Goodwill and Intangibles

9 Months Ended

Sep. 30, 2023

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, 2023 and December 31, 2022 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, 2023 and December 31, 2022 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, 2023 and December 31, 2022, the balance of the domestic servicing intangible was net of $36.0 million and $39.1 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, 2023 and December 31, 2022, the domestic servicing intangible had a balance of $54.2 million and $56.8 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, 2023 and December 31, 2022 (amounts in thousands):

	As of September 30, 2023						As of December 31, 2022
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Domestic servicing rights, at fair value	$	18,188	$	—	$	18,188	$	17,790	$	—	$	17,790
In-place lease intangible assets	97,913		(67,548)		30,365		98,622		(64,246)		34,376
Favorable lease intangible assets	28,859		(11,423)		17,436		26,649		(10,042)		16,607
Total net intangible assets	$	144,960	$	(78,971)	$	65,989	$	143,061	$	(74,288)	$	68,773

The following table summarizes the activity within intangible assets for the nine months ended September 30, 2023 (amounts in thousands):

	Domestic Servicing Rights		In-place Lease Intangible Assets		Favorable Lease Intangible Assets		Total
Balance as of January 1, 2023	$	17,790	$	34,376	$	16,607	$	68,773
Acquisition (1)	—		2,061		2,280		4,341
Amortization	—		(5,221)		(1,451)		(6,672)
Sales	—		(851)		—		(851)
Changes in fair value due to changes in inputs and assumptions	398		—		—		398
Balance as of September 30, 2023	$	18,188	$	30,365	$	17,436	$	65,989

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(1)    Represents lease intangibles related to a deed in lieu of foreclosure on a mortgage loan on the retail portion of a hotel located in Chicago in May 2023 (see Note 4).

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):

2023 (remainder of)	$	2,071
2024	7,241
2025	6,136
2026	4,610
2027	4,116
Thereafter	23,627
Total	$	47,801