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Loans
 9 Months Ended
Sep. 30, 2021
Receivables [Abstract]  
Loans Loans
Our loans held-for-investment are accounted for at amortized cost and our loans held-for-sale are accounted for at the lower of cost or fair value, unless we have elected the fair value option for either. The following tables summarize our investments in mortgages and loans as of September 30, 2021 and December 31, 2020 (dollars in thousands):
September 30, 2021Carrying
Value		Face
Amount		Weighted
Average
Coupon (1)		Weighted
Average Life
(“WAL”)
(years)(2)
Loans held-for-investment:
Commercial loans:
First mortgages (3)$10,984,936 $11,043,211 4.9 %1.8
Subordinated mortgages (4)81,159 82,916 9.6 %3.0
Mezzanine loans (3)477,227 474,105 9.6 %1.3
Other17,689 19,450 8.2 %2.3
Total commercial loans11,561,011 11,619,682 
Infrastructure first priority loans (5)1,698,061 1,719,931 4.3 %3.9
Residential loans, fair value option (6)91,499 91,280 6.1 %N/A(7)
Total loans held-for-investment13,350,571 13,430,893 
Loans held-for-sale:
Residential, fair value option (6)1,813,458 1,758,342 4.3 %N/A(7)
Commercial, fair value option 285,808 278,736 3.6 %9.7
Infrastructure, lower of cost or fair value (5)84,253 84,457 2.8 %1.5
Total loans held-for-sale2,183,519 2,121,535 
Total gross loans15,534,090 $15,552,428 
Credit loss allowances:
Commercial loans held-for-investment(48,359)
Infrastructure loans held-for-investment(9,214)
Total allowances(57,573)
Total net loans$15,476,517 
December 31, 2020
Loans held-for-investment:
Commercial loans:
First mortgages (3)$8,931,772 $8,978,373 5.3 %1.5
Subordinated mortgages (4)71,185 72,257 8.8 %2.8
Mezzanine loans (3)620,319 619,352 10.1 %1.6
Other30,284 33,626 8.9 %1.8
Total commercial loans9,653,560 9,703,608 
Infrastructure first priority loans1,420,273 1,439,940 4.4 %4.3
Residential loans, fair value option90,684 86,796 6.0 %N/A(7)
Total loans held-for-investment11,164,517 11,230,344 
Loans held-for-sale:
Residential, fair value option841,963 820,807 6.0 %N/A(7)
Commercial, fair value option90,332 90,789 3.9 %10.0
Infrastructure, lower of cost or fair value120,540 120,900 3.1 %3.2
Total loans held-for-sale1,052,835 1,032,496 
Total gross loans12,217,352 $12,262,840 
Credit loss allowances:
Commercial loans held-for-investment(69,611)
Infrastructure loans held-for-investment(7,833)
Total allowances(77,444)
Total net loans$12,139,908 
______________________________________________________________________________________________________________________
(1)Calculated using LIBOR or other applicable index rates as of September 30, 2021 and December 31, 2020 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 $1.2 billion and $877.3 million being classified as first mortgages as of September 30, 2021 and December 31, 2020, 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 nine months ended September 30, 2021, $30.7 million of infrastructure loans held-for-sale were reclassified into loans held-for-investment.
(6)During the nine months ended September 30, 2021, $94.2 million of residential loans held-for-sale were reclassified into loans held-for-investment and $94.9 million of residential loans held-for-investment were reclassified into loans held-for-sale.
(7)Residential loans have a weighted average remaining contractual life of 29.5 years and 27.9 years as of September 30, 2021 and December 31, 2020, respectively.
As of September 30, 2021, our variable rate loans held-for-investment were as follows (dollars in thousands):
September 30, 2021Carrying
Value		Weighted-average
Spread Above Index
Commercial loans$11,114,900 4.2 %
Infrastructure loans1,698,061 3.9 %
Total variable rate loans held-for-investment$12,812,961 4.2 %
Credit Loss Allowances
As discussed in Note 2, we do not have a history of realized credit losses on our HFI loans and HTM securities, so we have subscribed to third party database services to provide us with industry losses for both commercial real estate and infrastructure loans. Using these losses as a benchmark, we determine expected credit losses for our loans and securities on a collective basis within our commercial real estate and infrastructure portfolios.
For our commercial loans, we utilize a loan loss model that is widely used among banks and commercial mortgage REITs and is marketed by a leading CMBS data analytics provider. It employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. We provide specific loan-level inputs which include loan-to-stabilized-value (“LTV”) and debt service coverage ratio (DSCR) metrics, as well as principal balances, property type, location, coupon, origination year, term, subordination, expected repayment dates and future fundings. We also select from a group of independent five-year macroeconomic forecasts included in the model that are updated regularly based on current economic trends. We categorize the results by LTV range, which we consider the most significant indicator of credit quality for our commercial loans, as set forth in the credit quality indicator table below. A lower LTV ratio typically indicates a lower credit loss risk.
