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Loans (Tables)
 6 Months Ended
Jun. 30, 2016
Loans  
Summary of investments in mortgages and loans by subordination class

The following tables summarize our investments in mortgages and loans by subordination class as of June 30, 2016 and December 31, 2015 (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

  

 

 

  

 

    

Weighted

 

 

 

 

 

 

 

 

Weighted

 

Average Life

 

 

Carrying

 

Face

 

Average

 

(“WAL”)

June 30, 2016

    

Value

    

Amount

    

Coupon

    

(years)(3)

First mortgages (1)

 

$
4,538,986

 

$
4,592,601

 
5.8

%  
2.4

Subordinated mortgages (2)

 

 
392,208

 

 
413,228

 
8.5

%  
3.0

Mezzanine loans (1)

 

 
769,555

 

 
756,400

 
9.9

%  
2.1

Total loans held-for-investment

 

 
5,700,749

 

 
5,762,229

 

 

 

 

Loans held-for-sale, fair value option elected

 

 
237,106

 

 
235,296

 
5.0

%  
9.8

Loans transferred as secured borrowings

 

 
93,268

 

 
94,668

 
6.1

%  
2.0

Total gross loans

 

 
6,031,123

 

 
6,092,193

 

 

 

 

Loan loss allowance (loans held-for-investment)

 

 
(7,297)

 

 

 —

 

 

 

 

Total net loans

 

$
6,023,826

 

$
6,092,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

First mortgages (1)

 

$
4,723,852

 

$
4,776,576

 
6.0

%  
2.7

Subordinated mortgages (2)

 

 
392,563

 

 
416,713

 
8.5

%  
3.4

Mezzanine loans (1)

 

 
862,693

 

 
850,024

 
9.9

%  
2.5

Total loans held-for-investment

 

 
5,979,108

 

 
6,043,313

 

 

 

 

Loans held-for-sale, fair value option elected

 

 
203,865

 

 
203,710

 
4.9

%  
9.8

Loans transferred as secured borrowings

 

 
86,573

 

 
88,000

 
6.1

%  
2.4

Total gross loans

 

 
6,269,546

 

 
6,335,023

 

 

 

 

Loan loss allowance (loans held-for-investment)

 

 
(6,029)

 

 

 —

 

 

 

 

Total net loans

 

$
6,263,517

 

$
6,335,023

 

 

 

 

(1)

First mortgages include first mortgage loans and any contiguous mezzanine loan components because as a whole, the expected credit quality of these loans is more similar to that of a first mortgage loan.  The application of this methodology resulted in mezzanine loans with carrying values of $949.2 million and $930.0 million being classified as first mortgages as of June 30, 2016 and December 31, 2015, respectively.

(2)

Subordinated mortgages include B-Notes and junior participation in first mortgages where we do not own the senior A-Note or senior participation. If we own both the A-Note and B-Note, we categorize the loan as a first mortgage loan.

(3)

Represents the WAL of each respective group of loans as of the respective balance sheet date. The WAL of each individual loan is calculated using amounts and timing of future principal payments, as projected at origination.

Summary of investments in floating rate loans

The following table summarizes our investments in floating rate loans (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2016

 

December 31, 2015

 

 

    

 

    

Carrying

    

 

    

Carrying

 

Index

 

Base Rate

 

Value

 

Base Rate

 

Value

 

One-month LIBOR USD

 
0.4651

%

$
572,062

 
0.4295

%

$
438,641

 

Three-month LIBOR GBP

 

N/A

 

 

 —

 
0.5904

%

 
375,467

 

LIBOR floor

 

0.15 - 3.00

% (1)  

 
4,508,359

 

0.15 - 3.00

% (1)  

 
4,237,947

 

Total

 

 

 

$
5,080,421

 

 

 

$
5,052,055

 

(1)

The weighted-average LIBOR floor was 0.32% and 0.31% as of June 30, 2016 and December 31, 2015, respectively.
Schedule of internal rating categories

As of June 30, 2016, the risk ratings for loans subject to our rating system, which excludes loans on the cost recovery method and loans for which the fair value option has been elected, by class of loan were as follows (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Classification

 

 

 

 

 

 

 

 

Loans Held-For-Investment

 

 

 

 

Loans

 

 

 

 

 

 

 

    

 

    

 

    

 

    

 

