
|
|
(5)
|
|
(6)
|
|
—
|
|
|
—
|
|
|
|
Committed Loan Repurchase Facility
|
|
300,000
|
|
|
82,873
|
|
|
217,127
|
|
|
1.82%
|
—
|
2.82%
|
|
12/16/2021
|
|
(7)
|
|
(8)
|
|
142,515
|
|
|
142,515
|
|
|
|
Committed Loan Repurchase Facility
|
|
100,000
|
|
|
—
|
|
|
100,000
|
|
|
—%
|
—
|
—%
|
|
4/30/2024
|
|
(9)
|
|
(4)
|
|
—
|
|
|
—
|
|
|
|
Committed Loan Repurchase Facility
|
|
100,000
|
|
|
26,183
|
|
|
73,817
|
|
|
2.2%
|
—
|
2.2%
|
|
12/31/2022
|
|
(3)
|
|
(4)
|
|
45,053
|
|
|
45,053
|
|
|
|
Committed Loan Repurchase Facility
|
|
100,000
|
|
|
—
|
|
|
100,000
|
|
|
—%
|
—
|
—%
|
|
10/24/2021
|
|
(10)
|
|
(11)
|
|
—
|
|
|
—
|
|
|
|
Total Committed Loan Repurchase Facilities
|
|
1,200,000
|
|
|
218,356
|
|
|
981,644
|
|
|
|
|
|
|
|
|
|
|
|
|
366,471
|
|
|
366,471
|
|
|
|
Committed Securities Repurchase Facility(2)
|
|
790,700
|
|
|
62,914
|
|
|
727,786
|
|
|
0.63%
|
—
|
1.03%
|
|
5/27/2023
|
|
N/A
|
|
(12)
|
|
75,064
|
|
|
75,064
|
|
|
|
Uncommitted Securities Repurchase Facility
|
|
N/A (13)
|
|
244,430
|
|
|
N/A (13)
|
|
0.55%
|
—
|
2.14%
|
|
7/2021-11/2021
|
|
N/A
|
|
(12)
|
|
279,661
|
|
|
279,661
|
|
(14)
|
|
Total Repurchase Facilities
|
|
1,600,000
|
|
|
525,700
|
|
|
1,318,730
|
|
|
|
|
|
|
|
|
|
|
|
|
721,196
|
|
|
721,196
|
|
|
|
Revolving Credit Facility
|
|
266,430
|
|
|
—
|
|
|
266,430
|
|
|
—%
|
—
|
—%
|
|
2/11/2022
|
|
(15)
|
|
N/A (16)
|
|
N/A (16)
|
|
N/A (16)
|
|
|
Mortgage Loan Financing
|
|
745,971
|
|
|
745,971
|
|
|
—
|
|
|
3.75%
|
—
|
6.16%
|
|
2021 - 2030(17)
|
|
N/A
|
|
(18)
|
|
874,924
|
|
|
1,106,518
|
|
(19)
|
|
Secured Financing Facility
|
|
161,369
|
|
|
152,142
|
|
(20)
|
—
|
|
|
10.75%
|
—
|
10.75%
|
|
5/6/2023
|
|
N/A
|
|
(21)
|
|
246,288
|
|
|
246,512
|
|
|
|
CLO Debt
|
|
169,783
|
|
|
168,843
|
|
(22)
|
—
|
|
|
5.5%
|
—
|
5.5%
|
|
5/16/2024
|
|
N/A
|
|
(4)
|
|
296,992
|
|
|
296,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from the FHLB
|
|
288,000
|
|
|
288,000
|
|
|
—
|
|
|
0.36%
|
—
|
2.74%
|
|
2021 - 2024
|
|
N/A
|
|
(23)
|
|
319,565
|
|
|
319,565
|
|
(24)
|
|
Senior Unsecured Notes
|
|
2,115,644
|
|
|
2,095,059
|
|
(25)
|
—
|
|
|
4.25%
|
—
|
5.25%
|
|
2022 - 2029
|
|
N/A
|
|
N/A (26)
|
|
N/A (26)
|
|
N/A (26)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt Obligations, Net
|
|
$
|
5,347,197
|
|
|
$
|
3,975,715
|
|
|
$
|
1,585,160
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,458,965
|
|
|
$
|
2,690,783
|
|
|
(1)June 2021 LIBOR rates are used to calculate interest rates for floating rate debt.
(2)The combined committed amounts for the loan repurchase facility and the securities repurchase facility total $900.0 million, with maximum capacity on the loan repurchase facility of $500.0 million, and maximum capacity on the securities repurchase facility of $900.0 million less outstanding commitments on the loan repurchase facility.
(3)Two 12-month extension periods at Company’s option. No new advances are permitted after the initial maturity date.
(4)First mortgage commercial real estate loans and senior and pari passu interests therein. It does not include the real estate collateralizing such loans.
(5)Two additional 12-month periods at Company’s option.
(6)First mortgage commercial real estate loans. It does not include the real estate collateralizing such loans.
(7)Two additional 364-day periods at Company’s option.
(8)First mortgage and mezzanine commercial real estate loans and senior and pari passu interests therein. It does not include the real estate collateralizing such loans.
(9)One additional 12-month extension period and two additional 6-month extension periods at Company’s option.
(10)The Company may extend periodically with lender’s consent. At no time can the maturity of the facility exceed 364 days from the date of determination.
(11)First mortgage, junior and mezzanine commercial real estate loans, and certain senior and/or pari passu interests therein.
(12)Commercial real estate securities. It does not include the first mortgage commercial real estate loans collateralizing such securities.
(13)Represents uncommitted securities repurchase facilities for which there is no committed amount subject to future advances.
(14)Includes $2.1 million of restricted securities under the risk retention rules of the Dodd-Frank Act. These securities are accounted for as held-to-maturity and recorded at amortized cost basis.
(15)Three additional 12-month periods at Company’s option.
(16)The obligations under the revolving credit facility (“Revolving Credit Facility”) are guaranteed by the Company and certain of its subsidiaries and secured by equity pledges in certain Company subsidiaries.
(17)Anticipated repayment dates.
(18)Certain of our real estate investments serve as collateral for our mortgage loan financing.
(19)Using undepreciated carrying value of commercial real estate to approximate fair value.
(20)Presented net of unamortized debt issuance costs of $4.5 million and an unamortized discount of $4.7 million related to the Purchase Right (described in detail under Secured Financing Facility below) at June 30, 2021.
(21)First mortgage commercial real estate loans. Substitution of collateral and conversion of loan collateral to mortgage collateral are permitted with Lender’s approval. Pending substitution of acceptable collateral, $19.8 million of the obligations are unsecured and guaranteed by the Company.
(22)Presented net of unamortized debt issuance costs of $0.9 million at June 30, 2021.
(23)Investment grade commercial real estate securities and cash. It does not include the first mortgage commercial real estate loans collateralizing such securities.
(24)Includes $8.7 million of restricted securities under the risk retention rules of the Dodd-Frank Act. These securities are accounted for as held-to-maturity and recorded at amortized cost basis.
(25)Presented net of unamortized debt issuance costs of $20.6 million at June 30, 2021.
(26)The obligations under the senior unsecured notes are guaranteed by the Company and certain of its subsidiaries.
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Obligations
|
|
Committed Financing
|
|
Debt Obligations Outstanding
|
|
Committed but Unfunded
|
|
Interest Rate at December 31, 2020(1)
|
|
Current Term Maturity
|
|
Remaining Extension Options
|
|
Eligible Collateral
|
|
Carrying Amount of Collateral
|
|
Fair Value of Collateral
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Committed Loan Repurchase Facility(2)
|
|
$
|
500,000
|
|
|
$
|
112,004
|
|
|
$
|
387,996
|
|
|
1.91%
|
—
|
2.16%
|
|
12/19/2022
|
|
(3)
|
|
(4)
|
|
$
|
180,416
|
|
|
$
|
180,416
|
|
|
|
Committed Loan Repurchase Facility
|
|
250,000
|
|
|
—
|
|
|
250,000
|
|
|
—%
|
—
|
—%
|
|
2/26/2021
|
|
(5)
|
|
(6)
|
|
—
|
|
|
—
|
|
|
|
Committed Loan Repurchase Facility
|
|
300,000
|
|
|
90,197
|
|
|
209,803
|
|
|
1.91%
|
—
|
2.91%
|
|
12/16/2021
|
|
(7)
|
|
(8)
|
|
154,850
|
|
|
154,850
|
|
|
|
Committed Loan Repurchase Facility
|
|
300,000
|
|
|
11,312
|
|
|
288,688
|
|
|
2.19%
|
—
|
2.19%
|
|
11/6/2022
|
|
(9)
|
|
(4)
|
|
28,285
|
|
|
28,285
|
|
|
|
Committed Loan Repurchase Facility
|
|
100,000
|
|
|
26,183
|
|
|
73,817
|
|
|
2.28%
|
—
|
2.28%
|
|
12/31/2022
|
|
(10)
|
|
(4)
|
|
45,235
|
|
|
45,235
|
|
|
|
Committed Loan Repurchase Facility
|
|
100,000
|
|
|
15,672
|
|
|
84,328
|
|
|
2.66%
|
—
|
3.50%
|
|
10/24/2021
|
|
(11)
|
|
(12)
|
|
30,600
|
|
|
30,600
|
|
|
|
Total Committed Loan Repurchase Facilities
|
|
1,550,000
|
|
|
255,368
|
|
|
1,294,632
|
|
|
|
|
|
|
|
|
|
|
|
|
439,386
|
|
|
439,386
|
|
|
|
Committed Securities Repurchase Facility(2)
|
|
787,996
|
|
|
149,633
|
|
|
638,363
|
|
|
0.86%
|
—
|
1.11%
|
|
12/23/2021
|
|
N/A
|
|
(13)
|
|
226,008
|
|
|
226,008
|
|
|
|
Uncommitted Securities Repurchase Facility
|
|
N/A (14)
|
|
415,836
|
|
|
N/A (14)
|
|
0.73%
|
—
|
2.84%
|
|
1/2021-3/2021
|
|
N/A
|
|
(13)
|
|
502,476
|
|
|
502,476
|
|
(15)
|
|
Total Repurchase Facilities
|
|
1,950,000
|
|
|
820,837
|
|
|
1,544,999
|
|
|
|
|
|
|
|
|
|
|
|
|
1,167,870
|
|
|
1,167,870
|
|
|
|
Revolving Credit Facility
|
|
266,430
|
|
|
266,430
|
|
|
—
|
|
|
3.15%
|
|
|
|
2/11/2022
|
|
(16)
|
|
N/A (17)
|
|
N/A (17)
|
|
N/A (17)
|
|
|
Mortgage Loan Financing
|
|
766,064
|
|
|
766,064
|
|
|
—
|
|
|
3.75%
|
—
|
6.16%
|
|
2021 - 2030(18)
|
|
N/A
|
|
(19)
|
|
909,406
|
|
|
1,133,703
|
|
(20)
|
|
Secured Financing Facility
|
|
206,350
|
|
|
192,646
|
|
(21)
|
—
|
|
|
10.75%
|
—
|
10.75%
|
|
5/6/2023
|
|
N/A
|
|
(22)
|
|
327,769
|
|
|
328,097
|
|
|
|
CLO Debt
|
|
279,156
|
|
|
276,516
|
|
(23)
|
—
|
|
|
5.50%
|
—
|
5.50%
|
|
5/16/2024
|
|
N/A
|
|
(4)
|
|
362,600
|
|
|
362,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from the FHLB
|
|
1,500,000
|
|
|
288,000
|
|
|
1,212,000
|
|
|
0.41%
|
—
|
2.74%
|
|
2021 - 2024
|
|
N/A
|
|
(24)
|
|
388,400
|
|
|
392,212
|
|
(25)
|
|
Senior Unsecured Notes
|
|
1,612,299
|
|
|
1,599,371
|
|
(26)
|
—
|
|
|
4.25%
|
—
|
5.88%
|
|
2021 - 2027
|
|
N/A
|
|
N/A (27)
|
|
N/A (27)
|
|
N/A (27)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt Obligations
|
|
$
|
6,580,299
|
|
|
$
|
4,209,864
|
|
|
$
|
2,756,999
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,156,045
|
|
|
$
|
3,384,482
|
|
|
(1)December 31, 2020 LIBOR rates are used to calculate interest rates for floating rate debt.
(2)The combined committed amounts for the loan repurchase facility and the securities repurchase facility total $900.0 million, with maximum capacity on the loan repurchase facility of $500.0 million, and maximum capacity on the securities repurchase facility of $900.0 million less outstanding commitments on the loan repurchase facility.
(3)Two additional 12-month periods at Company’s option. No new advances are permitted after the initial maturity date.
(4)First mortgage commercial real estate loans and senior and pari passu interests therein. It does not include the real estate collateralizing such loans.
(5)Three additional 12-month periods at Company’s option.
