Goodwill and Intangibles

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangibles

Goodwill and Intangibles

Goodwill

Goodwill is tested for impairment annually in the fourth quarter, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

Infrastructure Lending Segment

The Infrastructure Lending Segment’s goodwill of $119.4 million at both September 30, 2022 and December 31, 2021 represents the excess of consideration transferred over the fair value of net assets acquired on September 19, 2018 and October 15, 2018. The goodwill recognized is attributable to value embedded in the acquired Infrastructure Lending Segment’s lending platform.

LNR Property LLC (“LNR”)

The Investing and Servicing Segment’s goodwill of $140.4 million at both September 30, 2022 and December 31, 2021 represents the excess of consideration transferred over the fair value of net assets of LNR acquired on April 19, 2013. The goodwill recognized is attributable to value embedded in LNR’s existing platform, which includes a network of commercial real estate asset managers, work-out specialists, underwriters and administrative support professionals as well as proprietary historical performance data on commercial real estate assets.

Intangible Assets

Servicing Rights Intangibles

In connection with the LNR acquisition, we identified domestic servicing rights that existed at the purchase date, based upon the expected future cash flows of the associated servicing contracts. As of September 30, 2022 and December 31, 2021, the balance of the domestic servicing intangible was net of $41.6 million and $42.1 million, respectively, which was eliminated in consolidation pursuant to ASC 810 against VIE assets in connection with our consolidation of securitization VIEs. Before VIE consolidation, as of September 30, 2022 and December 31, 2021, the domestic servicing intangible had a balance of $59.6 million and $58.9 million, respectively, which represents our economic interest in this asset.

Lease Intangibles

In connection with our acquisitions of commercial real estate, we recognized in-place lease intangible assets and favorable lease intangible assets associated with certain non-cancelable operating leases of the acquired properties.

The following table summarizes our intangible assets, which are comprised of servicing rights intangibles and lease intangibles, as of September 30, 2022 and December 31, 2021 (amounts in thousands):

	As of September 30, 2022						As of December 31, 2021
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Domestic servicing rights, at fair value	$	18,014	$	—	$	18,014	$	16,780	$	—	$	16,780
In-place lease intangible assets	100,450		(62,442)		38,008		94,712		(62,721)		31,991
Favorable lease intangible assets	26,649		(9,575)		17,074		23,746		(8,953)		14,793
Total net intangible assets	$	145,113	$	(72,017)	$	73,096	$	135,238	$	(71,674)	$	63,564

The following table summarizes the activity within intangible assets for the nine months ended September 30, 2022 (amounts in thousands):

	Domestic Servicing Rights		In-place Lease Intangible Assets		Favorable Lease Intangible Assets		Total
Balance as of January 1, 2022	$	16,780	$	31,991	$	14,793	$	63,564
Acquisition (1)	—		11,910		3,520		15,430
Amortization	—		(5,327)		(1,197)		(6,524)
Impairment (2)	—		(43)		(4)		(47)
Sales	—		(523)		(38)		(561)
Changes in fair value due to changes in inputs and assumptions	1,234		—		—		1,234
Balance as of September 30, 2022	$	18,014	$	38,008	$	17,074	$	73,096

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(1)    Represents lease intangibles related to an office building in Texas that are consolidated upon exercising control over a mezzanine loan borrower’s pledged equity interests in May 2022 (see Note 4).

(2)     Impairment of intangible lease assets is recognized within other expense in our condensed consolidated statement of operations.

The following table sets forth the estimated aggregate amortization of our in-place lease intangible assets and favorable lease intangible assets for the next five years and thereafter (amounts in thousands):

2022 (remainder of)	$	2,390
2023	8,629
2024	6,932
2025	5,827
2026	4,301
Thereafter	27,003
Total	$	55,082