Loans (Tables)

6 Months Ended

Jun. 30, 2019

Loans

Summary of investments in mortgages and loans by subordination class

							Weighted
					Weighted		Average Life
	Carrying		Face		Average		(“WAL”)
June 30, 2019	Value		Amount		Coupon		(years)(1)
First mortgages (2)	$	6,879,248	$	6,905,735	6.4	%	2.0
First priority infrastructure loans		1,356,511		1,367,336	5.9	%	4.6
Subordinated mortgages (3)		52,926		54,092	8.8	%	3.2
Mezzanine loans (2)		446,484		447,537	11.1	%	2.1
Other		61,931		65,651	8.2	%	2.0
Total loans held-for-investment		8,797,100		8,840,351
Loans held-for-sale, fair value option, residential		1,156,778		1,124,838	6.2	%	5.0
Loans held-for-sale, fair value option, commercial		215,620		215,425	4.2	%	9.7
Loans held-for-sale, infrastructure		214,923		219,298	4.1	%	1.5
Total gross loans		10,384,421		10,399,912
Loan loss allowance		(33,306)		—
Total net loans	$	10,351,115	$	10,399,912
December 31, 2018
First mortgages (2)	$	6,607,117	$	6,631,236	6.9	%	2.0
First priority infrastructure loans		1,456,779		1,465,828	5.7	%	4.5
Subordinated mortgages (3)		52,778		53,996	8.9	%	3.7
Mezzanine loans (2)		393,832		394,739	10.6	%	2.0
Other		61,001		64,658	8.2	%	2.5
Total loans held-for-investment		8,571,507		8,610,457
Loans held-for-sale, fair value option, residential		623,660		609,571	6.3	%	6.6
Loans held-for-sale, commercial ($47,622 under fair value option)		94,117		94,916	5.4	%	6.2
Loans held-for-sale, infrastructure		469,775		486,909	3.5	%	0.3
Loans transferred as secured borrowings		74,346		74,692	7.1	%	1.3
Total gross loans		9,833,405		9,876,545
Loan loss allowance		(39,151)		—
Total net loans	$	9,794,254	$	9,876,545

(1) 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 or acquisition.

(2) 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 $890.0 million and $1.0 billion being classified as first mortgages as of June 30, 2019 and December 31, 2018, respectively.

(3) 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.

Schedule of internal rating categories

Rating	Characteristics
1	●	Sponsor capability and financial condition—Sponsor is highly rated or investment grade or, if private, the equivalent thereof with significant management experience.
	●	Loan collateral and performance relative to underwriting—The collateral has surpassed underwritten expectations.
	●	Quality and stability of collateral cash flows—Occupancy is stabilized, the property has had a history of consistently high occupancy, and the property has a diverse and high quality tenant mix.
	●	Loan structure—Loan to collateral value ratio (“LTV”) does not exceed 65%. The loan has structural features that enhance the credit profile.
2	●	Sponsor capability and financial condition—Strong sponsorship with experienced management team and a responsibly leveraged portfolio.
	●	Loan collateral and performance relative to underwriting—Collateral performance equals or exceeds underwritten expectations and covenants and performance criteria are being met or exceeded.
	●	Quality and stability of collateral cash flows—Occupancy is stabilized with a diverse tenant mix.
	●	Loan structure—LTV does not exceed 70% and unique property risks are mitigated by structural features.
3	●	Sponsor capability and financial condition—Sponsor has historically met its credit obligations, routinely pays off loans at maturity, and has a capable management team.
	●	Loan collateral and performance relative to underwriting—Property performance is consistent with underwritten expectations.
	●	Quality and stability of collateral cash flows—Occupancy is stabilized, near stabilized, or is on track with underwriting.
	●	Loan structure—LTV does not exceed 80%.
4	●	Sponsor capability and financial condition—Sponsor credit history includes missed payments, past due payment, and maturity extensions. Management team is capable but thin.
	●	Loan collateral and performance relative to underwriting—Property performance lags behind underwritten expectations. Performance criteria and loan covenants have required occasional waivers. A sale of the property may be necessary in order for the borrower to pay off the loan at maturity.
	●	Quality and stability of collateral cash flows—Occupancy is not stabilized and the property has a large amount of rollover.
	●	Loan structure—LTV is 80% to 90%.
5	●	Sponsor capability and financial condition—Credit history includes defaults, deeds-in-lieu, foreclosures, and/or bankruptcies.
	●	Loan collateral and performance relative to underwriting—Property performance is significantly worse than underwritten expectations. The loan is not in compliance with loan covenants and performance criteria and may be in default. Sale proceeds would not be sufficient to pay off the loan at maturity.
	●	Quality and stability of collateral cash flows—The property has material vacancy and significant rollover of remaining tenants.
	●	Loan structure—LTV exceeds 90%.