(6)First mortgage commercial real estate loans. It does not include the real estate collateralizing such loans.
(7)Two additional 364-day periods at Company’s option.
(8)First mortgage and mezzanine commercial real estate loans and senior and pari passu interests therein. It does not include the real estate collateralizing such loans.
(9)One additional 12-month extension period and two additional 6-month extension periods at Company’s option.
(10)Two additional 12-month extension periods at Company’s option. No new advances are permitted after the initial maturity date.
(11)The Company may extend periodically with lender’s consent. At no time can the maturity of the facility exceed 364 days from the date of determination.
(12)First mortgage, junior and mezzanine commercial real estate loans, and certain senior and/or pari passu interests therein.
(13)Commercial real estate securities. It does not include the first mortgage commercial real estate loans collateralizing such securities.
(14)Represents uncommitted securities repurchase facilities for which there is no committed amount subject to future advances.
(15)Includes $2.1 million of restricted securities under the risk retention rules of the Dodd-Frank Act. These securities are accounted for as held-to-maturity and recorded at amortized cost basis.
(16)Three additional 12-month periods at Company’s option.
(17)The obligations under the Revolving Credit Facility are guaranteed by the Company and certain of its subsidiaries and secured by equity pledges in certain Company subsidiaries.
(18)Anticipated repayment dates.
(19)Certain of our real estate investments serve as collateral for our mortgage loan financing.
(20)Using undepreciated carrying value of commercial real estate to approximate fair value.
(21)Presented net of unamortized debt issuance costs of $7.2 million and an unamortized discount of $6.6 million related to the Purchase Right (described in detail under Secured Financing Facility below) at December 31, 2020.
(22)First mortgage commercial real estate loans. Substitution of collateral and conversion of loan collateral to mortgage collateral are permitted with Lender’s approval.
(23)Presented net of unamortized debt issuance costs of $2.6 million at December 31, 2020.
(24)First mortgage commercial real estate loans and investment grade commercial real estate securities. It does not include the real estate collateralizing such loans and securities.
(25)Includes $9.4 million of restricted securities under the risk retention rules of the Dodd-Frank Act. These securities are accounted for as held-to-maturity and recorded at amortized cost basis.
(26)Presented net of unamortized debt issuance costs of $12.9 million at December 31, 2020.
(27)The obligations under the senior unsecured notes are guaranteed by the Company and certain of its subsidiaries.
Combined Maturity of Debt Obligations
The following schedule reflects the Company’s contractual payments under all borrowings by maturity ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
Period ending December 31,
|
|
Borrowings by
Maturity(1)
|
|
|
|
|
|
2021 (last 6 months)
|
|
$
|
631,068
|
|
|
2022
|
|
925,858
|
|
|
2023
|
|
146,112
|
|
|
2024
|
|
296,315
|
|
|
2025
|
|
468,876
|
|
|
Thereafter
|
|
1,534,678
|
|
|
Subtotal
|
|
4,002,907
|
|
|
Debt issuance costs included in senior unsecured notes
|
|
(20,585)
|
|
|
|
|
|
|
Debt issuance costs included in secured financing facility
|
|
(4,535)
|
|
|
Discount on secured financing facility related to Purchase Right
|
|
(4,692)
|
|
|
Debt issuance costs included in CLO debt
|
|
(941)
|
|
|
Debt issuance costs included in mortgage loan financing
|
|
(329)
|
|
|
Premiums included in mortgage loan financing(2)
|
|
3,890
|
|
|
Total
|
|
$
|
3,975,715
|
|
(1)Contractual payments under current maturities, some of which are subject to extensions. The maturities listed above for 2021 relate to debt obligations that are subject to existing Company controlled extension options for one or more additional one-year periods or could be refinanced by other existing facilities as of June 30, 2021.
(2)Deferred gains on intercompany loans, secured by our own real estate, sold into securitizations. These premiums are amortized as a reduction to interest expense.
Financial Covenants
The Company’s debt facilities are subject to covenants which require the Company to maintain a minimum level of total equity. Largely as a result of this restriction, approximately $871.4 million of the total equity is restricted from payment as a dividend by the Company at June 30, 2021.
We were in compliance with all covenants described in the Company’s Annual Report, as of June 30, 2021.
Committed Loan and Securities Repurchase Facilities
The Company has entered into six committed master repurchase agreements, as outlined in the June 30, 2021 table above, totaling $1.2 billion of credit capacity in order to finance its lending activities. Assets pledged as collateral under these facilities are limited to whole mortgage loans or participation interests in mortgage loans collateralized by first liens on commercial
properties and mezzanine debt. The Company also has a term master repurchase agreement with a major U.S. bank to finance CMBS totaling $790.7 million. The Company’s repurchase facilities include covenants covering net worth requirements, minimum liquidity levels, maximum leverage ratios, and minimum fixed charge coverage ratios. The Company believes it was in compliance with all covenants as of June 30, 2021 and December 31, 2020.
The Company has the option to extend some of the current facilities subject to a number of conditions, including satisfaction of certain notice requirements, no event of default exists, and no margin deficit exists, all as defined in the repurchase facility agreements. The lenders have sole discretion with respect to the inclusion of collateral in these facilities, to determine the market value of the collateral on a daily basis, to be exercised on a good faith basis, and have the right in certain cases to require additional collateral, a full and/or partial repayment of the facilities (margin call), or a reduction in unused availability under the facilities, sufficient to rebalance the facilities if the estimated market value of the included collateral declines.
On May 19, 2021, the Company amended a credit facility with a major U.S. banking institution to, among other things, reduce the maximum facility amount from $300 million to $100 million and extend the initial term thereof from November 6, 2022 to April 30, 2024.
On May 25, 2021, the Company amended a credit facility with a major banking institution to, among other things, reduce the maximum facility amount from $250 million to $100 million.
Revolving Credit Facility
During the three months ended June 30, 2021, the Company paid down the full amount of the Revolving Credit Facility. As of June 30, 2021, the Company had no outstanding borrowings on the Revolving Credit Facility but still maintains the ability to draw $266.4 million.
Debt Issuance Costs
As discussed in Note 2, Significant Accounting Policies in the Annual Report, the Company considers its committed loan master repurchase facilities and Revolving Credit Facility to be revolving debt arrangements. As such, the Company continues to defer and present costs associated with these facilities as an asset, subsequently amortizing those costs ratably over the term of each revolving debt arrangement. As of June 30, 2021 and December 31, 2020, the amount of unamortized costs relating to such facilities were $4.4 million and $8.0 million, respectively, and are included in other assets in the consolidated balance sheets.
Mortgage Loan Financing
These non-recourse debt agreements provide for fixed rate financing at rates ranging from 3.75% to 6.16%, with anticipated maturity dates between 2021-2030 as of June 30, 2021. These loans have carrying amounts of $746.0 million and $766.1 million, net of unamortized premiums of $3.9 million and $4.6 million as of June 30, 2021 and December 31, 2020, respectively, representing proceeds received upon financing greater than the contractual amounts due under these agreements. The premiums are being amortized over the remaining life of the respective debt instruments using the effective interest method. The Company recorded $0.4 million and $0.3 million for the three months ended June 30, 2021 and June 30, 2020, respectively and $0.7 million and $0.6 million of premium amortization, which decreased interest expense, for the six months ended June 30, 2021 and 2020, respectively. The mortgage loans are collateralized by real estate and related lease intangibles, net, of $874.9 million and $909.4 million as of June 30, 2021 and December 31, 2020, respectively.
Secured Financing Facility
On April 30, 2020, the Company entered into a strategic financing arrangement with an American multinational corporation (the “Lender”), under which the Lender provided the Company with approximately $206.4 million in senior secured financing (the “Secured Financing Facility”) to fund transitional and land loans. The Secured Financing Facility is secured on a first lien basis on a portfolio of certain of the Company’s loans and will mature on May 6, 2023, and borrowings thereunder bear interest at LIBOR (or a minimum of 0.75% if greater) plus 10.0%, with a minimum interest premium clause, of which approximately $13.9 million remains. The Senior Financing Facility is non-recourse, subject to limited exceptions, and does not contain mark-to-market provisions. Additionally, the Senior Financing Facility provides the Company optionality to modify or restructure loans or forbear in exercising remedies, which maximizes the Company’s financial flexibility. During the three months ended June 30, 2021, the facility was partially paid down by $45.0 million, which resulted in an ending balance as of June 30, 2021 of $152.1 million.
As part of the strategic financing, the Lender also had the ability to make an equity investment in the Company of up to 4.0 million Class A common shares at $8.00 per share, subject to certain adjustments (the “Purchase Right”). The Purchase Right was exercised in full at $8.00 per share on December 29, 2020. In addition, the Lender has agreed not to sell, transfer, assign, pledge, hypothecate, mortgage, dispose of or in any way encumber the shares acquired as a result of exercising the Purchase Right for a period of time following the exercise date. In connection with the issuance of the Purchase Right, the Company and the Lender entered into a registration rights agreement, pursuant to which the Company has agreed to provide customary demand and piggyback registration rights to the Lender.
The Purchase Right was classified as equity and the $200.9 million of net proceeds from the original issuance were allocated $192.5 million to the originally issued debt obligation and $8.4 million to the Purchase Right using the relative fair value method. The commitment to issue shares will not be subsequently remeasured. The $8.4 million allocated to the Purchase Right is being treated as a discount to the debt and amortized over the life of the Purchase Right to interest expense.
As of June 30, 2021, the Company had $152.1 million of borrowings outstanding under the secured financing facility included in debt obligations on its consolidated balance sheets, net of unamortized debt issuance costs of $4.5 million and a $4.7 million unamortized discount related to the Purchase Right.
Collateralized Loan Obligation (“CLO”) Debt
On April 27, 2020, a consolidated subsidiary of the Company completed a private CLO transaction with a major U.S. bank which generated $310.2 million of gross proceeds to Ladder, financing $481.3 million of loans (“Contributed Loans”) at a 64.5% advance rate on a matched term, non-mark-to-market and non-recourse basis. A consolidated subsidiary of the Company retained a 35.5% subordinate and controlling interest in the CLO. The Company retained control over major decisions made with respect to the administration of the Contributed Loans, including broad discretion in managing these loans, and has the ability to appoint the special servicer under the CLO. The CLO is a VIE and the Company was the primary beneficiary and, therefore, consolidated the VIE - See Note 10, Consolidated Variable Interest Entities.
As of June 30, 2021, the Company had $168.8 million of matched term, non-mark-to-market and non-recourse CLO debt included in debt obligations on its consolidated balance sheets.
Borrowings from the Federal Home Loan Bank (“FHLB”)
On July 11, 2012, Tuebor, a consolidated subsidiary of the Company, became a member of the FHLB and subsequently drew its first secured funding advances from the FHLB. As of February 19, 2021, pursuant to a final rule adopted by the Federal Housing Finance Agency (the “FHFA”) regarding the eligibility of captive insurance companies, Tuebor’s membership in the FHLB has been terminated, although outstanding advances may remain outstanding until their scheduled maturity dates. Funding for future advance paydowns is expected to be obtained from the natural amortization and/or sales of securities collateral, or from other financing sources. There is no assurance that the FHFA or the FHLB will not take actions that could adversely impact Tuebor’s existing advances.
As of June 30, 2021, Tuebor had $288.0 million of borrowings outstanding, with terms of overnight to 3.25 years (with a weighted average of 2.26 years), interest rates of 0.36% to 2.74% (with a weighted average of 1.07%), and advance rates of 71.7% to 95.7% on eligible collateral. As of June 30, 2021, collateral for the borrowings was comprised of $236.1 millionof CMBS and U.S. Agency securities and $83.5 million of cash.
Tuebor is subject to state regulations which require that dividends (including dividends to the Company as its parent) may only be made with regulatory approval. However, there can be no assurance that we would obtain such approval if sought. Largely as a result of this restriction, approximately $2.1 billion of the member’s capital was restricted from transfer via dividend to Tuebor’s parent without prior approval of state insurance regulators at June 30, 2021. To facilitate intercompany cash funding of operations and investments, Tuebor and its parent maintain regulator-approved intercompany borrowing/lending agreements.
Senior Unsecured Notes
As of June 30, 2021, the Company had $2.1 billion of unsecured corporate bonds outstanding. These unsecured financings were comprised of $465.9 million in aggregate principal amount of 5.25% senior notes due 2022 (the “2022 Notes”), $348.0 million in aggregate principal amount of 5.25% senior notes due 2025 (the “2025 Notes”), $651.8 million in aggregate principal amount of 4.25% senior notes due 2027 (the “2027 Notes”) and $650.0 million in aggregate principal of 4.75% senior notes due 2029 (the “2029 Notes,” collectively with the 2022 Notes, the 2025 Notes, and the 2027 Notes, the “Notes”).
