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Debt and Preferred Equity Investments
 9 Months Ended
Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract]  
Debt and Preferred Equity Investments Debt and Preferred Equity Investments
Below is a summary of the activity in our debt and preferred equity investments for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021 (in thousands):
September 30, 2022December 31, 2021
Balance at beginning of year (1)
$1,088,723 $1,076,542 
Debt investment originations/fundings/accretion (2)
48,778 193,824 
Preferred equity investment originations/accretion (2)
35,536 13,220 
Redemptions/sales/syndications/equity ownership/amortization (3)
(509,052)(201,446)
Net change in loan loss reserves— 6,583 
Balance at end of period (1)
$663,985 $1,088,723 
(1)Net of unamortized fees, discounts, and premiums.
(2)Accretion includes amortization of fees and discounts and paid-in-kind investment income.
(3)Certain participations in debt investments that were sold or syndicated, but did not meet the conditions for sale accounting, are included in Other assets and Other liabilities on the consolidated balance sheets.
Below is a summary of our debt and preferred equity investments as of September 30, 2022 (dollars in thousands):
Floating RateFixed RateTotal Carrying ValueSenior FinancingWeighted Average Yield at End of Period
Maturity (1)
TypeCarrying ValueFace ValueInterest RateCarrying ValueFace ValueInterest Rate
Senior Mortgage Debt$32,616 $32,658 
L + 3.50%
$— $— 
—%
$32,616 $— 7.21%2022
Mezzanine Debt156,833 157,320 
L + 4.95% - 12.38%
356,647 364,742 
7.00% - 14.30%
513,480 1,663,817 6.27%2022 - 2029
Preferred Equity— — —117,889 117,889 6.5%117,889 250,000 6.55%2027
Balance at end of period$189,449 $189,978 $474,536 $482,631 $663,985 $1,913,817 
(1)Excludes available extension options to the extent they have not been exercised as of the date of this filing.
The following table is a roll forward of our total allowance for loan losses for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021 (in thousands):
September 30, 2022December 31, 2021
Balance at beginning of year$6,630 $13,213 
Write-offs charged against the allowance— (6,583)
Balance at end of period (1)
$6,630 $6,630 
(1)As of September 30, 2022, all financing receivables on non-accrual had an allowance for loan loss except for one debt investment with a carrying value of $225.4 million.
As of September 30, 2022 and December 31, 2021, all debt and preferred equity investments were performing in accordance with their respective terms, with the exception of one investment with a carrying value, net of reserves, of $6.9 million, as discussed in the Debt Investments and Preferred Equity Investments tables further below.
No other financing receivables were 90 days past due as of September 30, 2022 and December 31, 2021.
The following table sets forth the carrying value of our debt and preferred equity investment portfolio by risk rating as of September 30, 2022 and December 31, 2021 (dollars in thousands):
Risk RatingSeptember 30, 2022December 31, 2021
1 - Low Risk Assets - Low probability of loss
$307,492 $644,489 
2 - Watch List Assets - Higher potential for loss
349,603 437,344 
3 - High Risk Assets - Loss more likely than not6,890 6,890 
$663,985 $1,088,723 
The following table sets forth the carrying value of our debt and preferred equity investment portfolio by year of origination and risk rating as of September 30, 2022 (dollars in thousands):
As of September 30, 2022
Risk Rating
2022 (1)
2021 (1)
2020 (1)
Prior (1)
Total
1 - Low Risk Assets - Low probability of loss
$— $— $168,223 $139,269 $307,492 
2 - Watch List Assets - Higher potential for loss
— 74,390 — 275,213 349,603 
3 - High Risk Assets - Loss more likely than not
— — — 6,890 6,890 
$— $74,390 $168,223 $421,372 $663,985 
(1)Year in which the investment was originated or acquired by us or in which a material modification occurred.
We have determined that we have one portfolio segment of financing receivables as of September 30, 2022 and December 31, 2021 comprised of commercial real estate which is primarily recorded in debt and preferred equity investments.
Included in Other assets is an additional amount of financing receivables representing loans to joint venture partners totaling $9.0 million and $10.5 million as of September 30, 2022 and December 31, 2021, respectively. The Company recorded no provisions for loan losses related to these financing receivables for the three and nine months ended September 30, 2022 and 2021. All of these loans have a risk rating of 2 and were performing in accordance with their respective terms.
