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Loans
 9 Months Ended
Sep. 30, 2022
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, 2022 and December 31, 2021 (dollars in thousands):
September 30, 2022Carrying
Value		Face
Amount		Weighted
Average
Coupon (1)		Weighted
Average Life
(“WAL”)
(years)(2)
Loans held-for-investment:
Commercial loans:
First mortgages (3)$15,174,120 $15,263,633 6.8 %1.9
Subordinated mortgages (4)69,793 70,966 12.5 %2.0
Mezzanine loans (3)438,457 435,818 11.6 %1.0
Other58,694 59,850 8.2 %1.6
Total commercial loans15,741,064 15,830,267 
Infrastructure first priority loans 2,402,193 2,433,586 7.7 %4.0
Residential loans, fair value option (5)53,176 54,569 5.8 %N/A(6)
Total loans held-for-investment18,196,433 18,318,422 
Loans held-for-sale:
Residential, fair value option (5)2,125,827 2,340,929 4.7 %N/A(6)
Commercial, fair value option79,857 82,223 4.2 %7.3
Total loans held-for-sale2,205,684 2,423,152 
Total gross loans20,402,117 $20,741,574 
Credit loss allowances:
Commercial loans held-for-investment(64,862)
Infrastructure loans held-for-investment(27,749)
Total allowances(92,611)
Total net loans$20,309,506 
December 31, 2021
Loans held-for-investment:
Commercial loans:
First mortgages (3)$12,991,099 $13,067,524 4.5 %1.9
Subordinated mortgages (4)70,771 72,371 10.0 %2.8
Mezzanine loans (3)417,504 415,155 9.4 %1.4
Other17,424 19,029 8.2 %2.1
Total commercial loans13,496,798 13,574,079 
Infrastructure first priority loans2,048,096 2,071,912 4.4 %4.3
Residential loans, fair value option 59,225 60,133 6.0 %N/A(6)
Total loans held-for-investment15,604,119 15,706,124 
Loans held-for-sale:
Residential, fair value option 2,590,005 2,525,910 4.2 %N/A(6)
Commercial, fair value option286,795 289,761 4.0 %9.0
Total loans held-for-sale2,876,800 2,815,671 
Total gross loans18,480,919 $18,521,795 
Credit loss allowances:
Commercial loans held-for-investment(46,600)
Infrastructure loans held-for-investment(20,670)
Total allowances(67,270)
Total net loans$18,413,649 
______________________________________________________________________________________________________________________
(1)Calculated using applicable index rates as of September 30, 2022 and December 31, 2021 for variable rate loans and excludes loans for which interest income is not recognized.
(2)Represents the WAL of each respective group of loans, excluding loans for which interest income is not recognized, 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 $1.4 billion being classified as first mortgages as of September 30, 2022 and December 31, 2021, 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, 2022, $0.3 million of residential loans held-for-investment were reclassified into loans held-for-sale.
(6)Residential loans have a weighted average remaining contractual life of 29.1 years and 29.4 years as of September 30, 2022 and December 31, 2021, respectively.
As of September 30, 2022, our variable rate loans held-for-investment, excluding loans for which interest income is not recognized, were as follows (dollars in thousands):
September 30, 2022Carrying
Value		Weighted-average
Spread Above Index
Commercial loans$15,006,961 4.0 %
Infrastructure loans2,402,193 3.9 %
Total variable rate loans held-for-investment$17,409,154 3.9 %

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. For instance, although the office sector has been adversely affected by 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 office properties 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, 2022 (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, 202220222021202020192018Prior
Commercial loans:
Credit quality indicator:
LTV < 60%$1,697,121 $2,540,666 $459,943 $892,348 $373,102 $680,512 $— $6,643,692 $5,272 
LTV 60% - 70%1,694,971 3,805,828 238,557 1,096,130 457,696 68,455 — 7,361,637 19,204 
LTV > 70%100,444 333,874 228,133 429,098 313,469 267,098 — 1,672,116 35,461 
Credit deteriorated— — — — — 4,925 — 4,925 4,925 
Defeased and other42,138 — — — — 16,556 — 58,694 — 
Total commercial$3,534,674 $6,680,368 $926,633 $2,417,576 $1,144,267 $1,037,546 $— $15,741,064 $64,862 
Infrastructure loans:
Credit quality indicator:
Power$93,258 $222,453 $81,611 $288,355 $387,126 $409,170 $5,488 $1,487,461 $5,695 
Oil and gas87,946 359,963 10,284 286,506 84,587 50,189 1,969 881,444 5,553 
Credit deteriorated— — — — — 33,288 — 33,288 16,501 
Total infrastructure$181,204 $582,416 $91,895 $574,861 $471,713 $492,647 $7,457 $2,402,193 $27,749 
Residential loans held-for-investment, fair value option53,176 — 
Loans held-for-sale2,205,684 — 
Total gross loans$20,402,117 $92,611 

Non-Credit Deteriorated Loans
As of September 30, 2022, we had the following loans with a combined amortized cost basis of $505.4 million that were 90 days or greater past due at September 30, 2022: (i) a $204.3 million senior loan on a retail and entertainment project in New Jersey, of which $7.3 million was converted into equity interests (see Note 8); (ii) a $222.8 million senior loan on an office building in California; (iii) a $37.8 million leasehold mortgage loan on a luxury resort in California destroyed by wildfire; (iv) $31.3 million of residential loans; and (v) a $9.2 million loan on a hospitality asset in New York that our Investing and Servicing Segment acquired as nonperforming in October 2021. Loans on nonaccrual as of September 30, 2022 include (i) - (iv) above. None of these loans are considered credit deteriorated as we presently expect to recover all amounts due.