On January 27, 2021, the Company redeemed in full its 5.875% Senior Notes due 2021 (the “2021 Notes”) for $150.9 million. The 2021 Notes were redeemed at par, plus accrued and unpaid interest to the redemption date, pursuant to the optional redemption provisions of the indenture governing the 2021 Notes. The redemption of a portion of the 2021 Notes that were redeemed was subject to the condition that the Company’s subsidiary issuers of the 2021 Notes complete a notes offering of not less than $400 million. The issuers waived the condition prior to redeeming the 2021 Notes in full.
LCFH issued the Notes with Ladder Capital Finance Corporation (“LCFC”), as co-issuers on a joint and several basis. LCFC is a 100% owned finance subsidiary of LCFH with no assets, operations, revenues or cash flows other than those related to the issuance, administration and repayment of the Notes. The Company and certain subsidiaries of LCFH currently guarantee the obligations under the Notes and the indenture. The Company is the general partner of LCFH and, through LCFH and its subsidiaries, operates the Ladder Capital business. As of June 30, 2021, the Company has a 100% economic and voting interest in LCFH and controls the management of LCFH as a result of its ability to appoint board members. Accordingly, the Company consolidates the financial results of LCFH. In addition, the Company, through certain subsidiaries which are treated as TRSs, is indirectly subject to U.S. federal, state and local income taxes. Other than federal, state and local income taxes, there are no material differences between the Company’s consolidated financial statements and LCFH’s consolidated financial statements. The Company believes it was in compliance with all covenants of the Notes as of June 30, 2021 and 2020. Unamortized debt issuance costs of $20.6 million and $12.9 million are included in senior unsecured notes as of June 30, 2021 and December 31, 2020, respectively, in accordance with GAAP.
2022 Notes
On March 16, 2017, LCFH issued $500.0 million in aggregate principal amount of 5.250% senior notes due March 15, 2022 (the “2022 Notes”). The 2022 Notes require interest payments semi-annually in cash in arrears on March 15 and September 15 of each year, beginning on September 15, 2017. The 2022 Notes are unsecured and are subject to an unencumbered assets to unsecured debt covenant. At any time on or after September 15, 2021, the 2022 Notes are redeemable at the option of the Company, in whole or in part, upon not less than 15 nor more than 60 days’ notice, without penalty. On May 2, 2018, the board of the directors authorized the Company to repurchase any or all of the 2022 Notes from time to time without further approval. As of June 30, 2021, the remaining $465.9 million in aggregate principal amount of the 2022 Notes is due March 15, 2022.
2025 Notes
On September 25, 2017, LCFH issued $400.0 million in aggregate principal amount of 5.250% senior notes due October 1, 2025 (the “2025 Notes”). The 2025 Notes require interest payments semi-annually in cash in arrears on April 1 and October 1 of each year, beginning on April 1, 2018. The 2025 Notes are unsecured and are subject to an unencumbered assets to unsecured debt covenant. The Company may redeem the 2025 Notes, in whole or in part, at any time, or from time to time, prior to their stated maturity upon not less than 15 nor more than 60 days’ notice, at a redemption price as specified in the indenture governing the 2025 Notes, plus accrued and unpaid interest, if any, to the redemption date. On May 2, 2018, the board of the directors authorized the Company to repurchase any or all of the 2025 Notes from time to time without further approval. As of June 30, 2021, the remaining $348.0 million in aggregate principal amount of the 2025 Notes is due October 1, 2025.
2027 Notes
On January 30, 2020, LCFH issued $750.0 million in aggregate principal amount of 4.25% senior notes due February 1, 2027. The 2027 Notes require interest payments semi-annually in cash in arrears on August 1 and February 1 of each year, beginning on August 1, 2020. The 2027 Notes are unsecured and are subject to an unencumbered assets to unsecured debt covenant. The Company may redeem the 2027 Notes, in whole, at any time, or from time to time, prior to their stated maturity. At any time on or after February 1, 2023, the Company may redeem the 2027 Notes in whole or in part, upon not less than 15 nor more than 60 days’ notice, at a redemption price defined in the indenture governing the 2027 Notes, plus accrued and unpaid interest, if any, to the redemption date. Net proceeds of the offering were used to repay secured indebtedness. As of June 30, 2021, the remaining $651.8 million in aggregate principal amount of the 2027 Notes is due February 1, 2027.
2029 Notes
On June 23, 2021, LCFH issued $650.0 million in aggregate principal amount of 4.75% senior notes due June 15, 2029. The 2029 Notes require interest payments semi-annually in cash in arrears on June 15 and December 15 of each year, beginning December 15, 2021. The 2029 Notes are unsecured and are subject to an unencumbered asset to unsecured debt covenant. The Company may redeem the 2029 Notes, in whole, at any time, or from time to time, prior to their stated maturity. At any time on or after June 15, 2024, the Company may redeem the 2029 Notes in whole or in part, upon not less than 10 nor more than 60
days’ notice, at a redemption price defined in the indenture governing the 2029 Notes, plus accrued and unpaid interest, if any, to the redemption date. Net proceeds of the offering were used for general corporate purposes, including funding the Company’s pipeline of new loans, investments in its core business lines and repayment of indebtedness. As of June 30, 2021, the remaining $650.0 million in aggregate principal amount of the 2029 Notes is due June 15, 2029.
8. DERIVATIVE INSTRUMENTS
The Company uses derivative instruments primarily to economically manage the fair value variability of fixed rate assets caused by interest rate fluctuations and overall portfolio market risk. The following is a breakdown of the derivatives outstanding as of June 30, 2021 and December 31, 2020 ($ in thousands):
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Remaining
Maturity
(years)
|
|
Contract Type
|
|
Notional
|
|
Asset(1)
|
|
Liability(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Caps
|
|
|
|
|
|
|
|
|
|
1 Month LIBOR
|
|
$
|
69,571
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
0.36
|
|
Futures
|
|
|
|
|
|
|
|
|
|
5-year Swap
|
|
25,300
|
|
|
—
|
|
|
70
|
|
|
0.25
|
|
10-year Swap
|
|
107,700
|
|
|
—
|
|
|
298
|
|
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures
|
|
133,000
|
|
|
—
|
|
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
$
|
202,571
|
|
|
$
|
—
|
|
|
$
|
368
|
|
|
|
(1)Shown as derivative instruments, at fair value, in the accompanying consolidated balance sheets.
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Remaining
Maturity
(years)
|
|
Contract Type
|
|
Notional
|
|
Asset(1)
|
|
Liability(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Caps
|
|
|
|
|
|
|
|
|
|
1Month LIBOR
|
|
$
|
69,571
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
0.35
|
|
Futures
|
|
|
|
|
|
|
|
|
|
5-year Swap
|
|
23,800
|
|
|
108
|
|
|
—
|
|
|
0.25
|
|
10-year Swap
|
|
41,800
|
|
|
191
|
|
|
—
|
|
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total futures
|
|
65,600
|
|
|
299
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
$
|
135,171
|
|
|
$
|
299
|
|
|
$
|
—
|
|
|
|
(1)Shown as derivative instruments, at fair value, in the accompanying consolidated balance sheets.
The following table indicates the net realized gains (losses) and unrealized appreciation (depreciation) on derivatives, by primary underlying risk exposure, as included in net result from derivatives transactions in the consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
Six Months Ended June 30, 2021
|
|
Contract Type
|
|
|
|
|
|
|
Unrealized
Gain/(Loss)
|
|
Realized
Gain/(Loss)
|
|
Net Result
from
Derivative
Transactions
|
|
Unrealized
Gain/(Loss)
|
|
Realized
Gain/(Loss)
|
|
Net Result
from
Derivative
Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
|
|
|
|
|
$
|
(669)
|
|
|
$
|
(3,175)
|
|
|
$
|
(3,844)
|
|
|
$
|
(667)
|
|
|
$
|
1,594
|
|
|
$
|
927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
$
|
(669)
|
|
|
$
|
(3,175)
|
|
|
$
|
(3,844)
|
|
|
$
|
(667)
|
|
|
$
|
1,594
|
|
|
$
|
927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
Six Months Ended June 30, 2020
|
|
Contract Type
|
|
|
|
|
|
|
Unrealized
Gain/(Loss)
|
|
Realized
Gain/(Loss)
|
|
Net Result
from
Derivative
Transactions
|
|
Unrealized
Gain/(Loss)
|
|
Realized
Gain/(Loss)
|
|
Net Result
from
Derivative
Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures
|
|
|
|
|
|
|
$
|
(570)
|
|
|
$
|
(326)
|
|
|
$
|
(896)
|
|
|
$
|
(298)
|
|
|
$
|
(16,272)
|
|
|
$
|
(16,570)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Derivatives
|
|
|
|
|
|
|
—
|
|
|
83
|
|
|
83
|
|
|
111
|
|
|
211
|
|
|
322
|
|
|
Total
|
|
|
|
|
|
|
$
|
(570)
|
|
|
$
|
(243)
|
|
|
$
|
(813)
|
|
|
$
|
(187)
|
|
|
$
|
(16,061)
|
|
|
$
|
(16,248)
|
|
The Company’s counterparties held $1.9 million and $0.8 million of cash margin as collateral for derivatives as of June 30, 2021 and December 31, 2020, respectively, which is included in restricted cash in the consolidated balance sheets.
Futures
Collateral posted with our futures counterparties is segregated in the Company’s books and records. Interest rate futures are centrally cleared by the Chicago Mercantile Exchange (“CME”) through a futures commission merchant. Interest rate futures that are governed by an International Swaps and Derivatives Association (“ISDA”) agreement provide for bilateral collateral pledging based on the counterparties’ market value. The counterparties have the right to re-pledge the collateral posted but have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the interest rate futures change.
The Company is required to post initial margin and daily variation margin for our interest rate futures that are centrally cleared by CME. CME determines the fair value of our centrally cleared futures, including daily variation margin. Effective January 3, 2017, CME amended their rulebooks to legally characterize daily variation margin payments for centrally cleared interest rate futures as settlement rather than collateral. As a result of this rule change, variation margin pledged on the Company’s centrally cleared interest rate futures is settled against the realized results of these futures.
9. OFFSETTING ASSETS AND LIABILITIES
The following tables present both gross information and net information about derivatives and other instruments eligible for offset in the statement of financial position as of June 30, 2021 and December 31, 2020. The Company’s accounting policy is to record derivative asset and liability positions on a gross basis; therefore, the following tables present the gross derivative asset and liability positions recorded on the balance sheets, while also disclosing the eligible amounts of financial instruments and cash collateral to the extent those amounts could offset the gross amount of derivative asset and liability positions. The actual amounts of collateral posted by or received from counterparties may be in excess of the amounts disclosed in the following tables as the following only disclose amounts eligible to be offset to the extent of the recorded gross derivative positions.
There were no offsetting of financial assets and derivative assets at as of June 30, 2021.
The following table represents offsetting of financial liabilities and derivative liabilities as of June 30, 2021 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Gross amounts of
recognized
liabilities
|
|
Gross amounts
offset in the
balance sheet
|
|
Net amounts of
liabilities
presented in the
balance sheet
|
|
Gross amounts not offset in the
balance sheet
|
|
Net amount
|
|
|
|
|
|
Financial
instruments
collateral
|
|
Cash collateral
posted/(received)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
368
|
|
|
$
|
—
|
|
|
$
|
368
|
|
|
$
|
—
|
|
|
$
|
368
|
|
|
$
|
—
|
|
|
Repurchase agreements
|
|
$
|
525,700
|
|
|
$
|
—
|
|
|
$
|
525,700
|
|
|
$
|
525,700
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total
|
|
$
|
526,068
|
|
|
$
|
—
|
|
|
$
|
526,068
|
|
|
$
|
525,700
|
|
|
$
|
368
|
|
|
$
|
—
|
|
(1)Included in restricted cash on consolidated balance sheets.
The following table represents offsetting of financial assets and derivative assets as of December 31, 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Gross amounts of
recognized assets
|
|
Gross amounts
offset in the
balance sheet
|
|
Net amounts of
assets presented
in the balance
sheet
|
|
Gross amounts not offset in the
balance sheet
|
|
Net amount
|
|
|
|
|
|
Financial
instruments
|
|
Cash collateral
received/(posted)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
|
|
$
|
299
|
|
|
$
|
—
|
|
|
$
|
299
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
299
|
|
|
Total
|
|
$
|
299
|
|
|
$
|
—
|
|
|
$
|
299
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
299
|
|
(1)Included in restricted cash on consolidated balance sheets.
The following table represents offsetting of financial liabilities and derivative liabilities as of December 31, 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Description
|
|
Gross amounts of
recognized
liabilities
|
|
Gross amounts
offset in the
balance sheet
|
|
Net amounts of
liabilities
presented in the
balance sheet
|
|
Gross amounts not offset in the
balance sheet
|
|
Net amount
|
|
|
|
|
|
Financial
instruments
collateral
|
|
Cash collateral
posted/(received)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
|
$
|
820,837
|
|
|
$
|
—
|
|
|
$
|
820,837
|
|
|
$
|
820,837
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total
|
|
$
|
820,837
|
|
|
$
|
—
|
|
|
$
|
820,837
|
|
|
$
|
820,837
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)Included in restricted cash on consolidated balance sheets.