Debt Investments
    As of September 30, 2022 and December 31, 2021, we held the following debt investments with an aggregate weighted average current yield of 6.32% as of September 30, 2022 (dollars in thousands):
Loan TypeSeptember 30, 2022
Future Funding
Obligations		September 30, 2022 Senior
Financing
September 30, 2022
Carrying Value (1)
December 31, 2021
Carrying Value (1)
Maturity
Date (2)
Fixed Rate Investments:
Mezzanine Loan (3)
$— $394,854 $225,367 $225,367 June 2023
Mezzanine Loan— 281,147 74,390 66,873 June 2023
Mezzanine Loan (4)(5)
— 105,000 13,366 13,366 June 2024
Mezzanine Loan— 95,000 30,000 30,000 January 2025
Mezzanine Loan— 85,000 20,000 20,000 December 2029
Mezzanine Loan— — — 43,521 
Mortgage Loan— — — 73,000 
Mezzanine Loan (6)
— — — 55,250 
Total fixed rate$— $961,001 $363,123 $527,377  
Floating Rate Investments:
Mortgage and Mezzanine Loan$8,257 $— $50,186 $34,874 December 2022
Mezzanine Loan— 275,000 50,000 49,998 April 2023
Mezzanine Loan3,761 54,000 8,243 8,050 May 2023
Mezzanine Loan22,592 187,733 42,091 30,802 May 2023
Mezzanine Loan— 186,084 39,083 37,511 July 2023
Mezzanine Loan (7)
— — — 133,735 
Total floating rate$34,610 $702,817 $189,603 $294,970  
Allowance for loan loss — — (6,630)(6,630)
Total$34,610 $1,663,818 $546,096 $815,717 
(1)Carrying value is net of discounts, premiums, original issue discounts and deferred origination fees.
(2)Represents contractual maturity, excluding any extension options to the extent they have not been exercised as of the date of this filing.
(3)This loan was put on non-accrual in July 2020 and remains on non-accrual as of September 30, 2022. No investment income has been recognized subsequent to it being put on non-accrual. The Company is in discussions with the borrower.
(4)Carrying value is net of a $12.4 million participation that was sold and did not meet the conditions for sale accounting, which is included in Other assets and Other liabilities on the consolidated balance sheets as a result.
(5)This loan went into default and was put on non-accrual in June 2020 and remains on non-accrual as of September 30, 2022. No investment income has been recognized subsequent to it being put on non-accrual. The Company is in discussions with the borrower. Additionally, we determined the borrower entity to be a VIE, in which we are not the primary beneficiary.
(6)In September 2022, the Company successfully acquired full ownership and control of the property at 245 Park Avenue. See below table and Note 3, "Property Acquisitions."
(7)In September 2022, the Company converted its mezzanine loan position secured by the equity interest in 5 Times Square to an equity interest in a joint venture partnership with the existing equity holders. See Note 6, " Investments in Unconsolidated Joint Ventures."
Preferred Equity Investments
As of September 30, 2022 and December 31, 2021, we held the following preferred equity investments with an aggregate weighted average current yield of 6.55% as of September 30, 2022 (dollars in thousands):
TypeSeptember 30, 2022
Future Funding
Obligations		September 30, 2022 Senior
Financing
September 30, 2022
Carrying Value (1)
December 31, 2021
Carrying Value (1)
Mandatory Redemption (2)
Preferred Equity$— $250,000 $117,889 $112,234 February 2027
Preferred Equity (3)
— — — 160,772 
Total Preferred Equity$— $250,000 $117,889 $273,006  
Allowance for loan loss — — — — 
Total$— $250,000 $117,889 $273,006 
(1)Carrying value is net of deferred origination fees.
(2)Represents contractual redemption, excluding any unexercised extension options.
(3)On October 31, 2021, HNA, through an affiliated entity, filed for Chapter 11 bankruptcy protection on account of its investment in 245 Park Avenue, together with another asset in Chicago. On July 8, 2022, certain of the debtors and affiliates of SL Green entered into the Plan, pursuant to which SL Green became the stalking horse bidder for the property. Since the debtors did not receive any qualifying bids for the property and the Plan was confirmed, SL Green acquired full ownership and control of the property in September 2022, at which time the Company's outstanding preferred equity and accrued interest balance were credited to our equity investment in the property. See Note 3, "Property Acquisitions."