The macroeconomic forecasts do not differentiate among property types or asset classes. Instead, these forecasts reference general macroeconomic growth factors which apply broadly across all assets. However, the COVID-19 pandemic has had a more negative impact on certain property types, principally retail and hospitality, which were initially impacted by lockdowns and partial reopenings and reduced consumer travel. The office sector has also been adversely affected due to the increase in remote working arrangements. The broad macroeconomic forecasts do not account for such differentiation. Accordingly, we have selected a more adverse macroeconomic recovery forecast related to these property types in determining our credit loss allowance.
For our infrastructure loans, we utilize a database of historical infrastructure loan performance that is shared among a consortium of banks and other lenders and compiled by a major bond credit rating agency. The database is representative of industry-wide project finance activity dating back to 1983. We derive historical loss rates from the database filtered by industry, sub-industry, term and construction status for each of our infrastructure loans. Those historical loss rates reflect global economic cycles over a long period of time as well as average recovery rates. We categorize the results between the power and oil and gas industries, which we consider the most significant indicator of credit quality for our infrastructure loans, as set forth in the credit quality indicator table below.
As discussed in Note 2, we use a discounted cash flow or collateral value approach, rather than the industry loan loss approach described above, to determine credit loss allowances for any credit deteriorated loans.
We regularly evaluate the extent and impact of any credit deterioration associated with the performance and/or value of the underlying collateral, as well as the financial and operating capability of the borrower. Specifically, the collateral’s operating results and any cash reserves are analyzed and used to assess (i) whether cash flow from operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and/or (iii) the collateral’s liquidation value. We also evaluate the financial wherewithal of any loan guarantors as well as the borrower’s competency in managing and operating the collateral. In addition, we consider the overall economic environment, real estate or industry sector, and geographic sub-market in which the borrower operates. Such analyses are completed and reviewed by asset management and finance personnel who utilize various data sources, including (i) periodic financial data such as property operating statements, occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, and capitalization and discount rates, (ii) site inspections and (iii) current credit spreads and discussions with market participants.
The significant credit quality indicators for our loans measured at amortized cost, which excludes loans held-for-sale, were as follows as of September 30, 2021 (dollars in thousands):
Term Loans
Amortized Cost Basis by Origination Year		Revolving Loans
Amortized Cost
Total		Total
Amortized
Cost Basis		Credit
Loss
Allowance
As of September 30, 202120212020201920182017Prior
Commercial loans:
Credit quality indicator:
LTV < 60%$2,055,283 $758,931 $1,185,385 $595,145 $657,732 $287,335 $— $5,539,811 $8,226 
LTV 60% - 70%2,136,337 416,218 1,188,220 679,369 — 82,258 — 4,502,402 19,763 
LTV > 70%329,066 272,581 473,177 352,473 — 61,835 — 1,489,132 12,104 
Credit deteriorated— — — — — 11,977 — 11,977 8,266 
Defeased and other— — — — — 17,689 — 17,689 — 
Total commercial$4,520,686 $1,447,730 $2,846,782 $1,626,987 $657,732 $461,094 $— $11,561,011 $48,359 
Infrastructure loans:
Credit quality indicator:
Power$98,003 $52,343 $217,061 $410,610 $121,482 $305,241 $9,111 $1,213,851 $5,108 
Oil and gas64,547 17,376 254,266 98,924 45,113 — 3,984 484,210 4,106 
Total infrastructure$162,550 $69,719 $471,327 $509,534 $166,595 $305,241 $13,095 $1,698,061 $9,214 
Residential loans held-for-investment, fair value option91,499 — 
Loans held-for-sale2,183,519 — 
Total gross loans$15,534,090 $57,573 
As of September 30, 2021, we had credit deteriorated commercial loans with an amortized cost basis of $12.0 million. These loans were on nonaccrual status, with the cost recovery method of interest income recognition applied. In addition to these credit deteriorated loans, we had a $196.2 million commercial loan and $19.5 million of residential loans that were 90 days or greater past due at September 30, 2021. In March 2021, $7.3 million relating to the $196.2 million commercial loan that was 90 days or greater past due was converted to equity interests pursuant to a consensual transfer under pre-existing equity pledges of additional collateral (see Note 7). The $196.2 million commercial loan, along with a $13.1 million infrastructure loan in forbearance, were placed on nonaccrual status in January 2021, but are not considered credit deteriorated as we presently expect to recover all amounts due. Any loans which are modified to provide for the deferral of interest are not considered past due and are accounted for in accordance with our revenue recognition policy on interest income.