Master netting agreements that the Company has entered into with its derivative and repurchase agreement counterparties allow for netting of the same transaction, in the same currency, on the same date. Assets, liabilities, and collateral subject to master netting agreements as of June 30, 2021 and December 31, 2020 are disclosed in the tables above. The Company does not present its derivative and repurchase agreements net on the consolidated financial statements as it has elected gross presentation.
10. CONSOLIDATED VARIABLE INTEREST ENTITIES
The Company consolidates one collateralized loan obligation (“CLO”) VIE with the following balance sheets ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
Notes 3 & 7
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash
|
$
|
—
|
|
|
$
|
3,925
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost
|
296,992
|
|
|
362,600
|
|
|
|
|
|
|
|
Accrued interest receivable
|
1,050
|
|
|
1,382
|
|
|
Other assets
|
22
|
|
|
69,649
|
|
|
Total assets
|
$
|
298,064
|
|
|
$
|
437,556
|
|
|
Debt obligations, net
|
$
|
168,843
|
|
|
$
|
276,516
|
|
|
|
|
|
|
|
Accrued expenses
|
389
|
|
|
682
|
|
|
|
|
|
|
|
Total liabilities
|
169,232
|
|
|
277,198
|
|
|
Net equity in VIEs (eliminated in consolidation)
|
128,832
|
|
|
160,358
|
|
|
|
|
|
|
|
Total equity
|
128,832
|
|
|
160,358
|
|
|
Total liabilities and equity
|
$
|
298,064
|
|
|
$
|
437,556
|
|
11. EQUITY STRUCTURE AND ACCOUNTS
Exchange for Class A Common Stock
We are a holding company and have no material assets other than our direct and indirect ownership of Series REIT limited partnership units (“Series REIT LP Units”) and Series TRS limited partnership units (“Series TRS LP Units,” and, collectively with Series REIT LP Units, “Series Units”) of LCFH. Series TRS LP Units are exchangeable for the same number of limited liability company interests of LC TRS I LLC (“LC TRS I Shares”), which is a limited liability company that is a TRS as well as a general partner of Series TRS. Pursuant to the Third Amended and Restated LLLP Agreement of LCFH, the Continuing LCFH Limited Partners may from time to time, subject to certain conditions, receive one share of the Company’s Class A common stock in exchange for (i) one share of the Company’s Class B common stock, (ii) one Series REIT LP Unit and (iii) either one Series TRS LP Unit or one TRS I LLC Share, subject to equitable adjustments for stock splits, stock dividends and reclassifications. As of September 30, 2020, all shares of Class B common stock, Series REIT LP Units and Series TRS LP Units have been exchanged for shares of Class A common stock and no Class B common stock is outstanding as of June 30, 2021. As of June 30, 2021, the Company held a 100% interest in LCFH.
Stock Repurchases
On October 30, 2014, the board of directors authorized the Company to repurchase up to $50.0 million of the Company’s Class A common stock from time to time without further approval. Stock repurchases by the Company are generally made for cash in open market transactions at prevailing market prices but may also be made in privately negotiated transactions or otherwise. The timing and amount of purchases are determined based upon prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. As of June 30, 2021, the Company has a remaining amount available for repurchase of $36.8 million, which represents 2.5% in the aggregate of its outstanding Class A common stock, based on the closing price of $11.54 per share on such date.
The following table is a summary of the Company’s repurchase activity of its Class A common stock during the six months ended June 30, 2021 and 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount(1)
|
|
|
|
|
|
|
|
Authorizations remaining as of December 31, 2020
|
|
|
|
$
|
38,102
|
|
|
Additional authorizations
|
|
|
|
—
|
|
|
Repurchases paid
|
|
120,000
|
|
|
(1,312)
|
|
|
Repurchases unsettled
|
|
|
|
—
|
|
|
Authorizations remaining as of June 30, 2021
|
|
|
|
$
|
36,790
|
|
(1)Amount excludes commissions paid associated with share repurchases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount(1)
|
|
|
|
|
|
|
|
Authorizations remaining as of December 31, 2019
|
|
|
|
$
|
41,132
|
|
|
Additional authorizations
|
|
|
|
—
|
|
|
Repurchases paid
|
|
210,151
|
|
|
(1,682)
|
|
|
Repurchases unsettled
|
|
|
|
—
|
|
|
Authorizations remaining as of June 30, 2020
|
|
|
|
$
|
39,450
|
|
(1)Amount excludes commissions paid associated with share repurchases.
The following table presents dividends declared (on a per share basis) of Class A common stock for the six months ended June 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
Declaration Date
|
|
Dividend per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
March 15, 2021
|
|
$
|
0.20
|
|
|
|
June 15, 2021
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
February 27, 2020
|
|
$
|
0.34
|
|
|
|
May 28, 2020
|
|
$
|
0.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Accumulated Other Comprehensive Income
The following table presents changes in accumulated other comprehensive income related to the cumulative difference between the fair market value and the amortized cost basis of securities classified as available for sale for the six months ended June 30, 2021 and 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Other Comprehensive Income (Loss) of Noncontrolling Interests
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
$
|
(10,463)
|
|
|
$
|
(2)
|
|
|
$
|
(10,465)
|
|
|
Other comprehensive income (loss)
|
|
8,252
|
|
|
—
|
|
|
8,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
$
|
(2,211)
|
|
|
$
|
(2)
|
|
|
$
|
(2,213)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Accumulated Other Comprehensive Income (Loss) of Noncontrolling Interests
|
|
Total Accumulated Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
$
|
4,218
|
|
|
$
|
477
|
|
|
$
|
4,695
|
|
|
Other comprehensive income (loss)
|
|
(46,530)
|
|
|
(5,354)
|
|
|
(51,884)
|
|
|
Exchange of noncontrolling interest for common stock
|
|
(4,915)
|
|
|
4,915
|
|
|
—
|
|
|
Rebalancing of ownership percentage between Company and Operating Partnership
|
|
2,147
|
|
|
(2,147)
|
|
|
—
|
|
|
June 30, 2020
|
|
$
|
(45,080)
|
|
|
$
|
(2,109)
|
|
|
$
|
(47,189)
|
|
12. NONCONTROLLING INTERESTS
There are two main types of noncontrolling interest reflected in the Company’s consolidated financial statements (i) noncontrolling interest in the operating partnership and (ii) noncontrolling interests in consolidated joint ventures.
Noncontrolling Interest in the Operating Partnership
As more fully described in Note 1, certain of the predecessor equity owners held interests in the Operating Partnership as modified by the IPO Transactions. These interests were subsequently further modified by the REIT Structuring Transactions (also described in Note 1). These interests, along with the Class B common stock held by these investors, were exchangeable for Class A common stock of the Company. The roll-forward of the Operating Partnership’s LP Units followed the Class B common stock of the Company as disclosed in the consolidated statements of changes in equity. As of September 30, 2020, all shares of Class B common stock have been exchanged for shares of Class A common stock, and the Company held a 100% interest in LCFH.
Pursuant to ASC 810, Consolidation, on the accounting and reporting for noncontrolling interests and changes in ownership interests of a subsidiary, changes in a parent’s ownership interest (and transactions with noncontrolling interest unitholders in the subsidiary), while the parent retains its controlling interest in its subsidiary, should be accounted for as equity transactions. The carrying amount of the noncontrolling interest shall be adjusted to reflect the change in its ownership interest in the subsidiary, with the offset to equity attributable to the parent. There were no changes in ownership interest for the three months ended June 30, 2021.
Noncontrolling Interests in Consolidated Joint Ventures
As of June 30, 2021, the Company consolidates four ventures in which there are other noncontrolling investors, which own between 10.0% - 25.0% of such ventures. These ventures hold investments in a 40-building student housing portfolio in Isla Vista, CA with a book value of $81.2 million, 11 office buildings in Richmond, VA with a book value of $71.4 million, a single-tenant office building in Oakland County, MI with a book value of $8.7 million and an apartment complex in Miami, FL with a book value of $36.8 million. The Company makes distributions and allocates income from these ventures to the noncontrolling interests in accordance with the terms of the respective governing agreements.
13. EARNINGS PER SHARE
The Company’s net income (loss) and weighted average shares outstanding for the three and six months ended June 30, 2021 and 2020 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
($ in thousands except share amounts)
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net income (loss) available for Class A common shareholders
|
|
|
|
|
|
$
|
10,294
|
|
|
$
|
(4,189)
|
|
|
$
|
10,489
|
|
|
$
|
(19,918)
|
|
|
|
|
Diluted Net income (loss) available for Class A common shareholders
|
|
|
|
|
|
$
|
10,294
|
|
|
$
|
(4,189)
|
|
|
$
|
10,489
|
|
|
$
|
(19,918)
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
124,048,999
|
|
|
106,809,987
|
|
|
124,012,683
|
|
|
106,569,892
|
|
|
|
|
Diluted
|
|
|
|
|
|
124,480,487
|
|
|
106,809,987
|
|
|
124,353,202
|
|
|
106,569,892
|
|
|
|
The calculation of basic and diluted net income (loss) per share amounts for the three and six months ended June 30, 2021 and 2020 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(In thousands except share and per share amounts)
|
|
|
|
|
|
2021
|
|
2020
|
|
2021(1)
|
|
2020(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Net Income (Loss) Per Share of Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Class A common shareholders
|
|
|
|
|
|
$
|
10,294
|
|
|
$
|
(4,189)
|
|
|
$
|
10,489
|
|
|
$
|
(19,918)
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of Class A common stock outstanding
|
|
|
|
|
|
124,048,999
|
|
|
106,809,987
|
|
|
124,012,683
|
|
|
106,569,892
|
|
|
|
|
Basic net income (loss) per share of Class A common stock
|
|
|
|
|
|
$
|
0.08
|
|
|
$
|
(0.04)
|
|
|
$
|
0.08
|
|
|
$
|
(0.19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Net Income (Loss) Per Share of Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Class A common shareholders
|
|
|
|
|
|
$
|
10,294
|
|
|
$
|
(4,189)
|
|
|
$
|
10,489
|
|
|
$
|
(19,918)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) attributable to Class A common shareholders
|
|
|
|
|
|
10,294
|
|
|
(4,189)
|
|
|
10,489
|
|
|
(19,918)
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares of Class A common stock outstanding
|
|
|
|
|
|
124,048,999
|
|
|
106,809,987
|
|
|
124,012,683
|
|
|
106,569,892
|
|
|
|
|
Add - dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental shares of unvested Class A restricted stock(2)
|
|
|
|
|
|
431,488
|
|
|
—
|
|
|
340,519
|
|
|
—
|
|
|
|
|
Incremental shares of unvested stock options
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Diluted weighted average number of shares of Class A common stock outstanding
|
|
|
|
|
|
124,480,487
|
|
|
106,809,987
|
|
|
124,353,202
|
|
|
106,569,892
|
|
|
|
|
Diluted net income (loss) per share of Class A common stock
|
|
|
|
|
|
$
|
0.08
|
|
|
$
|
(0.04)
|
|
|
$
|
0.08
|
|
|
$
|
(0.19)
|
|
|
|
(1)For the three and six months ended June 30, 2020, shares issuable relating to converted Class B common shareholders are excluded from the calculation of diluted EPS as the inclusion of such potential common shares in the calculation would be anti-dilutive.
(2)The Company is using the treasury stock method.
The shares of Class B common stock do not share in the earnings of Ladder Capital Corp and are, therefore, not participating securities. Accordingly, basic and diluted net income (loss) per share of Class B common stock has not been presented, although the assumed conversion of Class B common stock has been included in the presented diluted net income (loss) per share of Class A common stock for the period of time that Class B common stock was outstanding.