    

Transferred

    

 

    

% of

 

Risk Rating

 

First

 

Subordinated

 

Mezzanine

 

Loans Held-

 

As Secured

 

 

 

Total

 

Category

 

Mortgages

 

Mortgages

 

Loans

 

For-Sale

 

Borrowings

 

Total

 

Loans

 

1

 

$
3,070

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$
3,070

 
0.1

%

2

 

 
606,666

 

 
86,069

 

 
96,404

 

 

 —

 

 

 —

 

 
789,139

 
13.1

%

3

 

 
3,728,584

 

 
285,921

 

 
552,692

 

 

 —

 

 
93,268

 

 
4,660,465

 
77.3

%

4

 

 
200,666

 

 
20,218

 

 
58,262

 

 

 —

 

 

 —

 

 
279,146

 
4.6

%

5

 

 

 —

 

 

 —

 

 
62,197

 

 

 —

 

 

 —

 

 
62,197

 
1.0

%

N/A

 

 

 —

 

 

 —

 

 

 —

 

 
237,106

 

 

 —

 

 
237,106

 
3.9

%

 

 

$
4,538,986

 

$
392,208

 

$
769,555

 

$
237,106

 

$
93,268

 

$
6,031,123

 
100.0

%

 

As of December 31, 2015, the risk ratings for loans subject to our rating system by class of loan were as follows (dollars in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Classification

 

 

 

 

 

 

 

 

Loans Held-For-Investment

 

 

 

 

Loans

 

 

 

 

 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Transferred

    

 

 

    

% of

 

Risk Rating

 

First

 

Subordinated

 

Mezzanine

 

Loans Held-

 

As Secured

 

 

 

 

Total

 

Category

 

Mortgages

 

Mortgages

 

Loans

 

For-Sale

 

Borrowings

 

Total

 

Loans

 

1

 

$
664

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$
664

 

 —

%

2

 

 
496,372

 

 
88,857

 

 
90,449

 

 

 —

 

 

 —

 

 
675,678

 
10.8

%

3

 

 
3,979,247

 

 
270,435

 

 
651,204

 

 

 —

 

 
86,573

 

 
4,987,459

 
79.6

%

4

 

 
247,569

 

 
33,271

 

 
121,040

 

 

 —

 

 

 —

 

 
401,880

 
6.4

%

5

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 —

%

N/A

 

 

 —

 

 

 —

 

 

 —

 

 
203,865

 

 

 —

 

 
203,865

 
3.2

%

 

 

$
4,723,852

 

$
392,563

 

$
862,693

 

$
203,865

 

$
86,573

 

$
6,269,546

 
100.0

%

 

Schedule of activity in allowance for loan losses

The following table presents the activity in our allowance for loan losses (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

June 30,

 

    

2016

    

2015

Allowance for loan losses at January 1

 

$
6,029

 

$
6,031

Provision for loan losses

 

 
1,268

 

 
2,978

Charge-offs

 

 

 —

 

 

—

Recoveries

 

 

 —

 

 

 —

Allowance for loan losses at June 30

 

$
7,297

 

$
9,009

Recorded investment in loans related to the allowance for loan loss

 

$
341,343

 

$
493,274

 

Schedule of activity in loan portfolio

The activity in our loan portfolio was as follows (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

June 30,

 

    

2016

    

2015

Balance at January 1

 

$
6,263,517

 

$
6,300,285

Acquisitions/originations/additional funding

 

 
1,492,845

 

 
2,150,080

Capitalized interest (1)

 

 
44,875

 

 
33,509

Basis of loans sold (2)

 

 
(596,454)

 

 
(1,411,912)

Loan maturities/principal repayments

 

 
(1,199,205)

 

 
(695,750)

Discount accretion/premium amortization

 

 
23,362

 

 
18,139

Changes in fair value

 

 
20,126

 

 
31,962

Unrealized foreign currency remeasurement loss

 

 
(33,325)

 

 
(4,419)

Change in loan loss allowance, net

 

 
(1,268)

 

 
(2,978)

Transfer to/from other asset classifications

 

 
9,353

 

 
(172)

Balance at June 30

 

$
6,023,826

 

$
6,418,744

(1)

Represents accrued interest income on loans whose terms do not require current payment of interest.

(2)

See Note 11 for additional disclosure on these transactions.