Credit Deteriorated Loans
As of September 30, 2022, we had the following loans with a combined amortized cost basis of $38.2 million which were deemed credit deteriorated and are on nonaccrual status: (i) a $33.3 million senior loan participation secured by a natural gas-fired power plant in Massachusetts, for which interest collections were current as of September 30, 2022 but for which we
recorded a credit loss allowance of $16.5 million ($6.4 million during the three and nine months ended September 30, 2022 and $10.1 million in 2021) based on our share of the estimated fair value of the asset; and (ii) a $4.9 million subordinated loan secured by a department store in Chicago which is fully reserved.
Foreclosures and Equity Control
In May 2022, we obtained control over the pledged equity interests of a mezzanine borrower entity related to an office building located in Texas, which resulted in our consolidating the mezzanine borrower entity including the underlying property collateral and related debt. The net carrying value of our loans related to this property totaled $50.2 million and consisted of first mortgage and mezzanine loans which are now eliminated in consolidation. In connection with the consolidation of the mezzanine borrower entity, we recorded properties of $110.8 million, lease intangible assets of $15.4 million, net working capital of $11.8 million and third-party first mortgage debt of $87.8 million in accordance with the asset acquisition provisions of ASC 805, Business Combinations.
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, 2022
CommercialInfrastructure
Credit loss allowance at December 31, 2021$46,600 $20,670 $67,270 
Credit loss provision, net18,262 7,079 25,341 
Credit loss allowance at September 30, 2022$64,862 $27,749 $92,611 
Unfunded Commitments Credit Loss Allowance (1)
Loans Held-for-Investment
Nine Months Ended September 30, 2022
CommercialInfrastructureCMBS (2)Total
Credit loss allowance at December 31, 2021$6,692 $145 $— $6,837 
Credit loss (reversal) provision, net(431)(145)40 (536)
Credit loss allowance at September 30, 2022$6,261 $— $40 $6,301 
Memo: Unfunded commitments as of September 30, 2022 (3)
$2,463,418 $— $32,494 $2,495,912 
______________________________________________________________________________________________________________________
(1)Included in accounts payable, accrued expenses and other liabilities in our consolidated balance sheets.
(2)See Note 5 for further details.
(3)Represents amounts expected to be funded (see Note 22).
Loan Portfolio Activity
The activity in our loan portfolio was as follows (amounts in thousands):
Held-for-Investment Loans
Nine Months Ended September 30, 2022
CommercialInfrastructureResidentialHeld-for-Sale LoansTotal Loans
Balance at December 31, 2021$13,450,198 $2,027,426 $59,225 $2,876,800 $18,413,649 
Acquisitions/originations/additional funding4,410,306 597,092 — 3,793,467 8,800,865 
Capitalized interest (1)85,454 373 1,445 402 87,674 
Basis of loans sold (2)(6,330)— — (4,056,511)(4,062,841)
Loan maturities/principal repayments(1,558,907)(246,127)(6,663)(146,184)(1,957,881)
Discount accretion/premium amortization40,179 7,289 — — 47,468 
Changes in fair value— — (485)(326,252)(326,737)
Foreign currency translation gain/(loss), net(612,669)(4,530)— — (617,199)
Credit loss provision, net(18,262)(7,079)— — (25,341)
Transfer to/from other asset classifications or between segments(113,767)— (346)63,962 (50,151)(3)
Balance at September 30, 2022$15,676,202 $2,374,444 $53,176 $2,205,684 $20,309,506 
Held-for-Investment Loans
Nine Months Ended September 30, 2021
CommercialInfrastructureResidentialHeld-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)(4)
Transfer to/from other asset classifications or between segments(204,583)93,085 23,251 519,930 431,683 (5)
Balance at September 30, 2021$11,512,652 $1,688,847 $91,499 $2,183,519 $15,476,517 
______________________________________________________________________________________________________________________
(1)Represents accrued interest income on loans whose terms do not require current payment of interest.
(2)See Note 12 for additional disclosure on these transactions.
(3)Represents the net carrying value of first mortgage and contiguous mezzanine loans related to an office building in Texas that is eliminated as a result of consolidating the net assets of the mezzanine borrower entity upon obtaining control over its pledged equity interests in May 2022 (see discussion above).
(4)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 8) pursuant to a consensual transfer under pre-existing equity pledges of additional collateral.
(5)Net transfers represent residential loans transferred from VIE assets upon redemption of two consolidated RMBS trusts.