14. STOCK BASED AND OTHER COMPENSATION PLANS
The following table summarizes the impact on the consolidated statement of operations of the various stock based and other compensation plans ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Based Compensation Expense
|
|
|
|
|
$
|
3,524
|
|
|
$
|
2,712
|
|
|
$
|
8,801
|
|
|
$
|
16,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phantom Equity Investment Plan
|
|
|
|
|
—
|
|
|
561
|
|
|
22
|
|
|
(1,577)
|
|
|
|
|
Stock Options Exercised
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonus Expense
|
|
|
|
|
1,850
|
|
|
—
|
|
|
2,300
|
|
|
(30)
|
|
|
|
|
Total
|
|
|
|
|
$
|
5,374
|
|
|
$
|
3,273
|
|
|
$
|
11,123
|
|
|
$
|
15,401
|
|
|
|
Summary of Stock and Shares Nonvested/Outstanding
A summary of the grants is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Shares
|
|
Weighted
Average
Fair Value
Per Share
|
|
Number
of Shares
|
|
Weighted
Average
Fair Value
Per Share
|
|
Number
of Shares
|
|
Weighted
Average
Fair Value
Per Share
|
|
Number
of Shares
|
|
Weighted
Average
Fair Value
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants - Class A Common Stock
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
747,713
|
|
|
$
|
9.81
|
|
|
1,466,337
|
|
|
$
|
18.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below presents the number of unvested shares and outstanding stock options at June 30, 2021 and changes during 2021 of the Class A common stock and stock options of Ladder Capital Corp granted under the 2014 Omnibus Incentive Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock
|
|
Stock Options
|
|
|
|
|
|
|
|
|
|
|
Nonvested/Outstanding at December 31, 2020
|
2,800,824
|
|
|
681,102
|
|
|
|
|
Granted
|
747,713
|
|
|
—
|
|
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
|
|
Vested
|
(982,998)
|
|
|
—
|
|
|
|
|
Forfeited
|
(327,143)
|
|
|
—
|
|
|
|
|
Expired
|
—
|
|
|
—
|
|
|
|
|
Nonvested/Outstanding at June 30, 2021
|
2,238,396
|
|
|
681,102
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2021
|
|
|
681,102
|
|
|
|
At June 30, 2021 there was $18.6 million of total unrecognized compensation cost related to certain share-based compensation awards that is expected to be recognized over a period of up to 24.6 months, with a weighted-average remaining vesting period of 31 months.
2014 Omnibus Incentive Plan
In connection with the IPO Transactions, the 2014 Ladder Capital Corp Omnibus Incentive Equity Plan (the “2014 Omnibus Incentive Plan”) was adopted by the board of directors on February 11, 2014, and provides certain members of management, employees and directors of the Company or its affiliates with additional incentives including grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards.
Annual Incentive Awards Granted in 2021 with respect to 2020 Performance
On January 1, 2021, in connection with 2020 compensation, annual stock awards were granted to non-management employees (“Non-Management Grantees”) with an aggregate fair value of $7.0 million, which represents 711,653 shares of Class A common stock. Approximately one-third of the awards to Non-Management Grantees were unrestricted, with another one-third of the awards subject to time-based vesting criteria, and the remaining one-third subject to attainment of the Performance Target for the applicable years. The one-third of awards subject to attainment of the Performance Target is also subject to the Performance Waiver and Catch-Up Provision, each described below. The time-vesting restricted stock will vest in three installments on February 18 of each of 2022, 2023 and 2024, subject to continued employment on the applicable vesting dates.
Fair value for all restricted and unrestricted stock grants was calculated using the most recent closing stock price prior to the grant date (due to markets being closed on the grant date). Compensation expense for unrestricted stock grants was expensed immediately. The Company has elected to recognize the compensation expense related to the time-based vesting of the annual restricted stock awards for the entire award on a straight-line basis over the requisite service period for the entire award. Restricted stock subject to performance criteria is eligible to vest in three equal installments upon the compensation committee’s confirmation that the Company achieves a return on equity, based on distributable earnings divided by the Company’s average book value of equity, equal to or greater than 8% for such year (the “Performance Target”) for the years ended December 31, 2021, 2022 and 2023, respectively. If the Company misses the Performance Target during either the first or second calendar year but meets the Performance Target for a subsequent year during the three year performance period and the Company’s return on equity for such subsequent year and any years for which it missed its Performance Target equals or exceeds the compounded return on equity of 8% based on distributable earnings divided by the Company’s average book value of equity, the performance-vesting restricted stock which failed to vest because the Company previously missed its Performance Target will vest subject to continued employment on the applicable vesting date (the “Catch-Up Provision”). Accruals of compensation cost for an award with a performance condition shall be based on the probable outcome of that performance condition. Therefore, compensation cost shall be accrued if it is probable that the performance condition will be achieved and shall not be accrued if it is not probable that the performance condition will be achieved. On May 27, 2020, the compensation committee of the board of directors used its discretion to waive the Performance Target for shares eligible to vest based on the Company’s performance in 2020 and 2021, subject to continued employment on the applicable vesting dates (the “Performance Waiver”). The Performance Waiver was made in recognition of the actions taken by Ladder’s employees in response to COVID-19 that, while in the best interests of the Company and its shareholders, would not produce earnings consistent with the Performance Target in their deferred compensation arrangements. Such actions included maintaining high levels of unrestricted cash liquidity and refinancing debt with more expensive non-mark-to-market funding sources. As of June 30, 2021, there were 42 Ladder employees and one consultant eligible for the 2021 Performance Waiver.
Other 2021 Restricted Stock Awards
On February 18, 2021, certain members of the board of directors each received annual restricted stock awards with a grant date fair value of $0.4 million, representing 36,060 shares of restricted Class A common stock, which will vest in full on the first anniversary of the date of grant, subject to continued service on the board of directors. Compensation expense related to the time-based vesting criteria of the award shall be recognized on a straight-line basis over the one-year vesting period.
Change in Control
In the event a Non-Management Grantee is terminated by the Company without cause within six months of certain changes in control (as defined in the respective award agreements), all unvested time shares shall vest on the termination date and all unvested performance shares shall remain outstanding and be eligible to vest (or be forfeited) in accordance with the performance conditions. The compensation committee retains the right, in its sole discretion, to provide for the accelerated vesting (in whole or in part) of the restricted stock awards granted.
Ladder Capital Corp Deferred Compensation Plan
As of December 31, 2020, there were 165,735 phantom units outstanding in the 2014 Deferred Compensation Plan, of which zero were unvested, resulting in a liability of $1.6 million, which is included in accrued expenses on the consolidated balance sheets. As of June 30, 2021, the deferred compensation plan ended as the liability had been fully paid.
Bonus Payments
On December 16, 2020, the board of directors of Ladder Capital Corp approved the 2020 bonus payments to employees, including officers, totaling $36.8 million of which $35.7 million consisted of equity based compensation. Of the total approved amount, there was $29.4 million of equity based compensation granted in 2020. During the six months ended June 30, 2021, the Company recorded $2.3 million of compensation expense related to bonuses. For the three and six months ended June 30, 2020, the Company did not record any bonus expense. For the six months ended June 30, 2021, the Company paid $2.3 million compensation expense related to bonuses accrued during the year ended December 31, 2020.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is based upon internal models, using market quotations, broker quotations, counterparty quotations or pricing services quotations, which provide valuation estimates based upon reasonable market order indications and are subject to significant variability based on market conditions, such as interest rates, credit spreads and market liquidity. The fair value of the mortgage loan receivables held for sale is based upon a securitization model utilizing market data from recent securitization spreads and pricing.
Fair Value Summary Table
The carrying values and estimated fair values of the Company’s financial instruments, which are both reported at fair value on a recurring basis (as indicated) or amortized cost/par, at June 30, 2021 and December 31, 2020 are as follows ($ in thousands):
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Outstanding
Face Amount
|
|
Amortized Cost Basis/Purchase Price
|
|
Fair Value
|
|
Fair Value Method
|
|
Yield
%
|
|
Remaining
Maturity/Duration (years)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS(1)
|
$
|
677,025
|
|
|
$
|
677,901
|
|
|
$
|
674,558
|
|
|
Internal model, third-party inputs
|
|
1.65 %
|
|
2.07
|
|
CMBS interest-only(1)
|
1,399,645
|
|
(2)
|
18,072
|
|
|
18,820
|
|
|
Internal model, third-party inputs
|
|
2.00 %
|
|
2.01
|
|
GNMA interest-only(3)
|
63,305
|
|
(2)
|
635
|
|
|
699
|
|
|
Internal model, third-party inputs
|
|
4.79 %
|
|
3.39
|
|
Agency securities(1)
|
568
|
|
|
572
|
|
|
580
|
|
|
Internal model, third-party inputs
|
|
1.60 %
|
|
0.97
|
|
GNMA permanent securities(1)
|
24,040
|
|
|
24,171
|
|
|
24,547
|
|
|
Internal model, third-party inputs
|
|
3.54 %
|
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for current expected credit reserves
|
N/A
|
|
(20)
|
|
|
(20)
|
|
|
(5)
|
|
N/A
|
|
N/A
|
|
Mortgage loan receivables held for investment, net, at amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost
|
2,548,013
|
|
|
2,531,048
|
|
|
2,424,602
|
|
|
Discounted Cash Flow(4)
|
|
5.80 %
|
|
1.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for current expected credit reserves
|
N/A
|
|
(35,891)
|
|
|
(35,891)
|
|
|
(5)
|
|
N/A
|
|
N/A
|
|
Mortgage loan receivables held for sale
|
59,198
|
|
|
59,182
|
|
|
62,295
|
|
|
Internal model, third-party inputs(6)
|
|
4.25 %
|
|
9.81
|
|
FHLB stock(7)
|
12,960
|
|
|
12,960
|
|
|
12,960
|
|
|
(7)
|
|
3.00 %
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements - short-term
|
390,217
|
|
|
390,217
|
|
|
390,217
|
|
|
Discounted Cash Flow(9)
|
|
0.98 %
|
|
0.23
|
|
Repurchase agreements - long-term
|
135,483
|
|
|
135,483
|
|
|
135,483
|
|
|
Discounted Cash Flow(10)
|
|
1.89 %
|
|
1.48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan financing
|
742,410
|
|
|
745,971
|
|
|
764,159
|
|
|
Discounted Cash Flow(10)
|
|
4.84
|
%
|
|
3.7
|
|
Secured financing facility
|
152,143
|
|
|
152,143
|
|
|
152,143
|
|
|
Discounted Cash Flow(9)
|
|
10.75 %
|
|
1.85
|
|
CLO debt
|
168,843
|
|
|
168,843
|
|
|
168,843
|
|
|
Discounted Cash Flow(10)
|
|
5.50 %
|
|
2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from the FHLB
|
288,000
|
|
|
288,000
|
|
|
288,712
|
|
|
Discounted Cash Flow
|
|
1.07
|
%
|
|
2.26
|
|
Senior unsecured notes
|
2,115,644
|
|
|
2,095,059
|
|
|
2,123,832
|
|
|
Internal model, third-party inputs
|
|
4.81 %
|
|
4.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonhedge derivatives(1)(8)
|
202,571
|
|
|
N/A
|
|
368
|
|
|
Counterparty quotations
|
|
N/A
|
|
0.25
|
(1)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.
(2)Represents notional outstanding balance of underlying collateral.
(3)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.
(4)Fair value for floating rate mortgage loan receivables, held for investment is estimated to approximate the outstanding face amount given the short interest rate reset risk (30 days) and no significant change in credit risk. Fair value for fixed rate mortgage loan receivables, held for investment is measured using a discounted cash flow model.
(5)Fair value is estimated to equal par value.
(6)Fair value for mortgage loan receivables, held for sale is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.
(7)Fair value of the FHLB stock approximates outstanding face amount as the Company’s captive insurance subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.
(8)The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.
(9)Fair value for repurchase agreement liabilities - short term borrowings under the Secured Financing Facility and borrowings under the Revolving Credit Facility is estimated to approximate carrying amount primarily due to the short interest rate reset risk (30 days) of the financings and the high credit quality of the assets collateralizing these positions. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.
