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COMMERCIAL REAL ESTATE INVESTMENTS (Tables)
 6 Months Ended
Jun. 30, 2016
Commercial Real Estate Investments Held for Investment
The following tables present commercial real estate investments held for investment at June 30, 2016 and December 31, 2015.
 
CRE Debt and Preferred Equity Investments
 
 
June 30, 2016
    
December 31, 2015
  
 
Outstanding
Principal
    
Carrying
Value(1)
    
Percentage
of Loan
Portfolio(2)
    
Outstanding
Principal
    
Carrying
Value(1)
    
Percentage
of Loan
Portfolio(2)
  
 
(dollars in thousands)
  
Senior mortgages
  
$
480,665
    
$
478,260
      
42.0
%
  
$
387,314
    
$
385,838
      
28.6
%
Senior securitized mortgages(3)
    
187,322
      
187,246
      
16.4
%
    
263,072
      
262,703
      
19.4
%
Mezzanine loans
    
466,844
      
463,507
      
40.8
%
    
582,592
      
578,503
      
43.0
%
Preferred equity
    
9,000
      
8,958
      
0.8
%
    
122,444
      
121,773
      
9.0
%
Total (4)
  
$
1,143,831
    
$
1,137,971
      
100.0
%
  
$
1,355,422
    
$
1,348,817
      
100.0
%

  (1) Carrying value includes unamortized origination fees of $5.9 million and $6.9 million as of June 30, 2016 and December 31, 2015, respectively.
  (2) Based on outstanding principal.
      
  (3) Assets of consolidated VIEs.
      
  (4) Excludes Loans held for sale, net. 
      
 
   
June 30, 2016
  
   
Senior
Mortgages
    
Senior Securitized Mortgages(1)
    
Mezzanine
Loans
    
Preferred
Equity
    
Total
  
   
(dollars in thousands)
  
Beginning balance
  
$
385,838
    
$
262,703
    
$
578,503
    
$
121,773
    
$
1,348,817
  
Originations & advances (principal)
    
158,502
      
-
      
32,363
      
-
      
190,865
  
Principal payments
    
(65,153
)
    
(75,750
)
    
(148,111
)
    
(113,444
)
    
(402,458
)
Sales (principal)
    
-
      
-
      
-
      
-
      
-
  
Amortization & accretion of (premium) discounts
    
(66
)
    
-
      
(205
)
    
-
      
(271
)
Net (increase) decrease in origination fees
    
(1,566
)
    
-
      
(282
)
    
-
      
(1,848
)
Amortization of net origination fees
    
705
      
293
      
1,239
      
629
      
2,866
  
Transfers
    
-
      
-
      
-
      
-
      
-
  
Allowance for loan losses
    
-
      
-
      
-
      
-
      
-
  
Net carrying value (2)
  
$
478,260
    
$
187,246
    
$
463,507
    
$
8,958
    
$
1,137,971
  
                                         
  (1) Assets of consolidated VIE.
                                    
  (2) Excludes Loans held for sale, net.
                                    

   
December 31, 2015
  
   
Senior
Mortgages
    
Senior Securitized Mortgages(1)
    
Mezzanine
Loans
    
Preferred
Equity
    
Total
  
   
(dollars in thousands)
  
Beginning balance
  
$
383,895
    
$
398,634
    
$
522,731
    
$
212,905
    
$
1,518,165
  
Originations & advances (principal)
    
293,925
      
-
      
195,312
      
-
      
489,237
  
Principal payments
    
(243,270
)
    
(136,469
)
    
(153,693
)
    
(92,210
)
    
(625,642
)
Sales (principal)
    
(46,945
)
    
-
      
-
      
-
      
(46,945
)
Amortization & accretion of (premium) discounts
    
(142
)
    
-
      
(232
)
    
517
      
143
  
Net (increase) decrease in origination fees
    
(3,702
)
    
(279
)
    
(4,806
)
    
-
      
(8,787
)
Amortization of net origination fees
    
2,077
      
817
      
691
      
561
      
4,146
  
Transfers
    
-
      
-
      
18,500
      
-
      
18,500
  
Allowance for loan losses
    
-
      
-
      
-
      
-
      
-
  
Net carrying value (2)
  
$
385,838
    
$
262,703
    
$
578,503
    
$
121,773
    
$
1,348,817
  
                                         
  (1) Assets of consolidated VIE.
                                        
  (2) Excludes Loans held for sale, net.
                                        
Internal Loan and Preferred Equity Ratings
Internal CRE Debt and Preferred Equity Investment Ratings
 
  
   
June 30, 2016
  
         
Percentage of CRE Debt and Preferred Equity Portfolio
    
Internal Ratings
                    
Investment Type
  
Outstanding Principal (1)
    
Performing
    
Performing - Closely Monitored
    
Performing - Special Mention
    
Substandard
    
Doubtful
    
Loss
    
Total
  
   
(dollars in thousands)
                    
