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Loans (Tables)

3 Months Ended

Mar. 31, 2020

Summary of investments in mortgages and loans by subordination class

The following tables summarize our investments in mortgages and loans as of March 31, 2020 and December 31, 2019 (dollars in thousands):


							Weighted
					Weighted		Average Life
	Carrying		Face		Average		(“WAL”)
March 31, 2020	Value		Amount		Coupon (1)		(years)(2)
Loans held-for-investment:
Commercial loans:
First mortgages (3)	$	8,290,772	$	8,318,289	5.3	%	1.9
Subordinated mortgages (4)		68,230		69,485	8.8	%	3.5
Mezzanine loans (3)		523,901		523,963	10.4	%	2.0
Other		31,058		34,852	8.9	%	2.2
Total commercial loans		8,913,961		8,946,589
Infrastructure first priority loans		1,397,404		1,416,147	5.0	%	4.7
Residential mortgage loans, fair value option (5)		274,758		276,661	6.2	%	4.1
Total loans held-for-investment		10,586,123		10,639,397
Loans held-for-sale:
Residential, fair value option (5)		886,076		892,815	6.1	%	4.1
Commercial, fair value option		186,963		185,535	3.9	%	10.0
Infrastructure, lower of cost or fair value		102,020		103,007	2.9	%	2.2
Total loans held-for-sale		1,175,059		1,181,357
Total gross loans		11,761,182	$	11,820,754
Credit loss allowances:
Commercial loans held-for-investment		(81,054)
Infrastructure loans held-for-investment		(16,133)
Total held-for-investment allowances		(97,187)
Infrastructure loans held-for-sale with a fair value allowance		(125)
Total allowances		(97,312)
Total net loans	$	11,663,870

December 31, 2019
Loans held-for-investment:
Commercial loans:
First mortgages (3)	$	7,928,026	$	7,962,788	5.8	%	2.0
Subordinated mortgages (4)		75,724		77,055	8.8	%	3.4
Mezzanine loans (3)		484,164		484,408	11.0	%	1.9
Other		62,555		66,525	8.2	%	1.6
Total commercial loans		8,550,469		8,590,776
Infrastructure first priority loans		1,397,448		1,416,164	5.6	%	4.9
Residential mortgage loans, fair value option		671,572		654,925	6.1	%	3.8
Total loans held-for-investment		10,619,489		10,661,865
Loans held-for-sale:
Residential, fair value option		605,384		587,144	6.2	%	3.9
Commercial, fair value option		159,238		160,635	3.9	%	10.0
Infrastructure, lower of cost or fair value		119,724		121,271	3.3	%	2.1
Total loans held-for-sale		884,346		869,050
Total gross loans		11,503,835	$	11,530,915
Credit loss allowances:
Commercial loans held-for-investment		(33,415)
Infrastructure loans held-for-investment		—
Total held-for-investment allowances		(33,415)
Infrastructure loans held-for-sale with a fair value allowance		(196)
Total allowances		(33,611)
Total net loans	$	11,470,224

(1)	Calculated using LIBOR or other applicable index rates as of March 31, 2020 and December 31, 2019 for variable rate loans.

(2)	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.

(3)

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 $968.2 million and $967.0 million being classified as first mortgages as of March 31, 2020 and December 31, 2019, respectively.

(4)	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.

(5)	During the three months ended March 31, 2020, $422.7 million of residential loans held-for-investment were reclassified into residential loans held-for-sale.

Summary of variable rate loans held-for-investment

As of March 31, 2020, our variable rate loans held-for-investment were as follows (dollars in thousands):


	Carrying		Weighted-average
March 31, 2020	Value		Spread Above Index
Commercial loans	$	8,360,382	4.2	%
Infrastructure loans		1,397,404	3.8	%
Total variable rate loans held-for-investment	$	9,757,786	4.1	%

Schedule of risk ratings by class of loan

The significant credit quality indicators for our loans measured at amortized cost, which excludes loans held-for-sale, were as follows as of March 31, 2020 (dollars in thousands):




	Term Loans												Revolving Loans		Total		Credit
	Amortized Cost Basis by Origination Year												Amortized Cost		Amortized		Loss
As of March 31, 2020	2020		2019		2018		2017		2016		Prior		Total		Cost Basis		Allowance
Commercial loans:
Credit quality indicator:
LTV < 60%	$	443,347	$	1,261,635	$	874,787	$	1,083,919	$	150,108	$	251,913	$	—	$	4,065,709	$	11,005
LTV 60% - 70%		135,804		928,481		1,448,921		474,098		53,385		169,668		—		3,210,357		25,356
LTV > 70%		159,833		789,538		326,551		127,046		—		60,712		—		1,463,680		14,840
Credit deteriorated		—		—		37,568		7,755		—		105,589		—		150,912		29,853
Defeased and other		—		—		—		—		—		23,303		—		23,303		—
Total commercial	$	738,984	$	2,979,654	$	2,687,827	$	1,692,818	$	203,493	$	611,185	$	—	$	8,913,961	$	81,054
Infrastructure loans:
Credit quality indicator:
Power	$	—	$	257,135	$	307,233	$	120,627	$	199,828	$	249,584	$	23,778	$	1,158,185	$	9,654
Oil and gas		—		154,429		84,790		—		—		—		—		239,219		6,479
Total infrastructure	$	—	$	411,564	$	392,023	$	120,627	$	199,828	$	249,584	$	23,778		1,397,404		16,133
Residential loans held-for-investment, fair value option																274,758		—
Loans held-for-sale																1,175,059		125
Total gross loans															$	11,761,182	$	97,312