(10)For repurchase agreements - long term, mortgage loan financing, and CLO debt, the carrying value approximates the fair value discounting the expected cash flows at current market rates. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Outstanding
Face Amount
|
|
Amortized
Cost Basis
|
|
Fair Value
|
|
Fair Value Method
|
|
Yield
%
|
|
Remaining
Maturity/Duration (years)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS(1)
|
$
|
1,015,520
|
|
|
$
|
1,015,282
|
|
|
$
|
1,003,301
|
|
|
Internal model, third-party inputs
|
|
1.56 %
|
|
2.01
|
|
CMBS interest-only(1)
|
1,498,181
|
|
(2)
|
21,567
|
|
|
22,213
|
|
|
Internal model, third-party inputs
|
|
3.53 %
|
|
2.19
|
|
GNMA interest-only(3)
|
75,350
|
|
(2)
|
868
|
|
|
1,001
|
|
|
Internal model, third-party inputs
|
|
5.06 %
|
|
3.59
|
|
Agency securities(1)
|
586
|
|
|
593
|
|
|
605
|
|
|
Internal model, third-party inputs
|
|
1.64 %
|
|
1.26
|
|
GNMA permanent securities(1)
|
30,254
|
|
|
30,340
|
|
|
31,199
|
|
|
Internal model, third-party inputs
|
|
3.49 %
|
|
1.98
|
|
Provision for current expected credit losses
|
N/A
|
|
(20)
|
|
|
(20)
|
|
|
(5)
|
|
N/A
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost
|
2,365,204
|
|
|
2,354,059
|
|
|
2,328,441
|
|
|
Discounted Cash Flow(4)
|
|
6.67 %
|
|
1.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for current expected credit losses
|
N/A
|
|
(41,507)
|
|
|
(41,507)
|
|
|
(5)
|
|
N/A
|
|
N/A
|
|
Mortgage loan receivables held for sale
|
30,478
|
|
|
30,518
|
|
|
32,082
|
|
|
Internal model, third-party inputs(6)
|
|
4.05 %
|
|
9.18
|
|
FHLB stock(7)
|
31,000
|
|
|
31,000
|
|
|
31,000
|
|
|
(7)
|
|
3.00 %
|
|
N/A
|
|
Nonhedge derivatives(1)(8)
|
65,600
|
|
|
N/A
|
|
299
|
|
|
Counterparty quotations
|
|
N/A
|
|
0.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements - short-term
|
708,833
|
|
|
708,833
|
|
|
708,833
|
|
|
Discounted Cash Flow(9)
|
|
1.16 %
|
|
0.34
|
|
Repurchase agreements - long-term
|
112,004
|
|
|
112,004
|
|
|
112,004
|
|
|
Discounted Cash Flow(10)
|
|
9.47 %
|
|
2.21
|
|
Revolving credit facility
|
266,430
|
|
|
266,430
|
|
|
266,430
|
|
|
Discounted Cash Flow(9)
|
|
3.15 %
|
|
0.07
|
|
Mortgage loan financing
|
761,793
|
|
|
766,064
|
|
|
786,405
|
|
|
Discounted Cash Flow(10)
|
|
4.84
|
%
|
|
4.04
|
|
Secured financing facility
|
192,646
|
|
|
192,646
|
|
|
192,646
|
|
|
Discounted Cash Flow(9)
|
|
10.75 %
|
|
2.35
|
|
CLO debt
|
276,516
|
|
|
276,516
|
|
|
276,516
|
|
|
Discounted Cash Flow(10)
|
|
5.50 %
|
|
3.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from the FHLB
|
288,000
|
|
|
288,000
|
|
|
289,091
|
|
|
Discounted Cash Flow
|
|
1.12
|
%
|
|
2.76
|
|
Senior unsecured notes
|
1,612,299
|
|
|
1,599,371
|
|
|
1,607,930
|
|
|
Internal model, third-party inputs
|
|
4.90 %
|
|
3.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.
(2)Represents notional outstanding balance of underlying collateral.
(3)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.
(4)Fair value for floating rate mortgage loan receivables, held for investment is estimated to approximate the outstanding face amount given the short interest rate reset risk (30 days) and no significant change in credit risk. Fair value for fixed rate mortgage loan receivables, held for investment is measured using a discounted cash flow model.
(5)Fair value is estimated to equal par value.
(6)Fair value for mortgage loan receivables, held for sale is measured using a hypothetical securitization model utilizing market data from recent securitization spreads and pricing.
(7)Fair value of the FHLB stock approximates outstanding face amount as the Company’s captive insurance subsidiary is restricted from trading the stock and can only put the stock back to the FHLB, at the FHLB’s discretion, at par.
(8)The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.
(9)Fair value for repurchase agreement liabilities - short term borrowings under the secured financing facility and borrowings under the revolving credit facility is estimated to approximate carrying amount primarily due to the short interest rate reset risk (30 days) of the financings and the high credit quality of the assets collateralizing these positions. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.
(10)For repurchase agreements - long term, mortgage loan financing, and CLO debt the carrying value approximates the fair value discounting the expected cash flows at current market rates. If the collateral is determined to be impaired, the related financing would be revalued accordingly. There are no impairments on any positions.
The following table summarizes the Company’s financial assets and liabilities, which are both reported at fair value on a recurring basis (as indicated) or amortized cost/par, at June 30, 2021 and December 31, 2020 ($ in thousands):
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments Reported at Fair Value on Consolidated Statements of Financial Condition
|
|
Outstanding Face
Amount
|
|
Fair Value
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
CMBS(1)
|
|
$
|
665,558
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
663,528
|
|
|
$
|
663,528
|
|
|
CMBS interest-only(1)
|
|
1,389,135
|
|
(2)
|
—
|
|
|
—
|
|
|
18,215
|
|
|
18,215
|
|
|
GNMA interest-only(3)
|
|
63,305
|
|
(2)
|
—
|
|
|
—
|
|
|
699
|
|
|
699
|
|
|
Agency securities(1)
|
|
568
|
|
|
—
|
|
|
—
|
|
|
580
|
|
|
580
|
|
|
GNMA permanent securities(1)
|
|
24,040
|
|
|
—
|
|
|
—
|
|
|
24,547
|
|
|
24,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
707,569
|
|
|
$
|
707,569
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Nonhedge derivatives(4)
|
|
202,571
|
|
|
$
|
—
|
|
|
$
|
368
|
|
|
$
|
—
|
|
|
$
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments Not Reported at Fair Value on Consolidated Statements of Financial Condition
|
|
Outstanding Face
Amount
|
|
Fair Value
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivable held for investment, net, at amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost
|
|
$
|
2,548,013
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,424,602
|
|
|
$
|
2,424,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for current expected credit losses
|
|
N/A
|
|
—
|
|
|
—
|
|
|
(35,891)
|
|
|
(35,891)
|
|
|
Mortgage loan receivable held for sale
|
|
59,198
|
|
|
—
|
|
|
—
|
|
|
62,295
|
|
|
62,295
|
|
|
CMBS(5)
|
|
11,467
|
|
|
—
|
|
|
—
|
|
|
11,030
|
|
|
11,030
|
|
|
CMBS interest-only(5)
|
|
10,510
|
|
|
—
|
|
|
—
|
|
|
605
|
|
|
605
|
|
|
Allowance for current expected credit losses
|
|
N/A
|
|
—
|
|
|
—
|
|
|
(20)
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FHLB stock
|
|
12,960
|
|
|
—
|
|
|
—
|
|
|
12,960
|
|
|
12,960
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,475,581
|
|
|
$
|
2,475,581
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements - short-term
|
|
390,217
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
390,217
|
|
|
$
|
390,217
|
|
|
Repurchase agreements - long-term
|
|
135,483
|
|
|
—
|
|
|
—
|
|
|
135,483
|
|
|
135,483
|
|
|
Revolving credit facility
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Mortgage loan financing
|
|
742,410
|
|
|
—
|
|
|
—
|
|
|
764,159
|
|
|
764,159
|
|
|
Secured financing facility
|
|
152,143
|
|
|
—
|
|
|
—
|
|
|
152,143
|
|
|
152,143
|
|
|
CLO debt
|
|
168,843
|
|
|
—
|
|
|
—
|
|
|
168,843
|
|
|
168,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from the FHLB
|
|
288,000
|
|
|
—
|
|
|
—
|
|
|
288,712
|
|
|
288,712
|
|
|
Senior unsecured notes
|
|
2,115,644
|
|
|
—
|
|
|
—
|
|
|
2,123,832
|
|
|
2,123,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,023,389
|
|
|
$
|
4,023,389
|
|
(1)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.
(2)Represents notional outstanding balance of underlying collateral.
(3)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.
(4)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings. The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.
(5)Restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust, which are classified as held-to-maturity and reported at amortized cost.
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments Reported at Fair Value on Consolidated Statements of Financial Condition
|
|
Outstanding Face
Amount
|
|
Fair Value
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
CMBS(1)
|
|
$
|
1,003,998
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
992,227
|
|
|
$
|
992,227
|
|
|
CMBS interest-only(1)
|
|
1,487,616
|
|
(2)
|
—
|
|
|
—
|
|
|
21,538
|
|
|
21,538
|
|
|
GNMA interest-only(3)
|
|
75,350
|
|
(2)
|
—
|
|
|
—
|
|
|
1,001
|
|
|
1,001
|
|
|
Agency securities(1)
|
|
586
|
|
|
—
|
|
|
—
|
|
|
605
|
|
|
605
|
|
|
GNMA permanent securities(1)
|
|
30,254
|
|
|
—
|
|
|
—
|
|
|
31,199
|
|
|
31,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
N/A
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Nonhedge derivatives(4)
|
|
65,600
|
|
|
—
|
|
|
299
|
|
|
—
|
|
|
299
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
299
|
|
|
$
|
1,046,570
|
|
|
$
|
1,046,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments Not Reported at Fair Value on Consolidated Statements of Financial Condition
|
|
Outstanding Face
Amount
|
|
Fair Value
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivable held for investment, net, at amortized cost:
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage loan receivables held for investment, net, at amortized cost
|
|
$
|
2,365,204
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,328,441
|
|
|
$
|
2,328,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
N/A
|
|
—
|
|
|
—
|
|
|
(41,507)
|
|
|
(41,507)
|
|
|
Mortgage loan receivables held for sale
|
|
30,478
|
|
|
—
|
|
|
—
|
|
|
32,082
|
|
|
32,082
|
|
|
CMBS(5)
|
|
11,523
|
|
|
—
|
|
|
—
|
|
|
11,074
|
|
|
11,074
|
|
|
CMBS interest-only(5)
|
|
10,566
|
|
(2)
|
—
|
|
|
—
|
|
|
675
|
|
|
675
|
|
|
Allowance for current expected credit losses
|
|
N/A
|
|
—
|
|
|
—
|
|
|
(20)
|
|
|
(20)
|
|
|
FHLB stock
|
|
31,000
|
|
|
—
|
|
|
—
|
|
|
31,000
|
|
|
31,000
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,361,745
|
|
|
$
|
2,361,745
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements - short-term
|
|
708,833
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
708,833
|
|
|
$
|
708,833
|
|
|
Repurchase agreements - long-term
|
|
112,004
|
|
|
—
|
|
|
—
|
|
|
112,004
|
|
|
112,004
|
|
|
Revolving credit facility
|
|
266,430
|
|
|
—
|
|
|
—
|
|
|
266,430
|
|
|
266,430
|
|
|
Mortgage loan financing
|
|
761,793
|
|
|
—
|
|
|
—
|
|
|
786,405
|
|
|
786,405
|
|
|
Secured financing facility
|
|
192,646
|
|
|
—
|
|
|
—
|
|
|
192,646
|
|
|
192,646
|
|
|
CLO debt
|
|
276,516
|
|
|
—
|
|
|
—
|
|
|
276,516
|
|
|
276,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from the FHLB
|
|
288,000
|
|
|
—
|
|
|
—
|
|
|
289,091
|
|
|
289,091
|
|
|
Senior unsecured notes
|
|
1,612,299
|
|
|
—
|
|
|
—
|
|
|
1,607,930
|
|
|
1,607,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,239,855
|
|
|
$
|
4,239,855
|
|
(1)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded as a component of other comprehensive income (loss) in equity.
(2)Represents notional outstanding balance of underlying collateral.
(3)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings.
(4)Measured at fair value on a recurring basis with the net unrealized gains or losses recorded in current period earnings. The outstanding face amount of the nonhedge derivatives represents the notional amount of the underlying contracts.
(5)Restricted securities which are designated as risk retention securities under the Dodd-Frank Act and are therefore subject to transfer restrictions over the term of the securitization trust, which are classified as held-to-maturity and reported at amortized cost.
The following table summarizes changes in Level 3 financial instruments reported at fair value on the consolidated statements of financial condition for the six months ended June 30, 2021 and 2020 ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
Level 3
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1,
|
|
$
|
1,046,569
|
|
|
$
|
1,695,913
|
|
|
|
|
Transfer from level 2
|
|
—
|
|
|
—
|
|
|
|
|
Purchases
|
|
101,358
|
|
|
437,536
|
|
|
|
|
Sales
|
|
(339,238)
|
|
|
(517,535)
|
|
|
|
|
Paydowns/maturities
|
|
(106,197)
|
|
|
(52,271)
|
|
|
|
|
Amortization of premium/discount
|
|
(3,702)
|
|
|
(4,278)
|
|
|
|
|
Unrealized gain/(loss)
|
|
8,184
|
|
|
(51,709)
|
|
|
|
|
Realized gain/(loss) on sale(1)
|
|
595
|
|
|
(12,773)
|
|
|
|
|
Balance at June 30,
|
|
$
|
707,569
|
|
|
$
|
1,494,883
|
|
|
|
(1)Includes realized losses on securities recorded as other than temporary impairments.