In April 2021, we foreclosed on certain credit deteriorated loans related to a residential conversion project located in New York City, which resulted in our obtaining physical possession of the underlying collateral. The net carrying value of the loans related to this project totaled $100.5 million and consisted of: (i) a first mortgage and mezzanine loan with a net carrying value of $71.5 million, for which we consolidated the underlying property collateral in October 2020 when we obtained control over certain pledged equity interests of the borrower; and (ii) a first mortgage loan with a net carrying value of $29.0 million that was not subject to the pledged equity interests and thus continued to be reflected as a loan on our consolidated balance sheet until the April 2021 foreclosure. See Note 6 for further detail.
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 Held-for-InvestmentTotal
Funded Loans
Nine Months Ended September 30, 2021CommercialInfrastructure
Credit loss allowance at December 31, 2020$69,611 $7,833 $77,444 
Credit loss (reversal) provision, net(13,238)1,124 (12,114)
Charge-offs(7,757)(1)— (7,757)
Recoveries— — — 
Transfers(257)257 — 
Credit loss allowance at September 30, 2021$48,359 $9,214 $57,573 
Unfunded Commitments Credit Loss Allowance (2)
Loans Held-for-Investment
Nine Months Ended September 30, 2021CommercialInfrastructureTotal
Credit loss allowance at December 31, 2020$5,258 $812 $6,070 
Credit loss reversal, net(440)(523)(963)
Credit loss allowance at September 30, 2021$4,818 $289 $5,107 
Memo: Unfunded commitments as of September 30, 2021 (3)
$1,352,772 $32,080 $1,384,852 
______________________________________________________________________________________________________________________
(1)Relates to an unsecured promissory note deemed uncollectible in connection with a residential conversion project located in New York City. The note was previously considered credit deteriorated and was fully reserved.
(2)Included in accounts payable, accrued expenses and other liabilities in our condensed consolidated balance sheets.
(3)Represents amounts expected to be funded (see Note 21).
Loan Portfolio Activity
The activity in our loan portfolio was as follows (amounts in thousands):
Held-for-Investment Loans
Nine Months Ended September 30, 2021CommercialInfrastructureResidentialHeld-for-Sale LoansTotal Loans
Balance at December 31, 2020$9,583,949 $1,412,440 $90,684 $1,052,835 $12,139,908 
Acquisitions/originations/additional funding5,242,378 393,329 — 3,151,361 8,787,068 
Capitalized interest (1)89,830 — 2,068 2,062 93,960 
Basis of loans sold (2)(243,378)— — (2,358,790)(2,602,168)
Loan maturities/principal repayments(2,897,747)(211,695)(26,341)(250,662)(3,386,445)
Discount accretion/premium amortization40,367 3,652 — 504 44,523 
Changes in fair value— — 1,837 66,279 68,116 
Foreign currency translation loss, net(75,094)(840)— — (75,934)
Credit loss reversal (provision), net13,238 (1,124)— — 12,114 
Loan foreclosure and conversion to equity interest(36,308)— — — (36,308)(3)
Transfer to/from other asset classifications or between segments(204,583)93,085 23,251 519,930 431,683 (4)
Balance at September 30, 2021$11,512,652 $1,688,847 $91,499 $2,183,519 $15,476,517 
Held-for-Investment Loans
Nine Months Ended September 30, 2020
CommercialInfrastructureResidentialHeld-for-Sale LoansTotal 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 funding2,090,964 177,247 100,720 1,800,018 4,168,949 
Capitalized interest (1)105,329 48 — — 105,377 
Basis of loans sold (2)(397,038)— (604)(2,035,770)(2,433,412)
Loan maturities/principal repayments(1,148,317)(96,150)(76,025)(75,632)(1,396,124)
Discount accretion/premium amortization28,686 1,672 — 110 30,468 
Changes in fair value— — (16,565)96,265 79,700 
Foreign currency translation loss, net(15,279)(38)— (1,291)(16,608)
Credit loss (provision) reversal, net(53,110)(3,824)— 125 (56,809)
Transfer to/from other asset classifications— 77,993 (422,691)344,698 — 
Balance at September 30, 2020$9,118,177 $1,544,068 $256,407 $1,012,673 $11,931,325 
______________________________________________________________________________________________________________________
(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.
(3)Includes (i) a $29.0 million credit deteriorated loan related to a residential conversion project which was foreclosed in April 2021 and (ii) $7.3 million of a commercial loan that was converted to equity interests in March 2021 (see Note 7) pursuant to a consensual transfer under pre-existing equity pledges of additional collateral, both as described above.
(4)Net transfers represent residential loans transferred from VIE assets upon redemption of two consolidated RMBS trusts.