Loans (Tables)

6 Months Ended

Jun. 30, 2020

Loans

Summary of investments in mortgages and loans by subordination class

The following tables summarize our investments in mortgages and loans as of June 30, 2020 and December 31, 2019 (dollars in thousands):

							Weighted
					Weighted		Average Life
	Carrying		Face		Average		(“WAL”)
June 30, 2020	Value		Amount		Coupon (1)		(years)(2)
Loans held-for-investment:
Commercial loans:
First mortgages (3)	$	8,095,262	$	8,114,492	5.3	%	1.7
Subordinated mortgages (4)		68,891		70,101	8.8	%	3.3
Mezzanine loans (3)		593,823		593,505	10.3	%	1.9
Other		30,804		34,452	8.9	%	2.1
Total commercial loans		8,788,780		8,812,550
Infrastructure first priority loans		1,475,564		1,493,693	4.2	%	4.5
Residential mortgage loans, fair value option (5)		267,730		260,542	6.2	%	3.8
Total loans held-for-investment		10,532,074		10,566,785
Loans held-for-sale:
Residential, fair value option (5)		432,786		429,966	6.2	%	3.7
Commercial, fair value option		194,097		191,229	3.9	%	10.0
Infrastructure, lower of cost or fair value		45,001		46,111	2.1	%	1.6
Total loans held-for-sale		671,884		667,306
Total gross loans		11,203,958	$	11,234,091
Credit loss allowances:
Commercial loans held-for-investment		(94,947)
Infrastructure loans held-for-investment		(16,325)
Total held-for-investment allowances		(111,272)
Infrastructure loans held-for-sale with a fair value allowance		(125)
Total allowances		(111,397)
Total net loans	$	11,092,561
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 June 30, 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 $918.3 million and $967.0 million being classified as first mortgages as of June 30, 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 six months ended June 30, 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 June 30, 2020, our variable rate loans held-for-investment were as follows (dollars in thousands):

	Carrying		Weighted-average
June 30, 2020	Value		Spread Above Index
Commercial loans	$	8,195,089	4.2	%
Infrastructure loans		1,475,564	3.7	%
Total variable rate loans held-for-investment	$	9,670,653	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 June 30, 2020 (dollars in thousands):

	Term Loans												Revolving Loans		Total		Credit
	Amortized Cost Basis by Origination Year												Amortized Cost		Amortized		Loss
As of June 30, 2020	2020		2019		2018		2017		2016		Prior		Total		Cost Basis		Allowance
Commercial loans:
Credit quality indicator:
LTV < 60%	$	499,114	$	1,004,947	$	915,109	$	973,889	$	152,365	$	252,631	$	—	$	3,798,055	$	13,295
LTV 60% - 70%		265,570		1,128,883		1,745,905		449,146		53,418		169,219		—		3,812,141		41,221
LTV > 70%		31,649		822,181		93,094		—		—		60,814		—		1,007,738		10,578
Credit deteriorated		—		—		34,454		7,755		—		105,589		—		147,798		29,853
Defeased and other		—		—		—		—		—		23,048		—		23,048		—
Total commercial	$	796,333	$	2,956,011	$	2,788,562	$	1,430,790	$	205,783	$	611,301	$	—	$	8,788,780	$	94,947
Infrastructure loans:
Credit quality indicator:
Power	$	—	$	248,691	$	304,589	$	123,558	$	189,365	$	302,918	$	24,736	$	1,193,857	$	9,139
Oil and gas		—		196,775		84,932		—		—		—		—		281,707		7,186
Total infrastructure	$	—	$	445,466	$	389,521	$	123,558	$	189,365	$	302,918	$	24,736	$	1,475,564	$	16,325
Residential loans held-for-investment, fair value option																267,730		—
Loans held-for-sale																671,884		125
Total gross loans															$	11,203,958	$	111,397

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):

	Funded Commitments Credit Loss Allowance
					Loans
	Loans Held-for-Investment				Held-for-Sale		Total
Six Months Ended June 30, 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		51,420		5,997		—		57,417
Charge-offs		—		—		(71)		(71)
Recoveries		—		—		—		—
Credit loss allowance at June 30, 2020	$	94,947	$	16,325	$	125	$	111,397

	Unfunded Commitments Credit Loss Allowance (1)
	Loans Held-for-Investment				HTM Preferred
Six Months Ended June 30, 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		(3,303)		1,371		625		(1,307)
Credit loss allowance at June 30, 2020	$	5,045	$	3,576	$	625	$	9,246
Memo: Unfunded commitments as of June 30, 2020 (3)	$	1,870,914	$	132,905	$	6,419	$	2,010,238

(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
Six Months Ended June 30, 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		1,452,753		113,430		100,720		786,860		2,453,763
Capitalized interest (1)		70,346		—		—		—		70,346
Basis of loans sold (2)		(397,038)		—		(604)		(1,378,952)		(1,776,594)
Loan maturities/principal repayments		(831,319)		(68,585)		(64,806)		(43,593)		(1,008,303)
Discount accretion/premium amortization		19,706		1,025		—		109		20,840
Changes in fair value		—		—		(16,461)		34,777		18,316
Unrealized foreign currency translation loss		(76,137)		—		—		(2,037)		(78,174)
Credit loss provision, net		(51,420)		(5,997)		—		—		(57,417)
Transfer to/from other asset classifications		—		32,246		(422,691)		390,445		—
Balance at June 30, 2020	$	8,693,833	$	1,459,239	$	267,730	$	671,759	$	11,092,561

							Loans
							Transferred
	Held-for-Investment Loans						As Secured
Six Months Ended June 30, 2019	Commercial		Infrastructure		Held-for-Sale Loans		Borrowings		Total Loans
Balance at December 31, 2018	$	7,075,577	$	1,456,779	$	1,187,552	$	74,346	$	9,794,254
Acquisitions/originations/additional funding		1,707,180		334,303		1,663,244		—		3,704,727
Capitalized interest (1)		52,405		—		—		—		52,405
Basis of loans sold (2)		(495,456)		—		(1,271,931)		—		(1,767,387)
Loan maturities/principal repayments		(959,160)		(333,607)		(80,134)		(74,692)		(1,447,593)
Discount accretion/premium amortization		15,448		318		—		346		16,112
Changes in fair value		—		—		33,157		—		33,157
Unrealized foreign currency translation (loss) gain		(5,396)		—		1,493		—		(3,903)
Credit loss provision, net		(2,085)		—		(1,196)		—		(3,281)
Loan foreclosures		(27,303)		—		—		—		(27,303)
Transfer to/from other asset classifications		46,495		(101,282)		54,714		—		(73)
Balance at June 30, 2019	$	7,407,705	$	1,356,511	$	1,586,899	$	—	$	10,351,115

(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.