The following is quantitative information about significant unobservable inputs in our Level 3 measurements for those assets and liabilities measured at fair value on a recurring basis ($ in thousands):
June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instrument
|
|
Carrying Value
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Minimum
|
|
Weighted Average
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS(1)
|
|
$
|
663,528
|
|
|
Discounted cash flow
|
|
Yield (4)
|
|
(0.13)
|
%
|
|
1.88
|
%
|
|
11.47
|
%
|
|
|
|
|
|
|
|
Duration (years)(5)
|
|
0
|
|
1.93
|
|
8.79
|
|
CMBS interest-only(1)
|
|
18,215
|
|
(2)
|
Discounted cash flow
|
|
Yield (4)
|
|
0.50
|
%
|
|
2.94
|
%
|
|
5.09
|
%
|
|
|
|
|
|
|
|
Duration (years)(5)
|
|
0.15
|
|
1.93
|
|
2.82
|
|
|
|
|
|
|
|
Prepayment speed (CPY)(5)
|
|
100.00
|
|
100.00
|
|
100.00
|
|
GNMA interest-only(3)
|
|
699
|
|
(2)
|
Discounted cash flow
|
|
Yield (4)
|
|
—
|
%
|
|
9.36
|
%
|
|
40.60
|
%
|
|
|
|
|
|
|
|
Duration (years)(5)
|
|
0
|
|
2.56
|
|
5.81
|
|
|
|
|
|
|
|
Prepayment speed (CPJ)(5)
|
|
5.00
|
|
18.60
|
|
35.00
|
|
Agency securities(1)
|
|
580
|
|
|
Discounted cash flow
|
|
Yield (4)
|
|
0.58
|
%
|
|
0.65
|
%
|
|
1.16
|
%
|
|
|
|
|
|
|
|
Duration (years)(5)
|
|
0
|
|
0.84
|
|
0.96
|
|
GNMA permanent securities(1)
|
|
24,547
|
|
|
Discounted cash flow
|
|
Yield (4)
|
|
2.67
|
%
|
|
3.48
|
%
|
|
3.79
|
%
|
|
|
|
|
|
|
|
Duration (years)(5)
|
|
1.8
|
|
3.37
|
|
3.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
707,569
|
|
|
|
|
|
|
|
|
|
|
|
(1)CMBS, CMBS interest-only securities, Agency securities, GNMA construction securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.
(2)The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.
(3)Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.
Sensitivity of the Fair Value to Changes in the Unobservable Inputs
(4)Significant increase (decrease) in the unobservable input in isolation would result in significantly lower (higher) fair value measurement.
(5)Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (lower or higher) fair value measurement depending on the structural features of the security in question.
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instrument
|
|
Carrying Value
|
|
Valuation Technique
|
|
Unobservable Input
|
|
Minimum
|
|
Weighted Average
|
|
Maximum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CMBS(1)
|
|
$
|
992,226
|
|
|
Discounted cash flow
|
|
Yield (3)
|
|
—
|
%
|
|
2.09
|
%
|
|
23.85
|
%
|
|
|
|
|
|
|
|
Duration (years)(4)
|
|
0.00
|
|
2.68
|
|
5.82
|
|
CMBS interest-only(1)
|
|
21,537
|
|
(2)
|
Discounted cash flow
|
|
Yield (3)
|
|
0.56
|
%
|
|
2.51
|
%
|
|
9.94
|
%
|
|
|
|
|
|
|
|
Duration (years)(4)
|
|
0.12
|
|
2.23
|
|
3.15
|
|
|
|
|
|
|
|
Prepayment speed (CPY)(4)
|
|
100.00
|
|
100.00
|
|
100.00
|
|
GNMA interest-only(3)
|
|
1,001
|
|
(2)
|
Discounted cash flow
|
|
Yield (4)
|
|
—
|
%
|
|
7.93
|
%
|
|
35.82
|
%
|
|
|
|
|
|
|
|
Duration (years)(5)
|
|
0.00
|
|
2.80
|
|
6.79
|
|
|
|
|
|
|
|
Prepayment speed (CPJ)(5)
|
|
5.00
|
|
17.78
|
|
35.00
|
|
Agency securities(1)
|
|
605
|
|
|
Discounted cash flow
|
|
Yield (4)
|
|
0.44
|
%
|
|
11.31
|
%
|
|
72.00
|
%
|
|
|
|
|
|
|
|
Duration (years)(5)
|
|
0.00
|
|
1.23
|
|
1.44
|
|
GNMA permanent securities(1)
|
|
31,199
|
|
|
Discounted cash flow
|
|
Yield (4)
|
|
—
|
%
|
|
2.99
|
%
|
|
3.47
|
%
|
|
|
|
|
|
|
|
Duration (years)(5)
|
|
1.57
|
|
9.74
|
|
14.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,046,568
|
|
|
|
|
|
|
|
|
|
|
|
(1)CMBS, CMBS interest-only securities, Agency securities, GNMA construction securities, GNMA permanent securities and corporate bonds are classified as available-for-sale and reported at fair value with changes in fair value recorded in the current period in other comprehensive income.
(2)The amounts presented represent the principal amount of the mortgage loans outstanding in the pool in which the interest-only securities participate.
(3)Agency interest-only securities are recorded at fair value with changes in fair value recorded in current period earnings.
Sensitivity of the Fair Value to Changes in the Unobservable Inputs
(4)Significant increase (decrease) in the unobservable input in isolation would result in significantly lower (higher) fair value measurement.
(5)Significant increase (decrease) in the unobservable input in isolation would result in either a significantly lower or higher (lower or higher) fair value measurement depending on the structural features of the security in question.
Nonrecurring Fair Values
The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may be impaired. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for sale or write-down of assets value due to impairment. Refer to Note 3, Mortgage Loan Receivables and Note 5, Real Estate and Related Lease Intangibles, Net for disclosure of level 3 inputs.
16. INCOME TAXES
The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ended December 31, 2015 (the REIT Election”). As such, the Company’s income is generally not subject to U.S. federal, state and local corporate income taxes other than as described below.
Certain of the Company’s subsidiaries have elected to be treated as TRSs. TRSs permit the Company to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Code, and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, the Company will continue to maintain its qualification as a REIT. The Company’s TRSs are not consolidated for U.S. federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earnings recognized by the Company with respect to its interest in TRSs. Current income tax expense (benefit) was $0.9 million and $(1.1) million for the three and six months ended June 30, 2021, respectively. Current income tax expense (benefit) was $1.6 million and $(15.0) million for the three and six months ended June 30, 2020, respectively.
As of June 30, 2021 and December 31, 2020, the Company’s net deferred tax assets (liabilities) were $(2.0) million and $(2.0) million, respectively, and are included in other assets (other liabilities) in the Company’s consolidated balance sheets. Deferred income tax expense (benefit) included within the provision for income taxes was $(1.2) million and $(2.1) million for the three months ended June 30, 2021, and June 30, 2020 respectively. There was no deferred income tax expense (benefit) for the six months ended June 30, 2021, and $9.9 million for the six months ended June 30, 2020. The Company’s net deferred tax liability is comprised of deferred tax assets and deferred tax liabilities. The Company believes it is more likely than not that the deferred tax assets (aside from the exception noted below) will be realized in the future. Realization of the deferred tax assets is dependent upon our generation of sufficient taxable income in future years in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.
As of June 30, 2021, the Company had a deferred tax asset of $4.9 million relating to capital losses which it may only use to offset capital gains. These tax attributes will begin to expire if unused in 2022. As the realization of these assets are not more likely than not before their expiration, the Company provided a full valuation allowance against this deferred tax asset. Additionally, as of June 30, 2021, the Company had $1.5 million of deferred tax asset related to Code Section 163(j) interest expense limitation. As the Company is uncertain if this asset will be realized in the future, the Company provided a full valuation allowance against this deferred tax asset.
The Company has historically calculated its tax provision during quarterly reporting periods by applying an annual effective tax rate (“AETR”) for the full year to the income for the reporting period; however, for the three and six months ended June 30, 2020, the Company used a discrete effective tax rate method to calculate taxes, given that, based on the projections of income at the time, the Company was unable to determine a reliable AETR. The Company has returned to using an AETR for the full year to income for the current reporting period.
The Company’s tax returns are subject to audit by taxing authorities. Generally, as of June 30, 2021, the tax years 2017-2020 remain open to examination by the major taxing jurisdictions in which the Company is subject to taxes. The Company is currently under New York City audit for tax years 2012-2013. Several of the Company’s subsidiary entities are under New York State audit for tax years 2015-2018. The Company does not expect these audits to result in any material changes to the Company’s financial position. The Company does not expect tax expense to have an impact on either short, or long-term liquidity or capital needs.
Under U.S. GAAP, a tax benefit related to an income tax position may be recognized when it is more likely than not that the position will be sustained upon examination by the tax authorities based on the technical merits of the position. In addition, the Company does not believe that it has any tax positions for which it is reasonably possible that it will be required to record a significant liability for unrecognized tax benefits within the next twelve months.
17. RELATED PARTY TRANSACTIONS
The Company has no material related party relationships to disclose.
18. COMMITMENTS AND CONTINGENCIES
Leases
The primary impact of applying ASC Topic 842 was the initial recognition of a $3.5 million lease liability and a $3.3 million right of use asset (including previously accrued straight line rent) on the Company’s consolidated financial statements, for leases classified as operating leases under ASC Topic 840, primarily for the Company’s corporate headquarters and other identified leases. As of June 30, 2021, the Company had a $0.8 million lease liability and a $0.8 million right-of-use asset on its consolidated balance sheets found within other liabilities and other assets, respectively. Tenant reimbursements, which consist of real estate taxes and other municipal charges paid by us which were reimbursable by our tenants pursuant to the terms of triple-net lease agreements, were $1.1 million and $2.2 million for the three and six months ended June 30, 2021 and $1.1 million and $2.3 million for the three and six months ended June 30, 2020, respectively, and are included in operating lease income on the Company’s consolidated statements of income.
Investments in Unconsolidated Joint Ventures
We have made investments in various unconsolidated joint ventures. See Note 6, Investment in and Advances to Unconsolidated Joint Ventures, for further details of our unconsolidated investments. Our maximum exposure to loss from these investments is limited to the carrying value of our investments.
Unfunded Loan Commitments
As of June 30, 2021, the Company’s off-balance sheet arrangements consisted of $245.1 million of unfunded commitments on mortgage loan receivables held for investment to provide additional first mortgage loan financing over the next three years at rates to be determined at the time of funding, 59% of which additional funds relate to the occurrence of certain “good news” events, such as the owner concluding a lease agreement with a major tenant in the building or reaching some pre-determined net operating income. As of December 31, 2020, the Company’s off-balance sheet arrangements consisted of $148.8 million of unfunded commitments on mortgage loan receivables held for investment to provide additional first mortgage loan financing. Commitments are subject to our loan borrowers’ satisfaction of certain financial and nonfinancial covenants and may or may not be funded depending on a variety of circumstances including timing, credit metric hurdles, and other nonfinancial events occurring. The COVID-19 pandemic has impacted the progress of work generally and, depending on specific property locations, the progress of capital expenditures, construction, and leasing, which have been delayed and/or slower paced than originally anticipated. The progress of those particular projects located in states or local municipalities with continuing restrictions on such activities is anticipated to remain slower to complete than otherwise expected, and the pace of future funding relating to these capital needs has been, and may continue to be, commensurately slower. These commitments are not reflected on the consolidated balance sheets.
19. SEGMENT REPORTING
The Company has determined that it has three reportable segments based on how the chief operating decision maker reviews and manages the business. These reportable segments include loans, securities, and real estate. The loans segment includes mortgage loan receivables held for investment (balance sheet loans) and mortgage loan receivables held for sale (conduit loans). The securities segment is composed of all of the Company’s activities related to commercial real estate securities, which include investments in CMBS, U.S. Agency securities, corporate bonds and equity securities. The real estate segment includes net leased properties, office buildings, student housing portfolios, hotels, industrial buildings, a shopping center and condominium units. Corporate/other includes the Company’s investments in joint ventures, other asset management activities and operating expenses.