Senior mortgages
  
$
480,665
      
42.0
%
  
$
91,620
    
$
243,605
    
$
145,440
    
$
-
    
$
-
    
$
-
    
$
480,665
  
Senior securitized mortgages(2)
    
187,322
      
16.4
%
    
58,426
      
17,500
      
111,396
      
-
      
-
      
-
      
187,322
  
Mezzanine loans
    
466,844
      
40.8
%
    
276,658
      
153,869
      
36,317
      
-
      
-
      
-
      
466,844
  
Preferred equity
    
9,000
      
0.8
%
    
-
      
-
      
9,000
      
-
      
-
      
-
      
9,000
  
   
$
1,143,831
      
100.0
%
  
$
426,704
    
$
414,974
    
$
302,153
    
$
-
    
$
-
    
$
-
    
$
1,143,831
  
                                                                         
  (1) Excludes Loans held for sale, net.                                   
  (2) Assets of consolidated VIE.                                  
 
                                                                        
   
December 31, 2015
  
           
Percentage of CRE Debt and Preferred Equity Portfolio
    
Internal Ratings
                          
Investment Type
  
Outstanding Principal (1)
    
Performing
    
Performing - Closely Monitored
    
Performing - Special Mention
    
Substandard
    
Doubtful
    
Loss
    
Total
  
   
(dollars in thousands)
                          
Senior mortgages
  
$
387,314
      
28.6
%
  
$
71,000
    
$
283,148
    
$
33,166
    
$
-
    
$
-
    
$
-
    
$
387,314
  
Senior securitized mortgages(2)
    
263,072
      
19.4
%
    
106,770
      
15,500
      
140,802
      
-
      
-
      
-
      
263,072
  
Mezzanine loans
    
582,592
      
43.0
%
    
342,493
      
219,969
      
20,130
      
-
      
-
      
-
      
582,592
  
Preferred equity
    
122,444
      
9.0
%
    
-
      
81,944
      
40,500
      
-
      
-
      
-
      
122,444
  
   
$
1,355,422
      
100.0
%
  
$
520,263
    
$
600,561
    
$
234,598
    
$
-
    
$
-
    
$
-
    
$
1,355,422
  
                                                                         
  (1) Excludes Loans held for sale, net.                                  
  (2) Assets of consolidated VIE.                                   
Summary of Acquisitions of Real Estate Held for Investment
The following table summarizes real estate held for investment acquired in 2015:

Date of Acquisition
Type
Location
Original Purchase
Price
  
Remaining Lease
Term (Years) (1)
  
(dollars in thousands)
      
 
 
 
        
July 2015
Single Tenant Retail
Ohio
  
$
11,000
      
4.4
  
August 2015
Multi Tenant Retail
Florida
  
$
18,900
      
4.9
  
October 2015
Multifamily Property
Washington, DC
  
$
75,000
      
0.1
  
October 2015
Multi Tenant Retail
California
  
$
37,750
      
2.8
  
November 2015
Multi Tenant Retail
Texas
  
$
131,950
      
4.6
  
 (1)            Does not include extension options.
Aggregate Allocation of Final Purchase Price
The following presents the aggregate final purchase price allocation of the Texas Portfolio:
 
  
Texas
  
 
  
(dollars in thousands)
  
Purchase Price Allocation:
      
Land
  
$
32,452
  
Buildings
    
82,552
  
Site improvements
    
5,446
  
Tenant Improvements
    
6,835
  
Real estate held for investment
    
127,285
  
 
        
Intangible assets (liabilities):
        
Leasehold intangible assets
    
14,598
  
Above market lease
    
274
  
Below market lease
    
(10,207
)
Total purchase price
  
$
131,950
  
Total Commercial Real Estate Held for Investments
   
June 30, 2016
    
December 31, 2015
  
   
(dollars in thousands)
  
Real estate held for investment, at amortized cost
            
Land
  
$
117,023
    
$
113,494
  
Buildings and improvements
    
355,082
      
373,603
  
Subtotal
    
472,105
      
487,097
  
Less: accumulated depreciation
    
(27,260
)
    
(16,886
)
Total real estate held for investment, at amortized cost, net
    
444,845
      
470,211
  
Equity in unconsolidated joint ventures
    
59,760
      
65,735
  
Investments in commercial real estate, net
  
$
504,605
    
$
535,946
  
Minimum Future Rentals on Non-cancelable Leases
Rental Income
 
 
 
  
June 30, 2016
  
 
  
(dollars in thousands)
  
2016 (remaining)
  
$
17,762
  
2017
    
35,242
  
2018
    
31,518
  
2019
    
27,614
  
2020
    
23,401
  
Later years
    
58,656
  
 
  
$
194,193
  
Mortgage loans payable
Mortgage loans payable as of June 30, 2016 and December 31, 2015, were as follows:
 