Schedule of activity in allowance for loan losses

The following tables present the activity in our credit loss allowance for funded loans and unfunded commitments (amounts in thousands):


					Loans
	Loans Held-for-Investment				Held-for-Sale		Total
Three Months Ended March 31, 2020	Commercial		Infrastructure		Infrastructure		Funded Loans
Credit loss allowance at December 31, 2019	$	33,415	$	—	$	196	$	33,611
Cumulative effect of ASC 326 effective January 1, 2020		10,112		10,328		—		20,440
Credit loss provision, net		37,527		5,805		—		43,332
Charge-offs		—		—		(71)		(71)
Recoveries		—		—		—		—
Credit loss allowance at March 31, 2020	$	81,054	$	16,133	$	125	$	97,312


	Unfunded Commitments Credit Loss Allowance (1)
	Loans Held-for-Investment				HTM Preferred
Three Months Ended March 31, 2020	Commercial		Infrastructure		Interests (2)		Total
Credit loss allowance at December 31, 2019	$	—	$	—	$	—	$	—
Cumulative effect of ASC 326 effective January 1, 2020		8,348		2,205		—		10,553
Credit loss (reversal) provision, net		(195)		2,645		1,980		4,430
Credit loss allowance at March 31, 2020	$	8,153	$	4,850	$	1,980	$	14,983
Memo: Unfunded commitments as of March 31, 2020 (3)	$	2,447,330	$	180,829	$	17,261	$	2,645,420

(1)	Included in accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheet.

(2)	See Note 5 for further details.

(3)	Represents amounts expected to be funded (see Note 21).

Schedule of activity in loan portfolio

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


	Held-for-Investment Loans
Three Months Ended March 31, 2020	Commercial		Infrastructure		Residential		Held-for-Sale Loans		Total Loans
Balance at December 31, 2019	$	8,517,054	$	1,397,448	$	671,572	$	884,150	$	11,470,224
Cumulative effect of ASC 326 effective January 1, 2020		(10,112)		(10,328)		—		—		(20,440)
Acquisitions/originations/additional funding		1,089,096		62,929		100,720		646,160		1,898,905
Capitalized interest (1)		36,072		—		—		—		36,072
Basis of loans sold (2)		—		—		(604)		(789,259)		(789,863)
Loan maturities/principal repayments		(689,972)		(37,051)		(48,620)		(20,680)		(796,323)
Discount accretion/premium amortization		11,559		411		—		110		12,080
Changes in fair value		—		—		(25,619)		9,485		(16,134)
Unrealized foreign currency translation loss		(83,263)		—		—		(4,056)		(87,319)
Credit loss provision, net		(37,527)		(5,805)		—		—		(43,332)
Transfer to/from other asset classifications		—		(26,333)		(422,691)		449,024		—
Balance at March 31, 2020	$	8,832,907	$	1,381,271	$	274,758	$	1,174,934	$	11,663,870


					Loans
					Transferred
	Held-for-Investment Loans				As Secured
Three Months Ended March 31, 2019	Commercial		Infrastructure		Borrowings		Held-for-Sale Loans		Total Loans
Balance at December 31, 2018	$	7,075,577	$	1,456,779	$	74,346	$	1,187,552	$	9,794,254
Acquisitions/originations/additional funding		1,005,325		275,079		—		747,265		2,027,669
Capitalized interest (1)		22,137		—		—		—		22,137
Basis of loans sold (2)		(393,556)		—		—		(733,645)		(1,127,201)
Loan maturities/principal repayments		(251,530)		(281,898)		(74,692)		(22,845)		(630,965)
Discount accretion/premium amortization		7,043		137		346		—		7,526
Changes in fair value		—		—		—		11,266		11,266
Unrealized foreign currency translation gain		12,089		—		—		2,119		14,208
Credit loss reversal (provision), net		11		—		—		(774)		(763)
Loan foreclosures		(8,963)		—		—		—		(8,963)
Transfer to/from other asset classifications		46,495		—		—		(46,448)		47
Balance at March 31, 2019	$	7,514,628	$	1,450,097	$	—	$	1,144,490	$	10,109,215

(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.