The Company evaluates performance based on the following financial measures for each segment ($ in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2021
|
Loans
|
|
Securities
|
|
Real Estate (1)
|
|
Corporate/Other(2)
|
|
Company
Total
|
|
Interest income
|
$
|
34,253
|
|
|
$
|
3,216
|
|
|
$
|
—
|
|
|
$
|
108
|
|
|
$
|
37,577
|
|
|
Interest expense
|
(13,681)
|
|
|
(556)
|
|
|
(9,944)
|
|
|
(21,045)
|
|
|
(45,226)
|
|
|
Net interest income (expense)
|
20,572
|
|
|
2,660
|
|
|
(9,944)
|
|
|
(20,937)
|
|
|
(7,649)
|
|
|
Provision for (release of) loan loss reserves
|
335
|
|
|
|
|
—
|
|
|
—
|
|
|
335
|
|
|
Net interest income (expense) after provision for (release of) loan reserves
|
20,907
|
|
|
2,660
|
|
|
(9,944)
|
|
|
(20,937)
|
|
|
(7,314)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate operating income
|
—
|
|
|
—
|
|
|
26,558
|
|
|
—
|
|
|
26,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of loans, net
|
3,392
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,392
|
|
|
Realized gain (loss) on securities
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on Agency interest-only securities
|
—
|
|
|
(48)
|
|
|
—
|
|
|
—
|
|
|
(48)
|
|
|
Realized gain on sale of real estate, net
|
—
|
|
|
|
|
19,389
|
|
|
—
|
|
|
19,389
|
|
|
Impairment of real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Fee and other income
|
2,295
|
|
|
—
|
|
|
14
|
|
|
142
|
|
|
2,451
|
|
|
Net result from derivative transactions
|
(2,792)
|
|
|
(1,052)
|
|
|
—
|
|
|
—
|
|
|
(3,844)
|
|
|
Earnings (loss) from investment in unconsolidated joint ventures
|
78
|
|
|
—
|
|
|
159
|
|
|
—
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (loss)
|
2,973
|
|
|
(1,085)
|
|
|
46,120
|
|
|
142
|
|
|
48,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
—
|
|
|
—
|
|
|
—
|
|
|
(8,477)
|
|
|
(8,477)
|
|
|
Operating expenses(3)
|
29
|
|
|
—
|
|
|
—
|
|
|
(4,245)
|
|
|
(4,216)
|
|
|
Real estate operating expenses
|
—
|
|
|
—
|
|
|
(6,345)
|
|
|
—
|
|
|
(6,345)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee expense
|
(944)
|
|
|
(61)
|
|
|
(1,018)
|
|
|
(172)
|
|
|
(2,195)
|
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
(9,440)
|
|
|
(24)
|
|
|
(9,464)
|
|
|
Total costs and expenses
|
(915)
|
|
|
(61)
|
|
|
(16,803)
|
|
|
(12,918)
|
|
|
(30,697)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
318
|
|
|
318
|
|
|
Segment profit (loss)
|
$
|
22,965
|
|
|
$
|
1,514
|
|
|
$
|
19,373
|
|
|
$
|
(33,395)
|
|
|
$
|
10,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of June 30, 2021
|
$
|
2,554,339
|
|
|
$
|
719,183
|
|
|
$
|
986,267
|
|
|
$
|
1,357,020
|
|
|
$
|
5,616,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2020
|
Loans
|
|
Securities
|
|
Real Estate (1)
|
|
Corporate/Other(2)
|
|
Company
Total
|
|
Interest income
|
$
|
53,641
|
|
|
$
|
8,177
|
|
|
$
|
2
|
|
|
$
|
276
|
|
|
$
|
62,096
|
|
|
Interest expense
|
(11,732)
|
|
|
(7,795)
|
|
|
(9,758)
|
|
|
(39,140)
|
|
|
(68,425)
|
|
|
Net interest income (expense)
|
41,909
|
|
|
382
|
|
|
(9,756)
|
|
|
(38,864)
|
|
|
(6,329)
|
|
|
Provision for (release of) loan loss reserves
|
726
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
729
|
|
|
Net interest income (expense) after provision for (release of) loan reserves
|
42,635
|
|
|
385
|
|
|
(9,756)
|
|
|
(38,864)
|
|
|
(5,600)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate operating income
|
—
|
|
|
—
|
|
|
23,773
|
|
|
—
|
|
|
23,773
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of loans, net
|
(744)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(744)
|
|
|
Realized gain (loss) on securities
|
—
|
|
|
(14,798)
|
|
|
—
|
|
|
—
|
|
|
(14,798)
|
|
|
Unrealized gain (loss) on equity securities
|
—
|
|
|
401
|
|
|
—
|
|
|
—
|
|
|
401
|
|
|
Unrealized gain (loss) on Agency interest-only securities
|
—
|
|
|
98
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
Realized gain on sale of real estate, net
|
—
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee and other income
|
2,429
|
|
|
2
|
|
|
—
|
|
|
1,074
|
|
|
3,505
|
|
|
Net result from derivative transactions
|
(588)
|
|
|
(225)
|
|
|
—
|
|
|
—
|
|
|
(813)
|
|
|
Earnings (loss) from investment in unconsolidated joint ventures
|
—
|
|
|
—
|
|
|
471
|
|
|
—
|
|
|
471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
19,017
|
|
|
19,017
|
|
|
Total other income (loss)
|
1,097
|
|
|
(14,522)
|
|
|
24,243
|
|
|
20,091
|
|
|
30,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,001)
|
|
|
(7,001)
|
|
|
Operating expenses(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,224)
|
|
|
(6,224)
|
|
|
Real estate operating expenses
|
—
|
|
|
—
|
|
|
(6,034)
|
|
|
—
|
|
|
(6,034)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee expense
|
(1,474)
|
|
|
(61)
|
|
|
(442)
|
|
|
—
|
|
|
(1,977)
|
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
(9,791)
|
|
|
(25)
|
|
|
(9,816)
|
|
|
Total costs and expenses
|
(1,474)
|
|
|
(61)
|
|
|
(16,267)
|
|
|
(13,250)
|
|
|
(31,052)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
550
|
|
|
550
|
|
|
Segment profit (loss)
|
$
|
42,258
|
|
|
$
|
(14,198)
|
|
|
$
|
(1,780)
|
|
|
$
|
(31,473)
|
|
|
$
|
(5,193)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2020
|
$
|
2,343,070
|
|
|
$
|
1,058,298
|
|
|
$
|
1,031,557
|
|
|
$
|
1,448,303
|
|
|
$
|
5,881,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2021
|
Loans
|
|
Securities
|
|
Real Estate (1)
|
|
Corporate/Other(2)
|
|
Company
Total
|
|
Interest income
|
$
|
70,145
|
|
|
$
|
6,450
|
|
|
$
|
—
|
|
|
$
|
270
|
|
|
76,865
|
|
|
Interest expense
|
(27,757)
|
|
|
(1,388)
|
|
|
(18,729)
|
|
|
(43,325)
|
|
|
(91,199)
|
|
|
Net interest income (expense)
|
42,388
|
|
|
5,061
|
|
|
(18,729)
|
|
|
(43,056)
|
|
|
(14,334)
|
|
|
Provision for (release of) loan loss reserves
|
4,586
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,586
|
|
|
Net interest income (expense) after provision for (release of) loan reserves
|
46,974
|
|
|
5,061
|
|
|
(18,729)
|
|
|
(43,056)
|
|
|
(9,748)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate operating income
|
—
|
|
|
—
|
|
|
50,718
|
|
|
—
|
|
|
50,718
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of loans, net
|
3,392
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,392
|
|
|
Realized gain (loss) on securities
|
—
|
|
|
594
|
|
|
—
|
|
|
—
|
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on Agency interest-only securities
|
—
|
|
|
(68)
|
|
|
—
|
|
|
—
|
|
|
(68)
|
|
|
Realized gain on sale of real estate, net
|
—
|
|
|
—
|
|
|
19,389
|
|
|
—
|
|
|
19,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee and other income
|
5,264
|
|
|
—
|
|
|
47
|
|
|
424
|
|
|
5,735
|
|
|
Net result from derivative transactions
|
251
|
|
|
676
|
|
|
—
|
|
|
—
|
|
|
927
|
|
|
Earnings (loss) from investment in unconsolidated joint ventures
|
218
|
|
|
—
|
|
|
455
|
|
|
—
|
|
|
673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (loss)
|
9,125
|
|
|
1,202
|
|
|
70,609
|
|
|
424
|
|
|
81,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,011)
|
|
|
(18,011)
|
|
|
Operating expenses(3)
|
38
|
|
|
—
|
|
|
—
|
|
|
(8,495)
|
|
|
(8,457)
|
|
|
Real estate operating expenses
|
—
|
|
|
—
|
|
|
(12,555)
|
|
|
—
|
|
|
(12,555)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee expense
|
(2,252)
|
|
|
(111)
|
|
|
(1,140)
|
|
|
(290)
|
|
|
(3,793)
|
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
(18,950)
|
|
|
(50)
|
|
|
(19,000)
|
|
|
Total costs and expenses
|
(2,214)
|
|
|
(111)
|
|
|
(32,645)
|
|
|
(26,846)
|
|
|
(61,816)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
1,096
|
|
|
1,096
|
|
|
Segment profit (loss)
|
$
|
53,885
|
|
|
$
|
6,152
|
|
|
$
|
19,235
|
|
|
$
|
(68,382)
|
|
|
$
|
10,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of June 30, 2021
|
$
|
2,554,339
|
|
|
$
|
719,183
|
|
|
$
|
986,267
|
|
|
$
|
1,357,020
|
|
|
$
|
5,616,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2020
|
Loans
|
|
Securities
|
|
Real Estate (1)
|
|
Corporate/Other(2)
|
|
Company
Total
|
|
Interest income
|
$
|
112,546
|
|
|
$
|
21,040
|
|
|
$
|
10
|
|
|
$
|
1,090
|
|
|
$
|
134,686
|
|
|
Interest expense
|
(16,602)
|
|
|
(14,554)
|
|
|
(19,993)
|
|
|
(68,678)
|
|
|
(119,827)
|
|
|
Net interest income (expense)
|
95,944
|
|
|
6,486
|
|
|
(19,983)
|
|
|
(67,588)
|
|
|
14,859
|
|
|
Provision for (release of) loan loss reserves
|
(25,855)
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
(25,852)
|
|
|
Net interest income (expense) after provision for (release of) loan reserves
|
70,089
|
|
|
6,489
|
|
|
(19,983)
|
|
|
(67,588)
|
|
|
(10,993)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease income
|
—
|
|
|
—
|
|
|
50,101
|
|
|
—
|
|
|
50,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of loans, net
|
261
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
261
|
|
|
Realized gain (loss) on securities
|
—
|
|
|
(11,787)
|
|
|
—
|
|
|
—
|
|
|
(11,787)
|
|
|
Unrealized gain (loss) on equity securities
|
—
|
|
|
(132)
|
|
|
—
|
|
|
—
|
|
|
(132)
|
|
|
Unrealized gain (loss) on Agency interest-only securities
|
—
|
|
|
174
|
|
|
—
|
|
|
—
|
|
|
174
|
|
|
Realized gain on sale of real estate, net
|
—
|
|
|
—
|
|
|
10,528
|
|
|
—
|
|
|
10,528
|
|
|
Impairment of real estate
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Fee and other income
|
3,854
|
|
|
403
|
|
|
25
|
|
|
742
|
|
|
5,024
|
|
|
Net result from derivative transactions
|
(11,939)
|
|
|
(4,309)
|
|
|
—
|
|
|
—
|
|
|
(16,248)
|
|
|
Earnings (loss) from investment in unconsolidated joint ventures
|
—
|
|
|
—
|
|
|
912
|
|
|
—
|
|
|
912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
21,077
|
|
|
21,077
|
|
|
Total other income (loss)
|
(7,824)
|
|
|
(15,651)
|
|
|
61,566
|
|
|
21,819
|
|
|
59,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,023)
|
|
|
(24,023)
|
|
|
Operating expenses(3)
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,018)
|
|
|
(12,018)
|
|
|
Real estate operating expenses
|
—
|
|
|
—
|
|
|
(13,981)
|
|
|
—
|
|
|
(13,981)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fee expense
|
(2,664)
|
|
|
(133)
|
|
|
(618)
|
|
|
—
|
|
|
(3,415)
|
|
|
Depreciation and amortization
|
—
|
|
|
—
|
|
|
(19,775)
|
|
|
(50)
|
|
|
(19,825)
|
|
|
Total costs and expenses
|
(2,664)
|
|
|
(133)
|
|
|
(34,374)
|
|
|
(36,091)
|
|
|
(73,262)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (expense) benefit
|
—
|
|
|
—
|
|
|
—
|
|
|
5,091
|
|
|
5,091
|
|
|
Segment profit (loss)
|
$
|
59,601
|
|
|
$
|
(9,295)
|
|
|
$
|
7,209
|
|
|
$
|
(76,769)
|
|
|
$
|
(19,254)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets as of December 31, 2020
|
$
|
2,343,070
|
|
|
$
|
1,058,298
|
|
|
$
|
1,031,557
|
|
|
$
|
1,448,303
|
|
|
$
|
5,881,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
(1)Includes the Company’s investment in unconsolidated joint ventures that held real estate of $37.8 million and $46.3 million as of June 30, 2021 and December 31, 2020, respectively.
(2)Corporate/Other represents all corporate level and unallocated items including any intercompany eliminations necessary to reconcile to consolidated Company totals. This segment also includes the Company’s investment in unconsolidated joint ventures and strategic investments that are not related to the other reportable segments above, including the Company’s investment in FHLB stock of $13.0 million and $31.0 million as of June 30, 2021 and December 31, 2020, respectively, and the Company’s senior unsecured notes of $2.1 billion and $1.6 billion as of June 30, 2021 and December 31, 2020, respectively.
20. SUBSEQUENT EVENTS
On July 13, 2021, a consolidated subsidiary of the Company completed a public CLO transaction with a major U.S. bank, which generated $498.2 million of gross proceeds to Ladder, financing $607.5 million of loans (“Contributed Loans”) at an 82% advance rate on a matched term, non-mark-to-market and non-recourse basis. A consolidated subsidiary of the Company retained an 18% subordinate and controlling interest in the CLO. The Company retained control over major decisions made with respect to the administration of the Contributed Loans, including broad discretion in managing these loans, and has the ability to appoint the special servicer under the CLO.