June 30, 2016
Property
Mortgage Carrying Value
  
Mortgage
Principal
  
Interest Rate
Fixed/Floating
Rate
Maturity Date
Priority
(dollars in thousands)
Joint Ventures
  
$
285,804
    
$
289,125
  
2.30% to 4.61%
Fixed
2016, 2024 and 2025
First liens
Tennessee
    
12,244
      
12,350
      
4.01
%
Fixed
9/6/2019
First liens
Virginia
    
11,013
      
11,025
      
3.58
%
Fixed
6/6/2019
First liens
Arizona
    
16,176
      
16,145
      
3.50
%
Fixed
1/1/2017
First liens
Nevada
    
2,406
      
2,401
      
3.45
%
Floating (1)
3/29/2017
First liens
 
  
$
327,643
    
$
331,046
          
 
 
        
 
                        
 
 
                
(1) Includes a mortgage with a fixed rate via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).
 
                        
 
 
                
 
                        
 
 
                
December 31, 2015
Property
Mortgage Carrying Value
  
Mortgage
Principal
  
Interest Rate
Fixed/Floating
Rate
Maturity Date
Priority
(dollars in thousands)
Joint Ventures
  
$
292,658
    
$
296,325
  
2.30% to 4.61%
Fixed
2016, 2024 and 2025
First liens
Tennessee
    
12,228
      
12,350
      
4.01
%
Fixed
9/6/2019
First liens
Virginia
    
11,012
      
11,025
      
3.58
%
Fixed
6/6/2019
First liens
Arizona
    
16,365
      
16,308
      
3.50
%
Fixed
1/1/2017
First liens
Nevada
    
2,444
      
2,436
      
3.45
%
Floating (1)
3/29/2017
First liens
 
  
$
334,707
    
$
338,444
          
 
 
        
 
                        
 
 
                
(1) Includes a mortgage with a fixed rate via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).
Future Mortgage Loan Principal Payments
The following table details future mortgage loan principal payments as of June 30, 2016:
 
 
  
Mortgage Loan Principal
Payments
  
 
  
(dollars in thousands)
  
2016 (remaining)
  
$
202
  
2017
    
18,344
  
2018
    
-
  
2019
    
23,375
  
2020
    
-
  
Later years
    
289,125
  
 
  
$
331,046
  
Geographic Concentrations of Credit Risk Exceeding 5% of Total Loan Unpaid Principal Balances
The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the FREMF Trusts as of June 30, 2016 are as follows:
 
Securitized Loans at Fair Value Geographic Concentration of Credit Risk
  
Property Location
  
Principal Balance
    
% of Balance
  
 
  
(dollars in thousands)
  
Texas
  
$
749,569
      
18.8
%
North Carolina
    
537,375
      
13.5
%
Maryland
    
499,495
      
12.5
%
Florida
    
456,589
      
11.4
%
Other
    
1,751,918
      
43.8
%
Total
  
$
3,994,946
      
100.0
%
FREMF Trust  
Statement of financial condition of FREMF Trust Reflected the Consolidated Statements of Financial Condition
The statement of financial condition of the FREMF Trusts that is reflected in the Company’s Consolidated Statements of Financial Condition at June 30, 2016 and December 31, 2015 are as follows:
 
 
  
June 30, 2016
    
December 31, 2015
  
 
  
(dollars in thousands)
  
Assets
            
Senior securitized commercial mortgages carried at fair value
  
$
3,987,191
    
$
2,554,023
  
Accrued interest receivable
    
8,166
      
4,994
  
Total assets
  
$
3,995,357
    
$
2,559,017
  
 
                
Liabilities
                
Securitized debt (non-recourse) at fair value
  
$
3,688,977
    
$
2,366,878
  
Accrued interest payable
    
4,214
      
4,183
  
Total liabilities
  
$
3,693,191
    
$
2,371,061
  
Statement of Comprehensive Income (Loss) of FREMF Trusts Reflected the Consolidated Statements of Comprehensive Income (Loss)
The statement of comprehensive income (loss) of the FREMF Trusts that is reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss) for the quarter and six months ended June 30, 2016 are as follows:
 
 
  
For the Quarter Ended
    
For the Six Months Ended
  
 
  
June 30, 2016
    
June 30, 2016
  
 
  
(dollars in thousands)
  
Net interest income:
            
Interest income
  
$
23,794
    
$
44,824
  
Interest expense
    
10,347
      
18,223
  
Net interest income
    
13,447
      
26,601
  
 
                
Other income (loss):
                
Unrealized gain (loss) on financial instruments at fair value (1)
    
6,838
      
6,985
  
Guarantee fees and servicing costs
    
(6,791
)
    
(12,088
)
Other income (loss)
    
47
      
(5,103
)
General and administration expenses
    
-
      
2
  
Net income
  
$
13,494
    
$
21,496
  
 
                
(1) Included in Net unrealized gains (losses) on financial instruments measured at fair value through earnings.