Schedule of risk ratings by class of loan

The risk ratings for loans subject to our rating system, which excludes loans held-for-sale, by class of loan were as follows as of June 30, 2019 and December 31, 2018 (dollars in thousands):

	Balance Sheet Classification
	Loans Held-For-Investment														Loans
				First Priority											Transferred				% of
Risk Rating	First			Infrastructure			Subordinated			Mezzanine					As Secured				Total
Category	Mortgages			Loans			Mortgages			Loans		Other			Borrowings		Total		Loans
June 30, 2019
1	$	812		$	—		$	—		$	—	$	23,264		$	—	$	24,076	0.2	%
2		3,316,307			—			38,017			165,910		—			—		3,520,234	33.9	%
3		3,361,878			—			2,933			280,574		31,104			—		3,676,489	35.4	%
4		—			—			—			—		—			—		—	—	%
5		60,637			—			—			—		—			—		60,637	0.6	%
N/A		139,614	(1)		1,356,511	(2)		11,976	(1)		—		7,563	(1)		—		1,515,664	14.6	%
	$	6,879,248		$	1,356,511		$	52,926		$	446,484	$	61,931		$	—		8,797,100
Loans held-for-sale																		1,587,321	15.3	%
Total gross loans																	$	10,384,421	100.0	%
December 31, 2018
1	$	6,538		$	—		$	—		$	—	$	23,767		$	—	$	30,305	0.3	%
2		3,356,342			—			7,392			111,466		—			74,346		3,549,546	36.1	%
3		2,987,296			—			33,410			282,366		31,039			—		3,334,111	33.9	%
4		63,094			—			—			—		—			—		63,094	0.6	%
5		—			—			—			—		—			—		—	—	%
N/A		193,847	(1)		1,456,779	(2)		11,976	(1)		—		6,195	(1)		—		1,668,797	17.0	%
	$	6,607,117		$	1,456,779		$	52,778		$	393,832	$	61,001		$	74,346		8,645,853
Loans held-for-sale																		1,187,552	12.1	%
Total gross loans																	$	9,833,405	100.0	%

(1) Principally represents loans individually evaluated for impairment in accordance with ASC 310-10.

(2) First priority infrastructure loans were not risk rated as the Company is in the process of developing a risk rating policy for these loans.

Schedule of activity in allowance for loan losses

	For the Six Months Ended
	June 30,
	2019		2018
Allowance for loan losses at January 1	$	39,151	$	4,330
Provision for (reversal of) loan losses		3,281		(3,055)
Provision for impaired loans		—		29,852
Charge-offs		(9,126)		—
Recoveries		—		—
Allowance for loan losses at June 30	$	33,306	$	31,127
Recorded investment in loans related to the allowance for loan loss	$	303,981	$	273,020

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,
	2019		2018
Balance at January 1	$	9,794,254	$	7,382,641
Acquisitions/originations/additional funding		3,704,727		3,315,664
Capitalized interest (1)		52,405		29,499
Basis of loans sold (2)		(1,767,387)		(676,214)
Loan maturities/principal repayments		(1,447,593)		(1,964,644)
Discount accretion/premium amortization		16,112		20,961
Changes in fair value		33,157		22,633
Unrealized foreign currency translation loss		(3,903)		(8,608)
Loan loss provision, net		(3,281)		(26,797)
Loan foreclosure		(27,303)		—
Transfer to/from other asset classifications		(73)		27
Balance at June 30	$	10,351,115	$	8,095,162

(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.